<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 26, 1999
REGISTRATION NO. 333-75643-01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
AMENDMENT NO. 3 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
COMPASS AEROSPACE CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3728 95-4659126
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------------
1501 HUGHES WAY, SUITE 400
LONG BEACH, CALIFORNIA 90810
(310) 522-0600
N. PAUL BROST
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
COMPASS AEROSPACE CORPORATION
1501 HUGHES WAY, SUITE 400
LONG BEACH, CALIFORNIA 90810
(310) 522-0600
(Name and address, including zip code, of agent for service)
------------------------------
COPIES TO:
PETER P. WALLACE, ESQ.
MORGAN, LEWIS & BOCKIUS LLP
300 SOUTH GRAND AVENUE, 22ND FLOOR
LOS ANGELES, CALIFORNIA 90071-3132
------------------------------
<TABLE>
<CAPTION>
PRIMARY STANDARD
JURISDICTION OF INDUSTRIAL IRS EMPLOYEE
NAME OF ADDITIONAL REGISTRANTS INCORPORATION CLASSIFICATION NUMBER IDENTIFICATION NUMBERS
- -------------------------------------------------- ------------------------- -------------------------- -------------------------
<S> <C> <C> <C>
Aeromil Engineering Company*...................... Delaware 3728 95-4659131
Barnes Machine, Inc.*............................. Delaware 3728 91-1165226
Brittain Machine, Inc.*........................... Delaware 3728 48-0816118
Modern Manufacturing, Inc.*....................... Delaware 3728 91-1413338
Pacific Hills Manufacturing Co.*.................. California 3469 95-4446681
Sea-Lect Products, Inc.*.......................... Delaware 3728 95-4682821
Western Methods Machinery Corporation*............ California 3728 95-3195940
Wichita Manufacturing, Inc.*...................... California 3728 33-0536613
Compass Aerospace Limited*........................ England and Wales 3728 --
Diac Limited**.................................... England and Wales 3728 --
Trefn Engineering Limited**....................... England and Wales 3728 --
Trefn Engineering (Metal Treatments Division)
Limited**....................................... England and Wales 3728 --
Trefn Fabrications Limited**...................... England and Wales 3728 --
Trim Engineering Limited**........................ England and Wales 3728 --
</TABLE>
- ------------------------------
* Address and telephone number of the principal executive offices of these
additional registrants are the same as those of Compass Aerospace
Corporation.
** Address and telephone number of the principal executive offices of these
additional registrants are 7 Lyon Road, Wallisdown, Poole, Dorset BH 12 5HF,
011-44-120-253-5536.
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effectiveness of this Registration Statement.
------------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
10 1/8% Series B Senior Subordinated Notes due
2005............................................ $110,000,000 100% $110,000,000 $30,580(2)
10 1/8% Series D Senior Subordinated Notes due
2005 by registrants other than Compass Aerospace
Corporation..................................... $19,000,000 100% $19,000,000 $5,282(3)
Guarantees of the 10 1/8% Series B Senior
Subordinated Notes due 2005 and the 10 1/8%
Series D Senior Subordinated Notes due 2005 by
registrants other than Compass Aerospace
Corporation..................................... $129,000,000 (4) (4) (4)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously paid.
(3) Paid upon filing of this Amendment.
(4) Pursuant to Rule 457(n), no separate registration fee is required with
respect to the guarantees.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) THE
SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This registration statement covers the registration of an aggregate
principal amount of $110,000,000 of our 10 1/8% Series B senior subordinated
notes due 2005 that may be exchanged for equal principal amounts of our
outstanding 10 1/8% Series A senior subordinated notes due 2005 and the
registration of an aggregate principal amount of $19,000,000 of our 10 1/8%
Series D senior subordinated notes due 2005 that may be exchanged for equal
principal amounts of our outstanding 10 1/8% Series C senior subordinated notes
due 2005. This registration statement also covers the registration of the Series
B and Series D notes for resale by broker-dealers in market-making transactions.
The complete prospectus relating to the exchange offer follows immediately after
this Explanatory Note. Following the prospectus are pages of the prospectus
relating solely to such market-making transactions (the "market-making
prospectus"), including alternate front and back cover pages, a section entitled
"Risk Factors--There Is No Existing Trading Market For The Notes And Any
Market-Making Activities May Be Terminated At Any Time" to be used in lieu of
the section entitled "Risk Factors--No Public Trading Market For The Notes
Exists And You May Not Be Able To Sell Them," a "Use of Proceeds" section and an
alternate "Plan of Distribution" section. In addition, the market-making
prospectus will not include the following captions nor the information set forth
under such captions included in the prospectus: "Summary--The Exchange Offer,"
"Summary of the Terms of the Exchange Offer," "Risk Factors--Outstanding Series
A and Series C Notes That Are Not Exchanged will Continue To Be Subject To
Transfer Restrictions," "The Exchange Offer," "United States Federal Income Tax
Consequences For Holders of Series B Notes" and "United States Federal Income
Tax Consequences For Holders of Series D Notes." All other sections of the
prospectus will be included in the market-making prospectus.
<PAGE>
SUBJECT TO COMPLETION DATED [ ], 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
COMPASS AEROSPACE CORPORATION
Offer to Exchange its
10 1/8% Series B Senior Subordinated Notes due 2005
for any and all of its outstanding
10 1/8% Series A Senior Subordinated Notes due 2005
($110,000,000 aggregate principal amount outstanding)
and its
10 1/8% Series D Senior Subordinated Notes due 2005
for any and all of its outstanding
10 1/8% Series C Senior Subordinated Notes due 2005
($19,000,000 aggregate principal amount outstanding)
Series A, Series B, Series C and Series D Notes Guaranteed by Aeromil
Engineering Company, Barnes Machine, Inc., Brittain Machine, Inc., Compass
Aerospace Limited, Diac Limited, Modern Manufacturing, Inc., Pacific Hills
Manufacturing Co., Sea-Lect Products, Inc., Trefn Engineering Limited, Trefn
Fabrications Limited, Trefn (Metal Treatments Division) Limited, Trim
Engineering Limited, Western Methods Machinery Corporation and Wichita
Manufacturing, Inc.
---------------------
TERMS OF EXCHANGE OFFER
- Expires at 5:00 p.m., New York City time, on , 1999, unless
extended
- Not subject to any condition other than that the exchange offer not
violate applicable law or any applicable interpretation of the staff of
the Securities and Exchange Commission
- Tenders of outstanding 10 1/8% Series A and Series C senior subordinated
notes due 2005 may be withdrawn any time before 5:00 p.m. on the business
day prior to expiration of the exchange offer
- The exchange of notes will not be a taxable exchange for U.S. federal
income tax purposes
- We will not receive any proceeds from the exchange offer
- The terms of the Series B notes to be issued are identical in all material
respects to the outstanding Series A notes and the terms of the Series D
notes to be issued are identical in all material respects to the
outstanding Series C notes, except the Series B and Series D notes lack a
number of transfer restrictions and registration rights relating to the
outstanding Series A and Series C notes.
------------------------
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A
DISCUSSION OF VARIOUS MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS.
---------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the notes to be distributed in the
exchange offer or determined that this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information...................................................................................... 3
Summary.................................................................................................... 4
Risk Factors............................................................................................... 16
Capitalization............................................................................................. 25
Unaudited Pro Forma Financial Data......................................................................... 26
Selected Historical Consolidated Financial Data............................................................ 37
Management's Discussion and Analysis of Consolidated Financial Condition and Consolidated Results of
Operations............................................................................................... 39
The Exchange Offer......................................................................................... 49
Business................................................................................................... 61
Management................................................................................................. 73
Principal Stockholders..................................................................................... 79
Description of Credit Agreement............................................................................ 80
Description of the Series B Notes.......................................................................... 81
Description of the Series D Notes.......................................................................... 117
United States Federal Income Tax Consequences For Holders of Series B Notes................................ 153
United States Federal Income Tax Consequences For Holders of Series D Notes................................ 157
Plan of Distribution....................................................................................... 161
Legal Matters.............................................................................................. 162
Experts.................................................................................................... 162
Index to Financial Statements.............................................................................. F-1
</TABLE>
2
<PAGE>
AVAILABLE INFORMATION
This prospectus constitutes a part of a registration statement on Form S-4
filed by us with the Securities and Exchange Commission under the Securities Act
of 1933. As permitted by the rules and regulations of the Commission, this
prospectus does not contain all of the information contained in the registration
statement, including additional exhibits and schedules not included in this
prospectus. In this prospectus we refer to the registration statement and to the
exhibits and schedules. For further information about us and about the
securities we are offering, you should consult the registration statement,
including the exhibits and schedules. You should be aware that statements
contained in this prospectus concerning the provisions of any documents filed as
an exhibit to the registration statement or otherwise filed with the Commission
are not necessarily complete, and in each instance reference is made to the copy
of such document so filed. Each such statement is qualified in its entirety by
such reference.
Upon the effectiveness of the registration statement, we will be subject to
the informational requirements of the Securities Exchange Act of 1934.
Accordingly, we will file periodic reports and other information with the
Commission. The registration statement, reports and other information filed by
us with the Commission will be available for inspection and copying at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the regional
offices of the Commission located at 7 World Trade Center, 13th Floor, New York,
New York 10048 and Suite 1400, Northwestern Atrium Center, 14th Floor, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material will also be
available at prescribed rates by writing to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549. If you would like
information on the operation of the Public Reference Room, you may call
1-800-SEC-0330. You may also be able to access this information electronically
through the Commission's web page on the Internet at http://www.sec.gov. This
web site contains reports and other information regarding registrants such as
ourselves that have filed electronically with the Commission.
The indentures governing the notes provide that we will furnish the holders
of the notes copies of the periodic reports required to be filed with the
Commission under the Exchange Act. Even if we are not subject to the periodic
reporting and informational requirements of the Exchange Act, we will make such
filings to the extent that such filings are accepted by the Commission. We will
make these filings regardless of whether we have a class of securities
registered under the Exchange Act. Furthermore, we will provide the trustee for
the notes and the holders of the notes within 15 days after such filings with
annual reports containing the information required to be contained in Form 10-K,
and quarterly reports containing the information required to be contained in
Form 10-Q promulgated by the Exchange Act. From time to time, we will also
provide such other information as is required to be contained in Form 8-K
promulgated by the Exchange Act. If the filing of such information is not
accepted by the Commission or is prohibited by the Exchange Act, we will then
provide promptly upon written request, and at our cost, copies of such reports
to prospective purchasers of the notes.
------------------------
This exchange offer is not being made to, nor will we accept surrenders for
exchange from, holders of outstanding notes in any jurisdiction in which this
exchange offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of that jurisdiction.
3
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL THE INFORMATION THAT IS IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY, INCLUDING THE FINANCIAL DATA AND RELATED NOTES AND THE
SECTION ENTITLED "RISK FACTORS," BEFORE MAKING A DECISION ABOUT WHETHER TO
EXCHANGE EITHER THE OUTSTANDING SERIES A NOTES YOU HOLD FOR 10 1/8% SERIES B
SENIOR SUBORDINATED NOTES DUE 2005 OR THE OUTSTANDING SERIES C NOTES YOU HOLD
FOR 10 1/8% SERIES D SENIOR SUBORDINATED NOTES DUE 2005. THE TERMS "COMPASS,"
OUR" AND "WE" AS USED IN THIS PROSPECTUS REFER TO COMPASS AEROSPACE CORPORATION
AND ITS SUBSIDIARIES, AS A COMBINED ENTITY, EXCEPT WHERE IT IS CLEAR THAT SUCH
TERM MEANS ONLY THE PARENT COMPANY. COMPASS' SUBSIDIARIES ARE: AEROMIL
ENGINEERING COMPANY, BARNES MACHINE, INC., BRITTAIN MACHINE, INC., COMPASS
AEROSPACE LIMITED, DIAC LIMITED, MAYBREY PRECISION CASTING LIMITED, MODERN
MANUFACTURING, INC. (FORMERLY KNOWN AS Y.F. AMERICAS, INC.), PACIFIC HILLS
MANUFACTURING CO. (FORMERLY KNOWN AS LAMSCO WEST, INC.), SEA-LECT PRODUCTS,
INC., TREFN ENGINEERING LIMITED, TREFN ENGINEERING (METAL TREATMENTS DIVISION)
LIMITED, TREFN FABRICATIONS LIMITED, TRIM ENGINEERING LIMITED, WESTERN METHODS
MACHINERY CORPORATION AND WICHITA MANUFACTURING, INC.
TRIM'S FINANCIAL STATEMENTS ARE DENOMINATED IN POUNDS STERLING. FOR THE
PURPOSES OF THIS PROSPECTUS, TRIM'S BALANCE SHEET AS OF JUNE 30, 1999 HAS BEEN
TRANSLATED TO U.S. DOLLARS AT THE INTERBANK SPOT RATE AT JUNE 30, 1999 OF L1.0 =
$1.58. TRIM'S STATEMENT OF OPERATIONS FOR THE YEAR ENDED APRIL 30, 1999 HAS BEEN
TRANSLATED TO U.S. DOLLARS AT THE AVERAGE INTERBANK EXCHANGE RATE FOR THE YEAR
ENDED APRIL 30, 1999 OF L1.0 = $1.65.
THE EXCHANGE OFFER
SERIES A NOTES
On April 21, 1998 we completed the private offering of $110.0 million of
Series A notes. You are entitled to exchange in the exchange offer your Series A
notes for registered Series B notes with terms which are identical in all
material respects to the Series A notes, except for a number of transfer
restrictions and registration rights.
Under a registration rights agreement executed as part of the offering of
the Series A notes, we agreed to:
- file a registration statement within 240 days after the issue date of the
Series A notes enabling note holders to exchange the Series A notes they
hold for publicly registered notes that are identical in all material
respects to the form and terms of the Series A notes;
- use our best efforts to cause the registration statement to become
effective within 300 days after the issue date of the Series A notes;
- use our best efforts to consummate the exchange offer within 30 days of
the effective date of our registration statement; and
- use our best efforts to file a shelf registration statement for the resale
of the notes if we cannot effect an exchange offer within the time periods
listed above and in various other circumstances.
The interest rate on the Series A notes increased as a form of liquidated
damages because we did not comply with some of our obligations under the
registration rights agreement. Liquidated damages are currently accruing at the
rate of $22,000 per week in the aggregate for the $110.0 million principal
amount of outstanding Series A notes. Liquidated damages will cease to accrue
once a registration statement registering the Series B notes is declared
effective by the Commission. You should read the discussion under the headings
"Summary Description of the Series B Notes Exchange Offer; Registration Rights"
and "The Exchange Offer--Conditions of the Exchange Offer" for further
information regarding the registration rights agreement which relates to the
Series A notes.
SERIES C NOTES
On July 30, 1999 we completed the private offering of $19.0 million of
Series C notes. You are entitled to exchange in the exchange offer your Series C
notes for registered Series D notes with terms which are identical in all
material respects to the Series C notes, except for a number of transfer
restriction and registration rights.
4
<PAGE>
Under a registration rights agreements executed as part of the offering of
the Series C notes, we agreed to:
- file a registration statement within 105 days after the issue date of the
Series C notes enabling note holders to exchange the Series C notes they
hold for publicly registered notes that are identical in all material
respects to the form and terms of the outstanding Series C notes;
- use our best efforts to cause the registration statement to become
effective within 180 days after the issue date of the outstanding Series C
notes;
- use our best efforts to consummate the exchange offer within 30 days of
the effective date of our registration statement; and
- use our best efforts to file a shelf registration for the resale of the
notes if we cannot effect an exchange offer within the time periods listed
above and various other circumstances.
If we do not comply with our obligations under the registration rights
agreement, our interest rate on the Series C notes may increase as a form of
liquidated damages. You should read the discussion under the headings "Summary
Description of the Series D Notes Exchange Offer; Registration Rights" and "The
Exchange Offer--Conditions of the Exchange Offer" for further information
regarding the registration rights agreement which relates to the Series C notes.
We believe that the Series B and the Series D notes issued in the exchange
offer may be resold by you without compliance with the registration and
prospectus delivery provisions of the Securities Act, subject to various
conditions. You should read the discussion under the headings "Summary of the
Terms of the Exchange Offer" and "The Exchange Offer" for further information
regarding the exchange offer and resale of the Series B and Series D notes.
COMPASS
Compass was founded in October 1997 to become a major supplier of precision
machined individual metal parts and of higher value-added sub-assemblies,
manufacturing kits and structural components used by aerospace manufacturers in
structural frames and other metal aircraft components. We intend to capitalize
on the trends among aircraft manufacturers which seek to increase outsourcing,
concentrate supplier relationships and encourage suppliers of individual parts
to manage the supply chain and produce more value-added sub-assemblies,
manufacturing kits and structural components. You should read the discussion
under the headings "Management's Discussion and Analysis of Consolidated
Financial Condition and Consolidated Results of Operations-- Results of
Operations" and "The Business" for more information on our business and
financial condition.
At present, we primarily manufacture individual parts for aircraft to
precise specifications from metals through the use of precision
computer-numerically-controlled machine tools. We use a variety of advanced
techniques and machinery. Our precision machining and tooling capabilities
provide us with a diverse and flexible manufacturing capability.
We believe that our machining capabilities are among the broadest, and that
we have among the largest number of three-spindle five-axis gantry mills of all
aerospace suppliers in the United States and in the United Kingdom. We currently
produce original equipment parts, sub-assemblies and structural components for:
- The Boeing Company (717, 737, 747, 757, 767, 777, MD-11, MD-80 and MD-90)
- Airbus Industrie (A300, A310, A320, A330 and A340)
- Bombardier Inc. (Canadair Regional Jet-Registered Trademark- 700, Canadair
Global Express, Lear and Dash-8)
- several other commercial and military aircraft manufacturers
We believe that the long-standing relationships that our management has
established with our key customers, the strong name recognition of our
subsidiaries, our subsidiaries' established track records of quality
manufacturing and their consistent histories of timely deliveries are among the
key factors in our success. For the six months ended June 30, 1999 we had
consolidated revenues of
5
<PAGE>
$67.1 million, EBITDA of $15.6 million and a negative net cash flow of $0.8
million. Net cash provided by operating activities was $1.9 million. Investing
activities consisting of purchases of property and equipment used $2.8 million
of cash flow. Financing activities generated $0.1 million in cash consisting of
a draw on our revolving line of credit partly offset by principal payments on
long term debt. At August 31, 1999 we had a total revenue backlog of
approximately $156.0 million, of which approximately $43.0 million is
deliverable in the remainder of 1999.
INDUSTRY OVERVIEW
Commercial aircraft manufacturers are experiencing a period of high demand
for new aircraft. According to the Aerospace Industries Association of America,
the annual worldwide market for commercial and military aircraft was
approximately $78.0 billion in 1998. Manufacturing U.S.A., Sixth Edition,
estimates the value of aircraft equipment shipped in 1998 was approximately
$20.4 billion. In response to the increased demand for aircraft, the major
aircraft manufacturers are increasing outsourcing and imposing increased
responsibilities on a smaller number of qualified suppliers to enable the
aircraft manufacturers to increase production rates.
STRATEGY
Our principal strategic objective is to increase revenues and profits by
managing the supply chain for our customers. We also seek to increase our
operating efficiencies and to reduce our customer concentration by diversifying
our revenue mix among aerospace customers. To reach our objectives we intend to:
- consolidate our acquired businesses;
- increase operating efficiencies and asset utilization;
- maximize the production volume of our manufacturing facilities;
- increase our production of sub-assemblies, manufacturing kits and
structural components by more effective use of our broad, flexible
manufacturing capabilities;
- continue to centralize various administrative functions at the corporate
level to generate economies of scale and minimize costs;
- continue to update and consolidate our management information systems to
improve internal controls and coordinate operations;
- consolidate engineering functions;
- improve marketing by proactively marketing our broad, flexible
manufacturing capabilities;
- target customers that our subsidiaries could not significantly penetrate
individually;
- increase outsourcing of some production functions to small machine shops
to increase manufacturing efficiencies and capacity; and
- diversify our revenue mix among aerospace customers by targeting the
Airbus and the business jet markets, and United States military programs.
RECENT DEVELOPMENTS
On July 30, 1999 we acquired Trim and its subsidiaries in the United
Kingdom. Trim's subsidiaries are Trefn, Trefn Fabrications, Trefn Metal
Treatments, Diac and Maybrey. Trim and its subsidiaries primarily produce parts
and sub-assemblies for divisions of Airbus. You should read the discussions
under the headings "Risk Factors--Our International Operations Are Subject To A
Number Of Risks That Could Adversely Affect The Results From These Operations
And Our Overall Business," "Risk Factors--Our Other Operations Are Located In
The United States And We May Not Have The Resources To Successfully Integrate
And Manage Our Combined Entity," "Unaudited Pro Forma Financial Data" and "The
Business" for further information on the business of Trim and the effects on us
of our acquisition of Trim.
------------------------
Our principal executive offices are located at 1501 Hughes Way, Suite 400,
Long Beach, California 90810. Our telephone number is (310) 522-0600.
6
<PAGE>
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The exchange offer relates to the exchange of up to $110.0 million aggregate
principal amount of outstanding Series A notes for an equal aggregate principal
amount of Series B notes and to the exchange of up to $19.0 million aggregate
principal amount of outstanding Series C Notes for an equal aggregate principal
amount of Series D notes. The Series B notes will be obligations of ours
entitled to the benefits of the indenture governing the Series A notes, and the
Series D notes will be obligations of ours entitled to the benefits of the
indenture governing the Series C notes. The Series B and Series D notes will be
fully, irrevocably and unconditionally guaranteed by each of our subsidiaries
except for Maybrey on a joint and several basis. The form and terms of the
Series B notes are identical in all material respects to the form and terms of
the Series A notes and the form and term of the Series D notes are identical in
all material respects to the form and terms of the Series C notes, except that
the Series B and Series D notes have been registered under the Securities Act.
<TABLE>
<S> <C>
Termination of Rights................... You are entitled to exchange your notes for registered notes that are
identical in all material respects to the form and terms of the Series
A or Series C notes that you hold, except for various transfer
restrictions and registration rights. The exchange offer is intended
to satisfy these rights. After the exchange offer is complete, you
will no longer be entitled to any exchange or registration rights with
respect to your notes.
The Exchange Offer...................... We are offering to exchange $1,000 principal amount of Series B notes
which have been registered under the Securities Act for each $1,000
principal amount of Series A notes which we issued in April 1998 in a
private offering. We are also offering to exchange $1,000 principal
amount of Series D notes which have been registered under the
Securities Act for each $1,000 principal amount of Series C notes
which we issued in July 1999 in a private offering. In order to be
exchanged, an outstanding note must be properly tendered and accepted.
All outstanding notes that are validly tendered, and not validly
withdrawn, will be exchanged. We will issue registered notes on or
promptly after the expiration of the exchange offer.
At this date there is $129.0 million principal amount of notes
outstanding.
Resale of the Series B and Series D
Notes................................. Based on an interpretation of the staff of the Securities and Exchange
Commission set forth in no-action letters issued to third parties,
including "Exxon Capital Holdings Corporation" (available May 13,
1988), "Morgan Stanley & Co. Incorporated" (available June 5, 1991),
"Mary Kay Cosmetics, Inc." (available June 5, 1991) and "Warnaco,
Inc." (available October 11, 1991), we believe that the notes issued
in the exchange offer may be offered for resale, resold and otherwise
transferred by you without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that:
- the notes issued in the exchange offer are being acquired in the
ordinary course of business;
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
- you are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in
a distribution of the notes issued to you in the exchange offer;
- you are not a broker-dealer who purchased such notes directly from
us for resale pursuant to Rule 144A or any other available
exemption under the Securities Act; and
- you are not an "affiliate" of ours.
If our belief is inaccurate and you transfer any note issued to you in
the exchange offer without delivering a prospectus meeting the
requirements of the Securities Act or without an exemption from
registration of your notes from such requirements, you may incur
liability under the Securities Act. We do not assume or indemnify you
against such liability.
Expiration Date......................... The exchange offer will expire at 5:00 p.m., New York City time, on
, 1999, or, at our option, at the time that 100% of the
outstanding notes have been validly tendered and not withdrawn, unless
we decide to extend the expiration date.
Accrued Interest on the Series B and
Series D Notes and Series A and Series
C Notes............................... The Series B and Series D notes will bear interest from their date of
issuance. Holders of Series A and Series C notes whose notes are
accepted for exchange will be deemed to have waived the right to
receive any payment of interest on such outstanding notes accrued on
and after the date of issuance of the Series B and Series D notes.
Consequently, holders who exchange their Series A notes for Series B
notes and holders who exchange their Series C notes for Series D notes
will receive the same interest payment on April 15, 2000, which is the
fourth interest payment date with respect to the Series A notes, the
second interest payment date with respect to the Series C notes, and
the first interest payment date with respect to the Series B and
Series D notes to be issued in the exchange offer, that they would
have received had they not accepted the exchange offer.
Termination of the Exchange Offer....... We may terminate the exchange offer if we determine that our ability
to proceed with the exchange offer could be materially impaired due to
any legal or governmental action, new law, statute, rule or regulation
or any interpretation of the staff of the Commission of any existing
law, statute, rule or regulation. We do not expect any of the
foregoing conditions to occur, although there can be no assurance that
such conditions will not occur. Holders of outstanding notes will have
rights against us under the registration rights agreements executed as
part of the offerings of the Series A and Series C notes should we
fail to consummate the exchange offer.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Procedures for Tendering Outstanding
Notes................................. If you are a holder of a note and you wish to tender your note for
exchange pursuant to the exchange offer you must transmit to The Bank
of New York, as exchange agent, on or prior to the expiration date:
either:
- a properly completed and duly executed letter of transmittal, which
accompanies this prospectus, or a facsimile of the letter of
transmittal, the certificates for the outstanding notes being
tendered, and all other documents required by the letter of
transmittal, to the exchange agent at the address set forth on the
cover page of the letter of transmittal; or
- a computer-generated message transmitted to The Depository Trust
Company by means of the Automated Tender Offer Program system and
received by the exchange agent and forming a part of a confirmation
of book entry transfer in which you acknowledge and agree to be
bound by the terms of the letter of transmittal;
and, either
- a timely confirmation of book-entry transfer of your outstanding
notes into the exchange agent's account at DTC pursuant to the
procedure for book-entry transfers described in this prospectus
under the headings "The Exchange Offer-- Procedures for Tendering
Outstanding Notes," and "The Exchange Offer--Book-Entry Transfer;"
or
- the documents necessary for compliance with the guaranteed delivery
procedures described below, must be received by the Exchange Agent
on or prior to the expiration date.
By executing the letter of transmittal, each holder will represent to
us that, among other things:
- the notes to be issued in the exchange offer are being obtained in
the ordinary course of business of the person receiving such notes
whether or not such person is the holder;
- neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of
such notes; and
- neither the holder nor any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act, of ours.
Special Procedures for Beneficial
Owners................................ If you are the beneficial owner of outstanding notes and your name
does not appear on a security position listing of DTC as the holder of
such notes or if you are a beneficial owner of outstanding notes that
are registered in the name of a broker, dealer, commercial bank, trust
company or other nominee and you wish to tender such notes in the
exchange offer, you should
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
contact the person in whose name your notes are registered promptly
and instruct that person to tender on your behalf. If you are a
beneficial owner and you wish to tender your outstanding notes on your
own behalf you must, prior to completing and executing the letter of
transmittal and delivering your outstanding notes, either make
appropriate arrangements to register ownership of the outstanding
notes in your name or obtain a properly completed bond power from the
registered holder. The transfer of record ownership may take
considerable time.
Guaranteed Delivery Procedures.......... If you wish to tender your notes and time will not permit your
required documents to reach the exchange agent by the expiration date,
or the procedure for book-entry transfer cannot be completed on time
or certificates for outstanding notes cannot be delivered on time, you
may tender your notes pursuant to the procedures set forth under the
heading "The Exchange Offer-- Guaranteed Delivery Procedures."
Withdrawal of Tenders................... You may withdraw the tender of your notes at any time before 5:00
p.m., New York City time, on , 1999, one business day prior to
the expiration date, unless your notes were previously accepted for
exchange.
Acceptance of Outstanding Notes and
Delivery of Series B and Series D
Notes................................. Subject to various conditions, including those summarized above in
"Termination of the Exchange Offer" and described more fully under the
heading "The Exchange Offer--Termination," we will accept for exchange
any and all outstanding notes which are properly tendered in the
exchange offer prior to 5:00 p.m., New York City time, on the
expiration date. The notes issued pursuant to the exchange offer will
be delivered promptly following the expiration date.
Federal Income Tax Consequences......... We believe the exchange of the Series B notes for the Series A notes
and the exchange of the Series D notes for the Series C notes should
not be a sale or exchange for United States federal income tax
purposes and therefore, that you will not recognize any taxable gain
or loss or any interest income as a result of such exchange.
Use of Proceeds......................... We will not receive any proceeds from the issuance of notes pursuant
to the exchange offer. We will pay all expenses incident to the
exchange offer.
Exchange Agent.......................... The Bank of New York is serving as the exchange agent in connection
with the exchange offer. The exchange agent can be reached at The Bank
of New York, Debt Processing Group-7E, P.O. Box 11265, New York, NY
10286. For more information with respect to the exchange offer, the
telephone number for the exchange agent is (212) 815-2568. The
facsimile for the exchange agent is (212) 815-6339.
</TABLE>
10
<PAGE>
SUMMARY DESCRIPTION OF THE SERIES B AND SERIES D NOTES
The terms of the Series A notes and the Series B notes are identical in all
material respects, except that the Series A notes are subject to various
transfer restrictions and have registration rights that the Series B notes do
not. The terms of the Series C notes and the Series D notes are identical in all
material respects, except that the Series C notes are subject to various
transfer restrictions and have registration rights that the Series D notes do
not.
<TABLE>
<S> <C>
Notes Offered to Holders of
Series A Notes................ $110.0 million aggregate principal amount of 10 1/8%
Series B senior subordinated notes due 2005.
Notes Offered to Holders of
Series C Notes................ $19.0 million aggregate principal amount of 10 1/8% Series
D senior subordinated notes due 2005.
Issuer.......................... Compass Aerospace Corporation
Maturity Date................... April 15, 2005.
Interest Payment Dates.......... April 15 and October 15 of each year, commencing April 15,
2000.
Ranking......................... The Series B and Series D notes will be unsecured senior
subordinated obligations and will be subordinated to all
our existing and future senior indebtedness. The Series B
and Series D notes will rank equal to each other and
senior to or equal to all our existing and future
subordinated indebtedness. Because the Series B and Series
D notes are subordinated to our senior indebtedness, in
the event of bankruptcy, liquidation or dissolution,
holders of the Series B and Series D notes will not
receive any payment until holders of senior indebtedness
have been paid in full. The terms "senior indebtedness"
and "subordinated indebtedness" are defined in the
"Description of the Series B Notes--Subordination,"
"Description of the Series B Notes--Definitions,"
"Description of the Series D Notes--Subordination"and
"Description of the Series D Notes-- Definitions" sections
of this prospectus.
At August 31, 1999 we had outstanding $106.7 million of
senior indebtedness which will rank senior to the Series B
and Series D notes and $131.6 million of senior
subordinated indebtedness.
Guarantees...................... The Series B and Series D notes will be jointly and
severally, fully, irrevocably and unconditionally
guaranteed on a senior subordinated basis by each of our
present and future restricted subsidiaries. The guarantees
will be unsecured senior subordinated obligations of our
restricted subsidiaries and will be subordinated to all
existing and future senior indebtedness of our restricted
subsidiaries. At June 30, 1999 our subsidiaries had $5.1
million of indebtedness outstanding.
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
Optional Redemption............. We may redeem the Series B or Series D notes, in whole or
in part, at any time on or after April 15, 2002, at the
redemption prices set forth in this prospectus. You should
read the discussions under the headings "Description of
the Series B Notes--Optional Redemption" and "Description
of the Series D Notes--Optional Redemption" for more
information on the optional redemption of the notes.
Public Equity Offering Optional
Redemption of Series B and
Series D Notes................ Before April 15, 2001, we may redeem up to 35% of the
aggregate principal amount of the Series B notes
originally outstanding with the net proceeds of a public
equity offering at 110.125% of the principal amount of the
redeemed notes, plus accrued interest, if at least 65% of
the aggregate principal amount of the Series B notes
originally issued remains outstanding after such
redemption. Before April 15, 2001, we may also redeem up
to 35% of the aggregate principal amount of the Series D
notes originally outstanding with the net proceeds of a
public equity offering at 110.125% of the principal amount
of the redeemed notes, plus accrued interest, if at least
65% of the aggregate principal amount of the Series D
notes originally issued remains outstanding after such
redemption. You should read the discussions under the
headings "Description of the Series B Notes--Optional
Redemption" and "Description of the Series D
Notes--Optional Redemption" for more information on the
optional redemption of the Series B and Series D notes.
Change of Control............... Upon a change of control event, each holder of Series B or
Series D notes may require us to repurchase all or a
portion of their Series B or Series D notes at a purchase
price equal to 101% of the principal amount of the
repurchased notes, plus accrued interest. You should read
the discussions under the headings "Description of the
Series B Notes--Covenants," "Description of the Series B
Notes--Definitions," "Description of the Series D
Notes--Covenants" and "Description of the Series D
Notes--Definitions" for a more complete definition of
"Change of Control."
Covenants....................... The indenture governing the Series B notes and the
indenture governing the Series D notes each contain
covenants that, among other things, will limit our ability
and the ability of our restricted subsidiaries to:
- incur additional indebtedness,
- issue some kinds of capital stock,
- pay dividends or make other distributions with
respect to our capital stock,
- create liens,
- sell assets,
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
- sell the capital stock of our subsidiaries,
- engage in transactions with affiliates, and
- effect consolidations or mergers.
These covenants are subject to important exceptions and
qualifications which are described under the headings
"Description of the Series B Notes" and "Description of
the Series D Notes" in this prospectus.
Exchange Offer; Registration
Rights........................ In connection with the offering of the Series A notes, we
entered into a registration rights agreement with
Donaldson, Lufkin & Jenrette Securities Corporation,
BancBoston Securities Inc. and Libra Investments, Inc., as
the initial purchasers of the Series A notes. We also
entered into a registration rights agreement with
BancBoston Robertson Stephens Inc. as the initial
purchasers of the Series C notes in connection with the
offering of the Series C notes. Under the registration
rights agreements, we agreed to register new notes and
exchange them for the Series A or Series C notes. Upon
completion of this exchange offer, the Series B and Series
D notes and the remaining outstanding Series A and Series
C notes will not be entitled to the benefits of the
registration rights granted under the registration rights
agreements. You should read the discussion under the
heading "The Exchange Offer--Conditions of the Exchange
Offer" for further information about these registration
rights.
</TABLE>
13
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
In the table below, we provide you with a summary of our historical
consolidated financial data. We have prepared this information using our
consolidated financial statements as of and for the period October 21, 1997, the
date of incorporation through December 31, 1997 and for the year ended December
31, 1998. These financial statements have been audited by Ernst & Young LLP,
independent auditors. We have also included data from our unaudited consolidated
financial statements as of and for the six months ended June 30, 1998 and 1999.
This data does not include financial information for Trim and its subsidiaries
which we acquired on July 30, 1999.
When you read this summary historical consolidated financial data, it is
important that you read along with it the historical consolidated financial
statements and the related notes thereto, as well as the sections titled
"Unaudited Pro Forma Financial Data," "Selected Historical Consolidated
Financial Data" and "Management's Discussion and Analysis of Consolidated
Financial Condition and Consolidated Results of Operations," included elsewhere
in this prospectus.
<TABLE>
<CAPTION>
COMPASS
----------------------------------------------------
YEAR 36 DAYS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1998 1997 1999 1998
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues................................................. $ 96,547 $ 3,057 $ 67,116 $ 34,851
Gross profit............................................. 26,137 671 19,304 8,812
Operating income......................................... 11,600 267 7,520 4,062
Net income (loss)........................................ 915 74 (1,953) 918
Other Data:
Cash flow provided by (used in):
operating activities................................... $ (6,677) $ 269 $ 1,856 $ 1,969
investing activities................................... (172,117) (23,456) (2,750) (77,985)
financing activities................................... 186,222 23,630 119 103,105
Net increase in cash..................................... 7,428 443 (775) 27,089
EBITDA(1)................................................ 20,550 486 15,648 6,633
EBITDA margin............................................ 21.3% 15.9% 23.3% 19.0%
Depreciation and amortization............................ $ 8,440 $ 219 $ 8,766 $ 2,713
Capital expenditures..................................... 5,701 25 2,750 3,009
Balance Sheet Data (at period end):
Cash and cash equivalents................................ $ 7,871 $ 443 $ 7,096 $ 27,532
Total assets............................................. 255,505 33,789 248,129 158,306
Long-term obligations (including current portion)(2)..... 196,968 20,585 197,087 115,442
Stockholders' Equity..................................... 29,955 9,074 28,002 29,958
</TABLE>
- ------------------------
(1) EBITDA is defined as operating income plus depreciation, goodwill
amortization and management fees paid to an affiliate. EBITDA is not a
defined term under generally accepted accounting principles ("GAAP") and
should not be construed as an alternative to operating income or cash flows
from operating activities as determined by GAAP. EBITDA data is presented
because such data is used by some investors to determine our ability to meet
debt service requirements and is used in some debt covenant calculations
required under the indentures and our existing credit agreement. EBITDA is
not indicative of our operating performance, does not provide a measure of
liquidity and does not represent our available or discretionary funds.
Furthermore, EBITDA as reported by us may not be comparable to EBITDA
reported by other companies.
(2) Long-term obligations include long-term debt, including the current portion,
and capital leases.
14
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
In the table below, we provide you with the ratio of earnings to fixed
charges for us and our predecessor, Brittain Machine.
<TABLE>
<CAPTION>
BRITTAIN MACHINE FOR
----------------------------------------------------
COMPASS FOR THE THE YEARS ENDED JUNE 30,
THE PERIOD FROM ---------------------------------
YEARS ENDED DECEMBER JULY 1, 1997 1995
31, THROUGH -----
-------------------- APRIL 21,
1998 1997 1998 1997 1996 (UNAUDITED)
--------- --------- ----------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1)............. 1.3x 1.5x 20.6x 14.6x 10.9x
<CAPTION>
COMPASS FOR THE
------------------------------
1994 SIX MONTHS SIX MONTHS
--------- ENDED ENDED
JUNE 30, JUNE 30,
1999 1998
--------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Ratio of earnings to fixed charges(1)............. 10.4x 1.6x
</TABLE>
- ------------------------------
(1) The ratio of earnings to fixed charges has been calculated by dividing
income before income taxes and fixed charges, by fixed charges. Fixed
charges consist of interest expense and 33% of operating rental expense,
which management believes is representative of the interest component of
rental expense. Earnings were insufficient to cover fixed charges for the
year ended June 30, 1995 and the six months ended June 30, 1999 by $0.4
million and $3.4 million, respectively.
15
<PAGE>
RISK FACTORS
You should carefully consider the following factors and other information in
this prospectus before deciding to invest in the notes.
WE HAVE A SIGNIFICANT AMOUNT OF DEBT WHICH LIMITS OUR FLEXIBILITY AND INCREASES
OUR VULNERABILITY TO A DECREASE IN REVENUES OR CASH FLOW AND WHICH MAY AFFECT
OUR ABILITY TO FULFILL OUR OBLIGATIONS UNDER THE NOTES
At June 30, 1999 we had approximately $197.1 million of consolidated
indebtedness outstanding, approximately $7.1 million of cash, approximately
$248.1 million of total assets, approximately $129.8 million of total tangible
assets and approximately $28.0 million of stockholders' equity. On a pro forma
basis, our EBITDA for the year ended December 31, 1998 would have equaled 2.7
times pro forma net interest expense. On a pro forma basis at December 31, 1998,
we would have had net debt equal to 3.9 times pro forma 1998 EBITDA. You should
read the discussions under the headings "Capitalization," "Management's
Discussion and Analysis of Consolidated Financial Condition and Consolidated
Results of Operations" and "Unaudited Pro Forma Financial Data" for further
information on our financial results.
Our high level of indebtedness could have important consequences to note
holders such as:
- limiting our ability to obtain additional financing to fund our working
capital needs, capital expenditures, debt service requirements or other
purposes;
- limiting our ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of these funds to
make principal payments and pay interest expense;
- increasing our vulnerability to a decrease in revenues or cash flow
because a greater portion of our resources must be dedicated to servicing
our debt obligations and we may have fewer resources available to assist
us in maintaining our business operations during adverse conditions; and
- increasing our vulnerability to interest rate increases because borrowings
under our bank credit facilities are at variable interest rates.
Pro forma interest expense for the year ended December 31, 1998 was $23.3
million which was 37.7% of pro forma EBITDA for the year ended December 31,
1998. Pro forma interest expense for the six months ended June 30, 1999 was
$12.0 million which was 61.0% of pro forma EBITDA for the six months ended June
30, 1999.
Our ability to pay interest on the notes and to satisfy our other debt
obligations will depend upon, among other things, our future operating
performance and our ability to refinance indebtedness when necessary. Each of
these factors is to a large extent dependent on economic, financial, competitive
and other factors beyond our control. If, in the future, we cannot generate
sufficient cash from operations to make scheduled payments on the notes or to
meet our other obligations we will need to refinance, obtain additional
financing or sell assets. We cannot assure you that our business will generate
cash flow, or that we will be able to obtain funding sufficient to satisfy our
debt service requirements.
WE ARE DEPENDENT ON A KEY CUSTOMER AND COULD SUFFER FINANCIAL HARM IF WE WERE TO
LOSE THAT CUSTOMER'S BUSINESS
Our largest customer is Boeing, which directly accounted for approximately
59.0% of our combined pro forma revenues for the year ended December 31, 1998.
In addition, approximately 11.0% of the remainder of our combined pro forma
revenues for the year ended December 31, 1998 were derived from Boeing
indirectly through sales to suppliers of Boeing. Most of our sales to Boeing are
16
<PAGE>
pursuant to contracts and purchase orders which may be terminated by Boeing at
any time. Boeing has announced that it will stop producing the MD-80 and MD-90
in 2000 and the MD-11 in 2001, models for which we currently produce parts, and
may stop producing other models for which we produce parts. In addition, under
some circumstances, Boeing may enforce alternative economic terms pursuant to
such contracts, in which case the contracts could become less commercially
favorable to us. Alternatively, we may elect to terminate the applicable portion
of such contracts. We cannot assure you that Boeing will not terminate its
contracts with us, or that we will be able to maintain our current level of
sales to Boeing and Boeing's suppliers.
Our subsidiaries that operate in the United States have experienced a
decrease in the value and number of orders from Boeing for delivery in 1999 as
compared to 1998. Boeing has announced it intends to increase its annual
inventory turn rate, which is currently approximately two times, to an annual
inventory turn rate of four times. We believe the reduction in the value and
number of orders from Boeing is due to changes in Boeing's purchasing practices
implemented as part of Boeing's strategy to reduce inventories and increase its
use of just-in-time manufacturing techniques. In addition, Boeing is forecasting
a reduction in its delivery of commercial aircraft to 480 aircraft in 2000
relative to projected deliveries of 620 aircraft in 1999, which may also reduce
the value and number of orders we receive from Boeing. Furthermore, Boeing
recently entered into an agreement with the union which represents approximately
30% of its employees in which Boeing agreed it would not lay off employees due
to Boeing's use of subcontractors. Boeing also agreed to establish a joint
labor-management committee to review outsourcing plans, although Boeing retains
the right to outsource to subcontractors. As a result of the new agreement with
the union, Boeing may produce some parts itself rather than outsourcing
production of parts to subcontractors such as ourselves. Boeing orders could
continue to decline and we cannot assure you that Boeing orders will increase or
return to the 1998 level in 1999 or in 2000. The loss of all or a substantial
portion of our revenues from Boeing could have a material adverse effect on our
business, financial condition or results of operations.
WE ARE DEPENDENT ON THE COMMERCIAL AIRCRAFT INDUSTRY WHICH HAS HISTORICALLY BEEN
HIGHLY CYCLICAL AND COULD SUFFER FINANCIALLY IF A DOWNWARD CYCLE CONTINUED TOO
LONG
Changes in the rate of future aircraft deliveries, including cancellations
or deferrals of scheduled deliveries, could have a material adverse effect on
our business, financial condition or results of operations because our principal
customers are commercial aircraft manufacturers. Our business is closely related
to the financial performance of the commercial airlines, which has historically
been highly cyclical and competitive. Consequently, demand from the aircraft
industry has historically been subject to cyclical fluctuations and has been
adversely affected in the past by a number of factors, including, but not
limited to, increased fuel and labor costs and intense price competition.
Several domestic and foreign commercial airlines have in the past encountered
significant financial difficulties, resulting in several airlines delaying
aircraft orders, canceling their options to purchase aircraft, or seeking
protection under bankruptcy laws. Deferrals or cancellations in aircraft orders
could adversely affect the volume and price of orders placed for products used
to manufacture commercial aircraft, including the individual parts and
sub-assemblies, manufacturing kits and structural components we manufacture. You
should read the discussion under the heading "Business--Industry Overview and
Trends" for more information on the commercial aircraft industry.
In particular, Boeing has developed a large backlog of aircraft sales to
customers in Asia. Recent financial turmoil in Asia, including currency
devaluations affecting Boeing's Asian customers, has resulted in Boeing
announcing that it will adjust its production schedule over the next several
years to adjust for delays or cancellations of orders. One Boeing customer, the
People's Republic of China, has announced that it will seek to postpone
deliveries of approximately 25 aircraft from Boeing presently scheduled for
delivery in 2000 and 2001. Boeing has announced that it expects to deliver 480
aircraft in 2000, compared to expected deliveries of approximately 620 aircraft
in 1999. Boeing's changes in its
17
<PAGE>
production schedules may reduce Boeing's demand for our products and could thus
have a material adverse effect on our business, financial condition or results
of operations.
RESTRICTIVE COVENANTS IN OUR INDENTURES AND OUR CREDIT AGREEMENT COULD CAUSE US
TO DEFAULT AND ACCELERATE OUR INDEBTEDNESS UNDER THE CREDIT AGREEMENT
If we fail to meet various restrictive covenants in the indentures governing
our notes or in our credit agreement, we could default and our payments could be
accelerated. In such an event, sufficient funds may not be available to pay the
noteholders. The restrictive covenants, among other things, restrict us and our
restricted subsidiaries from:
- incurring additional indebtedness;
- incurring liens;
- paying dividends;
- making some types of other restricted payments or investments;
- consummating some types of asset sales;
- entering into some types of transactions with affiliates;
- merging or consolidating with another entity;
- disposing of all or substantially all of our assets; and
- prepaying the notes, except in a few specific circumstances.
The credit agreement also requires us to maintain specified financial ratios
and satisfy various financial tests. At March 31, 1999 we failed to meet three
of the financial covenants under our credit agreement. We have retroactively
amended the credit agreement effective March 31, 1999 such that we are deemed to
have been in compliance on March 31, 1999 and we are in compliance with the
financial covenants at this time. We cannot assure you that we will be able to
continue to meet such tests. Our ability to meet such financial ratios and tests
may be affected by events beyond our control. A breach of any of these covenants
could result in an event of default under the credit agreement. If such an event
of default occurs, the lenders could accelerate our indebtedness to them under
the credit agreement. We cannot assure you that our assets would be sufficient
to repay our indebtedness in full, including the notes. You should read the
discussions under the headings "Description of the Series B Notes--Covenants,"
"Description of the Series D Notes--Covenants" and "Description of Credit
Agreement" for more details about our indebtedness.
WE BEGAN OPERATIONS IN NOVEMBER 1997 AND WE MAY NOT HAVE THE RESOURCES TO
SUCCESSFULLY INTEGRATE AND MANAGE OUR COMBINED ENTITY
We began operations in November 1997. Between November 1997 and July 1999,
we acquired fourteen operating companies. Prior to our acquisition of our
subsidiaries in the United States, each of those subsidiaries operated
independently. Trim and its subsidiaries operated as a group prior to our
acquisition of those subsidiaries. We may not be able to integrate these
businesses successfully. Our combined financial results covers periods when all
of our subsidiaries were not under the common control of our management and may
not be indicative of our future financial or operating results. In addition, our
management group has been assembled only recently. Our management control
structure is still in its formative stages and we are currently seeking
additional qualified senior managers. Our ability to continue to achieve our
goals will depend upon our ability to integrate effectively our prior and any
future acquisitions and to achieve operating and cost efficiencies. Any failure
by us to effectively oversee the combined entity could have a material adverse
effect on our business, financial condition, or results of operations.
18
<PAGE>
OUR INTERNATIONAL OPERATIONS ARE SUBJECT TO A NUMBER OF RISKS THAT COULD
ADVERSELY AFFECT THE RESULTS FROM THESE OPERATIONS AND OUR OVERALL BUSINESS
Trim and its subsidiaries were our first acquisitions outside the United
States. For the six months ended June 30, 1999 on a pro forma basis,
approximately 25.0% of our combined revenues would be derived from our
international operations. Having acquired our subsidiaries located in the United
Kingdom will require us to manage international operations for the first time.
International operations generally are subject to a number of risks including:
- foreign currency risks
- differences in accounting practices
- work stoppages
- transportation delays and interruptions
- tariffs and import and export controls
- differing licensing and permit requirements
- conflicting U.S. and foreign laws
We cannot predict what effect, if any, these risks would have on our
business.
WE MAY HAVE ACQUIRED UNKNOWN OR UNDISCOVERED LIABILITIES WHEN WE ACQUIRED TRIM
AND ITS SUBSIDIARIES WHICH MAY AFFECT OUR FINANCIAL CONDITION
Although we have performed a legal and financial due diligence investigation
of Trim and its
subsidiaries, including environmental studies of Trim and its subsidiaries'
major facilities, unknown or undisclosed legal, financial or operational
weakness or liabilities may exist or arise. We could become liable as a
successor owner of Trim and its subsidiaries for such liabilities, which could
include, among other things, liabilities arising from litigation, product
liability claims, employee benefit obligations or non-compliance with
environmental requirements of taxation regulation. Although the terms of the
share purchase agreement relating to our acquisition of Trim and its
subsidiaries is likely to provide warranty protection in relation to such
potential liabilities, we cannot assure you that we will be able to enforce
those warranties, which are in themselves subject to significant limitations, or
that they would be sufficient to fully protect us against such liabilities. The
acquisition or undisclosed or unknown liabilities could have a material adverse
effect on our business, financial condition, or results of operations.
WE MAY NOT HAVE THE RESOURCES TO SUCCESSFULLY INTEGRATE AND MANAGE OUR
OPERATIONS LOCATED IN THE UNITED STATES WITH OUR OPERATIONS LOCATED IN THE
UNITED KINGDOM
We may not be able to successfully integrate our operations in the United
States with our operations in the United Kingdom. The consolidated financial
results of Trim cover periods when Trim and its subsidiaries were not under the
common control of our management and may not be indicative of our future
financial or operating results. Our ability to continue to achieve our goals
will depend upon our ability to integrate our United Kingdom operations
effectively with our companies that operate in the United States and to achieve
operating and cost efficiencies. Any failure by us to effectively oversee the
combined entity could have a material adverse effect on our business, financial
condition, or results of operations.
19
<PAGE>
WE ARE DEPENDENT ON CUSTOMER CERTIFICATION OF OUR MANUFACTURING FACILITIES WHICH
COULD BE TERMINATED RESULTING IN FINANCIAL LOSS
We manufacture parts to exact specifications provided by our aerospace
customers in engineering drawings. You should read the discussions under the
headings "Business--Operations--Certification" and "Business--Sales and
Marketing" for more information on our manufacturing and operations. Our
customers require us to perform quality standards testing and certification
procedures on all manufactured parts and provide detailed records to ensure
traceability of each part. Our customers typically certify our manufacturing
facilities as meeting their quality standards. Such customer certification is
necessary for us to manufacture parts for our aerospace customers. From time to
time, other aerospace industry subcontractors have lost their customer
certifications by reason of, among other things, problems with product quality,
manufacturing processes or documentation. We have no reason to believe that any
of our certified manufacturing facilities will lose any of their customer
certifications, but we cannot assure you that such an event will not occur. If a
significant customer were to terminate our facility certification at one or more
of our facilities, it could have a material adverse effect on our business,
financial condition or results of operations.
YOU MAY NOT BE ABLE TO RELY ON FORWARD LOOKING STATEMENTS BECAUSE UNEXPECTED
CIRCUMSTANCES COULD ALTER CONDITIONS AND HARM OUR BUSINESS
This prospectus contains forward looking statements which involve risks and
uncertainties. Those statements appear in a number of places in this prospectus.
We have based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are subject to
risks, uncertainties, and assumptions about us, including, among other things:
- Our anticipated growth strategies,
- Our expected internal growth,
- Our intention to produce integrated parts,
- Technological advances in our industry,
- Anticipated trends and conditions in our industry,
- The on-going needs of our existing customers, especially Boeing,
- Our ability to integrate acquired businesses,
- Our ability to expand our customer base,
- Our future capital needs,
- Our future operating performance,
- Our ability to compete, including internationally, and
- Our ability to complete our Year 2000 readiness program.
In light of these risks, uncertainties, and assumptions, the forward-looking
events discussed in this prospectus might not occur. You should be aware that
any such forward looking statements are not guarantees of future performance and
that actual results may differ from those in the forward looking statements as a
result of various factors. The accompanying information contained in this
prospectus identifies important factors that could cause such differences.
20
<PAGE>
OUR CONTRACTS ASSOCIATED WITH OUR BACKLOG COULD BE TERMINATED, WHICH WOULD
DECREASE OUR FUTURE REVENUE
Our backlog and bookings are subject to fluctuations and are not necessarily
indicative of future revenues. Our contracts typically contain contingency
provisions permitting termination by the customer at any time without penalty.
We cannot assure you that backlog will be completed and booked as revenue.
Cancellations of pending contracts or terminations or reductions of contracts in
progress could have a material adverse effect on our business, financial
condition or results of operations. You should read the discussion under the
heading "Business--Backlog" for more information on how backlog affects our
business.
WE MAY BE EXPOSED TO ENVIRONMENTAL RISKS AT OUR MANUFACTURING FACILITIES AND ARE
SUBJECT TO ENVIRONMENTAL REGULATION
We are subject to federal, state, local and foreign laws, regulations and
ordinances establishing health and environmental quality standards, and may be
subject to liabilities or penalties for violations of those standards. We are
also subject to laws and regulations governing remediation of contamination at
facilities currently or formerly owned or operated by us or to which we have
sent hazardous substances or wastes for treatment, recycling or disposal. We
acquire, and expect to continue to acquire, pre-existing businesses that have
historical and ongoing operations. We have and will have limited information
about the past activities of those businesses and their operations on the
acquired properties. We have acquired at least one leased property that is
currently under investigation by governmental authorities for groundwater
contamination and we have been asked to conduct additional investigations. We
have also been named a defendant in an action filed by an owner of property
adjacent to property we lease. At this time, we cannot determine, in either
case, what cleanup activities, if any, will be required. Soil and groundwater
contamination may also exist on our other properties as a result of current or
former operations on our properties, or operations on other properties. We may
be subject to future liabilities or obligations as a result of new or more
stringent interpretations of existing laws and regulations. In addition, we may
have liabilities or obligations in the future if we discover any environmental
contamination or liability at any of our facilities, or at facilities we may
acquire. Such matters may have a material adverse effect on our business,
financial condition or results of operations.
WE MAY BE REQUIRED TO PAY OUT OF POCKET COSTS IF AVIATION-RELATED OR PRODUCT
LIABILITY CLAIMS EXCEED INSURANCE COVERAGE
We currently carry aviation products insurance. To date, we have not
experienced any significant uninsured or insured aviation-related claims or any
material product liability claims. However, we cannot assure you that our
existing insurance coverage will be adequate to cover future claims that may
arise or we will be able to renew such coverage at commercially reasonable
rates.
FRAUDULENT TRANSFER STATUTES MAY LIMIT YOUR RIGHTS AS A NOTE HOLDER TO RECEIVE
PAYMENTS ON THE NOTES
Each of our restricted subsidiaries is a guarantor of the notes. In the
event of the bankruptcy or other financial difficulty of a guarantor, the
guarantees of the notes by the guarantors may be subject to review under state
or federal fraudulent transfer laws. Under those laws a court could avoid a
guarantor's guarantee and direct the return of any amounts paid under its
guarantee to the guarantor or to a fund for the benefit of the guarantor's
creditors. As a result, such funds would not be available to repay the
guarantor's obligations to the note holders. A court would consider factors such
as whether a guarantor received less than fair consideration for incurring its
obligations under its guarantee, and whether:
- a guarantor was insolvent at the time it entered into the guarantee or was
rendered insolvent by entering into the guarantee;
21
<PAGE>
- a guarantor's remaining unencumbered assets constituted sufficient capital
for the conduct of the guarantor's business or operations; and
- a guarantor intended to incur or believed it would incur debts beyond its
ability to pay as such debts matured.
A court could also avoid a guarantor's guarantee if it found that the
guarantor entered into the guarantee with the actual intent to hinder, delay or
defraud its creditors.
If a guarantor's liability under its guarantee exceeds the amount by which
the guarantor directly benefits from the proceeds of the notes, a court is
likely to find that it did not receive fair consideration or reasonably
equivalent value for its guarantee.
A court will use a different measure of insolvency for purposes of the
foregoing depending on the law of the jurisdiction being applied. Generally,
however, an entity would be considered insolvent if the sum of its debts is
greater than all of its property at a fair valuation or if the present fair
market value of its assets is less than the amount that will be required to pay
its probable liability on its existing debts as they become absolute and mature.
Similar laws exist in the United Kingdom with respect to the above matters.
THE NOTES WILL BE SUBORDINATED TO OUR OTHER DEBT AND OUR HOLDING COMPANY
STRUCTURE MAY ADVERSELY AFFECT OUR ABILITY TO MEET OUR OBLIGATIONS UNDER THE
NOTES
The outstanding Series A and Series C notes and the Series B and Series D
notes will rank equally in right of payment and will be subordinated in right of
payment to all our existing and future senior indebtedness. In addition, the
guarantees effectively rank junior to the senior debt of our restricted
subsidiaries. At June 30, 1999 we had outstanding $82.0 million of senior
indebtedness and $110.0 million of senior subordinated indebtedness and our
subsidiaries had $5.1 million in outstanding indebtedness. At June 30, 1999
after giving pro forma effect to the acquisition of Trim and its subsidiaries
and the related financial transactions, we would have had outstanding $101.7
million of senior indebtedness and $131.6 million of senior subordinated
indebtedness and our subsidiaries would have had $5.1 million in outstanding
indebtedness. We may also incur additional senior indebtedness consistent with
the terms of our debt agreements, such as borrowings in connection with future
acquisitions.
In the event of our default in any payment due on our senior indebtedness,
or our bankruptcy, liquidation or dissolution, our assets would be available to
pay obligations on the notes only after all payments had been made on our senior
indebtedness. As a result, the lenders under our credit facility may receive
more ratably, and note holders may receive less ratably, than our other
creditors and may receive no compensation of any kind in the event of
bankruptcy, liquidation, reorganization, or a similar proceeding. You should
read the discussions under the headings, "Description of the Series B
Notes--Subordination" and "Description of the Series D Notes--Subordination" for
more information on the ranking of the notes in relation to our other
indebtedness.
We are a holding company whose material assets consist primarily of the
capital stock of our subsidiaries. Consequently, we are dependent upon the legal
and contractual ability of our subsidiaries to pay dividends in order to make
payments on the notes and satisfy any repurchase obligations relating to the
notes, as a result of a Change of Control or a sale or other disposition of
various assets. You should read the discussions under the headings "--Fraudulent
Transfer Statutes May Limit Your Rights as a Note Holder to Receive Payment on
the Notes," "Description of the Series B Notes" and "Description of the Series D
Notes" for more information on our dependence on our subsidiaries. We cannot
assure you that our subsidiaries will make sufficient dividend payments to
enable us to meet our obligations under the notes.
22
<PAGE>
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
OF CONTROL OFFER REQUIRED BY THE INDENTURES
Upon the occurrence of some specific kinds of change of control events, we
will be required by the indentures to offer to repurchase all outstanding notes.
However, it is possible that we will not have sufficient funds at the time of
the change of control to make the required repurchase of notes or that
restrictions in our credit agreement will not allow such repurchases. Our
failure to repurchase the notes could result in a default under the indentures
and could also result in a default under our credit agreement, thus restricting
our ability to make payments to the holders of the notes. If we default on our
obligations under the indentures, including the obligation to repurchase the
notes upon a change in control, holders of the notes would be entitled to
exercise remedies under the indentures. You should read the discussions under
the headings "Description of the Series B Notes--Events of Default and Remedies"
and "Description of the Series D Notes--Events of Default and Remedies" for more
information on the remedies which may be available to you if we are unable to
repurchase the notes upon a change in control.
WE MAY NOT BE REQUIRED TO MAKE A CHANGE OF CONTROL OFFER IF WE SELL OR TRANSFER
OUR ASSETS TO ANOTHER PARTY
The ability of a holder of notes to require us to repurchase such notes as a
result of a sale or transfer of less than all of our assets and those of the
guarantors to another person or group may be uncertain. The definition of change
of control includes a phrase relating to the direct or indirect sale or transfer
of "all or substantially all" of our assets on a consolidated basis. Although
there is a limited body of case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
The interpretation of the phrase "substantially all" will be dependent upon
particular facts and circumstances. You should read the discussions under the
headings "Description of the Series B Notes--Covenants--Repurchase of Notes at
the Option of the Holder Upon a Change of Control" and "Description of the
Series D Notes--Covenants--Repurchase of Notes at the Option of the Holder Upon
a Change of Control" for more information on your ability to require us to
repurchase your notes upon a change of control.
NO PUBLIC TRADING MARKET FOR THE NOTES EXISTS AND YOU MAY NOT BE ABLE TO SELL
THEM
There has not been an established trading market for the notes. Although two
of the initial purchasers have told us they currently make a market in the
Series A notes, and, if issued, intend to make a market in the Series B notes
which will replace the Series A notes, and the initial purchaser of the Series C
notes has told us it intends to make a market in the Series D notes, which, if
issued, will replace the Series C notes, they have no obligation to do so and
may discontinue making a market at any time without notice.
The notes are eligible for trading in the Private Offerings, Resale and
Trading through the Automatic Linkage ("PORTAL") market. However, we do not
intend to apply for listing of the Series A or Series C notes, or, if issued,
the Series B or Series D notes, on any securities exchange or for quotation
through the National Association of Securities Dealers' Automated Quotation
System. The liquidity of any market for the notes will depend upon the number of
holders of the notes, our performance, prevailing interest rates, the market for
similar securities, the interest of securities dealers in making a market for
the notes, and other factors. A liquid trading market may not develop for the
notes. We cannot assure you that a liquid trading market will develop for the
notes, or that holders of the notes will be able to sell the notes at an
acceptable price, if at all.
23
<PAGE>
OUTSTANDING SERIES A AND SERIES C NOTES THAT ARE NOT EXCHANGED WILL CONTINUE TO
BE SUBJECT TO TRANSFER RESTRICTIONS
Untendered Series A notes that are not exchanged for Series B notes, and
untendered Series C notes that are not exchanged for Series D notes, pursuant to
the exchange offer will remain restricted securities. Series A and Series C
notes will continue to be subject to the following restrictions on transfer:
- Series A and Series C notes may be resold only if registered under the
Securities Act, if an exemption from registration is available thereunder,
or if neither such registration nor such exemption is required by law;
- Series A and Series C notes will bear a legend restricting transfer in the
absence of registration or an exemption therefrom;
- a holder of Series A or Series C notes who desires to sell or otherwise
dispose of all or any part of its Series A or Series C notes to an
institutional accredited investor under an exemption from registration
under the Securities Act, must deliver to the trustee a signed letter
containing various representations and agreements relating to the transfer
of the Series A or Series C notes. If such transfer is for an aggregate
principal amount of Series A or Series C notes less than $250,000, the
holder must deliver to us, if we so request, an opinion of counsel
acceptable to us that the transfer is in compliance with the Securities
Act; and
- a holder of Series A or Series C notes who desires to sell or otherwise
dispose of all or any part of its Series A or Series C notes under
specific exemptions to the Securities Act must deliver to us, upon our
request, an opinion of counsel satisfactory to us that such exemption is
available.
24
<PAGE>
CAPITALIZATION
The following table sets forth our unaudited consolidated cash and
consolidated capitalization at June 30, 1999 on an actual basis and on a pro
forma basis as adjusted to give effect to our acquisition of Trim and its
subsidiaries on July 30, 1999. This table should be read in conjunction with our
consolidated financial statements, including the notes thereto, included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
AT JUNE 30, 1999
-----------------------
ACTUAL PRO FORMA
---------- -----------
(UNAUDITED)
<S> <C> <C>
(DOLLARS IN THOUSANDS)
CASH AND CASH EQUIVALENTS................................................................. $ 7,096 $ 6,861
---------- -----------
---------- -----------
DEBT (INCLUDING CURRENT PORTION):
Notes (1)............................................................................... $ 110,000 $ 129,000
Term Loan A............................................................................. 33,250 33,250
Term Loan B............................................................................. 44,775 44,775
Acquisition Line........................................................................ 1,000 20,700
Capital leases and other................................................................ 8,062 8,062
Seller variable rate note due 2002...................................................... -- 2,600
---------- -----------
Long-term obligations (including current portion) (2)................................. $ 197,087 $ 238,387
STOCKHOLDERS' EQUITY:
Common stock............................................................................ 248 350
Additional paid-in capital.............................................................. 28,718 43,616
Retained earnings....................................................................... (964) (964)
---------- -----------
TOTAL STOCKHOLDERS' EQUITY............................................................ 28,002 43,002
---------- -----------
TOTAL CAPITALIZATION.................................................................. $ 225,089 $ 281,389
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) Includes $2.9 million of original issue discount from the Series C notes.
(2) Long-term obligations include long-term debt, including the current portion,
and capital leases.
25
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data are derived by the
application of pro forma adjustments to our historical consolidated financial
statements included elsewhere in this prospectus. The historical consolidated
financial statements for Trim have been presented using U.S. GAAP.
The unaudited pro forma combined condensed statement of operations data for
the year ended December 31, 1998 give effect to the acquisitions we completed in
1998 and 1999 as if such acquisitions were consummated as of January 1, 1998.
The unaudited consolidated statements of operations data for Trim for the twelve
months ended March 31, 1999 has been translated from pounds sterling to U.S.
dollars at the average exchange rate for the twelve months ended March 31, 1999
of L1.0=$1.65.
The unaudited pro forma combined condensed statement of operations data for
the six months ended June 30, 1999 give effect to the acquisitions we completed
in 1999 as if such acquisitions were consummated as of January 1, 1999. The
consolidated statement of operations data for Trim for the year ended April 30,
1999 has been translated from pounds sterling to U.S. dollars at the average
interbank exchange rate for the year ended April 30, 1999 of L1.0=$1.65.
The unaudited pro forma combined condensed balance sheet data as of June 30,
1999 gives effect to our acquisition of Trim and its subsidiaries as if such
acquisitions were consummated as of June 30 1999 and combines our June 30, 1999
unaudited consolidated balance sheet with Trim's unaudited consolidated June 30,
1999 balance sheet. The unaudited consolidated balance sheet data for Trim as of
June 30, 1999 has been translated from pounds sterling to U.S. dollars at the
June 30, 1999 interbank spot rate of L1.0=$1.58.
The unaudited pro forma financial data are not necessarily indicative of
operating results or financial position that would have been achieved had the
events described above been consummated at January 1, 1998 or at January 1, or
June 30, 1999 and should not be construed as representative of our future
operating results or financial position. The unaudited pro forma financial data
set forth below are derived in part from the historical consolidated financial
statements and the related notes thereto included elsewhere in this prospectus.
The pro forma adjustments are applied to the historical consolidated
financial statements to reflect and account for the acquisitions completed by us
in 1998 and 1999 as a purchase. Accordingly, the pro forma data reflect the
preliminary allocations of purchase prices, based on estimated fair values of
the tangible and intangible assets and liabilities of the acquired businesses.
Management believes that the final allocations will not vary significantly from
such preliminary allocations.
26
<PAGE>
COMPASS AEROSPACE CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMPASS
YEAR ENDED
DECEMBER 31,
(DOLLARS IN THOUSANDS) 1998(1)
- ------------------------ -------------
1998 ACQUISITIONS COMPASS TRIM ADJUSTMENTS(5) COMPASS
FROM COMBINED WITH TWELVE MONTHS --------------- PRO FORMA
JANUARY 1, 1998 1998 ENDED MARCH 31, YEAR ENDED
THROUGH ACQUISITIONS(3) 1999(4) (UNAUDITED) DECEMBER 31,
THE DATE OF ------------------- ----------------- 1998(6)
ACQUISITION(2) -------------
----------------- (UNAUDITED) (UNAUDITED)
(UNAUDITED)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $ 96,547 $ 86,897 $ 183,444 $ 43,921 $ -- $ 227,365
Cost of sales........... 70,410 50,538 120,948 27,847 852 149,647
------------- ------- -------- ------- --------------- -------------
Gross profit............ 26,137 36,359 62,496 16,074 (852) 77,718
Selling, general and
administrative
expenses.............. 14,537 17,216 31,753 8,317 (5,819) 34,251
------------- ------- -------- ------- --------------- -------------
Operating income........ 11,600 19,143 30,743 7,757 4,967 43,467
Interest (income)
expense, net(7)....... 8,493 717 9,210 (700) 14,796 23,306
Other (income)
expense............... 670 1,212 1,882 (387) (50) 1,445
------------- ------- -------- ------- --------------- -------------
Income (loss) before
taxes................. 2,437 17,214 19,651 8,844 (9,779) 18,716
Income taxes............ 1,522 2,061 3,583 2,399 3,002 8,984
------------- ------- -------- ------- --------------- -------------
Net income (loss)....... $ 915 $ 15,153 $ 16,068 $ 6,445 $ (12,781) $ 9,732
------------- ------- -------- ------- --------------- -------------
------------- ------- -------- ------- --------------- -------------
OTHER DATA:
Net cash flow provided
by (used in):
operating
activities............ $ (6,677) $ 14,179 $ 7,502 $ 8,245 $ (463) $ 15,284
EBITDA(8)............... 20,550 20,578 41,128 9,051 11,677 61,856
EBITDA margin........... 21.3% 23.7% 22.4% 20.6% 27.2%
Depreciation and
amortization.......... $ 8,440 $ 1,435 $ 9,875 $ 1,294 $ 6,102 $ 17,271
</TABLE>
- ------------------------
(1) Reflects the results of operations of Brittain Machine, Wichita
Manufacturing, Barnes Machine, Sea-Lect and Pacific Hills for the period
from each of their dates of acquisition by us through December 31, 1998.
Also reflects our operations and those of Aeromil and Western Methods for
the year ended December 31, 1998.
(2) Reflects the results of operations of: (a) Brittain Machine and its
subsidiary, Wichita Manufacturing and Barnes Machine for the period from
January 1, 1998 through April 21, 1998, (b) Sea-Lect for the period from
January 1, 1998 through May 11, 1998, (c) Pacific Hills for the period from
January 1, 1998 through November 20, 1998, and (d) Modern for the year ended
December 31, 1998.
27
<PAGE>
The 1998 results of operations for each of these companies for the period
prior to acquisition is as follows:
<TABLE>
<CAPTION>
BRITTAIN MACHINE
& SUBSIDIARY BARNES MACHINE SEA-LECT PACIFIC HILLS MODERN
FROM FROM FROM FROM FROM
JANUARY 1, 1998 JANUARY 1, 1998 JANUARY 1, 1998 JANUARY 4, 1998 JANUARY 1, 1998
THROUGH THROUGH THROUGH THROUGH THROUGH
(DOLLARS IN THOUSANDS) APRIL 21, 1998 APRIL 21, 1998 MAY 11, 1998 NOVEMBER 20, 1998 DECEMBER 31, 1998
- --------------------------- ----------------- ----------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
STATEMENT OF OPERATIONS
DATA:
Revenues................... $ 21,344 $ 5,854 $ 5,369 $ 28,282 $ 26,048
Cost of sales.............. 14,121 3,795 4,474 10,687 17,461
------- ------ ------ ------- -------
Gross profit............... 7,223 2,059 895 17,595 8,587
Selling, general and
administrative
expenses................. 4,901 185 772 7,389 3,969
------- ------ ------ ------- -------
Operating income........... 2,322 1,874 123 10,206 4,618
Interest expense, net...... 114 34 66 -- 503
Other expense (income)..... (123) -- (4) -- 1,339
------- ------ ------ ------- -------
Income before income
taxes.................... 2,331 1,840 61 10,206 2,776
Income taxes............... 936 645 -- -- 480
------- ------ ------ ------- -------
Net income................. $ 1,395 $ 1,195 $ 61 $ 10,206 $ 2,296
------- ------ ------ ------- -------
------- ------ ------ ------- -------
OTHER DATA:
Net cash flow provided by
(used) in operating
activities............... $ 2,739 $ (55) $ (138) $ 10,789 $ 844
EBITDA..................... 2,935 1,950 203 10,386 5,104
EBITDA margin.............. 13.8% 33.3% 3.8% 36.7% 19.6%
Depreciation and
amortization............. $ 613 $ 76 $ 80 $ 180 $ 486
</TABLE>
(3) Presents an aggregate of the first two columns reflecting historical data of
our results of operations combined with results of operations from
pre-acquisition periods in 1998 of Brittain Machine and Subsidiary, Barnes
Machine, Sea-Lect, and Pacific Hills.
(4) The unaudited pro forma consolidated statement of operations for Trim for
the twelve months ended March 31, 1999 was derived from Trim's historical
consolidated statement of operations for
28
<PAGE>
the year ended April 30, 1999, adjusted to exclude the month ended April 30,
1999 and to include the month ended April 30, 1998 as follows:
<TABLE>
<CAPTION>
TRIM
YEAR
ENDED APRIL
(DOLLARS IN THOUSANDS) 30, 1999
------------- TRIM TRIM TRIM
ONE MONTH ONE MONTH TWELVE MONTHS
ENDED APRIL 30, ENDED APRIL 30, ENDED MARCH 31,
1998 1999 1999
--------------- --------------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................ $ 45,602 $ 3,478 $ 5,159 $ 43,921
Cost of sales....................................... 28,935 2,208 3,296 27,847
------------- ------ ------ -------
Gross profit........................................ 16,667 1,270 1,863 16,074
Selling, general and administrative expenses........ 9,060 998 1,741 8,317
------------- ------ ------ -------
Operating income.................................... 7,607 272 122 7,757
Interest (income) expense, net...................... (651) (31) 18 (700)
Other expense (income).............................. (361) -- 26 (387)
------------- ------ ------ -------
Income before income taxes.......................... 8,619 303 78 8,844
Income taxes........................................ 2,462 91 154 2,399
------------- ------ ------ -------
Net income (loss)................................... $ 6,157 $ 212 $ (76) $ 6,445
------------- ------ ------ -------
------------- ------ ------ -------
OTHER DATA:
Cash flow provided by (used in) operating
activities........................................ $ 8,245 $ 469 $ 343 $ 8,245
EBITDA.............................................. 8,909 513 371 9,051
EBITDA margin....................................... 19.5% 14.8% 7.2% 20.6%
Depreciation and amortization....................... $ 1,294 $ 241 $ 241 $ 1,294
</TABLE>
(5) Includes positive and negative pro forma adjustments, as if each acquisition
were consummated as of January 1, 1998, as follows:
(a) Cost of Sales:
- Additional depreciation expense of $1.1 million from step up of asset
values related to acquisitions completed in 1998.
- Reduced expense of $0.3 million to eliminate the costs associated with
discontinued lease payments by the acquired business to an affiliate of
the former owner(s) of the acquired business. We will not be continuing
such payments.
(b) Selling, General and Administrative Expenses:
- Reduced expense of $7.1 million to eliminate compensation to former
owners/executives of acquired companies under obligations that existed
under the previous ownership and which we are not obligated to, and
will not, continue. In each case the amounts involved relate to
compensation to individuals that have no continuing association with
us.
- Increased expense of $4.9 million to reflect the amortization of
goodwill related to acquired businesses. Goodwill is amortized on a
straight-line basis over a period of 20 years.
- Reduced expense of $0.2 million to eliminate the cost associated with
discontinued lease payments by the acquired company to an affiliate of
the former owner(s) of the acquired businesses.
- Reduced expense of $3.8 million related to one-time non-recurring bonus
payments by the former owner(s) of acquired companies to employees of
acquired businesses. The former owners are no longer in our employ or
that of the acquired businesses. We are under no obligation and do not
intend to make such payments in the future.
- Increased expense of $0.6 million related to increased management fees
associated with increased pro forma earnings.
29
<PAGE>
(c) Interest Expense:
- Includes additional interest expense of $14.8 million based on actual
debt incurred to complete our acquisitions in 1998 and 1999 as if the
acquisitions and additional borrowings had been completed/incurred as
of January 1, 1998.
(d) Income Taxes:
- Assumes a pro forma combined 48.0% income tax rate.
(6) Presents an aggregate of the third and fourth columns in order to present
pro forma data for the year ended December 31, 1998.
We filed suit against the former shareholder of Pacific Hills and the
stockholders of that former shareholder on May 28, 1999. Our suit alleges
violations of federal securities laws, fraud and breach of contract, among
other allegations. One of the remedies we are seeking is recission. While we
can give no assurance that recission will be granted as a remedy, were
recission to be granted the effect on our financial statements as of and for
the six month period ended June 30, 1999 would include a decrease in
revenues of $5.7 million to $84.3 million from $90.0 million and an increase
in net income of $1.7 million to $0.5 million from a loss of $1.2 million.
Our operating income would not change. In addition, our current assets would
decrease by $2.4 million to $75.2 million from $77.6 million, our total
assets would decrease by $70.1 million to $247.0 million from $317.0
million, our current liabilities would decrease by $1.8 million to $32.3
million from $34.1 million, our total liabilities would decrease by $75.5
million to $198.5 million from $274.0 million and our stockholders' equity
would increase by $5.4 million to $48.4 million from $43.0 million. The
effect on our statements of operations for the year ended December 31, 1998
were recission to be granted would include a decrease in revenues of $30.0
million to $197.4 million from $227.4 million, a decrease in operating
income of $13.8 million to $29.7 million from $43.5 million and a decrease
in net income of $3.6 million to $6.1 million from $9.7 million. You should
read the discussion under the heading "Business--Legal Proceedings" for
further information on this suit.
(7) The pro forma adjustment to interest expense assumes that the additional
borrowings related to the acquisitions we completed in 1998 and 1999 were
incurred as of January 1, 1998. The pro forma adjustment to interest expense
for the pro forma year ended December 31, 1998 consists of:
- Interest expense on the senior subordinated debt of $110.0 million at
10 1/8% for the period from January 1, 1998 through April 20, 1998 of
approximately $3.4 million.
- Interest expense on senior debt of $81.0 million at 9% for the period from
January 1, 1998 through December 31, 1998, less actual interest on senor
debt incurred during the period November 20,1998 through December 31,
1998, of approximately $6.5 million.
- Interest expense on the senior subordinated debt of $19.0 million at
10 1/8% for the period from January 1, 1998 through December 31, 1998 of
approximately $1.9 million, plus amortization of original issue discount
of approximately $0.4 million.
- Interest expense on senior debt of $19.7 million at 8 1/2% for the period
from January 1, 1998 through December 31, 1998 of approximately $1.7
million.
- Interest expense on a $2.6 million seller variable rate note at 9.0% for
the period from January 1, 1998 through December 31, 1998 of approximately
$0.2 million.
- The elimination of $0.7 million of interest income from Trim and its
subsidiaries.
The effect on interest expense of a 1/4% change in interest rate of our
variable rate debt would be approximately $0.2 million.
30
<PAGE>
(8) EBITDA is defined as operating income plus depreciation, goodwill
amortization and management fees paid to an affiliate. EBITDA is not a
defined term under GAAP and should not be construed as an alternative to
operating income or cash flows from operating activities as determined by
GAAP. EBITDA data is presented because such data is used by some investors
to determine our ability to meet debt service requirements and is used in
some debt covenant calculations required under the indentures and our
existing credit agreement. EBITDA is not indicative of our operating
performance, does not provide a measure of liquidity and does not represent
our available or discretionary funds. Furthermore, EBITDA as reported by us
may not be comparable to EBITDA reported by other companies.
31
<PAGE>
COMPASS AEROSPACE CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
TRIM
SIX MONTHS COMPASS
COMPASS ENDED PRO FORMA
(DOLLARS IN THOUSANDS) SIX MONTHS ENDED APRIL 30, SIX MONTHS ENDED
(UNAUDITED) JUNE 30, 1999 1999 ADJUSTMENTS(1) JUNE 30, 1999(2)
----------------- ------------- -------------- -----------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................... $ 67,116 $ 22,903 $ -- $ 90,019
Cost of sales............................... 47,812 14,823 -- 62,635
------- ------------- ------- -------
Gross profit................................ 19,304 8,080 -- 27,384
Selling, general and administrative
expenses.................................. 11,784 4,744 603 17,131
------- ------------- ------- -------
Operating income............................ 7,520 3,336 (603) 10,253
Interest (income) expense, net(3)........... 9,932 (227) 2,323 12,028
Other (income) expense...................... 987 (361) -- 626
------- ------------- ------- -------
Income (loss) before taxes.................. (3,399) 3,424 (2,926) (2,401)
Income taxes................................ (1,446) 2,462 (2,168) (1,152)
------- ------------- ------- -------
Net income (loss)........................... $ (1,953) $ 1,462 $ (758) $ (1,249)
------- ------------- ------- -------
------- ------------- ------- -------
OTHER DATA:
Net cash flow provided by (used in):
operating activities........................ $ 1,856 $ 2,962 $ (603) $ 4,215
EBITDA(4)................................... 15,648 3,976 $ 123 19,747
EBITDA margin............................... 23.3% 17.4% -- 21.9%
Depreciation and amortization............... $ 8,766 $ 632 $ 665 $ 10,063
</TABLE>
- ------------------------
(1) Includes positive and negative pro forma adjustments as if the acquisition
of Trim and its subsidiaries were consummated as of January 1, 1998, as
follows:
(a) Selling, General and Administrative Expenses:
- Reduced expense of $0.1 million to eliminate compensation to the former
owners that existed under previous ownership and which we are not
obligated to, and will not, continue.
- Increased expense of $0.1 million related to increased management fees
associated with increased pro forma earnings.
- Increased expense of $0.7 to reflect amortization of goodwill related
to an acquired business. Goodwill is amortized on a straight line basis
over 20 years.
(b) Interest Expense:
- Eliminates interest income of $0.2 million.
- Increases interest expense based on the estimated rates and additional
borrowings as if the acquisition of Trim and its subsidiaries was
completed as of January 1, 1999.
(c) Income Taxes:
- Assumes a pro forma combined 48.0% income tax rate.
(2) Presents an aggregate of the first three columns in order to present pro
forma data for the six month period ended June 30, 1999.
32
<PAGE>
(3) The pro forma adjustment to interest expense for the six month period ended
June 30, 1999 consists of:
- Interest expense on the senior subordinated debt of $19.0 of 10 1/8%
for the period from January 1, 1999 to June 30, 1999 of approximately
$1.0 million, plus amortization of original issue discount of
approximately $0.2 million.
- Interest expense on senior debt of $19.7 million at 8 1/2% for the
period from January 1, 1999 to June 30, 1999 of approximately $0.9
million.
- Interest expense on a $2.6 million seller variable rate note at 9.0%
from the period January 1, 1999 to June 30, 1999 of approximately $0.1
million.
- The elimination of $0.2 million of interest income from Trim and its
subsidiaries.
(4) EBITDA is defined as operating income plus depreciation, goodwill
amortization and management fees paid to an affiliate. EBITDA is not a
defined term under GAAP and should not be construed as an alternative to
operating income or cash flows from operating activities as determined by
GAAP. EBITDA data is presented because such data is used by some investors
to determine our ability to meet debt service requirements and is used in
some debt covenant calculations required under the indentures and our
existing credit agreement. EBITDA is not indicative of our operating
performance, does not provide a measure of liquidity and does not represent
our available or discretionary funds. Furthermore, EBITDA as reported by us
may not be comparable to EBITDA reported by other companies.
33
<PAGE>
COMPASS AEROSPACE CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
COMPASS
PRO FORMA
COMPASS AT TRIM AT WITH TRIM AT
(DOLLARS IN THOUSANDS) JUNE 30, JUNE 30, JUNE 30,
(UNAUDITED) 1999 1999 ADJUSTMENTS(1) 1999(2)
----------- --------- -------------- ---------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents............................. $ 7,096 $ 20,764 $ (20,999) $ 6,861
Accounts receivable................................... 17,045 11,028 -- 28,073
Inventories........................................... 32,671 6,499 -- 39,170
Prepaid expenses and other current assets............. 3,450 -- -- 3,450
----------- --------- -------------- ---------------
Total current assets.................................... 60,262 38,291 (20,999) 77,554
Property and equipment.................................. 56,911 19,079 -- 75,990
Goodwill, net........................................... 118,337 -- 26,670 145,007
Other assets............................................ 12,619 -- 5,850 18,469
----------- --------- -------------- ---------------
Total assets............................................ $ 248,129 $ 57,370 $ 11,521 $ 317,020
----------- --------- -------------- ---------------
----------- --------- -------------- ---------------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable...................................... $ 6,695 $ 21,388 $ (10,784) $ 17,299
Accrued expenses...................................... 8,500 -- -- 8,500
Current portion of long-term debt and capital
leases.............................................. 8,325 -- -- 8,325
----------- --------- -------------- ---------------
Total current liabilities............................... 23,520 21,388 (10,784) 34,124
Other long term liabilities............................. 7,845 1,994 -- 9,839
Long-term debt and capital leases, less current
portion............................................... 188,762 -- 41,293 230,055
Minority interest....................................... -- 4,053 (4,053) --
Stockholders' equity:
Common stock.......................................... 248 -- 102 350
Paid-in capital....................................... 28,718 604 14,294 43,616
Retained earnings (deficient)......................... (964) 29,331 (29,331) (964)
----------- --------- -------------- ---------------
Total stockholders' equity.............................. 28,002 29,935 (14,935) 43,002
Total liabilities and stockholders' equity.............. $ 248,129 $ 57,370 $ 11,521 $ 317,020
----------- --------- -------------- ---------------
----------- --------- -------------- ---------------
</TABLE>
- ------------------------
(1) Includes positive and negative pro forma adjustments, as if our acquisition
of Trim and its subsidiaries were consummated as of January 1, 1999, as
follows:
- The incurrence of $19.0 million in long-term liabilities related to the
issuance of the Series C notes, including $2.9 million or original issue
discount.
- The incurrence of an additional $19.7 million in long-term liabilities
under our credit agreement.
- The incurrence of $2.6 million in long-term liabilities under a seller
variable rate note issued in favor of the former owners of Trim.
- The reclassification to accounts payable of the consolidated Trim cash
overdraft of $10.8 million at June 30, 1999.
34
<PAGE>
- Goodwill of $26.7 million based on an allocation of the purchase price for
our acquisition of Trim and its subsidiaries.
- Additional acquisition and financing fees estimated at $3.0 million.
- The elimination of the minority interest of $4.1 million on Trim's June
30, 1999 balance sheet.
- The elimination of Trim's historical paid in capital and retained earnings
accounts in connection with our acquisition of Trim and its subsidiaries.
- An additional $15.0 million in equity contributions, partly used to
finance our acquisition of Trim and its subsidiaries.
(2) Presents an aggregate of the first three columns in order to present pro
forma data as of June 30, 1999.
The purchase price for each company we acquired in 1998 and 1999 was as
follows:
- Brittain Machine--$46.9 million
- Wichita Manufacturing--$8.0 million
- Barnes Machine--$15.0 million
- Sea-Lect (including J&J Leasing, Inc., acquired as a subsidiary of
Sea-Lect and merged into Sea-Lect in March 1999)--$12.2 million
- Pacific Hills--$73.7 million
- Modern (including Modern Holdings, Inc. and Modern Manufacturing, Inc., a
Washington corporation, acquired as subsidiaries of Modern and merged into
Modern in January 1999)-- $23.1 million
- Trim and its subsidiaries--$50.7 million
35
<PAGE>
The purchase price for each of our subsidiaries was allocated as follows:
<TABLE>
<CAPTION>
BARNES BRITTAIN WICHITA PACIFIC
MACHINE MACHINE MANUFACTURING SEA-LECT HILLS MODERN TRIM
--------- --------- -------------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents.... $ 687 $ 971 $ 631 $ -- $ -- $ 1,590 $ --
Accounts receivable.......... 2,035 7,093 1,732 2,246 2,258 1,294 11,028
Inventories.................. 1,584 7,043 1,803 2,584 2,662 6,632 6,499
Prepaid expenses and other
current assets............. 13 36 25 -- 34 358 --
--------- --------- ------- --------- ----------- --------- ---------
Total current assets........... 4,319 15,143 4,191 4,830 4,954 9,874 17,527
Property and equipment, net.... 6,712 19,329 4,488 4,587 1,584 6,782 19,079
Other Assets................... 133 637 -- -- -- -- --
Goodwill....................... 6,768 19,258 2,359 4,155 67,920 8,664 26,670
--------- --------- ------- --------- ----------- --------- ---------
Total assets................... $ 17,932 $ 54,367 $ 11,038 $ 13,572 $ 74,458 $ 25,320 $ 63,276
--------- --------- ------- --------- ----------- --------- ---------
--------- --------- ------- --------- ----------- --------- ---------
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable............. $ 1,162 $ 1,191 $ 1,596 $ 1,169 $ 510 $ 892 $ 10,604
Accrued expenses............. 242 1,917 272 240 276 296 --
Income taxes payable......... 489 (644) 222 -- -- -- --
Current portion of long term
debt....................... -- 55 -- -- -- -- --
--------- --------- ------- --------- ----------- --------- ---------
Total current liabilities...... 1,893 2,519 2,090 1,409 786 1,188 10,604
Deferred tax liability......... 1,050 4,282 976 -- -- 1,037 1,754
Other debt, less current
portion...................... -- 645 -- -- -- -- 240
Stockholders' equity:
Paid-in-capital................ 14,989 46,921 7,972 12,163 73,672 23,095 50,678
--------- --------- ------- --------- ----------- --------- ---------
Total stockholders' equity..... 14,989 46,921 7,972 12,163 73,672 23,095 50,678
--------- --------- ------- --------- ----------- --------- ---------
Total liabilities and
stockholders' equity......... $ 17,932 $ 54,367 $ 11,038 $ 13,572 $ 74,458 $ 25,320 $ 63,276
--------- --------- ------- --------- ----------- --------- ---------
--------- --------- ------- --------- ----------- --------- ---------
</TABLE>
36
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following selected historical consolidated financial data are derived
from our consolidated financial statements and those of our predecessor,
Brittain Machine. See "Management's Discussion and Analysis of Consolidated
Financial Condition and Consolidated Results of Operations-- Consolidated
Results of Operations." Our consolidated financial statements as of December 31,
1997 and 1998 and for the period October 21, 1997 (date of incorporation)
through December 31, 1997 and for the year ended December 31, 1998 have been
audited by Ernst & Young, LLP, independent auditors, and are included elsewhere
in this prospectus. Our consolidated financial statements for the six months
ended June 30, 1998 and 1999 are derived from unaudited financial statements
included elsewhere in this prospectus. The consolidated financial statements of
Brittain Machine as of and for the period from July 1, 1997 through April 21,
1998 and as of and for the year ended June 30, 1997 have been audited by other
independent auditors and are included elsewhere in this prospectus. The
consolidated financial statements of Brittain Machine as of and for the year
ended June 30, 1996 have been audited by Ernst & Young, LLP, independent
auditors, and are included elsewhere in this prospectus. The following selected
historical consolidated financial data for Brittain Machine as of and for the
years ended June 30, 1994 and 1995 are derived from unaudited financial
statements which are not included herein.
The information contained in this table should be read in conjunction with
"Management's Discussion and Analysis of Consolidated Financial Condition and
Consolidated Results of Operations" and the financial statements and related
notes thereto included elsewhere in this prospectus.
37
<PAGE>
<TABLE>
<CAPTION>
COMPASS
BRITTAIN FOR THE
COMPASS COMPASS MACHINE FOR SIX
FOR THE FOR THE THE PERIOD MONTHS
YEAR 36 DAYS FROM JULY 1, BRITTAIN MACHINE FOR THE YEARS ENDED
ENDED ENDED 1997 THROUGH ENDED JUNE 30, JUNE 30,
DECEMBER 31, DECEMBER 31, APRIL 21, ------------------------------------------ ---------
(DOLLARS IN THOUSANDS) 1998 1997 1998 1997 1996 1995 1994 1999
- ------------------------- ------------- ------------- ------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
INCOME STATEMENT DATA:
Revenues................. $ 96,547 $ 3,057 $ 49,682 $ 35,481 $ 26,892 $ 19,244 $ 20,788 $ 67,116
Cost of sales............ 70,410 2,386 34,640 25,656 19,076 16,708 14,729 47,812
------------- ------------- ------------- --------- --------- --------- --------- ---------
Gross profit............. 26,137 671 15,042 9,825 7,816 2,536 6,059 19,304
Selling, general and
administrative
expenses............... 14,537 404 6,798 3,229 2,953 2,654 2,632 11,784
------------- ------------- ------------- --------- --------- --------- --------- ---------
Operating income
(loss)................. 11,600 267 8,244 6,596 4,863 (118) 3,427 7,520
Interest expense, net.... 8,493 166 386 398 403 359 293 9,932
Other (income) expense... 670 (16) (20) 84 77 (63) (20) 987
------------- ------------- ------------- --------- --------- --------- --------- ---------
Income (loss) before
taxes.................. 2,437 117 7,878 6,114 4,383 (414) 3,154 (3,399)
Income taxes............. 1,522 43 2,901 2,208 1,637 (194) 1,282 (1,446)
------------- ------------- ------------- --------- --------- --------- --------- ---------
Net income (loss)........ $ 915 $ 74 $ 4,977 $ 3,906 $ 2,746 $ (220) $ 1,872 $ (1,953)
------------- ------------- ------------- --------- --------- --------- --------- ---------
------------- ------------- ------------- --------- --------- --------- --------- ---------
OTHER DATA:
Net cash flow provided by
(used in):
operating activities... $ (6,677) $ 269 $ 7,978 $ (155) $ 2,381 $ 1,027 $ 2,858 $ 1,856
investing activities... (172,117) (23,456) (3,535) (1,244) (1,619) (2,293) (1,198) (2,750)
financing activities... 186,222 23,630 (3,215) 1,763 (835) 1,331 (1,234) 119
------------- ------------- ------------- --------- --------- --------- --------- ---------
Net increase (decrease)
in cash................ $ 7,428 $ 443 $ 1,228 $ 364 $ (73) $ 65 $ 426 $ (775)
------------- ------------- ------------- --------- --------- --------- --------- ---------
------------- ------------- ------------- --------- --------- --------- --------- ---------
EBITDA(1)................ $ 20,550 $ 486 $ 9,755 $ 8,265 $ 6,255 $ 1,185 $ 4,544 $ 15,648
EBITDA margin............ 21.3% 15.9% 19.6% 23.3% 23.3% 6.2% 21.9% 23.3%
Depreciation and
amortization........... $ 8,440 $ 219 $ 1,511 $ 1,669 $ 1,392 $ 1,303 $ 1,117 $ 8,766
Capital expenditures..... 5,701 25 3,559 1,072 1,519 2,575 1,056 2,750
BALANCE SHEET DATA (AT
PERIOD END):
Cash and cash
equivalents............ $ 7,871 $ 443 $ 1,683 $ 455 $ 91 $ 164 $ 589 $ 7,096
Total assets............. 255,505 33,789 $ 32,776 28,602 22,095 17,290 15,110 248,129
Long-term obligations
(including current
portion) (2)........... 196,968 20,585 $ 3,775 3,950 4,495 5,131 3,957 197,087
Stockholders' equity..... 29,955 9,074 20,243 15,266 11,360 8,614 8,834 28,002
<CAPTION>
(DOLLARS IN THOUSANDS) 1998
- ------------------------- ---------
<S> <C>
INCOME STATEMENT DATA:
Revenues................. $ 34,851
Cost of sales............ 26,039
---------
Gross profit............. 8,812
Selling, general and
administrative
expenses............... 4,750
---------
Operating income
(loss)................. 4,062
Interest expense, net.... 2,370
Other (income) expense... 187
---------
Income (loss) before
taxes.................. 1,505
Income taxes............. 587
---------
Net income (loss)........ $ 918
---------
---------
OTHER DATA:
Net cash flow provided by
(used in):
operating activities... $ 1,969
investing activities... (77,985)
financing activities... 103,105
---------
Net increase (decrease)
in cash................ $ 27,089
---------
---------
EBITDA(1)................ $ 6,633
EBITDA margin............ 19.0%
Depreciation and
amortization........... $ 2,713
Capital expenditures..... 3,009
BALANCE SHEET DATA (AT
PERIOD END):
Cash and cash
equivalents............ $ 27,532
Total assets............. 158,306
Long-term obligations
(including current
portion) (2)........... 115,442
Stockholders' equity..... 29,958
</TABLE>
- ------------------------
(1) EBITDA is defined as operating income plus depreciation, goodwill
amortization and management fees paid to an affiliate. EBITDA is not a
defined term under GAAP and should not be construed as an alternative to
operating income or cash flows from operating activities as determined by
GAAP. EBITDA data is presented because such data is used by some investors
to determine our ability to meet debt service requirements and is used in
some debt covenant calculations required under the indentures and our
existing credit agreement. EBITDA is not indicative of our operating
performance, does not provide a measure of liquidity and does not represent
our available or discretionary funds. Furthermore, EBITDA as reported by us
may not be comparable to EBITDA reported by other companies.
(2) Long-term obligations include long-term debt, including the current portion,
and capital leases.
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND
CONSOLIDATED RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Historical Consolidated Financial Data," "Unaudited Pro Forma Financial Data"
and our consolidated financial statements and notes related thereto and those of
our predecessor, Brittain Machine, and other more detailed financial data
appearing elsewhere in this prospectus.
GENERAL
We began operations in November 1997 with the simultaneous acquisitions of
Western Methods and Aeromil. Since November 1997 we have completed the following
acquisitions:
<TABLE>
<S> <C>
April 1998:................ Brittain Machine, Wichita Manufacturing and Barnes
Machine
May 1998:.................. Sea-Lect
November 1998:............. Pacific Hills
December 1998:............. Modern
July 1999:................. Trim and its subsidiaries
</TABLE>
Prior to our acquisition of our subsidiaries, each of our subsidiaries,
except for Brittain Machine and its subsidiary, Wichita Manufacturing, had been
operating independently and were not subject to common management. Trim and its
subsidiaries had been operating as a group prior to our acquisition of those
companies. We intend to integrate our acquired businesses, their operations and
their administrative functions.
CONSOLIDATED RESULTS OF OPERATIONS
For accounting and financial reporting purposes, Brittain Machine is deemed
to be our predecessor based on the relative significance of Brittain Machine's
revenues, size and operating capacity. When we acquired Brittain Machine on
April 21, 1998, Brittain Machine represented, on a historical basis, 68% of the
revenues and 87% of the pre-tax income of the combined historical results of
Aeromil, Western Methods and Brittain Machine prior to our acquisition of those
companies. The acquisition of Brittain Machine added additional operating
capacity and manufacturing capabilities that significantly advanced our goal of
producing more sub-assemblies, manufacturing kits and structural components. The
following discussion therefore includes the results of operations of Brittain
Machine as our predecessor for the periods shown below.
COMPASS FOR THE SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED
JUNE 30, 1998.
REVENUES. Revenues increased $32.2 million to $67.1 million for the six
months ended June 30, 1999 from $34.9 million for the six months ended June 30,
1998. Combined revenues of Western Methods and Aeromil for the six months ended
June 30, 1999 decreased by $1.1 million, a decrease of 6.2%, as compared to the
six months ended June 30, 1998 as a result of lower Boeing requirements in 1999
as compared to 1998. Consolidated revenues increased as a result of our
acquisitions of Brittain Machine, Barnes Machine, Wichita Manufacturing,
Sea-Lect, Pacific Hills and Modern.
COST OF SALES. Cost of sales increased $21.8 million to $47.8 million for
the six months ended June 30, 1999 from $26.0 million for the six months ended
June 30, 1998. The increase in cost of sales was primarily attributable to the
acquisitions we completed in 1998. Cost of sales as a percentage of revenues
decreased to 71.2% for the six months ended June 30, 1999 from 74.7% for the six
months ended June 30, 1998. This percentage decrease was primarily attributable
to the acquisitions we completed in 1998 which provided a higher level of
average margins.
39
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $7.0 million to $11.8 million for the six
months ended June 30, 1999 from $4.8 million for the six months ended June 30,
1998. This increase in selling, general and administrative expenses was
primarily attributable to the acquisitions we completed in 1998. Selling,
general and administrative expenses as a percentage of revenues increased to
17.6% for the six months ended June 30, 1999 from 13.6% for the six months ended
June 30, 1998. Selling, general and administrative expenses as a percentage of
revenues for Western Methods and Aeromil was 10.4% for the six months ended June
30, 1999 as compared to 9.8% for the six months ended June 30, 1998. Selling,
general and administrative expenses as a percentage of revenues for the six
months ended June 30, 1999 for the companies we acquired in 1998 was 13.8%.
Corporate office selling, general and administrative expenses, including
management fees, was $2.9 million for the six months ended June 30, 1999 as
compared to $1.8 million for the six months ended June 30, 1998. The increase in
selling, general and administrative expenses is primarily attributable to our
overall growth and the development of our corporate office. The increase in
selling, general and administrative expenses as a percentage of revenues for the
six months ended June 30, 1999 is primarily attributable to the goodwill
associated with the acquisitions we completed in 1998.
OPERATING INCOME. Operating income increased $3.4 million to $7.5 million
for the six months ended June 30, 1999 from $4.1 million for the six months
ended June 30, 1998. The increase in operating income was primarily attributable
to the operating income derived from acquisitions we completed in 1998, partly
offset by higher selling, general and administrative expenses related to those
acquisitions and increased corporte expenses related to our growth. Operating
income as a percentage of revenues decreased to 11.2% for the six months ended
June 30, 1999 from 11.7% for the six months ended June 30, 1998 as a result of
higher selling, general and administrative expenses associated with the
acquisitions we completed in 1998 and the development of our corporate office.
INTEREST EXPENSE. Interest expense increased $7.5 million to $9.9 million
for the six months ended June 30, 1999 from $2.4 million for the six months
ended June 30, 1998. $3.4 million of the increase in interest expense is
attributable to our issuance of the Series A notes in April 1998, $3.7 million
of the increase is attributable to increased bank borrowings by us in November
1998 and $0.4 million of the increase is attributable to interest on operating
leases. Interest expense attributable to our issuance of the Series A notes in
April 1998 will decrease once we cease paying increased interest on the Series A
notes as a form of liquidated damages after the registration statement of which
this prospectus is a part becomes effective. As of June 30, 1999 increased
interest on the Series A notes as a form of liquidated damages totaled $0.2
million.
NET INCOME. Net income decreased $2.9 million to a net loss of $2.0 million
for the six months ended June 30, 1999 from net income of $0.9 million for the
six months ended June 30, 1998. The decrease in net income was primarily
attributable to increased operating income of $3.4 million, offset by increased
interest expense of $7.6 million, increased amortization of deferred financial
fees of $0.8 million and a decrease in income tax expense of $2.0 million.
NET CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES. Net cash flow
from operating activities decreased $0.1 million to $1.9 million for the six
months ended June 30, 1999 from $2.0 million for the six months ended June 30,
1998. The decrease in net cash flow provided by operating activities during the
six months ended June 30, 1999 was primarily attributable to a $6.1 million
increase in depreciation and amortization expense, partly offset by a reduction
in net income of $2.8 million and a reduction in the change in operating assets
and liabilities of $3.4 million during the six months ended June 30, 1999
compared to the six months ended June 30, 1998.
NET CASH FLOW PROVIDED BY (USED IN) INVESTING ACTIVITIES. Net cash flow
used on investing activities was related to the purchase of property, plant and
equipment and was $2.8 million for the six months ended June 30, 1999 and $78.0
million for the six months ended June 30, 1998.
40
<PAGE>
NET CASH FLOW PROVIDED BY (USED IN) FINANCING ACTIVITIES. Net cash flow
used in financing activities was $0.1 million for the six months ended June 30,
1999 as compared to net cash flow provided by financing activities of $103.1
million for the six months ended June 30, 1998. The decrease in net cash flow
provided by financing activities for the six months ended June 30, 1999 was
primarily attributable to the issuance of the Series A notes and to the proceeds
from the sale of some of our capital stock during the six months ended June 30,
1998.
EBITDA. EBITDA increased $9.0 million to $15.6 million for the six months
ended June 30, 1999 from $6.6 million for the six months ended June 30, 1998 as
a result of the acquisitions we completed in 1998. EBITDA as a percentage of
revenues increased to 23.3% for the six months ended June 30, 1999 from 19.0%
for the six months ended June 30, 1998. The increase in EBITDA was primarily
attributable to increased revenues of $32.7 million, increased gross profit of
$10.5 million and increased operating income of $3.4 million in the six months
ended June 30, 1999.
HISTORICAL RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 COMPARED
TO PRO FORMA RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998
REVENUES. Historical revenues were $96.5 million for the year ended
December 31, 1998 compared to pro forma revenues of $227.4 million for the same
period. The difference was primarily attributable to the timing of our
acquisitions in 1998 of Brittain Machine, Barnes Machine, Wichita Manufacturing,
Sea-Lect and Pacific Hills and our acquisition of Trim and its subsidiaries in
1999.
COST OF SALES. Historical cost of sales was $70.4 million for the year
ended December 31, 1998 compared to pro forma cost of sales of $149.6 million
for the same period. The difference was primarily attributable to the
acquisitions we completed in 1998 and 1999 and to pro forma adjustments which
increased pro forma cost of sales $0.9 million. Historical cost of sales as a
percentage of historical revenues was 73.0% for the year ended December 31, 1998
as compared to pro forma cost of sales as a percentage of pro forma revenues of
65.8% for the same period. The difference was primarily attributable to our
acquisitions in 1998 of Brittain Machine, Barnes Machine, Wichita Manufacturing,
Sea-Lect and Pacific Hills and our acquisition in 1999 of Trim and its
subsidiaries which provided a higher level of average margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Historical selling, general
and administrative expenses were $14.5 million for the year ended December 31,
1998 compared to pro forma selling, general and administrative expenses of $34.3
million for the same period. The difference was primarily attributable to the
acquisitions we completed in 1998 and 1999 and to pro forma adjustments which
reduced pro forma selling, general and administrative expenses by $5.8 million.
Historical selling, general and administrative expenses as a percentage of
historical revenues was 15.0% for the year ended December 31, 1998 compared to
pro forma selling, general and administrative expenses as a percentage of pro
forma revenues of 15.1% for the same period.
OPERATING INCOME. Historical operating income was $11.6 million for the
year ended December 31, 1998 compared to pro forma operating income of $43.5
million for the same period. The difference was primarily attributable to the
acquisitions we completed in 1998 and 1999 and to pro forma adjustments which
increased pro forma operating income by $5.0 million. Historical operating
income as a percentage of historical revenues was 12.0% for the year ended
December 31, 1998 compared to pro forma operating income as a percentage of pro
forma revenues of 19.1% for the same period. The difference was primarily
attributable to our acquisitions in 1998 of Brittain Machine, Barnes Machine,
Wichita Manufacturing, Sea-Lect and Pacific Hills and our acquisition in 1999 of
Trim and its subsidiaries which provided a higher level of operating income.
INTEREST EXPENSE. Historical interest expense was $8.5 million for the year
ended December 31, 1998 compared to pro forma interest expense of $23.3 million
for the same period. The difference was
41
<PAGE>
primarily attributable to pro forma adjustments to increase interest expense
related to increased borrowings required to reflect the acquisitions we
completed in 1998 and 1999 as if they had occurred on January 1, 1998.
NET INCOME. Historical net income was $0.9 million for the year ended
December 31, 1998 compared to pro forma net income of $9.7 million for the same
period. The difference was primarily attributable to the acquisitions we
completed in 1998 and 1999 and pro forma adjustments.
NET CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES. Historical net
cash flow used in operating activities was $6.7 million for the year ended
December 31, 1998 compared to pro forma net cash flow provided by operating
activities of $15.3 million for the same period. The difference was primarily
attributable to the acquisitions we completed in 1998 and 1999 which increased
pro forma net cash flow offset by increased pro forma working capital
requirements.
EBITDA. Historical EBITDA was $20.6 million for the year ended December 31,
1998 compared to pro forma EBITDA of $61.9 million for the same period. The
difference was primarily attributable to the acquisitions we completed in 1998
and 1999 and to higher margins of the acquired companies. Historical EBITDA as a
percentage of historical revenues was 21.3% for the year ended December 31, 1998
compared to pro forma EBITDA as a percentage of pro forma revenues of 27.2% for
the same period.
BRITTAIN MACHINE FOR THE PERIOD FROM JULY 1, 1997 THROUGH APRIL 21, 1998
COMPARED TO THE YEAR ENDED JUNE 30, 1997.
REVENUES. Revenues increased $14.2 million to $49.7 million for the period
from July 1, 1997 through April 21, 1998 from $35.5 million for the year ended
June 30, 1997. The increase was primarily attributable to a further increase in
capacity by the addition of two high-speed, three-spindle five-axis gantry mills
and two machining centers, as well as increased shipments to both Boeing and
Northrop Grumman Corporation.
COST OF SALES. Cost of sales increased $8.9 million to $34.6 million for
the period from July 1, 1997 to April 21, 1998 from $25.7 million for the year
ended June 30, 1997. Cost of sales increased primarily as a result of the
increase in sales. Cost of sales as a percentage of revenues decreased to 69.7%
for the period from July 1, 1997 to April 21, 1998 from 72.3% for the year ended
June 30, 1997. This decrease was primarily attributable to a reduction in the
level of start up costs encountered in the previous period as well as improved
productivity gains.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $3.6 million to $6.8 million for the period
from July 1, 1997 to April 21, 1998 from $3.2 million for the year ended June
30, 1997. Selling, general and administrative expenses for the period from July
1, 1997 to April 21, 1998 include $3.8 million of non-recurring management and
employee bonuses paid in connection with the sale of Brittain Machine. Selling,
general and administrative expenses as a percentage of revenues increased to
13.7% for the period from July 1, 1997 to April 21, 1998 from 9.1% for the year
ended June 30, 1997. Excluding non-recurring bonuses, selling, general and
administrative expenses as a percentage of revenues for the period from July 1,
1997 to April 21, 1998 was 6.0%.
OPERATING INCOME. Operating income increased $1.6 million to $8.2 million
for the period from July 1, 1997 through April 21, 1998 from $6.6 million for
the year ended June 30, 1997 as a result of an increase in revenues. Operating
income as a percentage of revenues decreased to 16.6% for the period from July
1, 1997 through April 21, 1998 from 18.6% for the year ended June 30, 1997.
42
<PAGE>
NET INCOME. Net income increased $1.1 million to $5.0 million for the
period from July 1, 1997 through April 21, 1998 from $3.9 million for the year
ended June 30, 1997. The increase in net income was primarily attributable to
increased revenues and higher gross profit margins.
NET CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES. Net cash flow
provided by operating activities increased $8.2 million to $8.0 million for the
period from July 1, 1997 through April 21, 1998 from net cash flow used in
operating activities of $0.2 million for the year ended June 30, 1997. The
primary sources of cash during the period from July 1, 1997 through April 21,
1998 related to increases in net income, accounts payable and accrued expenses,
and a decrease in inventories.
NET CASH FLOW PROVIDED BY (USED IN) INVESTING ACTIVITIES. Net cash flow
used in investing activities was primarily related to purchases of property and
equipment. Net cash flow used in investing activities was $3.5 million for the
period from July 1, 1997 through April 21, 1998 and $1.2 million for the year
ended June 30, 1997.
NET CASH FLOW PROVIDED BY (USED IN) FINANCING ACTIVITIES. Net cash flow
used in financing activities increased $5.0 million to net cash flow used in
financing activities of $3.2 million for the period from July 1, 1997 through
April 21, 1998 from $1.8 million of net cash flow provided by financing
activities for the year ended June 30, 1997. The increase in net cash flow used
in financing activities was primarily attributable to the repayments of
outstanding lines of credit and principal payments on debt.
EBITDA. EBITDA increased $1.5 million to $9.8 million for the period from
July 1, 1997 through April 21, 1998 from $8.3 million for the year ended June
30, 1997. The increase was primarily the result of an increase in revenues.
EBITDA as a percentage of revenues decreased to 19.6% for the period from July
1, 1997 through April 21, 1998 from 23.3% for the year ended June 30, 1997,
primarily as a result of increased selling, general and administrative expense
related to non-recurring bonuses above paid in connection with the sale of
Brittain Machine to us.
BRITTAIN MACHINE FOR THE YEAR ENDED JUNE 30, 1997 COMPARED TO THE YEAR ENDED
JUNE 30, 1996.
REVENUES. Revenues increased $8.6 million to $35.5 million for the year
ended June 30, 1997 from $26.9 million for the year ended June 30, 1996. The
increase was primarily attributable to the addition of four high-speed,
three-spindle five-axis gantry mills, increased sales of 747 parts to Northrop,
increased sales to Boeing-Wichita under a series of contracts relating to the
Next-Generation 737 and increased sales of fabricated tooling and fixtures.
COST OF SALES. Cost of sales increased $6.6 million to $25.7 million for
the year ended June 30, 1997 from $19.1 million for the year ended June 30,
1996. Cost of sales as a percentage of revenues increased to 72.3% for the year
ended June 30, 1997 from 70.9% for the year ended June 30, 1996. The increase in
cost of sales was primarily attributable to the high percentage of new work
undertaken during the year ended June 30, 1997, requiring higher start up costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.2 million to $3.2 million for the year
ended June 30, 1997 from $3.0 million for the year ended June 30, 1996. Selling,
general and administrative expense as a percentage of revenues decreased to 9.1%
for the year ended June 30, 1997 from 11.0% for the year ended June 30, 1996.
The increase in selling, general and administrative expense was primarily
attributable to increased selling activity.
OPERATING INCOME. Operating income increased $1.7 million to $6.6 million
for the year ended June 30, 1997 from $4.9 million for the year ended June 30,
1996 as a result of an increase in revenues. Operating income as a percentage of
revenues increased to 18.6% for the year ended June 30, 1997 from 18.1% for the
year ended June 30, 1996.
43
<PAGE>
NET INCOME. Net income increased $1.2 million to $3.9 million for the year
ended June 30, 1997 from $2.7 million for the year ended June 30, 1996. The
increase in net income was primarily attributable to the increase of revenues.
NET CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES. Net cash flow
provided by operating activities decreased $2.6 million to net cash flow used in
operating activities of $0.2 million for the year ended June 30, 1997 from $2.4
million of net cash flow provided by operating activities for the year ended
June 30, 1996. The primary uses of cash during the year ended June 30, 1997
related to an increase in inventories partly offset by an increase in net
income.
NET CASH FLOW PROVIDED BY (USED IN) INVESTING ACTIVITIES. Net cash flow
used in investing activities was primarily related to purchases of property and
equipment. Net cash flow used in investing activities was $1.2 million for the
year ended June 30, 1997 compared to $1.6 million for the year ended June 30,
1996.
NET CASH FLOW PROVIDED BY (USED IN) FINANCING ACTIVITIES. Net cash flow
provided by financing activities increased $2.6 million to $1.8 million for the
year ended June 30, 1997 from $0.8 million net cash flow used in financing
activities for the year ended June 30, 1996. The increase in net cash flow
provided by financing activities was primarily attributable to increased short
term borrowings.
EBITDA. EBITDA increased $2.0 million to $8.3 million for the year ended
June 30, 1997 from $6.3 million for the year ended June 30, 1996 as a result of
an increase in revenues. EBITDA as a percentage of revenues was 23.3% for the
years ended June 30, 1997 and June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity have been borrowings, proceeds from the
sale of stock and, to a lesser extent, cash flows from operating activities. At
June 30, 1999 we had cash of approximately $7.1 million, working capital of
approximately $36.7 million and total debt, including the current portion of
long term debt, of approximately $197.1 million. On a pro forma basis for the
acquisition of Trim and its subisidiaries, at June 30, 1999 we had cash of
approximately $6.9 million, working capital of approximately $43.4 million and
total debt, including the current portion of long term debt, of approximately
$238.4 million.
On April 21, 1998, we completed the private offering of $110.0 million of
Series A notes. After fees and expenses of $3.3 million, the net cash proceeds
of $106.7 million from the issuance and sale of the Series A notes were used to
repay existing bank debt, to finance acquisitions and for general corporate
purposes. In April and May 1998, we also issued additional shares of common
stock for approximately $13.5 million in cash.
On July 30, 1999, we completed the private offering of $19.0 million of
Series C notes. After the original issue discount of $2.9 million, the net cash
proceeds of $16.1 million were used to partly finance our acquisition of Trim
and our other subsidiaries located in the United Kingdom. We also issued
additional shares of common stock in July 1999 for $15.0 million in cash.
We entered into a credit agreement dated November 20, 1998, as amended and
restated on February 11, 1999, as amended further on June 7, 1999, as amended
further on July 30, 1999, with BankBoston, N.A. as Agent, NationsBank, N.A. as
Co-Agent, the lenders named therein, including BankBoston as a lender, Royal
Bank of Canada as Syndication Agent, General Electric Capital Corporation as
Documentation Agent and BancBoston Robertson Stephens Inc., an affiliate of
BankBoston, as arranger, providing for borrowing availability, after the
amendments, of up to $140.0 million. Our obligations under the credit agreement
are guaranteed on a senior basis by our direct and indirect subsidiaries, except
for Maybrey, and secured by a security interest in substantially all of our
assets and those of our subsidiaries. The credit agreement contains customary
conditions to
44
<PAGE>
borrowing and contains customary restrictions and covenants. The June 7, 1999
amendment to the credit agreement retroactively amended some of these covenants
effective as of March 31, 1999, particularly covenants based on EBITDA targets
and EBITDA ratios, to enable us to maintain compliance with the terms of the
credit agreement, as amended. The June 7, 1999 amendment also increased interest
rates by 0.25% and increased some fees which are based on leverage ratios. You
should read the discussions under the headings "Risk Factors--Restrictive
Covenants In Our Indenture And Our Credit Agreement Could Cause Us To Default
And Accelerate Our Indebtedness Under The Credit Agreement" and "The Credit
Agreement" for further information on restrictive covenants contained in the
credit agreement and the amendments to the credit agreement.
The credit agreement, as amended, consists of a revolving credit facility of
$25.0 million, a $35 million term loan ("Term Loan A"), a $45 million term loan
("Term Loan B") and a $35 million acquisition line (the "Acquisition Line"). At
August 31, 1999 we had borrowed $100.7 million under the credit agreement,
consisting of the full amount of Term A Loan and Term B Loan, $20.7 million of
the Acquisition Line and $3.0 million under the revolving credit facility. You
should read the discussion under the heading "Description of Credit Agreement"
for more information on the terms of the credit agreement. The credit agreement
replaced and terminated a $20.0 million senior secured revolving credit facility
with BankBoston as lender and administrative agent.
The Series A notes call for semi-annual interest payments on April 15 and
October 15 of each year, beginning October 15, 1998. The Series C notes call for
semi-annual interest payments on April 15 and October 15 of each year, beginning
October 15, 1999. The Series A and Series C notes are guaranteed by all of our
current subsidiaries except for Maybrey, are subordinate to borrowings under the
credit agreement and require us to meet specific financial ratios, and satisfy
other financial condition tests prior to incurring additional debt or making
some payments. The terms of the notes and the credit agreement include
restrictive covenants that restrict our ability to pay dividends, sell some
assets and incur additional indebtedness. Our ability to pay principal and
interest on our indebtedness, including the notes, will depend upon the future
operating performance of our subsidiaries and will require a substantial portion
of our cash flow from operations.
Operating activities provided $1.9 million of cash flow during the six
months ended June 30, 1999. Net cash used in investing activities during the six
months ended June 30, 1999 related to purchases of property and equipment and
was $2.8 million. Net cash provided by financing activities during the six
months ended June 30, 1999 was $0.1 million.
The principal use of cash during the year ended December 31, 1998 was to
fund the acquisitions we completed during 1998 and to repay indebtedness
incurred to finance our first two acquisitions in 1997. We used $6.7 million in
net cash for operating activities for the year ended December 31, 1998. Net cash
provided by financing activities was $186.2 million for the year ended December
31, 1998. Net cash used for investing activities was $172.1 million for the year
ended December 31, 1998.
Capital expenditures during the six months ended June 30, 1999 were
approximately $2.8 million for machinery and miscellaneous equipment. Capital
expenditures for the year ended December 31, 1998 were approximately $5.7
million. The capital expenditures were primarily for high-speed manufacturing
equipment. We believe that funds generated from operations and borrowing
availability under the credit agreement will be sufficient to finance our
current operations and planned capital expenditure requirements for the next 12
months.
We may pursue other acquisition opportunities. We expect to fund future
acquisitions, if any, through the issuance of additional equity securities,
incurrence of additional indebtedness, including use of amounts available under
the credit agreement, and cash flow from operations. To the extent we fund a
significant portion of the consideration for future acquisitions with cash, we
may have to increase the amount of our credit agreement or obtain other sources
of financing. There can be no assurance that we will be able to obtain financing
for potential acquisitions on satisfactory terms and conditions.
45
<PAGE>
INDUSTRY TRENDS
We and other suppliers to Boeing have recently experienced a decrease in the
value and number of orders from Boeing for delivery in 1999 as compared to 1998.
We believe the reduction is due to changes in Boeing's purchasing practices
implemented as part of Boeing's strategy to reduce inventories and increase its
use of just-in-time manufacturing techniques. Boeing's stated goal is to
increase its annual inventory turn rate, which is currently approximately two
times, to an annual inventory turn rate of four times. In addition, Boeing is
forecasting a reduction in its delivery of commercial aircraft to 480 aircraft
in 2000 relative to projected deliveries of 620 aircraft in 1999. We are
particularly experiencing a decline in the value of orders by Boeing for
delivery in 1999 at Brittain Machine and at Pacific Hills. Our consolidated
revenues for the six months ended June 30, 1999 were $67.1 million, a decrease
of approximately 28.1% from the combined revenues of our subsidiaries that are
located in the United States during the same period in 1998. Boeing orders could
continue to decline and we cannot assure you that Boeing orders will increase or
return to the 1998 level in 1999 or in 2000. In addition, our results of
operations in 1999 probably will not exceed 1998 pro forma results.
MARKET RISK AND RISK MANAGEMENT POLICIES
Our results of operations are affected by numerous external factors such as
general economic conditions, domestic and foreign competition, raw material
availability and production delays by aerospace manufacturers. You should read
the discussions under the section entitled "Risk Factors" for further
information on factors that may affect our results of operations. We are also
exposed to changes in interest rates primarily from our long term debt issued at
a fixed rate. Under our current policies we do not use interest rate derivative
instruments to manage exposure to interest rate changes. A hypothetical 100
basis point decrease in interest rates along the entire interest rate yield
curve would adversely affect the net fair value of all interest sensitive
financial instruments by $0.3 million for the six months ended June 30, 1999.
Based on the current holdings of debt, we do not believe our exposure to
interest rate risk is material. Fixed rate debt obligations currently issued by
us are callable prior to maturity under some circumstances. You should read the
discussions under the headings "Description of the Series B Notes--Optional
Redemption" and "Description of the Series D Notes--Optional Redemption" for
further information regarding redemption of the notes.
INFLATION
We believe that inflation has not had a material impact on its results of
operations for the 36 days ended December 31, 1997, the year ended December 31,
1998 and the six months ended June 30, 1999.
RECENT ACCOUNTING PRONOUNCEMENTS
We adopted Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130"), effective January 1, 1998. This
Statement establishes standards for the reporting and display of comprehensive
income and its components in the financial statements. There was no impact on
the financial statements of Compass due to the adoption of SFAS No. 130.
We also adopted Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information" ("SFAS"
No. 131"), on January 1, 1998. This statement requires us to report financial
and descriptive information about its reportable operating segments. There was
no impact on our financial statements due to the adoption of SFAS No. 131.
Also effective January 1, 1998, we adopted Statement of Financial Accounting
Standards No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits" ("SFAS No. 132"). SFAS No. 132 supersedes the
disclosure requirements in Statements of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions," Statements of Financial Accounting
Standards No. 88, "Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination
46
<PAGE>
Benefits," and Statements of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions." SFAS No. 132 is
intended to improve and standardize disclosures regarding pensions and
post-retirement benefits. There was no impact on our financial statements due to
the adoption of SFAS No. 132.
In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133")
was issued, effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. We do not expect the impact of SFAS No. 133 to have a material
effect on our financial reporting.
In June 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("AICPA") issued Statement of Position
98-1 "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"), which is effective for fiscal years beginning after
December 15, 1998. SOP 98-1 requires capitalization and amortization of
qualified computer software costs over their estimated useful life. We do not
expect the adoption of SOP 98-1 to have a material impact on our financial
statements.
In April 1998, the Accounting Standards Executive Committee of the AICPA
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5"), which is effective for fiscal years beginning after
December 15, 1998. SOP 98-5 requires costs of start-up activities, as defined in
Statement SOP 98-5, to be expenses as incurred. Compass does not expect the
adoption of SOP 98-5 to have a material impact on its financial statements.
YEAR 2000
The Year 2000 issue concerns the inability of information systems to
recognize properly and process date-sensitive information beyond January 1,
2000.
As a result of our acquisition program, we have acquired and operate a
number of stand-alone computer systems. We have completed an evaluation of our
primary computer software programs and operating systems used for business
processes to identify Year 2000 issues. Based upon this review, we have
determined that some of our subsidiaries' primary systems are not Year 2000
compliant. These primary systems handle such functions as purchasing, sales
order entry, warehouse inventory management, invoicing and accounts receivable,
and accounts payable.
We have developed plans to address the possible impact of the Year 2000
issue on our computer systems. In 1998 we decided to replace our Year 2000
non-compliant computer systems and install replacement systems. The installation
of the replacement systems is substantially complete and we believe we will
complete our replacement program by November 30, 1999.
We are currently developing a plan to evaluate Year 2000 compliance for all
of our non-information technology systems such as telephone systems, fax
machines and security systems. We have substantially completed our evaluation
and remediation of non-compliant non-information technology systems and we
expect to complete the remaining necessary remediation by November 30, 1999.
The majority of our cost to become Year 2000 compliant is related to the
purchase and installation of the computer system upgrades and the new computer
systems described above. We are expensing all costs except major software
packages as the costs are incurred. The cost of major software packages will be
amortized over a period of three to five years. Costs to remediate non-compliant
non-information technology systems will be expensed as incurred. At June 30,
1999 we had spent an estimated $0.6 million on development and implementation of
Year 2000 compliant computer systems. We estimate the remaining system
replacement or upgrade costs will be approximately $0.2 million. We have not
sought independent verification by third parties of our Year 2000 risk or cost
estimates.
47
<PAGE>
We are developing a plan to identify third parties with which we have a
significant business relationship and to survey such parties as to their Year
2000 compliance. We cannot ensure that all third parties significant to our
operations will be compliant by December 31, 1999. We believe a reasonably
likely worst case scenario resulting from non-compliance by some of our major
customers or critical vendors could include adverse effects on our revenue
collection, disbursements and communications, as well as the scheduling and
delivery of inventory resulting in a material adverse effect on our business,
financial condition or results of operations. In addition, loss of utility
service resulting from disruptions in power generation, transmission or
distribution could adversely affect our manufacturing facilities, leading to
delays in or the inability to provide products to our customers, resulting in a
material adverse effect on our business, financial condition or results of
operations. If it appears likely that any major customer or critical vendor will
not be compliant, we intend to develop contingency plans, if possible, to
mitigate the impact of non-compliance.
While we expect to resolve our Year 2000 risks without a material adverse
effect on our business, financial condition or results of operations, there can
be no assurance as to the ultimate success of our Year 2000 compliance program.
Uncertainties exist as to our ability to detect all Year 2000 issues as well as
our ability to achieve successful and timely resolution of all Year 2000 issues.
Uncertainties also exist concerning the preparedness of our major customers and
critical vendors to avoid Year 2000 issue related service and delivery
interruptions. We cannot predict the eventual outcome associated with the
possible situations that could result from the impact of Year 2000 issues on its
customers or vendors.
48
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
SERIES A NOTES
The outstanding Series A notes were sold by us on April 21, 1998 to
Donaldson, Lufkin & Jenrette, BancBoston Securities and Libra Investments as the
initial purchasers of the Series A notes, pursuant to a purchase agreement dated
April 15, 1998 by and among us, Aeromil, Western Methods and the initial
purchasers. The initial purchasers are qualified institutional buyers, as
defined in Rule 144A under the Securities Act. As a condition to the purchase
agreement, we entered into a registration rights agreement with the initial
purchasers on April 21, 1998. Pursuant to the registration rights agreement, we
agreed to:
- file a registration statement under the Securities Act with the Commission
with respect to the Series B notes within 240 days after the date of the
original issuance of the Series A notes,
- use our best efforts to cause the registration statement covering the
exchange offer to become effective under the Securities Act within 300
days after the Series A notes were originally issued, and
- use our best efforts to consummate the exchange offer within 30 days after
the registration statement covering the exchange offer is declared
effective.
We did not file a registration statement within the required 240 days from the
date we issued the Series A notes and the registration statement did not become
effective within the required 300 days from the date we issued the Series A
notes. As a result, increased interest is accruing on the outstanding Series A
notes at the rate of $22,000 per week. The registration statement of which this
prospectus is a part is intended to satisfy our obligations under the
registration rights agreement. When the registration statement goes effective,
liquidated damages will cease to accrue. You should read the discussion under
the heading "--Conditions of the Exchange Offer" for further information
regarding the registration rights agreement.
SERIES C NOTES
The outstanding Series C notes were sold by us on July 30, 1999 to
BancBoston Robertson Stephens Inc. as the initial purchaser of the Series C
notes, pursuant to a purchase agreement dated July 23, 1999 by and among us, all
of our subsidiaries at that time and the initial purchaser. The initial
purchaser is a qualified institutional buyer, as defined in Rule 144A under the
Securities Act. As a condition to the purchase agreement, we entered into a
registration rights agreement with the initial purchaser on July 30, 1999.
Pursuant to the registration rights agreement, we agreed to:
- file a registration statement under the Securities Act with the Commission
with respect to the Series D notes within 105 days after the date of the
original issuance of the Series C notes,
- use our best efforts to cause the registration statement covering the
exchange offer to become effective under the Securities Act within 180
days after the Series C notes were originally issued, and
- use our best efforts to consummate the exchange offer within 30 days after
the registration statement covering the exchange offer is declared
effective.
If we do not comply with the requirements of the registration rights agreement,
increased interest will accrue on the outstanding Series C notes as a form of
liquidated damages. The registration statement of which this prospectus is a
part is intended to satisfy our obligations under the registration rights
agreement. You should read the discussion under the heading "Conditions of the
Exchange Offer" for further information regarding the registration rights
agreement.
49
<PAGE>
TERMS OF THE EXCHANGE OFFER
We hereby offer, upon the terms and subject to the conditions set forth in
this prospectus and in the accompanying letter of transmittal, to exchange
$1,000 in principal amount of Series B notes for each $1,000 in principal amount
of the Series A notes, and to exchange $1,000 in principal amount of Series D
notes for each $1,000 in principal amount of the Series C notes. Series B notes
will be issued only in integral multiples of $1,000 to each tendering holder
whose outstanding Series A notes are accepted in the exchange offer. Series D
notes will be issued only in integral multiples of $1,000 to each tendering
holder whose outstanding Series C notes are accepted in the exchange offer. We
will accept any outstanding notes validly tendered and not withdrawn prior to
5:00 p.m. New York City time on the expiration date. Outstanding notes that are
not accepted for exchange will be returned as promptly as practicable after the
expiration date. Registered holders of Series A and Series C notes, or their
legal representative or attorney-in-fact, as reflected on the records of the
trustee under the indentures governing the notes are each eligible holders and
may tender all or a portion of the Series A or Series C notes they hold pursuant
to the exchange offer.
The form and terms of the Series B notes under the indenture governing the
Series A and Series B notes will be identical in all material respects to the
form and terms of the Series A notes. The form and terms of the Series D notes
under the indenture governing the Series C and Series D notes will be identical
in all material respects to the form and terms of the Series C notes. The Series
B and Series D notes evidence the same debt as the Series A and Series C notes
which they replace, and will be issued under, and be entitled to the benefits
of, the indenture governing the Series A in the case of the Series B notes, or
the indenture governing the Series C notes in the case of the Series D notes.
The Series B notes will bear interest from their date of issuance at the same
rate and upon the same terms as the Series A notes. The Series D notes will bear
interest from their date of issuance at the same rate and upon the same terms as
the Series C notes. You should read the discussions under the headings
"Description of the Series B Notes" and "Description of the Series D Notes" for
more information on the form and terms of the Series B and Series D notes.
As of the date of this prospectus, $110.0 million aggregate principal amount
of the Series A notes are outstanding and there are registered holders
thereof. As of the date of this prospectus, $19.0 million aggregate principal
amount of the Series C notes are outstanding and there are registered
holders thereof. Solely for reasons of administration (and for no other purpose)
we have fixed the close of business of , 1999, as the record date for
the exchange offer for purposes of determining the holders of certificated
Series A and Series C notes to whom this prospectus and the letter of
transmittal will be mailed initially. Only an eligible holder may participate in
the exchange offer. There will be no fixed record date for determining
registered holders of Series A and Series C notes entitled to participate in the
exchange offer.
Eligible holders of Series A and Series C notes do not have any appraisal or
dissenters' rights under the General Corporation Law of the State of Delaware or
the indentures governing the notes in connection with the exchange offer. We
intend to conduct the exchange offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the
Commission.
We shall be deemed to have accepted validly tendered Series A and Series C
notes when, as, and if we have given oral or written notice to that effect to
the exchange agent. The exchange agent will act as agent for the tendering
holders of Series A and Series C notes for the purposes of receiving the Series
B and Series D notes from us.
If any tendered Series A or Series C notes are not accepted for exchange
because of an invalid tender, the occurrence of some other events described in
this prospectus or otherwise, any such unaccepted Series A or Series C notes
will be returned, without expense, to the tendering holder as promptly as
practicable after the expiration date.
50
<PAGE>
Tendering eligible holders will not be required to pay broker commissions or
fees or, subject to the instructions in the letter of transmittal, transfer
taxes with respect to the exchange of Series A notes for Series B notes or with
respect to the exchange of Series C notes for Series D notes pursuant to the
exchange offer. We will pay all charges and expenses, other than some taxes
which may be levied in the event of any transfer of ownership, in connection
with the exchange offer. You should read the discussion under the heading
"--Fees and Expenses" for more information on the allocation of fees.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The "expiration date" shall be 5:00 p.m., New York City time, on ,
1999, or, at our option, such earlier date upon which 100% of the outstanding
notes shall have been validly tendered pursuant to the exchange offer and not
withdrawn. We may, however, in our sole discretion, extend the exchange offer,
in which case the "expiration date" shall be the latest date and time to which
the exchange offer is extended.
In order to extend the exchange offer, we will notify the exchange agent of
any extension by oral or written notice and will make a public announcement
thereof, each prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
We reserve the right, in our sole discretion:
- to delay accepting any outstanding notes,
- to extend the exchange offer,
- to terminate the exchange offer if it is determined that the exchange
offer does not meet the conditions set forth in "Conditions of the
Exchange Offer" below, in each case by giving oral or written notice of
such delay, extension, or termination to the exchange agent, or
- to amend the terms of the exchange offer in any manner.
Any delay in acceptance of the outstanding notes, or extension, termination, or
amendment or the exchange offer will be followed as promptly as practicable by a
public announcement thereof. If the exchange offer is amended in a manner
determined by us to constitute a material change, we will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered holders of Series A and Series C notes. We will then extend the
exchange offer for a period of five to ten business days, depending upon the
significance of the amendment and the manner of disclosure to the registered
holders, if the exchange offer would otherwise expire during that five to ten
business day period.
Without limiting the manner in which we may choose to make a public
announcement of the delay, extension, termination, or amendment of the exchange
offer, we shall not have an obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE SERIES B AND SERIES D NOTES
The Series B and Series D notes will bear interest from their date of
issuance. Holders of Series A or Series C notes that are accepted for exchange
will be entitled to receive, in cash, accrued and unpaid interest thereon to,
but not including, the date of issuance of the Series B or Series D notes,
respectively, and will be deemed to have waived the right to receive any payment
in respect of interest on the Series A or Series C notes accrued from and after
the date of issuance of the Series B or Series D notes, respectively. Such
accrued and unpaid interest on the outstanding notes will be paid to registered
holders of the Series B and Series D notes, as applicable, with the first
interest payment on the Series B and Series D notes. Interest on the outstanding
Series A and Series C notes accepted for exchange will cease to accrue on the
day prior to the issuance of the Series B and Series D notes.
51
<PAGE>
The Series B and Series D notes and the Series A and Series C notes bear
interest at a rate equal to 10 1/8% per annum. Interest on the Series B and
Series D notes is payable on each April 15 and October 15, commencing on April
15, 2000.
PROCEDURES FOR TENDERING SERIES A AND SERIES C NOTES
The tender by an eligible holder as set forth below and the acceptance
thereof will constitute a binding agreement between the tendering eligible
holder and us upon the terms and subject to the conditions set forth in this
prospectus and in the accompanying letter of transmittal. Except as set forth
below, an eligible holder who wishes to tender Series A or Series C notes for
exchange pursuant to the exchange offer must transmit a properly completed and
duly executed letter of transmittal, the certificates for the outstanding notes
being tendered, and all other documents required by the letter of transmittal,
to the exchange agent at the address set forth in the letter of transmittal on
or prior to 5:00 p.m., New York City time, on the expiration date. Eligible
holders wishing to accept the exchange offer through the book-entry transfer
procedure described below, if such procedure is available, may transfer the
Series A or Series C notes being tendered via ATOP. In tendering the Series A or
Series C notes via ATOP, such holder will expressly acknowledge the receipt, and
agree to be bound by, the terms of the letter of transmittal. In the case of a
tender by guaranteed delivery, a holder who tenders Series A or Series C notes
via ATOP will acknowledge the receipt of, and agree to be bound by, the Notice
of Guaranteed Delivery. Book-Entry Confirmation must be received by the exchange
agent by 5:00 p.m., New York City time, on the expiration date. Alternatively,
an eligible holder may accept the exchange offer by complying with the
guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF SERIES
A OR SERIES C NOTES, LETTERS OF TRANSMITTAL, AND ALL OTHER REQUIRED DOCUMENTS IS
AT THE ELECTION AND RISK OF THE ELIGIBLE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT
IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED BE USED. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT THE
ELIGIBLE HOLDER USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
Each signature on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an eligible institution, unless the
outstanding notes surrendered for exchange pursuant thereof are tendered:
- by a registered holder of the Series A notes who has completed either the
box entitled "Special Issuance Instructions for Series B Notes" or the box
entitled "Special Delivery Instructions for Series B Notes " on the letter
of transmittal,
- be a registered holder of the Series C notes who has completed either the
box entitled "Special Issuance Instructions for Series D Notes" or the box
entitled "Special Delivery Instructions for Series D Notes" on the letter
of transmittal, or
- by an eligible institution.
An eligible institution is a firm which is a member of a registered national
securities exchange or a member of the NASD, a commercial bank or trust company
having an office or correspondent in the United States or is otherwise an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act. If Series A or Series C notes are registered in the name of a
person other than a signer of the letter of transmittal, the Series A or Series
C notes surrendered for exchange must either:
- be endorsed by the registered holder, with the signature thereon
guaranteed by an eligible institution, or
- be accompanied by a bond power, in satisfactory form as determined by us
in our sole discretion, duly executed by the registered holder, with the
signature thereon guaranteed by an eligible institution along with any
other documents required upon transfer.
The term "registered holder" as used with respect to the outstanding notes means
any person in whose name the Series A or Series C notes are registered on the
books of the registrar for the Series A and Series C notes.
52
<PAGE>
Tenders of Series A or Series C notes may be made only in principal amounts
of $1,000 and integral multiples thereof. Subject to the foregoing, eligible
holders may tender less than the aggregate principal amount represented by the
Series A or Series C notes deposited with the exchange agent provided they
appropriately indicate this fact on the letter of transmittal accompanying the
tendered Series A and Series C notes.
All questions as to the validity, form, eligibility, time of receipt,
acceptance, and withdrawal of outstanding notes tendered for exchange will be
determined by us in our sole, reasonable discretion, which determination shall
be final and binding on all parties. We reserve the absolute right to reject any
and all tenders of any particular outstanding notes not properly tendered or to
reject any particular Series A or Series C notes whose acceptance might, in our
judgment or that of our counsel, be unlawful. We also reserve the absolute right
to waive any defects or irregularities or conditions of the exchange offer as to
any particular outstanding notes either before or after the expiration date. We
reserve the right to waive the ineligibility of any holder who seeks to tender
outstanding notes in the exchange offer. Our interpretation of the terms and
conditions of the exchange offer, including the letter of transmittal and the
instructions to that letter, shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Series A or
Series C notes for exchange must be cured within such reasonable period of time
as we shall determine. We will use reasonable efforts to give notification of
defects or irregularities with respect to tenders of Series A or Series C notes
for exchange but shall not incur any liability for failure to give such
notification. Tenders of the Series A and Series C notes will not be deemed to
have been made until such irregularities have been cured or waived.
If any letter of transmittal, endorsement, bond power, power of attorney, or
any other document required by the letter of transmittal is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation,
or other person acting in a fiduciary or representative capacity, such person
should so indicate when signing. Unless waived by us, proper evidence
satisfactory to us of a person's authority to act in a fiduciary or
representative capacity must be submitted.
Any beneficial owner whose outstanding notes are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee and who wishes
to tender outstanding notes in the exchange offer should contact such registered
holder promptly and instruct such registered holder to tender on the beneficial
owner's behalf. If a beneficial owner wishes to tender directly, the beneficial
owner must make appropriate arrangements to register ownership of the Series A
or Series C notes in that beneficial owner's name prior to completing and
executing the letter of transmittal and tendering outstanding notes. Beneficial
owners should be aware that the transfer of registered ownership may take
considerable time.
Each eligible holder accepting the exchange offer is required to make the
representations to us described under "--Resales of the Series B and Series D
Notes" below.
BOOK ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the Series A notes and an account with respect to the Series C notes at DTC
for purposes of the exchange offer within two business days after the date of
this prospectus. Any financial institution that is a participant in DTC's system
may make book-entry delivery of Series A or Series C notes by causing DTC to
transfer such Series A or Series C notes into the exchange agent's account at
DTC in accordance with DTC's procedures for transfer. A holder tendering the
notes via ATOP will expressly acknowledge the receipt of, and agree to be bound
by, the terms of the letter of transmittal. In the case of a tender by
guaranteed delivery, the holder will expressly acknowledge the receipt of, and
agree to be bound by, the Notice of Guaranteed Delivery.
53
<PAGE>
GUARANTEED DELIVERY PROCEDURES
If a registered holder of outstanding notes desires to tender their Series A
or Series C notes other than through book-entry transfer procedures and such
outstanding notes are not immediately available, or if time will not permit such
holder's Series A or Series C notes or other required documents to reach the
exchange agent on or prior to the expiration date, a tender may be effected if:
- the tender is made by or through an eligible institution,
- prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed letter of
transmittal or facsimile thereof and Notice of Guaranteed Delivery,
substantially in the form provided by us, by either facsimile
transmission, mail or hand delivery.
The letter and notice should set forth:
- the name and address of the holder of Series A or Series C notes,
- the certificate number or numbers of any Series A or Series C notes which
will not be tendered by book-entry transfer,
- the amount of Series A or Series C notes tendered,
- a statement that the tender is being made thereby,
- a guarantee that within three business days after the date of execution of
the Notice of Guaranteed Delivery, the certificates for all physically
tendered Series A or Series C notes, in proper form for transfer, and any
documents required by the letter of transmittal will be deposited by the
eligible institution with the exchange agent, and
- the certificates for all physically tendered Series A or Series C notes,
in proper form for transfer, and all other documents required by the
letter of transmittal, are received by the exchange agent within three
business days after the date of execution of the Notice of Guaranteed
Delivery.
If a registered holder of Series A or Series C notes desires to tender such
outstanding notes by book-entry transfer and the procedure for book-entry
transfer cannot be completed on or prior to the expiration date, a tender may be
effected if:
- the tender is made by or through an eligible institution,
- the exchange agent receives confirmation from DTC of receipt by DTC of a
Notice of Guaranteed Delivery via ATOP, by which the tendering holder will
expressly acknowledge the receipt of, and agree to be bound by, the Notice
of Guaranteed Delivery, including guarantee that Book-Entry Confirmation
will be received by the exchange agent within three business days after
the date of the transmittal of the Notice of Guaranteed Delivery via ATOP,
and
- Book-Entry Confirmation is received by the exchange agent within three
business days after the date of the transmittal of the Notice of
Guaranteed Delivery via ATOP.
ACCEPTANCE OF SERIES A AND SERIES C NOTES FOR EXCHANGE; DELIVERY OF SERIES B AND
SERIES D NOTES
Except as set forth under "--Conditions of the Exchange Offer" below, we
will accept, promptly after the expiration date, all outstanding notes properly
tendered and will issue the Series B and Series D notes promptly after
acceptance of the Series A and Series C notes. For purposes of the exchange
offer, we shall be deemed to have accepted properly tendered Series A and Series
C notes for exchange when, as, and if we have given oral or written notice to
that effect to the exchange agent.
54
<PAGE>
In all cases, issuances of Series B for Series A notes or Series D notes for
Series C notes that are accepted for exchange pursuant to the exchange offer
will be made only after timely receipt by the exchange agent of certificates for
outstanding Series A or Series C notes or a Book-Entry Confirmation of such
outstanding notes into the exchange agent's account at DTC, a properly completed
and duly executed letter of transmittal, and all other required documents;
PROVIDED, HOWEVER, that we have given oral or written notice thereof to the
exchange agent, and PROVIDED FURTHER that we reserve the absolute right to waive
any defects or irregularities in the tender or conditions of the exchange offer.
If any tendered Series A or Series C notes are not accepted for any reason set
forth in the terms and conditions of the exchange offer or if Series A or Series
C notes are submitted for a greater principal amount than the eligible holder
desires to exchange, such unaccepted or non-exchanged outstanding notes or
substitute outstanding notes evidencing the unaccepted portion, as appropriate,
will be returned without expense to the tendering eligible holder thereof as
promptly as practicable after the expiration or termination of the exchange
offer.
WITHDRAWAL RIGHTS
Tenders of the Series A or Series C notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, one business day prior to the expiration date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the exchange agent at its address set forth under "-- Exchange
Agent" below. Any such notice of withdrawal must:
- specify the name of the person having tendered the Series A or Series C
notes to be withdrawn,
- identify the Series A or Series C notes to be withdrawn, including the
principal amount of such outstanding notes, and
- if certificates for Series A or Series C notes were tendered, specify the
name in which such outstanding notes were registered, if different from
that of the withdrawing holder.
If certificates for Series A or Series C notes have been delivered or
otherwise identified to the exchange agent then, prior to the release of such
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an eligible institution unless such holder is an
eligible institution. If Series A or Series C notes have been tendered pursuant
to the procedure for book-entry transfer, any notice of withdrawal must specify
the name and number of the account at DTC to be credited with the withdrawn
Series A or Series C notes, and otherwise comply with the procedures of DTC. All
questions as to the validity, form, eligibility and time of receipt of such
notices will be determined by us in our sole, reasonable discretion. This
determination shall be final and binding on all parties. The Series A and Series
C notes so withdrawn, if any, will be deemed not to have been validly tendered
for exchange for purposes of the exchange offer. Any Series A and Series C notes
that have been tendered for exchange but which are withdrawn will be returned to
the eligible holder without cost to the eligible holder as soon as practicable
after withdrawal. Properly withdrawn Series A or Series C notes may be
retendered by following one of the procedures described under "--Procedures for
Tendering Series A or Series C Notes" above at any time on or prior to the
expiration date.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other provisions of the exchange offer, we shall not be
required to accept any Series A or Series C notes for exchange, or to issue the
Series B notes in exchange for the Series A notes, or to issue the Series D
notes in exchange for the Series C notes. We may terminate or amend the exchange
offer if, prior to the exchange of the Series B notes for the Series A notes and
the
55
<PAGE>
Series D notes for the Series C notes, we determine, in our sole discretion,
that any of the following situations exist:
- there has been a commencement of any action, legal or governmental, with
respect to the exchange offer or which we reasonably determine would make
it inadvisable to proceed with the exchange offer,
- there has been a banking moratorium or similar event or international
calamity involving the United States,
- there has been a change in our business or prospects that may have a
material adverse effect on us, or
- the exchange offer violates any applicable law.
If we make any of the foregoing determinations, we may:
- refuse to accept any Series A or Series C notes and return all tendered
Series A and Series C notes to the tendering holders, or
- extend the exchange offer, retain all Series A and Series C notes tendered
prior to the expiration date, and use reasonable efforts to satisfy any
such condition, subject, however, to the rights of eligible holders to
withdraw such outstanding notes.
You should read the discussion under the heading "--Withdrawal Rights" for
further information regarding your rights to withdraw tendered notes. In
addition, we will not accept for exchange any Series A or Series C notes
tendered, and no Series B or Series D notes will be issued in exchange for any
such outstanding notes, if at such time any stop order shall be threatened or in
effect with respect to the registration statement or the qualification of the
indentures governing the notes under the Trust Indenture Act of 1939, as in
effect on the date of the indentures.
Holders of outstanding notes may have rights and remedies against us under
the registration rights agreement should we fail to consummate the exchange
offer, notwithstanding any nonfulfillment of the above conditions. Such
conditions are not intended to modify such rights and remedies in any respect.
Under the registration rights agreement relating to the Series A notes,
during the first 90-day period immediately following the occurrence of any of
the following events, we agreed to pay to each holder of the Series A notes an
additional amount equal to $0.05 per week or partial week, per $1,000 principal
amount of the Series A notes held by such holder as liquidated damages, if,
other than as a result of actions by the holders of the Series A notes:
- the registration statement relating to the Series B notes was not filed by
December 17, 1998,
- the registration statement filed with the Commission relating to the
exchange offer for the Series A notes was not declared effective by the
Commission by February 16, 1999, or
- the exchange offer for the Series A notes is not consummated within 30
days after the registration statement is declared effective.
The amount of liquidated damages will increase by an additional $0.05 per
week or partial week, per $1,000 principal amount at the beginning of each
subsequent 90-day period to a maximum amount of liquidated damages of $0.50 per
week per $1,000 principal amount. Liquidated damages will continue to accrue
until the conditions noted above have been cured. Liquidated damages accrued as
of any interest payment date will be payable on that date. Because we did not
comply with some of these provisions, liquidated damages are currently accruing
with respect to the Series A notes at the rate of $22,000 per week. Liquidated
damages will cease to accrue when this registration statement is declared
effective.
56
<PAGE>
Under the registration rights agreement relating to the Series C notes,
during the first 90-day period immediately following the occurrence of any of
the following events, we have agreed to pay to each holder of the Series C notes
an additional amount equal to $0.05 per week or partial week, per $1,000
principal amount of the Series C notes held by such holder as liquidated
damages, if, other than as a result of actions by the holders of the Series C
notes:
- the registration statement relating to the Series D notes is not filed by
November 12, 1999,
- the registration statement filed with the Commission relating to the
exchange offer for the Series C notes is not declared effective by the
Commission by January 26, 2000, or
- the exchange offer for the Series C notes is not consummated within 30
days after the registration statement is declared effective.
The amount of liquidated damages will increase by an additional $0.05 per
week or partial week, per $1,000 principal amount at the beginning of each
subsequent 90-day period to a maximum amount of liquidated damages of $0.05 per
week per $1,000 principal amount. Liquidated damages will continue to accrue
until the conditions noted above have been cured. Liquidated damages accrued as
of any interest payment date will be payable on that date.
TERMINATION OF RIGHTS
Eligible holders of the Series A notes to whom this exchange offer is made
have rights under the registration rights agreement and purchase agreement which
relate to the Series A notes that will terminate upon the consummation of the
exchange offer. These rights include, without limitation the right to require
us:
- to file the exchange offer registration statement relating to the Series B
notes under the Securities Act with the Commission within 240 days after
the Series A notes were originally issued;
- to use our best efforts to cause the registration statement relating to
the Series B notes to become effective under the Securities Act within 300
days after the Series A notes were originally issued;
- to consummate the exchange offer for the Series A notes within 30 days
after the registration statement covering the exchange offer is declared
effective; and
- if some events described in the registration rights agreement relating to
the Series A notes occur, to:
- file a shelf registration statement covering resales of the notes,
- use our best efforts to cause such shelf registration statement to be
declared effective under the Securities Act, and
- keep such shelf registration statement effective for the period
described in the registration rights agreement.
Eligible holders of the Series C notes to whom this exchange offer is made
have rights under the registration rights agreement and purchase agreement which
relate to the Series C notes that will terminate upon the consummation of the
exchange offer. These rights include, without limitation the right to require
us:
- to file the exchange offer registration statement relating to the Series D
notes under the Securities Act with the Commission within 105 days after
the Series C notes were originally issued;
57
<PAGE>
- to use our best efforts to cause the registration statement relating to
the Series D notes to become effective under the Securuties Act within 180
days after the Series C notes were originally issued;
- to consummate the exchange offer for the Series C notes within 30 days
after the registration statement covering the exchange offer is declared
effective; and
- if some events described in the registration rights agreement relating to
the Series C notes occur, to;
- file a shelf registration statement covering resales of the notes,
- use our best efforts to cause such shelf registration statement to be
declared effective under the Series Act, and
- keep such shelf registration statement effective for the period
described in the registration rights agreement.
The right to receive liquidated damages from us under specific circumstances
described in the registration rights agreements will also terminate upon
consummation of exchange offer.
EXCHANGE AGENT
All tendered Series A and Series C notes, executed letters of transmittal,
and other related documents should be directed to the exchange agent at one of
the addresses set forth below. In addition, any questions and requests for
assistance and requests for additional copies of this prospectus, the letter of
transmittal, and other related documents should be addressed to the exchange
agent as follows:
<TABLE>
<S> <C> <C>
IF BY OVERNIGHT CARRIER OR BY IF BY REGISTERED OR CERTIFIED IF BY FACSIMILE:
HAND: MAIL: (212) 815-6339
Bank of New York Bank of New York CONFIRM BY TELEPHONE:
101 Barclay Street Debt Processing Group-7E (212) 815-6331
Reorg. Department-7E P.O. Box 11265
New York, NY 10286 New York, NY 10286
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by us. The principal
solicitation is being made by mail; however, additional solicitation may be made
by facsimile, telephone or in person by our officers and regular employees and
our affiliates. We have not retained any dealer-manager in connection with the
exchange offer. We will, however, reimburse brokers, dealers, commercial banks
and trust companies for reasonable and necessary costs and expenses incurred by
them in forwarding this prospectus and the related exchange offer documents to
the beneficial owners of Series A or Series C notes held by them as nominee or
in a fiduciary capacity. We will also pay the exchange agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses. The cash expenses to be incurred in connection with the
exchange offer will be paid by us and are estimated to be approximately
$350,000. Such expenses include fees and expenses of the exchange agent,
accounting and legal fees, filing fees and printing costs.
We will pay all transfer taxes, if any, applicable to the exchange of Series
A and Series C notes pursuant to the exchange offer. If, however, a transfer tax
is imposed for any reason other than the exchange of Series A and Series C notes
pursuant to the exchange offer, then the amount of any such transfer taxes will
be payable by the tendering holder, whether imposed on the registered holder or
any
58
<PAGE>
other persons. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the letter of transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The Series B notes will be recorded at the same carrying value as the Series
A notes and the Series D notes will be recorded at the same carrying value as
the Series C notes, as reflected in our accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized. The expenses of the exchange offer will be amortized over the term
of the Series B and Series D notes.
RESALES OF THE SERIES B AND SERIES D NOTES
With respect to resales of Series B and Series D notes, based on an
interpretation by the staff of the Securities and Exchange Commission set forth
in no-action letters issued to third parties, we believe that an eligible
holder, other than:
- an affiliate of our within the meaning of Rule 405 under the Securities
Act, or
- a broker-dealer, who exchanges Series A notes for Series B notes or Series
C notes for Series D notes in the ordinary course of its business and who
is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in a
distribution of the Series B or Series D notes,
will be allowed to resell the Series B or Series D notes to the public without
further registration under the Securities Act and without delivering to the
purchasers of the Series B or Series D notes a prospectus that satisfies the
requirements of Section 10 of the Securities Act. However, if any eligible
holder acquires Series B or Series D notes in the exchange offer for the purpose
of distributing or participating in a distribution of the Series B or Series D
notes, that eligible holder cannot rely on the position of the staff of the
Securities and Exchange Commission enunciated in "Exxon Capital Holdings
Corporation" (available May 13, 1988) or similar no-action letters or any
similar interpretive letters. In that case, the holder must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction, unless an exemption from
registration is otherwise available.
As contemplated by the above no-action letters and the registration rights
agreement, each holder of Series A or Series C notes accepting the exchange
offer is required to represent to us in the letter of transmittal that:
- any Series B or Series D notes are to be acquired in the ordinary course
of business of the person receiving such Series B or Series D notes,
- neither the holder of the Series A or Series C notes nor any such other
person receiving the Series B or Series D notes is participating, intends
to participate, or has any arrangement or understanding with any person to
participate, in a distribution of the Series B or Series D notes, as
applicable, and
- except as otherwise disclosed, neither the holder of the Series A or
Series C notes, as applicable, nor any such other person is an affiliate
of ours within the meaning of Rule 405 under the Securities Act.
Further, each holder of Series A or Series C notes accepting the exchange offer
must acknowledge that any person participating in the exchange offer for the
purpose of distributing the Series B notes in the case of the Series A note
holders, or the Series D notes in the case of the Series C note holders, must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection
59
<PAGE>
with a secondary resale of the Series B or Series D notes and cannot rely on the
no-action letters discussed above.
Each broker-dealer that receives Series B or Series D notes for its own
account pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Series B or Series D notes. The
letter of transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Series B or Series D notes received in exchange
for Series A or Series C notes, respectively, where such Series A or Series C
notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, for a period of up to one year after the
expiration date. We have agreed to make this prospectus, as it may be amended or
supplemented from time to time, available to any broker-dealer, at no charge,
for use in connection with any such resale for a period of up to one year after
the expiration date of the exchange offer, or for such shorter period that will
terminate when such broker-dealers have sold all of such Series B and Series D
notes. You should read the discussion under the heading "Plan of Distribution"
for further information on the continuing availability of this prospectus after
the expiration date.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Series A or Series C notes who do not exchange their Series A
notes for Series B notes or Series C notes for Series D notes pursuant to the
exchange offer will continue to be subject to the restrictions on transfer of
such Series A and Series C notes as set forth in the legends thereon. In
general, the Series A and Series C notes may not be offered or sold, unless
registered under the Securities Act and applicable state securities laws. We do
not intend to register the Series A or Series C notes under the Securities Act
or any state securities laws.
60
<PAGE>
BUSINESS
COMPASS
We commenced operations in November 1997 with the simultaneous acquisitions
of two established precision machining subcontractors. In 1998 and 1999 we
acquired a total of twelve additional operating companies. Our acquisitions to
date and our principal manufacturing facilities are summarized in the following
table.
<TABLE>
<CAPTION>
YEAR DATE MANUFACTURING
BUSINESS BUSINESS CAPABILITIES/
BUSINESS ACQUIRED FOUNDED ACQUIRED LOCATION SPECIALITIES
- ------------------------------- ----------- ------------- ------------------- ------------------------
<S> <C> <C> <C> <C>
Aeromil........................ 1971 Nov. 1997 Santa Ana, CA Medium-sized machined
parts
Western Methods................ 1978 Nov. 1997 Gardena, CA Small to medium-sized
machined parts
Brittain Machine............... 1966 April 1998 Wichita, KS Small to large-sized
machined parts,
fabrication and tooling
Wichita Manufacturing.......... 1992 April 1998 Cerritos, CA Small to medium-sized
machined parts
Barnes Machine................. 1982 April 1998 Shelton, WA Small to medium-sized
machined parts
Sea-Lect(1).................... 1989 May 1998 Kent, WA Sheet metal and
extruded/machined parts,
assembly including
bonding/ riveting, tool
and die making
Pacific Hills.................. 1962 Nov. 1998 Valencia, CA Shim stock, laminated
Kent, WA shims,
stampings, flat patterns
Modern(3)...................... 1966 Dec. 1998 Renton, WA Small to medium-sized
machined parts
Trim........................... 1962 July 1999 Wallisdown, Poole, Machining, assembly,
Dorset(4) turning
Diac........................... 1984 July 1999 New Addington Machining, assembly
Croydon and Biggin
Hill, Kent(4)
<CAPTION>
MAJOR
BUSINESS ACQUIRED CUSTOMERS(2)
- ------------------------------- -----------------------------
<S> <C>
Aeromil........................ Boeing, Korean Airlines,
Hughes Aircraft,
Raytheon
Western Methods................ Boeing, Northrop,
Lockheed, NASA-JPL
Brittain Machine............... Boeing, Raytheon,
Hughes Aircraft, Cessna,
Shorts Brothers
Wichita Manufacturing.......... Boeing, Northrop,
Tolo
Barnes Machine................. Boeing, Northrop,
Kawasaki
Sea-Lect(1).................... Boeing, Japan Airlines, B.F.
Goodrich, Lucas Aerospace,
Mitsubishi, Kawasaki
Pacific Hills.................. Boeing, Rohr
Modern(3)...................... Boeing, Hawker
Trim........................... Applied Materials, Shorts
Brothers, British
Aerospace-Airbus
Diac........................... Shorts Brothers
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
YEAR DATE MANUFACTURING
BUSINESS BUSINESS CAPABILITIES/
BUSINESS ACQUIRED FOUNDED ACQUIRED LOCATION SPECIALITIES
- ------------------------------- ----------- ------------- ------------------- ------------------------
<S> <C> <C> <C> <C>
Maybrey........................ 1962 July 1999 Lower Sydenham(4) Non-ferrous casting
Trefn.......................... 1978 July 1999 Llay, Wrexham, Machining, assembly,
Wales(4) turning
Trefn Metal Treatments......... 1982 July 1999 Llay, Wrexham, Heat treating,
Wales(4) anodizing, shot- peening
Trefn Fabrications............. 1994 July 1999 Llay, Wrexham, Metal forming,
Wales(4) fabrication, assembly
<CAPTION>
MAJOR
BUSINESS ACQUIRED CUSTOMERS(2)
- ------------------------------- -----------------------------
<S> <C>
Maybrey........................ Edwards
Trefn.......................... Applied Materials, British
Aerospace- Airbus
Trefn Metal Treatments......... British Aerospace- Airbus
Trefn Fabrications............. British Aerospace- Airbus
</TABLE>
- ------------------------
(1) We simultaneously acquired the assets of Sea-Lect and the stock of J&J
Leasing, Inc. as a subsidiary of Sea-Lect in May 1998. Subsequent to the
acquisition of these businesses, J&J, which had previously leased machinery
and equipment to Sea-Lect and did not conduct any manufacturing operations,
was merged into Sea-Lect.
(2) Major customers include Boeing, British Aerospace-Airbus, Northrop, Korean
Airlines Co., Ltd., Hughes Aircraft Company, Raytheon Aircraft Company,
Lockheed Martin Corporation, National Air Space Administration-Jet
Propulsion Laboratory, Cessna Aircraft Co., Japan Airlines Co., Ltd., B.F.
Goodrich Aerospace, a division of The B.F. Goodrich Company, Lucas
Aerospace, a division of LucasVarity plc, Mitsubishi Heavy Industries Ltd.,
Kawasaki Heavy Industries, Ltd., Hawker de Havilland Inc., Shorts Brothers
PLC, Edwards High Vacuum, Tolo Inc., a subsidiary of B.F. Goodrich and Rohr,
Inc., a subsidiary of B.F. Goodrich.
(3) We are in the process of consolidating the business operations of Modern
with Barnes Machine and Sea-Lect, including moving machinery and equipment
from the Modern facility to the facilities at Barnes Machine and Sea-Lect.
We believe this consolidation will assist us in achieving our strategic
goals by improving our utilization of our existing facilities and decreasing
our costs.
(4) There are multiple buildings and manufacturing sites at each location.
Prior to our acquisition of our subsidiaries, our subsidiaries operated
under independent management. As part of our strategy, we intend to leverage the
consolidated capabilities of our subsidiaries, expand production of
sub-assemblies, manufacturing kits and structural components and acquire
businesses with complementary capabilities.
At present, we are principally engaged in manufacturing individual parts for
aircraft to precise specifications from metals including aluminum, titanium and
steel through the use of precision computer numerically-controlled machine tools
and metal forming equipment. Our facilities in the United Kingdom are also
engaged in metal treatment, non-ferrous casting and produce welded assemblies
and components. We use a variety of advanced techniques and machinery including
horizontal and vertical machining centers and state-of-the-art high-speed
precision machining equipment, as well as three-spindle five-axis gantry mills.
We produce original equipment parts, sub-assemblies, manufacturing kits and
structural components for:
- all of the commercial jet models (717, 737, 747, 757, 767, 777, MD-11,
MD-80 and MD-90) produced by Boeing,
62
<PAGE>
- Airbus single-aisle (A319, A320 and A321) and twin-aisle (A300, A310,
A330 and A340), models,
- Bombardier (Canadair Regional Jet-Registered Trademark-, Canadair
Global Express, Lear and Dash-8 models)
- Embrear Aircraft Corporation (ERJ-145),
- as well as for several United States military programs and various
other commercial aircraft manufacturers.
We believe that among the key factors in our success are the long-standing
relationships that our management has established with its our customers, as
well as the strong name recognition of our subsidiaries, established track
records of quality manufacturing and consistent histories of timely deliveries
by our subsidiaries.
STRATEGY
Our principal strategic objective is to increase revenues and profits by
managing the supply chain for our customers, by consolidating our acquired
businesses and by producing sub-assemblies, manufacturing kits and structural
components as well as individual parts. We also seek to increase our operating
efficiencies and to reduce our customer concentration by diversifying our
revenue mix among aerospace customers. To reach our objectives we intend to:
CONSOLIDATE ACQUIRED BUSINESSES; INCREASE REVENUES AND MARGINS
We believe that there are significant opportunities to increase revenues and
margins by increasing operating efficiencies and asset utilization through
strategic coordination of production among our manufacturing facilities to
increase production runs, reduce set-up times and utilize the most appropriate
machinery for each production job. We have begun to introduce lean management
practices to reduce scrap rates, decrease direct manufacturing time per part,
decrease inventory levels and improve margins. We also believe that some of our
manufacturing facilities are underutilized. This excess capacity gives us the
opportunity to shift production among our manufacturing facilities to achieve
increased operating efficiencies. We are also in the process of consolidating
the operations of Modern with those of Barnes Machine and Sea-Lect and expect to
complete this consolidation during the fourth quarter of 1999. We believe that
the consolidation of the specialized and complementary manufacturing
capabilities of our facilities in the United States, combined with our strong
customer relationships, reputation for quality and ability to coordinate
production among our facilities, should allow us to grow internally and increase
profits by producing individual parts more efficiently. We believe that many of
the same opportunities also exist with respect to our facilities located in the
United Kingdom.
Each of our subsidiaries has substantial experience in the aerospace
industry and has experienced management and highly-skilled employees. We seek to
retain the technical expertise of many of these individuals and utilize their
expertise throughout our manufacturing facilities.
In addition, we are centralizing a number of administrative functions at the
corporate level including finance, accounting, purchasing, tax, sales and
marketing, payroll, employee benefits and insurance and other administrative
activities to realize economies of scale and reduce costs. We are updating and
consolidating our management information systems to improve internal controls
and coordinate operations and our consolidating some of the engineering
functions currently spread across our manufacturing facilities.
63
<PAGE>
FOCUS ON SUPPLY CHAIN MANAGEMENT AND INCREASE PRODUCTION OF SUB-ASSEMBLIES,
MANUFACTURING KITS AND STRUCTURAL COMPONENTS
We intend to increase our production of sub-assemblies, manufacturing kits
and structural components while maintaining our on-going business of
manufacturing individual parts. While we currently produce a limited number of
sub-assemblies and manufacturing kits, we believe that we are capable of
producing a wide range of sub-assemblies, manufacturing kits and structural
components by more effective use of our broad, flexible manufacturing
capabilities without significant additional capital expenditures. We believe the
ability to produce sub-assemblies, manufacturing kits and structural components
will become increasingly important as customers such as Boeing reduce their
inventories of individual parts. We intend to offer our customers supply chain
management services by providing just-in-time delivery and electronic data
interchange with our customers. We believe that we will be able to leverage our
specialized and complementary manufacturing capabilities and marketing expertise
to be awarded additional production contracts for sub-assemblies, manufacturing
kits and structural components.
IMPROVE MARKETING
Although our subsidiaries have enjoyed strong customer relationships and
repeat business as a result of strong name recognition, established track
records of quality manufacturing and consistent histories of timely deliveries,
they have not maximized marketing opportunities. We intend to proactively market
our broad, flexible manufacturing capabilities to secure additional long-term
production contracts from existing customers. We intend to position ourself as
an outsource alternative to our customers' own facilities by offering our
customers lower part costs and increased inventory turnover. In addition, we are
targeting customers that our subsidiaries could not significantly penetrate
individually, including Airbus which represented less than one percent of our
1998 consolidated revenues. We believe that improved marketing of our ability to
produce precision machined individual parts and sub-assemblies, manufacturing
kits and structural components to precise specifications with timely deliveries
should allow us to achieve our objectives of becoming a major supplier to the
aerospace industry.
DIVERSIFY REVENUE MIX
We participate in all Boeing commercial jet programs, and, with the
acquisition of Trim and its subsidiaries, we participate in all of the Airbus
commercial jet programs. We believe that our recent acquisition of our
facilities in the United Kingdom will assist us in achieving our goal of
diversifying our revenue mix within the aerospace industry. We believe that our
United Kingdom facilities will provide us with a platform from which to grow our
business with European aircraft manufacturers because of the equipment for
machining and surface treatments of long parts which is located at those
facilities. We also believe our facilities located in the United Kingdom are of
sufficient size to meet our customers outsourcing needs and that they have an
established reputation in the European market. In addition, we believe that
there are opportunities to increase revenues from regional and business jet
manufacturers and from United States military programs beyond our current
participation in the C-17 transport and F-18 fighter aircraft programs.
INCREASE OUTSOURCING
We utilize small machine shops for some production functions to increase
manufacturing efficiencies and capacity. We intend to increase outsourcing to
these small machine shops to augment our capacity and supplement our
capabilities without additional capital expenditures, thus enhancing our ability
to produce sub-assemblies, manufacturing kits and structural components. We will
pre-qualify, execute formal supply agreements and be held accountable for
meeting the quality standards of our customers. To ensure that the outsourced
parts shipped under its supplier numbers and purchase
64
<PAGE>
order numbers meet the requirements of our customers, we will impose the quality
requirements in our contracts and audit our subcontractors in a similar manner
to which we are required to perform and are audited by our customers. We will
also inspect the outsourced parts in our own quality control departments.
INDUSTRY OVERVIEW AND TRENDS
In response to an increased demand for aircraft, the major aircraft
manufacturers are dramatically changing their manufacturing and purchasing
practices to increase production rates and reduce costs. More specifically,
aircraft manufacturers are increasing outsourcing and imposing increased
responsibilities, such as the production of more sub-assemblies, manufacturing
kits and structural components, just-in-time deliveries and quality control
inspections before shipping on a smaller number of qualified suppliers.
Outsourcing also reduces costs because subcontractors can produce parts at a
fraction of the cost of in-house manufacturing. At present, the aerospace
supplier industry is highly fragmented, 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. As a result of the
aircraft manufacturers' new manufacturing and purchasing practices, the supplier
industry has been consolidating at an increasing pace in recent years and
management believes that such consolidation will continue.
Significant trends currently affecting the market for parts for aircraft
manufacturers include the following:
INCREASES IN AIR TRANSIT AND AIRCRAFT PRODUCTION
Boeing's 1999 Current Market Outlook projected that, through the year 2008,
global air travel will increase by 59% and that the number of passenger and
cargo delivery aircraft in service will increase by 52%, with approximately
8,900 new airplanes delivered worldwide through the year 2008. At December 31,
1998 Boeing reported unfilled announced orders for 1,786 aircraft, with orders
for 656 aircraft received as of December 31, 1998. Boeing delivered 270, 375 and
563 airplanes in 1996, 1997 and 1998, respectively. These numbers include
airplanes delivered by the former McDonnell Douglas Corporation, which was
acquired by Boeing in 1997. Boeing has publicly announced plans to increase its
delivery of aircraft to approximately 620 airplanes in 1999, followed by a
decrease in deliveries of aircraft to approximately 480 airplanes in 2000. At
September 30, 1999 Boeing reported unfilled announced orders for 1,469 aircraft.
At September 30, 1999 Boeing had delivered 455 commercial aircraft in 1999.
Airbus' 1999 Global Market Forecast projected that through the year 2018,
the number of aircraft in active service should increase by 91% and over 89% of
the current passenger jet fleet should be replaced, requiring approximately
14,768 new passenger aircraft. At September 30, 1999 Airbus' reported unfilled
announced orders for 1,427 aircraft. At September 30, 1999 Airbus had delivered
211 commercial aircraft in 1999.
We believe that the following factors, among others, are contributing to the
high levels of new aircraft production:
- a turnaround in worldwide airline operating performance from substantial
operating losses in 1992 to approximately $12.0 billion and $15.5 billion
of operating profit in 1996 and 1997, respectively;
- projected worldwide airline traffic growth of 5.0% per year and projected
cargo traffic growth of 6.4% per year over the next decade;
- increased aircraft load factors during the 1990-96 period;
65
<PAGE>
- increases in the average age of commercial aircraft during the 1990-96
period; and
- the increasing importance to the airline industry of city pair marketing
and flight frequencies.
We believe that over the longer term this trend will be driven, in part, by
the anticipated continued growth of carriers engaged in the air freight and
package delivery businesses and the expected commencement of new airlines,
especially in China and other Asian countries where air traffic was previously
limited. Further, retirement of aging aircraft and the anticipated removal of
approximately 1,000 airplanes domestically from the operating fleet to comply
with mandatory noise reduction standards by December 31, 1999 should contribute
to the increased demand for new aircraft production. The number of surplus
aircraft is expected to decline significantly while new aircraft production is
expected to increase over the next several years. The expected growth in air
transit and aircraft production should increase the demand for structural parts
from subcontractors as aircraft manufacturers increase outsourcing to reduce
costs and increase production rates.
REDUCTION IN THE NUMBER OF APPROVED SUBCONTRACTORS
In order to devote additional resources to their core competencies, reduce
operating and purchasing costs and streamline purchasing decisions while
retaining control over quality, aircraft manufacturers have been reducing the
number of approved subcontractors. Additionally, aircraft manufacturers have
established quality and operating criteria to ensure that approved
subcontractors operate with the required proficiency. We believe that, due to
the established market presence of our subsidiaries, their ability to
manufacture precision machined parts and their track records for quality, our
manufacturing facilities will continue to be approved suppliers to Boeing,
British Aerospace-Airbus and other major aircraft manufacturers.
OPERATIONS
Our existing manufacturing capabilities are principally centered around the
precision machining of aluminum, titanium and steel and the production of sheet
metal details, as well as the production of sub-assemblies, manufacturing kits
and structural components. In addition, we engage in fabrication, metal bonding,
metal treatment, non-ferrous casting and minor assembly.
MANUFACTURING FACILITIES
At August 31, 1999 we maintained our corporate headquarters and operated at
the manufacturing facilities listed below, comprising an aggregate of
approximately 782,650 square feet of space. The following table describes the
principal manufacturing facilities and indicates the location, function,
approximate size and ownership status of each location. We believe that our
facilities are suitable for their present intended purposes and adequate for our
present and anticipated level of operations.
<TABLE>
<CAPTION>
APPROXIMATE
FACILITY
PRODUCTS SIZE
LOCATION AND FUNCTION (SQ. FEET) OWNERSHIP
- ------------------------------------------ -------------------------------- ------------ ----------------------
<S> <C> <C> <C>
Long Beach, CA............................ Corporate Headquarters 8,670 Leased
Santa Ana, CA............................. Manufacturing 65,000 Leased(1)
Gardena, CA............................... Manufacturing 20,500 Leased
Wichita, KS............................... Manufacturing 153,000 Owned
Cerritos, CA.............................. Manufacturing 42,500 Leased
Shelton, WA............................... Manufacturing 50,000 Owned
Kent, WA.................................. Manufacturing 77,180 Leased
Valencia, CA.............................. Manufacturing 31,280 Leased
Kent, WA.................................. Manufacturing 10,450 Leased
Renton, WA................................ Manufacturing 95,070 Owned(2)
Wallisdown, Poole, Dorset................. Manufacturing 30,000 Leased and Owned
Llay, Wrexham, Wales...................... Manufacturing 75,000 Owned
Llay Wrexham, Wales....................... Manufacturing 36,000 Owned
New Addington, Croydon and Biggin Hill,
Kent.................................... Manufacturing 28,000 Leased
Lower Sydenham, Croydon................... Manufacturing 40,000 Leased and Owned
Llay, Wrexham, Wales...................... Manufacturing 20,000 Owned
</TABLE>
- ------------------------
(1) We lease our Santa Ana facility from a former Aeromil affiliate at a fair
market rent.
(2) We currently intend to offer this facility for sale following the
consolidation of Modern, which presently operates at this facility, with
Barnes Machine and Sea-Lect.
66
<PAGE>
We have a large portfolio of complex machinery which cut, fold, form and
drill metals and other materials used during our manufacturing processes,
including: sheet metal forming equipment, high-speed and conventional computer
numerically-controlled horizontal and vertical machining centers and
three-spindle five-axis gantry mills, computer-numerically-controlled long-bed
machining and milling centers, conventional and gap lathes, stretch presses,
bladder presses, and brakes and shears. These machines provide broad, flexible
manufacturing capabilities. We maintain in-house engineering departments at each
manufacturing facility, some of which utilize CATIA-CADAM Solutions and
Unigraphics systems to create machine control programs from digital parts
specifications received directly from the aircraft manufacturers.
We are is also engaged in metal bonding and assembly operations at several
of our manufacturing facilities. Western Methods has developed its own
Boeing-certified specialized bonding process which enables the assembly/bonding
department to bond composite material to aluminum and mechanical hardware to
milled parts. Britain Machine fabricates assembly and tooling platforms and has
diversified into complex assembly production involving bonding and riveting
individual parts together. Western Methods, Britain Machine and Barnes Machine
also participate in Boeing's Advanced Technology Assembly program under which
they manufacture parts requiring drilling precise manufacturing assembly
location holes. In addition, Trefn Fabrications engages in specialty welding and
Maybrey has a full range of non-ferrous casting capabilities, including sand,
die and investment casting.
PRODUCTS
We manufacture parts for all of the Boeing and Airbus commercial aircraft
models, as well as for a variety of aircraft from other commercial aircraft
manufacturers and several U.S. military aircraft and other programs. Our
products range in size from large ribs used in wings and vertical stabilizers to
engine mounts, door stops and shims and range in value from less than $50 to
more than $20,000. We primarily manufacture original equipment parts from
various metals such as aluminum, titanium and steel which are used in the
structural elements of aircraft.
SOURCES AND AVAILABILITY OF RAW MATERIALS
We use a variety of metals in our manufacturing processes, including
aluminum, titanium and steel. We generally acquire these metals from third party
suppliers. The availability and prices of these materials may fluctuate. Any
delay in our ability to obtain necessary raw materials may affect our ability to
meet our customer's needs. In some instances, Boeing may supply us with the
metals we will use in manufacturing parts under a specific purchase order.
Boeing may also require us to acquire metals from some third party suppliers
identified by Boeing. If Boeing requires us to acquire metals from third party
suppliers, Boeing has agreed to reimburse us for the actual cost of those
metals.
CERTIFICATION
We manufacture parts to exact specifications provided by our aerospace
customers in engineering drawings. Our customers require our manufacturing
facilities to perform quality standards testing and certification procedures on
all manufactured parts and provide detailed records to ensure traceability of
each part. Such customers typically certify our manufacturing facilities as
meeting specific quality standards, which certification is necessary for us to
submit bids and manufacture parts for such customers. You should read the
discussions under the headings "Risk Factors--Certification" and "--Sales and
Marketing" for more information on the impact of certification on us.
Our manufacturing facilities have imposed quality control criteria on their
manufacturing processes and all of our facilities located in the United States
have received Boeing's D1-9000 certification. Boeing's D1-9000 certification is
site specific and certifies that a facility meets a number of specific customer
satisfaction requirements, including manufacturing parts that comply with
specifications and
67
<PAGE>
delivery of parts on time and at cost. Furthermore, all but one of our
facilities located in the United States have received Boeing's D1-9000-A
certification, which allows the facility to produce more critical parts. Some of
our facilities in the United Kingdom have received Boeing's DI-4426
certification, which enables those facilities to produce certain parts for
Boeing. Our Shelton, Washington facility and two of our facilities in the United
Kingdom have received ISO 9002 certification, which indicates that the
facilities have met quality standards set by an international bureau of quality
standards.
Qualified suppliers often subcontract parts to other machine shops while
still remaining responsible for quality and delivery schedules. Several of our
subsidiaries have been selected as Boeing-Wichita key suppliers, which permits
them to subcontract production without Boeing's supervision. Some of our
facilities are also certified by other customers including Northrop, Lockheed,
Raytheon, Airbus, Menasco Aerospace, a division of Coltec Industries Inc., and
B.F. Goodrich. The certification process necessary to become an aerospace
supplier, combined with the aircraft manufacturers' desire to reduce their
number of approved suppliers, provide barriers to entry for machining companies
from industries which have greater tolerances for production variances and which
accept parts produced to less precise specifications under less rigorous
manufacturing procedures.
QUALITY CONTROL
We believe that our machining and quality control equipment is among the
best of any independent aerospace supplier in the United States and the United
Kingdom and represents state-of-the-art technology. Each of our manufacturing
facilities maintains quality control departments utilizing computer-assisted
inspections which meet or exceed customer requirements and produce required
documentation to each customer's standards.
We maintain the most stringent quality control of our manufactured parts and
services. Our customers require our manufacturing facilities to satisfy specific
standards relating to the quality of our manufactured parts and services. Our
manufacturing facilities perform testing and certification procedures on all
manufactured parts and provide detailed records to ensure traceability of parts.
In addition, we perform quality control tests on all parts we outsource to small
machine shops. We believe that the emphasis on quality control has enabled our
manufacturing facilities to obtain D1-9000, D1-9000-A and other customer
certifications which contribute to our ability to successfully market our
manufacturing and production capabilities. The expense required to institute and
maintain quality control procedures comparable to ours represents a barrier to
entry for other companies.
BACKLOG
The growth of orders for new aircraft has created a substantial backlog of
purchase orders and parts ordered under long term agreements. We operate under a
series of long term contracts with the major aircraft manufacturers which
generally cover a two-to five-year period for various part numbers. Each long
term contract includes customer estimates of the number of parts the customer
will require over the term of the contract and defines the responsibilities of
the parties, pricing formulas and product specifications for specific parts
covered by the contract. The customer generally issues purchase orders for
selected parts six to twelve months prior to the required shipping date under
the pricing terms and conditions agreed upon in the contract. Most of our
shipments are made pursuant to purchase orders. The long term contracts and
purchase orders are often terminable at will by the customer with respect to
uncompleted portions of the contract or purchase order. The backlog consists of
customers' unfilled purchase orders and therefore is represented largely by
contracts and orders that may be canceled by customers. At August 31, 1999 we
had a total revenue backlog of approximately $156.0 million, of which
approximately $43.0 million is deliverable in the remainder of 1999.
68
<PAGE>
CUSTOMERS
Our principal customer is Boeing, which directly accounted for approximately
59.0% of our pro forma combined revenues for the year ended December 31, 1998
and indirectly accounted for approximately 11.0% of our pro forma combined
revenues for the year ended December 31, 1998. We supply parts to a number of
major Boeing divisions, including Boeing-Wichita, Boeing-Seattle, Boeing-Auburn,
Boeing-Portland and Douglas Products, which typically make independent
purchasing decisions. Boeing has announced that it will decrease its delivery of
commercial aircraft from approximately 620 aircraft in 1999 to 480 aircraft in
2000. Boeing orders could decline as a result of such a reduction in deliveries.
A decline in Boeing orders could have a material adverse effect on our business,
financial condition or results of operations. You should read the discussions
under the Headings "Risk Factors--We Are Dependent On A Key Customer And Could
Suffer Financial Harm If We Were To Lose That Customer's Business" and
"Management's Discussion And Analysis Of Consolidated Financial Condition And
Consolidated Results Of Operations--Industry Trends" for further information on
our dependence on Boeing as a key customer.
Our other customers include Airbus, Northrop, Lockheed, Raytheon, Cessna,
Learjet, NASA-JPL, Rockwell International Corporation, General Dynamics
Corporation, British Aerospace, Bombardier, Inc. Canadair, Shorts Brothers PLC
and Embrear Aircraft Corporation, some of which are also Boeing suppliers.
SALES AND MARKETING
Our products are sold directly to aircraft manufacturers such as Boeing,
British Aerospace-Airbus, Lockheed and Raytheon, which perform final assembly of
aircraft, and to large aerospace subcontractors through both direct sales
efforts and independent sales representatives. The aircraft manufacturers and
subcontractors purchase products from qualified subcontractors under rigorous
ongoing certification programs such as Boeing's D1-9000 certification.
The sales process primarily entails relationship management to maximize new
sales from existing customers. The direct sales effort is primarily via
communication with our key customers and is continually maintained by senior
management and dedicated sales professionals. Technical support for such sales,
which is a critical component of the marketing process, is provided through line
manufacturing managers, engineering and quality control personnel. Our
management has long-standing relationships with our key customers and we believe
that our integrated capabilities will allow us to bid on sub-assemblies,
manufacturing kits and structural components programs which typically offer
higher contract value compared to purchase orders for individual parts.
We produce parts to the exact specifications of customer-provided
engineering drawings. We believe a key element of our competitive strength and
marketing strategy is our ability to deliver parts on schedule and maintain
specifications and quality standards. Sales are generally made under two- to
five-year long term contracts in which the customer specifies the number of
parts it estimates it will require over the term of the contract and the
responsibilities of the parties, pricing formulas and product specifications are
documented. The customer generally issues purchase orders for selected parts six
to twelve months prior to the required shipping date under the pricing terms and
conditions agreed upon in the contract. The customer generally has the right to
delay shipment of placed orders or not to place orders previously forecasted.
Most of our shipments are made pursuant to purchase orders.
COMPETITION
The aerospace supplier 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. We
believe that the principal competitive factors in the aerospace
69
<PAGE>
supplier industry are quality, precision-machining ability, timely deliveries,
overall customer service and price. We believe that we compete favorably on the
basis of the foregoing factors. We compete with third party manufacturers, some
of which are divisions or subsidiaries of aircraft manufacturers or other large
companies, in the manufacture of individual parts and sub-assemblies,
manufacturing kits and structural components. Some of these competitors have
greater financial and other resources than we do.
GOVERNMENT REGULATION
The aviation industry is highly regulated in the United States by the
Federal Aviation Administration and in other countries by similar agencies. The
FAA regulates commercial flight operations in the United States and requires
that aircraft components meet stringent standards. FAA regulations provide that
aircraft manufacturers must operate under one or more of several different FAA
authorizations. Manufacturers holding FAA production approvals are known as
production approval holders and may engage a supplier to manufacture all or a
portion of an authorized part. If the supplier manufactures complete parts, the
production approval holder must ensure that the parts are fabricated and
inspected under the production approval holder's FAA-approved quality control
system. We must satisfy the requirements of our customers that are subject to
FAA regulations, and provide these customers with products and services that
comply with the government regulations. If material authorizations or approvals
held by our customers were revoked or suspended, our operations could be
adversely affected.
An initial parts manufacturer approval is, in general, an approval of a
manufacturing or modification facility's production quality control system. A
supplemental parts manufacturer approval authorizes the manufacture of a
particular part in accordance with the requirements of the corresponding FAA
production certificate. We are currently in the process of applying for a parts
manufacturer approval for some parts produced at one of our manufacturing
facilities. Our FAA approvals will be owned, and may only be used by, the
manufacturing facility obtaining such approval. We do not believe a parts
manufacturer approval is necessary to operate our business as it is currently
being conducted. We believe any delay or failure to obtain the parts
manufacturer approval will not have a material adverse effect on our business,
financial condition or results of operations.
The aviation industry is regulated in the United Kingdom by the Civil
Aviation Authority and in other European countries by similar agencies. The CAA
regulates aircraft operated in the United Kingdom. CAA regulations provide that
aircraft manufacturers must operate under CAA authorization. In addition, some
of our customers are subject to similar regulation in other European countries.
Aircraft manufacturers holding CAA approvals or approvals from other European
regulatory agencies may, subject to undertakings to, and regulation by, the
relevant state authority, engage a supplier to manufacture all or a portion of
an authorized part. The aircraft manufacturer must ensure that the parts
manufactured by its suppliers meet approved quality control standards. We must
satisfy the requirements of our customers that are subject to CAA and European
regulations. If material authorizations or approvals held by our customers were
revoked or suspended, our operations could be adversely affected.
Our manufacturing operations in the United States are 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 in the treatment, disposal or storage of hazardous waste.
We believe that our operations are in material compliance with OSHA's health and
safety requirements.
Our manufacturing operations in the United Kingdom are subject to a variety
of worker and European community safety laws. The Health and Safety at Work Act
of 1974, and regulations made
70
<PAGE>
thereunder, mandates general requirements for safe workplaces for all employees.
We believe that our operations in the United Kingdom are in material compliance
with the Health and Safety at Work requirements.
ENVIRONMENTAL MATTERS
We are subject to federal, state, local and foreign laws, regulation and
ordinances that:
- govern activities or operations that may have adverse environmental
effects, such as discharges to air and water,
- establish handling and disposal practices for solid and hazardous wastes,
and
- impose liability for the clean-up costs of, and some of the damages
resulting from, past spills, disposal or other releases of hazardous
substances.
Our operations use some substances and generate some wastes that are regulated
or may be deemed hazardous under applicable environmental laws. Although we
endeavor at each of our facilities to assure compliance with environmental laws
and regulations, from time to time our operations and those of our predecessors
have resulted in, and may in the future result in, some degree of noncompliance
with applicable requirements under environmental laws for which we may incur
liability. We believe, based on currently available information, that any such
noncompliance under current environmental laws will not have a material adverse
effect on our business, financial condition or results of operations. There can
be no assurance that future changes in such laws, regulations or interpretations
thereof, or the nature of our operations, will not require us to make
significant additional capital expenditures to ensure environmental compliance
in the future.
We have acquired and expect to continue to acquire, pre-existing businesses
that have historical and ongoing operations. We have and will have limited
information about past activities of those companies and operations on our
properties. We are aware that at one of our leased properties, governmental
authorities are currently investigating groundwater contamination and we have
been asked to conduct additional investigations. We have also been named a
defendant in an action filed by an owner of property adjacent to property we
lease. We are indemnified by the owner of the property leased by us, and that
owner has assumed the defense of this action. At this time, we cannot determine,
in either case, what cleanup activities, if any, will be required. Soil and
groundwater contamination may also exist on our other properties as a result of
current or former operations on our properties, or operations on other
properties. Based in part on indemnities obtained in connection with our past
acquisitions, we believe, although there can be no assurance, that such matters
will not have a material adverse effect on our business, financial condition or
results of operations.
We may also incur liability under the Comprehensive Environmental Response
Compensation and Liability Act of 1980 ("CERCLA"), the Resource Conservation and
Recovery Act and similar state and local laws. Some of these laws impose strict,
and in some cases, joint and several liability, for the cleanup of contamination
resulting from past disposal of waste, including disposal at off-site locations.
A pre-existing business acquired by us has been named as a potentially
responsible party under CERCLA at a site where it disposed of waste in the past.
Based on the information available to us, including the apparent limited amount
of waste sent to the site by that business, as well as an existing indemnity
from the seller of the business, we believe that this matter will not have a
material adverse effect on our business, financial condition or results of
operation.
Our operations in the United Kingdom are subject to European community and
United Kingdom regulations, directives and legislation, that:
- govern activities or operations that may have adverse environmental
effects, such as discharges to air and water
71
<PAGE>
- establish handling and disposal practices for solid and hazardous wastes
- impose liability for the clean-up costs of, and some of the damages
resulting from, past spills, disposal or other releases of hazardous
substances.
Our operations in the United Kingdom use some substances and generate some
wastes that are regulated or may be deemed hazardous under applicable
environmental laws. Although we endeavor at each of our facilities in the United
Kingdom to assure compliance with environmental laws and regulations, from time
to time our operations or those of our predecessors may have resulted in, and
may in the future result in, some degree of noncompliance with applicable
requirements under environmental laws for which we may incur liability. We
believe, based on currently available information, that any such noncompliance
under current environmental laws will not have a material adverse effect on our
business, financial condition or results of operations. There can be no
assurance that future changes in such laws, regulations or interpreting thereof,
or the nature of our operations in the United Kingdom, will not require us to
make significant additional capital expenditures to ensure environmental
compliance in the future. Based in part on warranties covering Trim and some of
its subsidiaries that we obtained in connection with our acquisition of Trim and
its subsidiaries, we believe, although there can be no assurance, that such
matters will not have a material adverse effect on our business, financial
condition or results of operations.
TRADEMARKS
We hold a trademark registered in the United States and nine other countries
through one of our subsidiaries. We believe that the termination, expiration or
infringement of our trademark would not have a material adverse effect on our
business, financial condition or results of operation.
EMPLOYEES
We had 707 employees at August 31, 1999 in three states and had no
collective bargaining agreements in the United States. We had 515 employees at
August 31, 1999 in our United Kingdom facilities. At one of our subsidiaries in
the United Kingdom, a union has been granted sole collective bargaining rights
for 60 hourly paid employees. The same union is recognized at another of our
United Kingdom subsidiaries, but plays no direct role in negotiating employment
terms and conditions. Neither of these arrangements is documented. The union is
currently seeking recognition at another one of our facilities in the United
Kingdom. We have not experienced any strikes or general work stoppages at any of
our facilities and we believe that our relations with our employees is
excellent.
LEGAL PROCEEDINGS
On May 28, 1999, we filed suit against Alinabal Holdings Corporation, the
former shareholder of Pacific Hills, and the three principal stockholders of
Alinabal, Samuel S. Bergami, Jr., Stephen G. Cerri and Kevin M. Conlisk, in U.S.
District Court of the Southern District of New York. The suit, which alleges
violations of federal securities laws, fraud and breach of contract, seeks
recision of the Amended and Restated Stock Purchase Agreement dated November 20,
1998 by and among us. Alinabal and the three stockholders of Alinabal pursuant
to which we acquired Pacific Hills, or in the alternative, $79.0 million in
damages. On July 9, 1999 the defendants filed an answer and counterclaim
seeking, among other relief, release of $0.7 million from escrow. Both sides are
engaged in discovery and trial is scheduled to begin in March 2000. At this
preliminary stage of the proceedings, we cannot determine or predict the outcome
of this suit.
72
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information with respect to our directors and
executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Douglas M. Hayes....................... 55 Chairman of the Board and Director
Alexander Hogg......................... 52 Chief Executive Officer, President and Director
N. Paul Brost.......................... 45 Vice President, Chief Financial Officer and Treasurer
Douglas B. Solomon..................... 44 Secretary and Director
Harald H. Ludwig....................... 44 Director
James P. Angus......................... 53 Director
William R. Monkman..................... 55 Director
Michael Dritz.......................... 61 Director
Philip J. Olsson....................... 50 Director
</TABLE>
DOUGLAS M. HAYES has been a Director and our Chairman of the Board since
November 1997. Mr. Hayes has been a Managing Director of Macluan Capital
Corporation, a private investment company and President of Hayes Capital
Corporation, a private investment company since June 1997. From 1986 to June
1997, Mr. Hayes was a Managing Director of Donaldson, Lufkin & Jenrette
Securities Corporation. Mr. Hayes is a graduate of Dartmouth College and holds
an M.B.A. from the Harvard Business School. Mr. Hayes also serves on the board
of directors of GameTech International, Inc. and Reliance Steel & Aluminum Co.
ALEXANDER HOGG has been a Director and our President and Chief Executive
Officer since November 1997. Mr. Hogg has spent his entire career in the
aerospace industry and has more than 30 years of experience in manufacturing
aircraft and major systems such as landing gear, flight controls and complex
machine parts. From 1995 to 1997, Mr. Hogg was General Manager of Castle
Precision, Inc. and from 1992 to 1995, he held the position of Operating Officer
of Hydromil Co. Mr. Hogg's prior work experience includes, among other
positions, service as Vice President, General Manager of Menasco (Canada)
Aerospace, Director of Production Engineering for Boeing De Havilland and
Manager, Manufacturing Engineering, Canadair, Ltd. Mr. Hogg attended Boeing's
Senior Management Training Program and personally received Boeing's PRIDE IN
EXCELLENCE AWARD for his contributions to the 757 and 767 programs. Mr. Hogg is
a graduate of Heriot Watt University with a degree in Mechanical Engineering.
N. PAUL BROST has been our Vice President, Chief Financial Officer and
Treasurer since September 1998. From 1993 to 1998, Mr. Brost served as Segment
Financial Executive for Textron Inc. responsible for the Systems and Component
Segment, and as Vice President-Finance and Administration for HR Textron, a
division of Textron Inc. From 1976 to 1993, Mr. Brost was with Ernst & Young
LLP, most recently as a partner, with responsibility for numerous manufacturing,
aerospace and defense clients. Mr. Brost is a graduate of Southern Illinois
University and is a Certified Public Accountant.
DOUGLAS B. SOLOMON has been a Director and our Secretary since November
1997. Mr. Solomon has been a Managing Director of Macluan Capital Corporation
since December 1998 and a Managing Director of Hayes Capital Corporation since
August 1997. From August 1997 to December 1998, Mr. Solomon served as a Senior
Vice President of Macluan Capital Corporation. Since 1992, Mr. Solomon has been
President of The Woodland Company, which provides financial advisory and
consulting services. Mr. Solomon was a Managing Director of The Chase Manhattan
Investment Bank from 1989 to 1991. Mr. Solomon is a graduate of the University
of California-Davis and holds an M.B.A. from the University of California-Los
Angeles.
73
<PAGE>
HARALD H. LUDWIG has been a Director of Compass since November 1997. Mr.
Ludwig co-founded and has been President of Macluan Capital Corporation since
1985. He is a graduate of Simon Fraser University and holds an L.L.B. from
Osgoode Hall Law School. An entity controlled by Mr. Ludwig controls Compass
Holdings, LLC, which is the majority stockholder of Compass. Mr. Ludwig also
serves on the board of directors for Lions Gate Entertainment Corp. and for West
Fraser Timber Limited.
JAMES P. ANGUS has been a Director of Compass since March 1998. Mr. Angus is
a co-founder of Macluan Capital Corporation and has been President of Angroup
Holdings Limited, a private investment company with interests in marine
transportation, real estate development and other industries, since 1986. Mr.
Angus is a graduate of the University of Victoria and holds an M.B.A. from the
University of Western Ontario.
WILLIAM R. MONKMAN has been a Director of Compass since March 1998. Mr.
Monkman is also the Chief Executive Officer and President of Precision Aerospace
Corporation, which manufactures fuel control systems and carburetors for
aerospace customers and fuel control systems for industrial engines at plants in
Washington, California and Virginia. Mr. Monkman has been affiliated with
Precision Aerospace Corporation since 1981. Between 1981 and 1997 Mr. Monkman
was also affiliated with Suntree Industries Limited, most recently as Chief
Executive Officer. Mr. Monkman is a graduate of the University of Alberta and
holds an M.B.A. from the University of Western Ontario.
MICHAEL DRITZ has been a Director of Compass since March 1998. Mr. Dritz is
also the Chairman of Dritz Enterprises LLC which provides consulting services
for the financial industry, serving in that capacity since 1997. From 1995 to
1996, Mr. Dritz was a Managing Director for Merrill Lynch and Chairman of the
Smith Brothers International Advisory Division. Mr. Dritz was the President and
Chief Executive Officer of Smith New Court, Inc. and an Executive Director of
Smith New Court PLC from 1985 to 1995. Mr. Dritz is a graduate of Syracuse
University.
PHILIP J. OLSSON has been a Director of Compass since March 1999. Mr. Olsson
is also a Managing Director of Royal Bank Equity Partners Limited, having served
in such a capacity since 1997. From 1986 to 1997, Mr. Olsson served in various
positions at RBC Dominion Securities, including as Vice Chairman. Mr. Olsson is
a graduate of and holds an M.B.A. from Vanderbilt University. Mr. Olsson also
serves on the board of directors of Anchor Lamina, Inc.
Our directors will serve until their respective successors are elected or
until death, resignation or removal. Executive Officers are appointed by, and
serve at the pleasure of, the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
Our Board of Directors has established an Audit Committee and a Compensation
Committee.
The responsibilities of the Audit Committee include recommending to the
Board of Directors the independent public accountants to be selected to conduct
the annual audit of our books and records, reviewing the proposed scope of such
audit and approving the audit fees to be paid, reviewing our accounting and
financial controls with the independent public accountants and our financial and
accounting staff and reviewing and approving transactions between us and our
directors, officers and affiliates. Messrs. Angus, Monkman and Solomon are the
members of the Audit Committee.
The Compensation Committee provides a general review of our compensation
plans and policies to ensure that they meet corporate objectives. Our existing
plans with respect to executive compensation are largely based upon contractual
commitments set forth in employment and consulting agreements. You should read
the discussion under the heading "Employment Agreements" for further information
on the terms and conditions of existing employment contracts with our executive
officers. The Compensation Committee's responsibilities also include
administering the 1998 Stock Incentive Plan, including selecting the officers
and salaried employees to whom awards will be granted.
74
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Hayes, Ludwig and Dritz served as the members of the Compensation
Committee in 1998. Mr. Hayes served as our Chairman of the Board and for each of
our subsidiaries in 1998. Mr. Hayes did not receive any compensation for such
service.
Mr. Hayes and Mr. Ludwig are affiliates of Hayes Capital Corporation and
Dunhill Bank Caribbean Ltd., respectively, which are parties to a management
consulting agreement with us. You should read the discussion under "--Certain
Relationships and Related Party Transactions" for further information on the
terms of the management consulting agreement.
DIRECTOR COMPENSATION
Directors who are not currently receiving compensation as one of our
officers, employees or consultants are entitled to receive an annual retainer
fee of $12,000, plus reimbursement of expenses for each Board of Directors'
meeting and each committee meeting that they attend in person.
75
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by us to our Chief
Executive Officer and one other executive officer for the fiscal year ended
December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------
ANNUAL COMPENSATION SECURITIES
NAME AND ---------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS/SARS (#) COMPENSATION ($)
- ----------------------------------------- --------- ---------- ---------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Alexander Hogg...........................
Chief Executive Officer and 1998 $ 250,000 $ 200,000(1) 346,291 $ --
President
N. Paul Brost............................
Vice President, Chief Financial 1998 35,577(2) 5,000 25,000 --
Officer and Treasurer
</TABLE>
- ------------------------
(1) Pursuant to the terms of his employment agreement, Mr. Hogg may be granted
certain stock options based on our 1998 performance. You should read the
discussion under the heading "--Employment Agreements" for more information
on the terms of Mr. Hogg's employment.
(2) Represents Mr. Brost's salary for the partial year from September 21, 1998
when Mr. Brost began his employment with us. You should read the discussion
under the heading "-Employment Agreements" for more information on the terms
of Mr. Brost's employment.
OPTION/SAR GRANTS IN 1998
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT ANNUAL RATES
NUMBER OF OPTIONS/ OF STOCK PRICE
SECURITIES SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OF OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#) 1998 ($/SH) DATE 5% ($) 10%($)
- ------------------------------- ------------- ------------- ----------- ---------------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Alexander Hogg................. 346,291 42.1% $ 1.00 March 10, 2008 $ 564,000 $ 898,000
N. Paul Brost.................. 25,000 3.0 $ 1.47 October 14, 2008 60,000 95,000
</TABLE>
1998 STOCK INCENTIVE PLAN
In March 1998 our Board of Directors adopted, and the shareholders approved,
the Compass Aerospace Corporation 1998 Stock Incentive Plan. The 1998 Stock
Incentive Plan is administered by the Compensation Committee of the Board of
Directors. All officers, directors, employees and independent contractors of
Compass are eligible for discretionary awards under the 1998 Stock Incentive
Plan. The 1998 Stock Incentive Plan provides for stock-based incentive awards,
including incentive stock options, non-qualified stock options and restricted
stock. The 1998 Stock Incentive Plan permits the Compensation Committee to
select eligible persons to receive awards and to determine terms and conditions
of such awards, including the vesting schedule and exercise price of each award,
PROVIDED, that the option exercise price may not be less than 85% of the fair
market value per share of our common stock on the date of the grant. Under the
1998 Stock Incentive Plan, no participant may be granted incentive stock options
that are first exercisable in any one calendar year with fair market value in
excess of $100,000. Two million shares of our common stock have been reserved
for issuance under the 1998 Stock Incentive Plan.
76
<PAGE>
The 1998 Stock Incentive Plan may be amended, suspended or terminated at any
time. However, neither the maximum number of shares that may be sold or issued
under the 1998 Stock Incentive Plan, nor the benefits accruing to participants
thereunder may be increased, nor may the class of persons eligible to
participate in the 1998 Stock Incentive Plan be altered, without the approval of
our shareholders; PROVIDED, HOWEVER, that adjustments to the number of shares
subject to the 1998 Stock Incentive Plan and to individual awards thereunder
and/or to the exercise price of awards previously granted are permitted without
shareholder approval upon the occurrence of specific events affecting our
capital structure.
EMPLOYMENT AGREEMENTS
Effective November 26, 1997 we entered into an employment agreement with
Alexander Hogg, pursuant to which we agreed to employ Mr. Hogg as President and
Chief Executive Officer for a term of five years at an annual base salary,
beginning January 2, 1998 of $250,000. Mr. Hogg also received $21,000 in salary
for the period from the agreement's effective date through January 1, 1998. In
addition, the agreement provides that Mr. Hogg shall be granted an option to
purchase 346,291 shares of our common stock at an exercise price equal to $1.00
per share, which shall vest and become exercisable on November 26, 1999. Mr.
Hogg's option will also fully vest and become immediately exercisable if:
- any entity other than Compass Holdings, LLC or its successors acquires
51% or more of our common stock or if we sell all or substantially all of
our assets, or
- Mr. Hogg's employment is terminated without cause.
Mr. Hogg will also be granted stock options to purchase an additional 62,500
shares, on each of March 1, 2000, 2001 and 2002 if we meet specific EBITDA
targets. Mr. Hogg will also be entitled to receive his base salary to the end of
the term of the agreement if he is terminated without cause.
Effective September 21, 1998 we entered into an employment agreement with N.
Paul Brost, pursuant to which we agreed to employ Mr. Brost as Vice President
and Chief Financial Officer for a term of three years at an annual base salary
of $125,000, which has been raised to $180,000, and a minimum $15,000 bonus
payable in 1999. In addition, the agreement provides that Mr. Brost will be
granted stock options to purchase 25,000 shares of our common stock at an
exercise price equal to $1.47 per share. Such options will vest at the rate of
6,250 shares per year on September 21 of each year, beginning September 21,
1999. On the date, options for 6,250 shares vested. Mr. Brost's options will
fully vest and become immediately exercisable:
- in the event of a sale of 81% or more of our voting common stock in a
single transaction or a related series of transactions within a six
months period, or
- Mr. Brost's employment is terminated due to death or permanent
disability.
Mr. Brost will also be granted stock options to purchase an additional
10,000 shares per annum, at an exercise price to be determined which shall vest
over a four year period at 25% per year if we meet specific EBITDA targets. Mr.
Brost will also be entitled to receive up to six months of his then current base
salary if he is terminated without cause.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We are a party to a management consulting agreement with Dunhill Bank
Caribbean Ltd. and Hayes Capital Corporation, which provides for the payment of
management fees from us to Dunhill Bank Caribbean Ltd. and Hayes Capital
Corporation in an annual aggregate amount equal to $200,000 plus 1.5% of our
EBITDA plus expenses, payable quarterly in arrears. Fifty percent of this
management fee is payable to Dunhill Bank Caribbean Ltd. and 50% is payable to
Hayes Capital Corporation. Mr. Ludwig is the beneficial owner of Dunhill Bank
Caribbean Ltd. Mr. Hayes and
77
<PAGE>
Mr. Solomon are the President and a Managing Director of Hayes Capital
Corporation, respectively. Payment of the management fee is subordinated to the
notes and is subject to the limitation on restricted payments set forth in the
indentures governing the notes to the extent that such fees exceed $500,000 in
any fiscal year. You should read the discussions under the headings "Description
of the Series B Notes--Limitation on Restricted Payments" and "Description of
the Series D Notes--Limitation on Restricted Payments" for further information
on the subordination of, and limitations on, the management fee under the
indentures. In addition to the management fee described above, we typically also
pay advisory fees to Dunhill Bank Caribbean Ltd. and Hayes Capital Corporation
in an amount equal to an aggregate of 1% of the consideration paid for each
business acquired by us. We believe that the management fees and the advisory
fees are on terms no less favorable to us than those that could be obtained from
independent third-parties in arms-length negotiations.
BankBoston, a lender and the administrative agent under the credit
agreement, and BancBoston Robertson Stephens, the arranger under the credit
agreement, are affiliates of BancBoston Securities, an initial purchaser of the
outstanding notes, and are affiliates of BancBoston Ventures Inc. which holds
11.7% of our voting common stock.
78
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our capital stock as of the date of this prospectus of:
- each person known to us to beneficially own more than 5% of our voting
securities;
- each of our directors and executive officers; and
- our directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
OWNERSHIP
NUMBER OF OF CLASS A
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES COMMON STOCK
- --------------------------------------------------------------------------------- ------------ ---------------------
<S> <C> <C>
Compass Holdings, L.L.C. (1)..................................................... 19,691,602 56.3%
RBC Equity Investments, Inc. (2)................................................. 10,238,904 29.3%
BancBoston Ventures, Inc. (4).................................................... 4,085,181 11.7%
Douglas M. Hayes (3)(6).......................................................... 256,000 *
Alexander Hogg (3)............................................................... 416,667 1.2%
N. Paul Brost (3)................................................................ 6,250 *
Douglas B. Solomon (3)........................................................... 290,014 *
Harald H. Ludwig (1)(5).......................................................... 19,691,602 56.3%
James P. Angus (1)............................................................... -- *
William R. Monkman............................................................... -- *
Michael Dritz.................................................................... -- *
Philip J. Olsson................................................................. -- *
All directors and officers as a group............................................ 20,660,533 58.5%
</TABLE>
- ------------------------
* Less than one percent.
(1) The stockholder's address is 940-1040 W. Georgia Street, Vancouver, British
Columbia, Canada V6E 4H1.
(2) The stockholder's address is 200 Bay Street, Royal Bank Plaza, 4th Floor,
North Tower, Toronto, Ontario M51 2W7. Mr. Olsson is an officer of RBC
Equity Investments, Inc.
(3) The stockholder's address is 1501 Hughes Way, Suite 400, Long Beach, CA
90815.
(4) The stockholder's address is 175 Federal Street, M/S75-10-01, Boston,
Massachusetts 02110.
(5) Represents shares owned by Compass Holdings, LLC. Under the terms of the
Operating Agreement of Compass Holdings, Mr. Ludwig has sole voting power
and investment power with respect to the shares held by Compass Holdings.
Messrs. Hayes, Dritz, Monkman, Angus and Brost hold membership interests in
Compass Holdings or its affiliates.
(6) Represents shares owned by the D&C Hayes Living Trust. Mr. Hayes is a
co-trustee of the trust and shares voting power and investment power with
respect to the Class A Common Stock held by the trust.
79
<PAGE>
DESCRIPTION OF CREDIT AGREEMENT
We are a party to a $140.0 million senior revolving credit facility. The
credit agreement was originally entered into on November 20, 1998, was amended
and restated on February 11, 1999, was amended again on June 7, 1999 and was
further amended on July 30, 1999. The June 7, 1999 amendment included amendments
to the covenants entitled "Minimum Consolidated EBITDA," "Minimum Interest
Coverage Ratio," "Maximum Leverage Ratio," "Minimum Debt Service Coverage" and
"Maximum Capital Expenditures." The June 7, 1999 amendment also reduced the
amount available under the credit facility from $170.0 million to $140.0
million, set the Acquisition Line to $35 million, increased some fees and
increased interest rates under the credit agreement. The July 30, 1999 amendment
provided for the acquisition of Trim and its subsidiaries and included
adjustments to the covenants entitled "Minimum Consolidated EBITDA" and "Maximum
Capital Expenditures."
The proceeds of the credit agreement will be used for working capital and
general corporate purposes and to finance permitted acquisitions. The credit
agreement currently consists of a $25 million revolving credit facility, a $35
million Acquisition Line, a $35 million "Term Loan A" and a $45 million "Term
Loan B". Availability under the revolving credit facility is limited to 85.0% of
eligible accounts receivable, plus 50.0% of the net book value of eligible
inventory, plus 25.0% of the orderly liquidation value of machinery and
equipment, subject to reserves that may be established by BankBoston from time
to time. Availability under the Acquisition Line is subject to approval by a
majority of the lenders.
Each of the facilities other than Term Loan B will mature five years
following its inception. Term Loan B will mature on February 1, 2005. Amounts
outstanding under Term Loan A will bear interest at the agent bank's base rate
plus a margin between 1.00% and 1.75%, or the Eurocurrency rate plus a margin
between 2.50% and 3.25% based on the leverage ratio. Amounts outstanding under
Term Loan B will bear interest at the agent bank's base rate plus a margin
between 2.00% and 2.25%, or the Eurocurrency rate plus a margin between 3.50%
and 3.75% based on the leverage ratio. We may prepay the indebtedness evidenced
by the credit agreement in whole or in part at any time without penalty, subject
to reimbursement of the lenders' breakage and redeployment costs actually
incurred in the case of prepayment of Eurodollar borrowings.
Repayment of the indebtedness evidenced by the credit agreement is secured
by a security interest in all of our accounts receivable, inventory, property,
machinery and equipment, intangibles, contract rights and other personal
property and those of our subsidiaries, including the pledge of all of the
capital stock of our subsidiaries in the United States and the pledge of 65.0%
of the capital stock of our subsidiaries in the United Kingdom. The credit
agreement also allows the lenders to place a lien on our real property in the
United States. In addition, repayment is guaranteed by all of our subsidiaries,
except Maybrey. The credit agreement allows us to incur up to an additional $8.0
million of mortgage indebtedness and allows for capital expenditures and
purchase money indebtedness of up to $10.0 million in the aggregate.
The loan documents also contain representations, indemnification and other
provisions that are usual and customary for credit facilities of this type. The
credit agreement requires us to meet customary financial maintenance and other
covenants.
80
<PAGE>
DESCRIPTION OF THE SERIES B NOTES
You can find the definitions of some of the terms used in this description
under the subheading "Definitions." In this description, the words "Compass,"
"us," "we," and "our" refer only to Compass Aerospace Corporation and not to any
of our subsidiaries.
The outstanding Series A notes were issued under an indenture dated as of
April 21, 1998 by and among Compass, Western Methods, Aeromil, Brittain Machine,
Barnes Machine and IBJ Whitehall Bank & Trust Company, (formerly known as IBJ
Schroder Bank & Trust Company), as trustee. Upon the issuance of the Series B
notes the indenture will be subject to and governed by the Trust Indenture Act
of 1939. The following description is a summary of the material provisions of
the indenture. It does not restate that agreement in its entirety. We urge you
to read the indenture because it, and not this description, defines your rights
as holders of the notes. Any Series A notes that remain outstanding after the
consummation of the exchange offer, together with the Series B notes, will be
treated as a single class of securities under the indenture. The outstanding
Series A notes and the Series B notes are collectively referred to herein as the
"notes."
BRIEF DESCRIPTION OF THE SERIES B NOTES AND THE SUBSIDIARY GUARANTEES
THE SERIES B NOTES
The Series B notes will be:
- senior subordinated, unsecured, general obligations of Compass;
- limited in aggregate principal amount to $110.0 million;
- subordinated in right of payment to some of our other debt obligations;
- senior or PARI PASSU in right of payment to all our existing and future
subordinated indebtedness; and
- jointly and severally, fully, irrevocably and unconditionally guaranteed
on a senior subordinated basis by each of our present and future
restricted Subsidiaries, all of whom are guarantors of the notes.
THE SUBSIDIARY GUARANTEES
The Subsidiary guarantees of the notes will be:
- unsecured, general obligations of each of the guarantors;
- subordinated in right of payment to all senior debt of each of the
guarantors; and
- senior or PARI PASSU in right of payment to all existing and future
subordinated indebtedness of each of the guarantors.
The term "Subsidiaries" as used in this description of the Series B notes
does not include Unrestricted Subsidiaries. Our Unrestricted Subsidiaries will
not guarantee the notes. You should read the discussion under the heading
"--Bankruptcy Limitations" for further information regarding the guarantees.
PRINCIPAL, MATURITY AND INTEREST
The Series B notes will be issued solely in exchange for an equal principal
amount of outstanding Series A notes pursuant to the exchange offer. The form
and terms of the Series B notes will be identical in all material respects to
the form and terms of the outstanding Series A notes except that:
- the Series B notes will have been registered under the Securities Act, and
- the registration rights and liquidated damages applicable to the
outstanding Series A notes will not be applicable to the Series B notes.
81
<PAGE>
The Series B notes will be issued only in fully registered form without
coupons in denominations of $1,000 and integral multiples thereof, and will
mature on April 15, 2005. The Series B notes will bear interest at 10 1/8% per
annum from the date of issuance or from the most recent Interest Payment Date to
which interest has been paid or provided for. Interest will be payable
semi-annually on April 15 and October 15 of each year, commencing April 15,
2000, to the persons in whose names such notes are registered at the close of
business on the April 1 or October 1 immediately preceding such Interest Payment
Date. Interest will be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
METHODS OF RECEIVING PAYMENT ON THE NOTES
Principal of, premium, if any, and interest on the notes will be payable,
and the notes may be presented for registration of transfer or exchange, at the
office or agency maintained by us for such purpose in the Borough of Manhattan,
The City of New York. Except as set forth below, at our option, payment of
interest may be made by check mailed to the holders of the notes at the
addresses set forth upon our registry books. No service charge will be made for
any registration of transfer or exchange of notes, but we may require payment of
a sum sufficient to cover any tax or other governmental charge payable in
connection with a transfer or exchange. Until otherwise designated by us, our
office or agency will be the corporate trust office of the trustee presently
located in the Borough of Manhattan, The City of New York.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the notes will
be subordinated to the prior payment in full of our senior debt and that of each
of the guarantors. At August 31, 1999 we and the guarantors had outstanding an
aggregate of approximately $106.7 million of secured senior debt.
If any of our senior debt or that of the guarantors has matured, the holders
of senior debt will be entitled to receive payment in full in cash or cash
equivalents of all obligations due in respect of senior debt before the holders
of the notes will be entitled to receive any payment, other than with Junior
Securities, with respect to the notes, including:
- the principal of, premium if any, or interest accrued on the notes;
- payments to repurchase any of the notes; or
- payments to redeem any of the notes.
We or a guarantor, as applicable, may also not make any payment with respect
to the notes, other than with Junior Securities, if:
- a payment default on our senior debt or that of that guarantor occurs and
is continuing beyond any applicable grace period; or
- any other default occurs and is continuing on senior debt that permits the
holders of that senior debt to accelerate its maturity and we and the
trustee receive written notice of that default (a "Payment Notice") from
the holders of the senior debt.
Payments on the notes may and shall be resumed:
- in the case of a payment default, upon the date on which that default is
cured or waived; and
- in the case of a default other than a payment default, the earlier of the
date on which that default is cured or waived or 179 days after the date
on which the applicable Payment Notice is received (the "Payment Blockage
Period"), unless the maturity of the senior debt has been accelerated.
82
<PAGE>
Any number of Payment Notices may be given, provided that :
- no more than one Payment Notice may be given within a period of any 360
consecutive days; and
- no default that existed upon the date of a Payment Notice or the
commencement of a Payment Blockage Period shall be made the basis for the
commencement of any other Payment Blockage Period.
Any subsequent action, or any subsequent breach of any financial covenant
for a period commencing after the expiration of a Payment Blockage Period that
would give rise to a new event of default, even though it is an event that would
also have been a separate breach pursuant to any provision under which a prior
event of default previously existed, shall constitute a new event of default.
In the event of any distribution of our assets or those of the guarantors
in:
- a total or partial liquidation, dissolution, winding up or reorganization
of us or a guarantor, whether voluntary or involuntary;
- a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to us or our property;
- an assignment for the benefit or creditors; or
- any marshaling of our assets or liabilities;
the holders of all our senior debts or those of the guarantors will be entitled
to receive payment in full in cash or Cash Equivalents of all amounts due in
respect of senior debt before the holders of notes will be entitled to receive
any payment, other than with Junior Securities, with respect to the notes.
Any payment or distribution of our assets or those of any guarantor whether
in cash, property or securities other than Junior Securities to which the
holders or the trustee on behalf of the holders would be entitled except for the
subordination provisions in the indenture, will be paid by the liquidating
trustee or agent or other person making such a payment or distribution directly
to the holders of the senior debt or their representative to the extent
necessary to make payment in full on all the senior debt remaining unpaid, after
giving effect to any concurrent payment or distribution to the holders of the
senior debt.
In the event that any payment or distribution of our assets or those of any
guarantor other than Junior Securities shall be received by the trustee or the
holders of the notes at a time when that payment or distribution is prohibited
by the foregoing provisions, such payment or distribution shall be held in trust
for the benefit of the holders of the senior debt. The payment shall be paid or
delivered by the trustee or the holders of the notes, as the case may be, to the
holders of the senior debt remaining unpaid or to their representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing any of unpaid senior debt may have been issued. The payment or
distribution shall be paid to the holders of senior debt ratably according to
the aggregate principal amounts remaining unpaid on account of such senior debt.
The payment shall be applied to all unpaid senior debt to the extent necessary
to pay or to provide for the payment of all such senior debt in full after
giving effect to any concurrent payment or distribution to the holders of such
senior debt.
No provision contained in the indenture or the notes will affect our
obligation or that of the guarantors, which is absolute and unconditional, to
pay, when due, principal of, premium, if any, and interest on the notes. The
subordination provisions of the indenture and the notes will not prevent the
occurrence of any Default or Event of Default under the indenture or limit the
rights of the trustee or any holder to pursue any other rights or remedies with
respect to the notes.
As a result of these subordination provisions, holders of the notes may
receive ratably less than other creditors in the event of the liquidation,
bankruptcy, reorganization, insolvency, receivership or
83
<PAGE>
similar proceeding or an assignment for the benefit of our creditors or a
marshalling of our assets or liabilities. You should read the discussion under
the heading "Risk Factors-Subordination" for further information on the risk
that you may receive ratably less than other creditors under some circumstances.
BANKRUPTCY LIMITATIONS
We are a holding company which conducts our business through our
Subsidiaries. The Subsidiaries have guaranteed or will guarantee our obligations
with respect to the notes. Our Unrestricted Subsidiaries will not guarantee the
notes. Holders of the notes will be direct creditors of each guarantor by virtue
of its guarantee. Nonetheless, in the event of the bankruptcy or financial
difficulty of a guarantor, such guarantor's obligations under its guarantee may
be subject to review and avoidance under state and federal fraudulent transfer
laws. Among other things, a guarantor may avoid its obligations if a court
concludes that the obligations were incurred for less than reasonably equivalent
value or fair consideration at a time when the guarantor was insolvent, was
rendered insolvent, or was left with inadequate capital to conduct its business.
A court would likely conclude that a guarantor did not receive reasonably
equivalent value or fair consideration to the extent that the aggregate amount
of its liability on its guarantee exceeds the economic benefits it receives in
the offering of the outstanding Series A notes. Similar laws exist in the United
Kingdom with respect to these issues. The obligations of each guarantor under
its guarantee are limited in a manner intended to cause it not to be a
fraudulent conveyance under applicable law although we cannot assure you that a
court would give the holder the benefit of such a provision. You should read the
discussion under the heading "Risk Factors-Fraudulent Transfer Considerations"
for further discussion of the risk that the guarantors may avoid their
obligations under their guarantees.
If the obligations of a guarantor under its guarantee were avoided, holders
of notes would have to look to the assets of any remaining guarantors for
payment. We cannot assure you that the assets of the remaining guarantors would
suffice to pay the outstanding principal and interest on the notes.
OPTIONAL REDEMPTION
At any time prior to April 15, 2001, upon an Initial Public Equity Offering
of common stock for cash, up to 35% of the aggregate principal amount of the
notes originally issued under the indenture may be redeemed at our option with
cash from the Net Cash Proceeds of the Initial Public Equity Offering at a
redemption price equal to 110.125% of principal; PROVIDED HOWEVER that:
- immediately following such redemption not less than 65% of the original
aggregate principal amount of the notes remain outstanding;
- we must give at least 30 days, but no more than 60 days, notice to each
holder of notes to be redeemed; and
- the redemption must occur within 90 days of the Initial Public Equity
Offering.
Except pursuant to the preceding paragraphs, we may not redeem the notes
prior to April 15, 2002.
At any time on or after April 15, 2002, we may redeem all or a part of the
notes for cash upon not less than 30 days nor more than 60 days notice to each
holder of notes, at the following redemption prices, expressed as percentages of
the principal amount, if redeemed during the 12-month period commencing April 15
of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------------- -----------
<S> <C>
2002.................................................................................. 105.063%
2003.................................................................................. 102.531%
2004.................................................................................. 100.000%
</TABLE>
84
<PAGE>
Any optional redemption of the notes will in each case be subject to the
rights of holders of record on a Record Date to receive the interest due on an
Interest Payment Date corresponding to that Record Date that occurs prior to the
Redemption Date, together with accrued and unpaid interest on the notes prior to
the Redemption Date.
SELECTION AND NOTICE
If less than all of the notes are to be redeemed at any time, the trustee
shall select the notes for redemption on a PRO RATA basis, by lot or in such
other manner it deems appropriate and fair. The notes may be redeemed in part in
multiples of $1,000 only.
The notes will not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first class mail, at least 30 days
and not more than 60 days before the Redemption Date to each holder of notes to
be redeemed at the holder's registered address. If any note is to be redeemed in
part only, the notice of redemption that relates to that note must state the
portion of the principal amount that will not be redeemed and must state that on
and after the date of redemption, upon surrender of the note, a new note or
notes, in a principal amount equal to the unredeemed portion of the note will be
issued. On and after the date of redemption, interest will cease to accrue on
the notes or portions of them called for redemption, unless we default in the
payment thereof.
COVENANTS
There are covenants in the indenture in addition to those described here.
You should read the indenture for more complete information.
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL
If a Change of Control occurs, each holder of notes has the right to require
us to repurchase all or any part of such holder's notes equal to $1,000 or an
aggregate amount thereof pursuant to a Change of Control Offer. In the Change of
Control Offer, we will offer a Change of Control Payment in cash equal to 101%
of the aggregate principal amount of notes repurchased plus accrued and unpaid
interest thereon, if any, to the date of purchase. Within 10 days following any
Change of Control, we will mail a notice to each holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase notes on the Change of Control Purchase Date which must occur no
later than 35 days after the occurrence of the Change of Control. The Change of
Control Offer must remain open for 20 business days after we mail a Change in
Control Offer to the holders of the notes (the "Change in Control Offer
Period").
Upon expiration of the Change of Control Offer Period, we promptly shall
purchase all notes properly tendered in response to the Change of Control Offer.
On or before the Change of Control Purchase Date, we will:
- accept for payment notes or portions thereof properly tendered pursuant to
the Change of Control Offer;
- deposit with the Paying Agent cash sufficient to pay the Change of Control
Purchase Price, together with accrued and unpaid interest and liquidated
damages, if any, of all notes so tendered; and
- deliver to the trustee notes so accepted together with an Officers'
Certificate listing the notes or portions thereof being purchased by us.
85
<PAGE>
The Paying Agent will promptly pay the holders of notes so accepted an
amount equal to the Change of Control Purchase Price together with accrued and
unpaid interest and liquidated damages, if any. The trustee will promptly
authenticate and deliver to such holders a new note equal in principal amount to
any unpurchased portion of the note surrendered. Any notes not so accepted will
be delivered promptly by us to the holder thereof. We will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Purchase Date.
The Change of Control purchase feature of the notes may make more difficult
or discourage a takeover of Compass, and, thus, the removal of incumbent
management.
The definition of Change of Control includes a phrase relating to the direct
or indirect sale or transfer of "all or substantially all" of our assets on a
consolidated basis. Although there is a limited body of case law interpreting
the phrase "substantially all," there is no precise established definition of
the phrase under applicable law. The interpretation of the phrase "substantially
all" will be dependent upon particular facts and circumstances. As a result, the
ability of a holder of notes to require us to repurchase such notes as a result
of a sale or transfer of less than all of our assets and those of the guarantors
to another person or group may be uncertain. In addition, we cannot assure you
that we will be able to acquire notes tendered upon the occurrence of a Change
of Control.
Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under the
Exchange Act and the rules thereunder and all other applicable Federal and state
securities laws. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this paragraph, compliance by us or
any of the guarantors with such laws and regulations shall not in and of itself
cause a breach of its obligations under the indenture.
If the Change of Control Purchase Date is on or after an interest payment
Record Date and on or before the associated Interest Payment Date, any accrued
and unpaid interest, due on such Interest Payment Date will be paid to the
person in whose name a note is registered at the close of business on such
Record Date. Such interest will not be payable to holders who tender the notes
pursuant to the Change of Control Offer.
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND DISQUALIFIED CAPITAL
STOCK
We will not and we will not permit any of our Subsidiaries to, and the
guarantors will not and will not permit any of their Subsidiaries to, directly
or indirectly, issue, assume, guaranty, incur, become directly or indirectly
liable with respect to, or otherwise become responsible for, contingently or
otherwise, including as a result of an Acquisition, any Indebtedness or any
Disqualified Capital Stock including Acquired Indebtedness, other than Permitted
Indebtedness. Notwithstanding the foregoing, we may incur such Indebtedness or
Disqualified Capital Stock and the guarantors may incur such Indebtedness, other
than Disqualified Capital Stock, if:
- no Default or Event of Default shall have occurred and be continuing at
the time of, or would occur after giving effect on a pro forma basis to,
such incurrence of Indebtedness or Disqualified Capital Stock; and
- on the date of such incurrence (the "Incurrence Date"), the Consolidated
Coverage Ratio of Compass for the Reference Period immediately preceding
the Incurrence Date, after giving effect on a pro forma basis to such
incurrence of such Indebtedness or Disqualified Capital Stock and, to the
extent set forth in the definition of the Consolidated Coverage Ratio, the
use of proceeds thereof, would be at least 2.0 to 1 (as applicable, each
the "Debt Incurrence Ratio").
86
<PAGE>
In addition, the foregoing limitations will not apply:
(1) to the incurrence by us or any guarantor of Purchase Money Indebtedness,
PROVIDED, that:
(a) the aggregate principal amount of such Indebtedness incurred on or after
the Issue Date and outstanding at any time pursuant to this paragraph
shall not exceed $2.0 million, including any Refinancing Indebtedness and
other Indebtedness issued to refinance, replace, defease or refund
Purchase Money Indebtedness; and
(b) in each case, Purchase Money Indebtedness shall not constitute more than
100% of the cost determined in accordance with GAAP to us or such
guarantor, as applicable, of the property so purchased or leased;
(2) if no Event of Default shall have occurred and be continuing, the incurrence
by us or any guarantor of Indebtedness in an aggregate principal amount
outstanding at any time of up to $5.0 million, including Refinancing
Indebtedness and other Indebtedness incurred to refinance, replace, defease
or refund such Indebtedness;
(3) to the incurrence by us or any guarantor of Mortgage Indebtedness or
Indebtedness pursuant to the credit agreement up to an aggregate principal
amount outstanding under the credit agreement or of Mortgage Indebtedness
collectively not to exceed in the aggregate $12.0 million, in each case
including any Refinancing Indebtedness and other Indebtedness incurred to
refinance, replace, defease or refund such Indebtedness; PROVIDED, THAT:
(a) in the case of Indebtedness pursuant to the credit agreement minus the
amount of any such Indebtedness retired with the Net Cash Proceeds from
any Asset Sale applied to permanently reduce the outstanding amounts or
the commitments with respect to such Indebtedness pursuant the covenant
"Limitation on Sale of Assets and Subsidiary Stock," or
(b) assumed by a transferee in an Asset Sale, and
(c) in the case of Mortgage Indebtedness such Indebtedness shall not
constitute more than 100% of the cost determined in accordance with GAAP
to us or such guarantor, as applicable, of such mortgaged real estate
asset.
Indebtedness or Disqualified Capital Stock of any Person which is
outstanding at the time such Person becomes our Subsidiary or is merged with or
into or consolidated with us or one of our Subsidiaries shall be deemed to have
been incurred at the time such Person becomes our Subsidiary or is merged with
or into or consolidated with us one of our Subsidiaries.
Upon each incurrence of Indebtedness, we may designate under which provision
of this covenant such Indebtedness is being incurred. Such Indebtedness will be
deemed to have been incurred under that provision and no other provision of this
covenant, except as specifically provided otherwise.
LIMITATION ON RESTRICTED PAYMENTS
We will not and we will not permit any of our Subsidiaries, and the
guarantors will not and will not permit any of their Subsidiaries, directly or
indirectly, to make any Restricted Payment if, after giving effect to such
Restricted Payment on a pro forma basis:
(1) a Default or an Event of Default shall have occurred and be continuing;
(2) we are not permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Debt Incurrence Ratio in the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock; or
87
<PAGE>
(3) the aggregate amount of all Restricted Payments made by us and our
Subsidiaries, including after giving effect to such proposed Restricted
Payment, from and after the Issue Date, would exceed, without duplication,
the sum of:
(a) 50% of our aggregate Consolidated Net Income for the period taken as one
accounting period that commences on the first day of the first full
fiscal quarter commencing after the Issue Date and continues to and
includes the last day of the fiscal quarter ended immediately prior to
the date of each such calculation, or, in the event Consolidated Net
Income for such period is a deficit, then minus 100% of such deficit;
plus
(b) the aggregate Net Cash Proceeds received by us from a Capital
Contribution or the sale of our Qualified Capital Stock, other than to
one of our Subsidiaries, to the extent applied in connection with a
Qualified Exchange and to the extent credited in accordance with the
following paragraph, after the Issue Date, plus
(c) other than amounts credited pursuant to clauses 1 and 2 of the next
following paragraph, the net amount of any Restricted Investments not to
exceed the original amount of such Investment made after the Issue Date
that are returned to us or the guarantor that made such prior Investment,
without restriction in cash on or prior to the date of any such
calculation.
So long as no Default or Event of Default has occurred and is continuing or
would be caused thereby, the preceding provisions will not prohibit:
(1) Restricted Investments in a Related Business, PROVIDED, that, after giving
pro forma effect to such Investment, the aggregate amount of all such
Investments made on or after the Issue Date that are outstanding at any time
does not exceed $4.0 million, after giving effect to any such Investments
that are returned to us or the Subsidiary guarantor that made such prior
Investment, without restriction, in cash on or prior to the date of any such
calculation, or
(2) repurchases of Capital Stock from our employees or employees of our
Subsidiaries upon the death, disability or termination of employment in an
aggregate amount to all employees not to exceed $300,000 in any fiscal year
or $1.5 million in the aggregate on and after the Issue Date, net of the Net
Cash Proceeds received by us from subsequent reissuances of such Qualified
Capital Stock to new employees that are not Excluded Persons.
Even if a Default or Event of Default shall have occurred and is continuing
or would be caused thereby, the preceding provisions against making Restricted
Payments will not apply to:
(3) a Qualified Exchange,
(4) the payment of any dividend on Qualified Capital Stock within 60 days after
the date of its declaration if such dividend could have been made on the
date of such declaration in compliance with the foregoing provisions, or
(5) Permitted Payments to Parent.
The full amount of any Restricted Payment made pursuant to the foregoing
clauses (1), (2), (4) and (5) of the immediately preceding sentences, however,
will be deducted in the calculation of the aggregate amount of Restricted
Payments available to be made.
In addition, we will not and we will not permit any of our Subsidiaries to,
and the guarantors will not and will not permit any of their Subsidiaries to,
directly or indirectly, make any Management Fee Payment or similar payment to
Affiliates other than Subsidiaries, except for Permitted Payments to Parent if,
on a pro forma basis after giving effect to such Management Fee Payments or
similar payments, a Default or an Event of Default shall have occurred and be
continuing.
88
<PAGE>
For purposes of this covenant, the amount of any Restricted Payment, if
other than in cash, shall be the fair market value thereof, as determined in the
good faith reasonable judgment of our Board of Directors. Additionally, on the
date of each Restricted Payment, we shall deliver an Officers' Certificate to
the trustee:
- describing in reasonable detail the nature of such Restricted Payment,
- stating the amount of such Restricted Payment,
- stating in reasonable detail the provisions of the indenture pursuant to
which such Restricted Payment was made, and
- certifying that such Restricted Payment was made in compliance with the
terms of the indenture.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES
We will not and we will not permit any of our Subsidiaries to, and the
guarantors will not and will not permit any of their Subsidiaries to, directly
or indirectly, create, assume or suffer to exist any consensual restriction on
the ability of any of our Subsidiaries to:
(1) pay dividends or make other distributions to or on behalf of, or
(2) pay any obligation to or on behalf of, or
(3) otherwise to transfer assets or property to or on behalf of, or
(4) make or pay loans or advances to or on behalf of us or any of our
Subsidiaries.
However, the preceding restrictions will not apply to:
(1) restrictions imposed by the notes or the indenture or by our other
indebtedness (which may also be guaranteed by the guarantors) ranking senior
or PARI PASSU with the notes or the guarantees, provided such restrictions
are no more restrictive than those imposed by the indenture and the notes;
(2) restrictions imposed by applicable law;
(3) existing restrictions under Indebtedness outstanding on the Issue Date,
including pursuant to the credit agreement;
(4) restrictions under any Acquired Indebtedness not incurred in violation of
the indenture or any agreement relating to any property, asset, or business
acquired by us or any of our Subsidiaries, which restrictions in each case
existed at the time of acquisition, were not put in place in connection with
or in anticipation of such acquisition and are not applicable to any person,
other than the person acquired, or to any property, asset or business, other
than the property, assets and business so acquired;
(5) any such restriction or requirement imposed by Indebtedness incurred under
the credit agreement pursuant to the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock," provided such
restriction or requirement is no more restrictive than that imposed by the
credit agreement as of the Issue Date;
(6) restrictions with respect solely to a Subsidiary of ours imposed pursuant to
a binding agreement which has been entered into for the sale or disposition
of all or substantially all of the Equity Interests or assets of such
Subsidiary, provided such restrictions apply solely to the Equity Interests
or assets of such Subsidiary which are being sold;
(7) restrictions on transfer contained in Purchase Money Indebtedness or
Mortgage Indebtedness incurred pursuant to the covenant "Limitation on
Incurrence of Additional Indebtedness and
89
<PAGE>
Disqualified Capital Stock," provided such restrictions relate only to the
transfer of the property acquired with the proceeds of such Purchase Money
Indebtedness or Mortgage Indebtedness, as applicable; and
(8) in connection with and pursuant to permitted Refinancings, replacements of
restrictions imposed pursuant to clauses (1), (3) or (4) of this paragraph
that are not more restrictive than those being replaced and do not apply to
any other person or assets than those that would have been covered by the
restrictions in the Indebtedness so refinanced.
Notwithstanding the foregoing, neither:
- customary provisions restricting subletting or assignment of any lease
entered into in the ordinary course of business, consistent with industry
practice, nor
- Liens permitted under the terms of the indenture on assets securing senior
debt, Purchase Money Indebtedness, or Mortgage Indebtedness incurred in
accordance with the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock,"
shall in and of themselves be considered a restriction on the ability of the
applicable Subsidiary to transfer such agreement or assets.
LIMITATIONS ON LAYERING INDEBTEDNESS
We will not and we will not permit any of our Subsidiaries to, and the
guarantors will not and will not permit any of their Subsidiaries to, directly
or indirectly, incur, or suffer to exist any Indebtedness that is subordinate in
right of payment to any other Indebtedness of ours or a guarantor unless, by its
terms, such Indebtedness is subordinate in right of payment to, or ranks PARI
PASSU with, the notes or the guarantees, as applicable.
LIMITATION ON LIENS SECURING INDEBTEDNESS
Unless we provide and cause our Subsidiaries to provide that the notes are
equally and ratably secured, we will not and we will not permit any of our
Subsidiaries to, and the guarantors will not and will not permit any of their
Subsidiaries to, create, incur, assume or suffer to exist any Lien of any kind,
other than Permitted Liens, upon any of their respective assets now owned or
acquired on or after the date of the indenture or upon any income or profits
therefrom securing any of our Indebtedness or that of any guarantor other than
Senior Indebtedness, PROVIDED that:
- if such Indebtedness is Subordinated Indebtedness, the Lien securing such
Subordinated Indebtedness shall be subordinate and junior to the Lien
securing the notes with the same relative priority as such Subordinated
Indebtedness shall have with respect to the notes, and
- this clause shall not be applicable to any Liens securing any such
Indebtedness which became our Indebtedness pursuant to a transaction
subject to the provisions of the indenture described below under
"Limitation on Merger, Sale or Consolidation" or which constitutes
Acquired Indebtedness and which in either case were in existence at the
time of such transaction, unless such Indebtedness was incurred or such
Lien created in connection with or in contemplation of, such transaction,
so long as such Liens do not extend to or cover any of our property or
assets or that of any of our Subsidiaries other than property or assets
acquired in such transaction.
90
<PAGE>
LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK
We will not, and we will not permit any of our Subsidiaries to, and the
guarantors will not and will not permit any of their Subsidiaries to, convey,
sell, transfer, assign or otherwise dispose of, directly or indirectly, any of
our property, business or assets, including by merger, or consolidation of our
Subsidiary and including any sale or other transfer or issuance of any Equity
Interests of any Subsidiary, whether by us or a Subsidiary and including any
sale and leaseback transaction (any of the foregoing, an "Asset Sale"), unless:
(1) (a) the Net Cash Proceeds therefrom (the "Asset Sale Offer Amount") are
applied:
- within 270 days after the date of such Asset Sale to the optional
redemption of the notes in accordance with the terms of the
indenture and other Indebtedness of ours ranking on a parity with
the notes and with similar provisions requiring us to redeem such
Indebtedness with the proceeds for asset sales, pro rata in
proportion to the respective principal amounts of the notes and
such other Indebtedness then outstanding, or
- within 300 days after the date of such Asset Sale to the repurchase
of the notes and such other Indebtedness on a parity with the notes
and with similar provisions requiring us to make an offer to
purchase such Indebtedness with the proceeds for asset sales
pursuant to a cash offer pro rata in proportion to the respective
principal amounts of the notes and such other Indebtedness then
outstanding (the "Asset Sale Offer") at a purchase price of 100% of
principal amount (the "Asset Sale Offer Price") together with
accrued and unpaid interest and liquidated damages, if any, to the
date of payment, made within 270 days of such Asset Sale, or
(b) within 270 days following such Asset Sale, the Asset Sale Offer
Amount is:
- invested, or committed to be invested, and is invested, within an
additional 90 days in tangible assets and property other than
notes, bonds, obligations and securities which in the good faith
reasonable judgment of the Board will immediately constitute or be
a part of a Related Business of ours or such Subsidiary immediately
following such transaction, or
- used to retire Purchase Money Indebtedness, Mortgage Indebtedness
or senior debt and, to permanently reduce the amount of such
Indebtedness, incurred under the covenant "Limitation on Incurrence
of Additional Indebtedness and Disqualified Capital Stock,"
(c) at least 90% of the consideration for such Asset Sale or series of
related Asset Sales consists of cash or Cash Equivalents,
(d) no Default or Event of Default shall have occurred and be continuing
at the time of, or would occur after giving effect, on a pro forma basis,
to, such Asset Sale, and
(e) our Board of Directors determines in good faith that we or such
Subsidiary, as applicable, will receive fair market value for such Asset
Sale.
An acquisition of notes pursuant to an Asset Sale Offer may be deferred
until the accumulated Net Cash Proceeds from Asset Sales not applied to the uses
set forth in (1)(a) or (b) above (the "Excess Proceeds") exceeds $5.0 million.
Each Asset Sale Offer shall remain open for 20 Business Days following its
commencement (the "Asset Sale Offer Period"). Upon expiration of the Asset Sale
Offer Period, we shall apply the Asset Sale Offer Amount plus an amount equal to
accrued and unpaid interest and liquidated damages, if any, to the purchase of
all Indebtedness properly tendered at the Asset Sale Offer Price, together with
accrued interest and liquidated damages, if any. The Asset Sale
91
<PAGE>
Offer Amount shall be applied on a PRO RATA basis if the Asset Sale Offer Amount
is insufficient to purchase all Indebtedness so tendered. To the extent that the
aggregate amount of notes and such other PARI PASSU Indebtedness tendered
pursuant to an Asset Sale Offer is less than the Asset Sale Offer Amount, we may
use any remaining Net Cash Proceeds for general corporate purposes as otherwise
permitted by the indenture. Following each Asset Sale Offer the Excess Proceeds
amount shall be reset to zero.
For purposes of determining the percentage of the consideration for the
Asset Sale received in cash or Cash Equivalents, total consideration received
means the total consideration received for such Asset Sales minus the amount of:
- Purchase Money Indebtedness or Mortgage Indebtedness secured solely by the
assets sold and assumed by a transferee, and
- property that within 30 days of such Asset Sale is converted into cash or
Cash Equivalents, PROVIDED that such cash and Cash Equivalents shall be
treated as Net Cash Proceeds attributable to the original Asset Sale for
which such property was received.
Notwithstanding, and without complying with, the provisions of this
covenant, we and our Subsidiaries may:
(1) in the ordinary course of business:
(a) convey, sell, transfer, assign or otherwise dispose of inventory and
other assets acquired and held for resale in the ordinary course of
business, and
(b) liquidate Cash Equivalents;
(2) convey, sell, transfer, assign or otherwise dispose of assets pursuant
to and in accordance with the covenant "Limitation on Merger, Sale or
Consolidation;"
(3) sell or dispose of damaged, worn out, scrap or other obsolete property
in the ordinary course of business so long as such property is no longer
necessary for the proper conduct of the business of ours or such
Subsidiary, as applicable; and
(4) convey, sell, transfer, assign or otherwise dispose of assets to us or
any of our Wholly-owned Subsidiary guarantors;
(5) in the ordinary course of business, convey, sell, transfer, assign, or
otherwise dispose of assets or related assets in related transactions
with a fair market value of less than $250,000; and
(6) surrender or waive contract rights or settle, release or surrender of
contract, tort or other claims of any kind or grant Liens not prohibited
by the indenture.
All Net Cash Proceeds from an Event of Loss relating to a Material Facility
shall be invested, used for prepayment of Senior Indebtedness or used to
repurchase notes, all within the period and as otherwise provided above in
clauses (1)(a) or (b) of the first paragraph of this covenant plus 90 days.
In addition to the foregoing and notwithstanding anything herein to the
contrary, we will not, and will not permit any of our Subsidiaries to, directly
or indirectly make any Asset Sale of any of the Equity Interests of any
Subsidiary of ours other than us or a Wholly-owned Subsidiary guarantor, except
pursuant to an Asset Sale of all the Equity Interests of such Subsidiary.
Any Asset Sale Offer shall be made in compliance with all applicable laws,
rules, and regulations, including, if applicable, Regulation 14E of the Exchange
Act and the rules and regulations thereunder and all other applicable Federal
and state securities laws. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of this paragraph, compliance
by us or any of
92
<PAGE>
our subsidiaries with such laws and regulations shall not in and of itself cause
a breach of our obligations under such covenant.
If the payment date in connection with an Asset Sale Offer hereunder is on
or after an interest payment Record Date and on or before the associated
Interest Payment Date, any accrued and unpaid interest will be paid to the
person in whose name a note is registered at the close of business on such
Record Date, and such interest will not be payable to holders who tender notes
pursuant to such Asset Sale Offer.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
Neither we nor any of our Subsidiaries will be permitted to enter into or
suffer to exist any contract, agreement, arrangement or transaction with any
Affiliate, an "Affiliate Transaction", or any series of related Affiliate
Transactions, other than Exempted Affiliate Transactions, unless:
- it is determined that the terms of such Affiliate Transaction are fair and
reasonable to us, and no less favorable to us than could have been
obtained in an arm's length transaction with a non-Affiliate,
- if involving consideration to either party in excess of $1.0 million, the
Affiliate Transaction is evidenced by an Officers' Certificate addressed
and delivered to the trustee certifying that such Affiliate Transaction
has been approved by a majority of the members of the Board of Directors
that are disinterested in such transaction, and
- if involving consideration to either party in excess of $5.0 million, we
obtain, prior to the consummation of an Affiliate Transaction, a written
favorable opinion as to the fairness of the transaction to us from a
financial point of view from an independent investment banking firm of
national reputation or, if pertaining to a matter for which such
investment banking firms do not customarily render such opinions, an
appraisal or valuation firm of national reputation.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
We will not consolidate with or merge with or into another person or,
directly or indirectly, sell, lease, convey or transfer all or substantially all
of our assets (computed on a consolidated basis), whether in a single
transaction or a series of related transactions, to another Person or group of
affiliated Persons unless:
(1) we are the continuing entity;
(2) the resulting, surviving or transferee entity is a corporation organized
under the laws of the United States, any state thereof or the District of
Columbia and expressly assumes by supplemental indenture all of our
obligations in connection with the notes and the indenture;
(3) no Default or Event of Default shall exist or shall occur immediately
after giving effect on a pro forma basis to such transaction; and
(4) unless such transaction is solely the merger of us and one of our
previously existing Wholly-owned Subsidiaries which is also a guarantor
and which transaction is not in connection with any other transaction,
immediately after giving effect to such transaction on a pro forma basis,
the consolidated resulting, surviving or transferee entity would
immediately thereafter be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Debt Incurrence Ratio set forth in the
covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock."
Upon any consolidation or merger or any transfer of all or substantially all
of our assets in accordance with the foregoing, the successor corporation formed
by such consolidation or into which
93
<PAGE>
we are merged or to which such transfer is made shall succeed to and be
substituted for us, and may exercise every right and power of ours under the
indenture with the same effect as if such successor corporation had been named
therein as us. We shall be released from the obligations under the notes and the
indenture except with respect to any obligations that arise from, or are related
to, such transaction.
For purposes of the foregoing, the transfer by lease, assignment, sale or
otherwise of all or substantially all of the properties and assets of one or
more Subsidiaries, our interest in which constitutes all or substantially all of
our properties and assets shall be deemed to be the transfer of all or
substantially all of our properties and assets.
LIMITATION ON LINES OF BUSINESS
Neither we nor any of our Subsidiaries shall directly or indirectly engage
to any substantial extent in any line or lines of business activity other than
that which, in the reasonable good faith judgment of our Board of Directors, is
a Related Business.
FUTURE SUBSIDIARY GUARANTORS
All of our present and future Subsidiaries will jointly and severally,
fully, irrevocably and unconditionally guarantee all principal, premium, if any,
and interest on the notes on a senior subordinated basis. The term Subsidiary
does not include Unrestricted Subsidiaries.
RELEASE OF GUARANTORS
The indenture provides that no guarantor shall consolidate or merge with or
into another person, whether or not such guarantor is the surviving person,
unless:
- subject to the provisions of the following paragraph and other provisions
of the indenture, the person formed by or surviving any such consolidation
or merger, if other than such guarantor, assumes all the obligations of
such guarantor pursuant to a supplemental indenture in form reasonably
satisfactory to the trustee, pursuant to which such person shall
unconditionally guarantee, on a senior subordinated basis, all of such
guarantor's obligations under such guarantor's guarantee, on the terms set
forth in the indenture; and
- immediately before and immediately after giving effect to such transaction
on a pro forma basis, no Default or Event of Default shall have occurred
or be continuing.
A guarantor will be deemed released from its obligations under its guarantee
of the notes upon the sale or disposition, whether by merger, stock purchase,
asset sale or otherwise, of that guarantor or all of its assets to an entity
which is not a guarantor or the designation of a Subsidiary to become an
Unrestricted Subsidiary, which transaction is otherwise in compliance with the
indenture; PROVIDED, HOWEVER, that any such termination shall occur only in the
event that all obligations of that guarantor under all of its guarantees of and
under all of its pledges of assets or other security interests which secure any
Indebtedness of ours or any other of our Subsidiary shall also terminate upon
such release, sale or transfer.
LIMITATION ON STATUS AS INVESTMENT COMPANY
We and our Subsidiaries may not be required to register as an "investment
company," as that term is defined in the Investment Company Act of 1940, or may
not otherwise become subject to regulation under the Investment Company Act.
94
<PAGE>
REPORTS
Whether or not we are subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, we shall deliver to the trustee and to each holder
within 15 days after the time period specified in the Securities and Exchange
Commission's rules and regulations:
- all annual and quarterly financial statements substantially equivalent to
financial statements that would have been included in reports filed with
the Commission on Forms 10-K and 10-Q, including, with respect to annual
information only, a report thereon by our certified independent public
accountants as such would be required in such reports to the Commission;
and
- all current reports that would be required to be filed with the Commission
on Form 8-K if we were required to file such reports.
In each case, we shall include a management's discussion and analysis of
financial condition and results of operations which would be so required. Unless
the Commission will not accept such reports, we will file with the Commission
the annual, quarterly and other reports which we are or would have been required
to file with the Commission.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
- our failure to pay any installment of interest or liquidated damages, if
any, on the notes as and when the same becomes due and payable and the
continuance of any such failure for 30 days;
- our failure to pay all or any part of the principal, or premium, if any,
on the notes when and as the same becomes due and payable at maturity,
redemption, by acceleration or otherwise, including, without limitation,
payment of the Change of Control Purchase Price or the Asset Sale Offer
Price;
- the failure by us or any Subsidiary of ours to observe or perform any
other covenant or agreement contained in the notes or the indenture and,
subject to some exceptions, the continuance of such failure for a period
of 30 days after written notice is given to us by the trustee or to us and
the trustee by the holders of at least 25% in aggregate principal amount
of the notes outstanding;
- events of bankruptcy, insolvency or reorganization with respect to us or
any of our Significant Subsidiaries;
- a default in any issue of our Indebtedness or that of any of our
Subsidiaries with an aggregate principal amount in excess of $5.0 million
resulting from either the failure to pay principal at maturity or as a
result of which the maturity of such Indebtedness has been accelerated
prior to its stated maturity; and
- final unsatisfied judgments not covered by insurance aggregating in excess
of $5.0 million at any one time, rendered against us or any of our
Subsidiaries which are not stayed, bonded or discharged within 60 days.
If a Default occurs and is continuing, the trustee must give the holders
notice of such default within 90 days after the occurrence of such default.
Other than an Event of Default resulting from events of bankruptcy,
insolvency or reorganization relating to us or any of our Significant
Subsidiaries, if an Event of Default occurs and is continuing, then in every
such case, either the trustee or the holders of at least 25% in aggregate
principal amount of the notes then outstanding, by notice in writing to us and
to the trustee if given by holders (an "Acceleration Notice"), may declare all
principal, determined as set forth below, and accrued interest and liquidated
damages, if any, thereon to be due and payable immediately. If any senior debt
is
95
<PAGE>
outstanding pursuant to the credit agreement, upon a declaration of such
acceleration, such principal and interest shall be due and payable upon the
earlier of:
- the third Business Day after the sending to us and the Representative of
such written notice, unless such Event of Default is cured or waived prior
to such date; and
- the date of acceleration of any senior debt under the credit agreement.
If an Event of Default resulting from events of bankruptcy, insolvency or
reorganization relating to Compass or any of its Significant Subsidiaries
occurs, all principal and accrued interest and liquidated damages, if any,
thereon will be immediately due and payable on all outstanding notes without any
declaration or other act on the part of trustee or the holders. The holders of a
majority in aggregate principal amount of notes generally are authorized to
rescind such acceleration if all existing Events of Default have been cured or
waived, other than:
- the non-payment of the principal of, premium, if any, and interest on the
notes which have become due solely by such acceleration, and
- except on default with respect to any provision requiring a supermajority
approval to amend, which default may only be waived by such a
supermajority.
Prior to the declaration of acceleration of the maturity of the notes, the
holders of a majority in aggregate principal amount of the notes at the time
outstanding may waive on behalf of all the holders any default, except:
- a default with respect to any provision requiring a supermajority approval
to amend, which default may only be waived by such a supermajority,
- a default in the payment of principal of or interest on any note not yet
cured, or
- a default with respect to any covenant or provision which cannot be
modified or amended without the consent of the holder of each outstanding
note affected.
Subject to the provisions of the indenture relating to the duties of the
trustee, the trustee will be under no obligation to exercise any of its rights
or powers under the indenture at the request, order or direction of any of the
holders, unless such holders have offered to the trustee reasonable security or
indemnity. Subject to all provisions of the indenture and applicable law, the
holders of a majority in aggregate principal amount of the notes at the time
outstanding will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee, or exercising
any trust or power conferred on the trustee.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
We may, at our option, elect to have our obligations and the obligations of
the guarantors discharged with respect to the outstanding notes ("Legal
Defeasance"). Such Legal Defeasance means that we shall be deemed to have paid
and discharged the entire indebtedness represented, and the indenture shall
cease to be of further effect as to all outstanding notes and guarantees, except
as to:
- rights of holders to receive payments in respect of the principal of,
premium, if any, and interest and liquidated damages, if any, on such
notes when such payments are due from the trust funds;
- our obligations with respect to such notes concerning issuing temporary
notes, registration of notes, mutilated, destroyed, lost or stolen notes,
and the maintenance of an office or agency for payment and money for
security payments held in trust;
- the rights, powers, trust, duties, and immunities of the trustee, and our
obligations in connection therewith; and
- the Legal Defeasance provisions of the indenture.
In addition, we may, at our option and at any time, elect to have our
obligations and the guarantors released with respect to some of the covenants
that are described in the indenture
96
<PAGE>
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the notes. Covenant Defeasance will not affect holders' rights with respect to
non-payment, guarantees, bankruptcy, receivership, rehabilitation and insolvency
events.
In order to exercise either Legal Defeasance or Covenant Defeasance, we must
irrevocably deposit with the trustee, in trust, for the benefit of the holders
of the notes:
(1) U.S. legal tender, U.S. Government Obligations or a combination thereof,
in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal
of, premium, if any, and interest on such notes on the stated date for
payment thereof or on the redemption date of such principal or
installment of principal of, premium, if any, or interest on such notes,
and
(2) the holders of notes must have a valid, perfected, exclusive security
interest in such trust;
(3) in the case of Legal Defeasance, we shall have delivered to the trustee
an opinion of counsel in the United States reasonably acceptable to the
trustee confirming that:
(a) we have received from, or there has been published by the Internal
Revenue Service, a ruling, or
(b) since the date of the indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that
the holders of such notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
Legal Defeasance had not occurred.
(4) in the case of Covenant Defeasance, we shall have delivered to the
trustee an opinion of counsel in the United States reasonably acceptable
to such trustee confirming that the holders of such notes will not
recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(5) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit;
(6) we shall have delivered to the trustee an Officer's Certificate
acceptable to the trustee, to the effect that, assuming no intervening
bankruptcy of ours between the date of deposit and the 91st day following
the deposit and that no holder of the notes is an insider of ours, after
the 91st day following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors rights generally;
(7) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under the indenture or
any other material agreement or instrument to which we or any of our
Subsidiaries is a party or by which we or any of our Subsidiaries is
bound;
(8) we shall have delivered to the trustee an Officers' Certificate stating
that the deposit was not made by us with the intent of preferring the
holders of such notes over any other creditors of ours or with the intent
of defeating, hindering, delaying or defrauding any other creditors of
ours or others;
(9) we shall have delivered to the trustee an Officers' Certificate stating
that the conditions precedent set forth above in the first eight clauses
of this paragraph have been complied with; and
97
<PAGE>
(10) we shall have delivered to the trustee an opinion of counsel, stating
that the conditions precedent set forth above in the first clause of this
paragraph with respect to the validity and perfection of the security
interest, and in the second, third and fifth clauses of this paragraph
have been complied with.
If the funds deposited with the trustee to effect Covenant Defeasance are
insufficient to pay the principal of, premium, if any, and interest on the notes
when due, then our obligations and those of the guarantors under the indenture
and the Collateral Agreement will be revived and no such defeasance will be
deemed to have occurred.
AMENDMENTS AND SUPPLEMENTS
We, the guarantors and the trustee may enter into a supplemental indenture
for limited purposes without the consent of the holders. With the consent of the
holders of not less than a majority in aggregate principal amount of the notes
at the time outstanding, we, the guarantors and the trustee are permitted to
amend or supplement the indenture or any supplemental indenture or modify the
rights of the holders. No such modification may, however, without the consent of
holders of at least 66 2/3% in aggregate principal amount of notes at the time
outstanding, modify the provisions including the defined terms used therein of
the covenant "Repurchase of Notes at the Option of the Holder Upon a Change of
Control" in a manner adverse to the holders; and no such modification may,
without the consent of each holder affected thereby:
- change the Stated Maturity on any note;
- reduce the principal amount thereof or the rate or extend the time for
payment of interest thereon or any premium payable upon the redemption at
our option thereof;
- change the place of payment where, or the coin or currency in which, any
note or any premium or the interest thereon is payable;
- impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof, or, in the case of redemption at
our option, on or after the Redemption Date;
- reduce the Change of Control Purchase Price or the Asset Sale Offer Price;
- alter the provisions, including the defined terms used therein, regarding
our right to redeem the notes as a right, or at our option in a manner
adverse to the holders;
- reduce the percentage in principal amount of the outstanding notes, the
consent of whose holders is required for any such amendment, supplemental
indenture or waiver provided for in the indenture; or
- modify any of the waiver provisions, except to increase any required
percentage or to provide that other specific provisions of the indenture
cannot be modified or waived without the consent of the holder of each
outstanding note affected thereby.
NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS
No past, present or future direct or indirect stockholder, employee, officer
or director, as such, of ours, our guarantors or any successor entity shall have
any personal liability for any of our obligations or those of the guarantors
under the indenture or the notes solely by reason of his, her or its status as
such stockholder, employee, officer or director. This provision shall not limit
the obligation of any guarantor pursuant to any guarantee of the notes.
DEFINITIONS
"ACQUIRED INDEBTEDNESS" means Indebtedness or Disqualified Capital Stock of
any person existing at the time such person becomes a Subsidiary of ours,
including by designation, or is merged or consolidated into or with us or one of
our Subsidiaries.
98
<PAGE>
"ACQUISITION" means the purchase or other acquisition of any person or all
or substantially all the assets of any person by any other person, whether by
purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
"AFFILIATE" means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with us. For purposes
of this definition, the term "control" means the power to direct the management
and policies of a person, directly or through one or more intermediaries,
whether through the ownership of voting securities, by contract, or otherwise,
PROVIDED, THAT, with respect to ownership interest in us and our Subsidiaries, a
Beneficial Owner of 10% or more of the total voting power normally entitled to
vote in the election of directors, managers or trustees, as applicable, shall
for such purposes be deemed to constitute control.
"AVERAGE LIFE" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing:
(1) the sum of the products:
(a) of the number of years from the date of determination to the date or
dates of each successive scheduled principal or redemption payment of
such security or instrument and
(b) the amount of each such respective principal or redemption payment;
(2) by the sum of all such principal or redemption payments.
"BENEFICIAL OWNER" or "BENEFICIAL OWNER" for purposes of the definition of
Change of Control and Affiliate has the meaning attributed to it in Rules 13d-3
and 13d-5 under the Exchange Act as in effect on the Issue Date, whether or not
applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"BOARD OF DIRECTORS" means, with respect to any person, the board of
directors of such person or any committee of the Board of Directors of such
person authorized, with respect to any particular matter, to exercise the power
of the board of directors of such person.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"CAPITAL CONTRIBUTION" means any contribution to our equity from our direct
or indirect parent for which no consideration other than the issuance of common
stock with no redemption rights and no special preferences, privileges or voting
rights is given.
"CAPITALIZED LEASE OBLIGATION" means, as to any person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"CAPITAL STOCK" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness that is not itself otherwise capital stock), warrants, options,
participations or other equivalents of or interests, however designated, in
stock issued by that corporation.
99
<PAGE>
"CASH EQUIVALENT" means any of the following which matures within one year
after the date of acquisition:
- securities issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America
is pledged in support thereof);
- time deposits and certificates of deposit and commercial paper issued by
the parent corporation of any domestic commercial bank of recognized
standing having capital and surplus in excess of $500 million; or
- commercial paper issued by others rated at least A-2 or the equivalent
thereof by Standard & Poor's Corporation or at least P-2 or the equivalent
thereof by Moody's Investors Service, Inc.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(1) prior to consummation of an Initial Public Equity Offering, the Excluded
Persons shall cease to own beneficially and of record at least 51% of the
total voting power in the aggregate of all classes of our Capital Stock
then outstanding normally entitled to vote in elections of directors; or
(2) on or following the consummation of an Initial Public Equity Offering;
(a) any merger or consolidation of us with or into any person or any
direct or indirect sale, transfer or other conveyance, in one
transaction or a series of related transactions, of all or
substantially all of our assets, on a consolidated basis if,
immediately after giving effect to such transaction(s):
- any "person" or "group" as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, other than any of the
Excluded Persons, is or becomes the "beneficial owner," directly or
indirectly, of more than 35% of the total voting power in the
aggregate normally entitled to vote in the election of directors,
managers, or trustees of the transferee(s) or surviving entity or
entities; and
- any such person or group becomes, directly or indirectly, the
beneficial owner of a greater percentage of such total voting power,
than beneficially owned by the Excluded Persons;
(b) any "person" or "group" as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, other than any of the
Excluded Persons:
- is or becomes the "beneficial owner," directly or indirectly, of more
than 35% of the total voting power in the aggregate of all classes of
our Capital Stock then outstanding normally entitled to vote in
elections of directors; and
- any such person or group becomes, directly or indirectly, the
beneficial owner of a greater percentage of such total voting power,
than beneficially owned by the Excluded Persons; or
(c) during any period of 12 consecutive months after the Issue Date,
individuals who at the beginning of any such 12-month period
constituted our Board of Directors, together with any new directors
whose election by such Board of Directors or whose nomination for
election by our shareholders was approved by a vote of a majority of
the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a
majority of our Board of Directors then in office.
100
<PAGE>
"CONSOLIDATION" means, with respect to us, the consolidation of the accounts
of the Subsidiaries with our accounts, all in accordance with GAAP; PROVIDED
that "consolidation" will not include consolidation of the accounts of any
Unrestricted Subsidiary with our accounts. The term "consolidated" has a
correlative meaning to the foregoing.
"CONSOLIDATED COVERAGE RATIO" of any person on any date of determination
(the "Transaction Date") means the ratio, on a pro forma basis, of:
(1) the aggregate amount of Consolidated EBITDA of such person attributable
to continuing operations and businesses (exclusive of amounts
attributable to operations and businesses permanently discontinued or
disposed of) for the Reference Period
(2) to the aggregate Consolidated Fixed Charges of such person (exclusive of
amounts attributable to operations and businesses permanently
discontinued or disposed of, but only to the extent that the obligations
giving rise to such Consolidated Fixed Charges would no longer be
obligations contributing to such person's Consolidated Fixed Charges
subsequent to the Transaction Date) during the Reference Period;
PROVIDED, that for purposes of such calculation:
- Acquisitions which occurred during the Reference Period or subsequent to
the Reference Period and on or prior to the Transaction Date shall be
assumed to have occurred on the first day of the Reference Period;
- transactions giving rise to the need to calculate the Consolidated
Coverage Ratio shall be assumed to have occurred on the first day of the
Reference Period;
- the incurrence of any Indebtedness or issuance of any Disqualified Capital
Stock during the Reference Period or subsequent to the Reference Period
and on or prior to the Transaction Date (and the application of the
proceeds therefrom to the extent used to refinance or retire other
Indebtedness) shall be assumed to have occurred on the first day of the
Reference Period; and
- the Consolidated Fixed Charges of such person attributable to interest on
any Indebtedness or dividends on any Disqualified Capital Stock bearing a
floating interest or dividend rate shall be computed on a pro forma basis
as if the average rate in effect from the beginning of the Reference
Period to the Transaction Date had been the applicable rate for the entire
period, unless such Person or any of its Subsidiaries is a party to an
Interest Swap or Hedging Obligation, which shall remain in effect for the
12-month period immediately following the Transaction Date, that has the
effect of fixing the interest rate on the date of computation, in which
case such rate, whether higher or lower, shall be used.
"CONSOLIDATED EBITDA" means, with respect to any person, for any period, the
Consolidated Net Income of such person for such period adjusted to add thereto,
to the extent deducted from net revenues in determining Consolidated Net Income,
without duplication:
(1) the sum of:
(a) Consolidated income tax expense,
(b) Consolidated depreciation and amortization expense, and
(c) Consolidated Fixed Charges,
(2) less the amount of all cash payments made by such person or any of its
Subsidiaries during such period to the extent such payments relate to
non-cash charges that were added back in determining Consolidated EBITDA
for such period or any prior period, provided that consolidated income
tax expense and depreciation and amortization of a Subsidiary that is a
101
<PAGE>
less than Wholly-owned Subsidiary shall only be added to the extent of
our equity interest in such Subsidiary.
"CONSOLIDATED FIXED CHARGES" of any person means, for any period, the
aggregate amount, determined in each case in accordance with GAAP and without
duplication, of:
(1) interest expensed or capitalized, paid, accrued, or scheduled to be paid
or accrued, including, in accordance with the following sentence,
interest attributable to Capitalized Lease Obligations, of such person
and its Consolidated Subsidiaries during such period, including:
(a) original issue discount and non-cash interest payments or accruals on
any Indebtedness,
(b) the interest portion of all deferred payment obligations, and
(c) all commissions, discounts and other fees and charges owed with
respect to bankers' acceptances and letters of credit financings and
currency and Interest Swap and Hedging Obligations, in each case to
the extent attributable to such period, and
(2) the amount of dividends accrued or payable or guaranteed by such person
or any of its Consolidated Subsidiaries in respect of Preferred Stock,
other than by Subsidiaries of such person to such person or such person's
Wholly-owned Subsidiaries, except if such Preferred Stock is a
payment-in-kind ("PIK") security, issuance of such additional PIK
securities would not count as dividends for purposes of this definition.
For purposes of this definition:
- interest on a Capitalized Lease Obligation shall be deemed to accrue at an
interest rate reasonably determined in good faith by us to be the rate of
interest implicit in such Capitalized Lease Obligation in accordance with
GAAP, and
- interest expense attributable to any Indebtedness represented by the
guaranty by such person or a Subsidiary of such person of an obligation of
another person shall be deemed to be the interest expense attributable to
the Indebtedness guaranteed.
"CONSOLIDATED NET INCOME" means, with respect to any person for any period,
the net income or loss of such person and its Consolidated Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP and adjusted
to exclude, only to the extent included in computing such net income or loss and
without duplication:
- all gains, but not losses, which are either extraordinary, as determined
in accordance with GAAP, or are either unusual or nonrecurring, including
any gain from the sale or other disposition of assets outside the ordinary
course of business or from the issuance or sale of any capital stock;
- the net income, if positive, of any person, other than a Consolidated
Subsidiary, in which such person or any of its Consolidated Subsidiaries
has an interest, except to the extent of the amount of any dividends or
distributions actually paid in cash to such person or a Consolidated
Subsidiary of such person during such period, but in any case not in
excess of such person's PRO RATA share of such person's net income for
such period;
- the net income or loss of any person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition; and
- the net income, if positive, of any of such person's Consolidated
Subsidiaries to the extent that the declaration or payment of dividends or
similar distributions is not at the time permitted by operation of the
terms of its charter or bylaws or any other agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Consolidated Subsidiary.
102
<PAGE>
"CONSOLIDATED SUBSIDIARY" means, for any person, each Subsidiary of such
person, whether now existing or hereafter created or acquired, the financial
statements of which are consolidated for financial statement reporting purposes
with the financial statements of such person in accordance with GAAP.
"CREDIT AGREEMENT" means the credit agreement entered into by and among
Compass, its subsidiaries, various financial institutions, and BancBoston
Securities as arranger, BankBoston as a lender and administrative agent, and
Donaldson, Lufkin & Jenrette Capital Funding as documentation agent, providing a
revolving credit facility, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, as such
credit agreement and/or related documents may be amended, restated,
supplemented, renewed, replaced or otherwise modified from time to time whether
or not with the same agent, trustee, representative lenders or holders, and
irrespective of any changes in the terms and conditions thereof. Without
limiting the generality of the foregoing, the term "Credit Agreement" shall
include agreements in respect of Interest Swap and Hedging Obligations with
lenders party to the credit agreement and shall also include any amendment,
amendment and restatement, renewal, extension, restructuring, supplement or
modification to any credit agreement and all refundings, refinancings and
replacements of any credit agreement, including any agreement:
- extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby,
- adding or deleting borrowers or guarantors thereunder, so long as
borrowers and issuers include one or more of us and our Subsidiaries and
their respective successors and assigns,
- increasing the amount of Indebtedness incurred thereunder or available to
be borrowed thereunder, PROVIDED that on the date such Indebtedness is
incurred in accordance with the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock," or
- otherwise altering the terms and conditions thereof in a manner not
prohibited by the terms of the indenture.
"DISQUALIFIED CAPITAL STOCK" means:
- with respect to any person, Equity Interests of such person that, by its
terms or by the terms of any security into which it is convertible,
exercisable or exchangeable, is, or upon the happening of an event or the
passage of time or both would be, required to be redeemed or repurchased,
including at the option of the holder thereof, such person or any of its
Subsidiaries, in whole or in part, on or prior to the Stated Maturity of
the notes, and
- with respect to any Subsidiary of such person, including with respect to
any Subsidiary of ours, any Equity Interests other than any common equity
with no preference, privileges, or redemption or repayment provisions.
"EQUITY INTEREST" of any Person means any shares, interests, participations
or other equivalents, however designated, in such Person's equity, and shall in
any event include any Capital Stock issued by, or partnership or membership
interests in, such Person.
"EVENT OF LOSS" means, with respect to any property or asset, any:
- loss, destruction or damage of such property or asset or
- any condemnation, seizure or taking, by exercise of the power of eminent
domain or otherwise, of such property or asset, or confiscation or
requisition of the use of such property or asset.
"EXCLUDED PERSON" means our officers and directors and those persons who
beneficially own membership interests in Compass Holdings LLC, in each case, as
of the Issue Date.
103
<PAGE>
"EXEMPTED AFFILIATE TRANSACTION" means:
- customary employee compensation arrangements approved by a majority of
independent members of our Board of Directors who are independent with
respect to such transactions;
- dividends permitted under the terms of the covenant discussed above under
"Limitation on Restricted Payments" above and payable, in form and amount,
on a pro rata basis to all holders of our common stock;
- Management Fee Payments up to $500,000 in any fiscal year and the
reimbursement by us of reasonable out-of-pocket costs and expenses
incurred in connection with the rendering of management services to us on
our behalf;
- Permitted Payments to Parent;
- transactions solely between us and any of our Wholly-owned Consolidated
Subsidiaries or solely among our Wholly-owned Consolidated Subsidiaries;
and
- the payment of $750,000 to Parent for reimbursement of the nonrefundable
deposit against the purchase price for the acquisition of Barnes Machine.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States as in effect on the Issue Date.
"GUARANTOR" means each Subsidiary of ours that executes a guarantee
guaranteeing the notes in accordance with the provisions of the indenture.
"INDEBTEDNESS" of any person means, without duplication
(1) all liabilities and obligations, contingent or otherwise, of such any
person, to the extent such liabilities and obligations would appear as a
liability upon the consolidated balance sheet of such person in
accordance with GAAP:
(a) in respect of borrowed money, whether or not the recourse of the
lender is to the whole of the assets of such person or only to a
portion thereof,
(b) evidenced by bonds, notes, debentures or similar instruments,
(c) representing the balance deferred and unpaid of the purchase price of
any property or services, except those incurred in the ordinary
course of its business that would constitute ordinarily a trade
payable to trade creditors, excluding accounts payable or other
obligations to trade creditors which have remained unpaid for greater
than 60 days past their original due date;
(2) all liabilities and obligations, contingent or otherwise, of such person
(a) evidenced by bankers' acceptances or similar instruments issued or
accepted by banks,
(b) relating to any Capitalized Lease Obligation, or
(c) evidenced by a letter of credit or a reimbursement obligation of such
person with respect to any letter of credit;
(3) all net obligations of such person under Interest Swap and Hedging
Obligations;
104
<PAGE>
(4) all liabilities and obligations of others of the kind described in the
preceding clauses that such person has guaranteed or that is otherwise
its legal liability or which are secured by any assets or property of
such person and all obligations to purchase, redeem or acquire any Equity
Interests;
(5) any and all deferrals, renewals, extensions, refinancing and refundings,
whether direct or indirect, of, or amendments, modifications or
supplements to, any liability of the kind described in any of the
preceding clauses, or this clause, whether or not between or among the
same parties; and
(6) all Disqualified Capital Stock of such Person measured at the greater of
its voluntary or involuntary maximum fixed repurchase price plus accrued
and unpaid dividends.
For purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the indenture, and if such price
is based upon, or measured by, the Fair Market Value of such Disqualified
Capital Stock, such Fair Market Value to be determined in good faith by the
board of directors or managing general partner of the issuer of such
Disqualified Capital Stock.
"INITIAL PUBLIC EQUITY OFFERING" means an initial underwritten offering of
our common stock or that of Parent for cash pursuant to an effective
registration statement under the Securities Act as a consequence of which our
common stock or that of Parent is listed on a national securities exchange or
quoted on the national market system of the Nasdaq stock market.
"INTEREST SWAP AND HEDGING OBLIGATION" means any obligation of any person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"INVESTMENT" by any person in any other person means, without duplication:
- the acquisition, whether by purchase, merger, consolidation or otherwise,
by such person, whether for cash, property, services, securities or
otherwise, of capital stock, bonds, notes, debentures, partnership or
other ownership interests or other securities, including any options or
warrants, of such other person or any agreement to make any such
acquisition;
- the making by such person of any deposit with, or advance, loan or other
extension of credit to, such other person, including the purchase of
property from another person subject to an understanding or agreement,
contingent or otherwise, to resell such property to such other person, or
any commitment to make any such advance, loan or extension, but excluding
accounts receivable, endorsements for collection or deposits arising in
the ordinary course of business;
- other than guarantees of Indebtedness of us or any guarantor to the extent
permitted by the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock," the entering into by such
person of any guarantee of, or other credit support or contingent
obligation with respect to, Indebtedness or other liability of such other
person;
- the making of any capital contribution by such person to such other
person; and
- the designation by our Board of Directors of any person to be an
Unrestricted Subsidiary.
We shall be deemed to make an Investment in an amount equal to the fair
market value of the net assets of any subsidiary, or, if neither we nor any of
our Subsidiaries have theretofore made an
105
<PAGE>
Investment in such subsidiary, in an amount equal to the Investments being made,
at the time that such subsidiary is designated an Unrestricted Subsidiary, and
any property transferred to an Unrestricted Subsidiary from us or a Subsidiary
of ours shall be deemed an Investment valued at its fair market value at the
time of such transfer.
"ISSUE DATE" means the date of first issuance of the notes under the
indenture.
"JUNIOR SECURITY" means any Qualified Capital Stock and any Indebtedness of
ours or a guarantor, as applicable, that is subordinated in right of payment to
senior debt at least to the same extent as the notes or the guarantee, as
applicable, and has no scheduled installment of principal due, by redemption,
sinking fund payment or otherwise, on or prior to the Stated Maturity of the
notes; PROVIDED, that in the case of subordination in respect of senior debt
under the credit agreement, "Junior Security" shall mean any Qualified Capital
Stock and any Indebtedness of ours or the guarantor, as applicable, that:
- has a final maturity date occurring after the final maturity date of, all
senior debt outstanding under the credit agreement on the date of issuance
of such Qualified Capital Stock or Indebtedness,
- is unsecured,
- has an Average Life longer than the security for which such Qualified
Capital Stock or Indebtedness is being exchanged, and
- by their terms or by law are subordinated to senior debt outstanding under
the credit agreement on the date of issuance of such Qualified Capital
Stock or Indebtedness at least to the same extent as the notes.
"LIEN" means any mortgage, charge, pledge, statutory or other lien,
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired.
"MANAGEMENT FEE PAYMENTS" means payments from us to Dunhill Bank Caribbean
Ltd. and Hayes Capital Corporation under a Management Consulting Agreement,
dated March 9, 1998, by and between us, Dunhill Bank Caribbean Ltd. and Hayes
Capital Corporation, in accordance with the terms and provisions of such
Management Consulting Agreement on the Issue Date, PROVIDED, HOWEVER, that our
obligation to make such payments will be subordinated to the payment of all
Obligations with respect to the notes and any guarantee thereof.
"MATERIAL FACILITY" means a facility that has a customer certification
including without limitation D1-9000.
"MORTGAGE INDEBTEDNESS" of any person means any Indebtedness of such person
secured by real property of such person which in the reasonable good faith
judgment of the Board of Directors is directly related to a Related Business of
ours.
"NET CASH PROCEEDS" means:
(1) the aggregate amount of cash or Cash Equivalents received by us in the
case of a sale of Qualified Capital Stock and by us and our Subsidiaries
in respect of an Asset Sale;
(2) plus, in the case of an issuance of Qualified Capital Stock upon any
exercise, exchange or conversion of securities, including options,
warrants, rights and convertible or exchangeable debt of ours that were
issued for cash on or after the Issue Date the amount of cash originally
received by us upon the issuance of such securities, including options,
warrants, rights and convertible or exchangeable debt;
(3) less:
(a) in each case, the sum of all payments, fees, commissions and, in the
case of Asset Sales, reasonable and customary expenses, including,
without limitation, the fees and expenses
106
<PAGE>
of legal counsel and investment banking fees and expenses incurred in
connection with such Asset Sale or sale of Qualified Capital Stock,
and
(b) in the case of an Asset Sale only, the amount estimated reasonably
and in good faith by us of income, franchise, sales and other
applicable taxes, the computation of which shall take into account
any available net operating losses and other tax attributes of
Parent, and us and our Subsidiaries required to be paid by us or any
of our respective Subsidiaries in the taxable year of such sale in
connection with such Asset Sale.
"NON-RECOURSE INDEBTEDNESS" means our Indebtedness or that of our
Subsidiaries to the extent that:
- under the terms thereof or pursuant to law, no personal recourse may be
had against us or our Subsidiaries for the payment of the principal of or
interest or premium on such Indebtedness, and enforcement of obligations
on such Indebtedness, except with respect to fraud, willful misconduct,
misrepresentation, misapplication of funds, reckless damage to assets and
undertakings with respect to environmental matters or construction
defects, is limited only to recourse against interests in specified assets
and property (the "Special Assets"), accounts and proceeds arising
therefrom, and rights under purchase agreements or other agreements with
respect to such Subject Assets;
- such Indebtedness is incurred concurrently with the acquisition by us or
our Subsidiaries of such Subject Assets, or a Person or interests in a
Person holding such Subject Assets, or constitutes Refinancing
Indebtedness with respect to Indebtedness so incurred; and
- the Subject Assets are not existing assets and no existing assets or
proceeds from the sale, transfer or other disposition of existing assets
were used to acquire such Subject Assets.
"OBLIGATION" means any principal, premium or interest payment, or monetary
penalty, or damages, due by us or any guarantor under the terms of the notes or
the indenture, including any liquidated damages due pursuant to the terms of the
registration rights agreement.
"PARENT" means Compass Holdings LLC or its successor, so long as such entity
owns at least 51% of the Capital Stock of Compass.
"PERMITTED INDEBTEDNESS" means that:
- we and the guarantors may incur Indebtedness evidenced by the notes and
represented by the indenture up to the amounts specified therein as of the
date thereof;
- we and the guarantors, as applicable, may incur Refinancing Indebtedness
with respect to any Indebtedness or Disqualified Capital Stock, as
applicable, described in the foregoing clause of this definition or
incurred under the Debt Incurrence Ratio test of the covenant "Limitation
on Incurrence of Additional Indebtedness and Disqualified Capital Stock,"
or which is outstanding on the Issue Date, after giving effect to the
issuance of the outstanding notes, and $3.5 million of Mortgage
Indebtedness to be incurred in connection with the acquisition of Brittain
Machine and within six months after the Issue Date, which will be
considered outstanding on the Issue Date for purposes of this clause,
provided that in each case such Refinancing Indebtedness is secured only
by the assets that secured the Indebtedness so refinanced;
- we and our Subsidiaries may incur Indebtedness solely in respect of
bankers acceptances, and performance bonds to the extent that such
incurrence does not result in the incurrence of any obligation to repay
any obligation relating to borrowed money of others, all in the ordinary
course of business in accordance with customary industry practices, in
amounts and for the purposes customary in our industry; PROVIDED, that the
aggregate principal amount outstanding of such Indebtedness, including any
Refinancing Indebtedness and any other Indebtedness issued to refinance,
refund, defease or replace such Indebtedness, shall at no time exceed
$250,000;
- we may incur Indebtedness to any guarantor, and any guarantor may incur
Indebtedness to any other guarantor or to us; PROVIDED, that, in the case
of our Indebtedness, such obligations shall
107
<PAGE>
be unsecured and subordinated in all respects to our obligations pursuant
to the notes and the date of any event that causes such guarantor no
longer to be a guarantor shall be an Incurrence Date; and
- any guarantor may guaranty any of our Indebtedness or that of another
guarantor that was permitted to be incurred pursuant to the indenture,
substantially concurrently with such incurrence or at the time such person
becomes a guarantor.
"PERMITTED INVESTMENT" means:
- Investments in any of the notes;
- Investments in Cash Equivalents;
- intercompany notes to the extent permitted under the definition of
"Permitted Indebtedness;" and
- any Investment by us or any guarantor in a Person if as a result of such
Investment such Person immediately becomes a Wholly-owned Subsidiary
guarantor or such Person is immediately merged with or into us or a
Wholly-owned Subsidiary guarantor.
"PERMITTED LIEN" means:
(1) Liens existing on the Issue Date;
(2) Liens imposed by governmental authorities for taxes, assessments or
other charges not yet subject to penalty or which are being contested in
good faith and by appropriate proceedings, if adequate reserves with
respect thereto are maintained on our books in accordance with GAAP;
(3) statutory liens of carriers, warehousemen, mechanics, material men,
landlords, repairmen or other like Liens arising by operation of law in
the ordinary course of business provided that:
(a) the underlying obligations are not overdue for a period of more than
30 days, or
(b) such Liens are being contested in good faith and by appropriate
proceedings and adequate reserves with respect thereto are maintained
on our books in accordance with GAAP;
(4) Liens securing the performance of bids, trade contracts (other than
borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(5) easements, rights-of-way, zoning, similar restrictions and other similar
encumbrances or title defects which, singly or in the aggregate, do not
in any case materially detract from the value of the property, subject
thereto (as such property is used by us or any of our Subsidiaries) or
interfere with the ordinary conduct of our business or that of any of our
Subsidiaries;
(6) Liens arising by operation of law in connection with judgments, only to
the extent, for an amount and for a period not resulting in an Event of
Default with respect thereto;
(7) pledges or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security legislation;
(8) Liens securing the notes;
(9) Liens securing Indebtedness of a Person existing at the time such Person
becomes a Subsidiary or is merged with or into us or a Subsidiary or
Liens securing Indebtedness incurred in connection with an Acquisition,
PROVIDED that such Liens were in existence prior to the date of such
acquisition, merger or consolidation, were not incurred in anticipation
thereof, and do not extend to any other assets;
(10) Liens arising from Purchase Money Indebtedness or Mortgage Indebtedness
permitted to be incurred pursuant to the covenant "Limitation on
Incurrence of Additional Indebtedness and
108
<PAGE>
Disqualified Capital Stock" PROVIDED such Liens relate solely to the
property which is subject to such Purchase Money Indebtedness or Mortgage
Indebtedness, as applicable;
(11) Leases or subleases granted to other persons in the ordinary course of
business not materially interfering with the conduct of our business or
that of any of our Subsidiaries or materially detracting from the value
of our relative assets or those of any Subsidiary;
(12) Liens arising from precautionary Uniform Commercial Code financing
statement filings regarding operating leases entered into by us or any of
our Subsidiaries in the ordinary course of business;
(13) Liens securing Refinancing Indebtedness incurred to refinance any
Indebtedness that was previously so secured in a manner no more adverse
to the holders of the notes than the terms of the Liens securing such
refinanced Indebtedness, and provided that the Indebtedness secured is
not increased and the lien is not extended to any additional assets or
property that would not have been security for the Indebtedness
refinanced; and
(14) Liens securing Indebtedness incurred under the credit agreement in
accordance with the terms of the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock."
"PERMITTED PAYMENTS TO PARENT" means without duplication:
- payments to Parent in an amount sufficient to permit Parent to pay
reasonable and necessary operating expenses and other general corporate
expenses to the extent such expenses relate or are fairly allocable to us
and our Subsidiaries, provided such expenses do not exceed $250,000 in any
fiscal year; and
- payments to Parent to enable Parent to pay foreign, federal, state or
local tax liabilities ("Tax Payment"), not to exceed the amount of any tax
liabilities that would be otherwise payable by us and our Subsidiaries and
Unrestricted Subsidiaries to the appropriate taxing authorities if they
filed separate tax returns to the extent that Parent has an obligation to
pay such tax liabilities relating to our operations, assets or capital or
those of our Subsidiaries and Unrestricted Subsidiaries;
PROVIDED, HOWEVER, that, notwithstanding the foregoing:
- in the case of determining the amount of a Tax Payment that is permitted
to be paid by us and any of our United States subsidiaries in respect of
their Federal income tax liability, such payment shall be determined on
the basis of assuming that all payments made to Parent pursuant to the
immediately preceding clause shall be treated as a deductible expense of
ours in the taxable year during which the obligation to make such payment
accrues; and
- any Tax Payments shall either be used by Parent to pay such tax
liabilities within 90 days of Parent's receipt of such payment or refunded
to the payee.
"PURCHASE MONEY INDEBTEDNESS" of any person means any Non-Recourse
Indebtedness of such person to any seller or other person incurred solely to
finance the acquisition (including in the case of a Capitalized Lease
Obligation, the lease) of any after acquired tangible property which, in the
reasonable good faith judgment of our Board of Directors of Compass, is directly
related to a Related Business of ours and which is incurred substantially
concurrently with such acquisition and is secured only by the assets so
financed.
"QUALIFIED CAPITAL STOCK" means any of our Capital Stock that is not
Disqualified Capital Stock.
"QUALIFIED EXCHANGE" means any legal defeasance, redemption, retirement,
repurchase or other acquisition of Capital Stock or of our Indebtedness issued
on or after the Issue Date with the Net Cash Proceeds received by us from the
substantially concurrent sale of Qualified Capital Stock or any exchange of
Qualified Capital Stock for any of our Capital Stock or for our Indebtedness
issued on or after the Issue Date.
109
<PAGE>
"REFERENCE PERIOD" with regard to any person means the four full fiscal
quarters, or such lesser period during which such person has been in existence,
ended immediately preceding any date upon which any determination is to be made
pursuant to the terms of the notes or the indenture.
"REFINANCING INDEBTEDNESS" means Indebtedness or Disqualified Capital Stock:
(1) issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease,
refund, refinance, discharge or otherwise retire for value, in whole or
in part, or constituting an amendment, modification or supplement to, or
a deferral or renewal of (a "Refinancing"), any Indebtedness or
Disqualified Capital Stock in a principal amount or, in the case of
Disqualified Capital Stock, liquidation preference, not to exceed the
lesser of the following, after deduction of reasonable and customary fees
and expenses incurred in connection with the Refinancing plus the amount
of any premium paid in connection with such Refinancing in accordance
with the terms of the documents governing the Indebtedness refinanced
without giving effect to any modification thereof made in connection with
or in contemplation of such refinancing:
(a) the principal amount or, in the case of Disqualified Capital Stock,
liquidation preference, of the Indebtedness or Disqualified Capital
Stock so Refinanced, and
(b) if such Indebtedness being Refinanced was issued with an original
issue discount, the accreted value thereof, as determined in
accordance with GAAP, at the time of such Refinancing;
(2) PROVIDED, that:
(a) such Refinancing Indebtedness of any Subsidiary of ours shall only be
used to Refinance outstanding Indebtedness or Disqualified Capital
Stock of such Subsidiary,
(b) such Refinancing Indebtedness shall not have an Average Life shorter
than the Indebtedness or Disqualified Capital Stock to be so
refinanced at the time of such Refinancing and in all respects, be no
less subordinated or junior, if applicable, to the rights of holders
of the notes than was the Indebtedness or Disqualified Capital Stock
to be refinanced,
(c) such Refinancing Indebtedness shall have a final stated maturity or
redemption date, as applicable, no earlier than the final stated
maturity or redemption date, as applicable, of the Indebtedness or
Disqualified Capital Stock to be so refinanced, and
(d) such Refinancing Indebtedness shall be secured, if secured, in a
manner no more adverse to the holders of the notes than the terms of
the Liens, if any, securing such refinanced Indebtedness, including,
without limitation, the amount of Indebtedness secured shall not be
increased.
"RELATED BUSINESS" means the business conducted, or proposed to be
conducted, by us and our Subsidiaries as of the Issue Date and any and all
businesses that in the good faith judgment of our Board of Directors are
materially related businesses.
"RESTRICTED INVESTMENT" means, in one or a series of related transactions,
any Investment, other than other Permitted Investments.
"RESTRICTED PAYMENT" means, with respect to any person:
- the declaration or payment of any dividend or other distribution in
respect of Equity Interests of such person or any parent or Subsidiary of
such person;
- any payment on account of the purchase, redemption or other acquisition or
retirement for value of Equity Interests of such person or any Subsidiary
or parent of such person;
- other than with the proceeds from the substantially concurrent sale of, or
in exchange for, Refinancing Indebtedness any purchase, redemption, or
other acquisition or retirement for value
110
<PAGE>
of, any payment in respect of any amendment of the terms of or any
defeasance of, any Subordinated Indebtedness, directly or indirectly, by
such person or a parent or Subsidiary of such person prior to the
scheduled maturity, any scheduled repayment of principal, or scheduled
sinking fund payment, as the case may be, of such Indebtedness;
- any Restricted Investment by such person, and
- any Management Fee Payments or similar payments to any Affiliates other
than Subsidiaries in excess of an aggregate of $500,000 in any fiscal
year; PROVIDED, HOWEVER, that our obligation to pay such Management Fee
Payments will be subordinated to the payment of all Obligations with
respect to the notes and any guarantee thereof.
The term "Restricted Payment" shall not include:
- any dividend, distribution or other payment on or with respect to Equity
Interests of an issuer to the extent payable solely in shares of Qualified
Capital Stock of such issuer;
- any dividend, distribution or other payment to us, or to any of our
guarantors, by us or any of our Subsidiaries; or
- the payment of $750,000 to Parent for reimbursement for the down payment
on the purchase price of Barnes Machine.
"SENIOR DEBT" of ours or any guarantor means Indebtedness, including any
monetary obligation in respect of the credit agreement, and interest, whether or
not allowable, accruing on Indebtedness incurred pursuant to the credit
agreement after the filing of a petition initiating any proceeding under any
bankruptcy, insolvency or similar law, of us or such guarantor arising under the
credit agreement or that, by the terms of the instrument creating or evidencing
such Indebtedness, is expressly designated senior debt and made senior in right
of payment to the notes or the applicable guarantee; PROVIDED, that in no event
shall senior debt include:
- Indebtedness to any of our Subsidiaries or any of our officers, directors
or employees or those of any of our Subsidiaries;
- Indebtedness incurred in violation of the terms of the indenture;
- Indebtedness to trade creditors;
- Disqualified Capital Stock;
- Capitalized Lease Obligations; and
- any liability for taxes owed or owing by us or such guarantor.
"SIGNIFICANT SUBSIDIARY" shall have the meaning provided under Regulation
S-X of the Securities Act, as in effect on the Issue Date.
"STATED MATURITY," when used with respect to any note, means April 15, 2005.
"SUBORDINATED INDEBTEDNESS" means our Indebtedness or that of a guarantor
that is subordinated in right of payment by its terms or the terms of any
document or instrument relating thereto to the notes or such guarantee, as
applicable, in any respect or has a stated maturity after the Stated Maturity.
"SUBSIDIARY," with respect to any person, means:
- a corporation a majority of whose Equity Interests with voting power,
under ordinary circumstances, to elect directors is at the time, directly
or indirectly, owned by such person, by such person and one or more
Subsidiaries of such person or by one or more Subsidiaries of such person;
- any other person, other than a corporation, in which such person, one or
more Subsidiaries of such person, or such person and one or more
Subsidiaries of such person, directly or indirectly, at the date of
determination thereof has at least majority ownership interest; or
111
<PAGE>
- a partnership in which such person or a Subsidiary of such person is, at
the time, a general partner.
Notwithstanding the foregoing, an Unrestricted Subsidiary shall not be a
Subsidiary of ours or of any of our Subsidiaries. Unless the context requires
otherwise, Subsidiary means each of our direct and indirect Subsidiaries.
"UNRESTRICTED SUBSIDIARY" means any of our Subsidiaries that does not own
any Capital Stock of, or own or hold any Lien on any of our property or that of
any of our Subsidiaries and that, at the time of determination, shall be an
Unrestricted Subsidiary as designated by our Board of Directors; PROVIDED, that:
- such subsidiary shall not engage, to any substantial extent, in any line
or lines of business activity other than a Related Business;
- neither immediately prior thereto nor after giving pro forma effect to
such designation would there exist a Default or Event of Default; and
- immediately after giving pro forma effect thereto, we could incur at least
$1.00 of Indebtedness pursuant to the Debt Incurrence Ratio of the
covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock."
Our Board of Directors may designate any Unrestricted Subsidiary to be a
Subsidiary, PROVIDED, that:
- no Default or Event of Default is existing or will occur as a consequence
thereof; and
- immediately after giving effect to such designation, on a pro forma basis,
we could incur at least $1.00 of Indebtedness pursuant to the Debt
Incurrence Ratio of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock."
Each such designation shall be evidenced by filing with the trustee a certified
copy of the resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions.
"U.S. GOVERNMENT OBLIGATIONS" means direct non-callable obligations of, or
non-callable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
"WHOLLY-OWNED SUBSIDIARY" means a Subsidiary all the Equity Interests of
which are owned by us or one or more of our Wholly-owned Subsidiaries.
BOOK-ENTRY; DELIVERY; FORM AND TRANSFER
The Series B notes will be issued in the form of one or more registered
global notes without interest coupons (collectively, the "Global Notes"). Upon
issuance, the Global Notes will be deposited with the trustee, as custodian for
DTC, in New York, New York, and registered in the name of DTC or its nominee for
credit to the accounts of DTC's Direct and Indirect Participants, as defined
below.
Beneficial interests in all Global Notes and all Certificated Notes, as
defined below, if any, will be subject to restrictions on transfer and will bear
a restrictive legend as described under "Notice to Investors." In addition,
transfer of beneficial interests in any Global Notes will be subject to the
applicable rules and procedures of DTC and its Direct or Indirect Participants
including, if applicable, those of Euroclear and CEDEL, which may change from
time to time.
The Global Notes may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee in limited
circumstances. Beneficial interests in the Global Notes may be exchanged for
notes in certificated form in limited circumstances. You should read the
discussion under the heading "--Transfer of Interests in Global Notes for
Certificated Notes" for further information regarding such an exchange.
112
<PAGE>
Initially, the trustee will act as Paying Agent and Registrar. The notes may
be presented for registration of transfer and exchange at the offices of the
Registrar.
DEPOSITORY PROCEDURES
DTC has advised us that DTC is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the "Direct
Participants") and to facilitate the clearance and settlement of transactions in
those securities between Direct Participants through electronic book-entry
changes in accounts of Participants. The Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and various
other organizations, including Euroclear and Cedel. Access to DTC's system is
also available to other entities that clear through or maintain a direct or
indirect, custodial relationship with a Direct Participant (collectively, the
"Indirect Participants").
DTC has also advised Compass that, pursuant to procedures established by it:
- upon deposit of the Global Notes for exchange, DTC will credit the
accounts of the Direct Participants with such portions of the principal
amount of the Global Notes as determined based on the portion of
outstanding notes deposited by such Direct Participant as designated by
the exchange agent, and
- DTC will maintain records of the ownership interests of such Direct
Participants in the Global Notes and the transfer of ownership interests
by and between Direct Participants.
DTC will not maintain records of the ownership interests of, or the transfer
of ownership interests by and between, Indirect Participants or other owners of
beneficial interests in the Global Notes. Direct Participants and Indirect
Participants must maintain their own records of the ownership interests of, and
the transfer of ownership interests by and between, Indirect Participants and
other owners of beneficial interests in the Global Notes.
Investors in the U.S. Global Notes may hold their interests therein directly
through DTC if they are Direct Participants in DTC or indirectly through
organizations that are Direct Participants in DTC. All ownership interests in
any Global Notes may be subject to the procedures and requirements of DTC.
The laws of some states in the United States require that some persons take
physical delivery in definitive, certificated form, of securities that they own.
This may limit or curtail the ability to transfer beneficial interests in a
Global Note to such persons. Because DTC can act only on behalf of Direct
Participants, which in turn act on behalf of Indirect Participants and others,
the ability of a person having a beneficial interest in a Global Note to pledge
such interest to persons or entities that are not Direct Participants in DTC, or
to otherwise take actions in respect of such interests, may be affected by the
lack of physical certificates evidencing such interests. You should read the
discussion under the heading "--Transfers of Interests in Global Notes for
Certificated Notes" for further information on other restrictions on the
transferability of the notes.
Except as described in "--Transfers of Interests in Global Notes for
Certificated Notes," owners of beneficial interests in the Global Notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
holders thereof under the indenture for any purpose.
Under the terms of the indenture, we, the guarantors and the trustee will
treat the persons in whose names the notes are registered, including notes
represented by Global Notes, as the owners thereof for the purpose of receiving
payments and for any and all other purposes whatsoever. Payments in respect of
the principal, premium, and interest on Global Notes registered in the name of
DTC or its nominee will be payable by the trustee to DTC or its nominee as the
registered holder under the
113
<PAGE>
indenture. Consequently, neither we, the trustee nor any agent of ours or the
trustee has or will have any responsibility or liability for:
- any aspect of DTC's records or any Direct Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Notes or for maintaining,
supervising or reviewing any of DTC's records or any Direct Participant's
or Indirect Participant's records relating to the beneficial ownership
interests in any Global Note, or
- any other matter relating to the actions and practices of DTC or any of
its Direct Participants or Indirect Participants.
DTC has advised us that its current payment practice for payments of
principal, interest and the like with respect to securities such as the notes is
to credit the accounts of the relevant Direct Participants with such payment on
the payment date in amounts proportionate to such Direct Participant's
respective ownership interests in the Global Notes as shown on DTC's records.
Payments by Direct Participants and Indirect Participants to the beneficial
owners of the notes will be governed by standing instructions and customary
practices between them and will not be the responsibility of DTC, the trustee,
us or the guarantors. Neither we, the guarantors nor the trustee will be liable
for any delay by DTC or its Direct Participants or Indirect Participants in
identifying the beneficial owners of the notes, and we and the trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee as the registered owner of the notes for all purposes.
The Global Notes will trade in DTC's Same-Day Funds Settlement System and,
therefore, transfers between Direct Participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in immediately available
funds. Transfers between Indirect Participants, other than Indirect Participants
who hold an interest in the notes through Euroclear or CEDEL, who hold an
interest through a Direct Participant will be effected in accordance with the
procedures of such Direct Participant but generally will settle in immediately
available funds. Transfers between and among Indirect Participants who hold
interests in the notes through Euroclear and CEDEL will be effected in the
ordinary way in accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the notes
described herein, cross-market transfers between Direct Participants in DTC, on
the one hand, and Indirect Participants who hold interests in the notes through
Euroclear or CEDEL, on the other hand, will be effected by Euroclear's or
CEDEL's respective Nominee through DTC in accordance with DTC's rules on behalf
of Euroclear or CEDEL. Delivery of instructions relating to crossmarket
transactions must be made directly to Euroclear or CEDEL, as the case may be, by
the counterparty in accordance with the rules and procedures of Euroclear or
CEDEL and within their established deadlines (Brussels time for Euroclear and
U.K. time for CEDEL). Indirect Participants who hold interest in the notes
through Euroclear and CEDEL may not deliver instructions directly to Euroclear's
or CEDEL's Nominee. Euroclear or CEDEL will, if the transaction meets its
settlement requirements, deliver instructions to its respective Nominee to
deliver or receive interests on Euroclear's or CEDEL's behalf in the relevant
Global Note in DTC, and make or receive payment in accordance with normal
procedures for same-day fund settlement applicable to DTC.
Because of time zone differences, the securities accounts of an Indirect
Participant who holds an interest in the notes through Euroclear or CEDEL
purchasing an interest in a Global Note from a Direct Participant in DTC will be
credited, and any such crediting will be reported to Euroclear or CEDEL during
the European business day immediately following the settlement date of DTC in
New York. Although recorded in DTC's accounting records as of DTC's settlement
date in New York, Euroclear and CEDEL customers will not have access to the cash
amount credited to their accounts as a result of a sale of an interest in a
Global Note to a DTC Participant until the European business day for Euroclear
or CEDEL immediately following DTC's settlement date.
114
<PAGE>
DTC has advised us that it will take any action permitted to be taken by a
holder of notes only at the direction of one or more Direct Participants to
whose account interests in the Global Notes are credited and only in respect of
such portion of the aggregate principal amount of the notes to which such Direct
Participant or Direct Participants has or have given direction. However, if
there is an Event of Default under the notes, DTC reserves the right to exchange
Global Notes, without the direction of one or more of its Direct Participants,
for legended notes in certificated form, and to distribute such certificated
forms of notes to its Direct Participants. You should read the discussion under
the heading "--Transfers of Interests in Global Notes for Certificated Notes"
for further information regarding such transfers.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Notes among Direct Participants,
including Euroclear and CEDEL, they are under no obligation to perform or to
continue to perform such procedures, and such procedures may be discontinued at
any time. None of us, the guarantors or the trustee shall have any
responsibility for the performance by DTC, Euroclear or CEDEL or their
respective Direct and Indirect Participants of their respective obligations
under the rules and procedures governing any of their operations.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that we believe to be
reliable, but we take no responsibility for the accuracy thereof.
TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES
An entire Global Note may be exchanged for definitive notes in registered,
certificated form without interest coupons ("Certificated Notes") if:
- DTC notifies us that it is unwilling or unable to continue as depositary
for the Global Notes and we thereupon fail to appoint a successor
depositary within 90 days, or DTC has ceased to be a clearing agency
registered under the Exchange Act,
- we, at our option, notify the trustee in writing that we elect to cause
the issuance of Certificated Notes, or
- there shall have occurred and be continuing a Default or an Event of
Default with respect to the notes.
In any such case, we will notify the trustee in writing that, upon surrender
by the Direct and Indirect Participants of their interest in such Global Note,
Certificated Notes will be issued to each person that such Direct and Indirect
Participants and DTC identify as being the beneficial owner of the related
notes.
Beneficial interests in Global Notes held by any Direct or Indirect
Participant may be exchanged for Certificated Notes upon request to DTC, by such
Direct Participant for itself or on behalf of an Indirect Participant, to the
trustee in accordance with customary DTC procedures. Certificated Notes
delivered in exchange for any beneficial interest in any Global Note will be
registered in the names, and issued in any approved denominations, requested by
DTC on behalf of such Direct or Indirect Participants in accordance with DTC's
customary procedures.
In all cases described herein, such Certificated Notes will bear the
restrictive legend referred to in "Notice to Investors," unless we determine
otherwise in compliance with applicable law.
Neither we, the guarantors nor the trustee will be liable for any delay by
the holder of any Global Note or DTC in identifying the beneficial owners of
notes, and we and the trustee may conclusively rely on, and will be protected in
relying on, instructions from the holder of the Global Note or DTC for all
purposes.
115
<PAGE>
TRANSFERS OF CERTIFICATED NOTES FOR INTERESTS IN GLOBAL NOTES
Certificated Notes may only be transferred if the transferor first delivers
to the trustee a written certificate and, in some circumstances, an opinion of
counsel confirming that, in connection with such transfer, it has complied with
the restrictions on transfer described under "Notice to Investors."
SAME DAY SETTLEMENT AND PAYMENT
Payments in respect of the notes represented by the Global Notes, including
principal, premium, if any, interest and Liquidated Damages, if any, shall be
made by wire transfer of immediately available same day funds to the accounts
specified by the holder of interests in such Global Note. With respect to
Certificated Notes, we will make all payments of principal, premium, if any,
interest and liquidated damages, if any, by wire transfer of immediately
available same day funds to the accounts specified by the holders thereof or, if
no such account is specified, by mailing a check to each such holder's
registered address. We expect that secondary trading in the Certificated Notes
will also be settled in immediately available funds.
116
<PAGE>
DESCRIPTION OF THE SERIES D NOTES
You can find the definitions of some of the terms used in this description
under the subheading "Definitions." In this description, the words "Compass,"
"us," "we," and "our" refer only to Compass Aerospace Corporation and not to any
of our subsidiaries.
The outstanding Series C notes were issued under an indenture dated as of
July 30, 1999 by and among Compass, Western Methods, Aeromil, Brittain Machine,
Barnes Machine, Wichita Manufacturing, Sea-Lect, Pacific Hills, Modern, Compass
Limited, Trim Engineering, Trefn Engineering, Trefn Metal Treatments, Trefn
Fabrications, Diac and IBJ Whitehall Bank & Trust Company as trustee. Upon the
issuance of the Series D notes the indenture will be subject to and governed by
the Trust Indenture Act of 1939. The following description is a summary of the
material provisions of the indenture. It does not restate that agreement in its
entirety. We urge you to read the indenture because it, and not this
description, defines your rights as holders of the notes. Any Series C notes
that remain outstanding after the consummation of the exchange offer, together
with the Series D notes, will be treated as a single class of securities under
the indenture. The outstanding Series C notes and the Series D notes are
collectively referred to herein as the "notes."
BRIEF DESCRIPTION OF THE SERIES D NOTES AND THE SUBSIDIARY GUARANTEES
THE SERIES D NOTES
The Series D notes will be:
- senior subordinated, unsecured, general obligations of Compass;
- limited in aggregate principal amount to $19.0 million;
- subordinated in right of payment to some of our other debt obligations;
- senior or PARI PASSU in right of payment to all our existing and future
subordinated indebtedness; and
- jointly and severally, fully, irrevocably and unconditionally guaranteed
on a senior subordinated basis by each of our present and future
restricted Subsidiaries, all of whom are guarantors of the notes.
THE SUBSIDIARY GUARANTEES
The Subsidiary guarantees of the notes will be:
- unsecured, general obligations of each of the guarantors;
- subordinated in right of payment to all senior debt of each of the
guarantors; and
- senior or PARI PASSU in right of payment to all existing and future
subordinated indebtedness of each of the guarantors.
The term "Subsidiaries" as used in this description of the Series D notes
does not include Unrestricted Subsidiaries. Our Unrestricted Subsidiaries will
not guarantee the notes. You should read the discussion under the heading
"--Bankruptcy Limitations" for further information regarding the guarantees.
117
<PAGE>
PRINCIPAL, MATURITY AND INTEREST
The Series D notes will be issued solely in exchange for an equal principal
amount of outstanding Series C notes pursuant to the exchange offer. The form
and terms of the Series D notes will be identical in all material respects to
the form and terms of the outstanding Series C notes except that:
- The Series D notes will have been registered under the Securities Act, and
- the registration rights and liquidation damages applicable to the
outstanding Series C notes will not be applicable to the Series D notes.
The Series D notes will be issued only in fully registered form without
coupons in denominations of $1,000 and integral multiples thereof, and will
mature on April 15, 2005. The Series D notes will bear interest at 10 1/8% per
annum from the date of issuance or from the most recent Interest Payment Date to
which interest has been paid or provided for. Interest will be payable
semi-annually on April 15 and October 15 of each year, commencing April 15,
2000, to the persons in whose names such notes are registered at the close of
business on the April 1 or October 1 immediately preceding such Interest Payment
Date. Interest will be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
METHODS OF RECEIVING PAYMENT ON THE NOTES
Principal of, premium, if any, interest and liquidated damages, if any, on
the notes will be payable, and the notes may be presented for registration of
transfer or exchange, at the office or agency maintained by us for such purpose
in the Borough of Manhattan, The City of New York. Except as set forth below, at
our option, payment of interest may be made by check mailed to the holders of
the notes at the addresses set forth upon our registry books. No service charge
will be made for any registration of transfer or exchange of notes, but we may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection with a transfer or exchange. Until otherwise
designated by us, our office or agency will be the corporate trust office of the
trustee presently located in the Borough of Manhattan, The City of New York.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the notes will
be subordinated to the prior payment in full of all our senior debt and that of
each of the guarantors. At August 31, 1999 we and the guarantors had outstanding
an aggregate of approximately $106.7 million of secured senior debt.
If any of our senior debt or that of the guarantors has matured, the holders
of senior debt will be entitled to receive payment in full in cash or cash
equivalents of all obligations due in respect of senior debt before the holders
of the notes will be entitled to receive any payment, other than with Junior
Securities, with respect to the notes, including:
- the principal of, premium if any, or interest accrued on the notes;
- payments to repurchase any of the notes; or
- payments to redeem any of the notes.
We or a guarantor, as applicable, may also not make any payment with respect
to the notes, other than with Junior Securities, if:
- a payment default on our senior debt or that of that guarantor occurs and
is continuing beyond any applicable grace period; or
118
<PAGE>
- any other default occurs and is continuing on senior debt that permits the
holders of that senior debt to accelerate its maturity and we and the
trustee receive written notice of that default (a "Payment Notice") from
the holders of the senior debt.
Payments on the notes may and shall be resumed:
- in the case of a payment default, upon the date on which that default is
cured or waived; and
- in the case of a default other than a payment default, the earlier of the
date on which that default is cured or waived or 179 days after the date
on which the applicable Payment Notice is received (the "Payment Blockage
Period"), unless the maturity of the senior debt has been accelerated.
Any number of Payment Notices may be given, provided that:
- no more than one Payment Notice may be given within a period of any 360
consecutive days; and
- no default that existed upon the date of a Payment Notice or the
commencement of a Payment Blockage Period shall be made the basis for the
commencement of any other Payment Blockage Period.
Any subsequent action, or any subsequent breach of any financial covenant
for a period commencing after the expiration of a Payment Blockage Period that
would give rise to a new event of default, even though it is an event that would
also have been a separate breach pursuant to any provision under which a prior
event of default previously existed, shall constitute a new event of default.
In the event of any distribution of our assets or those of the guarantors
in:
- a total or partial liquidation, dissolution, winding up or reorganization
of us or a guarantor, whether voluntary or involuntary;
- a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to us or our property;
- an assignment for the benefit or creditors; or
- any marshaling of our assets or liabilities;
the holders of all our senior debts or those of the guarantors will be entitled
to receive payment in full in cash or Cash Equivalents of all amounts due in
respect of senior debt before the holders of notes will be entitled to receive
any payment, other than with Junior Securities, with respect to the notes.
Any payment or distribution of our assets or those of any guarantor whether
in cash, property or securities other than Junior Securities to which the
holders or the trustee on behalf of such holders would be entitled except for
the subordination provisions in the indenture, will be paid by the liquidating
trustee or agent or other person making such a payment or distribution directly
to the holders of the senior debt or their representative to the extent
necessary to make payment in full on all the senior debt remaining unpaid, after
giving effect to any concurrent payment or distribution to the holders of the
senior debt.
In the event that any payment or distribution of our assets or those of any
guarantor other than Junior Securities shall be received by the trustee or the
holders of the notes at a time when that payment or distribution is prohibited
by the foregoing provisions, such payment or distribution shall be held in trust
for the benefit of the holders of the senior debt. The payment shall be paid or
delivered by the trustee or the holders of the notes, as the case may be, to the
holders of the senior debt remaining unpaid or to their representatives, or to
the trustee or trustees under any indenture pursuant
119
<PAGE>
to which any instruments evidencing any of unpaid senior debt may have been
issued. The payment or distribution shall be paid to the holders of senior debt
ratably according to the aggregate principal amounts remaining unpaid on account
of such senior debt. The payment shall be applied to all unpaid senior debt to
the extent necessary to pay or to provide for the payment of all such senior
debt in full in cash or Cash Equivalents after giving effect to any concurrent
payment or distribution to the holders of such senior debt.
No provision contained in the indenture or the notes will affect our
obligations or that of the guarantors, which is absolute and unconditional, to
pay, when due, principal of, premium, if any, and interest on the notes. The
subordination provisions of the indenture and the notes will not prevent the
occurrence of any Default or Event of Default under the indenture or limit the
rights of the trustee or any holder to pursue any other rights or remedies with
respect to the notes.
As a result of these subordination provisions, holders of the notes may
receive ratably less than other creditors in the event of the liquidation,
bankruptcy, reorganization, insolvency, receivership or similar proceeding or an
assignment for the benefit of our creditors or a marshalling of our assets or
liabilities. You should read the discussion under the heading "Risk
Factors--Subordination" for further information on the risk that you may receive
ratably less than other creditors under some circumstances.
BANKRUPTCY LIMITATIONS
We are a holding company which conducts our business through our
Subsidiaries. Our Subsidiaries have guaranteed or will guarantee our obligations
with respect to the notes. Our Unrestricted Subsidiaries will not guarantee the
notes. Holders of the notes will be direct creditors of each guarantor by virtue
of its guarantee. Nonetheless, in the event of the bankruptcy or financial
difficulty of a guarantor, such guarantor's obligations under its guarantee may
be subject to review and avoidance under state and federal fraudulent transfer
laws. Among other things, a guarantor may avoid its obligations if a court
concludes that the obligations were incurred for less than reasonably equivalent
value or fair consideration at a time when the guarantor was insolvent, was
rendered insolvent, or was left with inadequate capital to conduct its business.
A court would likely conclude that a guarantor did not receive reasonably
equivalent value or fair consideration to the extent that the aggregate amount
of its liability on its guarantee exceeds the economic benefits it receives in
the offering of the outstanding Series C notes. Similar laws exist in the United
Kingdom with respect to these issues. The obligations of each guarantor under
its guarantee are limited in a manner intended to cause it not to be a
fraudulent conveyance under applicable law although we cannot assure you that a
court would give the holder the benefit of such a provision. You should read the
discussion under the heading "Risk Factors--Fraudulent Transfer Considerations"
for further discussion of the risk that the guarantors may avoid their
obligations under their guarantees.
If the obligations of a guarantor under its guarantee were avoided, holders
of notes would have to look to the assets of any remaining guarantors for
payment. We cannot assure you that the assets of the remaining guarantors would
suffice to pay the outstanding principal and interest on the notes.
OPTIONAL REDEMPTION
At any time prior to April 15, 2001, upon an Initial Public Equity Offering
of common stock for cash, up to 35% of the aggregate principal amount of the
notes originally issued under the indenture with cash from the Net Cash Proceeds
of the Initial Public Equity Offering at a redemption price equal to 110.125% of
principal; PROVIDED HOWEVER that:
- immediately following such redemption not less than 65% of the original
aggregate principal amount of the notes remain outstanding;
120
<PAGE>
- we must give at least 30 days, but no more than 60 days, notice to each
holder of notes to be redeemed; and
- the redemption must occur within 90 days of the Initial Public Equity
Offering.
Except pursuant to the preceding paragraph, we may not redeem the notes
prior to April 15, 2002.
At any time on or after April 15, 2002, we may redeem all or a part of the
notes for cash upon not less than 30 days nor more than 60 days notice to each
holder of notes, at the following redemption prices, expressed as percentages of
the principal amount, if redeemed during the 12-month period commencing April 15
of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------------- -----------
<S> <C>
2002.................................................................................. 105.063%
2003.................................................................................. 102.531%
2004.................................................................................. 100.000%
</TABLE>
Any optional redemption of the notes will in each case be subject to the
rights of holders of record on a Record Date to receive the interest due on an
Interest Payment Date corresponding to that Record Date that occurs prior to the
Redemption Date, together with accrued and unpaid interest on the notes prior to
the Redemption Date.
SELECTION AND NOTICE
If less than all of the notes are to be redeemed at any time, the trustee
shall select the notes for redemption on a PRO RATA basis, by lot or in such
other manner it deems appropriate and fair. The notes may be redeemed in part in
multiples of $1,000 only.
The notes will not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first class mail, at least 30 days
and not more than 60 days before the Redemption Date to each holder of notes to
be redeemed at the holder's registered address. If any note is to be redeemed in
part only, the notice of redemption that relates to that note must state the
portion of the principal amount that will not be redeemed and must state that on
and after the date of redemption, upon surrender of the note, a new note or
notes, in a principal amount equal to the unredeemed portion of the note will be
issued. On and after the date of redemption, interest will cease to accrue on
the notes or portions of them called for redemption, unless we default in the
payment thereof.
COVENANTS
There are covenants in the indenture in addition to those described here.
You should read the indenture for more complete information.
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL
If a Change of Control occurs, each holder of notes has the right to require
us to repurchase all or any part of such holder's notes equal to $1,000 or an
aggregate amount thereof pursuant to a Change of Control Offer. In the Change of
Control Offer, we will offer a Change of Control Payment in cash equal to 101%
of the aggregate principal amount of notes repurchased plus accrued and unpaid
interest thereon, if any, to the date of purchase. Within 10 days following any
Change of Control, we will mail a notice to each holder of notes describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase the notes on the Change of Control Purchase Date which must occur
no later than 35 days after the occurrence of the Change of Control. The Change
of
121
<PAGE>
Control Offer must remain open for 20 business days after we mail a Change in
Control Offer to the holders of the notes (the "Change in Control Offer
Period").
Upon expiration of the Change of Control Offer Period, we promptly shall
purchase all notes properly tendered in response to the Change of Control Offer.
On or before the Change of Control Purchase Date, we will:
- accept for payment notes or portions thereof properly tendered pursuant to
the Change of Control Offer;
- deposit with the Paying Agent cash sufficient to pay the Change of Control
Purchase Price, together with accrued and unpaid interest and liquidated
damages, if any, of all notes so tendered; and
- deliver to the trustee the notes so accepted together with an Officers'
Certificate listing the notes or portions thereof being purchased by us.
The Paying Agent will promptly pay the holders of notes so accepted an
amount equal to the Change of Control Purchase Price together with accrued and
unpaid interest and liquidated damages, if any. The trustee will promptly
authenticate and deliver to such holders a new note equal in principal amount to
any unpurchased portion of the note surrendered. Any notes not so accepted will
be delivered promptly by us to the holder thereof. We will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Purchase Date.
The Change of Control purchase feature of the notes may make more difficult
or discourage a takeover of Compass, and, thus, the removal of incumbent
management.
The definition of Change of Control includes a phrase relating to the direct
or indirect sale or transfer of "all or substantially all" of our assets on a
consolidated basis. Although there is a limited body of case law interpreting
the phrase "substantially all," there is no precise established definition of
the phrase under applicable law. The interpretation of the phrase "substantially
all" will be dependent upon particular facts and circumstances. As a result, the
ability of a holder of notes to require us to repurchase such notes as a result
of a sale or transfer of less than all of our assets and those of the guarantors
to another person or group may be uncertain. In addition, we cannot assure you
that we will be able to acquire notes tendered upon the occurrence of a Change
of Control.
Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under the
Exchange Act and the rules thereunder and all other applicable Federal and state
securities laws. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this paragraph, compliance by us or
any of the guarantors with such laws and regulations shall not in and of itself
cause a breach of its obligations under the indenture.
If the Change of Control Purchase Date is on or after an interest payment
Record Date and on or before the associated Interest Payment Date, any accrued
and unpaid interest, due on such Interest Payment Date will be paid to the
person in whose name a note is registered at the close of business on such
Record Date. Such interest will not be payable to holders who tender their notes
pursuant to the Change of Control Offer.
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND DISQUALIFIED CAPITAL
STOCK
We will not and we will not permit any of our Subsidiaries to, the
guarantors will not and will not permit any of their subsidiaries to, directly
or indirectly, issue, assume, guaranty, incur, become directly or indirectly
liable with respect to, or otherwise become responsible for, contingently or
otherwise, including as a result of an Acquisition, any Indebtedness or any
Disqualified Capital Stock including
122
<PAGE>
Acquired Indebtedness, other than Permitted Indebtedness. Notwithstanding the
foregoing, we may incur such Indebtedness or Disqualified Capital Stock and the
guarantors may incur such Indebtedness, other than Disqualified Capital Stock,
if:
- no Default or Event of Default shall have occurred and be continuing at
the time of, or would occur after giving effect on a pro forma basis to,
such incurrence of Indebtedness or Disqualified Capital Stock; and
- on the date of such incurrence (the "Incurrence Date"), the Consolidated
Coverage Ratio of Compass for the Reference Period immediately preceding
the Incurrence Date, after giving effect on a pro forma basis to such
incurrence of such Indebtedness or Disqualified Capital Stock and, to the
extent set forth in the definition of Consolidated Coverage Ratio, the use
of proceeds thereof, would be at least 2.0 to 1 (as applicable, each the
"Debt Incurrence Ratio").
In addition, the foregoing limitations will not apply:
(1) to the incurrence by us or any guarantor of Purchase Money Indebtedness,
PROVIDED, that:
(a) the aggregate principal amount of such Indebtedness incurred on or after
the Issue Date and outstanding at any time pursuant to this paragraph
shall not exceed $2.0 million, including any Refinancing Indebtedness and
other Indebtedness issued to refinance, replace, defease or refund
Purchase Money Indebtedness; and
(b) in each case, Purchase Money Indebtedness shall not constitute more than
100% of the cost determined in accordance with GAAP to us or such
guarantor, as applicable, of the property so purchased or leased;
(2) if no Event of Default shall have occurred and be continuing, the incurrence
by us or any guarantor of Indebtedness in an aggregate principal amount
outstanding at any time of up to $5.0 million, including Refinancing
Indebtedness and other Indebtedness incurred to refinance, replace, defease
or refund such Indebtedness;
(3) to the incurrence by us or any guarantor of Mortgage Indebtedness or
Indebtedness pursuant to the credit agreement up to an aggregate principal
amount outstanding under the credit agreement or of Mortgage Indebtedness
collectively not to exceed in the aggregate $12.0 million, in each case
including any Refinancing Indebtedness and other Indebtedness incurred to
refinance, replace, defease or refund such Indebtedness; PROVIDED, THAT:
(a) in the case of Indebtedness pursuant to the credit agreement minus the
amount of any such Indebtedness retired with the Net Cash Proceeds from
any Asset Sale applied to permanently reduce the outstanding amounts or
the commitments with respect to such Indebtedness pursuant the covenant
"Limitation on Sale of Assets and Subsidiary Stock," or
(b) assumed by a transferee in an Asset Sale, and
(c) in the case of Mortgage Indebtedness such Indebtedness shall not
constitute more than 100% of the cost determined in accordance with GAAP
to us or such guarantor, as applicable, of such mortgaged real estate
asset.
Indebtedness or Disqualified Capital Stock of any Person which is
outstanding at the time such Person becomes our Subsidiary or is merged with or
into or consolidated with us or a Subsidiary of ours shall be deemed to have
been incurred at the time such Person becomes our Subsidiary or is merged with
or into or consolidated with us or a Subsidiary of ours.
Upon each incurrence of Indebtedness, we may designate under which provision
of this covenant such Indebtedness is being incurred. Such Indebtedness will be
deemed to have been incurred under that provision and no other provision of this
covenant, except as specifically provided otherwise.
123
<PAGE>
LIMITATION ON RESTRICTED PAYMENTS
We will not and we will not permit any of our Subsidiaries, and the
guarantors will not and will not permit any of their subsidiaries, directly or
indirectly, to make any Restricted Payment if, after giving effect to such
Restricted Payment on a pro forma basis:
(1) a Default or an Event of Default shall have occurred and be continuing;
(2) we are not permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Debt Incurrence Ratio in the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock"; or
(3) the aggregate amount of all Restricted Payments made by us and our
Subsidiaries, including after giving effect to such proposed Restricted
Payment, from and after the Issue Date, would exceed, without duplication,
the sum of:
(a) 50% of our aggregate Consolidated Net Income for the period taken as one
accounting period that commences on the first day of the first full
fiscal quarter commencing after the Issue Date and continues to and
includes the last day of the fiscal quarter ended immediately prior to
the date of each such calculation, or, in the event Consolidated Net
Income for such period is a deficit, then minus 100% of such deficit;
plus
(b) the aggregate Net Cash Proceeds received by us from a Capital
Contribution or the sale of our Qualified Capital Stock, other than to
one of our Subsidiaries, to the extent applied in connection with a
Qualified Exchange and to the extent credited in accordance with the
following paragraph, after the Issue Date; plus
(c) other than amounts credited pursuant to clauses 1 and 2 of the next
following paragraph, the net amount of any Restricted Investments not to
exceed the original amount of such Investment made after the Issue Date
that are returned to us or the guarantor that made such prior Investment,
without restriction in cash on or prior to the date of any such
calculation.
So long as no Default or Event of Default has occurred and is continuing or
would be caused thereby, the preceding provisions will not prohibit:
(1) Restricted Investments in a Related Business, PROVIDED, that, after giving
pro forma effect to such Investment, the aggregate amount of all such
Investments made on or after the Issue Date that are outstanding at any time
does not exceed $4.0 million, after giving effect to any such Investments
that are returned to us or the Subsidiary guarantor that made such prior
Investment, without restriction, in cash on or prior to the date of any such
calculation, or
(2) repurchases of Capital Stock from our employees or employees of our
Subsidiaries upon the death, disability or termination of employment in an
aggregate amount to all employees not to exceed $300,000 in any fiscal year
or $1.5 million in the aggregate on and after the Issue Date, net of the Net
Cash Proceeds received by us from subsequent reissuances of such Qualified
Capital Stock to new employees that are not Excluded Persons.
Even if a Default or Event of Default shall have occurred and is continuing
or would be caused thereby, the preceding provisions against making Restricted
Payments will not apply to:
(3) a Qualified Exchange,
(4) the payment of any dividend on Qualified Capital Stock within 60 days after
the date of its declaration if such dividend could have been made on the
date of such declaration in compliance with the foregoing provisions, or
(5) Permitted Payments to Parent.
124
<PAGE>
The full amount of any Restricted Payment made pursuant to the foregoing
clauses (1), (2), (4) and (5) of the immediately preceding sentences, however,
will be deducted in the calculation of the aggregate amount of Restricted
Payments available to be made.
In addition, we will not and we will not permit any of our Subsidiaries to,
and the guarantors will not and will not permit any of their Subsidiaries to,
directly or indirectly, make any Management Fee Payment or similar payment to
Affiliates other than Subsidiaries, except for Permitted Payments to Parent if,
on a pro forma basis after giving effect to such Management Fee Payments or
similar payments, a Default or an Event of Default shall have occurred and be
continuing.
For purposes of this covenant, the amount of any Restricted Payment, if
other than in cash, shall be the fair market value thereof, as determined in the
good faith reasonable judgment of our Board of Directors. Additionally, on the
date of each Restricted Payment, we shall deliver an Officers' Certificate to
the trustee:
- describing in reasonable detail the nature of such Restricted Payment,
- stating the amount of such Restricted Payment,
- stating in reasonable detail the provisions of the indenture pursuant to
which such Restricted Payment was made, and
- certifying that such Restricted Payment was made in compliance with the
terms of the indenture.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES
We will not and we will not permit any of our Subsidiaries to, and the the
guarantors will not and will not permit any of their Subsidiaries to, directly
or indirectly, create, assume or suffer to exist any consensual restriction on
the ability of any of our Subsidiaries to:
(1) pay dividends or make other distributions to or on behalf of, or
(2) pay any obligation to or on behalf of, or
(3) otherwise to transfer assets or property to or on behalf of, or
(4) make or pay loans or advances to or on behalf of us or any of our
Subsidiaries.
However, the preceding restrictions will not apply to:
(1) restrictions imposed by the notes or the indenture or by our other
indebtedness (which may also be guaranteed by the guarantors) ranking senior
or PARI PASSU with the notes or the guarantees, provided such restrictions
are no more restrictive than those imposed by the indenture and the notes;
(2) restrictions imposed by applicable law;
(3) existing restrictions under Indebtedness outstanding on the Issue Date,
including pursuant to the credit agreement;
(4) restrictions under any Acquired Indebtedness not incurred in violation of
the indenture or any agreement relating to any property, asset, or business
acquired by us or any of our Subsidiaries, which restrictions in each case
existed at the time of acquisition, were not put in place in connection with
or in anticipation of such acquisition and are not applicable to any person,
other than the person acquired, or to any property, asset or business, other
than the property, assets and business so acquired;
(5) any such restriction or requirement imposed by Indebtedness incurred under
the credit agreement pursuant to the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified
125
<PAGE>
Capital Stock," provided such restriction or requirement is no more
restrictive than that imposed by the credit agreement as of the Issue Date;
(6) restrictions with respect solely to a Subsidiary of ours imposed pursuant to
a binding agreement which has been entered into for the sale or disposition
of all or substantially all of the Equity Interests or assets of such
Subsidiary, provided such restrictions apply solely to the Equity Interests
or assets of such Subsidiary which are being sold;
(7) restrictions on transfer contained in Purchase Money Indebtedness or
Mortgage Indebtedness incurred pursuant to the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock,"
provided such restrictions relate only to the transfer of the property
acquired with the proceeds of such Purchase Money Indebtedness or Mortgage
Indebtedness, as applicable; and
(8) in connection with and pursuant to permitted Refinancings, replacements of
restrictions imposed pursuant to clauses (1), (3) or (4) of this paragraph
that are not more restrictive than those being replaced and do not apply to
any other person or assets than those that would have been covered by the
restrictions in the Indebtedness so refinanced.
Notwithstanding the foregoing, neither:
- customary provisions restricting subletting or assignment of any lease
entered into in the ordinary course of business, consistent with industry
practice, nor
- Liens permitted under the terms of the indenture on assets securing senior
debt, Purchase Money Indebtedness, or Mortgage Indebtedness incurred in
accordance with the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock,"
shall in and of themselves be considered a restriction on the ability of the
applicable Subsidiary to transfer such agreement or assets.
LIMITATIONS ON LAYERING INDEBTEDNESS
We will not and we will not permit any of our Subsidiaries to, and the
guarantors will not and will not permit any of their subsidiaries to, directly
or indirectly, incur, or suffer to exist any Indebtedness that is subordinate in
right of payment to any other Indebtedness of ours or a guarantor unless, by its
terms, such Indebtedness is subordinate in right of payment to, or ranks PARI
PASSU with, the notes or the guarantees, as applicable.
LIMITATION ON LIENS SECURING INDEBTEDNESS
Unless we provide and cause our Subsidiaries to provide that the notes are
equally and ratably secured, we will not and we will not permit any of our
Subsidiaries to, and the guarantors will not and will not permit any of their
Subsidiaries to, create, incur, assume or suffer to exist any Lien of any kind,
other than Permitted Liens, upon any of their respective assets now owned or
acquired on or after the date of the indenture or upon any income or profits
therefrom securing any of our Indebtedness or that of any guarantor other than
Senior Indebtedness, PROVIDED that:
- if such Indebtedness is Subordinated Indebtedness, the Lien securing such
Subordinated Indebtedness shall be subordinate and junior to the Lien
securing the notes with the same relative priority as such Subordinated
Indebtedness shall have with respect to the notes, and
- this clause shall not be applicable to any Liens securing any such
Indebtedness which became our Indebtedness pursuant to a transaction
subject to the provisions of the indenture described below under
"Limitation on Merger, Sale or Consolidation" or which constitutes
Acquired Indebtedness and which in either case were in existence at the
time of such transaction, unless
126
<PAGE>
such Indebtedness was incurred or such Lien created in connection with or
in contemplation of, such transaction, so long as such Liens do not extend
to or cover any of our property or assets or that of any of our
Subsidiaries other than property or assets acquired in such transaction.
LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK
We will not and we will not permit any of our Subsidiaries to, and the
guarantors will not and will not permit and of their Subsidiaries to, convey,
sell, transfer, assign or otherwise dispose of, directly or indirectly, any of
our property, business or assets, including by merger, or consolidation of our
Subsidiaries and including any sale or other transfer or issuance of any Equity
Interests of any of our Subsidiaries, whether by us or a Subsidiary, or through
the issuance, sale or transfer of Equity Interests by any of our Subsidiaries,
and including any sale and leaseback transaction (any of the foregoing, an
"Asset Sale"), unless:
(1) (a) the Net Cash Proceeds therefrom (the "Asset Sale Offer Amount") are
applied:
- within 270 days after the date of such Asset Sale to the optional
redemption of the notes in accordance with the terms of the indenture
and other Indebtedness of ours ranking on a parity with the notes and
with similar provisions requiring us to redeem such Indebtedness with
the proceeds for asset sales, pro rata in proportion to the
respective principal amounts of the notes and such other Indebtedness
then outstanding, or
- within 300 days after the date of such Asset Sale to the repurchase
of the notes and such other Indebtedness on a parity with the notes
and with similar provisions requiring us to make an offer to purchase
such Indebtedness with the proceeds for asset sales pursuant to a
cash offer pro rata in proportion to the respective principal amounts
of the notes and such other Indebtedness then outstanding (the "Asset
Sale Offer") at a purchase price of 100% of principal amount (the
"Asset Sale Offer Price") together with accrued and unpaid interest
and liquidated damages, if any, to the date of payment, made within
270 days of such Asset Sale, or
(b) within 270 days following such Asset Sale, the Asset Sale Offer
Amount is:
- invested, or committed to be invested, and is invested, within an
additional 90 days in tangible assets and property other than notes,
bonds, obligations and securities which in the good faith reasonable
judgment of the Board will immediately constitute or be a part of a
Related Business of ours or such subsidiary immediately following
such transaction, or
- used to retire Purchase Money Indebtedness, Mortgage Indebtedness or
senior debt and, to permanently reduce the amount of such
Indebtedness, incurred under the covenant "Limitation on Incurrence
of Additional Indebtedness and Disqualified Capital Stock,"
(c) at least 90% of the consideration for such Asset Sale or series of
related Asset Sales consists of cash or Cash Equivalents,
(d) no Default or Event of Default shall have occurred and be continuing
at the time of, or would occur after giving effect, on a pro forma basis,
to, such Asset Sale, and
(e) our Board of Directors determines in good faith that we or such
Subsidiary, as applicable, will receive fair market value for such Asset
Sale.
An acquisition of notes pursuant to an Asset Sale Offer may be deferred
until the accumulated Net Cash Proceeds from Asset Sales not applied to the uses
set forth in (1)(a) or (b) above (the
127
<PAGE>
"Excess Proceeds") exceeds $5.0 million. Each Asset Sale Offer shall remain open
for 20 Business Days following its commencement (the "Asset Sale Offer Period").
Upon expiration of the Asset Sale Offer Period, we shall apply the Asset Sale
Offer Amount plus an amount equal to accrued and unpaid interest and liquidated
damages, if any, to the purchase of all Indebtedness properly tendered at the
Asset Sale Offer Price, together with accrued interest and liquidated damages,
if any. The Asset Sale Offer Amount shall be applied on a PRO RATA basis if the
Asset Sale Offer Amount is insufficient to purchase all Indebtedness so
tendered. To the extent that the aggregate amount of notes and such other PARI
PASSU Indebtedness tendered pursuant to an Asset Sale Offer is less than the
Asset Sale Offer Amount, we may use any remaining Net Cash Proceeds for general
corporate purposes as otherwise permitted by the indenture. Following each Asset
Sale Offer the Excess Proceeds amount shall be reset to zero.
For purposes of determining the percentage of the consideration for the
Asset Sale received in cash or Cash Equivalents, total consideration received
means the total consideration received for such Asset Sales minus the amount of:
- Purchase Money Indebtedness or Mortgage Indebtedness secured solely by the
assets sold and assumed by a transferee, and
- property that within 30 days of such Asset Sale is converted into cash or
Cash Equivalents, PROVIDED that such cash and Cash Equivalents shall be
treated as Net Cash Proceeds attributable to the original Asset Sale for
which such property was received.
Notwithstanding, and without complying with, the provisions of this
covenant, we and our Subsidiaries may:
(1) in the ordinary course of business:
(a) convey, sell, transfer, assign or otherwise dispose of inventory and
other assets acquired and held for resale in the ordinary course of
business, and
(b) liquidate Cash Equivalents;
(2) convey, sell, transfer, assign or otherwise dispose of assets pursuant
to and in accordance with the covenant "Limitation on Merger, Sale or
Consolidation";
(3) sell or dispose of damaged, worn out, scrap or other obsolete property
in the ordinary course of business so long as such property is no longer
necessary for the proper conduct of the business of ours or such
Subsidiary, as applicable; and
(4) convey, sell, transfer, assign or otherwise dispose of assets to us or
any of our Wholly-owned Subsidiary guarantors;
(5) in the ordinary course of business, convey, sell, transfer, assign, or
otherwise dispose of assets or related assets in related transactions
with a fair market value of less than $250,000; and
(6) surrender or waive contract rights or settle, release or surrender of
contract, tort or other claims of any kind or grant Liens not prohibited
by the indenture.
All Net Cash Proceeds from an Event of Loss relating to a Material Facility
shall be invested, used for prepayment of Senior Indebtedness or used to
repurchase notes, all within the period and as otherwise provided above in
clauses (1)(a) or (b) of the first paragraph of this covenant plus 90 days.
128
<PAGE>
In addition to the foregoing and notwithstanding anything herein to the
contrary, we will not, and will not permit any of our Subsidiaries to, directly
or indirectly make any Asset Sale of any of the Equity Interests of any
Subsidiary of ours other than us or a Wholly-owned Subsidiary guarantor, except
pursuant to an Asset Sale of all the Equity Interests of such Subsidiary.
Any Asset Sale Offer shall be made in compliance with all applicable laws,
rules, and regulations, including, if applicable, Regulation 14E of the Exchange
Act and the rules and regulations thereunder and all other applicable Federal
and state securities laws. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of this paragraph, compliance
by us or any of our subsidiaries with such laws and regulations shall not in and
of itself cause a breach of our obligations under such covenant.
If the payment date in connection with an Asset Sale Offer hereunder is on
or after an interest payment Record Date and on or before the associated
Interest Payment Date, any accrued and unpaid interest will be paid to the
person in whose name a note is registered at the close of business on such
Record Date, and such interest will not be payable to holders who tender notes
pursuant to such Asset Sale Offer.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
Neither we nor any of our Subsidiaries will be permitted to enter into or
suffer to exist any contract, agreement, arrangement or transaction with any
Affiliate, an "Affiliate Transaction", or any series of related Affiliate
Transactions, other than Exempted Affiliate Transactions, unless:
- it is determined that the terms of such Affiliate Transaction are fair and
reasonable to us, and no less favorable to us than could have been
obtained in an arm's length transaction with a non-Affiliate,
- if involving consideration to either party in excess of $1.0 million, the
Affiliate Transaction is evidenced by an Officers' Certificate addressed
and delivered to the trustee certifying that such Affiliate Transaction
has been approved by a majority of the members of the Board of Directors
that are disinterested in such transaction, and
- if involving consideration to either party in excess of $5.0 million, we
obtain, prior to the consummation of an Affiliate Transaction, a written
favorable opinion as to the fairness of the transaction to us from a
financial point of view from an independent investment banking firm of
national reputation or, if pertaining to a matter for which such
investment banking firms do not customarily render such opinions, an
appraisal or valuation firm of national reputation.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
We will not consolidate with or merge with or into another person or,
directly or indirectly, sell, lease, convey or transfer all or substantially all
of our assets (computed on a consolidated basis), whether in a single
transaction or a series of related transactions, to another Person or group of
affiliated Persons unless:
(1) we are the continuing entity;
(2) the resulting, surviving or transferee entity is a corporation organized
under the laws of the United States, any state thereof or the District of
Columbia and expressly assumes by supplemental indenture all of our
obligations in connection with the notes and the indenture;
(3) no Default or Event of Default shall exist or shall occur immediately
after giving effect on a pro forma basis to such transaction; and
(4) unless such transaction is solely the merger of us and one of our
previously existing Wholly-owned Subsidiaries which is also a guarantor
and which transaction is not in connection with any other transaction,
immediately after giving effect to such transaction on a pro forma basis,
the consolidated resulting, surviving or transferee entity would
immediately thereafter be
129
<PAGE>
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Debt Incurrence Ratio set forth in the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock."
Upon any consolidation or merger or any transfer of all or substantially all
of our assets in accordance with the foregoing, the successor corporation formed
by such consolidation or into which we are merged or to which such transfer is
made shall succeed to and be substituted for us, and may exercise every right
and power of ours under the indenture with the same effect as if such successor
corporation had been named therein as us. We shall be released from the
obligations under the notes and the indenture except with respect to any
obligations that arise from, or are related to, such transaction.
For purposes of the foregoing, the transfer by lease, assignment, sale or
otherwise of all or substantially all of the properties and assets of one or
more Subsidiaries, our interest in which constitutes all or substantially all of
our properties and assets shall be deemed to be the transfer of all or
substantially all of our properties and assets.
LIMITATION ON LINES OF BUSINESS
Neither we nor any of our Subsidiaries shall directly or indirectly engage
to any substantial extent in any line or lines of business activity other than
that which, in the reasonable good faith judgment of our Board of Directors, is
a Related Business.
FUTURE SUBSIDIARY GUARANTORS
All of our present and future Subsidiaries will jointly and severally,
fully, irrevocably and unconditionally guarantee all principal, premium, if any,
and interest on the notes on a senior subordinated basis. The term Subsidiary
does not include Unrestricted Subsidiaries.
RELEASE OF GUARANTORS
The indenture provides that no guarantor shall consolidate or merge with or
into another person, whether or not such guarantor is the surviving person,
unless:
- subject to the provisions of the following paragraph and other provisions
of the indenture, the person formed by or surviving any such consolidation
or merger, if other than such guarantor, assumes all the obligations of
such guarantor pursuant to a supplemental indenture in form reasonably
satisfactory to the trustee, pursuant to which such person shall
unconditionally guarantee, on a senior subordinated basis, all of such
guarantor's obligations under such guarantor's guarantee, on the terms set
forth in the indenture; and
- immediately before and immediately after giving effect to such transaction
on a pro forma basis, no Default or Event of Default shall have occurred
or be continuing.
A guarantor will be deemed released from its obligations under its guarantee
of the notes upon the sale or disposition, whether by merger, stock purchase,
asset sale or otherwise, of that guarantor or all of its assets to an entity
which is not a guarantor or the designation of a Subsidiary to become an
Unrestricted Subsidiary, which transaction is otherwise in compliance with the
indenture; PROVIDED, HOWEVER, that any such termination shall occur only in the
event that all obligations of that guarantor under all of its guarantees of and
under all of its pledges of assets or other security interests which secure any
Indebtedness of ours or any other of our Subsidiary shall also terminate upon
such release, sale or transfer.
LIMITATION ON STATUS AS INVESTMENT COMPANY
We and our Subsidiaries may not be required to register as an "investment
company," as that term is defined in the Investment Company Act of 1940, or may
not otherwise become subject to regulation under the Investment Company Act.
130
<PAGE>
REPORTS
Whether or not we are subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, we shall deliver to the trustee and to each holder
within 15 days after the time period specified in the Securities and Exchange
Commission's rules and regulations:
- all annual and quarterly financial statements substantially equivalent to
financial statements that would have been included in reports filed with
the Commission on Forms 10-K and 10-Q, including, with respect to annual
information only, a report thereon by our certified independent public
accountants as such would be required in such reports to the Commission;
and
- all current reports that would be required to be filed with the Commission
on Form 8-K if we were required to file such reports.
In each case, we shall include a management's discussion and analysis of
financial condition and results of operations which would be so required. Unless
the Commission will not accept such reports, we will file with the Commission
the annual, quarterly and other reports which we are or would have been required
to file with the Commission.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
- our failure to pay any installment of interest or liquidated damages, if
any, on the notes as and when the same becomes due and payable and the
continuance of any such failure for 30 days;
- our failure to pay all or any part of the principal, or premium, if any,
on the notes when and as the same becomes due and payable at maturity,
redemption, by acceleration or otherwise, including, without limitation,
payment of the Change of Control Purchase Price or the Asset Sale Offer
Price;
- the failure by us or any Subsidiary of ours to observe or perform any
other covenant or agreement contained in the notes or the indenture and,
subject to some exceptions, the continuance of such failure for a period
of 30 days after written notice is given to us by the trustee or to us and
the trustee by the holders of at least 25% in aggregate principal amount
of the notes outstanding;
- events of bankruptcy, insolvency or reorganization with respect to us or
any of our Significant Subsidiaries;
- a default in any issue of our Indebtedness or that of any of our
Subsidiaries with an aggregate principal amount in excess of $5.0 million
resulting from either the failure to pay principal at maturity or as a
result of which the maturity of such Indebtedness has been accelerated
prior to its stated maturity; and
- final unsatisfied judgments not covered by insurance aggregating in excess
of $5.0 million at any one time, rendered against us or any of our
Subsidiaries which are not stayed, bonded or discharged within 60 days.
If a Default occurs and is continuing, the trustee must give the holders
notice of such default within 90 days after the occurrence of such default.
Other than an Event of Default resulting from events of bankruptcy,
insolvency or reorganization relating to us or any of our Significant
Subsidiaries, if an Event of Default occurs and is continuing, then in every
such case, either the trustee or the holders of at least 25% in aggregate
principal amount of the notes then outstanding, by notice in writing to us and
to the trustee if given by holders (an "Acceleration Notice"), may declare all
principal, determined as set forth below, and accrued interest and liquidated
damages, if any, thereon to be due and payable immediately. If any senior debt
is
131
<PAGE>
outstanding pursuant to the credit agreement, upon a declaration of such
acceleration, such principal and interest shall be due and payable upon the
earlier of:
- the third Business Day after the sending to us and the Representative of
such written notice, unless such Event of Default is cured or waived prior
to such date; and
- the date of acceleration of any senior debt under the credit agreement.
If an Event of Default resulting from events of bankruptcy, insolvency or
reorganization relating to us or any of our Significant Subsidiaries occurs, all
principal and accrued interest and liquidated damages, if any, thereon will be
immediately due and payable on all outstanding notes without any declaration or
other act on the part of trustee or the holders. The holders of a majority in
aggregate principal amount of notes generally are authorized to rescind such
acceleration if all existing Events of Default have been cured or waived, other
than:
- the non-payment of the principal of, premium, if any, and interest on the
notes which have become due solely by such acceleration, and
- except on default with respect to any provision requiring a supermajority
approval to amend, which default may only be waived by such a
supermajority.
Prior to the declaration of acceleration of the maturity of the notes, the
holders of a majority in aggregate principal amount of the notes at the time
outstanding may waive on behalf of all the holders any default, except:
- a default with respect to any provision requiring a supermajority approval
to amend, which default may only be waived by such a supermajority,
- a default in the payment of principal of or interest on any note not yet
cured, or
- a default with respect to any covenant or provision which cannot be
modified or amended without the consent of the holder of each outstanding
note affected.
Subject to the provisions of the indenture relating to the duties of the
trustee, the trustee will be under no obligation to exercise any of its rights
or powers under the indenture at the request, order or direction of any of the
holders, unless such holders have offered to the trustee reasonable security or
indemnity. Subject to all provisions of the indenture and applicable law, the
holders of a majority in aggregate principal amount of the notes at the time
outstanding will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee, or exercising
any trust or power conferred on the trustee.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
We may, at our option, elect to have our obligations and the obligations of
the guarantors discharged with respect to the outstanding notes ("Legal
Defeasance"). Such Legal Defeasance means that we shall be deemed to have paid
and discharged the entire indebtedness represented, and the indenture shall
cease to be of further effect as to all outstanding notes and guarantees, except
as to:
- rights of holders to receive payments in respect of the principal of,
premium, if any, and interest and liquidated damages, if any, on such
notes when such payments are due from the trust funds;
- our obligations with respect to such notes concerning issuing temporary
notes, registration of notes, mutilated, destroyed, lost or stolen notes,
and the maintenance of an office or agency for payment and money for
security payments held in trust;
- the rights, powers, trust, duties, and immunities of the trustee, and our
obligations in connection therewith; and
- the Legal Defeasance provisions of the indenture.
132
<PAGE>
In addition, we may, at our option and at any time, elect to have our
obligations and the guarantors released with respect to some of the covenants
that are described in the indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the notes. Covenant Defeasance will not affect
holders' rights with respect to non-payment, guarantees, bankruptcy,
receivership, rehabilitation and insolvency events.
In order to exercise either Legal Defeasance or Covenant Defeasance, we must
irrevocably deposit with the trustee, in trust, for the benefit of the holders
of the notes:
(1) U.S. legal tender, U.S. Government Obligations or a combination thereof,
in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal
of, premium, if any, and interest on such notes on the stated date for
payment thereof or on the redemption date of such principal or
installment of principal of, premium, if any, or interest on such notes,
and
(2) the holders of notes must have a valid, perfected, exclusive security
interest in such trust;
(3) in the case of Legal Defeasance, we shall have delivered to the trustee
an opinion of counsel in the United States reasonably acceptable to the
trustee confirming that:
(a) we have received from, or there has been published by the Internal
Revenue Service, a ruling, or
(b) since the date of the indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that
the holders of such notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
Legal Defeasance had not occurred.
(4) in the case of Covenant Defeasance, we shall have delivered to the
trustee an opinion of counsel in the United States reasonably acceptable
to such trustee confirming that the holders of such notes will not
recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(5) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit;
(6) we shall have delivered to the trustee an Officer's Certificate
acceptable to the trustee, to the effect that, assuming no intervening
bankruptcy of ours between the date of deposit and the 91st day following
the deposit and that no holder of the notes is an insider of ours, after
the 91st day following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors rights generally;
(7) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under the indenture or
any other material agreement or instrument to which we or any of our
Subsidiaries is a party or by which we or any of our Subsidiaries is
bound;
(8) we shall have delivered to the trustee an Officers' Certificate stating
that the deposit was not made by us with the intent of preferring the
holders of such notes over any other creditors of ours or with the intent
of defeating, hindering, delaying or defrauding any other creditors of
ours or others;
133
<PAGE>
(9) we shall have delivered to the trustee an Officers' Certificate stating
that the conditions precedent set forth above in the first eight clauses
of this paragraph have been complied with; and
(10) we shall have delivered to the trustee an opinion of counsel, stating
that the conditions precedent set forth above in the first clause of this
paragraph with respect to the validity and perfection of the security
interest, and in the second, third and fifth clauses of this paragraph
have been complied with.
If the funds deposited with the trustee to effect Covenant Defeasance are
insufficient to pay the principal of, premium, if any, and interest on the notes
when due, then our obligations and those of the guarantors under the indenture
and the Collateral Agreement will be revived and no such defeasance will be
deemed to have occurred.
AMENDMENTS AND SUPPLEMENTS
We, the guarantors and the trustee may enter into a supplemental indenture
for limited purposes without the consent of the holders. With the consent of the
holders of not less than a majority in aggregate principal amount of the notes
at the time outstanding, we, the guarantors and the trustee are permitted to
amend or supplement the indenture or any supplemental indenture or modify the
rights of the holders. No such modification may, however, without the consent of
holders of at least 66 2/3% in aggregate principal amount of notes at the time
outstanding, modify the provisions including the defined terms used therein of
the covenant "Repurchase of Notes at the Option of the Holder Upon a Change of
Control" in a manner adverse to the holders; and no such modification may,
without the consent of each holder affected thereby:
- change the Stated Maturity on any note;
- reduce the principal amount thereof or the rate or extend the time for
payment of interest thereon or any premium payable upon the redemption at
our option thereof;
- change the place of payment where, or the coin or currency in which, any
note or any premium or the interest thereon is payable;
- impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof, or, in the case of redemption at
our option, on or after the Redemption Date;
- reduce the Change of Control Purchase Price or the Asset Sale Offer Price;
- alter the provisions, including the defined terms used therein, regarding
our right to redeem the notes as a right, or at our option in a manner
adverse to the holders;
- reduce the percentage in principal amount of the outstanding notes, the
consent of whose holders is required for any such amendment, supplemental
indenture or waiver provided for in the indenture; or
- modify any of the waiver provisions, except to increase any required
percentage or to provide that other specific provisions of the indenture
cannot be modified or waived without the consent of the holder of each
outstanding note affected thereby.
NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS
No past, present or future direct or indirect stockholder, employee, officer
or director, as such, of ours, our guarantors or any successor entity shall have
any personal liability for any of our obligations or those of the guarantors
under the indenture or the notes solely by reason of his, her or its status as
such stockholder, employee, officer or director. This provision shall not limit
the obligation of any guarantor pursuant to any guarantee of the notes.
134
<PAGE>
DEFINITIONS
"ACQUIRED INDEBTEDNESS" means Indebtedness or Disqualified Capital Stock of
any person existing at the time such person becomes a Subsidiary of ours,
including by designation, or is merged or consolidated into or with us or one of
our Subsidiaries.
"ACQUISITION" means the purchase or other acquisition of any person or all
or substantially all the assets of any person by any other person, whether by
purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
"AFFILIATE" means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with us. For purposes
of this definition, the term "control" means the power to direct the management
and policies of a person, directly or through one or more intermediaries,
whether through the ownership of voting securities, by contract, or otherwise,
PROVIDED, THAT, with respect to ownership interest in us and our Subsidiaries, a
Beneficial Owner of 10% or more of the total voting power normally entitled to
vote in the election of directors, managers or trustees, as applicable, shall
for such purposes be deemed to constitute control.
"AVERAGE LIFE" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing:
(1) the sum of the products:
(a) of the number of years from the date of determination to the date or
dates of each successive scheduled principal or redemption payment of
such security or instrument and
(b) the amount of each such respective principal or redemption payment;
(2) by the sum of all such principal or redemption payments.
"BENEFICIAL OWNER" or "BENEFICIAL OWNER" for purposes of the definition of
Change of Control and Affiliate has the meaning attributed to it in Rules 13d-3
and 13d-5 under the Exchange Act as in effect on the Issue Date, whether or not
applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"BOARD OF DIRECTORS" means, with respect to any person, the board of
directors of such person or any committee of the Board of Directors of such
person authorized, with respect to any particular matter, to exercise the power
of the board of directors of such person.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"CAPITAL CONTRIBUTION" means any contribution to our equity from our direct
or indirect parent for which no consideration other than the issuance of common
stock with no redemption rights and no special preferences, privileges or voting
rights is given.
"CAPITALIZED LEASE OBLIGATION" means, as to any person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"CAPITAL STOCK" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness that is not itself otherwise capital stock), warrants, options,
participations or other equivalents of or interests, however designated, in
stock issued by that corporation.
135
<PAGE>
"CASH EQUIVALENT" means any of the following which matures within one year
after the date of acquisition:
- securities issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America
is pledged in support thereof);
- time deposits and certificates of deposit and commercial paper issued by
the parent corporation of any domestic commercial bank of recognized
standing having capital and surplus in excess of $500 million; or
- commercial paper issued by others rated at least A-2 or the equivalent
thereof by Standard & Poor's Corporation or at least P-2 or the equivalent
thereof by Moody's Investors Service, Inc.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(1) prior to consummation of an Initial Public Equity Offering, the Excluded
Persons shall cease to own beneficially and of record at least 51% of the
total voting power in the aggregate of all classes of our Capital Stock
then outstanding normally entitled to vote in elections of directors; or
(2) on or following the consummation of an Initial Public Equity Offering;
(a) any merger or consolidation of us with or into any person or any
direct or indirect sale, transfer or other conveyance, in one
transaction or a series of related transactions, of all or
substantially all of our assets, on a consolidated basis if,
immediately after giving effect to such transaction(s):
- any "person" or "group" as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, other than any of the
Excluded Persons, is or becomes the "beneficial owner," directly or
indirectly, of more than 35% of the total voting power in the
aggregate normally entitled to vote in the election of directors,
managers, or trustees of the transferee(s) or surviving entity or
entities; and
- any such person or group becomes, directly or indirectly, the
beneficial owner of a greater percentage of such total voting
power, than beneficially owned by the Excluded Persons;
(b) any "person" or "group" as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, other than any of the
Excluded Persons:
- is or becomes the "beneficial owner," directly or indirectly, of
more than 35% of the total voting power in the aggregate of all
classes of our Capital Stock then outstanding normally entitled to
vote in elections of directors; and
- any such person or group becomes, directly or indirectly, the
beneficial owner of a greater percentage of such total voting
power, than beneficially owned by the Excluded Persons; or
(c) during any period of 12 consecutive months after the Issue Date,
individuals who at the beginning of any such 12-month period
constituted our Board of Directors, together with any new directors
whose election by such Board of Directors or whose nomination for
election by our shareholders was approved by a vote of a majority of
the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a
majority of our Board of Directors then in office.
"CONSOLIDATION" means, with respect to us, the consolidation of the accounts
of the Subsidiaries with our accounts, all in accordance with GAAP; PROVIDED
that "consolidation" will not include
136
<PAGE>
consolidation of the accounts of any Unrestricted Subsidiary with our accounts.
The term "consolidated" has a correlative meaning to the foregoing.
"CONSOLIDATED COVERAGE RATIO" of any person on any date of determination
(the "Transaction Date") means the ratio, on a pro forma basis, of:
(1) the aggregate amount of Consolidated EBITDA of such person attributable
to continuing operations and businesses (exclusive of amounts
attributable to operations and businesses permanently discontinued or
disposed of) for the Reference Period
(2) to the aggregate Consolidated Fixed Charges of such person (exclusive of
amounts attributable to operations and businesses permanently
discontinued or disposed of, but only to the extent that the obligations
giving rise to such Consolidated Fixed Charges would no longer be
obligations contributing to such person's Consolidated Fixed Charges
subsequent to the Transaction Date) during the Reference Period;
PROVIDED, that for purposes of such calculation:
- Acquisitions which occurred during the Reference Period or subsequent to
the Reference Period and on or prior to the Transaction Date shall be
assumed to have occurred on the first day of the Reference Period;
- transactions giving rise to the need to calculate the Consolidated
Coverage Ratio shall be assumed to have occurred on the first day of the
Reference Period;
- the incurrence of any Indebtedness or issuance of any Disqualified Capital
Stock during the Reference Period or subsequent to the Reference Period
and on or prior to the Transaction Date (and the application of the
proceeds therefrom to the extent used to refinance or retire other
Indebtedness) shall be assumed to have occurred on the first day of the
Reference Period; and
- the Consolidated Fixed Charges of such person attributable to interest on
any Indebtedness or dividends on any Disqualified Capital Stock bearing a
floating interest or dividend rate shall be computed on a pro forma basis
as if the average rate in effect from the beginning of the Reference
Period to the Transaction Date had been the applicable rate for the entire
period, unless such Person or any of its Subsidiaries is a party to an
Interest Swap or Hedging Obligation, which shall remain in effect for the
12-month period immediately following the Transaction Date, that has the
effect of fixing the interest rate on the date of computation, in which
case such rate, whether higher or lower, shall be used.
"CONSOLIDATED EBITDA" means, with respect to any person, for any period, the
Consolidated Net Income of such person for such period adjusted to add thereto,
to the extent deducted from net revenues in determining Consolidated Net Income,
without duplication:
(1) the sum of:
(a) Consolidated income tax expense,
(b) Consolidated depreciation and amortization expense, and
(c) Consolidated Fixed Charges,
(2) less the amount of all cash payments made by such person or any of its
Subsidiaries during such period to the extent such payments relate to
non-cash charges that were added back in determining Consolidated EBITDA
for such period or any prior period, provided that consolidated income
tax expense and depreciation and amortization of a Subsidiary that is a
less than Wholly-owned Subsidiary shall only be added to the extent of
our equity interest in such Subsidiary.
137
<PAGE>
"CONSOLIDATED FIXED CHARGES" of any person means, for any period, the
aggregate amount, determined in each case in accordance with GAAP and without
duplication, of:
(1) interest expensed or capitalized, paid, accrued, or scheduled to be paid
or accrued, including, in accordance with the following sentence,
interest attributable to Capitalized Lease Obligations, of such person
and its Consolidated Subsidiaries during such period, including:
(a) original issue discount and non-cash interest payments or accruals on
any Indebtedness,
(b) the interest portion of all deferred payment obligations, and
(c) all commissions, discounts and other fees and charges owed with
respect to bankers' acceptances and letters of credit financings and
currency and Interest Swap and Hedging Obligations, in each case to
the extent attributable to such period, and
(2) the amount of dividends accrued or payable or guaranteed by such person
or any of its Consolidated Subsidiaries in respect of Preferred Stock,
other than by Subsidiaries of such person to such person or such person's
Wholly-owned Subsidiaries, except if such Preferred Stock is a
payment-in-kind ("PIK") security, issuance of such additional PIK
securities would not count as dividends for purposes of this definition.
For purposes of this definition:
- interest on a Capitalized Lease Obligation shall be deemed to accrue at an
interest rate reasonably determined in good faith by us to be the rate of
interest implicit in such Capitalized Lease Obligation in accordance with
GAAP, and
- interest expense attributable to any Indebtedness represented by the
guaranty by such person or a Subsidiary of such person of an obligation of
another person shall be deemed to be the interest expense attributable to
the Indebtedness guaranteed.
"CONSOLIDATED NET INCOME" means, with respect to any person for any period,
the net income or loss of such person and its Consolidated Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP and adjusted
to exclude, only to the extent included in computing such net income or loss and
without duplication:
- all gains, but not losses, which are either extraordinary, as determined
in accordance with GAAP, or are either unusual or nonrecurring, including
any gain from the sale or other disposition of assets outside the ordinary
course of business or from the issuance or sale of any capital stock;
- the net income, if positive, of any person, other than a Consolidated
Subsidiary, in which such person or any of its Consolidated Subsidiaries
has an interest, except to the extent of the amount of any dividends or
distributions actually paid in cash to such person or a Consolidated
Subsidiary of such person during such period, but in any case not in
excess of such person's PRO RATA share of such person's net income for
such period;
- the net income or loss of any person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition; and
- the net income, if positive, of any of such person's Consolidated
Subsidiaries to the extent that the declaration or payment of dividends or
similar distributions is not at the time permitted by operation of the
terms of its charter or bylaws or any other agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Consolidated Subsidiary.
"CONSOLIDATED SUBSIDIARY" means, for any person, each Subsidiary of such
person, whether now existing or hereafter created or acquired, the financial
statements of which are consolidated for financial statement reporting purposes
with the financial statements of such person in accordance with GAAP.
138
<PAGE>
"CREDIT AGREEMENT" means the credit agreement entered into by and among us,
our subsidiaries, various financial institutions, and BancBoston Robertson
Stephens Inc. as arranger, BankBoston, N.A. as a lender and agent, Bank of
America, N.A. (formerly known as NationsBank, N.A.) as co-agent, the lenders
named therein, Royal Bank of Canada as syndication agent and General Electric
Capital Corporation as documentation agent, providing a revolving credit
facility, term loans and an acquisition line, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, as such credit agreement and/or related documents may be
amended, restated, supplemented, renewed, replaced or otherwise modified from
time to time whether or not with the same agent, trustee, representative lenders
or holders, and irrespective of any changes in the terms and conditions thereof.
Without limiting the generality of the foregoing, the term "Credit Agreement"
shall include agreements in respect of Interest Swap and Hedging Obligations
with lenders party to the Credit Agreement and shall also include any amendment,
amendment and restatement, renewal, extension, restructuring, supplement or
modification to any credit agreement and all refundings, refinancings and
replacements of any credit agreement, including any agreement:
- extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby,
- adding or deleting borrowers or guarantors thereunder, so long as
borrowers and issuers include one or more of us and our Subsidiaries and
their respective successors and assigns,
- increasing the amount of Indebtedness incurred thereunder or available to
be borrowed thereunder, PROVIDED that on the date such Indebtedness is
incurred in accordance with the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock," or
- otherwise altering the terms and conditions thereof in a manner not
prohibited by the terms of the indenture.
"DISQUALIFIED CAPITAL STOCK" means:
- with respect to any person, Equity Interests of such person that, by its
terms or by the terms of any security into which it is convertible,
exercisable or exchangeable, is, or upon the happening of an event or the
passage of time or both would be, required to be redeemed or repurchased,
including at the option of the holder thereof, such person or any of its
Subsidiaries, in whole or in part, on or prior to the Stated Maturity of
the notes, and
- with respect to any Subsidiary of such person, including with respect to
any Subsidiary of ours, any Equity Interests other than any common equity
with no preference, privileges, or redemption or repayment provisions.
"EQUITY INTEREST" of any Person means any shares, interests, participations
or other equivalents, however designated, in such Person's equity, and shall in
any event include any Capital Stock issued by, or partnership or membership
interests in, such Person.
"EVENT OF LOSS" means, with respect to any property or asset, any:
- loss, destruction or damage of such property or asset or
- any condemnation, seizure or taking, by exercise of the power of eminent
domain or otherwise, of such property or asset, or confiscation or
requisition of the use of such property or asset.
"EXCLUDED PERSON" means our officers and directors and those persons who
beneficially own membership interests in Compass Holdings LLC, in each case, as
of the Issue Date.
"EXEMPTED AFFILIATE TRANSACTION" means:
- customary employee compensation arrangements approved by a majority of
independent members of our Board of Directors who are independent with
respect to such transactions;
139
<PAGE>
- dividends permitted under the terms of the covenant discussed above under
"Limitation on Restricted Payments" above and payable, in form and amount,
on a pro rata basis to all holders of our common stock;
- Management Fee Payments up to $500,000 in any fiscal year and the
reimbursement by us of reasonable out-of-pocket costs and expenses
incurred in connection with the rendering of management services to us on
our behalf;
- Permitted Payments to Parent; and
- transactions solely between us and any of our Wholly-owned Consolidated
Subsidiaries or solely among our Wholly-owned Consolidated Subsidiaries.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States as in effect on the Issue Date.
"GUARANTOR" means each Subsidiary of ours that executes a guarantee
guaranteeing the notes in accordance with the provisions of the indenture.
"INDEBTEDNESS" of any person means, without duplication
(1) all liabilities and obligations, contingent or otherwise, of such any
person, to the extent such liabilities and obligations would appear as a
liability upon the consolidated balance sheet of such person in
accordance with GAAP:
(a) in respect of borrowed money, whether or not the recourse of the
lender is to the whole of the assets of such person or only to a
portion thereof,
(b) evidenced by bonds, notes, debentures or similar instruments,
(c) representing the balance deferred and unpaid of the purchase price of
any property or services, except those incurred in the ordinary
course of its business that would constitute ordinarily a trade
payable to trade creditors, excluding accounts payable or other
obligations to trade creditors which have remained unpaid for greater
than 60 days past their original due date;
(2) all liabilities and obligations, contingent or otherwise, of such person
(a) evidenced by bankers' acceptances or similar instruments issued or
accepted by banks,
(b) relating to any Capitalized Lease Obligation, or
(c) evidenced by a letter of credit or a reimbursement obligation of such
person with respect to any letter of credit;
(3) all net obligations of such person under Interest Swap and Hedging
Obligations;
(4) all liabilities and obligations of others of the kind described in the
preceding clauses that such person has guaranteed or that is otherwise
its legal liability or which are secured by any assets or property of
such person and all obligations to purchase, redeem or acquire any Equity
Interests;
(5) any and all deferrals, renewals, extensions, refinancing and refundings,
whether direct or indirect, of, or amendments, modifications or
supplements to, any liability of the kind described in any of the
preceding clauses, or this clause, whether or not between or among the
same parties; and
140
<PAGE>
(6) all Disqualified Capital Stock of such Person measured at the greater of
its voluntary or involuntary maximum fixed repurchase price plus accrued
and unpaid dividends.
For purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the indenture, and if such price
is based upon, or measured by, the Fair Market Value of such Disqualified
Capital Stock, such Fair Market Value to be determined in good faith by the
board of directors or managing general partner of the issuer of such
Disqualified Capital Stock.
"INITIAL PUBLIC EQUITY OFFERING" means an initial underwritten offering of
our common stock or that of Parent for cash pursuant to an effective
registration statement under the Securities Act as a consequence of which our
common stock or that of Parent is listed on a national securities exchange or
quoted on the national market system of the Nasdaq stock market.
"INTEREST SWAP AND HEDGING OBLIGATION" means any obligation of any person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"INVESTMENT" by any person in any other person means, without duplication:
- the acquisition, whether by purchase, merger, consolidation or otherwise,
by such person, whether for cash, property, services, securities or
otherwise, of capital stock, bonds, notes, debentures, partnership or
other ownership interests or other securities, including any options or
warrants, of such other person or any agreement to make any such
acquisition;
- the making by such person of any deposit with, or advance, loan or other
extension of credit to, such other person, including the purchase of
property from another person subject to an understanding or agreement,
contingent or otherwise, to resell such property to such other person, or
any commitment to make any such advance, loan or extension, but excluding
accounts receivable, endorsements for collection or deposits arising in
the ordinary course of business;
- other than guarantees of Indebtedness of us or any guarantor to the extent
permitted by the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock," the entering into by such
person of any guarantee of, or other credit support or contingent
obligation with respect to, Indebtedness or other liability of such other
person;
- the making of any capital contribution by such person to such other
person; and
- the designation by our Board of Directors of any person to be an
Unrestricted Subsidiary.
We shall be deemed to make an Investment in an amount equal to the fair
market value of the net assets of any subsidiary, or, if neither we nor any of
our Subsidiaries have theretofore made an Investment in such subsidiary, in an
amount equal to the Investments being made, at the time that such subsidiary is
designated an Unrestricted Subsidiary, and any property transferred to an
Unrestricted Subsidiary from us or a Subsidiary of ours shall be deemed an
Investment valued at its fair market value at the time of such transfer.
"ISSUE DATE" means the date of first issuance of the notes under the
indenture.
141
<PAGE>
"JUNIOR SECURITY" means any Qualified Capital Stock and any Indebtedness of
ours or a guarantor, as applicable, that is subordinated in right of payment to
senior debt at least to the same extent as the notes or the guarantee, as
applicable, and has no scheduled installment of principal due, by redemption,
sinking fund payment or otherwise, on or prior to the Stated Maturity of the
notes; PROVIDED, that in the case of subordination in respect of senior debt
under the credit agreement, "Junior Security" shall mean any Qualified Capital
Stock and any Indebtedness of ours or the guarantor, as applicable, that:
- has a final maturity date occurring after the final maturity date of, all
senior debt outstanding under the credit agreement on the date of issuance
of such Qualified Capital Stock or Indebtedness,
- is unsecured,
- has an Average Life longer than the security for which such Qualified
Capital Stock or Indebtedness is being exchanged, and
- by their terms or by law are subordinated to senior debt outstanding under
the credit agreement on the date of issuance of such Qualified Capital
Stock or Indebtedness at least to the same extent as the notes.
"LIEN" means any mortgage, charge, pledge, statutory or other lien,
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired.
"MANAGEMENT FEE PAYMENTS" means payments from us to Dunhill Bank Caribbean
Ltd. and Hayes Capital Corporation under a Management Consulting Agreement,
dated March 9, 1998, by and between us, Dunhill Bank Caribbean Ltd. and Hayes
Capital Corporation, in accordance with the terms and provisions of such
Management Consulting Agreement on the Issue Date, PROVIDED, HOWEVER, that our
obligation to make such payments will be subordinated to the payment of all
Obligations with respect to the notes and any guarantee thereof.
"MATERIAL FACILITY" means a facility that has a customer certification
including without limitation D1-9000.
"MORTGAGE INDEBTEDNESS" of any person means any Indebtedness of such person
secured by real property of such person which in the reasonable good faith
judgment of the Board of Directors is directly related to a Related Business of
ours.
"NET CASH PROCEEDS" means:
(1) the aggregate amount of cash or Cash Equivalents received by us in the
case of a sale of Qualified Capital Stock and by us and our Subsidiaries
in respect of an Asset Sale;
(2) plus, in the case of an issuance of Qualified Capital Stock upon any
exercise, exchange or conversion of securities, including options,
warrants, rights and convertible or exchangeable debt of ours that were
issued for cash on or after the Issue Date the amount of cash originally
received by us upon the issuance of such securities, including options,
warrants, rights and convertible or exchangeable debt;
(3) less:
(a) in each case, the sum of all payments, fees, commissions and, in the
case of Asset Sales, reasonable and customary expenses, including,
without limitation, the fees and expenses of legal counsel and
investment banking fees and expenses incurred in connection with such
Asset Sale or sale of Qualified Capital Stock, and
142
<PAGE>
(b) in the case of an Asset Sale only, the amount estimated reasonably
and in good faith by us of income, franchise, sales and other
applicable taxes, the computation of which shall take into account
any available net operating losses and other tax attributes of
Parent, and us and our Subsidiaries required to be paid by us or any
of our respective Subsidiaries in the taxable year of such sale in
connection with such Asset Sale.
"NON-RECOURSE INDEBTEDNESS" means our Indebtedness or that of our
Subsidiaries to the extent that:
- under the terms thereof or pursuant to law, no personal recourse may be
had against us or our Subsidiaries for the payment of the principal of or
interest or premium on such Indebtedness, and enforcement of obligations
on such Indebtedness, except with respect to fraud, willful misconduct,
misrepresentation, misapplication of funds, reckless damage to assets and
undertakings with respect to environmental matters or construction
defects, is limited only to recourse against interests in specified assets
and property (the "Special Assets"), accounts and proceeds arising
therefrom, and rights under purchase agreements or other agreements with
respect to such Subject Assets;
- such Indebtedness is incurred concurrently with the acquisition by us or
our Subsidiaries of such Subject Assets, or a Person or interests in a
Person holding such Subject Assets, or constitutes Refinancing
Indebtedness with respect to Indebtedness so incurred; and
- the Subject Assets are not existing assets and no existing assets or
proceeds from the sale, transfer or other disposition of existing assets
were used to acquire such Subject Assets.
"OBLIGATION" means any principal, premium or interest payment, or monetary
penalty, or damages, due by us or any guarantor under the terms of the notes or
the indenture, including any liquidated damages due pursuant to the terms of the
registration rights agreement.
"PARENT" means Compass Holdings LLC or its successor, so long as such entity
owns at least 51% of our Capital Stock.
"PERMITTED INDEBTEDNESS" means that:
- we and the guarantors may incur Indebtedness evidenced by the notes and
represented by the indenture up to the amounts specified therein as of the
date thereof;
- we and the guarantors, as applicable, may incur Refinancing Indebtedness
with respect to any Indebtedness or Disqualified Capital Stock, as
applicable, described in the foregoing clause of this definition or
incurred under the Debt Incurrence Ratio test of the covenant "Limitation
on Incurrence of Additional Indebtedness and Disqualified Capital Stock,"
or which is outstanding on the Issue Date, provided that in each case such
Refinancing Indebtedness is secured only by the assets that secured the
Indebtedness so refinanced;
- we and our Subsidiaries may incur Indebtedness solely in respect of
bankers acceptances, and performance bonds to the extent that such
incurrence does not result in the incurrence of any obligation to repay
any obligation relating to borrowed money of others, all in the ordinary
course of business in accordance with customary industry practices, in
amounts and for the purposes customary in our industry; PROVIDED, that the
aggregate principal amount outstanding of such Indebtedness, including any
Refinancing Indebtedness and any other Indebtedness issued to refinance,
refund, defease or replace such Indebtedness, shall at no time exceed
$250,000;
- we may incur Indebtedness to any guarantor, and any guarantor may incur
Indebtedness to any other guarantor or to us; PROVIDED, that, in the case
of our Indebtedness, such obligations shall be unsecured and subordinated
in all respects to our obligations pursuant to the notes and the date of
any event that causes such guarantor no longer to be a guarantor shall be
an Incurrence Date; and
143
<PAGE>
- any guarantor may guaranty any of our Indebtedness or that of another
guarantor that was permitted to be incurred pursuant to the indenture,
substantially concurrently with such incurrence or at the time such person
becomes a guarantor.
"PERMITTED INVESTMENT" means:
- Investments in any of the notes;
- Investments in Cash Equivalents;
- intercompany notes to the extent permitted under the definition of
"Permitted Indebtedness" and
- any Investment by us or any guarantor in a Person if as a result of such
Investment such Person immediately becomes a Wholly-owned Subsidiary
guarantor or such Person is immediately merged with or into us or a
Wholly-owned Subsidiary guarantor.
"PERMITTED LIEN" means:
(1) Liens existing on the Issue Date;
(2) Liens imposed by governmental authorities for taxes, assessments or
other charges not yet subject to penalty or which are being contested in
good faith and by appropriate proceedings, if adequate reserves with
respect thereto are maintained on our books in accordance with GAAP;
(3) statutory liens of carriers, warehousemen, mechanics, material men,
landlords, repairmen or other like Liens arising by operation of law in
the ordinary course of business provided that:
(a) the underlying obligations are not overdue for a period of more than
30 days, or
(b) such Liens are being contested in good faith and by appropriate
proceedings and adequate reserves with respect thereto are maintained
on our books in accordance with GAAP;
(4) Liens securing the performance of bids, trade contracts (other than
borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(5) easements, rights-of-way, zoning, similar restrictions and other similar
encumbrances or title defects which, singly or in the aggregate, do not
in any case materially detract from the value of the property, subject
thereto (as such property is used by us or any of our Subsidiaries) or
interfere with the ordinary conduct of our business or that of any of our
Subsidiaries;
(6) Liens arising by operation of law in connection with judgments, only to
the extent, for an amount and for a period not resulting in an Event of
Default with respect thereto;
(7) pledges or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security legislation;
(8) Liens securing the notes;
(9) Liens securing Indebtedness of a Person existing at the time such Person
becomes a Subsidiary or is merged with or into us or a Subsidiary or
Liens securing Indebtedness incurred in connection with an Acquisition,
PROVIDED that such Liens were in existence prior to the date of such
acquisition, merger or consolidation, were not incurred in anticipation
thereof, and do not extend to any other assets;
(10) Liens arising from Purchase Money Indebtedness or Mortgage Indebtedness
permitted to be incurred pursuant to the covenant "Limitation on
Incurrence of Additional Indebtedness and
144
<PAGE>
Disqualified Capital Stock" PROVIDED such Liens relate solely to the
property which is subject to such Purchase Money Indebtedness or Mortgage
Indebtedness, as applicable;
(11) Leases or subleases granted to other persons in the ordinary course of
business not materially interfering with the conduct of our business or
that of any of our Subsidiaries or materially detracting from the value
of our relative assets or those of any Subsidiary;
(12) Liens arising from precautionary Uniform Commercial Code financing
statement filings regarding operating leases entered into by us or any of
our Subsidiaries in the ordinary course of business;
(13) Liens securing Refinancing Indebtedness incurred to refinance any
Indebtedness that was previously so secured in a manner no more adverse
to the holders of the notes than the terms of the Liens securing such
refinanced Indebtedness, and provided that the Indebtedness secured is
not increased and the lien is not extended to any additional assets or
property that would not have been security for the Indebtedness
refinanced; and
(14) Liens securing Indebtedness incurred under the credit agreement in
accordance with the terms of the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock."
"PERMITTED PAYMENTS TO PARENT" means without duplication:
- payments to Parent in an amount sufficient to permit Parent to pay
reasonable and necessary operating expenses and other general corporate
expenses to the extent such expenses relate or are fairly allocable to us
and our Subsidiaries, provided such expenses do not exceed $250,000 in any
fiscal year; and
- payments to Parent to enable Parent to pay foreign, federal, state or
local tax liabilities ("Tax Payment"), not to exceed the amount of any tax
liabilities that would be otherwise payable by us and our Subsidiaries and
Unrestricted Subsidiaries to the appropriate taxing authorities if they
filed separate tax returns to the extent that Parent has an obligation to
pay such tax liabilities relating to our operations, assets or capital or
those of our Subsidiaries and Unrestricted Subsidiaries;
PROVIDED, HOWEVER, that, notwithstanding the foregoing:
- in the case of determining the amount of a Tax Payment that is permitted
to be paid by us and any of our United States subsidiaries in respect of
their Federal income tax liability, such payment shall be determined on
the basis of assuming that all payments made to Parent pursuant to the
immediately preceding clause shall be treated as a deductible expense of
ours in the taxable year during which the obligation to make such payment
accrues; and
- any Tax Payments shall either be used by Parent to pay such tax
liabilities within 90 days of Parent's receipt of such payment or refunded
to the payee.
"PURCHASE MONEY INDEBTEDNESS" of any person means any Non-Recourse
Indebtedness of such person to any seller or other person incurred solely to
finance the acquisition (including in the case of a Capitalized Lease
Obligation, the lease) of any after acquired tangible property which, in the
reasonable good faith judgment of our Board of Directors, is directly related to
a Related Business of ours and which is incurred substantially concurrently with
such acquisition and is secured only by the assets so financed.
"QUALIFIED CAPITAL STOCK" means any of our Capital Stock that is not
Disqualified Capital Stock.
"QUALIFIED EXCHANGE" means any legal defeasance, redemption, retirement,
repurchase or other acquisition of Capital Stock or of our Indebtedness issued
on or after the Issue Date with the Net Cash
145
<PAGE>
Proceeds received by us from the substantially concurrent sale of Qualified
Capital Stock or any exchange of Qualified Capital Stock for any of our Capital
Stock or for our Indebtedness issued on or after the Issue Date.
"REFERENCE PERIOD" with regard to any person means the four full fiscal
quarters, or such lesser period during which such person has been in existence,
ended immediately preceding any date upon which any determination is to be made
pursuant to the terms of the notes or the indenture.
"REFINANCING INDEBTEDNESS" means Indebtedness or Disqualified Capital Stock:
(1) issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease,
refund, refinance, discharge or otherwise retire for value, in whole or
in part, or constituting an amendment, modification or supplement to, or
a deferral or renewal of (a "Refinancing"), any Indebtedness or
Disqualified Capital Stock in a principal amount or, in the case of
Disqualified Capital Stock, liquidation preference, not to exceed the
lesser of the following, after deduction of reasonable and customary fees
and expenses incurred in connection with the Refinancing plus the amount
of any premium paid in connection with such Refinancing in accordance
with the terms of the documents governing the Indebtedness refinanced
without giving effect to any modification thereof made in connection with
or in contemplation of such refinancing:
(a) the principal amount or, in the case of Disqualified Capital Stock,
liquidation preference, of the Indebtedness or Disqualified Capital
Stock so Refinanced, and
(b) if such Indebtedness being Refinanced was issued with an original
issue discount, the accreted value thereof, as determined in
accordance with GAAP, at the time of such Refinancing;
(2) PROVIDED, that:
(a) such Refinancing Indebtedness of any Subsidiary of ours shall only be
used to Refinance outstanding Indebtedness or Disqualified Capital
Stock of such Subsidiary,
(b) such Refinancing Indebtedness shall not have an Average Life shorter
than the Indebtedness or Disqualified Capital Stock to be so
refinanced at the time of such Refinancing and in all respects, be no
less subordinated or junior, if applicable, to the rights of holders
of the notes than was the Indebtedness or Disqualified Capital Stock
to be refinanced,
(c) such Refinancing Indebtedness shall have a final stated maturity or
redemption date, as applicable, no earlier than the final stated
maturity or redemption date, as applicable, of the Indebtedness or
Disqualified Capital Stock to be so refinanced, and
(d) such Refinancing Indebtedness shall be secured, if secured, in a
manner no more adverse to the holders of the notes than the terms of
the Liens, if any, securing such refinanced Indebtedness, including,
without limitation, the amount of Indebtedness secured shall not be
increased.
"RELATED BUSINESS" means the business conducted, or proposed to be
conducted, by us and our Subsidiaries as of the Issue Date and any and all
businesses that in the good faith judgment of our Board of Directors are
materially related businesses.
"RESTRICTED INVESTMENT" means, in one or a series of related transactions,
any Investment, other than other Permitted Investments.
146
<PAGE>
"RESTRICTED PAYMENT" means, with respect to any person:
- the declaration or payment of any dividend or other distribution in
respect of Equity Interests of such person or any parent or Subsidiary of
such person;
- any payment on account of the purchase, redemption or other acquisition or
retirement for value of Equity Interests of such person or any Subsidiary
or parent of such person;
- other than with the proceeds from the substantially concurrent sale of, or
in exchange for, Refinancing Indebtedness any purchase, redemption, or
other acquisition or retirement for value of, any payment in respect of
any amendment of the terms of or any defeasance of, any Subordinated
Indebtedness, directly or indirectly, by such person or a parent or
Subsidiary of such person prior to the scheduled maturity, any scheduled
repayment of principal, or scheduled sinking fund payment, as the case may
be, of such Indebtedness;
- any Restricted Investment by such person, and
- any Management Fee Payments or similar payments to any Affiliates other
than Subsidiaries in excess of an aggregate of $500,000 in any fiscal
year; PROVIDED, HOWEVER, that our obligation to pay such Management Fee
Payments will be subordinated to the payment of all Obligations with
respect to the notes and any guarantee thereof.
The term "Restricted Payment" shall not include:
- any dividend, distribution or other payment on or with respect to Equity
Interests of an issuer to the extent payable solely in shares of Qualified
Capital Stock of such issuer; or
- any dividend, distribution or other payment to us, or to any of our
guarantors, by us or any of our Subsidiaries.
"SENIOR DEBT" of ours or any guarantor means Indebtedness, including any
monetary obligation in respect of the credit agreement, and interest, whether or
not allowable, accruing on Indebtedness incurred pursuant to the credit
agreement after the filing of a petition initiating any proceeding under any
bankruptcy, insolvency or similar law, of us or such guarantor arising under the
credit agreement or that, by the terms of the instrument creating or evidencing
such Indebtedness, is expressly designated senior debt and made senior in right
of payment to the notes or the applicable guarantee; PROVIDED, that in no event
shall senior debt include:
- Indebtedness to any of our Subsidiaries or any of our officers, directors,
or employees or those of any of our Subsidiaries;
- Indebtedness incurred in violation of the terms of the indenture;
- Indebtedness to trade creditors;
- Disqualified Capital Stock;
- Capitalized Lease Obligations; and
- any liability for taxes owed or owing by us or such guarantor.
"SIGNIFICANT SUBSIDIARY" shall have the meaning provided under Regulation
S-X of the Securities Act, as in effect on the Issue Date.
"STATED MATURITY," when used with respect to any note, means April 15, 2005.
"SUBORDINATED INDEBTEDNESS" means our Indebtedness or that of a guarantor
that is subordinated in right of payment by its terms or the terms of any
document or instrument relating thereto to the notes or such guarantee, as
applicable, in any respect or has a stated maturity after the Stated Maturity.
147
<PAGE>
"SUBSIDIARY," with respect to any person, means:
- a corporation a majority of whose Equity Interests with voting power,
under ordinary circumstances, to elect directors is at the time, directly
or indirectly, owned by such person, by such person and one or more
Subsidiaries of such person or by one or more Subsidiaries of such person;
- any other person, other than a corporation, in which such person, one or
more Subsidiaries of such person, or such person and one or more
Subsidiaries of such person, directly or indirectly, at the date of
determination thereof has at least majority ownership interest; or
- a partnership in which such person or a Subsidiary of such person is, at
the time, a general partner.
Notwithstanding the foregoing, an Unrestricted Subsidiary shall not be a
Subsidiary of ours or of any of our Subsidiaries. Unless the context requires
otherwise, Subsidiary means each direct and indirect Subsidiary of ours.
"UNRESTRICTED SUBSIDIARY" means any of our Subsidiaries that does not own
any Capital Stock of, or own or hold any Lien on any of our property or that of
any of our Subsidiaries and that, at the time of determination, shall be an
Unrestricted Subsidiary as designated by our Board of Directors; PROVIDED, that:
- such subsidiary shall not engage, to any substantial extent, in any line
or lines of business activity other than a Related Business;
- neither immediately prior thereto nor after giving pro forma effect to
such designation would there exist a Default or Event of Default; and
- immediately after giving pro forma effect thereto, we could incur at least
$1.00 of Indebtedness pursuant to the Debt Incurrence Ratio of the
covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock."
Our Board of Directors may designate any Unrestricted Subsidiary to be a
Subsidiary, PROVIDED, that:
- no Default or Event of Default is existing or will occur as a consequence
thereof; and
- immediately after giving effect to such designation, on a pro forma basis,
we could incur at least $1.00 of Indebtedness pursuant to the Debt
Incurrence Ratio of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock."
Each such designation shall be evidenced by filing with the trustee a certified
copy of the resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions.
"U.S. GOVERNMENT OBLIGATIONS" means direct non-callable obligations of, or
non-callable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
"WHOLLY-OWNED SUBSIDIARY" means a Subsidiary all the Equity Interests of
which are owned by us or one or more of our Wholly-owned Subsidiaries.
BOOK-ENTRY; DELIVERY; FORM AND TRANSFER
The Series D notes will be issued in the form of one or more registered
global notes without interest coupons (collectively, the "Global Notes"). Upon
issuance, the Global Notes will be deposited with the trustee, as custodian for
DTC, in New York, New York, and registered in the name of DTC or its nominee for
credit to the accounts of DTC's Direct and Indirect Participants, as defined
below.
148
<PAGE>
Beneficial interests in all Global Notes and all Certificated Notes, as
defined below, if any, will be subject to restrictions on transfer and will bear
a restrictive legend as described under "Notice to Investors." In addition,
transfer of beneficial interests in any Global Notes will be subject to the
applicable rules and procedures of DTC and its Direct or Indirect Participants
including, if applicable, those of Euroclear and CEDEL, which may change from
time to time.
The Global Notes may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee in limited
circumstances. Beneficial interests in the Global Notes may be exchanged for
notes in certificated form in limited circumstances. You should read the
discussion under the heading "--Transfer of Interests in Global Notes for
Certificated Notes" for further information regarding such an exchange.
Initially, the trustee will act as Paying Agent and Registrar. The notes may
be presented for registration of transfer and exchange at the offices of the
Registrar.
DEPOSITORY PROCEDURES
DTC has advised us that DTC is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the "Direct
Participants") and to facilitate the clearance and settlement of transactions in
those securities between Direct Participants through electronic book-entry
changes in accounts of Participants. The Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and various
other organizations, including Euroclear and Cedel. Access to DTC's system is
also available to other entities that clear through or maintain a direct or
indirect, custodial relationship with a Direct Participant (collectively, the
"Indirect Participants").
DTC has also advised us that, pursuant to procedures established by it:
- upon deposit of the Global Notes for exchange, DTC will credit the
accounts of the Direct Participants with such portions of the principal
amount of the Global Notes as determined based on the portion of
outstanding Series C notes deposited by such Direct Participant as
designated by the exchange agent, and
- DTC will maintain records of the ownership interests of such Direct
Participants in the Global Notes and the transfer of ownership interests
by and between Direct Participants.
DTC will not maintain records of the ownership interests of, or the transfer
of ownership interests by and between, Indirect Participants or other owners of
beneficial interests in the Global Notes. Direct Participants and Indirect
Participants must maintain their own records of the ownership interests of, and
the transfer of ownership interests by and between, Indirect Participants and
other owners of beneficial interests in the Global Notes.
Investors in the U.S. Global Notes may hold their interests therein directly
through DTC if they are Direct Participants in DTC or indirectly through
organizations that are Direct Participants in DTC. All ownership interests in
any Global Notes may be subject to the procedures and requirements of DTC.
The laws of some states in the United States require that some persons take
physical delivery in definitive, certificated form, of securities that they own.
This may limit or curtail the ability to transfer beneficial interests in a
Global Note to such persons. Because DTC can act only on behalf of Direct
Participants, which in turn act on behalf of Indirect Participants and others,
the ability of a person having a beneficial interest in a Global Note to pledge
such interest to persons or entities that are not Direct Participants in DTC, or
to otherwise take actions in respect of such interests, may be affected by the
lack of physical certificates evidencing such interests. You should read the
discussion under the heading "--Transfers of Interests in Global Notes for
Certificated Notes" for further information on other restrictions on the
transferability of the notes.
149
<PAGE>
Except as described in "--Transfers of Interests in Global Notes for
Certificated Notes," owners of beneficial interests in the Global Notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
holders thereof under the indenture for any purpose.
Under the terms of the indenture, we, the guarantors and the trustee will
treat the persons in whose names the notes are registered, including notes
represented by Global Notes, as the owners thereof for the purpose of receiving
payments and for any and all other purposes whatsoever. Payments in respect of
the principal, premium, and interest on Global Notes registered in the name of
DTC or its nominee will be payable by the trustee to DTC or its nominee as the
registered holder under the indenture. Consequently, neither we, the trustee nor
any agent of ours or the trustee has or will have any responsibility or
liability for:
- any aspect of DTC's records or any Direct Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Notes or for maintaining,
supervising or reviewing any of DTC's records or any Direct Participant's
or Indirect Participant's records relating to the beneficial ownership
interests in any Global Note, or
- any other matter relating to the actions and practices of DTC or any of
its Direct Participants or Indirect Participants.
DTC has advised us that its current payment practice for payments of
principal, interest and the like with respect to securities such as the notes is
to credit the accounts of the relevant Direct Participants with such payment on
the payment date in amounts proportionate to such Direct Participant's
respective ownership interests in the Global Notes as shown on DTC's records.
Payments by Direct Participants and Indirect Participants to the beneficial
owners of the notes will be governed by standing instructions and customary
practices between them and will not be the responsibility of DTC, the trustee,
us or the guarantors. Neither we, the guarantors nor the trustee will be liable
for any delay by DTC or its Direct Participants or Indirect Participants in
identifying the beneficial owners of the notes, and we and the trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee as the registered owner of the notes for all purposes.
The Global Notes will trade in DTC's Same-Day Funds Settlement System and,
therefore, transfers between Direct Participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in immediately available
funds. Transfers between Indirect Participants, other than Indirect Participants
who hold an interest in the notes through Euroclear or CEDEL, who hold an
interest through a Direct Participant will be effected in accordance with the
procedures of such Direct Participant but generally will settle in immediately
available funds. Transfers between and among Indirect Participants who hold
interests in the notes through Euroclear and CEDEL will be effected in the
ordinary way in accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the notes
described herein, cross-market transfers between Direct Participants in DTC, on
the one hand, and Indirect Participants who hold interests in the notes through
Euroclear or CEDEL, on the other hand, will be effected by Euroclear's or
CEDEL's respective Nominee through DTC in accordance with DTC's rules on behalf
of Euroclear or CEDEL. Delivery of instructions relating to crossmarket
transactions must be made directly to Euroclear or CEDEL, as the case may be, by
the counterparty in accordance with the rules and procedures of Euroclear or
CEDEL and within their established deadlines (Brussels time for Euroclear and
U.K. time for CEDEL). Indirect Participants who hold interest in the notes
through Euroclear and CEDEL may not deliver instructions directly to Euroclear's
or CEDEL's Nominee. Euroclear or CEDEL will, if the transaction meets its
settlement requirements, deliver instructions to its respective Nominee to
deliver or receive interests on Euroclear's or CEDEL's behalf in the relevant
150
<PAGE>
Global Note in DTC, and make or receive payment in accordance with normal
procedures for same-day fund settlement applicable to DTC.
Because of time zone differences, the securities accounts of an Indirect
Participant who holds an interest in the notes through Euroclear or CEDEL
purchasing an interest in a Global Note from a Direct Participant in DTC will be
credited, and any such crediting will be reported to Euroclear or CEDEL during
the European business day immediately following the settlement date of DTC in
New York. Although recorded in DTC's accounting records as of DTC's settlement
date in New York, Euroclear and CEDEL customers will not have access to the cash
amount credited to their accounts as a result of a sale of an interest in a
Global Note to a DTC Participant until the European business day for Euroclear
or CEDEL immediately following DTC's settlement date.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes only at the direction of one or more Direct Participants to
whose account interests in the Global Notes are credited and only in respect of
such portion of the aggregate principal amount of the notes to which such Direct
Participant or Direct Participants has or have given direction. However, if
there is an Event of Default under the notes, DTC reserves the right to exchange
Global Notes, without the direction of one or more of its Direct Participants,
for legended notes in certificated form, and to distribute such certificated
forms of notes to its Direct Participants. You should read the discussion under
the heading "--Transfers of Interests in Global Notes for Certificated Notes"
for further information regarding such transfers.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Notes among Direct Participants,
including Euroclear and CEDEL, they are under no obligation to perform or to
continue to perform such procedures, and such procedures may be discontinued at
any time. None of us, the guarantors or the trustee shall have any
responsibility for the performance by DTC, Euroclear or CEDEL or their
respective Direct and Indirect Participants of their respective obligations
under the rules and procedures governing any of their operations.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that we believe to be
reliable, but we take no responsibility for the accuracy thereof.
TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES
An entire Global Note may be exchanged for definitive notes in registered,
certificated form without interest coupons ("Certificated Notes") if:
- DTC notifies us that it is unwilling or unable to continue as depositary
for the Global Notes and we thereupon fail to appoint a successor
depositary within 90 days, or DTC has ceased to be a clearing agency
registered under the Exchange Act,
- we, at our option, notify the trustee in writing that we elect to cause
the issuance of Certificated Notes, or
- there shall have occurred and be continuing a Default or an Event of
Default with respect to the notes.
In any such case, we will notify the trustee in writing that, upon surrender
by the Direct and Indirect Participants of their interest in such Global Note,
Certificated Notes will be issued to each person that such Direct and Indirect
Participants and DTC identify as being the beneficial owner of the related
notes.
Beneficial interests in Global Notes held by any Direct or Indirect
Participant may be exchanged for Certificated Notes upon request to DTC, by such
Direct Participant for itself or on behalf of an
151
<PAGE>
Indirect Participant, to the trustee in accordance with customary DTC
procedures. Certificated Notes delivered in exchange for any beneficial interest
in any Global Note will be registered in the names, and issued in any approved
denominations, requested by DTC on behalf of such Direct or Indirect
Participants in accordance with DTC's customary procedures.
In all cases described herein, such Certificated Notes will bear the
restrictive legend referred to in "Notice to Investors," unless we determine
otherwise in compliance with applicable law.
Neither we, the guarantors nor the trustee will be liable for any delay by
the holder of any Global Note or DTC in identifying the beneficial owners of
notes, and we and the trustee may conclusively rely on, and will be protected in
relying on, instructions from the holder of the Global Note or DTC for all
purposes.
TRANSFERS OF CERTIFICATED NOTES FOR INTERESTS IN GLOBAL NOTES
Certificated Notes may only be transferred if the transferor first delivers
to the trustee a written certificate and, in some circumstances, an opinion of
counsel confirming that, in connection with such transfer, it has complied with
the restrictions on transfer described under "Notice to Investors."
SAME DAY SETTLEMENT AND PAYMENT
Payments in respect of the notes represented by the Global Notes, including
principal, premium, if any, interest and Liquidated Damages, if any, shall be
made by wire transfer of immediately available same day funds to the accounts
specified by the holder of interests in such Global Note. With respect to
Certificated Notes, we will make all payments of principal, premium, if any,
interest and liquidated damages, if any, by wire transfer of immediately
available same day funds to the accounts specified by the holders thereof or, if
no such account is specified, by mailing a check to each such holder's
registered address. We expect that secondary trading in the Certificated Notes
will also be settled in immediately available funds.
152
<PAGE>
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
FOR HOLDERS OF SERIES B NOTES
The following is a summary of material United States federal income tax
consequences of the exchange offer to holders of Series A notes and the
ownership and disposition of Series B notes by holders who acquire Series B
notes pursuant to the exchange offer. This summary is based upon existing United
States federal income tax law, which is subject to change, possibly with
retroactive effect. We have not and will not seek any rulings or opinions from
the Internal Revenue Service or counsel with respect to the matters discussed
below. There can be no assurance that the IRS will not take positions concerning
the tax consequences of the exchange offer and the ownership and disposition of
Series B notes which are different from those discussed herein. This summary
does not discuss all aspects of United States federal income taxation which may
be important to particular investors in light of their specific circumstances,
such as:
- to investors subject to special tax rules, including financial
institutions, insurance companies, broker-dealers and tax-exempt
organizations, or
- to persons that will hold the Series B notes as part of a straddle, hedge,
conversion, synthetic security, or constructive sale transaction for
United States federal income tax purposes, or
- to persons that have a functional currency other than the United States
dollar, or
- to investors in pass-through entities.
All of these persons may be subject to tax rules that differ significantly from
those summarized below. In addition, this summary does not discuss any foreign,
state, or local tax considerations. This summary assumes that investors will
hold their notes as "capital assets" (generally, property held for investment)
within the meaning of the United States Internal Revenue code of 1986. WE URGE
EACH PROSPECTIVE INVESTOR TO CONSULT HIS TAX ADVISOR REGARDING THE UNITED STATES
FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE
EXCHANGE OFFER AND THE OWNERSHIP AND DISPOSITION OF THE SERIES B NOTES IN LIGHT
OF THEIR PARTICULAR SITUATION.
The exchange of Series A notes for Series B notes under the terms of the
exchange offer should not constitute a taxable exchange. As a result:
- a holder should not recognize taxable gain or loss as a result of
exchanging Series A notes for Series B notes under the terms of the
exchange offer,
- the holding period of the Series B notes should include the holding period
of the Series A notes exchanged for the Series B notes, and
- the adjusted tax basis of the Series B notes should be the same as the
adjusted tax basis of the Series A notes exchanged therefor immediately
before the exchange.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS FOR U.S. HOLDERS
For purposes of this summary, a "U.S. Holder" is a beneficial owner of a
Series B note who is:
- an individual who is a citizen or resident of the United States,
- a corporation created or organized in, or under the laws of, the United
States or any State thereof,
- an estate that is subject to United States federal income taxation without
regard to the source of its income, or
153
<PAGE>
- a trust the administration of which is subject to the primary supervision
of a United States court and which has one or more United States persons
who have the authority to control all substantial decisions of the trust.
DISPOSITION OF THE SERIES B NOTES
A U.S. Holder will recognize capital gain or loss upon the sale, redemption,
or other disposition of a Series B note in an amount equal to the difference
between the amount realized from such disposition and his adjusted tax basis in
the Series B note. Any such gain or loss will be long-term gain or loss if the
Series B note has been held for more than one year at the time of the
disposition.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, payments of interest on, and the proceeds from the sale,
redemption or other disposition of Series B notes, other than Series B notes
held by certain exempt persons, including most corporations and other persons
who, when required, demonstrate their exempt status, will be subject to
information reporting requirements. "Backup withholding" at a rate of 31% may
apply to such payments of the U.S. Holder fails to furnish a correct taxpayer
identification number or otherwise fails to comply with all backup withholding
requirements.
The backup withholding tax is not an additional tax and may be credited
against a U.S. Holder's regular United States federal income tax liability or
refunded by the Internal Revenue Service.
The payment of proceeds from the disposition of Series B notes to or through
the United States office of a broker will be subject to information reporting
and backup withholding rules unless the owner establishes an exemption. Special
rules may apply with respect to the payment of the proceeds from the disposition
of Series B notes to or through foreign offices of certain brokers.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS.
As used herein the term "Non-U.S. Holder" means a beneficial owner of a
Series B note that is, for United States federal income tax purposes:
- a nonresident alien individual,
- a foreign corporation, or
- a nonresident alien fiduciary of a foreign estate or trust.
Interest that we pay to Non-U.S. Holders will not be subject to United
States federal income or withholding tax; PROVIDED THAT:
- such holder does not actually or constructively own 10% or more of the
total combined voting power of all classes of our stock entitled to vote,
- such holder is not a controlled foreign corporation that is related to us
through stock ownership, a foreign tax-exempt organization or foreign
private foundation for United States federal income tax purposes, and
- the requirements of section 871(h) or 881(c) of the Code are satisfied as
described below under the heading "Owner Statement Requirement."
Notwithstanding the above, a Non-U.S. Holder that is engaged in the conduct
of a United States trade or business will be subject to:
- United States federal income tax on interest that is effectively connected
with the conduct of such trade or business, and
154
<PAGE>
- if the Non-U.S. Holder is a corporation, a United States branch profits
tax equal to 30% of its "effectively connected earnings and profits" as
adjusted for the taxable year, unless the holder qualifies for an
exemption from such tax or a lower tax rate under an applicable treaty.
GAIN ON DISPOSITION
A Non-U.S. Holder will generally not be subject to United States federal
income tax on gain recognized on a sale, redemption, or other disposition of a
Series B note if such gain is not effectively connected with the conduct of a
trade or business within the United States by the Non-U.S. Holder, except that
in the case of a Non-U.S. Holder who is an individual, such holder may be
subject to tax at a flat rate of 30%, unless exempt by an applicable treaty, on
any such gain if the Non-U.S. Holder who is an individual is present in the
United States for 183 or more days during the taxable year and other specific
requirements are met. Any gain recognized on a sale, redemption, or other
disposition of a Series B note that is effectively connected with the conduct of
a United States trade or business by a Non-U.S. Holder will be subject to United
States federal income tax on a net income basis in the same manner as if such
holder were a U.S. Holder. If such Non-U.S. Holder is a corporation, such gain
may also be subject to the 30% United States branch profits tax described above.
OWNER STATEMENT REQUIREMENT
Sections 871(h) and 881(c) of the Code require that either:
- the beneficial owner of a Series B note, or
- a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business and that holds a Series B note on behalf of a benefical owner of
a Series B note,
file a statement with us or our agent to the effect that the beneficial owner is
not a United States person for United States federal income tax purposes in
order to avoid withholding of United States federal income tax. Under current
regulations, this requirement will be satisfied if we or our agent receive:
- a statement from the beneficial owner of a Series B note in which such
owner certifies, under penalties of perjury, that such owner is not a
United States person and provides its name and address, or
- a statement from the financial institution holding the Series B note on
behalf of the beneficial owner in which the financial institution
certifies, under penalties of perjury, that it has received a statement
from the beneficial owner of the Series B note, together with a copy of
the statement.
The beneficial owner must inform us or our agent, or, in the case of a statement
made to a financial institution, the financial institution, within 30 days of
any change in information on the statement made by such beneficial owner.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Current United States federal income tax law provides that in the case of
payments of interest to Non-U.S. Holders, the 31% backup withholding tax will
not apply to payments made outside the United States by us or a paying agent on
a Series B note if a statement by the beneficial owner as described above is
received or an exemption has otherwise been established; provided in each case
that we or the paying agent, as the case may be, do not have actual knowledge
that the payee is a United States person.
155
<PAGE>
Under current Treasury Regulations, payments of the proceeds of the sale of
a Series B note to or through a foreign office of a "broker" will not be subject
to backup withholding but will be subject to information reporting if the broker
is, for United States federal income tax purposes:
- a United States person,
- a controlled foreign corporation,
- a foreign person 50% or more of whose gross income is from a United States
trade or business for a specified three-year period or,
- in the case of payments made after December 31, 2000, a foreign
partnership with specific connections to the United States,
unless the broker has in its records documentary evidence that the holder is not
a U.S. Holder and other specific conditions are met or the holder otherwise
establishes an exemption. Payment of the proceeds of a sale to or through the
United States office of a broker is subject to backup withholding and
information reporting unless the holder certifies its non-United States status
under penalties of perjury or otherwise establishes an exemption.
The Treasury Department recently promulgated final regulations regarding the
withholding and information reporting rules discussed above. In general, the
final regulations do not significantly alter the substantive withholding and
information reporting requirements but unify current certification procedures
and forms and clarify reliance standards. Under the final regulations, special
rules apply which permit the shifting of primary responsibility for withholding
to certain financial intermediaries acting on behalf of beneficial owners. The
final regulations are anticipated to be effective for payments made after
December 31, 2000, subject to some transition rules.
156
<PAGE>
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
FOR HOLDERS OF SERIES D NOTES
The following is a summary of material United States federal income tax
consequences of the exchange offer to holders of Series C notes and the
ownership and disposition of Series D notes by holders who acquire Series D
notes pursuant to the exchange offer. This summary is based upon existing United
States federal income tax law, which is subject to change, possibly with
retroactive effect. We have not and will not seek any rulings or opinions from
the Internal Revenue Service or counsel with respect to the matters discussed
below. There can be no assurance that the IRS will not take positions concerning
the tax consequences of the exchange offer and the ownership and disposition of
Series D notes which are different from those discussed herein. This summary
does not discuss all aspects of United States federal income taxation which may
be important to particular investors in light of their specific circumstances,
such as:
- to investors subject to special tax rules, including financial
institutions, insurance companies, broker-dealers and tax-exempt
organizations, or
- to persons that will hold the Series D notes as part of a straddle, hedge,
conversion, synthetic security, or constructive sale transaction for
United States federal income tax purposes, or
- to persons that have a functional currency other than the United States
dollar, or
- to investors in pass-through entities.
All of these persons may be subject to tax rules that differ significantly from
those summarized below. In addition, this summary does not discuss any foreign,
state, or local tax considerations. This summary assumes that investors will
hold their notes as "capital assets" (generally, property held for investment)
within the meaning of the United States Internal Revenue code of 1986. WE URGE
EACH PROSPECTIVE INVESTOR TO CONSULT HIS TAX ADVISOR REGARDING THE UNITED STATES
FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE
EXCHANGE OFFER AND THE OWNERSHIP AND DISPOSITION OF THE SERIES D NOTES IN LIGHT
OF THEIR PARTICULAR SITUATION.
The exchange of Series C notes for Series D notes under the terms of the
exchange offer should not constitute a taxable exchange. As a result:
- a holder should not recognize taxable gain or loss as a result of
exchanging Series C notes for Series D notes under the terms of the
exchange offer,
- the holding period of the Series D notes should include the holding period
of the Series C notes exchanged for the Series D notes, and
- the adjusted tax basis of the Series D notes should be the same as the
adjusted tax basis of the Series C notes exchanged therefor immediately
before the exchange.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS FOR U.S. HOLDERS
For purposes of this summary, a "U.S. Holder" is a beneficial owner of a
Series D note who is:
- an individual who is a citizen or resident of the United States,
- a corporation created or organized in, or under the laws of, the United
States or any State thereof,
- an estate that is subject to United States federal income taxation without
regard to the source of its income, or
157
<PAGE>
- a trust the administration of which is subject to the primary supervision
of a United States court and which has one or more United States persons
who have the authority to control all substantial decisions of the trust.
ORIGINAL ISSUE DISCOUNT
The Series C notes were issued with original issue discount for United
States federal income tax purposes. Accordingly, U.S. Holders of Series C notes
and persons who exchange Series C notes for Series D notes pursuant to the
exchange offer will be required to include original issue discount in gross
income over the period that they hold the Series D notes in advance of the
receipt of the cash attributable thereto. The amount of original issue discount
to be included in income will be determined using a constant yield method, which
will result in a greater portion of such discount being included in income in
the later part of the term of the Series D notes. Any amount of original issue
discount included in income will increase a U.S. Holder's tax basis in the
Series D notes.
We will report annually to the Internal Revenue Service and to record U.S.
Holders information with respect to the amount of original issue discount
accruing during the calendar year.
DISPOSITION OF THE SERIES D NOTES
A U.S. Holder will recognize capital gain or loss upon the sale, redemption,
or other disposition of a Series D note in an amount equal to the difference
between the amount realized from such disposition and his adjusted tax basis in
the Series D note. Any such gain or loss will be long-term gain or loss if the
Series D note has been held for more than one year at the time of the
disposition.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, payments of interest on, and the proceeds from the sale,
redemption or other disposition of Series D notes, other than Series D notes
held by certain exempt persons, including most corporations and other persons
who, when required, demonstrate their exempt status, will be subject to
information reporting requirements. "Backup withholding" at a rate of 31% may
apply to such payments of the U.S. Holder fails to furnish a correct taxpayer
identification number or otherwise fails to comply with all backup withholding
requirements.
The backup withholding tax is not an additional tax and may be credited
against a U.S. Holder's regular United States federal income tax liability or
refunded by the Internal Revenue Service.
The payment of proceeds from the disposition of Series D notes to or through
the United States office of a broker will be subject to information reporting
and backup withholding rules unless the owner establishes an exemption. Special
rules may apply with respect to the payment of the proceeds from the disposition
of Series D notes to or through foreign offices of certain brokers.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO US; DIVIDENDS RECEIVED
DEDUCTION
The Series D note will constitute "applicable high yield discount
obligations," for United States federal income tax purposes. We will not be
entitled to claim a deduction for original issue discount that accrues on the
Series D notes for United States federal income tax purposes, until amounts
attributable to such original issue discount are paid in cash. In addition, to
the extent that the yield to maturity of the Series D notes exceeds the sum of
the "applicable Federal rate" plus six percentage points, any deduction we claim
that is attributable to such excess yield will be disallowed. Such disallowed
deduction will be treated as a dividend to the extent it is deemed to have been
paid out of our current or accumulated earnings and profits. Accordingly, a U.S.
Holder that is a corporation may be entitled to a dividends received deduction
with respect to any such disallowed interest received by such corporate U.S.
Holder with respect to a Series D note.
158
<PAGE>
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS.
As used herein the term "Non-U.S. Holder" means a beneficial owner of a
Series D note that is, for United States federal income tax purposes:
- a nonresident alien individual,
- a foreign corporation, or
- a nonresident alien fiduciary of a foreign estate or trust.
Interest, including original issue discount, that we pay to Non-U.S. Holders
will not be subject to United States federal income or withholding tax; PROVIDED
THAT:
- such holder does not actually or constructively own 10% or more of the
total combined voting power of all classes of our stock entitled to vote,
- such holder is not a controlled foreign corporation that is related to us
through stock ownership, a foreign tax-exempt organization or foreign
private foundation for United States federal income tax purposes, and
- the requirements of section 871(h) or 881(c) of the Code are satisfied as
described below under the heading "Owner Statement Requirement."
Notwithstanding the above, a Non-U.S. Holder that is engaged in the conduct
of a United States trade or business will be subject to:
- United States federal income tax on interest, including original issue
discount, that is effectively connected with the conduct of such trade or
business, and
- if the Non-U.S. Holder is a corporation, a United States branch profits
tax equal to 30% of its "effectively connected earnings and profits" as
adjusted for the taxable year, unless the holder qualifies for an
exemption from such tax or a lower tax rate under an applicable treaty.
GAIN ON DISPOSITION
A Non-U.S. Holder will generally not be subject to United States federal
income tax on gain recognized on a sale, redemption, or other disposition of a
Series D note if such gain is not effectively connected with the conduct of a
trade or business within the United States by the Non-U.S. Holder, except that
in the case of a Non-U.S. Holder who is an individual, such holder may be
subject to tax at a flat rate of 30%, unless exempt by an applicable treaty, on
any such gain if the Non-U.S. Holder who is an individual is present in the
United States for 183 or more days during the taxable year and other specific
requirements are met. Any gain recognized on a sale, redemption, or other
disposition of a Series D note that is effectively connected with the conduct of
a United States trade or business by a Non-U.S. Holder will be subject to United
States federal income tax on a net income basis in the same manner as if such
holder were a U.S. Holder. If such Non-U.S. Holder is a corporation, such gain
may also be subject to the 30% United States branch profits tax described above.
OWNER STATEMENT REQUIREMENT
Sections 871(h) and 881(c) of the Code require that either:
- the beneficial owner of a Series D note, or
- a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business and that holds a Series D note on behalf of a beneficial owner,
159
<PAGE>
file a statement with us or our agent to the effect that the beneficial owner is
not a United States person for United States federal income tax purposes in
order to avoid withholding of United States federal income tax. Under current
regulations, this requirement will be satisfied if we or our agent receive:
- a statement from the beneficial owner of a Series D note in which such
owner certifies, under penalties of perjury, that such owner is not a
United States person and provides its name and address, or
- a statement from the financial institution holding the Series D note on
behalf of the beneficial owner in which the financial institution
certifies, under penalties of perjury, that it has received a statement
from the beneficial owner of the Series D note, together with a copy of
the statement.
The beneficial owner must inform us or our agent, or, in the case of a statement
made to a financial institution, the financial institution, within 30 days of
any change in information on the statement made by such beneficial owner.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Current United States federal income tax law provides that in the case of
payments of interest to Non-U.S. Holders, the 31% backup withholding tax will
not apply to payments made outside the United States by us or a paying agent on
a Series D note if a statement by the beneficial owner as described above is
received or an exemption has otherwise been established; provided in each case
that we or the paying agent, as the case may be, do not have actual knowledge
that the payee is a United States person.
Under current Treasury Regulations, payments of the proceeds of the sale of
a Series D note to or through a foreign office of a "broker" will not be subject
to backup withholding but will be subject to information reporting if the broker
is, for United States federal income tax purposes:
- a United States person,
- a controlled foreign corporation,
- a foreign person 50% or more of whose gross income is from a United States
trade or business for a specified three-year period or,
- in the case of payments made after December 31, 2000, a foreign
partnership with specific connections to the United States,
unless the broker has in its records documentary evidence that the holder is not
a U.S. Holder and other specific conditions are met or the holder otherwise
establishes an exemption. Payment of the proceeds of a sale to or through the
United States office of a broker is subject to backup withholding and
information reporting unless the holder certifies its non-United States status
under penalties of perjury or otherwise establishes an exemption.
The Treasury Department recently promulgated final regulations regarding the
withholding and information reporting rules discussed above. In general, the
final regulations do not significantly alter the substantive withholding and
information reporting requirements but unify current certification procedures
and forms and clarify reliance standards. Under the final regulations, special
rules apply which permit the shifting of primary responsibility for withholding
to certain financial intermediaries acting on behalf of beneficial owners. The
final regulations are anticipated to be effective for payments made after
December 31, 2000, subject to some transition rules.
160
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Series B or Series D notes for its own
account pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Series B or Series D notes.
This prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Series B notes received in
exchange for Series A notes, or of Series D notes received in exchange for
Series C notes, where such outstanding notes were acquired as a result of
market-making activities or other trading activities. We have agreed that we
will make this prospectus, as amended or supplemented, available to any broker-
dealer for use in connection with any such resales for a period of up to one
year after the expiration date, or for such shorter period that will terminate
when such broker-dealers have sold all of such Series B or Series D notes.
We will not receive any proceeds from any sale of Series B notes or Series D
by broker-dealers. Series B and Series D notes received by broker-dealers for
their own accounts pursuant to the exchange offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Series B or Series D notes
or a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or at
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers of
any such Series B or Series D notes. Any broker-dealer that resells Series B or
Series D notes that were received by it for its own account pursuant to the
exchange offer and any broker or dealer that participates in a distribution of
such Series B or Series D notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of Series B or
Series D notes and any commissions or concessions received by any such persons
may be deemed to be underwriting compensation under the Securities Act. The
letter of transmittal states that by acknowledging it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
We have been advised by two of the initial purchasers of the Series A notes
and the initial purchaser of the Series C notes that following completion of the
exchange offer they intend to make a market in the Series B and Series D notes
to be issued in the exchange offer. However, such entities are under no
obligation to do so and any such market-making activities with respect to the
Series B or Series D notes may be discontinued at any time.
161
<PAGE>
LEGAL MATTERS
The validity of the Series B and Series D notes offered hereby will be
passed upon for us by Morgan, Lewis & Bockius LLP, Los Angeles, California.
EXPERTS
Our consolidated financial statements as of December 31, 1997 and 1998 and
for the period October 21, 1997 through December 31, 1997 and for the year ended
December 31, 1998, the financial statements of Aeromil, the consolidated
financial statements of Brittain Machine as of June 30, 1996 and for the year
then ended, the financial statements of Barnes Machine, the combined financial
statements of Sea-Lect and the consolidated financial statements of Modern and
Subsidiary appearing in this prospectus and registration statement have been
audited by Ernst & Young LLP, independent auditors, to the extent indicated in
their reports thereon also appearing elsewhere herein and in the registration
statement. Such financial statements have been included herein in reliance upon
such reports given on the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of Trim as of and for the year ended
April 30, 1999 appearing in this prospectus and registration statement have been
audited by Ernst & Young, independent auditors, to the extent indicated in their
report thereon also appearing elsewhere herein and in the registration
statement. Such financial statements have been included herein in reliance upon
such reports given on the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of Brittain Machine as of April 21,
1998 and June 30, 1997 and for the period July 1, 1997 through April 21, 1998
and for the year ended June 30, 1997 appearing in this prospectus and
registration statement have been audited by Grant Thornton LLP, independent
auditors, to the extent indicated in their reports thereon also appearing
elsewhere herein and in the registration statement. Such consolidated financial
statements have been included herein in reliance upon such reports given on the
authority of such firm as experts in accounting and auditing.
The financial statements of Pacific Hills appearing in this prospectus and
registration statement have been audited by McGladrey & Pullen, LLP, independent
auditors, to the extent indicated in their reports thereon also appearing herein
and in the registration statement. Such financial statements have been included
herein in reliance upon such reports given on the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of Trim as of April 30, 1997 and 1998
and for the years ended April 30, 1997 and 1998 appearing in this prospectus and
registration statement have been audited by Pricecroft Redman, independent
auditors, to the extent indicated in their reports thereon also appearing herein
and in the registration statement. Such financial statements have been included
herein in reliance upon such reports given on the authority of such firm as
experts in accounting and auditing.
162
<PAGE>
COMPASS AEROSPACE CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
COMPASS AEROSPACE CORPORATION
For the six months ended June 30, 1999 and June 30, 1998
Consolidated Condensed Balance Sheets at June 30, 1999 (unaudited) and December 31, 1998............... F-4
Consolidated Condensed Statements of Operations (unaudited)............................................ F-5
Consolidated Condensed Statements of Cash Flows (unaudited)............................................ F-6
Notes to Unaudited Interim Consolidated Condensed Financial Statements................................. F-7
For the year ended December 31, 1998 and for the period from October 21, 1997 (date of incorporation)
through December 31, 1997
Report of Independent Auditors......................................................................... F-9
Consolidated Balance Sheets............................................................................ F-10
Consolidated Statements of Income...................................................................... F-11
Consolidated Statements of Stockholders' Equity........................................................ F-12
Consolidated Statements of Cash Flows.................................................................. F-13
Notes to Consolidated Financial Statements............................................................. F-14
AEROMIL ENGINEERING COMPANY
For the period from January 1, 1997 through November 25, 1997
Report of Independent Auditors......................................................................... F-25
Balance Sheet.......................................................................................... F-26
Statement of Operations and Retained Earnings.......................................................... F-27
Statement of Cash Flows................................................................................ F-28
Notes to Financial Statements.......................................................................... F-29
BRITTAIN MACHINE, INC.
For the period from July 1, 1997 through April 21, 1998
Report of Independent Certified Public Accountants..................................................... F-35
Consolidated Balance Sheet............................................................................. F-36
Consolidated Statement of Earnings and Retained Earnings............................................... F-37
Consolidated Statement of Cash Flows................................................................... F-38
Notes to Consolidated Financial Statements............................................................. F-39
For the years ended June 30, 1997 and June 30, 1996
Report of Independent Certified Public Accountants..................................................... F-46
Report of Independent Auditors......................................................................... F-47
Consolidated Balance Sheets............................................................................ F-48
Consolidated Statements of Earnings and Retained Earnings.............................................. F-50
Consolidated Statements of Cash Flows.................................................................. F-51
Notes to Consolidated Financial Statements............................................................. F-52
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
BARNES MACHINE, INC.
For the period from October 1, 1997 through April 21, 1998 and for the year ended September 30, 1997
Report of Independent Auditors......................................................................... F-60
Balance Sheets......................................................................................... F-61
Statements of Income and Retained Earnings............................................................. F-62
Statements of Cash Flows............................................................................... F-63
Notes to Financial Statements.......................................................................... F-64
SEA-LECT PRODUCTS, INC.
For the period from January 1, 1998 through May 11, 1998 and for the year ended December 31, 1997
Report of Independent Auditors......................................................................... F-69
Combined Balance Sheets................................................................................ F-70
Combined Statements of Income.......................................................................... F-71
Combined Statements of Shareholders' Equity............................................................ F-72
Combined Statements of Cash Flows...................................................................... F-73
Notes to Combined Financial Statements................................................................. F-74
PACIFIC HILLS MANUFACTURING CO. (formerly known as Lamsco West, Inc.)
For the period from January 4, 1998 through November 20, 1998 and for the years ended January 3, 1998 and
December 28, 1996
Independent Auditor's Report........................................................................... F-77
Balance Sheets......................................................................................... F-78
Statements of Income................................................................................... F-79
Statements of Retained Earnings........................................................................ F-80
Statements of Cash Flows............................................................................... F-81
Notes to Financial Statements.......................................................................... F-82
MODERN MANUFACTURING, INC. (formerly Y.F. Americas, Inc.)
For the years ended December 31, 1998, December 31, 1997 and December 31, 1996
Report of Independent Auditors......................................................................... F-86
Consolidated Balance Sheets............................................................................ F-87
Consolidated Statements of Income...................................................................... F-88
Consolidated Statements of Shareholders' Equity........................................................ F-89
Consolidated Statements of Cash Flows.................................................................. F-90
Notes to Consolidated Financial Statements............................................................. F-91
TRIM ENGINEERING LIMITED
For the year ended April 30, 1999
Report of Independent Auditors......................................................................... F-97
Consolidated Profit and Loss Account................................................................... F-98
Consolidated Balance Sheet............................................................................. F-99
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Consolidated Cash Flow Statement....................................................................... F-100
Notes to the Accounts.................................................................................. F-101
For the years ended April 30, 1998 and April 30, 1997
Report of the directors................................................................................ F-110
Statement of director's responsibilities............................................................... F-112
Report of the auditors................................................................................. F-113
Consolidated Profit and Loss Account................................................................... F-114
Consolidated Balance Sheet............................................................................. F-115
Balance Sheet.......................................................................................... F-116
Consolidated Cash Flow Statement....................................................................... F-117
Notes to the Consolidated Cash Flow Statement.......................................................... F-118
Notes to the Accounts.................................................................................. F-119
</TABLE>
F-3
<PAGE>
COMPASS AEROSPACE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1998
JUNE 30, ------------
1999
-----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 7,096 $ 7,871
----------- ------------
----------- ------------
Accounts receivable, net............................................................ 17,045 19,553
Inventories......................................................................... 32,671 32,631
Prepaid expenses and other current assets........................................... 3,450 3,407
----------- ------------
Total current assets.................................................................. 60,262 63,462
----------- ------------
----------- ------------
Property and equipment, net........................................................... 56,911 58,914
Goodwill, net......................................................................... 118,337 120,412
Other assets.......................................................................... 12,619 12,717
----------- ------------
Total assets.......................................................................... $ 248,129 $ 255,505
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................... $ 6,695 $ 10,827
Accrued expenses.................................................................... 8,500 9,910
Current portion of long-term debt and capital leases................................ 8,325 4,632
----------- ------------
Total current liabilities............................................................. 23,520 25,369
Deferred income taxes................................................................. 7,845 7,845
Long-term debt and capital leases, less current portion............................... 188,762 192,336
Stockholders' equity:
Common stock........................................................................ 248 248
Paid-in capital..................................................................... 28,718 28,718
Retained earnings................................................................... (964) 989
----------- ------------
Total stockholders' equity............................................................ 28,002 29,955
----------- ------------
Total liabilities and stockholders' equity............................................ $ 248,129 $ 255,505
----------- ------------
----------- ------------
</TABLE>
See accompanying notes.
F-4
<PAGE>
COMPASS AEROSPACE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1999 1998
--------- ---------
(UNAUDITED)
<S> <C> <C>
Net sales................................................................................... $ 67,116 $ 34,851
Cost of sales............................................................................... 47,812 26,039
--------- ---------
Gross profit................................................................................ 19,304 8,812
Selling, general and administrative expenses................................................ 8,744 4,157
Amortization of goodwill.................................................................... 3,040 593
--------- ---------
11,784 4,750
Operating income............................................................................ 7,520 4,062
Interest expense, net....................................................................... 9,932 2,370
Other expense............................................................................... 987 187
--------- ---------
Income (loss) before income taxes........................................................... (3,399) 1,505
Income tax expense (benefit)................................................................ (1,446) 587
--------- ---------
Net income (loss)........................................................................... $ (1,953) $ 918
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
F-5
<PAGE>
COMPASS AEROSPACE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
---------------------
1999 1998
--------- ----------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss).......................................................................... $ (1,953) $ 918
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating
activities:
Depreciation and amortization............................................................ 8,766 2,713
Stock issued for compensation............................................................ -- 466
Changes in operating assets and liabilities:
Accounts receivable.................................................................... 2,508 (658)
Inventories............................................................................ (40) (72)
Prepaid expenses and other assets...................................................... (43) 1,129
Accounts payable....................................................................... (4,132) (522)
Accrued expenses and other liabilities................................................. (1,410) (2,005)
Change in other assets................................................................... (1,840) --
--------- ----------
Net cash (used in) provided by operating activities........................................ 1,856 1,969
INVESTING ACTIVITIES
Purchase of property and equipment......................................................... (2,750) (3,009)
Acquired businesses, net of cash acquired.................................................. -- (74,976)
--------- ----------
Net cash used in investing activities...................................................... (2,750) (77,985)
FINANCING ACTIVITIES
Proceeds from long-term debt............................................................... -- 1,527
Proceeds from note offering................................................................ -- 110,000
Repayment of debt.......................................................................... (2,881) (17,888)
Net increase (decrease) in line of credit.................................................. 3,000 (4,034)
Proceeds from the sale of stock............................................................ -- 13,500
--------- ----------
Net cash (used in) provided by financing activities........................................ 119 103,105
Net increase (decrease) in cash............................................................ (775) 27,089
Cash and cash equivalents at beginning of period........................................... 7,871 443
--------- ----------
Cash and cash equivalents at end of period................................................. $ 7,096 $ 27,532
--------- ----------
--------- ----------
</TABLE>
See accompanying notes
F-6
<PAGE>
COMPASS AEROSPACE CORPORATION
NOTES TO UNAUDITED INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1999
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions of Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring adjustments, necessary for fair presentation, with respect
to the interim financial statements have been included. The results of
operations for the six month period ended June 30, 1999 are not necessarily
indicative of the results for the full year ending December 31, 1999. For
further information, refer to the Compass Aerospace Corporation consolidated
financial statements and notes thereto for the year ended December 31, 1998.
The accompanying consolidated financial statements include the accounts of
Compass Aerospace Corporation and its wholly owned subsidiaries as of June 30,
1999, Western Methods Machinery Corporation, Aeromil Engineering Company, Barnes
Machine, Inc., Brittain Machine, Inc., Wichita Manufacturing, Inc., Sea-Lect
Products, Inc., Pacific Hills Manufacturing Company, and Modern Manufacturing,
Inc. (collectively, the Company). All significant intercompany accounts have
been eliminated in consolidation.
2. OTHER FINANCIAL INFORMATION
Earnings before interest, income taxes, depreciation and amortization for
the six month period ended June 30,1999 and June 30,1998 are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1999 1998
--------- ---------
(UNAUDITED)
<S> <C> <C>
Operating Income......................................................... $ 7,520 $ 4,062
Plus: Depreciation....................................................... 4,753 1,854
Plus: Amortization....................................................... 3,040 593
Plus: Management Fees.................................................... 335 200
Less: Extraordinary Expenses............................................. -- (76)
--------- ---------
EBITDA................................................................... $ 15,648 $ 6,633
</TABLE>
3. RECENT DEVELOPMENTS
On July 31, 1999 the Company acquired 100% of the outstanding capital stock
of Trim Engineering Limited ("Trim") for $51.2 million, net of acquired cash,
including a $2.6 million seller variable rate note due 2002. Trim is a leading
manufacturer of aerospace structural parts in the United Kingdom. The company
manufactures individual parts, sub-assemblies and structural components for
aerospace manufacturers from a variety of metals including aluminum, titanium
and steel through the use of precision computer-numerically-controlled and
conventional machine tools and metal forming equipment. Trim also provides its
customers with metal treatments, non-ferrous castings and welded assemblies and
components.
In July 1999, the Company sold approximately 10.2 million shares of common
stock for $15.0 million in cash. The proceeds are to be used to fund current and
anticipated working capital requirements, capital expenditures and in part to
fund the aforementioned acquisition of Trim.
F-7
<PAGE>
COMPASS AEROSPACE CORPORATION
NOTES TO UNAUDITED INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
JUNE 30, 1999
3. RECENT DEVELOPMENTS (CONTINUED)
The acquisition of Trim was funded through the issuance of $19.0 million of
10 1/8% Senior Subordinated Notes (net proceeds of $16.1 million), a $19.7
million bank loan under the Company's existing acquisition line, a $2.6 million
variable rate note payable to the seller (due in 2002) and available cash.
4. YEAR 2000 COMPLIANCE
The Year 2000 issue concerns the inability of information systems to
recognize properly and process date-sensitive information beyond January 1,
2000.
The Company has developed plans to address the possible impact of the Year
2000 issue on its computer systems. In 1998, the Company decided to replace its
Year 2000 non-compliant systems and install replacement systems. The
installation of the replacement systems is underway and the Company believes it
will complete this program by September 30, 1999.
The Company is in the process of its evaluation of Year 2000 compliance of
non-information technology systems such as telephone systems, fax machines,
security systems, etc. The Company expects to complete its evaluation and
remediation of non-compliant, non-information technology systems by September
30, 1999.
The Company is developing a plan to identify third parties with which it has
a significant business relationship and to survey such parties as to their Year
2000 compliance. The Company cannot ensure that all third parties significant to
the Company's operations will be compliant by December 31, 1999. The Company
believes a reasonably likely worst case scenario resulting from non-compliance
by certain of the Company's major customers or critical vendors could include
adverse effects on the Company's revenue collection, disbursements and
communications, as well as the scheduling and delivery of inventory resulting in
a material adverse effect on the Company's business, financial condition or
results of operations. In addition, loss of utility service resulting from
disruptions in power generation, transmission or distribution could adversely
affect the Company's manufacturing facilities, leading to delays in or the
inability to provide products to the Company's customers, resulting in a
material adverse effect on the Company's business, financial condition or
results of operations. If it appears likely that any major customer or critical
vendor will not be compliant, the Company intends to develop contingency plans,
if possible, to mitigate the impact of non-compliance.
F-8
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders
Compass Aerospace Corporation
We have audited the accompanying consolidated balance sheets of Compass
Aerospace Corporation and subsidiaries as of December 31, 1998 and 1997, and the
related statements of income, stockholders' equity, and cash flows for the year
ended December 31, 1998 and the period October 21, 1997 (date of incorporation)
through December 31, 1997. Our audits also included the financial statement
schedule listed in the Index at Item 21(b). 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 the 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Compass
Aerospace Corporation and subsidiaries at December 31, 1998 and 1997 and the
consolidated results of its operations and its cash flows for the year ended
December 31, 1998 and the period October 21, 1997 (date of incorporation)
through December 31, 1997, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presented fairly, in all material respects the information set forth
therein.
Long Beach, California
March 15, 1999
F-9
<PAGE>
COMPASS AEROSPACE CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
<S> <C> <C>
1998 1997
---------- ---------
ASSETS
Current assets:
Cash and cash equivalents................................................................ $ 7,871 $ 443
Accounts receivable less allowance for doubtful accounts of $756 in 1998 and $31 in
1997................................................................................... 19,553 2,168
Inventories.............................................................................. 32,631 5,559
Deferred income taxes.................................................................... 2,100 123
Refundable income taxes.................................................................. 889 --
Prepaid expenses and other current assets................................................ 418 350
---------- ---------
Total current assets..................................................................... 63,462 8,643
Property and equipment, net.............................................................. 58,914 11,947
Goodwill, net of accumulated amortization of $2,519 in 1998 and $53 in 1997.............. 120,412 13,199
Other assets............................................................................. 12,717 --
---------- ---------
Total assets............................................................................. $ 255,505 $ 33,789
---------- ---------
---------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................................................... $ 10,827 $ 2,084
Accrued liabilities...................................................................... 9,910 742
Income taxes payable..................................................................... -- 889
Current portion of long-term debt and capital leases..................................... 4,632 2,104
Line of credit........................................................................... -- 4,034
---------- ---------
Total current liabilities................................................................ 25,369 9,853
Deferred income taxes.................................................................... 7,845 415
Long-term debt and capital leases, less current portion.................................. 192,336 8,447
Mezzanine debt with related party........................................................ -- 6,000
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares:
36,000,000 at December 31, 1998
20,000,000 at December 31, 1997
Issued and Outstanding:
24,775,628 at December 31, 1998
9,000,000 at December 31, 1997....................................................... 248 90
Paid-in capital.......................................................................... 28,718 8,910
Retained earnings........................................................................ 989 74
---------- ---------
Total stockholders' equity............................................................... 29,955 9,074
---------- ---------
Total liabilities and stockholders' equity............................................... $ 255,505 $ 33,789
---------- ---------
---------- ---------
</TABLE>
See accompanying notes.
F-10
<PAGE>
COMPASS AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 21
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1998 1997
------------ -------------
<S> <C> <C>
Net sales............................................................................. $ 96,547 $ 3,057
Cost of sales......................................................................... 70,410 2,386
------------ ------
Gross profit.......................................................................... 26,137 671
Selling, general and administrative expenses.......................................... 14,537 404
------------ ------
Operating income...................................................................... 11,600 267
Interest expense...................................................................... 8,493 166
Other (expense) income................................................................ (670) 16
------------ ------
Income before income taxes............................................................ 2,437 117
Income tax expense.................................................................... 1,522 43
------------ ------
Net income............................................................................ $ 915 $ 74
------------ ------
------------ ------
</TABLE>
F-11
<PAGE>
COMPASS AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------------- ----------- ----------- ----------- ------------
COMMON STOCK
--------------------------
<S> <C> <C> <C> <C> <C>
Balance at October 21, 1997 (date of
incorporation)................................... $ -- $ -- $ -- $ -- $ --
Proceeds from initial private placement of stock... 9,000,000 90 8,910 -- 9,000
Net income......................................... -- -- 74 74
------------- ----- ----------- ----- ------------
Balance at December 31, 1997....................... 9,000,000 90 8,910 74 9,074
Issuance of stock.................................. 582,376 6 460 -- 466
Conversion of mezzanine debt to stock.............. 6,000,000 60 5,940 -- 6,000
Issuance of stock.................................. 9,193,252 92 13,408 -- 13,500
Net income......................................... -- -- -- 915 915
------------- ----- ----------- ----- ------------
Balance at December 31, 1998....................... 24,775,628 $ 248 $ 28,718 $ 989 $ 29,955
------------- ----- ----------- ----- ------------
------------- ----- ----------- ----- ------------
</TABLE>
See accompanying notes.
F-12
<PAGE>
COMPASS AEROSPACE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 21
YEAR ENDED THROUGH
DECEMBER 31 DECEMBER 31
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.......................................................................... $ 915 $ 74
Adjustments to reconcile net income to net cash (used in) provided by operating
activities:
Depreciation........................................................................ 5,974 166
Amortization........................................................................ 2,466 53
Stock issued for compensation....................................................... 466 --
Deferred taxes...................................................................... (317) --
Changes in operating assets and liabilities:
Accounts receivable............................................................... (681) 249
Inventories....................................................................... (5,253) 308
Prepaid expenses and other assets................................................. (14,829) (136)
Accounts payable.................................................................. 2,432 (530)
Accrued expenses and other liabilities............................................ 2,150 85
------------ ------------
Net cash (used in) provided by operating activities................................. (6,677) 269
INVESTING ACTIVITIES
Purchase of property and equipment.................................................. (5,701) (25)
Acquired businesses, net of cash acquired........................................... (166,416) (23,431)
------------ ------------
Net cash used in investing activities............................................... (172,117) (23,456)
FINANCING ACTIVITIES
Proceeds from note offering......................................................... 110,000 --
Proceeds from long-term debt........................................................ 81,000 10,262
Proceeds from mezzanine debt........................................................ -- 6,000
Proceeds from sale of stock......................................................... 13,500 9,000
Payments on long-term debt and capital leases....................................... (14,244) (5,666)
Net (decrease) increase in line of credit........................................... (4,034) 4,034
------------ ------------
Net cash provided by financing activities........................................... 186,222 23,630
------------ ------------
Net increase in cash................................................................ 7,428 443
Cash and cash equivalents at beginning of period.................................... 443 --
------------ ------------
Cash and cash equivalents at end of period.......................................... $ 7,871 $ 443
------------ ------------
------------ ------------
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest............................................................................ $ 6,600 $ 33
------------ ------------
------------ ------------
Income taxes........................................................................ $ 2,100 $ 110
------------ ------------
------------ ------------
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES
Conversion of mezzanine debt to stock............................................... $ 6,000 $ --
------------ ------------
------------ ------------
Assets acquired under capital leases................................................ $ 4,672 $ --
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
F-13
<PAGE>
COMPASS AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Compass Aerospace Corporation and its wholly owned subsidiaries, Western Methods
Machinery Corporation (Western), Aeromil Engineering Company (Aeromil), Barnes
Machine, Inc. (Barnes), Brittain Machine Inc. (Brittain), Wichita Manufacturing
Inc. (Wichita), Sea-Lect Products Inc. (Sea-Lect), Lamsco West, Inc. (Lamsco),
and Modern Manufacturing, Inc. (formerly known as Y.F. Americas, Inc.) (Modern)
(collectively, the Company). All significant intercompany accounts and
transactions have been eliminated in consolidation.
BUSINESS
The Company was founded in October 1997 to become a major supplier of
precision machined individual parts, and of higher value-added sub-assemblies,
manufacturing kits and structural components used by aerospace manufacturers in
structural frames and other metal aircraft components. Customers include
domestic and foreign entities.
The Company manufactures its products using various metals including
aluminum, titanium and steel through the use of precision computer numerically
controlled machine tools. The Company uses a variety of advanced techniques and
machinery including horizontal and vertical machining centers and
state-of-the-art high-speed precision machining equipment, as well as
three-spindle five-axis gantry mills.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid instruments with an original
maturity of three months or less when purchased to be cash equivalents. Cash and
cash equivalents are held by major financial institutions. The Company is
subject to risk for amounts in excess of federal deposit insurance limits.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables. The
Company conducts a major portion of its business with a limited number of
customers. Credit is extended based upon an evaluation of each customer's
financial condition, with terms consistent with those present throughout the
industry. Typically, the Company does not require collateral from customers.
Sales to the Boeing Company accounted for 72% and 77% of total consolidated
sales for the year ended December 31, 1998 and for the period October 21, 1997
through December 31, 1997, respectively.
F-14
<PAGE>
COMPASS AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Trade accounts receivable from the Boeing Company accounted for 63% and 76% of
total consolidated accounts receivable as of December 31, 1998 and 1997,
respectively.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of cash and cash equivalents approximate cost due to the short
period of time to maturity. Fair values of long-term debt, which have been
determined based on borrowing rates currently available to the Company for loans
with similar terms of maturity, approximate the carrying amounts in the
consolidated financial statements.
INVENTORIES
Inventories are valued under methodologies that approximate the first-in
first-out method of cost, and are stated at the lower of cost or market.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. The provision for depreciation
of property and equipment, which includes amortization of assets under capital
leases, is generally computed on the straight-line method over the following
useful lives:
<TABLE>
<S> <C>
Buildings and improvements...... 5-40 years
Machinery and equipment......... 2-10 years
Furniture and fixtures.......... 5-10 years
Lease term or life of asset, whichever is
Leasehold improvements.......... shorter
</TABLE>
GOODWILL
Goodwill represents the excess of the purchase price over the estimated fair
value of the net assets acquired in connection with business combinations.
Amortization is provided for on a straight-line basis over 20 years.
Amortization expense related to goodwill was $2,466,000 for the year ended
December 31, 1998 and $53,000 for the period October 21, 1997 through December
31, 1997.
IMPAIRMENT OF LONG-LIVED ASSETS
The carrying values of long-lived assets are reviewed periodically and if
future cash flows are believed insufficient to recover the remaining carrying
value of the related assets, the carrying value is written down to its estimated
fair value in the period the impairment is identified.
STOCK-BASED COMPENSATION
The Company elected to continue to account for stock-based compensation
plans using the intrinsic value-based method of accounting prescribed by
Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for Stock
Issued to Employees," and related interpretations. Under the provisions of APB
25, compensation expense is measured at the grant date for the difference
between the fair value of the stock and the exercise price.
F-15
<PAGE>
COMPASS AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
The Company recognizes revenue from product sales at the time of shipment.
The Company provides its customers the right to return products that are damaged
or defective. Provisions are made currently for estimated returns.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
130, "Reporting Comprehensive Income," effective January 1, 1998. This Statement
establishes standards for the reporting and display of comprehensive income and
its components in the financial statements. There was no impact on the financial
statements of the Company due to the adoption of SFAS No. 130.
SFAS No. 131, "Disclosure About Segments of an Enterprise and Related
Information," was also adopted on January 1, 1998, which requires the Company to
report financial and descriptive information about its reportable operating
segments. There was no impact on the financial statements of the Company due to
the adoption of SFAS No. 131.
Also effective January 1, 1998, the Company adopted SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits." This
statement supersedes the disclosure requirements in Statements of Financial
Accounting Standards 87, "Employers' Accounting for Pensions," 88, "Accounting
for Settlements and Curtailments of Defined Benefit Pension Plans for
Termination Benefits," and 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions." The objective of SFAS No. 132 is to improve and
standardize disclosures regarding pensions and postretirement benefits. There
was no impact on the financial statements of the Company due to the adoption of
SFAS No. 132.
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted in years beginning after June 15, 1999. The Company
believes that there will be no impact due to the adoption of Statement No. 133.
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," which is effective for fiscal years beginning after December 15,
1998. SOP 98-1 requires capitalization of qualified computer software costs with
amortization recognized over their estimated useful lives. The Company believes
that there will be no impact due to the adoption of SOP 98-1.
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-Up Activities," which is effective for
fiscal years beginning after December 15, 1998. SOP 98-5 requires costs of
start-up activities, as defined in the Statement, to be expensed as incurred.
The Company believes that there will be no impact due to the adoption of SOP
98-5.
2. ACQUISITIONS
Each of the following transactions has been accounted for under the purchase
method of accounting for business combinations. Accordingly, the accompanying
consolidated statements of operations include
F-16
<PAGE>
COMPASS AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
2. ACQUISITIONS (CONTINUED)
revenues and expenses related to these entities since their respective closing
dates. The financial statements reflect the preliminary allocations of the
purchase price, though the purchase price allocation has not been finalized on
certain of the Company's business combinations.
During 1997, the Company funded the November 26, 1997 acquisitions of
Western and Aeromil under its then existing credit facility. The purchase prices
for Western and Aeromil were $16.8 million and $13.2 million, respectively.
During 1998, the Company paid down the debt related to the 1997 acquisitions and
funded its 1998 acquisitions through the proceeds provided by the $110 million
Offering and the $170 million Credit Agreement (see Notes 5 and 7).
Each of the businesses discussed below, acquired during 1998, manufactures
parts for aerospace customers, including precision machined parts from titanium,
aluminum, and steel.
On April 21, 1998, the Company acquired all of the outstanding common stock
of Barnes Machine, Inc., located in Shelton, Washington. The Company also
acquired certain land and buildings owned by the stockholders and used in the
operation of the business. The purchase price was $15.0 million. The Company
also retired debt of approximately $0.8 million upon acquisition.
On April 21, 1998, the Company acquired all of the outstanding stock of
Brittain Machine, Inc. and its wholly-owned subsidiary, Wichita Manufacturing,
Inc. Brittain is located in Wichita, Kansas, and Wichita is located in Cerritos,
California. The purchase price was $54.9 million. The Company also retired debt
of approximately $3.0 million upon acquisition.
On May 11, 1998, the Company acquired certain assets and liabilities of
Sea-Lect Products, Inc. and all of the outstanding common stock of its affiliate
J&J Leasing (collectively Sea-Lect). Sea-Lect is located in Kent, Washington.
The purchase price was $12.2 million. The Company also retired debt of $0.9
million upon acquisition.
On November 20, 1998, the Company purchased all of the outstanding stock of
Lamsco West, Inc. Lamsco's operations are located in Santa Clarita, California,
and Kent, Washington. The purchase price was $73.7 million. At December 31,
1998, $2.5 million is held for the seller in escrow pending fulfillment of
provisions in the purchase agreement.
On December 31, 1998, the Company acquired all of the outstanding common
stock of Modern Manufacturing, Inc. (formerly Y.F. Americas, Inc.), located in
Renton, Washington. The purchase price was $23.1 million. At December 31, 1998,
$2.5 million is held in escrow for the seller pending fulfillment of certain
provisions in the purchase agreement.
The following unaudited consolidated supplemental pro forma information
includes the accounts of Compass Aerospace Corporation and its wholly owned
subsidiaries, Western, Aeromil, Barnes, Brittain, Wichita Manufacturing,
Sea-Lect, Lamsco and Modern. The pro forma information assumes that all the
acquisitions were consummated on January 1, 1997 (in thousands).
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
<S> <C> <C>
1998 1997
---------- ----------
Net sales............................................................. $ 183,444 $ 150,785
---------- ----------
---------- ----------
Net income............................................................ $ 8,188 $ 5,745
---------- ----------
---------- ----------
</TABLE>
F-17
<PAGE>
COMPASS AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
2. ACQUISITIONS (CONTINUED)
The pro forma consolidated results of operations included adjustments to
give effect to amortization of goodwill, interest on acquisition debt,
additional depreciation expense based on the fair market value of the property,
plant and equipment acquired and certain other adjustments, together with the
income tax effects. The unaudited consolidated pro forma information is not
necessarily indicative of the combined results that would have occurred had the
acquisitions and borrowings occurred on those dates, nor is it indicative of the
results that may occur in the future.
3. INVENTORY
The following is a summary of inventory (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Raw materials............................................................ $ 10,048 $ --
Work in process.......................................................... 16,970 5,356
Finished goods........................................................... 5,613 203
--------- ---------
$ 32,631 $ 5,559
--------- ---------
--------- ---------
</TABLE>
4. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment, which is recorded at
cost (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Land.................................................................... $ 1,991 $ --
Building and improvements............................................... 6,098 --
Furniture and fixtures.................................................. 1,376 264
Leasehold improvements.................................................. 547 301
Machinery and equipment................................................. 55,042 11,548
--------- ---------
65,054 12,113
Accumulated depreciation................................................ (6,140) (166)
--------- ---------
$ 58,914 $ 11,947
--------- ---------
--------- ---------
</TABLE>
Included in machinery and equipment is approximately $2,565,000 of equipment
under capital lease arrangements (see Note 12).
5. DEBT OFFERING
On April 21, 1998, the Company completed a $110 million debt offering of
10 1/8% Senior Subordinated Notes (the Notes) due 2005 (the Offering). The Notes
are unconditionally guaranteed on a senior subordinated basis by the Company's
existing subsidiaries and all future subsidiaries. The net proceeds from the
Offering were used to repay all outstanding bank debt, to finance the
acquisitions, and for general corporate purposes. The transaction costs of $7.3
million incurred in connection with the Offering were recorded as a deferred
charge and are amortized over the seven-year life of the Notes using the
straight-line method.
F-18
<PAGE>
COMPASS AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
5. DEBT OFFERING (CONTINUED)
The Notes mature on April 15, 2005, unless redeemed prior to that time.
Interest on the Notes is payable semiannually on April 15 and October 15 of each
year, commencing October 15, 1998, to holders of record. The Notes will be
redeemable at the option of the Company, in whole or in part, on or after April
15, 2002 at the redemption price as defined in the agreement. In addition, on or
before April 15, 2001 the Company may redeem up to 35% of the Notes at a
redemption price of 110.125% of the principal amount with the net proceeds of
one or more public equity offerings as defined and provided for in the
agreement.
Under provisions of the indenture applicable to the Notes, the Company may,
under certain circumstances, be limited in its ability to incur additional
indebtedness or issue Disqualified Capital Stock (as defined), pay dividends or
make other distributions, create certain liens on assets, sell certain assets
and stock of subsidiaries, enter into certain transactions with affiliates, and
effect certain mergers and consolidations. The Company is also subject to
certain restrictive covenants and is required to maintain certain financial
ratios in connection with the Notes.
6. MEZZANINE DEBT
In connection with the acquisitions of Western Methods and Aeromil, the
Company entered into a subordinated note with its largest stockholder for $6
million bearing interest at 11%, payable quarterly. On March 18, 1998, the Note
and related accrued interest was exchanged for 6 million shares of the Company's
common stock.
7. BANK BORROWINGS
Long-term debt and capital leases consist of the following (dollars in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1998 1997
---------- ---------
<S> <C> <C>
Senior subordinated notes.............................................. $ 110,000 $ --
Term Loan A............................................................ 35,000 --
Term Loan B............................................................ 45,000 --
Acquisition line of credit............................................. 1,000 --
Capital leases and other............................................... 5,968 10,551
---------- ---------
$ 196,968 $ 10,551
---------- ---------
---------- ---------
</TABLE>
On November 20, 1998, the Company entered into a $170 million credit
agreement (Credit Agreement) with BankBoston, N.A. and its participants. This
credit agreement, as amended and restated on February 11, 1999, replaced a prior
revolving credit facility with BankBoston. The credit agreement includes a $25
million revolving credit note (Revolver), Term Loan A with available lending of
up to $35 million, Term Loan B with available lending of up to $45 million, and
an acquisition line of credit (Acquisition Line) for up to $65 million. The
transaction costs of $5.2 million incurred in connection with the credit
agreement were recorded as a deferred charge and are amortized over the life of
the credit agreement using the straight-line method. The credit agreement
accrues interest at variable rates based upon the bank's prime rate or
Eurocurrency rate and is payable quarterly. The interest rate in effect at
F-19
<PAGE>
COMPASS AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
7. BANK BORROWINGS (CONTINUED)
December 31, 1998, was approximately 10.1%. The Revolver matures November 2003.
Term Loan A is payable in equal quarterly installments, totaling 10% of the
outstanding principal in 1999, 15% of the outstanding principal in 2000 and
2001, 23.75% of the outstanding principal in 2002, and the remainder in 2003.
Term Loan B is payable in equal quarterly installments totaling 1% of the
outstanding principal in 1999 through 2003, and 47.5% of the outstanding
principal in 2004 and 2005. Payments on the Acquisition Line begin at December
31, 2000 and are payable in 13 equal quarterly installments. The credit
agreement contains certain restrictive covenants and requires the maintenance of
certain financial ratios.
As prescribed by and defined in the credit agreement, availability under the
Revolver is limited to 85% of eligible accounts receivable, plus 50% of the net
book value of eligible inventory, plus 25% of the orderly liquidation value of
machinery and equipment, subject to reserves that may be established by the
lender. Subject to these provisions, the Company has $25 million available under
the Revolver and an initial availability of $35 million under the Acquisition
Line. The remaining $30 million of the Acquisition Line will become available
provided the Company raises one dollar of equity for every additional dollar of
borrowings over the initial $35 million of availability.
As of December 31, 1997, the Company had a note payable to a bank for $10.3
million. The note was secured by substantially all of the Company's assets and
accrued interest at 9.5%. Interest and principal payments were due monthly. The
note had a maturity date of November 2000. At December 31, 1997, the Company
also had outstanding an installment loan with a bank for $300,000 that was
payable monthly with 8.6% interest and an original maturity of October 2002.
Both of these loans were paid in full during 1998 and there are no outstanding
balances under either credit facility at the end of 1998.
Maturities of long-term debt, excluding capital lease payments (see Note 12)
as of December 31, 1998 are as follows (in thousands):
<TABLE>
<S> <C>
1999.............................................................. $ 4,304
2000.............................................................. 6,159
2001.............................................................. 6,422
2002.............................................................. 9,509
2003.............................................................. 13,633
Thereafter........................................................ 154,376
---------
194,403
Less current portion.............................................. 4,304
---------
Long-term debt.................................................... $ 190,099
---------
---------
</TABLE>
8. INCOME TAXES
Deferred income taxes are computed using the liability method and reflect
the net tax effects of temporary differences between the carrying amount of
assets and liabilities for financial statement purposes and the amounts used for
income tax purposes. The provision for income taxes reflects the taxes
F-20
<PAGE>
COMPASS AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
8. INCOME TAXES (CONTINUED)
to be paid for the period and the change during the period in the deferred tax
assets and liabilities. Significant components of the Company's deferred tax
assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Accrued expenses not deductible for tax............................... $ 735 $ 62
Inventories........................................................... 1,365 61
--------- ---------
Total deferred tax assets............................................. 2,100 123
Deferred tax liabilities:
Depreciation and amortization......................................... (7,645) --
Other................................................................. (200) (415)
--------- ---------
Total deferred tax liabilities........................................ (7,845) (415)
--------- ---------
Net deferred tax liability............................................ $ (5,745) $ (292)
--------- ---------
--------- ---------
</TABLE>
Significant components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 21,
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1998 1997
------------- -----------------
<S> <C> <C>
Current:
Federal........................................................ $ 1,770 $ 36
State.......................................................... 69 7
------ ---
1,839 43
Deferred:
Federal........................................................ (270) --
State.......................................................... (47) --
------ ---
(317)............................................................ --
------ ---
$ 1,522 $ 43
------ ---
------ ---
</TABLE>
F-21
<PAGE>
COMPASS AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
8. INCOME TAXES (CONTINUED)
The reconciliation of income tax at the U.S. federal statutory rate to
income tax expense is as follows:
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 21,
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1998 1997
----------------- -----------------
<S> <C> <C>
Income tax at U.S. statutory rates............................... 34% 34%
State income tax, net of federal benefit......................... 3 3
Goodwill......................................................... 27 --
Other............................................................ (2) --
-- --
62% 37%
-- --
-- --
</TABLE>
9. STOCKHOLDERS' EQUITY
In October 1997, the Company was incorporated with the issuance of 9 million
shares of common stock in a private placement, generating net proceeds of $9
million. The proceeds from this placement were primarily used to acquire Western
and Aeromil.
In April 1998, the Company amended its articles of incorporation to increase
the number of authorized shares from 20 million to 36 million and to establish a
second class of common stock, Class B. All rights remain the same as Class A,
except Class B stock is nonvoting and contains conversion rights based upon
certain criteria.
In connection with the Offering, the Company issued approximately 5.4
million shares of Class B and 3.7 million shares of Class A shares for $13.5
million in cash. Additionally, 582,376 shares of stock were issued to board
members and the president as compensation for services related to the
acquisitions. Shares outstanding as of December 31, 1998, under Class A and
Class B, amounted to 19,327,775 and 5,447,853, respectively.
10. STOCK OPTION PLAN
In March 1998, the Company's Board of Directors adopted, and the
shareholders approved, the Compass Aerospace Corporation 1998 Stock Incentive
Plan (the Plan). The Plan will be administered by the Compensation Committee of
the Board of Directors (the Committee). All officers, directors, employees and
independent contractors of the Company are eligible for discretionary awards
under the Plan. The Plan provides for stock-based incentive awards, including
incentive stock options, non-qualified stock options and restricted stock. The
Plan permits the Committee to select eligible persons to receive awards and to
determine certain terms and conditions of such awards, including the vesting
schedule and exercise price of each award, provided, that the option exercise
price may not be less than 85% of the fair market value per share of the
Company's Common Stock on the date of the grant. Under the Plan, no participant
may be granted incentive stock options that are first exercisable in any one
calendar year with fair market value in excess of $100,000. 2,000,000 shares of
the Company's Common Stock have been reserved for issuance under the Plan.
F-22
<PAGE>
COMPASS AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
10. STOCK OPTION PLAN (CONTINUED)
No options were granted as of December 31, 1997. The status of the Company's
stock option plan during 1998 is summarized as follows:
<TABLE>
<CAPTION>
NUMBER
OF OPTIONS
-----------
<S> <C>
Outstanding at January 1, 1998.................................................... --
Granted........................................................................... 888,291
Exercised......................................................................... --
Canceled.......................................................................... --
-----------
Outstanding at December 31, 1998.................................................. 888,291
-----------
-----------
Options Exercisable at December 31, 1998.......................................... 60,000
-----------
-----------
</TABLE>
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options, as allowed for
under FASB Statement No. 123, "Accounting for Stock-Based Compensation." Under
APB 25, because 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 net income, as required to be disclosed by SFAS No. 123,
determined as if the Company had accounted for its employee stock options under
the fair value method of that Statement, would be $840,000. The fair value for
these options was estimated at the date of grant using a binomial option pricing
model with the following weighted-average assumptions for December 31, 1998:
dividend yield of 0.0%; volatility of 36.30%; risk-free interest rates ranging
from 4.58% to 4.66% depending on a weighted-average expected life ranging from
two to four years.
The weighted average fair value of options granted during 1998 is $.37 per
option. The weighted average exercise price for 1998 was $1.22. The weighted
average remaining contractual life of options outstanding is 9.5 years.
During 1998, the Company approved several stock option agreements to
purchase 888,291 shares of the Company's common stock at an exercise price
ranging from $1.00 to $1.47 per share. All options granted have 10-year terms.
One option for 60,000 shares is fully vested and immediately exercisable. The
remainder of the options vest and become exercisable at various dates through
December 1, 2002.
11. RELATED PARTY TRANSACTIONS
The Company has entered into a management fee agreement with certain
entities controlled by directors of the Company. Under this agreement, the
Company is required to pay an annual aggregate amount equal to $200,000 plus
1.5% of the Company's earnings before income taxes, depreciation, amortization,
and management fees. The Company also typically pays advisory fees to these
affiliates in an amount equal to an aggregate of 1% of the consideration paid
for each business acquired by the Company. Management and advisory fees paid to
these affiliates were $3,165,000 and $282,000 in 1998 and 1997.
F-23
<PAGE>
COMPASS AEROSPACE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
12. COMMITMENTS AND CONTINGENCIES
The Company leases certain machinery and equipment under capital leases
expiring at various dates through 2007. The Company also leases office spaces
under operating leases with terms expiring at various dates through 2008. Rent
expense for operating leases amounted to $1,125,000 and $53,000 for the year
ended December 31, 1998 and the period October 21 through December 31, 1997,
respectively.
Future minimum payments by year and in the aggregate under all
non-cancelable operating and capital leases with terms in excess of one year at
December 31, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR ENDED DECEMBER 31 LEASES LEASES
- ------------------------------------------------------------------------- ----------- ---------
<S> <C> <C>
1999..................................................................... $ 1,205 $ 494
2000..................................................................... 1,110 494
2001..................................................................... 1,122 494
2002..................................................................... 1,126 494
2003..................................................................... 1,036 484
Thereafter............................................................... 3,574 725
----------- ---------
$ 9,173 3,185
-----------
-----------
Less amount representing interest........................................ 620
---------
Present value of net minimum lease payments.............................. 2,565
Less current portion..................................................... 328
---------
Long-term leases payable................................................. $ 2,237
---------
---------
</TABLE>
During the normal course of business, the Company is involved in various
lawsuits. Management, in consultation with legal counsel, does not believe that
the outcome of these lawsuits will have a materially adverse impact on the
financial position or future operations of the Company.
13. PROFIT SHARING PLANS
As a result of the acquisitions of the subsidiaries, the Company has
maintained the profit-sharing plans covering all of its eligible employees for
those entities acquired. Contributions to the plans are at the discretion of the
Board of Directors and may not exceed the maximum amount permitted by the
Internal Revenue Code. During the year ended December 31, 1998 and the period
from October 21, 1997 through December 31, 1997, the Company charged $1,078,000
and $26,000, respectively, to expense pursuant to the Plans.
F-24
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders
Aeromil Engineering Company
We have audited the accompanying balance sheet of Aeromil Engineering
Company as of November 25, 1997, and the related statements of operations and
retained earnings and cash flows for the period January 1, 1997 through November
25, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Aeromil Engineering Company
at November 25, 1997, and the results of its operations and its cash flows for
the period January 1, 1997 through November 25, 1997, in conformity with
generally accepted accounting principles.
Long Beach, California
March 19, 1998
F-25
<PAGE>
AEROMIL ENGINEERING COMPANY
BALANCE SHEET
NOVEMBER 25, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 182
Accounts receivable.............................................................. 1,680
Inventories...................................................................... 3,213
Related party receivables........................................................ 32
Prepaid expenses and other assets................................................ 52
---------
Total current assets............................................................... 5,159
Property and equipment, net........................................................ 4,860
---------
Total assets....................................................................... $ 10,019
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................. $ 1,310
Accrued expenses................................................................. 276
Loan payable, shareholder........................................................ 677
Current portion of long-term debt................................................ 600
Line of credit................................................................... 1,445
---------
Total current liabilities.......................................................... 4,308
Long-term debt, less current portion............................................... 1,556
Commitments........................................................................ --
---------
Stockholders' equity:
Capital stock, $100 par value:
Authorized shares-750
Issued and outstanding shares-300.............................................. 30
Retained earnings.................................................................. 4,125
---------
Total stockholders' equity......................................................... 4,155
---------
Total liabilities and stockholders' equity......................................... $ 10,019
---------
---------
</TABLE>
See accompanying notes.
F-26
<PAGE>
AEROMIL ENGINEERING COMPANY
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH NOVEMBER 25, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Net sales.......................................................................... $ 11,077
Cost of sales...................................................................... 11,095
---------
Gross loss......................................................................... (18)
Selling, general and administrative expenses....................................... 499
---------
Operating loss..................................................................... (517)
Interest expense................................................................... (229)
Other income, net.................................................................. 48
---------
Loss before income taxes........................................................... (698)
---------
Income taxes....................................................................... 1
Net loss........................................................................... (699)
Retained earnings at beginning of period........................................... 4,824
---------
Retained earnings at end of period................................................. $ 4,125
---------
---------
</TABLE>
See accompanying notes.
F-27
<PAGE>
AEROMIL ENGINEERING COMPANY
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH NOVEMBER 25, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss............................................................................ $ (699)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation...................................................................... 681
Changes in operating assets and liabilities:
Accounts receivables............................................................ (549)
Inventories..................................................................... (283)
Prepaid expenses and other assets............................................... (7)
Accounts payable................................................................ (441)
Accrued expenses................................................................ 159
-----------
Net cash used in operating activities............................................... (1,139)
INVESTING ACTIVITIES
Increase in related party receivables............................................... (29)
Purchase of property and equipment.................................................. (1,665)
-----------
Net cash used in investing activities............................................... (1,694)
-----------
FINANCING ACTIVITIES
Proceeds from long-term debt........................................................ 2,420
Payments on long-term debt.......................................................... (343)
Net increase in line of credit...................................................... 935
-----------
Net cash provided by financing activities........................................... 3,012
-----------
Net increase in cash................................................................ 179
Cash at beginning of period......................................................... 3
-----------
Cash at end of period............................................................... $ 182
-----------
-----------
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest.......................................................................... $ 229
</TABLE>
See accompanying notes.
F-28
<PAGE>
AEROMIL ENGINEERING COMPANY
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 25, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Aeromil Engineering Company (the "Company"), a closely held California
corporation, manufactures medium-sized parts for aerospace customers,
specializing in the precision machining of hard metals such as titanium, as well
as the high-speed precision machining of aluminum.
Effective on the close of business on November 25, 1997 the Company sold
substantially all of its net assets to Compass Aerospace Corporation for
$7,985,000 in cash. The Company's financial statements have been prepared on a
historical basis and, as such, do not reflect any adjustments that may result
from the sale.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables. The
Company sells its products to limited number of customers within the aerospace
and defense industry. Credit is extended based upon an evaluation of each
customer's financial condition, with terms consistent in the industry and no
collateral required. The Company has historically incurred minimal credit
losses.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair value of cash and cash equivalents, short-term borrowings and the
current portion of long-term debt approximate cost due to the short period of
time to maturity. Fair values of long-term debt, which have been determined
based on borrowing rates currently available to the Company for loans with
similar terms or maturity, approximate the carrying amounts in the financial
statements.
CASH EQUIVALENTS
The Company considers all highly liquid instruments with an original
maturity of three months or less when purchased to be cash equivalents. Cash and
cash equivalents are held by major financial institutions.
INVENTORIES
Inventories which consist primarily of work-in-process, are valued at
average cost, which approximates first-in first-out cost, and finished goods and
are stated at the lower of cost or market. Finished goods amounted to
approximately $192,000 at November 25, 1997.
F-29
<PAGE>
AEROMIL ENGINEERING COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 25, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
The provision for depreciation of property and equipment is generally
computed on the straight-line method over the following useful lives:
<TABLE>
<S> <C>
Machinery and equipment.............. 8 - 10 years
Furniture and fixtures............... 5 years
Automotive equipment................. 3 - 5 years
Leasehold improvements............... Term of lease or life of asset,
whichever is shorter
</TABLE>
INCOME TAXES
The Company adopted S corporation status for both federal and state income
tax purposes. Accordingly, the Company has no current liability or provision for
federal taxes based on income. The provision for California franchise tax is at
the statutory rate applicable to S corporations.
REVENUE RECOGNITION
The Company recognizes revenue from product sales at the time of shipment.
The Company provides its customers the right to return products that are damaged
or defective. The effect of these programs is estimated and current period sales
and cost of sales are adjusted accordingly.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997 the Financial Accounting Standards Board ("FASB") issued
Statement No. 130, "Reporting Comprehensive Income," which is effective for
financial statements for periods beginning after December 15, 1997. This
Statement establishes standards for the reporting and display of comprehensive
income and its components in the financial statements. The Company believes
there will be no impact on its financial statements due to the adoption of
Statement 130.
In June 1997 the FASB also issued Statement No. 131, "Disclosures About
Segments of an Enterprise and Related Information," which is effective for
financial statements for periods beginning after December 15, 1997. At that
time, the Company will be required to report financial and descriptive
information about its reportable operating segments. The Company believes there
will be no impact on its financial statements due to the adoption of Statement
131.
F-30
<PAGE>
AEROMIL ENGINEERING COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 25, 1997
2. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment, which is recorded at
cost (in thousands):
<TABLE>
<CAPTION>
NOVEMBER 25,
1997
------------
<S> <C>
Automotive equipment............................................................ $ 85
Furniture and fixtures.......................................................... 421
Leasehold improvements.......................................................... 450
Machinery and equipment......................................................... 12,030
------------
12,986
Allowance for depreciation...................................................... (8,126)
------------
$ 4,860
------------
------------
</TABLE>
3. LOAN PAYABLE, STOCKHOLDER
During 1996, the Company received an advance of $677,000 from a Company
stockholder. The loan is unsecured, non-interest bearing and payable on demand.
4. LINE OF CREDIT
The Company has a line of credit with National Bank of Southern California
which provides for borrowings up to $1,500,000. Interest is payable monthly at
1% over the Wall Street Journal's prime interest rate. The balance outstanding
was $1,445,000 at November 25, 1997. The line of credit is guaranteed by the
Company's stockholders and is secured by substantially all of the Company's
assets.
5. LONG-TERM DEBT
The following is a summary of long-term debt at November 25, 1997 (in
thousands):
<TABLE>
<S> <C>
Note payable to National Bank of Southern California, payable in
monthly installments of $25,000 including interest at 1% over
prime, maturity date January 3, 2001, secured by one Cincinnati
Milacron milling machine and attachments.......................... $ 750
Note payable to National Bank of Southern California, payable in
monthly installments of $25,000 plus interest at 1% over prime,
maturity July 30, 2002, secured by assets of the Company.......... 1,406
---------
2,156
Long-term Debt, less current portion................................ (600)
---------
$ 1,556
---------
---------
</TABLE>
F-31
<PAGE>
AEROMIL ENGINEERING COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 25, 1997
5. LONG-TERM DEBT (CONTINUED)
Future minimum payments of long-term debt are (in thousands):
<TABLE>
<S> <C>
1998................................................................ $ 600
1999................................................................ 558
2000................................................................ 537
2001................................................................ 300
2002................................................................ 161
---------
$ 2,156
---------
---------
</TABLE>
6. PROFIT SHARING PLANS
The Company has a profit-sharing plan covering all of its employees.
Contributions to the plan are at the discretion of the Board of Directors and
may not exceed the maximum amount permitted by the Internal Revenue Code. The
Company did not make a contribution to the plan during the period from January
1, 1997 through November 25, 1997.
The Company has also adopted a profit sharing plan which qualifies under
Section 401(k) of the Internal Revenue Code. The plan covers all eligible
employees who may elect to contribute a percentage of their gross earnings to
the plan. Contributions to the plan by the Company equal up to a maximum of 6%
of each participating employee's annual salary. The Company's contribution to
the plan for the period from January 1, 1997 through November 25, 1997 was
$50,000.
7. PROVISION FOR CALIFORNIA FRANCHISE TAX
Deferred income taxes are computed using the liability method and reflect
the net tax effects of temporary differences between the carrying amount of
assets and liabilities for financial statement purposes and the amounts used for
state income tax purposes. The provision for California franchise tax consists
of $800 California minimum franchise tax. Significant components of the
Company's deferred tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
NOVEMBER 25,
1997
---------------
<S> <C>
Deferred tax assets:
Net Operating Loss carryforward............................................... $ 9
Tax credit carryforward....................................................... 37
---
$ 46
Deferred tax liabilities:
Tax depreciation in excess of book............................................ (15)
---
31
Valuation allowance............................................................. (31)
---
Net deferred taxes.............................................................. --
---
---
</TABLE>
The Company is providing for deferred taxes using a rate of 1.5% for
California purposes.
F-32
<PAGE>
AEROMIL ENGINEERING COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 25, 1997
7. PROVISION FOR CALIFORNIA FRANCHISE TAX (CONTINUED)
For California purposes, the Company has a net operating loss carryforward
of $1,097,000 available to offset its state taxable income in future years,
expiring through 2012. The Company also has an enterprise zone sales tax credit
carryforward of $36,900 available to offset its state income tax in future
years, expiring in 2010.
8. COMMITMENTS AND RELATED PARTY TRANSACTIONS
The Company leases its manufacturing and office facility and its warehouse
space from a shareholder under ten-year noncancelable operating leases expiring
on November 25, 2007. The leases provide for periodic adjustments to the monthly
rent payments based on changes in the consumer price index. The leases also
require the Company to pay property taxes. Rent expense under these leases
amounted to $354,000 during the period from January 1, 1997 through November 25,
1997.
Future minimum lease payments by year under these leases consisted of the
following as of November 26, 1997 (in thousands):
<TABLE>
<S> <C>
1998................................................................ $ 467
1999................................................................ 471
2000................................................................ 513
2001................................................................ 513
2002................................................................ 513
Thereafter.......................................................... 2,523
---------
$ 5,000
</TABLE>
9. REVENUES FROM MAJOR CUSTOMERS
Due to the nature of the aerospace industry, the Company conducts a major
portion of its business with a limited number of customers. For the period from
January 1, 1997 through November 25, 1997, revenues from one major customer
amounted to 79% of sales. The total accounts receivable from this customer at
November 25, 1997 amounted to 70% of the total trade accounts receivable
balance.
10. IMPACT ON YEAR 2000 (UNAUDITED)
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
Based on a recent assessment, the Company determined that it will replace
its software so that its computer systems will function properly with respect to
dates in the year 2000 and thereafter. The Company presently believes that with
conversions to new software, the Year 2000 issue will not pose significant
operational problems for its computer systems. However, if such conversions are
not made, or are not completed timely, the Year 2000 issue could have a material
impact on the operations of the Company.
F-33
<PAGE>
AEROMIL ENGINEERING COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 25, 1997
10. IMPACT ON YEAR 2000 (UNAUDITED) (CONTINUED)
The Company will initiate formal communications with all of its significant
suppliers and large customers to determine the extent to which the Company's
interface systems are vulnerable to those third parties' failure to remediate
their own Year 2000 issues. However, there can be no guarantee that the systems
of other companies on which the Company's systems rely will be timely converted
and would not have an adverse effect on the Company's systems. The Company has
determined it has no exposure to contingencies related to the Year 2000 issue
for the products it has sold.
The Company anticipates completing the Year 2000 project no later than
December 31, 1998, which is prior to any anticipated impact on its operating
systems. Company management is currently working with outside consultants to
estimate the costs associated with replacing or modifying its operating systems.
The total cost of the project is expected to be funded through operating cash
flows and will be capitalized or expensed based upon generally accepted
accounting principles and corporate policy. To date, the Company has not
incurred any costs related to the assessment of, and preliminary efforts on, its
Year 2000 project and the development of a modification plan, purchase of new
systems and systems modifications.
F-34
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Brittain Machine, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of Brittain
Machine, Inc. and Subsidiary as of April 21, 1998, and the related consolidated
statements of earnings and retained earnings and cash flows for the period July
1, 1997 through April 21, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Brittain
Machine, Inc. and Subsidiary as of April 21, 1998, and the consolidated results
of their operations and their consolidated cash flows for the period July 1,
1997 through April 21, 1998 in conformity with generally accepted accounting
principles.
/s/ Grant Thornton LLP
Wichita, Kansas
July 9, 1998
F-35
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
APRIL 21, 1998
<TABLE>
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................................................. $1,683,235
Accounts receivable
Trade accounts receivable........................................................... 7,672,400
Other............................................................................... 46,955
Inventories........................................................................... 8,845,527
Refundable income taxes............................................................... 401,691
Prepaid expenses and other............................................................ 73,147
Deferred income taxes................................................................. 606,936
----------
Total current assets.............................................................. 19,329,891
PROPERTY AND EQUIPMENT, AT COST
Land.................................................................................. $ 200,604
Buildings............................................................................. 3,691,276
Machinery and equipment............................................................... 20,828,710
Vehicles.............................................................................. 148,425
Office equipment...................................................................... 730,218
Construction in progress.............................................................. 2,892,234
----------
28,491,467
Less accumulated depreciation......................................................... 15,134,005 13,357,462
----------
INVESTMENTS AND OTHER ASSETS
Funds held by trustee................................................................. 55,408
Bond issuance costs................................................................... 33,682 89,090
---------- ----------
$32,776,443
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable...................................................................... $1,784,819
Accrued payroll, bonuses and employee benefits........................................ 3,992,423
Payable to affiliate.................................................................. 1,600,000
Other accrued liabilities............................................................. 233,937
Current maturities of capital lease obligations....................................... 428,757
Current maturities of long-term debt.................................................. 508,151
Current maturities of industrial revenue bonds........................................ 55,000
----------
Total current liabilities......................................................... 8,603,087
LONG-TERM LIABILITIES
Capital lease obligations............................................................. 1,585,953
Long-term debt........................................................................ 551,809
Industrial revenue bonds.............................................................. 645,000
Deferred income taxes................................................................. 1,147,273
----------
3,930,035
STOCKHOLDERS' EQUITY
Common stock, Class A, voting, par value $1 Authorized-300,000 shares Issued and
outstanding-90,000 shares........................................................... $ 90,000
Common stock, Class B, nonvoting, par value $1 Authorized-300,000 shares Issued and
outstanding-90,000 shares........................................................... 90,000
Additional paid-in capital............................................................ 55,004
Retained earnings..................................................................... 20,008,317 20,243,321
---------- ----------
$32,776,443
----------
----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-36
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS
PERIOD JULY 1, 1997 THROUGH APRIL 21, 1998
<TABLE>
<S> <C>
Sales.......................................................................... $49,682,444
Cost of sales.................................................................. 34,640,582
----------
Gross margin on sales.......................................................... 15,041,862
General, administrative and selling expenses................................... 2,966,547
Nonrecurring management and employee bonuses paid in connection with sale of
Company...................................................................... 3,831,472
----------
Earnings from operations....................................................... 8,243,843
Other income (expense)
Interest income.............................................................. 13,327
Interest expense............................................................. (398,808)
Loss on sale of assets....................................................... (59,184)
Other........................................................................ 79,410
----------
(365,255)
----------
Earnings before income taxes................................................... 7,878,588
Income taxes................................................................... 2,901,353
----------
NET EARNINGS............................................................... 4,977,235
Retained earnings at July 1, 1997.............................................. 15,031,082
----------
Retained earnings at April 21, 1998............................................ $20,008,317
----------
----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-37
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD JULY 1, 1997 THROUGH APRIL 21, 1998
<TABLE>
<S> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net earnings.................................................................. $4,977,235
Adjustments to reconcile net earnings to net cash provided by operating
activities
Depreciation and amortization............................................... 1,510,526
Deferred income taxes....................................................... 72,078
Loss on disposal of property and equipment.................................. 59,184
Change in assets and liabilities
Increase in accounts receivable........................................... (2,618,103)
Increase in income taxes receivable....................................... (294,205)
Decrease in inventories................................................... 2,132,289
Increase in accounts payable.............................................. 172,920
Increase in accrued payroll, bonuses and employee benefits................ 2,273,572
Other..................................................................... (307,565)
----------
Net cash provided by operating activities............................... 7,977,931
Cash flows from investing activities
Purchase of property and equipment............................................ (3,558,952)
Proceeds from disposal of property and equipment.............................. 24,418
----------
Net cash used in investing activities................................... (3,534,534)
Cash flows from financing activities
Net increase in payable to affiliate.......................................... 1,600,000
Net decrease in line of credit................................................ (3,855,000)
Repayments of long-term debt and industrial revenue bonds..................... (702,314)
Repayments of capital lease obligations....................................... (258,125)
----------
Net cash used in financing activities................................... (3,215,439)
----------
Net increase in cash and cash equivalents....................................... 1,227,958
Cash and cash equivalents at July 1, 1997....................................... 455,277
----------
Cash and cash equivalents at April 21, 1998..................................... $1,683,235
----------
----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-38
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 21, 1998
NOTE A--SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows.
1. BUSINESS ACTIVITY, BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
Brittain Machine, Inc. manufactures parts according to customer
specification primarily for use in the aerospace industry. The Company also
designs, manufactures and sells tooling, machinery and equipment for use in the
aerospace industry.
Wichita Manufacturing, Inc., a wholly-owned subsidiary, is located in
Cerritos, California, and is engaged in the same line of business as Brittain
Machine, Inc.
The consolidated financial statements include the consolidated accounts of
Brittain Machine, Inc. and its wholly-owned subsidiary, Wichita Manufacturing,
Inc. immediately prior to the sale of the Company to Compass Aerospace
Corporation (see Note L). All significant intercompany accounts have been
eliminated.
2. ACCOUNTS RECEIVABLE
The Company considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required.
3. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
4. INVENTORIES
Inventories are stated at the lower of weighted average cost or net
realizable value.
5. PROPERTY AND EQUIPMENT
Land, buildings and equipment are carried at cost. Major additions and
betterments are charged to the property accounts while replacements, maintenance
and repairs which do not improve or extend the life of the respective assets are
expensed currently. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets. Estimated useful lives are as follows:
<TABLE>
<S> <C>
10-30
Buildings....................................................... years
Machinery and equipment......................................... 7-10 years
Vehicles........................................................ 4- 6 years
Office equipment................................................ 5- 7 years
</TABLE>
F-39
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 21, 1998
NOTE A--SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
6. INCOME TAXES
The Company files a consolidated income tax return with its subsidiary.
Deferred income tax assets and liabilities are determined based on the
temporary differences between the financial accounting and tax basis of assets
and liabilities. Deferred tax assets or liabilities at the end of each period
are determined using the currently enacted tax rate expected to apply to taxable
income in the periods in which the deferred tax asset or liability is expected
to be realized or settled.
7. SELF INSURANCE
The Company participates in various self-insurance programs for medical and
workers' compensation risks. In connection with these programs the Company has
mitigated its exposure through the purchase of stipulated stop-loss coverage
with insurance companies. The Company estimates and accrues its liability for
the self-insurance portions of the risks covered by such programs.
8. CASH EQUIVALENTS
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments with maturities of less than three
months to be cash equivalents.
9. REVENUE RECOGNITION
The Company's sales contracts are generally of a short-term nature and are
billed upon delivery. Revenue from such contracts is recognized upon passage of
title to the customer which, in most cases, coincides with shipments of the
related products to customers. Provisions for anticipated losses on contracts,
if any, are made currently as the amount of the loss is determinable.
NOTE B--INVENTORIES
Inventories consist of the following at April 21, 1998:
<TABLE>
<S> <C>
Raw material and supplies....................................... $2,889,886
Work in progress................................................ 5,306,881
Finished goods.................................................. 648,760
---------
$8,845,527
---------
---------
</TABLE>
NOTE C--LINE OF CREDIT
At April 21, 1998, the Company had available a line of credit with a bank
for up to $5,000,000. There were no borrowings outstanding at April 21, 1998.
Interest is payable monthly on the outstanding balance at a variable rate equal
to the bank's base rate (9.5% at April 21, 1998). There are no compensating
balance or commitment fee requirements. Borrowings under the line of credit are
collateralized by substantially all assets of the Company.
F-40
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 21, 1998
NOTE D--INCOME TAXES
Income tax expense for the period July 1, 1997 through April 21, 1998
consists of the following:
<TABLE>
<S> <C>
Current......................................................... $2,829,275
Deferred........................................................ 72,078
---------
$2,901,353
---------
---------
</TABLE>
The principal reason for the variation between income taxes computed at the
federal tax rate of 34% and actual income taxes is state income tax expense.
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities at April 21, 1998 are as follows:
<TABLE>
<S> <C>
Deferred tax assets
Inventory valuation differences............................... $ 438,819
Accrued expenses not deductible until paid.................... 168,117
---------
606,936
Deferred tax liabilities
Depreciation of property and equipment........................ 891,579
Capital leases treated as operating leases for tax purposes... 255,694
---------
1,147,273
---------
Net deferred tax liability.................................. $ 540,337
---------
---------
</TABLE>
NOTE E--LONG-TERM DEBT
Long-term debt consists of the following at April 21, 1998:
<TABLE>
<S> <C>
Note payable to bank, payable in monthly installments including
variable interest at the bank's base interest rate adjusted
annually (effective rate 9.25% April 21, 1998), due in 2000
and collateralized by certain equipment and machinery......... $ 906,452
Note payable to bank, payable in monthly installments including
variable interest, due in 1998 and collateralized by a
$250,000 real estate mortgage................................. 7,458
Note payable to former stockholder, payable in equal monthly
installments including fixed interest at 9%, due in 2007-not
collateralized................................................ 146,050
---------
1,059,960
Less current maturities......................................... 508,151
---------
$ 551,809
---------
---------
</TABLE>
F-41
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 21, 1998
NOTE E--LONG-TERM DEBT (CONTINUED)
In connection with the sale of the Company (see Note K), all notes payable
were paid in full subsequent to April 21, 1998.
NOTE F--INDUSTRIAL REVENUE BONDS
The Company financed $2,500,000 for the purchase of certain equipment and
the construction of a building through industrial revenue bonds issued by the
City of Wichita, Kansas and maturing through 2006. The principal and interest
(6% to 8%) on the bonds are serviced by biannual payments by the Company to a
trustee who then remits the funds to the City on the scheduled interest payment
and bond maturity dates. Certain of the proceeds from the bonds and the biannual
payments made by the Company have been and are deposited with the trustee.
The total amount of bonds outstanding at April 21, 1998 was $700,000.
Aggregate annual maturities are as follows:
<TABLE>
<S> <C>
1999.............................................................. $ 55,000
2000.............................................................. 60,000
2001.............................................................. 65,000
2002.............................................................. 70,000
2003.............................................................. 75,000
Thereafter........................................................ 375,000
---------
$ 700,000
---------
---------
</TABLE>
NOTE G--RELATED PARTY TRANSACTIONS
LEASING ACTIVITIES
The Company has entered into several agreements with an entity, affiliated
by common stockholders, to lease a building and certain machinery and equipment.
Due to the related party relationship with the affiliate and based upon the
underlying economic substance of the leasing arrangements, the leases have been
recorded as capital lease obligations. The recorded lease obligations represent
the outstanding principal balance on the loans incurred by the affiliated entity
to finance that entity's purchase of the building and machinery and equipment
(the "underlying debt"). In addition, the Company is the guarantor of such debt.
A summary of lease payments made during the period July 1, 1997 through
April 21, 1998 under these capital leases is as follows:
<TABLE>
<S> <C>
Total lease payments............................................. $ 653,100
Amount representing interest..................................... (105,401)
Amount representing excess lease payments........................ (289,574)
---------
Principal payments............................................... $ 258,125
---------
---------
</TABLE>
F-42
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 21, 1998
NOTE G--RELATED PARTY TRANSACTIONS (CONTINUED)
In connection with the leases, property, plant and equipment at April 21,
1998 included the following:
<TABLE>
<S> <C>
Machinery and equipment......................................... $2,293,024
Building........................................................ 347,561
---------
2,640,585
Less accumulated depreciation................................... (566,142)
---------
$2,074,443
---------
---------
</TABLE>
Depreciation expense for the property under lease was $307,270 for the
period July 1, 1997 through April 21, 1998.
The following is a schedule by years of future minimum lease payments under
capital leases:
<TABLE>
<S> <C>
1999............................................................ $ 975,720
2000............................................................ 975,720
2001............................................................ 751,720
2002............................................................ 551,720
2003............................................................ 311,720
Thereafter...................................................... 1,005,480
----------
Total minimum lease payments.................................... 4,572,080
Amount representing interest.................................... (521,176)
Amount representing excess lease payments....................... (2,036,194)
----------
Total capital lease obligations................................. 2,014,710
Less current maturities......................................... 428,757
----------
$1,585,953
----------
----------
</TABLE>
In connection with the sale of the Company (see Note K), all capital leases
were paid in full subsequent to April 21, 1998.
In addition, the Company leased equipment under an operating lease from this
affiliated entity which expired March 1, 1998. The lease which began March 1996
provided for monthly payments of $14,000 per month.
The Company also has a month-to-month rental agreement with a stockholder
for two warehouses. In connection with such agreement rental expense charged to
operations by the Company for the period July 1, 1997 through April 21, 1998 was
$33,500.
OTHER TRANSACTIONS
The Company purchased goods from an entity controlled by the spouse of a
stockholder in the amount of $2,956,000 during the period July 1, 1997 through
April 21, 1998. An amount of $204,000 was due to such affiliate at April 21,
1998 and was included in accounts payable in the accompanying consolidated
balance sheet. The Company also paid $344,000 to an individual related to the
Company's
F-43
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 21, 1998
NOTE G--RELATED PARTY TRANSACTIONS (CONTINUED)
principal stockholders during the period July 1, 1997 through April 21, 1998 for
debarring services performed.
NOTE H--RETIREMENT PLAN
All employees who have completed one year of service and who have attained
21 years of age are eligible to participate in the Company's Profit Sharing
Retirement Plan. Contributions to the Plan are discretionary and made by the
Company for amounts that are determined by the Board of Directors based on a
percentage of each participant's annual compensation. Employees may also
contribute a portion of their compensation to the Plan. The Company charged
$864,000 to expense pursuant to the plan during the period July 1, 1997 through
April 21, 1998.
NOTE I--COMMITMENTS
The Company provides group medical insurance for its employees through a
self-insured medical plan. The Company has purchased a stop-loss insurance
policy that will pay claims in excess of $30,000 per year per individual and in
excess of annual aggregate claims of $420,000.
The Company is self-insured for workers' compensation claims. The Company
has purchased a stop-loss insurance policy that pays workers' compensation
claims in excess of $175,000 per occurrence and aggregate annual claims in
excess of $430,292. The Company has obtained a $655,000 letter of credit from a
bank in favor of the State of Kansas in connection with a self-insurance
program.
Wichita Manufacturing, Inc. leases its facility located in Cerritos,
California at a rental cost of $12,000 per month through October 31, 1998 for a
total commitment of $72,000.
NOTE J--CONTINGENCY
In January 1996, the Company was found liable in a civil action for, inter
alia, breach of contract and termination of joint venture/partnership associated
with a relationship the Company had with another entity. A judgment was recorded
against the Company in the amount of $600,000. The Company secured a $750,000
letter of credit in favor of the plaintiffs and filed a Notice of Appeal. The
plaintiffs filed a Notice of Cross-Appeal seeking damages of approximately
$1,500,000. Through April 21, 1998 the Company recorded a liability for the
$600,000 judgment plus $116,000 of post-judgment interest. On April 21, 1998,
the Company's principal owner assumed the liability. In connection with the
assumption of the liability, the Company transferred life insurance policies
with recorded cash surrender values of $614,000 to the principal owner. The
Company recorded a gain of $102,000 in connection with the transaction.
NOTE K--CONCENTRATION OF SALES
Substantially all of the Company's sales are made to a very few customers.
These customers are typically large companies in the aerospace industry. If the
Company were to lose one or more of these customers and were unable to find
replacement customers, sales would be adversely affected. Two customers
accounted for 73% and 13% of sales for the period July 1, 1997 through April 21,
1998. Amounts due from these customers accounted for 68% and 12% of total
accounts receivable at April 21, 1998.
F-44
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 21, 1998
NOTE L--SALE OF COMPANY
Effective April 21, 1998, the Company was sold and became a subsidiary of
Compass Aerospace Corporation (Compass). At April 21, 1998, Compass had advanced
the Company $1,600,000 which is shown as due to affiliate in the accompanying
balance sheet.
In anticipation of and in connection with the sale of the Company, certain
nonrecurring management and employee bonuses were declared. Bonuses totaling
$1,600,000 were paid to management/minority stockholders of the Company. Bonuses
and related payroll taxes totaling $2,231,472 were accrued to other employees of
the Company.
NOTE M--SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<S> <C>
Cash paid during the period for
Interest...................................................... $ 407,788
Income taxes.................................................. 3,286,467
Noncash investing and financing activity
Acquisition of property and equipment under capital lease
obligations................................................. 785,061
Transfer of life insurance policies and assumption of
litigation
liability by the Company's principal owner.................. 614,000
</TABLE>
F-45
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Brittain Machine, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of Brittain
Machine, Inc. and Subsidiary as of June 30, 1997, and the related consolidated
statements of earnings and retained earnings and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1997 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Brittain Machine, Inc. and Subsidiary as of June 30, 1997, and the consolidated
results of their operations and their consolidated cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ GRANT THORNTON LLP
Wichita, Kansas
October 17, 1997
F-46
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Brittain Machine, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of Brittain
Machine, Inc. and Subsidiary as of June 30, 1996, and the related consolidated
statements of earnings and retained earnings, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our 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 audit provides 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
Brittain Machine, Inc. and Subsidiary at June 30, 1996, and the consolidated
results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Wichita, Kansas
September 3, 1996
F-47
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30,
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................................. $ 455 $ 91
Accounts receivable
Trade accounts receivable........................................... 4,913 5,386
Other............................................................... 188 109
Income tax receivable................................................. 107 --
Inventories........................................................... 10,978 4,878
Note receivable from affiliate........................................ -- 207
Prepaid expenses and other............................................ 50 56
Deferred income taxes................................................. 694 608
--------- ---------
Total current assets................................................ 17,385 11,335
PROPERTY AND EQUIPMENT, AT COST
Land.................................................................. 201 199
Buildings............................................................. 3,603 2,812
Machinery and equipment............................................... 19,754 18,669
Vehicles.............................................................. 180 175
Office equipment...................................................... 775 679
Construction in progress.............................................. 99 6
--------- ---------
24,612 22,540
Less accumulated depreciation......................................... 14,007 12,357
--------- ---------
10,605 10,183
INVESTMENTS AND OTHER ASSETS
Funds held by trustee................................................. 56 52
Cash surrender value of life insurance................................ 520 486
Bond issuance costs................................................... 36 39
--------- ---------
612 577
--------- ---------
$ 28,602 $ 22,095
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-48
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30,
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving note payable to bank........................................ $ 3,855 $ 525
Accounts payable...................................................... 1,612 923
Accrued payroll and employee benefits................................. 1,719 1,388
Litigation judgment payable........................................... 672 600
Income taxes payable.................................................. -- 1,621
Other accrued liabilities............................................. 366 187
Current maturities of capital lease obligations....................... 285 156
Current maturities of long-term debt.................................. 741 972
Current maturities of industrial revenue bonds........................ 50 400
--------- ---------
Total current liabilities........................................... 9,300 6,772
LONG-TERM LIABILITIES
Capital lease obligations............................................. 1,203 507
Long-term debt........................................................ 971 1,710
Industrial revenue bonds.............................................. 700 750
Deferred income taxes................................................. 1,162 996
--------- ---------
4,036 3,963
STOCKHOLDERS' EQUITY
Common stock, Class A, voting, par value $1
Authorized--300,000 shares
Issued and outstanding--90,000 shares............................... 90 90
Common stock, Class B, nonvoting, par value $1
Authorized--300,000 shares
Issued and outstanding--90,000 shares............................... 90 90
Additional paid-in capital............................................ 55 55
Retained earnings..................................................... 15,031 11,125
--------- ---------
15,266 11,360
--------- ---------
$ 28,602 $ 22,095
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-49
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
YEAR ENDED JUNE 30,
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Sales................................................................... $ 35,481 $ 26,892
Cost of sales........................................................... 25,656 19,076
--------- ---------
Gross margin on sales................................................... 9,825 7,816
General, administrative and selling expenses............................ 2,770 2,353
Write off note receivable from affiliate................................ 386 --
Litigation expense...................................................... 73 600
--------- ---------
Earnings from operations................................................ 6,596 4,863
Other income (expense)
Interest income....................................................... 11 28
Interest expense...................................................... (409) (431)
Gain (loss) on sale of assets......................................... 5 (8)
Other............................................................... (89) (69)
--------- ---------
(482) (480)
--------- ---------
Earnings before income taxes............................................ 6,114 4,383
Income taxes............................................................ 2,208 1,637
--------- ---------
NET EARNINGS...................................................... 3,906 2,746
Retained earnings at beginning of year.................................. 11,125 8,379
--------- ---------
Retained earnings at end of year........................................ $ 15,031 $ 11,125
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-50
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
YEAR ENDED JUNE 30,
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net earnings................................................................................. $ 3,906 $ 2,746
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities
Depreciation and amortization.............................................................. 1,669 1,392
Deferred income taxes...................................................................... 80 (280)
(Gain) loss on disposal of property and equipment.......................................... (5) 8
Write-off uncollectible note receivable from affiliate..................................... 386 --
Change in assets and liabilities
(Increase) decrease in accounts receivable............................................... 393 (2,384)
Increase in income taxes receivable...................................................... (107) --
Increase in inventories.................................................................. (6,099) (2,240)
Increase in accounts payable............................................................. 688 302
Increase (decrease) in accrued payroll and employee benefits............................. 331 (28)
Increase in litigation judgment payable.................................................. 73 600
Increase (decrease) in income taxes payable.............................................. (1,621) 2,404
Other.................................................................................... 151 (139)
--------- ---------
Net cash provided by (used in) operating activities.................................... (155) 2,381
Cash flows from investing activities
Decrease in marketable securities............................................................ -- 12
Purchase of property and equipment........................................................... (1,072) (1,519)
Proceeds from disposal of property and equipment............................................. 7 17
Increase in note receivable from affiliate................................................... (179) (129)
--------- ---------
Net cash used in investing activities...................................................... (1,244) (1,619)
Cash flows from financing activities
Net change in funds held by trustee.......................................................... (3) 377
Net change in line of credit................................................................. 3,331 165
Repayments of long-term debt and industrial revenue bonds.................................... (1,370) (1,299)
Repayments of capital lease obligations...................................................... (195) (78)
--------- ---------
Net cash provided by (used in) financing activities........................................ 1,763 (835)
--------- ---------
Net increase (decrease) in cash and cash equivalents........................................... 364 (73)
Cash and cash equivalents at beginning of year................................................. 91 164
--------- ---------
Cash and cash equivalents at end of year....................................................... $ 455 $ 91
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of this statement.
F-51
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE A--SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows.
1. BUSINESS ACTIVITY AND PRINCIPLES OF CONSOLIDATION
Brittain Machine, Inc. manufactures parts according to customer
specification primarily for use in the aerospace industry. The Company also
designs, manufactures and sells tooling, machinery and equipment for use in the
aerospace industry.
Wichita Manufacturing, Inc., a wholly-owned subsidiary, is located in
Cerritos, California, and is engaged in the same line of business as Brittain
Machine, Inc.
The consolidated financial statements include the consolidated accounts of
Brittain Machine, Inc. and its wholly-owned subsidiary, Wichita Manufacturing,
Inc. All significant intercompany accounts have been eliminated.
2. ACCOUNTS RECEIVABLE
The Company considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required. If amounts become
uncollectible, they will be charged to operations when that determination is
made.
3. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
4. INVENTORIES
Inventories are stated at the lower of weighted average cost or net
realizable value.
5. PROPERTY AND EQUIPMENT
Land, buildings and equipment are carried at cost. Major additions and
betterments are charged to the property accounts while replacements, maintenance
and repairs which do not improve or extend the life of the respective assets are
expensed currently. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets. Estimated useful lives are as follows:
<TABLE>
<S> <C>
10-30
Buildings....................................................... years
Machinery and equipment......................................... 7-10 years
Vehicles........................................................ 4-6 years
Office equipment................................................ 5-7 years
</TABLE>
F-52
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 AND 1996
NOTE A--SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
6. INCOME TAXES
The Company files a consolidated income tax return with its subsidiary.
Deferred income tax assets and liabilities are determined based on the
temporary differences between the financial accounting and tax basis of assets
and liabilities. Deferred tax assets or liabilities at the end of each period
are determined using the currently enacted tax rate expected to apply to taxable
income in the periods in which the deferred tax asset or liability is expected
to be realized or settled.
7. CASH SURRENDER VALUE OF LIFE INSURANCE
The Company pays the premiums on certain life insurance policies insuring
the lives of two of its stockholders. The cumulative value of net premiums paid
by the Company on behalf of the beneficiary of such life insurance policies is
recorded as an asset as this amount is payable by the policy owner to the
Company upon death of the insured.
The cash surrender values of certain other life insurance contracts owned by
the Company are recorded as assets. The change in such cash surrender values is
accounted as an adjustment of premiums paid in determining the expense or income
to be recognized under the contract for the period.
8. SELF INSURANCE
The Company participates in various self-insurance programs for medical and
workers' compensation risks. In connection with these programs the Company has
mitigated its exposure through the purchase of stipulated stop-loss coverage
with insurance companies. The Company estimates its liability for the
self-insured portions of the risks covered by such programs and accrues
appropriate reserves.
9. CASH EQUIVALENTS
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments with maturities of less than three
months to be cash equivalents.
10. REVENUE RECOGNITION
The Company's sales contracts are generally of a short-term nature and are
billed upon delivery. Revenue from such contracts is recognized upon passage of
title to the customer which, in most cases, coincides with shipments of the
related products to customers. Provisions for anticipated losses on contracts,
if any, are made currently as the amount of the loss is determinable.
F-53
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 AND 1996
NOTE B--INVENTORIES
Inventories consist of the following at June 30 (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Raw material and supplies................................................ $ 3,108 $ 1,155
Work in progress......................................................... 7,260 3,445
Finished goods........................................................... 610 278
--------- ---------
$ 10,978 $ 4,878
--------- ---------
--------- ---------
</TABLE>
NOTE C--LINE OF CREDIT
At June 30, 1997, the Company had available a line of credit with a bank for
up to $5,000,000, of which $3,855,000 and $524,519 was outstanding at June 30,
1997 and 1996, respectively. Interest is payable monthly on the outstanding
balance at a variable rate equal to the bank's base rate (9.25% at June 30,
1997). There are no compensating balance or commitment fee requirements.
Borrowings under the line of credit are collateralized by substantially all
assets of the Company.
NOTE D--INCOME TAXES
Income tax expense for the years ended June 30 consists of the following
(dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Current.................................................................... $ 2,128 $ 1,917
Deferred................................................................... 80 (280)
--------- ---------
$ 2,208 $ 1,637
--------- ---------
--------- ---------
</TABLE>
The principal reason for the variation between income taxes computed at the
federal tax rate of 34% and actual income taxes is state income tax expense.
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities at June 30 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Deferred tax assets
Inventory valuation differences............................................ $ 317 $ 393
Accrued expenses not deductible until paid................................. 458 377
--------- ---------
775 770
Deferred tax liabilities
Depreciation of property and equipment..................................... 1,026 1,009
Capital leases treated as operating leases for tax purposes................ 136 68
Other...................................................................... 81 81
--------- ---------
1,243 1,158
--------- ---------
Net deferred tax liability............................................... $ 468 $ 388
--------- ---------
--------- ---------
</TABLE>
F-54
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 AND 1996
NOTE E--LONG-TERM DEBT
Long-term debt consists of the following at June 30 (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Note payable to bank, payable in monthly installments including variable interest at the bank's
base interest rate adjusted annually (effective rate 9.125% and 9.0% at June 30, 1997 and
1996, respectively), due in 2000 and collateralized by certain equipment and machinery....... $ 1,280 $ 1,692
Equipment loans payable to a finance company, payable in monthly installments including
interest at a fixed rate of 7.95% changing to a variable rate during the final year of the
loan, which will range from the index rate (a) to the index rate plus 1.5% maturing at
various dates through 1998 and collateralized by the equipment financed and the personal
guarantees of two stockholders............................................................... 238 751
Note payable to bank, payable in monthly installments including variable interest, due in 1998
and collateralized by a $250,000 real estate mortgage........................................ 40 77
Unsecured note payable to former stockholder, payable in equal monthly installments including
fixed interest at 9%, due in 2007............................................................ 154 162
--------- ---------
1,712 2,682
Less current maturities........................................................................ 741 972
--------- ---------
$ 971 $ 1,710
--------- ---------
--------- ---------
</TABLE>
(a) The index rate is a rate equal to the highest of (i) the Prime Rate of
Chemical Bank, (ii) the Wall Street Journal prime rate or (iii) the
commercial paper rate in effect from time to time.
Aggregate annual maturities are as follows for the years ending June 30
(dollars in thousands):
<TABLE>
<S> <C>
1998................................................................ $ 741
1999................................................................ 506
2000................................................................ 343
2001................................................................ 12
2002................................................................ 13
Thereafter.......................................................... 97
---------
$ 1,712
---------
---------
</TABLE>
Interest capitalized during the years ended June 30, 1997 and 1996 was
$17,000 and $125,000 respectively.
NOTE F--INDUSTRIAL REVENUE BONDS
The Company financed $2,500,000 for the purchase of certain equipment and
the construction of a building through industrial revenue bonds issued by the
City of Wichita, Kansas and maturing through 2006. The principal and interest
(6% to 8%) on the bonds are serviced by biannual payments by the Company to a
trustee who then remits the funds to the City on the scheduled interest payment
and bond maturity dates. Certain of the proceeds from the bonds and the biannual
payments made by the Company have been and are deposited with the trustee.
F-55
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 AND 1996
NOTE F--INDUSTRIAL REVENUE BONDS (CONTINUED)
The total amount of bonds outstanding at June 30, 1997 and 1996 was $750,000
and $1,150,000, respectively. Aggregate annual maturities are as follows for the
years ended June 30 (dollars in thousands):
<TABLE>
<S> <C>
1998................................................................. $ 50
1999................................................................. 55
2000................................................................. 60
2001................................................................. 65
2002................................................................. 70
Thereafter........................................................... 450
---------
$ 750
---------
---------
</TABLE>
NOTE G--RELATED PARTY TRANSACTIONS
LEASING ACTIVITIES
The Company has entered into several agreements with an entity, affiliated
by common stockholders, to lease a building and certain machinery and equipment.
Due to the related party relationship with the affiliate and based upon the
underlying economic substance of the leasing arrangements, the leases have been
recorded as capital lease obligations. The recorded lease obligation represents
the outstanding principal balance on the loans incurred by the affiliated entity
to finance that entity's purchase of the building and machinery and equipment
(the "underlying debt"). In addition, the Company is the guarantor of such debt.
A summary of lease payments made during the years ended June 30 under these
capital leases is as follows (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Total lease payments.......................................................... $ 483 $ 192
Amount representing interest.................................................. (72) (29)
Amount representing excess lease payments..................................... (216) (85)
--------- ---------
Principal payments............................................................ $ 195 $ 78
--------- ---------
--------- ---------
</TABLE>
In connection with the leases, property, plant and equipment at June 30
included the following (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Machinery and equipment...................................................... $ 1,508 $ 836
Building..................................................................... 348 --
--------- ---------
1,856 836
Less accumulated depreciation................................................ (259) (16)
--------- ---------
$ 1,597 $ 820
--------- ---------
--------- ---------
</TABLE>
F-56
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 AND 1996
NOTE G--RELATED PARTY TRANSACTIONS (CONTINUED)
Depreciation expense for the property under lease was $242,474 and $16,398
for the years ended June 30, 1997 and 1996, respectively.
The following is a schedule by years of future minimum lease payments under
capital leases (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30
- -------------------------------------------------------------------------------------
<S> <C>
1998................................................................................. $ 736
1999................................................................................. 736
2000................................................................................. 736
2001................................................................................. 448
2002................................................................................. 272
Thereafter........................................................................... 1,098
---------
Total minimum lease payments......................................................... 4,026
Amount representing interest......................................................... (457)
Amount representing excess lease payments............................................ (2,081)
---------
Total capital lease obligations...................................................... 1,488
Less current maturities.............................................................. 285
---------
$ 1,203
---------
---------
</TABLE>
In addition, the Company leases equipment under an operating lease from this
affiliated entity which expires March 1, 1998. The lease which began March 1996
provides for monthly payments of $14,000 per month.
The Company also has a month-to-month rental agreement with a stockholder
for two warehouses. In connection with such agreement rental expense charged to
operations by the Company for the years ended June 30, 1997 and 1996 was $60,000
annually.
OTHER TRANSACTIONS
The Company pays the premiums on certain policies insuring the lives of two
of its stockholders. The aggregate amount of such premiums paid during the years
ended June 30, 1997 and 1996 was $103,000 and $87,000, respectively.
The Company purchased goods from an entity controlled by the spouse of a
stockholder in the amount of $4,117,000 and $2,331,000 during 1997 and 1996,
respectively. Additionally, an amount of $502,000 and $285,000 was due to such
affiliate at June 30, 1997 and 1996, respectively, and was included in accounts
payable in the accompanying consolidated balance sheets. The Company also paid
to an individual related to the Company's principal stockholders $310,000 and
$186,000 during 1997 and 1996, respectively, for debarring services performed.
NOTE H--RETIREMENT PLAN
All employees who have completed one year of service and who have attained
age 21 years of age are eligible to participate in the Company's Profit Sharing
Retirement Plan. Contributions to the Plan are
F-57
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 AND 1996
NOTE H--RETIREMENT PLAN (CONTINUED)
made by the Company for amounts that are determined by the Board of Directors
based on a percentage of each participant's annual compensation. Employees may
also contribute a portion of their compensation to the Plan. During the years
ended June 30, 1997 and 1996, the Company charged $842,000 and $834,000 to
expense pursuant to the Plan.
NOTE I--COMMITMENTS
The Company provides group medical insurance for its employees through a
self-insured medical plan. The Company has purchased a stop-loss insurance
policy that will pay claims in excess of $30,000 per year per individual and in
excess of annual aggregate claims of $420,000.
The Company is self-insured for workers' compensation claims. The Company
has purchased a stop-loss insurance policy that pays workers' compensation
claims in excess of $175,000 per occurrence and aggregate annual claims in
excess of $430,292. The Company has obtained a $655,000 letter of credit from a
bank in favor of the State of Kansas in connection with a self-insurance
program.
Wichita Manufacturing, Inc. leases its facility located in Cerritos,
California at a rental cost of $12,000 per month through October 31, 1998. The
lease provides an option for an extension of a three-year period. Future
noncancelable lease commitments are as follows (dollars in thousands):
<TABLE>
<S> <C>
1998................................................................. $ 144
1999................................................................. 48
---------
$ 192
---------
---------
</TABLE>
The Company had at June 30, 1997 a commitment to purchase additional
equipment costing $1,748,000. The equipment is scheduled to be delivered in
December 1997.
NOTE J--CONTINGENCY
In January 1996, the Company was found liable in a civil action for, inter
alia, breach of contract and termination of joint venture/partnership associated
with a relationship the Company had with another entity. A judgment was recorded
against the Company in the amount of $600,000. However, the Company has filed a
Notice of Appeal. The plaintiffs have filed a Notice of Cross-Appeal seeking
damages of approximately $1,500,000. While the ultimate outcome of the
disposition of the matter is presently difficult to estimate, the Company
recorded a provision during 1996 of $600,000 and believes that the ultimate
outcome will not have a material adverse effect on its financial position. An
additional provision of $72,500 was recorded in 1997 for post-judgment interest.
NOTE K--CONCENTRATION OF SALES
Nearly all of the Company's sales are made to a very few customers. These
customers are typically large companies in the aerospace industry. If the
Company were to lose one or more of these customers and were unable to find
replacement customers, sales would be adversely affected. One customer accounted
for 67% and 56% of sales for 1997 and 1996, respectively. Amounts due from this
customer accounted for 60% and 64% of total accounts receivable at June 30, 1997
and 1996, respectively.
F-58
<PAGE>
BRITTAIN MACHINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997 AND 1996
NOTE L--SUPPLEMENTAL CASH FLOW INFORMATION (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Cash paid during the year for
Interest.................................................................... $ 405 $ 586
Income taxes................................................................ 3,852 --
Noncash investing and financing activity
Acquisition of property and equipment under capital lease obligations....... 1,019 741
</TABLE>
F-59
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Barnes Machine, Inc.
We have audited the accompanying balance sheets of Barnes Machine, Inc. as
of April 21, 1998 and September 30, 1997, and the related statements of income
and retained earnings and cash flows for the period from October 1, 1997 to
April 21, 1998 and for the year ended September 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepting auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Barnes Machine, Inc. at
April 21, 1998 and September 30, 1997, and the results of its operations and its
cash flows for the period from October 1, 1997 to April 21, 1998 and the year
ended September 30, 1997, in conformity with generally accepted accounting
principles.
Long Beach, California
August 12, 1998
F-60
<PAGE>
BARNES MACHINE, INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 21, SEPTEMBER 30,
1998 1997
----------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................. $ 687 $ 655
Accounts receivable less allowance for doubtful accounts of $39
in 1998 and 1997.................................................................... 1,951 1,250
Inventories........................................................................... 1,861 1,005
Prepaid expenses...................................................................... 26 27
Deferred assets....................................................................... 41 25
----------- ------
Total current assets.................................................................... 4,566 2,962
Property and equipment, net............................................................. 2,106 1,401
Other assets............................................................................ 217 427
----------- ------
Total assets............................................................................ $ 6,889 $ 4,790
----------- ------
----------- ------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................................................... $ 1,161 $ 711
Accrued expenses...................................................................... 808 660
Loan payable-stockholders............................................................. -- 209
Current portion of long-term debt..................................................... 153 147
----------- ------
Total current liabilities............................................................... 2,122 1,727
Long-term debt, less current portion.................................................... 631 722
Commitments
Deferred taxes.......................................................................... 66 39
Stockholders' equity:
Common stock, par value $1 per share:
Authorized shares 50,000
Issued and outstanding shares 2,500..................................................... 3 3
Capital in excess of par.............................................................. 247 7
Retained earnings..................................................................... 3,820 2,292
----------- ------
Total stockholders' equity.............................................................. 4,070 2,302
----------- ------
Total liabilities and stockholders' equity.............................................. $ 6,889 $ 4,790
----------- ------
----------- ------
</TABLE>
See accompanying notes.
F-61
<PAGE>
BARNES MACHINE, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
OCTOBER 1, 1997
TO YEAR ENDED
APRIL 21, 1998 SEPTEMBER 30, 1997
--------------- -------------------
<S> <C> <C>
Net sales..................................................................... $ 8,809 $ 7,693
Cost of sales................................................................. 6,057 4,854
------ ------
Gross profit.................................................................. 2,752 2,839
Selling, general and administrative expenses.................................. 362 1,587
------ ------
Operating income.............................................................. 2,390 1,252
Interest expense.............................................................. 50 9
Other (income) expense, net................................................... (4) (21)
------ ------
Income before income taxes.................................................... 2,344 1,264
Income tax expense............................................................ 816 438
------ ------
Net income.................................................................... 1,528 826
Retained earnings at beginning of period...................................... 2,292 1,466
------ ------
Retained earnings at end of period............................................ $ 3,820 $ 2,292
------ ------
------ ------
</TABLE>
See accompanying notes.
F-62
<PAGE>
BARNES MACHINE, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
OCTOBER 1, 1997 YEAR ENDED
TO SEPTEMBER 30,
APRIL 21, 1998 1997
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income........................................................................ $ 1,528 $ 826
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Deferred taxes.................................................................. 11 (1)
Depreciation.................................................................... 171 208
Changes in operating assets and liabilities:
Accounts receivable........................................................... (701) (339)
Inventories................................................................... (856) (937)
Prepaid expenses and other assets............................................. 211 (425)
Accounts payable.............................................................. 450 450
Accrued expenses.............................................................. 148 113
------ -----
Net cash provided by (used in) operating activities............................... 962 (105)
INVESTING ACTIVITIES
Purchase of property and equipment................................................ (636) (931)
FINANCING ACTIVITIES
(Payments on) proceeds from long-term debt........................................ (85) 868
Payment of loan payable to stockholder............................................ (209) (28)
------ -----
Net cash (used in) provided by financing activities............................... (294) 840
------ -----
Net increase (decrease) in cash................................................... 32 (196)
Cash and cash equivalents at beginning of period.................................. 655 851
------ -----
Cash and cash equivalents at end of period........................................ $ 687 $ 655
------ -----
------ -----
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest........................................................................ $ 50 $ 9
Income taxes.................................................................... $ 220 $ 361
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Donation of machinery and equipment by owners................................... $ 240 $ --
</TABLE>
See accompanying notes.
F-63
<PAGE>
BARNES MACHINE, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 21, 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Barnes Machine, Inc. (the Company) manufactures small to medium-sized
structural parts for aerospace customers, specializing in precision machining of
titanium and steel and the high-speed precision machining of aluminum.
At the close of business on April 21, 1998, 100% of the issued and
outstanding common stock of the Company and land and buildings owned by the
stockholders were sold to Compass Aerospace, Inc. for a total sales price of
$13,620,000. Transactions related to the sale have been treated as subsequent
events and are not reflected in the accompanying financial statements. These
transactions include the repayment of the Company's interest bearing note, as
well as purchase price allocations which affect the carrying value of the
Company's assets and liabilities.
CONCENTRATION OF RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables. The
Company sells its products to a limited number of customers within the aerospace
and defense industry. Revenues from one major customer amounted to 96% of sales
for the seven months ended April 21, 1998 and 90% for the year ended September
30, 1997. Total accounts receivable from this customer amounted to 98% and 95%
of total trade accounts receivable at April 21, 1998 and September 30, 1997,
respectively. Credit is extended based upon an evaluation of each customer's
financial condition, with terms consistent in the industry and no collateral
required. The Company has historically incurred minimal credit losses.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of cash and cash equivalents and the current portion of
long-term debt approximate cost due to the short period of time to maturity.
Fair values of long-term debt, which have been determined based on borrowing
rates currently available to the Company for loans with similar terms of
maturity, approximate the carrying amounts in the financial statements.
CASH EQUIVALENTS
The Company considers all highly liquid instruments with an original
maturity of three months or less when purchased to be cash equivalents. Cash and
cash equivalents are held by major financial institutions.
INVENTORIES
Inventories consist primarily of work-in-process which are recorded on a
weighted average basis, which approximates first-in first-out, and are stated at
the lower of cost or market.
F-64
<PAGE>
BARNES MACHINE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 21, 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
The provision for depreciation of property and equipment is generally
computed on the straight-line method over the following useful lives:
<TABLE>
<S> <C>
Machinery and equipment.............. 3--10 years
Furniture and fixtures............... 5--7 years
Automotive equipment................. 5 years
Leasehold improvements............... Term of lease or life of asset,
whichever is shorter
</TABLE>
REVENUE RECOGNITION
The Company recognizes revenue from product sales at the time of shipment.
The Company provides its customers the right to return products that are damaged
or defective. The effect of these programs is estimated and current period sales
and cost of sales are adjusted accordingly.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which is effective for financial
statements for fiscal years beginning after June 15, 1999, and which provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. There will be no impact due to the adoption
of SFAS No. 133.
In February 1998, the FASB issued SFAS No. 132, "Employers Disclosures about
Pensions and Other Postretirement Benefits," which is effective for financial
statements for periods beginning after December 15, 1997, and which revises and
standardizes disclosure requirements for pensions and other postretirement
benefits. The Company will revise its disclosures as necessary upon adoption of
SFAS No. 132.
In March 1998, Statement of Position (SOP) 98-1, "Accounting for the Costs
of Computer Software Developed for or Obtained for Internal Use," was issued,
which is effective for fiscal years beginning after December 15, 1998. SOP 98-1
requires capitalization and amortization of qualified computer software costs
over its estimated useful life. There will be no impact due to the adoption of
SOP 98-1.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
RECLASSIFICATION
Certain prior year balances have been reclassified to conform to the current
year presentation.
F-65
<PAGE>
BARNES MACHINE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 21, 1998
2. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment, which is recorded at
cost (in thousands):
<TABLE>
<CAPTION>
APRIL 21, SEPTEMBER 30,
1998 1997
--------- -------------
<S> <C> <C>
Automotive equipment................................................ $ 122 $ 121
Furniture and fixtures.............................................. 487 403
Leasehold improvements.............................................. 309 281
Machinery and equipment............................................. 3,017 2,279
--------- -------------
3,935 3,084
Allowance for depreciation.......................................... (1,829) (1,683)
--------- -------------
$ 2,106 $ 1,401
--------- -------------
--------- -------------
</TABLE>
3. INCOME TAXES
Deferred income taxes are computed using the liability method and reflect
the net tax effects of temporary differences between the carrying amount of
assets and liabilities for financial statement purposes and the amounts used for
income tax purposes. The provision for income taxes reflects the taxes to be
paid for the respective periods ended and the change during each period in the
deferred tax assets and liabilities. Significant components of the Company's
deferred tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
APRIL 21, SEPTEMBER 30,
1998 1997
----------- ---------------
<S> <C> <C>
Deferred tax assets:
Accrued expenses not deductible for tax........................... $ 41 $ 25
Deferred tax liabilities:
Tax depreciation over book........................................ (66) (39)
--- ---
Net deferred tax liability.......................................... $ (25) $ (14)
--- ---
--- ---
</TABLE>
Significant components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
OCTOBER 1, 1997 YEAR ENDED
THROUGH SEPTEMBER 30,
APRIL 21, 1998 1997
----------------- ---------------
<S> <C> <C>
Federal:
Current..................................................... $ 805 $ 439
Deferred.................................................... 11 (1)
----- -----
$ 816 $ 438
----- -----
----- -----
</TABLE>
F-66
<PAGE>
BARNES MACHINE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 21, 1998
4. DEBT
The Company has a promissory note with Keybank National Association, payable
in monthly installments of $17,936 plus interest at 8.50% with a maturity date
of October 15, 2002. The promissory note is secured by a milling machine.
Maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
1999................................................................. $ 153
2000................................................................. 167
2001................................................................. 182
2002................................................................. 198
2003................................................................. 84
---------
Total................................................................ $ 784
---------
---------
</TABLE>
The Company has an unsecured line of credit with Key Bank, which provides
for borrowings up to $500,000 under a revolving line of credit that bears
interest at 1% over prime. There was no balance outstanding at April 21, 1998 or
September 30, 1997.
5. COMMITMENTS AND RELATED PARTY TRANSACTIONS
The Company rents office, plant and warehouse space on a monthly basis from
its stockholders. Property rent expense amounted to $193,000 for the seven
months ended April 21, 1998 and $251,000 for the year ended September 30, 1997.
The Company also leases machinery and equipment from its stockholders. The
machinery and equipment lease has a one-year term and may be cancelled with
sixty days' advance notice. Rent expense under this arrangement amounted to
$78,000 for the seven months ended April 21, 1998 and $139,000 for the year
ended September 30, 1997. The leases require the Company to pay property taxes.
The Company had outstanding notes payable to its stockholders for $209,000
at September 30, 1997. These notes were repaid during the period ended April 21,
1998. Interest expense was $3,000 and $6,000 for the period ended April 21, 1998
and the year ended September 30, 1997, respectively.
The Company is a defendant in various legal proceedings arising in the
normal course of business. In consultation with legal counsel, management has
reviewed these proceedings and, based upon current information, believes that
the ultimate disposition thereof will have no material effect on the Company's
consolidated financial position.
6. PROFIT SHARING PLAN
The Company has adopted a profit sharing plan which qualifies under Section
401(k) of the Internal Revenue Code. The plan covers all eligible employees who
may elect to contribute a percentage of their gross earnings to the Plan.
Contributions to the plan by the Company are discretionary. Contributions to the
profit sharing plan for the period from October 1, 1997 to April 21, 1998 and
the year ended September 30, 1997 were $10,000 and $150,000, respectively.
F-67
<PAGE>
BARNES MACHINE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 21, 1998
7. IMPACT OF YEAR 2000 (UNAUDITED)
The Company does not anticipate that there would be a material impact on the
results of operations or cash flows of the Company related to the Year 2000
issue. The Year 2000 issue addresses computer programs which have time-sensitive
software that recognizes a date using "00" as the year 1900 rather than the year
2000. The Company converted to a new computer system in 1998 and is currently
seeking a Year 2000 compliant certification from the Company's software vendor.
In addition, the Company has an ongoing program to test its systems for such
compliance. The major business systems of the Company are not vulnerable to
third parties failure to remediate their own Year 2000 issues, as the Company's
interface with third parties, including customers and vendors, does not involve
date-dependent computer communication systems. The Company believes that with
the conversions to new software and modifications to other existing software,
the Year 2000 issue will not pose significant operational problems for its
computer system. In the event the remaining conversions and modifications are
not made, or are not completed timely, the Year 2000 issue is not expected to
have a material impact on the operations of the Company, as the products sold by
the Company and the processing and delivery equipment used are not
date-dependent, minimizing the impact of any Year 2000 issues related to meeting
customer requirements.
As the Company has been incurring costs related to this project since 1997
and no significant additional costs have been identified, the Company does not
anticipate a material impact on the results of operations related to the Year
2000 issue.
F-68
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Sea-Lect Products Inc. and Affiliate
We have audited the accompanying combined balance sheets of Sea-Lect
Products Inc. and Affiliate as of May 11, 1998 and December 31, 1997 and the
related combined statements of income, shareholders' equity, and cash flows for
the period from January 1, 1998 through May 11, 1998 and for the year ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Sea-Lect Products
Inc. and Affiliate at May 11, 1998 and December 31, 1997, and the combined
results of their operations and their cash flows for the period from January 1,
1998 through May 11, 1998, and for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Long Beach, California
September 25, 1998
F-69
<PAGE>
SEA-LECT PRODUCTS INC. AND AFFILIATE
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 11, DECEMBER 31,
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................................................. $ 6,260 $ 70,915
Accounts receivable net of an allowance of $100,000 in 1998 and $54,000 in 1997... 2,245,912 1,531,163
Inventories:
Raw materials................................................................... 729,505 513,165
Work in process................................................................. 1,334,515 1,322,138
Finished goods.................................................................. 518,591 729,572
------------- -------------
Total current assets................................................................ 4,834,783 4,166,953
Property and equipment:
Machinery and equipment........................................................... 3,582,271 3,582,271
Automobiles....................................................................... 132,902 132,902
Office equipment.................................................................. 98,167 98,167
Leasehold improvements............................................................ 93,843 93,843
------------- -------------
3,907,183 3,907,183
Less accumulated depreciation....................................................... (2,750,366) (2,670,659)
------------- -------------
Total property and equipment........................................................ 1,156,817 1,236,524
------------- -------------
Total assets........................................................................ $ 5,991,600 $ 5,403,477
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit.................................................................... $ 1,316,422 $ 701,755
Shareholders' notes payable....................................................... 348,257 375,182
Accounts payable.................................................................. 1,165,825 713,179
Wage and related accruals......................................................... 421,705 304,808
Other accrued liabilities......................................................... 69,847 187,304
Due to shareholders............................................................... -- 200,000
Current portion of long-term debt................................................. 258,252 384,165
------------- -------------
Total current liabilities........................................................... 3,580,308 2,866,393
Long-term debt, less current portion................................................ 665,398 665,399
Commitments and contingencies
Shareholders' equity:
Sea-Lect common stock, $1 par value; authorized 50,000 shares; issued and
outstanding 10,200 shares....................................................... 10,200 10,200
J&J Leasing, Inc. common stock, no par value; authorized 1,000,000 shares; issued
and outstanding 2,000 shares, stated capital.................................... 113,350 113,350
Retained earnings................................................................. 1,622,344 1,748,135
------------- -------------
Total shareholders' equity.......................................................... 1,745,894 1,871,685
------------- -------------
Total liabilities and shareholders' equity.......................................... $ 5,991,600 $ 5,403,477
------------- -------------
------------- -------------
</TABLE>
See notes to combined financial statements.
F-70
<PAGE>
SEA-LECT PRODUCTS INC. AND AFFILIATE
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
1998
THROUGH YEAR ENDED
MAY 11, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
Sales......................................................................... $ 5,368,737 $ 14,162,416
Cost of goods sold............................................................ 4,393,686 10,437,350
-------------- -----------------
Gross profit.................................................................. 975,051 3,725,066
Selling, general and administrative expenses.................................. 772,173 1,905,679
-------------- -----------------
202,878 1,819,387
Other income (expenses):
Interest expense............................................................ (65,811) (275,084)
Miscellaneous (expense) income.............................................. 3,651 137,915
-------------- -----------------
Other expenses, net........................................................... (62,160) (137,169)
-------------- -----------------
-------------- -----------------
Net income.................................................................... $ 140,718 $ 1,682,218
-------------- -----------------
-------------- -----------------
</TABLE>
See notes to combined financial statements.
F-71
<PAGE>
SEA-LECT PRODUCTS INC. AND AFFILIATE
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEA-LECT J&J LEASING, INC.
COMMON STOCK COMMON STOCK
-------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
RETAINED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT EARNINGS EQUITY
--------- --------- ----------- ---------- ------------ -------------------
Balance at January 1, 1997.................... 10,200 $ 10,200 2,000 $ 113,350 $ 875,917 $ 999,467
Net income.................................. -- -- -- -- 1,682,218 1,682,218
Distributions to shareholders............... -- -- -- -- (810,000) (810,000)
--------- --------- ----- ---------- ------------ -------------------
Balance at December 31, 1997.................. 10,200 10,200 2,000 113,350 1,748,135 1,871,685
Net income.................................. -- -- -- -- 140,718 140,718
Distributions to shareholders............... -- -- -- -- (266,509) (266,509)
--------- --------- ----- ---------- ------------ -------------------
Balance at May 11, 1998....................... 10,200 $ 10,200 2,000 $ 113,350 $ 1,622,344 $ 1,745,894
--------- --------- ----- ---------- ------------ -------------------
--------- --------- ----- ---------- ------------ -------------------
</TABLE>
See notes to combined financial statements.
F-72
<PAGE>
SEA-LECT PRODUCTS INC. AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
1998
THROUGH YEAR ENDED
MAY 11, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................................... $ 140,718 $ 1,682,218
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Depreciation and amortization............................................... 79,707 228,466
Gain on sale of equipment................................................... -- (13,000)
Changes in operating assets and liabilities:
Accounts receivable....................................................... (714,749) (479,769)
Inventories............................................................... (17,736) (418,412)
Accounts payable and accrued liabilities.................................. 452,086 253,170
Prepaid expenses.......................................................... -- 36,000
-------------- -----------------
Net cash (used in) provided by operating activities........................... (59,974) 1,288,673
INVESTING ACTIVITIES
Purchase of equipment......................................................... -- (813,277)
Proceed from sale of equipment................................................ -- 13,000
-------------- -----------------
Net cash used in investing activities......................................... -- (800,277)
FINANCING ACTIVITIES
Distributions to shareholders................................................. (466,509) (610,000)
Repayments on short-term borrowings........................................... (4,678,252) (14,231,408)
Advances on short-term borrowings............................................. 5,292,919 13,970,352
Repayments on long-term debt.................................................. (125,914) (363,143)
Advances on long-term debt.................................................... -- 782,440
Repayment on shareholders' note............................................... (26,925) (283,360)
Advances made from shareholders............................................... -- 259,713
-------------- -----------------
Net cash used in financing activities......................................... (4,681) (475,406)
-------------- -----------------
Net (decrease) increase in cash............................................... (64,655) 12,990
Cash at beginning of period................................................... 70,915 57,925
-------------- -----------------
Cash at end of period......................................................... $ 6,260 $ 70,915
-------------- -----------------
-------------- -----------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest...................................... $ 65,811 $ 267,762
-------------- -----------------
-------------- -----------------
</TABLE>
See notes to combined financial statements.
F-73
<PAGE>
SEA-LECT PRODUCTS INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
MAY 11, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF COMBINATION AND ORGANIZATION
The accompanying combined financial statements include the accounts of the
Sea- Lect Products, Inc. (Sea-Lect) and its affiliate, J&J Leasing (J&J) (the
Company). These financial statements have been combined due to their common
ownership and management. Significant intercompany accounts and transactions
have been eliminated in combination.
Sea-Lect is a Washington S corporation, which operates a manufacturing
facility in Kent, Washington, for the purpose of metal fabrication. A
significant portion of its business is with customers in the aerospace business,
primarily in North America. J&J is a Washington S corporation that primarily
leases machinery and equipment to Sea-Lect. Some of the shareholders of J&J are
also shareholders in Sea-Lect.
At the close of business on May 11, 1998, the net assets of Sea-Lect and
100% of J&J's issued and outstanding common stock were sold to SLP Acquisition
Co., a subsidiary of Compass Aerospace Corporation for a total sales price of
$10,500,000. Transactions related to the sale have been treated as subsequent
events and are not reflected in the accompanying financial statements. These
transactions include the repayment of the Company's interest bearing note, as
well as purchase price allocations which affect the carrying value of the
Company's assets and liabilities.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
INVENTORIES
Inventories are valued at the lower of cost or market, with cost being
determined by the first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed on the
straight-line method over five to seven years.
INCOME TAXES
The shareholders of Sea-Lect and J&J have elected, under Subchapter S of the
Internal Revenue Code, to include each company's income in their own income for
federal income tax purposes. Accordingly, no provision has been made for federal
income taxes.
2. LINE OF CREDIT
The Company has an operating line of credit agreement with a bank that
provides for borrowings up to $1.3 million with interest at the bank's prime
rate plus 1% on an individual promissory note basis with no expiration date. At
May 11, 1998, the Company had $1,316,422 outstanding under this agreement with
interest at 9.5%. The borrowings under this agreement are secured by the
Company's accounts receivable and inventory.
F-74
<PAGE>
SEA-LECT PRODUCTS INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
MAY 11, 1998
3. SHAREHOLDERS' NOTES PAYABLE
The Company has unsecured notes payable to its shareholders that bear
interest at 12% per annum. The notes are payable on demand and $300,000 of the
balance is subordinated to the line of credit. Interest expense on these notes
was approximately $32,000 and $46,000 for the period from January 1, 1998
through May 11, 1998 and the year ended December 31, 1997, respectively.
4. LONG-TERM DEBT
Long-term debt consists of the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
MAY 11, 1998 1997
------------ ------------
<S> <C> <C>
Note payable, due in monthly installments of $9,727 including interest at 9.25%, due
July 25, 2000...................................................................... $ 209,732 $ 266,587
Note payable, due in monthly installments of $8,655 including interest at 9.25%, due
July 25, 2000...................................................................... 10,933 237,291
Note payable, due in monthly installments of $5,060 including interest at 9.25%, due
April 25, 2000..................................................................... 34,253 126,684
Note payable, due in monthly installments of $2,656 including interest at 9.5%, due
April 25, 2002..................................................................... 235,612 112,523
Note payable, due in monthly installments of $3,732 including interest at 9.25%, due
March 25, 2000..................................................................... 24,806 90,346
Note payable, due in monthly installments of $2,619 including interest at 9.25%, due
April 25, 2000..................................................................... 78,087 65,611
Various other notes payable, due in monthly installments of $6,859 including interest
at 9.75%, due starting June 25, 1998 through December 25, 2000..................... 330,227 150,522
------------ ------------
923,650 1,049,564
Less current portion................................................................. 258,252 384,165
------------ ------------
$ 665,398 $ 665,399
------------ ------------
------------ ------------
</TABLE>
The above notes payable are secured by certain equipment, machinery and
automobiles and guaranteed by shareholders of J&J.
The aggregate maturities of the above notes payable are as follows as of May
11:
<TABLE>
<S> <C>
1998.............................................................. $ 258,252
1999.............................................................. 410,428
2000.............................................................. 215,693
2001.............................................................. 29,414
2002.............................................................. 9,863
---------
$ 923,650
---------
---------
</TABLE>
F-75
<PAGE>
SEA-LECT PRODUCTS INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
MAY 11, 1998
5. COMMITMENTS AND RELATED-PARTY TRANSACTIONS
The Company has several noncancelable operating leases for buildings and
equipment. Buildings are leased from an affiliated joint venture, Building Joint
Venture (JV), that is owned by the shareholders of J&J. Future minimum lease
payments under noncancelable operating leases are as follows as of May 11:
<TABLE>
<CAPTION>
BUILDING EQUIPMENT
(JV) (NON-AFFILIATE) TOTAL
------------ ------------- ------------
<S> <C> <C> <C>
1998.............................................. $ 244,599 $ 456,973 $ 701,572
1999.............................................. 389,916 704,952 1,094,868
2000.............................................. 396,024 439,540 835,564
2001.............................................. 14,090 87,322 101,412
------------ ------------- ------------
$1,044,629 $ 1,688,787 $ 2,733,416
------------ ------------- ------------
------------ ------------- ------------
</TABLE>
Rent expense to affiliated parties for the period from January 1, 1998
through May 11, 1998 and the year ended December 31, 1997 was $137,163 and
$293,532, respectively. Rent expense to a non-affiliated party for the period
from January 1, 1998 through May 11, 1998 and the year ended December 31, 1997
was $24,839 and $49,500, respectively.
6. CONCENTRATIONS
Approximately 42% and 43% of sales for the period from January 1, 1998
through May 11, 1998 and the year ended December 31, 1997, respectively, were
made to one customer. Accounts receivable from this customer amounted to
$777,165 at May 11, 1998 and $676,428 at December 31, 1997.
The Company's borrowings under the line of credit agreement and long-term
debt are made from the same bank.
7. 401(K) PLAN
The Company has a defined contribution plan (401(k)) covering substantially
all permanent employees who have completed six months of services and are at
least 18 years of age. Under the plan, the Company has agreed to contribute to
each eligible participant's account an amount equal to 50% of the amount
contributed by each participant, up to 6% of each participant's annual salary.
The 401(k) expense was $7,518 for the period from January 1, 1998 through May
11, 1998 and $21,000 for the year ended December 31, 1997.
8. YEAR 2000 ISSUE--UNAUDITED
The Company has developed a plan to modify its information technology to be
ready for the year 2000 and has begun converting critical data processing
systems. The Company substantially completed the project during 1997. The
Company does not expect the remaining project to have a significant effect on
operations. The Company will continue to implement systems with strategic value,
although some projects may be delayed due to resource constraints.
F-76
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Pacific Hills Manufacturing Co.
(formerly known as Lamsco West, Inc.)
Milford, Connecticut
We have audited the accompanying balance sheets of Pacific Hills
Manufacturing Co. (formerly known as Lamsco West, Inc.), a wholly-owned
subsidiary of Alinabal Holdings Corporation, as of November 20, 1998, January 3,
1998 and December 28, 1996, and the related statements of income, retained
earnings and cash flows for the period January 4, 1998 to November 20, 1998 and
the years ended January 3, 1998 and December 28, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pacific Hills Manufacturing
Co. (formerly known as Lamsco West, Inc.) as of November 20, 1998, January 3,
1998 and December 28, 1996, and the results of its operations and its cash flows
for the period January 4, 1998 to November 20, 1998 and the years ended January
3, 1998 and December 28, 1996 in conformity with generally accepted accounting
principles.
/s/ McGladrey & Pullen, LLP
New Haven, Connecticut
March 5, 1999
F-77
<PAGE>
PACIFIC HILLS MANUFACTURING CO.
(FORMERLY KNOWN AS LAMSCO WEST, INC.)
BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 20, JANUARY 3, DECEMBER 28,
1998 1998 1996
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Current Assets
Accounts receivable, less allowance for doubtful accounts 1998
$100,000; 1997 $75,000; 1996 $30,000 (Note 2)..................... $2,258,948 $ 4,190,653 $1,195,504
Inventories......................................................... 2,662,332 2,223,305 1,267,825
Prepaid expenses.................................................... 33,580 47,989 21,079
------------ ------------ ------------
Total current assets.............................................. 4,954,860 6,461,947 2,484,408
------------ ------------ ------------
Equipment and Leasehold Improvements
Machinery and equipment............................................. 1,804,692 1,596,146 920,908
Leasehold improvements.............................................. 275,908 146,629 114,297
------------ ------------ ------------
2,080,600 1,742,775 1,035,205
Less accumulated depreciation and amortization...................... 711,132 530,923 380,195
------------ ------------ ------------
1,369,468 1,211,852 655,010
------------ ------------ ------------
$6,324,328 $ 7,673,799 $3,139,418
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Excess of outstanding checks over bank balances..................... $ $ 37,400 $ 168,415
Accounts payable.................................................... 509,838 905,978 400,540
Accrued liabilities................................................. 275,910 984,547 193,033
------------ ------------ ------------
Total current liabilities......................................... 785,748 1,927,925 761,988
------------ ------------ ------------
Commitments and Contingency (Notes 3 and 4)
Stockholder's Equity
Common stock, $.01 par value; 20,000 shares authorized, 100 shares
issued and outstanding............................................ 1 1 1
Paid-in capital..................................................... 99 99 99
Retained earnings................................................... 5,538,480 5,745,774 2,377,330
------------ ------------ ------------
5,538,580 5,745,874 2,377,430
------------ ------------ ------------
$6,324,328 $ 7,673,799 $3,139,418
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See Notes to Financial Statements.
F-78
<PAGE>
PACIFIC HILLS MANUFACTURING CO.
(FORMERLY KNOWN AS LAMSCO WEST, INC.)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 4, FISCAL YEAR ENDED
1998 TO ----------------------------
NOVEMBER 20, JANUARY 3, DECEMBER 28,
1998 1998 1996
------------- ------------- -------------
<S> <C> <C> <C>
Net Sales
Commercial sales (Note 2)......................................... $ 28,095,863 $ 33,382,982 $ 10,593,249
Intercompany sales................................................ 186,453 151,715 221,922
------------- ------------- -------------
Total net sales................................................. 28,282,316 33,534,697 10,815,171
Cost of Goods Sold.................................................. 10,686,881 12,644,551 5,134,677
------------- ------------- -------------
Gross profit.................................................... 17,595,435 20,890,146 5,680,494
Selling, General and Administrative Expenses (Notes 3 and 4)........ 7,388,484 12,030,687 2,017,970
------------- ------------- -------------
Income before provision in lieu of income taxes................. 10,206,951 8,859,459 3,662,524
Provision in lieu of income taxes................................... 1,282,000
------------- ------------- -------------
Net income...................................................... $ 10,206,951 $ 8,859,459 $ 2,380,524
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See Notes to Financial Statements.
F-79
<PAGE>
PACIFIC HILLS MANUFACTURING CO.
(FORMERLY KNOWN AS LAMSCO WEST, INC.)
STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
PERIOD FROM FISCAL YEAR ENDED
JANUARY 4, 1998 ---------------------------------
TO JANUARY 3,
NOVEMBER 20, 1998 1998 DECEMBER 28, 1996
----------------- -------------- -----------------
<S> <C> <C> <C>
Balance, beginning........................................ $ 5,745,774 $ 2,377,330 $ 1,187,193
Net income.............................................. 10,206,951 8,859,459 2,380,524
Cash transfers to parent, net........................... (10,414,245) (5,491,015) (1,190,387)
----------------- -------------- -----------------
Balance, ending........................................... $ 5,538,480 $ 5,745,774 $ 2,377,330
----------------- -------------- -----------------
----------------- -------------- -----------------
</TABLE>
See Notes to Financial Statements.
F-80
<PAGE>
PACIFIC HILLS MANUFACTURING CO.
(FORMERLY KNOWN AS LAMSCO WEST, INC.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM FISCAL YEAR ENDED
JANUARY 4, 1998 --------------------------
TO NOVEMBER 20, JANUARY 3, DECEMBER 28,
1998 1998 1996
--------------- ------------ ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income........................................................ $ 10,206,951 $ 8,859,459 $2,380,524
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................... 180,209 152,250 76,412
Provision for doubtful accounts................................. 25,000 75,000 5,000
Changes in working capital components:
Decrease (increase) in accounts receivable.................... 1,906,705 (3,070,149) (800,651)
Increase in inventories....................................... (439,027) (955,480) (424,968)
Decrease (increase) in prepaid expenses....................... 14,409 (26,910) (12,955)
(Decrease) increase in accounts payable....................... (433,540) 374,423 361,945
(Decrease) increase in accrued liabilities.................... (708,637) 791,514 112,270
--------------- ------------ ------------
Net cash provided by operating activities................... 10,752,070 6,200,107 1,697,577
--------------- ------------ ------------
Cash Flows From Investing Activities
Purchases of equipment and leasehold improvements................. (337,825) (709,092) (507,190)
--------------- ------------ ------------
Cash Flows From Financing Activities
Cash transfers to parent, net..................................... (10,414,245) (5,491,015) (1,190,387)
--------------- ------------ ------------
Net increase in cash........................................
Cash
Beginning.........................................................
--------------- ------------ ------------
Ending............................................................ $ $ $
--------------- ------------ ------------
--------------- ------------ ------------
</TABLE>
See Notes to Financial Statements.
F-81
<PAGE>
PACIFIC HILLS MANUFACTURING CO.
(FORMERLY KNOWN AS LAMSCO WEST, INC.)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 20, 1998
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Until November 20, 1998, Pacific Hills Manufacturing Co. (formerly known as
Lamsco West, Inc., the "Company") was a wholly-owned subsidiary of Alinabal
Holdings Corporation ("Alinabal" or "Parent"). On November 20, 1998, the Company
was sold to Compass Aerospace Corporation ("Compass"). The Company is engaged in
the manufacturing of shims for the aerospace, defense and industrial markets.
The Company's sales are primarily to customers located throughout the United
States to whom they extend credit on an unsecured basis on terms it establishes
for each individual customer.
THESE STATEMENTS HAVE BEEN PREPARED ON A STAND-ALONE BASIS FOR THE COMPANY
AND THEREFORE INTERCOMPANY SALES TO OTHER AFFILIATES OF ALINABAL HAVE NOT BEEN
ELIMINATED.
ACCOUNTING PERIOD
The Company utilizes a fiscal year that ends on the Saturday nearest to
December 31. Fiscal years ended on January 3, 1998 ("fiscal year 1997") and
December 28, 1996 ("fiscal year 1996") included 53 weeks and 52 weeks of
activity, respectively. The accounting period, which ended on November 20, 1998,
began on January 4, 1998 and included 46 weeks of activity.
ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company recognizes revenue from product sales at the time of shipment.
The Company provides its customers the right to return products that are damaged
or defective. The provision for such returns is estimated and current period
sales and cost of sales are adjusted accordingly.
INVENTORIES
Inventories, consisting principally of raw materials, are stated at the
lower of cost (first-in, first-out method) or market.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are recorded at cost. Depreciation is
provided primarily utilizing the straight-line method over the estimated useful
lives of the respective assets which range from four to ten years. Leasehold
improvements are amortized over the shorter of the remaining lease period or
useful life of the respective asset.
F-82
<PAGE>
PACIFIC HILLS MANUFACTURING CO.
(FORMERLY KNOWN AS LAMSCO WEST, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 20, 1998
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EMPLOYEE BENEFIT PLANS
PENSION PLAN
The Company participates in Alinabal's defined benefit pension plan. To be
eligible, an employee must have completed one year of service and attained the
age of twenty-one. The plan provides benefits based on years of service and the
employee's compensation during their last five years of employment.
PROFIT SHARING AND SAVINGS PLAN
Employees of the Company are included in Alinabal's 401(k) employee profit
sharing and savings plan. Participants can make salary reduction contributions
to the plan equal to the lesser of 15% of their earnings or the maximum
allowable by the Internal Revenue Code. Company contributions are discretionary
and determined annually.
INCOME TAXES
Through fiscal year 1996, the Company filed a consolidated tax return with
its Parent; accordingly, for fiscal year 1996, the Company recognized a
provision in lieu of income taxes for its proportionate share of the Parent's
income tax provision.
Effective December 29, 1996, the Parent elected to be taxed under provisions
of Subchapter S of the Internal Revenue Code (S Corporation Status), which
provides that, in lieu of corporate income taxes, the stockholders separately
account for their pro rata share of the income, deductions, losses and credits
of the Company. State income taxes are generally insignificant to the Company
due to state allocations and low tax rates. As a result, no provision for
federal or state income taxes is made in these financial statements for the
period from January 4, 1998 to November 20, 1998 and for fiscal year 1997.
When the Parent elected S Corporation Status, the Parent became contingently
liable for income taxes (built in gains tax) at the maximum corporate rate if
certain assets are sold at a gain for a ten year period following the election.
As a result of the sale of the Company, the Parent will be responsible for
approximately $3,300,000 of built-in gains tax.
NOTE 2. MAJOR CUSTOMER
During the period from January 4, 1998 to November 20, 1998 and during
fiscal years 1997 and 1996, one customer accounted for approximately $20,807,000
(74%); $28,938,000 (86%); and $8,150,000 (75%), respectively, of the Company's
net sales and approximately $2,000,000 (89%); $3,921,000 (94%); and $1,066,000
(89%), of the Company's accounts receivable at November 20, 1998, January 3,
1998 and December 28, 1996, respectively. If the Company were to lose this
customer and was unable to find replacement customers, sales would be adversely
affected.
In March 1998, the Company signed an agreement in which the Company will be
the sole source supplier of certain defined parts, primarily shims, to this
customer in exchange for a 10% price reduction. The agreement contains certain
circumstances in which the customer can elect not to purchase from the Company.
F-83
<PAGE>
PACIFIC HILLS MANUFACTURING CO.
(FORMERLY KNOWN AS LAMSCO WEST, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 20, 1998
NOTE 3. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
JANUARY 3,
NOVEMBER 30, 1998 1998 DECEMBER 28, 1996
----------------- -------------- -----------------
<S> <C> <C> <C>
Customer advances......................................... $ $ 613,531 $
Accrued profit sharing.................................... 110,000 176,680 130,700
Accrued payroll........................................... 41,886 40,376 23,559
Other..................................................... 124,024 153,960 38,774
-------- -------------- --------
$ 275,910 $ 984,547 $ 193,033
-------- -------------- --------
-------- -------------- --------
</TABLE>
NOTE 4. LEASES
The Company leases equipment and certain manufacturing facilities under
operating leases. Future annual lease commitments under these operating leases
are summarized as follows:
<TABLE>
<CAPTION>
LEASE
FISCAL YEAR ENDING COMMITMENT
- --------------------------------------------------------------------------- -----------------
<S> <C>
January 2, 1999............................................................ $ 266,651
January 1, 2000............................................................ 266,149
December 30, 2000.......................................................... 33,695
December 29, 2001.......................................................... 24,429
December 28, 2002.......................................................... 1,834
--------
$ 592,758
--------
--------
</TABLE>
Rent expense was approximately $216,000, $278,000 and $121,000 during the
period from January 4, 1998 to November 20, 1998 and during fiscal years 1997
and 1996, respectively.
NOTE 5. EMPLOYEE BENEFIT PLANS
PENSION PLAN
Contributions to the Alinabal sponsored defined benefit pension plan, which
were derived through application of various actuarial assumptions to the
Company's employee group, approximated $37,000, $24,500 and $19,500 during the
period from January 4, 1998 to November 20, 1998 and during fiscal years 1997
and 1996, respectively.
PROFIT-SHARING PLAN
For the period from January 4, 1998 to November 20, 1998 and during fiscal
years 1997 and 1996, the Company made contributions on behalf of its employees
to Alinabal's profit-sharing and savings plan of approximately $16,000, $12,000
and $6,000, respectively.
F-84
<PAGE>
PACIFIC HILLS MANUFACTURING CO.
(FORMERLY KNOWN AS LAMSCO WEST, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 20, 1998
NOTE 6. IMPACT OF YEAR 2000
The Year 2000 ("Y2K") issue is the result of computer programs using a
two-digit format, as opposed to four digits, to indicate the year. Such computer
systems will be unable to interpret dates beyond the year 1999, which could
cause a system failure or other computer errors, leading to disruptions in
operations. The Company and its Parent have developed a three-phase program for
Y2K information systems compliance. Phase I is to identify those systems with
which the Company has exposure to Y2K issues. Phase II is the development and
implementation of action plans to be Y2K compliant in all areas by mid 1999.
Phase III, to be completed by late 1999, is the final testing of each major area
of exposure to ensure compliance. The Company has identified three major areas
determined to be critical for successful Y2K compliance: (1) financial and
informational system applications, (2) manufacturing applications, and (3)
third-party relationships.
The Company, in accordance with Phase I of the program, is in the process of
conducting an internal review of all systems and contacting all software
suppliers to determine major areas of exposure to Y2K issues. In the financial
and information system area, a number of applications have been identified as
being Y2K compliant due to their recent implementation. The Company's core
financial and reporting systems are not Y2K compliant but were already scheduled
for replacement by early 1999. In the manufacturing area, the Company is in the
process of identifying areas of exposure, however, it does not believe that
there is material exposure in this area. In the third-party area, the Company
has contacted most of its major third parties. Most of these parties state that
they intend to be Y2K compliant by 2000.
The Company currently believes the cost to replace the core financial and
reporting systems will not be significant. The Company is interviewing outside
consultants to undertake a portion of the work and expects most of the cost to
be incurred during 1999. The Company has yet to determine what costs, if any,
will be incurred in connection with the manufacturing area and the third-party
area.
NOTE 7. SUBSEQUENT EVENTS
The Company's new parent, Compass Aerospace Corporation, is registering the
exchange of $110 million of debt securities with the Securities and Exchange
Commission. Effective November 20, 1998, the Company became a corporate
guarantor of these debt securities.
UNAUDITED EVENTS
Subsequent to November 20, 1998, sales to the major customer discussed in
Note 2 to the financial statements have decreased to approximately 40% of the
annualized sales occurring in the period ended November 20, 1998.
On May 28, 1999, Compass filed suit against Alinabal and the three primary
shareholders of Alinabal seeking recision of the Stock Purchase Agreement. The
ultimate outcome of this litigation is presently not determinable.
F-85
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Modern Manufacturing, Inc. (formerly Y.F. Americas, Inc. and Subsidiary)
We have audited the accompanying consolidated balance sheets of Modern
Manufacturing, Inc. (formerly YF Americas, Inc. and Subsidiary) as of December
31, 1998 and 1997, and the related consolidated statements of income,
shareholder's equity, and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Modern
Manufacturing, Inc. (formerly YF Americas, Inc. and Subsidiary) at December 31,
1998 and 1997 and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Long Beach, California
April 27, 1999
F-86
<PAGE>
MODERN MANUFACTURING, INC.
(FORMERLY YF AMERICAS, INC. AND SUBSIDIARY)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
<S> <C> <C>
1998 1997
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents................................................................. $ 1,590 $ 2,134
Accounts receivable less allowance for doubtful accounts of $117 in 1998
and $80 in 1997......................................................................... 1,294 2,002
Inventories............................................................................... 6,631 5,856
Deferred tax assets....................................................................... 397 1,051
Prepaid expenses and other assets......................................................... 185 148
--------- ---------
Total current assets........................................................................ 10,097 11,191
Property and equipment, net................................................................. 4,842 4,410
Goodwill, net of accumulated amortization of $364 in 1998 and $329 in 1997.................. 130 165
--------- ---------
Total assets................................................................................ $ 15,069 $ 15,766
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................................................... $ 892 $ 1,276
Accrued expenses.......................................................................... 382 470
Current portion of long-term debt and capital leases...................................... -- 158
Line of credit............................................................................ 1,389 2,189
--------- ---------
Total current liabilities................................................................... 2,663 4,093
Deferred tax liability...................................................................... 127 131
Payable to affiliate, long-term............................................................. -- 3,613
Long-term debt and capital leases, less current portion..................................... 2,329 3,458
Commitments and contingencies
Shareholder's equity:
Common stock, 1,000 shares authorized, issued and outstanding shares 94.4191 in 1998 and
100 in 1997, $.01 par value............................................................. -- --
Paid-in capital........................................................................... 11,726 8,100
Accumulated deficit....................................................................... (1,776) (3,629)
--------- ---------
Total shareholder's equity.................................................................. 9,950 4,471
--------- ---------
Total liabilities and shareholder's equity.................................................. $ 15,069 $ 15,766
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
F-87
<PAGE>
MODERN MANUFACTURING, INC.
(FORMERLY YF AMERICAS, INC. AND SUBSIDIARY)
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Net sales........................................................................ $ 26,967 $ 22,470 $ 11,401
Cost of sales.................................................................... 17,965 15,416 7,797
--------- --------- ---------
Gross profit..................................................................... 9,002 7,054 3,604
Selling, general and administrative expenses..................................... 5,679 3,729 2,094
--------- --------- ---------
Operating income................................................................. 3,323 3,325 1,510
Interest expense, net............................................................ 502 854 370
Other income..................................................................... -- -- (12)
--------- --------- ---------
Income before income taxes....................................................... 2,821 2,471 1,152
Income tax expense............................................................... 968 881 414
--------- --------- ---------
Net income....................................................................... $ 1,853 $ 1,590 $ 738
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
F-88
<PAGE>
MODERN MANUFACTURING, INC.
(FORMERLY YF AMERICAS, INC. AND SUBSIDIARY)
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------------- PAID-IN ACCUMULATED SHAREHOLDER'S
SHARES AMOUNT CAPITAL DEFICIT EQUITY
--------- --------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996.......................... 100 $ -- $8,100 $ (5,957) $ 2,143
Net income........................................ -- -- -- 738 738
--------- --------- ---------- ------------ ------
Balance at December 31, 1996........................ 100 -- 8,100 (5,219) 2,881
Net income........................................ -- -- -- 1,590 1,590
--------- --------- ---------- ------------ ------
Balance at December 31, 1997........................ 100 -- 8,100 (3,629) 4,471
Conversion of debt to equity...................... -- -- 3,626 -- 3,626
Treasury stock transferred by shareholder to
Company and retired............................. (5.5809) -- -- -- --
Net income........................................ -- -- -- 1,853 1,853
--------- --------- ---------- ------------ ------
Balance at December 31, 1998........................ 94.4191 $ -- $11,726 $ (1,776) $ 9,950
--------- --------- ---------- ------------ ------
--------- --------- ---------- ------------ ------
</TABLE>
See accompanying notes.
F-89
<PAGE>
MODERN MANUFACTURING, INC.
(FORMERLY YF AMERICAS, INC. AND SUBSIDIARY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income......................................................................... $ 1,853 $ 1,590 $ 738
Adjustments to reconcile net income to net cash (used in) provided by operating
activities:
Depreciation..................................................................... 457 375 359
Amortization..................................................................... 35 35 35
Deferred taxes................................................................... 650 846 414
Gain on sale of property and equipment........................................... (34) -- (102)
Changes in operating assets and liabilities:
Accounts receivable............................................................ 708 (682) (393)
Inventories.................................................................... (775) (915) (1,340)
Prepaid expenses and other assets.............................................. (37) (119) 22
Accounts payable............................................................... (384) 372 462
Accrued expenses and other liabilities......................................... (88) (132) 560
--------- --------- ---------
Net cash provided by operating Activities.......................................... 2,385 1,370 755
INVESTING ACTIVITIES
Proceeds from the sale of property and equipment................................... 100 -- 344
Purchases of property and equipment................................................ (953) (142) (103)
--------- --------- ---------
Net cash (used in) provided by investing activities................................ (853) (142) 241
FINANCING ACTIVITIES
Proceeds from long-term debt....................................................... -- 2,415 --
Payments on long-term debt and capital leases...................................... (1,287) (380) (206)
Net increase (decrease) in long-term payable to affiliate.......................... 11 (376) (97)
Net decrease in line of credit..................................................... (800) (2,171) --
--------- --------- ---------
Net cash used in financing activities.............................................. (2,076) (512) (303)
--------- --------- ---------
Net (decrease) increase in cash.................................................... (544) 716 693
Cash and cash equivalents at beginning of period................................... 2,134 1,418 725
--------- --------- ---------
Cash and cash equivalents at end of period......................................... $ 1,590 $ 2,134 $ 1,418
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest......................................................................... $ 547 $ 856 $ 678
--------- --------- ---------
--------- --------- ---------
Income taxes..................................................................... $ 480 $ 20 $ --
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES
Assets acquired under capital leases............................................... $ -- $ 325 $ 653
--------- --------- ---------
--------- --------- ---------
Conversion of debt to equity....................................................... $ 3,624 $ -- $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
F-90
<PAGE>
MODERN MANUFACTURING, INC.
(FORMERLY YF AMERICAS, INC. AND SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
Y.F. Americas, Inc. owns 100% of the shares of Modern Holdings, Inc., which
owns 100% of the shares of Modern Manufacturing, Inc. The accompanying
consolidated financial statements include the accounts of Y.F. Americas, Inc.,
Modern Holdings, Inc. and Modern Manufacturing, Inc. (collectively, Y.F.
Americas, Inc. and Subsidiary, or the Company). All significant intercompany
balances and transactions have been eliminated in consolidation.
Y.F. Americas, Inc. is a Delaware corporation and is a wholly-owned
subsidiary of Y.F. International Ltd., a Hong Kong corporation. Modern Holdings,
Inc. and Modern Manufacturing, Inc. are Washington corporations.
Effective with the close of business on December 31, 1998, Y.F.
International Ltd. sold the Company to Compass Aerospace Corporation. The
accompanying financial statements have been prepared on a historical basis and,
as such, do not reflect any adjustments that may result from the sale of the
Company.
DESCRIPTION OF BUSINESS
The Company is located in Renton, Washington, and is a supplier of precision
machined small to medium-sized structural parts and structural components used
by aerospace manufacturers in structural frames and other metal aircraft
components. Customers include domestic and foreign entities.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid instruments with an original
maturity of three months or less to be cash equivalents. Cash and cash
equivalents are held by major financial institutions. The Company is subject to
risk for amounts in excess of federal deposit insurance limits.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables. The
Company conducts a major portion of its business with a limited number of
customers. Credit is extended based upon an evaluation of each customer's
financial condition, with terms consistent with those present throughout the
industry. Typically, the Company does not require collateral from customers.
Sales to the Boeing Company accounted for 82%, 83%, and 82% of total
consolidated sales for the years ended December 31, 1998, 1997 and 1996,
respectively. Trade accounts receivable from the Boeing
F-91
<PAGE>
MODERN MANUFACTURING, INC.
(FORMERLY YF AMERICAS, INC. AND SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company accounted for 69% and 70% of total consolidated accounts receivable as
of December 31, 1998 and 1997, respectively.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of cash and cash equivalents approximate cost due to the short
period of time to maturity. Fair values of long-term debt, which have been
determined based on borrowing rates currently available to the Company for loans
with similar terms of maturity, approximate the carrying amounts in the
consolidated financial statements.
INVENTORIES
Inventories are stated at the lower of cost or market using the first-in,
first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. The provision for depreciation
of property and equipment is generally computed on the straight-line method over
the following useful lives:
<TABLE>
<S> <C>
27.5-31.5
Buildings and improvements................................... years
Furniture and fixtures....................................... 5-7 years
Vehicles, machinery and equipment............................ 3-10 years
</TABLE>
GOODWILL
Goodwill represents the excess of the purchase price over the estimated fair
value of the net assets acquired in connection with business combinations.
Amortization is provided on a straight-line basis over 14 years.
IMPAIRMENT OF LONG-LIVED ASSETS
The carrying values of long-lived assets are reviewed periodically and if
future cash flows are believed insufficient to recover the remaining carrying
value of the related assets, the carrying value is written down to its estimated
fair value in the period the impairment is identified.
REVENUE RECOGNITION
The Company recognizes revenue from product sales at the time of shipment.
Customers typically have the right to return products that are damaged or
defective. Provisions are made currently for estimated returns.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," which is effective for fiscal years beginning after
F-92
<PAGE>
MODERN MANUFACTURING, INC.
(FORMERLY YF AMERICAS, INC. AND SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
December 15, 1998. SOP 98-1 requires capitalization of qualified computer
software costs with amortization recognized over their estimated useful lives.
The Company believes that there will be no impact due to the adoption of SOP
98-1.
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-Up Activities," which is effective for
fiscal years beginning after December 15, 1998. SOP 98-5 requires costs of
start-up activities, as defined in the Statement, to be expensed as incurred.
The Company believes that there will be no impact due to the adoption of SOP
98-5.
2. INVENTORIES
The following is a summary of inventories (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Raw materials.............................................................. $ 1,770 $ 1,608
Work in process............................................................ 2,137 2,338
Finished goods............................................................. 2,724 1,910
--------- ---------
$ 6,631 $ 5,856
--------- ---------
--------- ---------
</TABLE>
3. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Land....................................................................... $ 1,474 $ 1,474
Building and improvements.................................................. 2,421 2,421
Furniture and fixtures..................................................... 537 543
Vehicles, machinery and equipment.......................................... 3,927 3,128
Machinery under capital leases............................................. 1,340 1,340
--------- ---------
9,699 8,906
Less accumulated depreciation.............................................. 4,857 4,496
--------- ---------
$ 4,842 $ 4,410
--------- ---------
--------- ---------
</TABLE>
4. LINE OF CREDIT
The Company has a revolving credit facility agreement with the Bank of China
for $3.5 million. The Company had availability of approximately $2.1 million at
December 31, 1998. Interest is due quarterly at prime (7.75% at December 31,
1998) plus 0.25%. The line of credit expires October 15, 1999, and is secured by
substantially all of the assets of the Company.
F-93
<PAGE>
MODERN MANUFACTURING, INC.
(FORMERLY YF AMERICAS, INC. AND SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
5. LONG-TERM DEBT
Long-term debt includes a note payable to the Bank of China. The note
totaled $2.5 million and $2.3 million as of December 31, 1998 and 1997,
respectively. Interest on the note is set at the London Inter-Bank Offered Rate
(5.2% at December 31, 1998) plus 2.25%, and is due monthly. The note matures in
January 2003, at which time the principal is due in full. This loan is secured
by real property owned by the Company.
At December 31, 1997, the Company had a mortgage loan payable to U.S.
Bancorp Mortgage Company for $0.5 million. The Company had obligations under
capital lease agreements of approximately $0.8 million at December 31, 1997.
Though the original maturity dates under these agreements extended beyond 1998,
the Company paid these obligations in full during 1998.
6. INCOME TAXES
Deferred income taxes are computed using the liability method and reflect
the net tax effects of temporary differences between the carrying amount of
assets and liabilities for financial statement purposes and the amounts used for
income tax purposes. The provision for income taxes reflects the taxes to be
paid for the period and the change during the period in the deferred tax assets
and liabilities.
Significant components of the Company's deferred tax assets and liabilities
are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Deferred tax assets:
Net operating losses........................................................ $ -- $ 470
Inventory reserves.......................................................... 285 233
Management fees............................................................. -- 231
Accrued expenses not deductible for tax..................................... 112 51
Other....................................................................... -- 66
--------- ---------
Total deferred tax assets..................................................... 397 1,051
Deferred tax liabilities:
Depreciation and amortization............................................... 83 50
Other....................................................................... 44 81
--------- ---------
Total deferred tax liabilities................................................ 127 131
--------- ---------
Net deferred tax asset........................................................ $ 270 $ 920
--------- ---------
--------- ---------
</TABLE>
F-94
<PAGE>
MODERN MANUFACTURING, INC.
(FORMERLY YF AMERICAS, INC. AND SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. INCOME TAXES (CONTINUED)
Significant components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------- --------- ---------
Current:
Federal.......................................................... $ 318 $ 35 $ 20
Deferred:
Federal.......................................................... 650 846 394
--------- --------- ---------
$ 968 $ 881 $ 414
--------- --------- ---------
--------- --------- ---------
</TABLE>
The reconciliation of income tax at the U.S. federal statutory rate to
income tax expense is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------- --------- ---------
Income tax at U.S. statutory rates.................................. 34.0% 34.0% 34.0%
Book expenses not deductible for tax purposes....................... 0.3 1.7 1.9
--- --- ---
34.3% 35.7% 35.9%
--- --- ---
--- --- ---
</TABLE>
7. RELATED PARTY TRANSACTIONS
During 1998, the Company's parent, Y.F. International, Ltd., contributed
advances previously made to the Company totaling $3.6 million as additional
equity. This balance is recorded as additional paid-in capital at December 31,
1998.
8. CONTINGENCIES
During the normal course of business, the Company is involved in various
lawsuits and other legal matters. Management, in consultation with legal
counsel, does not believe that the outcome of these matters will have a
materially adverse impact on the financial position or future operations of the
Company.
9. SALARY DEFERRAL PLAN AND TRUST
The Company has a qualified retirement plan and trust covering substantially
all full-time employees with more than one year of service. Company
contributions to the defined contribution plan are made at the discretion of the
board of directors. During the years ended December 31, 1998, 1997, and 1996,
the Company charged $29,000, $31,000, and $16,000, respectively, to expense
pursuant to the Plans.
10. SUBSEQUENT EVENT
Modern Holdings, Inc. and Modern Manufacturing, Inc. merged with Y.F.
Americas, Inc. on January 15, 1999 and January 19, 1999, respectively, to form a
single corporation. After the mergers, Y.F. Americas, Inc. changed its name to
Modern Manufacturing, Inc.
F-95
<PAGE>
MODERN MANUFACTURING, INC.
(FORMERLY YF AMERICAS, INC. AND SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
11. IMPACT OF YEAR 2000 (UNAUDITED)
The Year 2000 issue concerns the inability of information systems to
recognize properly and process date-sensitive information beyond January 1,
2000.
The Company has developed a plan to modify its information technology to be
ready for the year 2000 and has completed converting critical data processing
systems. The Company substantially completed the project during 1999. The
Company does not expect the remaining project to have a significant effect on
operations. The Company will continue to implement systems with strategic value,
although some projects may be delayed due to resource constraints.
F-96
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Trim Engineering Limited
We have audited the accompanying consolidated balance sheet of Trim
Engineering Limited as at April 30, 1999, and the related consolidated profit
and loss account and cash flow statement for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audit in accordance with United Kingdom auditing standards
which do not differ in any significant respect from those generally accepted in
the United States. 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 evaluation the overall financial statement
presentation. We believe that our audit provides 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
Trim Engineering Limited at April 30, 1999, and its consolidated profit and cash
flows for the year then ended, in conformity with accounting principles
generally accepted in the United Kingdom.
Ernst & Young
Southampton, England
October 12, 1999
F-97
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30TH APRIL 1999
<TABLE>
<CAPTION>
1999
NOTES ------------
----- L
<S> <C> <C>
TURNOVER.................................................................................... 2 27,637,607
Cost of sales............................................................................... 17,536,491
------------
GROSS PROFIT................................................................................ 10,101,116
Administrative expenses..................................................................... 5,490,837
------------
4,610,279
Other operating income...................................................................... 3 218,901
------------
Operating profit for the year............................................................... 4 4,829,180
Interest receivable and similar income
Bank interest............................................................................. 423,720
------------
5,252,900
Interest payable and similar charges........................................................ 7 29,464
------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION............................................... 5,223,436
Taxation on profit on ordinary activities................................................... 8 1,491,866
------------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION................................................ 3,731,570
Minority interests.......................................................................... 356,965
------------
PROFIT ATTRIBUTABLE TO SHAREHOLDERS......................................................... 3,374,605
------------
GROUP RETAINED PROFIT FOR THE YEAR.......................................................... 3,374,605
Group retained profits brought forward...................................................... 14,653,824
------------
Group retained profits carried forward...................................................... 18,028,429
------------
</TABLE>
The profit and loss account contains all the recognised gains and losses for the
current and preceding year.
The notes to these accounts form part of these accounts.
F-98
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
CONSOLIDATED BALANCE SHEET
AT 30TH APRIL 1999
<TABLE>
<CAPTION>
1999
NOTES ------------
----- L
<S> <C> <C>
FIXED ASSETS
Intangible asset..........................................................................
Goodwill................................................................................ 2
Tangible assets........................................................................... 9 11,854,769
------------
11,854,771
CURRENT ASSETS
Stocks and work-in-progress............................................................... 10 4,169,239
Debtors................................................................................... 11 6,354,086
Cash at bank and in hand.................................................................. 12 12,439,515
------------
22,962,840
CREDITORS--amounts falling due within one year.............................................. 13 12,627,663
------------
NET CURRENT ASSETS.......................................................................... 10,335,177
------------
TOTAL ASSETS LESS CURRENT LIABILITIES....................................................... 22,189,948
PROVISION FOR LIABILITIES AND CHARGES
Deferred taxation......................................................................... 14 1,110,157
------------
21,079,791
DEFERRED INCOME
Deferred Government grants................................................................ 154,517
------------
20,925,274
Less: Minority interests (equity interests)................................................. 2,514,726
------------
NET ASSETS.................................................................................. 18,410,548
------------
------------
CAPITAL AND RESERVES
Called up share capital................................................................... 17 100,000
Capital reserve on consolidation.......................................................... 282,119
Profit and loss account................................................................... 18 18,028,429
------------
SHAREHOLDERS' FUNDS......................................................................... 18,410,548
------------
------------
</TABLE>
The notes to these accounts form part of these accounts.
F-99
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30TH APRIL 1999
<TABLE>
<CAPTION>
1999
-----------
L
<S> <C>
Net cash inflow from operating activities............................................................ 4,996,642
-----------
Returns on investments and servicing of finance
Interest received.................................................................................. 423,720
Interest paid...................................................................................... (29,464)
-----------
394,256
-----------
Taxation
Corporation tax paid (including advance corporation tax)........................................... (1,062,392)
-----------
Capital expenditure
Payments to acquire tangible fixed assets.......................................................... (4,560,099)
Receipts from sale of tangible fixed assets........................................................ 15,440
-----------
(4,544,659)
-----------
Decrease in cash..................................................................................... (216,153)
-----------
</TABLE>
<TABLE>
<CAPTION>
1999
-----------
L
<S> <C> <C>
1. Reconciliation of operating profit to net cash inflow from operating activities
Operating profit................................................................................ 4,829,180
Profit on sale of assets........................................................................ (510)
Depreciation charges............................................................................ 789,110
Decrease in stocks.............................................................................. 746,575
Increase in debtors............................................................................. (1,104,110)
Decrease in creditors........................................................................... (247,733)
Government grants released...................................................................... (15,870)
-----------
Net cash inflow from operating activities....................................................... 4,996,642
-----------
-----------
2. Reconciliation of net cash to movements in net debt
Decrease in cash for the year................................................................... (216,153)
Net debt at 1st May 1998........................................................................ 6,422,065
-----------
Net debt at 30th April 1999..................................................................... 6,205,912
-----------
-----------
</TABLE>
<TABLE>
<CAPTION>
AT CASH AT
1.5.98 FLOWS 30.4.99
3. Analysis of changes in net debt ----------- ----------- ------------
L L L
<S> <C> <C> <C> <C>
Cash at bank and in hand........................................... 9,405,669 3,033,846 12,439,515
Bank overdraft..................................................... (2,983,604) (3,249,999) (6,233,603)
----------- ----------- ------------
6,422,065 (216,153) 6,205,912
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
F-100
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30TH APRIL 1999
1. ACCOUNTING POLICIES
a) BASIS OF ACCOUNTING
The accounts are prepared under the historical cost convention and in
accordance with applicable United Kingdom accounting standards.
b) BASIS OF CONSOLIDATION
The group accounts consolidate the accounts of the company and all its
subsidiary undertakings, after eliminating internal sales and profits and
recognising the minority interests in subsidiary undertakings.
c) DEPRECIATION
Depreciation is provided on all tangible fixed assets in use at rates
calculated to write off the cost or valuation, less estimated residual
value, of each asset over its expected useful life, calculated as follows:
<TABLE>
<S> <C> <C>
Leasehold land and buildings - Straight line over 60 years
Freehold industrial buildings - Straight line over 50 years
Plant and machinery - 15% p.a. reducing balance
Fixtures, fittings and 10% p.a. reducing balance
equipment -
Computer equipment - Straight line over 3 years
Motor vehicles - 25% p.a. reducing balance
</TABLE>
The cost of payments on account and the cost of assets in course of
construction are not depreciated until the asset is brought into use.
No depreciation is provided on the following properties:
a) Freehold land.
b) A freehold hotel property, as it is the company's practice to
maintain this asset in a continual state of sound repair and
accordingly the directors consider that the life of this asset is so
long and the residual value (based on prices prevailing at the time
of acquisition) so high, that its depreciation is insignificant. Any
permanent diminution in the value of the property is charged to
profit and loss account as appropriate.
d) STOCKS AND WORK-IN-PROGRESS
Stocks and work-in-progress are stated at the lower of cost and net
realisable value. Cost is determined on a "first in, first out" basis and in
the case of work-in-progress and finished goods includes production expenses
and overheads, based on normal levels of activity.
e) TITLE TO ASSETS
Assets to which title has not passed to the company by virtue of non-payment
are treated as if title had passed on delivery rather than on the date of
payment and the liability in respect of those assets is not considered as
secured.
F-101
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1999
1. ACCOUNTING POLICIES (CONTINUED)
f) DEFERRED TAXATION
Deferred taxation is accounted for using the liability method on all
material timing differences to the extent that it is probable that
liabilities or assets will crystallise in the foreseeable future. Advance
corporation tax is carried forward to the extent that it is expected to be
recovered. Timing differences are taxable items, allowances or reliefs which
are given effect to in taxation periods different from those in which they
have effect in the accounts.
g) TURNOVER
Turnover represents the net amounts invoiced to customers, less trade
discounts and value added tax, and excluding sales of fixed assets.
h) GOODWILL
In the case of two subsidiary undertakings, goodwill has been written off to
profit and loss account in a previous year, except for a nominal amount of
L1 for each subsidiary undertaking.
Goodwill arising on consolidation has been written off to profit and loss
account in the year of acquisition.
i) FOREIGN CURRENCIES
Transactions denominated in foreign currencies are translated into sterling
at the rate of exchange ruling at the date of the transaction. Exchange
differences arising in the ordinary course of business are included in
operating profit.
Assets and liabilities denominated in foreign currencies are translated into
sterling at the exchange rates ruling at the balance sheet date.
j) GOVERNMENT GRANTS
Government grants in respect of capital expenditure are credited to a
deferred income account and are released to the profit and loss account over
the expected useful lives of the relevant assets. Revenue grants are
released to the profit and loss account over the life of the project to
which they relate.
F-102
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1999
2. TURNOVER AND RESULTS
<TABLE>
<CAPTION>
1999
------------
L
<S> <C>
The analysis of turnover by activity is as follows:
Engineering..................................................................... 27,574,367
Building and construction....................................................... 2,180
Hotel and restaurant............................................................ 61,060
------------
27,637,607
------------
------------
The profit (loss) before taxation by activity is as follows:
Engineering..................................................................... 5,269,765
Building and construction....................................................... 1,665
Hotel and restaurant............................................................ (47,994)
------------
5,223,436
------------
------------
</TABLE>
During the year the company discontinued its hotel and restaurant
activities. Subsequent to the end of the year, the hotel was disposed of for
a sum equal to its net book value.
3. OTHER OPERATING INCOME
<TABLE>
<CAPTION>
1999
---------
L
<S> <C>
Rent receivable.................................................................... 18,137
Government grant................................................................... 15,870
Currency gains on trading items.................................................... 184,894
---------
218,901
---------
---------
</TABLE>
4. OPERATING PROFIT
<TABLE>
<CAPTION>
1999
---------
L
<S> <C>
This is stated after charging (crediting):
Profit on sale of assets......................................................... (510)
Hire and lease of plant and machinery............................................ 48,614
Auditors' remuneration........................................................... 58,400
Depreciation..................................................................... 789,108
---------
---------
</TABLE>
F-103
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1999
5. STAFF COSTS--(including directors)
<TABLE>
<CAPTION>
1999
------------
L
<S> <C>
Directors' benefits in kind..................................................... 17,521
Directors' remuneration......................................................... 370,653
Wages and salaries.............................................................. 9,837,149
Social security costs........................................................... 1,017,102
Other pension costs (see note 6)................................................ 345,228
Redundancy costs................................................................ 11,221
Staff BUPA contributions........................................................ 3,389
------------
11,602,263
------------
------------
</TABLE>
<TABLE>
<CAPTION>
1999
NO.
-----
<S> <C>
The average number of employees during the year was made up as follows:
Directors............................................................................ 3
Administration....................................................................... 64
Production........................................................................... 444
---
511
---
---
</TABLE>
<TABLE>
<CAPTION>
1999
---------
L
<S> <C>
Highest paid director:
Aggregate emoluments............................................................. 178,688
---------
---------
</TABLE>
6. PENSION SCHEME--STAFF
The group operates a contributory defined contribution pension scheme for
some employees. The assets of the scheme are held separately from those of
the group, being invested with insurance companies.
The group is also responsible for a now closed defined benefits pension
scheme in respect of Maybrey Precision Castings Limited. The scheme is
currently L188,000 underfunded on the basis of a transfer to Scottish Life
Assurance Company. This sum has been provided for in the year.
The pension cost for the year represents contributions payable to the fund
amounting to L154,104 and L188,000 provided in the year in respect of the
deficit on the defined benefit pension scheme.
PENSION SCHEME--DIRECTORS
The company operates for two directors a defined contribution pension
scheme. The assets of the scheme are held in separate trustee administered
funds. The pension charge for the year was L3,124.
F-104
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1999
7. INTEREST PAYABLE
<TABLE>
<CAPTION>
1999
---------
L
<S> <C>
On bank loans, overdrafts and other loans:
--repayable within five years...................................................... 0
--on directors' loans (see note 22)................................................ 29,464
---------
29,464
---------
---------
</TABLE>
8. TAXATION ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
1999
----------
L
<S> <C>
Based on the profit for the year:
Corporation tax at an effective rate of 30.918%................................ 1,378,576
Adjustment in respect of prior years........................................... (58,409)
Deferred taxation at 30.918%................................................... 239,816
Adjustment in respect of Prior years........................................... (68,117)
----------
1,491,866
----------
----------
</TABLE>
9. TANGIBLE FIXED ASSETS--GROUP
<TABLE>
<CAPTION>
LEASEHOLD PLANT,
PROPERTIES MACHINERY TOTAL
---------- AND EQUIPMENT ------------
FREEHOLD ---------------
PROPERTIES L L
---------- L
L
<S> <C> <C> <C> <C>
Cost:
1st May 1998........................ 3,441,891 390,304 15,601,561 19,433,756
Additions at cost................... 820,632 1,553 3,737,914 4,560,099
Disposals........................... -- -- (31,266) (31,266)
---------- ---------- --------------- ------------
30th April 1999..................... 4,262,523 391,857 19,308,209 23,962,589
---------- ---------- --------------- ------------
---------- ---------- --------------- ------------
Depreciation:
1st May 1998........................ 498,685 39,030 10,797,331 11,335,046
Disposals........................... -- -- (16,334) (16,334)
Provision for year.................. 47,836 6505 734,767 789,108
---------- ---------- --------------- ------------
30th April 1999..................... 546,521 45,535 11,515,764 12,107,820
---------- ---------- --------------- ------------
---------- ---------- --------------- ------------
Net book values:
30th April 1999..................... 3,716,002 346,322 7,792,445 11,854,769
---------- ---------- --------------- ------------
---------- ---------- --------------- ------------
</TABLE>
F-105
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1999
9. TANGIBLE FIXED ASSETS--GROUP (CONTINUED)
The net book values of freehold properties comprise:
<TABLE>
<CAPTION>
1999
----------
L
<S> <C>
Freehold land.................................................................... 735,046
Freehold industrial buildings.................................................... 2,624,029
Freehold hotel................................................................... 356,927
----------
3,716,002
----------
----------
</TABLE>
10. STOCKS AND WORK IN PROGRESS
<TABLE>
<CAPTION>
1999
----------
L
<S> <C>
Raw materials and consumables.................................................... 946,761
Work-in-progress................................................................. 3,222,478
----------
4,169,239
----------
----------
</TABLE>
11. DEBTORS
<TABLE>
<CAPTION>
1999
----------
L
<S> <C>
Trade debtors.................................................................... 5,928,758
Other debtors.................................................................... 282,553
Prepayments and accrued income................................................... 142,775
----------
6,354,086
----------
----------
</TABLE>
13. CREDITORS: amounts falling due within one year
<TABLE>
<CAPTION>
1999
------------
L
<S> <C>
Bank loans and overdrafts....................................................... 6,233,603
Trade creditors................................................................. 1,803,623
Amounts due to group undertakings............................................... --
Directors' loan accounts (see below)............................................ 1,718
Corporation tax................................................................. 1,348,728
Other creditors including taxation and social security.......................... 603,569
Accruals and deferred income.................................................... 2,636,422
------------
12,627,663
------------
------------
</TABLE>
F-106
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1999
13. CREDITORS: amounts falling due within one year (Continued)
Directors' loan accounts
<TABLE>
<CAPTION>
1999
---------
L
<S> <C>
J.R. Pinson Esq....................................................................... 1,481
B.D.W. Pinson Esq..................................................................... 237
---------
1,718
---------
---------
</TABLE>
14. DEFERRED TAXATION
The movement on the provision for deferred taxation is as follows:
<TABLE>
<CAPTION>
1999
----------
L
<S> <C>
At 1st May 1998.................................................................. 938,458
Charge for the year.............................................................. 171,699
----------
At 30th April 1999............................................................... 1,110,157
----------
----------
</TABLE>
Deferred taxation provided in the accounts, and the total potential
liability including the amounts for which provision has been made, are as
follows:
<TABLE>
<CAPTION>
1999
-----------------------
PROVIDED IN
THE
ACCOUNTS
FULL -----------
POTENTIAL L
LIABILITY
----------
L
<S> <C> <C>
Timing differences arising from Accelerated tax allowances.......... 1,110,157 1,110,157
---------- -----------
---------- -----------
</TABLE>
F-107
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1999
15. CONTINGENT LIABILITIES
Diac Limited
Rental and service charges on a lease which was assigned during the year
ended 30th April 1988 (when the annual rent was L36,000) and expiring in the
year ending 30th April 2006.
16. LEASING COMMITMENTS
The company occupies premises at Lyon Road which are owned by the Director's
pension fund. An annual rental of L37,000 is payable by the company.
17. SHARE CAPITAL
<TABLE>
<CAPTION>
1999
---------
L
<S> <C>
Authorised
100,000 ordinary shares of L1 each................................................. 100,000
---------
---------
Allotted, called up and fully paid
100,000 ordinary shares of L1 each................................................. 100,000
---------
---------
</TABLE>
18. CAPITAL AND RESERVES--MOVEMENT IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
PROFIT
& LOSS
ACCOUNT
SHARE ------------
CAPITAL
--------- L
L
<S> <C> <C>
As at 1st May 1998................................................... 100,000 14,653,824
Retained profit for the year......................................... -- 3,374,605
--------- ------------
As at 30th April 1999................................................ 100,000 18,028,429
--------- ------------
--------- ------------
</TABLE>
19. TRANSACTIONS INVOLVING DIRECTORS
a) Loan interest of L29,464 was payable to the following directors in
respect of their loans to the company. The rate of interest applied was at a
commercial level.
<TABLE>
<CAPTION>
L
<S> <C>
R.W.H. Pinson Esq.................................................................... 24,589
B.D.W. Pinson Esq.................................................................... 4,875
---------
29,464
---------
---------
</TABLE>
b) The company occupies property owned by the directors' pension scheme and
pays rent of L37,000. All the directors are trustees of the scheme and, in
addition, J.R. Pinson Esq. and B.D.W. Pinson Esq. are scheme members.
F-108
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1999
20. CAPITAL COMMITMENTS
At 30 April 1999 the Group had contracted but not provided for in these
financial statements the sum of L456,077 in respect of building work at
Trefn Engineering (Metal Treatments) Limited.
21. POST BALANCE SHEET EVENT
On 30 July 1999 the entire share capital of the company was acquired by
Compasss Aerospace Corporation.
22. STATUTORY ACCOUNTS
These accounts do not compromise the company's statutory accounts within the
meaning of Section 420 of the Companies Act 1985 of Great Britain. Statutory
accounts for the year ended 30 April 1999, on which the auditors have given
an unqualified opinion, will be delivered to the Registrar of Companies for
England and Wales.
F-109
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 30TH APRIL 1998
<TABLE>
<S> <C>
Business address & registered office:... 7 Lyon Road, Wallisdown, Poole, Dorset.
Registered number:...................... 723273
</TABLE>
The directors have pleasure in presenting their report and the group
accounts for the year ended 30th April 1998.
<TABLE>
<CAPTION>
RESULTS AND DIVIDENDS L
---------
<S> <C>
Profit attributable to shareholders...................................... 2,491,569
Dividend--interim paid................................................... 266,667
---------
Group retained profit for the year....................................... 2,224,902
---------
---------
</TABLE>
The directors do not recommend payment of a final dividend.
REVIEW OF THE BUSINESS AND DEVELOPMENTS
The principal activity of the company and five of its subsidiary
undertakings continued to be precision engineering and services mainly allied to
the aircraft industry. Those subsidiary undertakings with other activities were
as follows:
Poole Bay Construction Co. Limited's main activity continued to be
construction work and sub-contract repair and development work in the building
industry but the only activity was the sale of its remaining trading property.
Holland Granfield Limited, Pinson Investments Limited and C & C Production
Services Limited did not trade during the year and in fact the latter company
was dissolved on 16th September 1997.
Following general increase in trade there will be further investment in
factory premises for Trefn Engineering Ltd. and Trefn Engineering (Metal
Treatments Division) Ltd. as well as new offices for Trim Engineering Ltd. The
anticipated cost will be Ll,400,000 and new plant across the group will be
purchased for around L3,000,000. The Hotel and Restaurant owned by Trim was
closed after the summer season and will be sold.
DIRECTORS' INTERESTS
The directors of the company and their beneficial interests in the share
capital of the company were as follows:
<TABLE>
<CAPTION>
ORDINARY SHARES
OF L1 EACH
--------------------
30.4.98 1.5.97
--------- ---------
<S> <C> <C>
R.W.H. Pinson Esq................................................................. 46,000 46,000
J.R. Pinson Esq................................................................... 28,000 28,000
B.D.W. Pinson Esq................................................................. 26,000 26,000
</TABLE>
R.W.H. Pinson Esq. retires by rotation at the forthcoming annual general
meeting and, being eligible, offers himself for re-election.
F-110
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
REPORT OF THE DIRECTORS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1998
EMPLOYMENT POLICY
The group offers equal opportunities to all applicants for employment,
whatever their sex, race, religion or marital status. Disabled people are
offered employment, training, career development and promotion on the basis of
their aptitude and abilities, in common with all employees. It is the policy
throughout the group to ensure that health and safety standards are constantly
reviewed and maintained at a high level.
CLOSE COMPANY
The company is a close company within the provisions of the Income and
Corporation Taxes Act 1988.
AUDITORS
In accordance with Section 385 of the Companies Act 1985 a resolution
proposing the reappointment of Prince, Croft & Ball as auditors to the company
will be put to the annual general meeting.
By order of the board
J.R. Pinson Esq.
Secretary
Date: 19th February 1999
F-111
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
STATEMENT OF DIRECTORS' RESPONSIBILITIES
FOR THE YEAR ENDED 30TH APRIL 1998
Company law requires the directors to prepare accounts for each financial
year which give a true and fair view of the company's and group's state of
affairs at the end of the year and of its profit or loss for that period. In
preparing those accounts the directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the accounts;
- prepare the accounts on the going concern basis unless it is inappropriate
to assume that the group will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
group and to enable them to ensure that the accounts comply with the Companies
Act 1985. They are also responsible for safeguarding the assets of the group and
hence for taking reasonable steps for the prevention and detection of fraud or
irregularities.
F-112
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
REPORT OF THE AUDITORS TO THE MEMBERS OF
TRIM ENGINEERING LIMITED
FOR THE YEAR ENDED 30TH APRIL 1998
We have audited the accounts on pages F-114 to F-128 which have been
prepared under the accounting policies set out on pages F-119 and F-120.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page F-112 the company's directors are responsible for the
preparation of accounts. It is our responsibility to form an independent
opinion, based on our audit, on those accounts and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the accounts. It also
includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the accounts, and of whether the accounting
policies are appropriate to the group's circumstances, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the accounts are free from
material misstatement, whether caused by fraud or other irregularity or error.
In forming our opinion we also evaluated the overall adequacy of the
presentation of the information in the accounts.
OPINION
In our opinion the accounts give a true and fair view of the state of the
company and of the group's affairs as at 30th April 1998 and of its profit for
the year then ended and have been properly prepared in accordance with the
Companies Act 1985.
19th February 1999
3 Lorne Park Road Prince, Croft & Ball
Bournemouth BH1 1LD Chartered Accountants
Registered Auditors
F-113
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30TH APRIL 1998
<TABLE>
<CAPTION>
1998 1997
NOTES ------------ ------------
----- L L
<S> <C> <C> <C>
TURNOVER...................................................................... 2 24,231,075 17,831,255
Cost of Sales................................................................. 15,419,628 12,612,931
------------ ------------
GROSS PROFIT.................................................................. 8,811,447 5,218,324
Administrative expenses....................................................... 4,921,581 4,528,339
------------ ------------
3,889,866 689,985
Other operating income........................................................ 3 (68,984) (304,829)
------------ ------------
Operating profit for the year................................................. 4 3,820,882 385,156
Interest receivable and similar income
Bank interest............................................................... 228,790 217,499
------------ ------------
4,049,672 602,655
Interest payable and similar charges.......................................... 7 82,002 81,541
------------ ------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION................................. 3,967,670 521,114
Taxation on profit on ordinary activities..................................... 8 1,218,983 152,965
------------ ------------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION.................................. 2,748,687 368,149
Minority interests............................................................ 257,118 (6,894)
------------ ------------
PROFIT ATTRIBUTABLE TO SHAREHOLDERS........................................... 2,491,569 375,043
Dividend...................................................................... 9 266,667 266,667
------------ ------------
GROUP RETAINED PROFIT FOR THE YEAR............................................ 2,224,902 108,376
Group retained profits brought forward........................................ 12,428,922 12,320,546
------------ ------------
Group retained profits carried forward........................................ 14,653,824 12,428,922
------------ ------------
</TABLE>
The profit and loss account contains all the recognised gains and losses for the
current and preceding year.
The notes on pages F-119 to F-128 form part of these accounts.
F-114
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
CONSOLIDATED BALANCE SHEET
AT 30TH APRIL 1998
<TABLE>
<CAPTION>
1998 1997
NOTES ------------ ------------
----- L L
<S> <C> <C> <C>
FIXED ASSETS
Intangible asset
Goodwill (cost L68,100)................................................. 2 2
Tangible assets........................................................... 10 8,098,710 7,530,032
------------ ------------
8,098,712 7,530,034
CURRENT ASSETS
Stocks and work-in-progress............................................... 13 4,915,814 4,233,955
Debtors................................................................... 14 5,249,976 4,228,619
Cash at bank and in hand.................................................. 15 9,405,669 6,330,499
------------ ------------
19,571,459 14,793,073
CREDITORS-- amounts falling due within one year............................... 16 9,367,22 6,559,511
------------ ------------
NET CURRENT ASSETS............................................................ 10,203,837 8,193,562
------------ ------------
TOTAL ASSETS LESS CURRENT LIABILITIES......................................... 18,302,549 15,723,596
PROVISION FOR LIABILITIES AND CHARGES
Deferred taxation......................................................... 17 938,458 869,290
------------ ------------
17,364,091 14,854,306
------------
DEFERRED INCOME
Deferred Government grants................................................ 170,387 142,622
------------ ------------
17,193,704 14,711,684
Less: Minority interests.................................................. 2,157,761 1,900,643
------------ ------------
NET ASSETS.................................................................... 15,035,943 12,811,041
------------ ------------
------------ ------------
CAPITAL AND RESERVES
Called up share capital................................................... 19 100,000 100,000
Capital reserve on consolidation.......................................... 282,119 282,119
Profit and loss account................................................... 20 14,653,824 12,428,922
------------ ------------
SHAREHOLDERS' FUNDS........................................................... 15,035,943 12,811,041
------------ ------------
------------ ------------
</TABLE>
Approved by the board
and signed on its behalf by:
J.R. Pinson DIRECTOR
Date 19th February 1999
The notes on pages F-119 to F-128 form part of these accounts.
F-115
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
BALANCE SHEET
AT 30TH APRIL 1998
<TABLE>
<CAPTION>
1998 1997
NOTES ---------- ----------
----- L L
<S> <C> <C> <C>
FIXED ASSETS
Tangible asset................................................................. 11 3,144,360 2,472,253
Investments.................................................................... 12 94,900 94,900
---------- ----------
3,239,260 2,567,153
CURRENT ASSETS
Stocks and work-in-progress.................................................... 13 2,239,366 1,184,140
Debtors........................................................................ 14 1,565,835 1,302,975
Cash at bank and in hand....................................................... 15 4,554,239 3,807,964
---------- ----------
8,359,440 6,295,079
CREDITORS - amounts falling due within one year.................................. 16 6,606,915 4,403,040
---------- ----------
NET CURRENT ASSETS............................................................... 1,752,525 1,892,039
---------- ----------
TOTAL ASSETS LESS CURRENT LIABILITIES............................................ 4,991,785 4,459,192
PROVISION FOR LIABILITIES AND CHARGES
Deferred taxation.............................................................. 17 281,904 205,193
---------- ----------
NET ASSETS....................................................................... 4,709,881 4,253,999
---------- ----------
---------- ----------
CAPITAL AND RESERVES
Called up share capital........................................................ 19 100,000 100,000
Profit and loss account........................................................ 20 4,609,881 4,153,999
---------- ----------
SHAREHOLDERS' FUNDS.............................................................. 4,709,881 4,253,999
---------- ----------
---------- ----------
</TABLE>
Approved by the board
and signed on its behalf by:
J.R. Pinson DIRECTOR
Date 19th February 1999
The notes on pages F-119 to F-128 form part of these accounts.
F-116
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30TH APRIL 1998
<TABLE>
<CAPTION>
1998 1997
----------- -----------
L L
<S> <C> <C>
Net cash inflow from operating activities.............................................. 3,905,228 1,210, 522
----------- -----------
Returns on investments and servicing of finance
Interest received.................................................................... 228,790 217,499
Interest paid........................................................................ (94,007) (57,711)
----------- -----------
134,783 159,788
----------- -----------
Taxation
Corporation tax paid (including advance corporation tax)............................. (238,362) (501,517)
----------- -----------
Capital Expenditure
Payments to acquire tangible fixed assets............................................ (1,414,554) (1,114,930)
Receipts from sale of tangible fixed assets.......................................... 152,949 30,402
Government grant received............................................................ 55,000 45,000
----------- -----------
(1,206,605) (1,039,528)
-----------
Dividend paid.......................................................................... (266,667) (266,667)
----------- -----------
Increase/(decrease) in cash............................................................ 2,328,377 (437,402)
----------- -----------
----------- -----------
</TABLE>
The notes on page F-118 form part of this cash flow statement.
F-117
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30TH APRIL 1998
<TABLE>
<CAPTION>
1998 1997
----------- ----------
L L
<S> <C> <C> <C>
1. Reconciliation of operating profit to net cash inflow from operating activities
Operating profit................................................................... 3,820,882 385,156
Loss/(profit) on sale of assets.................................................... 23,050 (1,690)
Depreciation charges............................................................... 722,316 741,240
(Increase) in stocks............................................................... (681,859) (148,135)
(Increase) in debtors.............................................................. (1,021,357) (267,528)
Increase in creditors.............................................................. 1,069,431 524,409
Government grants released......................................................... (27,235) (22,930)
----------- ----------
Net cash inflow from operating activities.......................................... 3,905,228 1,210,522
----------- ----------
----------- ----------
2. Reconciliation of net cash to movements in net debt
Increase/(decrease) in cash for the year........................................... 2,328,377 (437,402)
Net debt at 1st May 1997........................................................... 4,093,688 4,531,090
----------- ----------
Net debt at 30th April 1998........................................................ 6,422,065 4,093,688
----------- ----------
----------- ----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AT CASH AT
1.5.97 FLOWS 30.4.98
3. Analysis of changes in net debts L L L
Cash at bank and in hand............................................. 6,330,499 3,075,170 9,405,669
Bank overdraft....................................................... (2,236,811) (746,793) (2,983,604)
----------- ---------- -----------
4,093,688 2,328,377 6,422,065
----------- ---------- -----------
----------- ---------- -----------
</TABLE>
F-118
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30TH APRIL 1998
1. ACCOUNTING POLICIES
a. BASIS OF ACCOUNTING
The accounts are prepared under the historical cost convention and in
accordance with applicable accounting standards.
b. BASIS OF CONSOLIDATION
The group accounts consolidate the accounts of the company and all its
subsidiary undertakings after eliminating internal sales and profits and
recognising the minority interests in subsidiary undertakings. No profit and
loss account is presented for Trim Engineering Limited as permitted by
Section 230 of the Companies Act 1985.
c. DEPRECIATION
Depreciation is provided on all tangible fixed assets in use at rates
calculated to write off the cost or valuation, less estimated residual
value, of each asset over its expected useful life, calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Leasehold land and buildings - Straight line over 60 years
Freehold industrial buildings - Straight line over 50 years
Plant and machinery - 15% p.a. reducing balance
Fixtures, fittings and equipment - 10% p.a. reducing balance
Computer equipment - Straight line over 3 years
Motor vehicles - 25% p.a. reducing balance
</TABLE>
The cost of payments on account and the cost of assets in course of
construction are not depreciated until the asset is brought into use.
No depreciation is provided on the following properties:
a) Freehold land.
b) A freehold hotel property, as it is the company's practice to
maintain this asset in a continual state of sound repair and
accordingly the directors consider that the life of this asset is so
long and the residual value (based on prices prevailing at the time
of acquisition) so high, that its depreciation is insignificant. Any
permanent diminution in the value of the property is charged to
profit and loss account as appropriate.
d. STOCKS AND WORK-IN-PROGRESS
Stocks and work-in-progress are stated at the lower of cost and net
realisable value. Cost is determined on a "first in, first out" basis and in
the case of work-in-progress and finished goods includes all direct
expenditure of production, based on normal levels of activity.
e. TITLE TO ASSETS
Assets to which title has not passed to the company by virtue of non-payment
are treated as if title had passed on delivery rather than on the date of
payment and the liability in respect of those assets is not considered as
secured.
f. DEFERRED TAXATION
Deferred taxation is accounted for using the liability method on all
material timing differences to the extent that it is probable that
liabilities or assets will crystallise in the foreseeable future. Advance
F-119
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1998
1. ACCOUNTING POLICIES (CONTINUED)
corporation tax is carried forward to the extent that it is expected to be
recovered. Timing differences are taxable items, allowances or reliefs which
are given effect to in taxation periods different from those in which they
have effect in the accounts.
g. TURNOVER
Turnover represents the net amounts invoiced to customers, less trade
discounts and value added tax, and excluding sales of fixed assets. In
respect of the engineering companies, and as is normal in the industry,
sales have only been included when prices have been accepted by the
customer. Where prices are still being negotiated the items have been
included in work-in-progress.
h. GOODWILL
In the case of two subsidiary undertakings, goodwill has been written off to
profit and loss account in a previous year, except for a nominal amount of
L1 for each subsidiary undertaking.
Goodwill arising on consolidation has been written off to profit and loss
account in the year of acquisition.
i. FOREIGN CURRENCIES
Transactions denominated in foreign currencies are translated into sterling
at the rate of exchange ruling at the date of the transaction. Exchange
differences arising in the ordinary course of business are included in
operating profit.
Assets and liabilities denominated in foreign currencies are translated into
sterling at the exchange rates ruling at the balance sheet date.
j. GOVERNMENT GRANTS
Government grants in respect of capital expenditure are credited to a
deferred income account and are released to the profit and loss account over
the expected useful lives of the relevant assets. Revenue grants are
released to the profit and loss account over the life of the project to
which they relate.
2. TURNOVER AND RESULTS--GROUP
<TABLE>
<CAPTION>
1997
1998 ------------
------------ L
L
<S> <C> <C>
The analysis of turnover by activity is as follows:
Engineering....................................................... 23,400,399 17,584,726
Building and construction......................................... 600,000 1,563
Hotel and restaurant.............................................. 230,676 244,966
------------ ------------
24,231,075 17,831,255
------------ ------------
------------ ------------
The profit (loss) before taxation by activity is as follows:
Engineering....................................................... 3,751,991 541,648
Building and construction......................................... 299,869 2,681
Hotel and restaurant.............................................. (84,190) (23,215)
------------ ------------
3,967,670 521,114
------------ ------------
------------ ------------
</TABLE>
F-120
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1998
3. OTHER OPERATING INCOME
<TABLE>
<CAPTION>
1997
1998 ----------
--------- L
L
<S> <C> <C>
Rent receivable......................................................... 3,055 1,450
Government grant........................................................ 27,235 22,930
Currency losses on trading items........................................ (99,274) (329,209)
--------- ----------
(68,984) (304,829)
--------- ----------
--------- ----------
</TABLE>
4. OPERATING PROFIT
<TABLE>
<CAPTION>
1997
1998 ---------
--------- L
L
<S> <C> <C>
This is stated after charging (crediting):
Loss/(profit) on sale of assets....................................... 23,050 (1,690)
Hire and lease of plant and machinery................................. 30,507 24,518
Auditors' renumeration................................................ 40,550 42,450
Depreciation.......................................................... 722,316 741,240
--------- ---------
--------- ---------
</TABLE>
The auditors' remuneration of L40,550 (1997 - L42,450) includes L20,000 (1997 -
L18,000) in respect of Trim Engineering Limited.
5. STAFF COSTS--(including directors)
<TABLE>
<CAPTION>
1997
1998 ----------
------------ L
L
<S> <C> <C>
Directors' benefits in kind........................................ 16,523 19,293
Directors' remuneration............................................ 351,936 145,787
Wages and salaries................................................. 9,238,731 8,016,644
Social security costs.............................................. 877,416 708,605
Other pension costs (see note 6)................................... 138,037 185,176
Redundancy costs................................................... -- 79,374
Staff BUPA contributions........................................... 5,923 2,165
------------ ----------
10,628,566 9,157,044
------------ ----------
------------ ----------
</TABLE>
F-121
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1998
5. STAFF COSTS--(including directors) (Continued)
The average number of employees during the year was made up as follows:
<TABLE>
<CAPTION>
1997
1998 ----------
------------ NO.
NO.
<S> <C> <C>
Directors.......................................................... 3 3
Administration..................................................... 58 61
Production......................................................... 421 373
------------ ----------
482 437
------------ ----------
------------ ----------
</TABLE>
<TABLE>
<CAPTION>
1998 1997
------------ ----------
<S> <C> <C>
Highest paid director:-
Aggregate emoluments............................................... 173,710 72,781
------------ ----------
------------ ----------
</TABLE>
6. PENSION SCHEME--STAFF
The group operates a contributory defined contribution pension scheme for
some employees. The assets of the scheme are held separately from those of
the group, being invested with insurance companies. The pension cost charge
represents contributions payable by the group to the fund and amounted to
L135,252 (1997 L183,316).
PENSION SCHEME--DIRECTORS
The company operates for two directors a defined contribution pension
scheme. The assets of the scheme are held in separate trustee administered
funds. The pension charge for the year was L2,785 (1997 L1,860).
7. INTEREST PAYABLE
<TABLE>
<CAPTION>
1997
1998 ---------
--------- L
L
<S> <C> <C>
On bank loans, overdrafts and other loans:
- --repayable within five years.............................................. 58 41
- --on directors' loans (see note 21)........................................ 81,944 81,500
--------- ---------
82,002 81,541
--------- ---------
--------- ---------
</TABLE>
F-122
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1998
8. TAX ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
1997
1998 ---------
---------- L
L
<S> <C> <C>
Based on the profit for the year:
Corporation tax at an effective rate of 31% (1997 - 31%)............ 1,149,700 176,908
Adjustment in respect of prior years.................................. 115 32,313
Deferred taxation at 31% (1997 - 31%)................................. 69,168 (56,256)
---------- ---------
1,218,983 152,965
---------- ---------
---------- ---------
</TABLE>
9. DIVIDENDS
<TABLE>
<CAPTION>
1997
1998 ---------
--------- L
L
<S> <C> <C>
Dividend paid........................................................... 266,667 266,667
--------- ---------
--------- ---------
</TABLE>
10. TANGIBLE FIXED ASSETS--GROUP
<TABLE>
<CAPTION>
LEASEHOLD PLANT,
PROPERTIES MACHINERY AND TOTAL
----------- EQUIPMENT ------------
FREEHOLD ---------------
PROPERTIES L L
------------ L
L
<S> <C> <C> <C> <C>
Cost of valuation:
1st of May.......................... 3,531,342 391,303 14,268,077 18,190,722
Additions at cost................... 21,269 -- 1,445,724 1,466,993
Disposals........................... (111,719) -- (112,239) (223,958)
------------ ----------- --------------- ------------
30th of April 1998.................. 3,440,892 391,303 15,601,562 19,433,757
------------ ----------- --------------- ------------
------------ ----------- --------------- ------------
Depreciation:
1st of May 1997..................... 444,326 32,525 10,183,839 10,660,690
Disposals........................... -- -- (47,959) (47,959)
Provision for year.................. 54,359 6,505 661,452 722,316
------------ ----------- --------------- ------------
30th April 1998..................... 498,685 39,030 10,797,332 11,335,047
------------ ----------- --------------- ------------
------------ ----------- --------------- ------------
Net book values:
30th April 1997..................... 3,087,016 358,778 4,084,238 7,530,032
------------ ----------- --------------- ------------
------------ ----------- --------------- ------------
30th April 1998..................... 2,942,207 352,273 4,804,230 8,098,710
------------ ----------- --------------- ------------
------------ ----------- --------------- ------------
</TABLE>
F-123
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1998
10. TANGIBLE FIXED ASSETS--GROUP (CONTINUED)
The net book values of freehold properties comprise:
<TABLE>
<CAPTION>
1997
1998 ----------
---------- L
L
<S> <C> <C>
Freehold land....................................................... 735,046 735,046
Freehold industrial buildings....................................... 1,850,234 1,883,324
Freehold hotel...................................................... 356,927 356,927
Freehold investment property........................................ -- 111,719
---------- ----------
2,942,207 3,087,016
---------- ----------
---------- ----------
</TABLE>
11. TANGIBLE FIXED ASSETS--COMPANY
<TABLE>
<CAPTION>
PLANT,
MACHINERY AND TOTAL
EQUIPMENT ----------
FREEHOLD ---------------
PROPERTIES L
---------- L
L
<S> <C> <C> <C>
Cost or valuation:
1st May 1997....................................... 1,382,734 3,287,933 4,670,667
Additions at cost.................................. 14,518 1,041,683 1,056,201
Disposals.......................................... (111,719) (99,300) (211,019)
---------- --------------- ----------
30 April 1998...................................... 1,285,533 4,230,316 5,515,849
---------- --------------- ----------
---------- --------------- ----------
Depreciation:
1st May 1997....................................... 151,497 2,046,917 2,198,414
Disposals.......................................... -- (39,276) (39,276)
Provision for year................................. 21,054 191,297 212,351
---------- --------------- ----------
30th April 1998.................................... 172,551 2,198,938 2,371,489
---------- --------------- ----------
---------- --------------- ----------
Net book values:
30th April 1997.................................... 1,231,237 1,241,016 2,472,253
---------- --------------- ----------
---------- --------------- ----------
30th April 1998.................................... 1,112,982 2,031,378 3,144,360
---------- --------------- ----------
---------- --------------- ----------
</TABLE>
<TABLE>
<CAPTION>
1997
1998 ----------
---------- L
L
<S> <C> <C>
The net book values of freehold properties compromise:
Freehold land....................................................... 225,859 225,859
Freehold industrial buildings....................................... 530,196 536,742
Freehold hotel...................................................... 356,927 356,927
Freehold investment property........................................ -- 111,719
---------- ----------
1,112,982 1,231,237
---------- ----------
---------- ----------
</TABLE>
F-124
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1998
12. INVESTMENTS--COMPANY
<TABLE>
<CAPTION>
1998 1997
PROPORTION OF THE NOMINAL VALUE --------- ---------
OF ORDINARY SHARES HELD %
--------------------------------- L L
<S> <C> <C> <C>
Cost of ordinary shares in subsidiary undertakings:
Diac Limited.................................................. 80.0 321 321
Holland Granfield Limited..................................... 77.5 -- --
Maybrey Precision Castings Ltd................................ 90.0 15,329 15,329
Trefn Engineering Limited..................................... 85.0 4,250 4,250
Trefn Fabrications Limited.................................... 100.0 75,000 75,000
Poole Bay Construction Co. Ltd................................ 100.0 -- --
Pinson Investments Limited.................................... 100.0 -- --
----- --------- ---------
94,900 94,900
--------- ---------
--------- ---------
</TABLE>
Trefn engineering limited owns 100% (1997 -100%) of the ordinary issued
shares of Trefn Engineering (Metal Treatments Division) Limited.
The cost of the investments in Holland Granfield Limited, Poole Bay
Construction Co. Limited and Pinson Investments Limited were written off to
the profit and loss account in a previous year.
All the subsidiary undertakings are incorporated in Great Britain.
13. STOCKS AND WORK IN PROGRESS
<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
GROUP COMPANY GROUP
---------- ---------- ----------
COMPANY L L L
----------
L
<S> <C> <C> <C> <C>
Raw materials and consumables............. 247,850 698,944 187,386 659,030
Work-in-progress.......................... 1,991,516 4,216,870 996,754 3,574,925
---------- ---------- ---------- ----------
2,239,336 4,915,814 1,184,140 4,233,955
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
14. DEBTORS
<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
GROUP COMPANY GROUP
---------- ---------- ----------
COMPANY L L L
----------
L
<S> <C> <C> <C> <C>
Trade debtors............................. 1,376,721 4,756,816 1,228,468 3,930,136
Other debtors............................. 146,224 333,254 14,563 141,455
Prepayments and accrued income............ 42,890 159,906 59,944 157,028
---------- ---------- ---------- ----------
1,565,835 5,249,976 1,302,975 4,228,619
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
F-125
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1998
15. CASH AT BANK AND IN HAND
<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
GROUP COMPANY GROUP
---------- ---------- ----------
COMPANY L L L
----------
L
<S> <C> <C> <C> <C>
4,554,239 9,405,669 3,807,964 6,330,499
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
16. CREDITORS: amounts falling due within one year
<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
GROUP COMPANY GROUP
---------- ---------- ----------
COMPANY L L L
----------
L
<S> <C> <C> <C> <C>
Banks loans and overdrafts.................................... 1,162,078 2,983,604 351,373 2,236,811
Trade creditors............................................... 840,169 1,968,531 440,871 1,547,353
Amounts due to group undertakings............................. 2,352,294 -- 1,757,976 --
Directors' loan accounts (see below).......................... 1,579,350 1,579,350 1,410,434 1,410,434
Advance corporation tax....................................... -- -- 66,667 66,667
Corporation tax............................................... 185,348 1,090,953 15,356 112,833
Other creditors including taxation and social security........ 41,713 345,954 48,116 312,974
Accruals and deferred income.................................. 445,963 1,399,230 312,247 912,439
---------- ---------- ---------- ----------
6,606,915 9,367,622 4,403,040 6,599,511
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
Director's loan accounts
<TABLE>
<CAPTION>
1997
1998 ----------
---------- L
L
<S> <C> <C>
R. W. H. Pinson, Esq................................................ 1,272,927 1,103,763
J. R. Pinson, Esq................................................... 241,185 252,234
B.D.W. Pinson Esq................................................... 65,238 54,437
---------- ----------
1,579,350 1,410,434
---------- ----------
---------- ----------
</TABLE>
17. DEFERRED TAXATION
The movement on the provision for deferred taxation is as follows:
<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
GROUP COMPANY GROUP
--------- ----------- ---------
COMPANY L L L
-----------
L
<S> <C> <C> <C> <C>
At 1st May 1997................................... 205,193 869,290 197,659 925,546
Charge (credit) for the year...................... 76,711 69,168 7,534 (56,256)
----------- --------- ----------- ---------
At 30th April 1998................................ 281,904 938,458 205,193 869,290
----------- --------- ----------- ---------
----------- --------- ----------- ---------
</TABLE>
F-126
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1998
17. DEFERRED TAXATION (CONTINUED)
Deferred taxation provided in the accounts, and the total potential
liability including the amounts for which provision has been made, as follows:
<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
PROVIDED IN FULL PROVIDED IN
THE POTENTIAL THE
ACCOUNTS LIABILITY ACCOUNTS
FULL ----------- --------- -----------
POTENTIAL L L L
LIABILITY
---------
L
<S> <C> <C> <C> <C>
GROUP:
Timing differences arising from accelerated
tax allowances............................ 938,458 938,458 869,290 869,290
--------- ----------- --------- -----------
--------- ----------- --------- -----------
COMPANY:
Timing differences arising from accelerated
tax allowances............................ 281,904 281,904 205,193 205,193
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
18. CONTINGENT LIABILITIES
Diac Limited
Rental and service charges on a lease was assigned during the year ended
30th April 1988 (when the annual rent was L36,000) and expiring in the year
ending
30th April 2006.
19. SHARE CAPITAL
<TABLE>
<CAPTION>
1997
1998 ---------
--------- L
L
<S> <C> <C>
Authorised
100,000 ordinary shares of L1 each...................................... 100,000 100,000
--------- ---------
--------- ---------
Allotted, called up and fully paid...................................... 100,000 100,000
--------- ---------
--------- ---------
</TABLE>
F-127
<PAGE>
TRIM ENGINEERING LIMITED AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED 30TH APRIL 1998
20. CAPITAL AND RESERVES--MOVEMENT IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
PROFIT & LOSS
ACCOUNT
SHARE -------------
CAPITAL L
---------
L
<S> <C> <C>
GROUP:
As at 1st May 1997.................................................. 100,000 12,428,922
Retained profit for the year........................................ -- 2,224,902
--------- -------------
As at 30th April 1998............................................... 100,000 14,653,824
--------- -------------
--------- -------------
COMPANY:
As at 1st May 1997.................................................. 100,000 4,153,999
Retained profit for the year........................................ -- 455,882
--------- -------------
As at 30th April 1998............................................... 100,000 4,609,881
--------- -------------
--------- -------------
</TABLE>
21. TRANSACTIONS INVOLVING DIRECTORS
a) Loan interest of L81,994 was payable to the following directors in
respect of their loans to the company:-
<TABLE>
<CAPTION>
L
<S> <C>
R.W.H. Pinson, Esq................................................................... 50,000
J. R. Pinson Esq..................................................................... 26,500
D.W. Pinson Esq...................................................................... 5,444
---------
81,944
</TABLE>
The rate of interest applied was at a commercial level.
b) The company occupies property owned by the directors' pension scheme and
pays rent of L37,000. All the directors are trustees of the scheme and,
in addition, J.R. Pinson Esq. and B.D.W. Pinson Esq. are scheme members.
22. CAPITAL COMMITMENTS
The directors have authorised and contracted expenditure for the company of
LNil relating to the purchase of plant and machinery. (1997 - L135,000 for
the company and for the group).
F-128
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$110,000,000
AND
$19,000,000
EXCHANGE OFFER
COMPASS AEROSPACE CORPORATION
[LOGO]
10 1/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2005
AND
10 1/8% SERIES D SENIOR SUBORDINATED NOTES DUE 2005
---------------------
PROSPECTUS
, 1999
---------------------
UNTIL , 2000 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN
THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENT OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[ALTERNATE FRONT COVER FOR MARKET-MAKING PROSPECTUS]
SUBJECT TO COMPLETION DATED [ ], 1999
COMPASS AEROSPACE CORPORATION
10 1/8% Series B Senior Subordinated Notes due 2005
and
10 1/8% Series D Senior Subordinated Notes due 2005
------------------------
- The Series B notes were issued in exchange for our 10 1/8% Series A senior
subordinated notes due 2005
- The Series D notes were issued in exchange for our 10 1/8% Series C senior
subordinated notes due 2005
- The Series B and Series D notes will mature on April 15, 2005
- Interest on the Series B and Series D notes is payable on April 15 and
October 15 of each year, commencing April 15, 2000
- We may redeem the Series B notes, in whole or in part, at any time on or
after April 15, 2002, at the redemption prices set forth on page 84, plus
accrued interest
- We may redeem the Series D notes, in whole or in part, at any time on or
after April 15, 2002, at the redemption prices set forth on page 121, plus
accrued interest
- For each of the Series B and the Series D notes before April 15, 2001, we
may redeem up to 35% of the aggregate principal amount of the notes
originally outstanding with the net proceeds of a public equity offering
at 110.125% of the principal amount of the redeemed notes, plus accrued
interest, if at least 65% of the aggregate principal amount of the notes
originally issued remains outstanding after such redemption
- You have the right to require us to purchase the Series B and the Series D
notes upon the occurrence of some change of control events at a purchase
price equal to 101% of the principal amount of the repurchased notes, plus
accrued interest
- The Series B and the Series D notes are unsecured senior subordinated
obligations and rank junior to all our existing and future senior
indebtedness. The Series B and Series D notes rank equal to each other and
rank senior to or equal to all our future subordinated indebtedness
- The Series B and Series D notes are jointly and severally, fully,
irrevocably and unconditionally guaranteed on a senior subordinated basis
by each of our present subsidiaries, except Maybrey, and effectively rank
junior to all existing and future senior indebtedness of our subsidiaries
- We will not receive the proceeds of the sale of the notes
------------------------
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A
DISCUSSION OF SOME MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
This prospectus is to be used by broker-dealers in connection with offers
and sales in
market-making transactions at negotiated prices related to prevailing market
prices. We do not intend to list the Series B or Series D notes on any
securities exchange. Some broker-dealers have informed us that they intend to
make a market in the Series B and Series D notes, however, they are under no
obligation to do so and may stop at any time.
------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Series B or Series D notes or
determined that this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
THE DATE OF THIS PROSPECTUS IS , 1999
<PAGE>
[ALTERNATE RISK FACTOR FOR MARKET-MAKING PROSPECTUS]
THERE IS NO EXISTING TRADING MARKET FOR THE NOTES AND ANY MARKET-MAKING
ACTIVITIES MAY BE TERMINATED AT ANY TIME
There is no existing trading market for the notes. We cannot assure you that
any market for the notes will develop, or about your ability to sell the notes
or the price at which you may be able to sell them. If such a market were to
develop, the notes could trade at prices that may be higher or lower than their
initial offering price. That trading price could depend on many factors,
including prevailing interest rates, our operating results and the market for
similar securities. We have also been advised by some broker-dealers that,
subject to applicable laws and regulations, they currently intend to make a
market in the notes. However, they are under no obligation to do so and they may
discontinue or interrupt any such market-making at any time without notice.
One such broker-dealer who has notified us it intends to make a market in
the notes may be deemed to be our "affiliate" (as defined in the Securities Act)
and, as such, may be required to deliver a prospectus in connection with its
market-making activities in the notes. Pursuant to the registration rights
agreements we signed with the initial purchasers of the Series A notes in
connection with our initial offering of the Series A notes and the initial
purchaser of the Series C Notes in connection with our initial offering of the
Series C notes, we have agreed to use our best efforts to file and maintain a
registration statement that would allow a broker-dealer who may be deemed to be
an affiliate of ours to engage in market-making transactions in the Series B or
Series D notes for up to one year from the date on which we consummate the offer
to exchange the Series B notes for Series A notes and the Series C notes for
Series D notes. We have agreed to bear substantially all the costs and expenses
related to that registration.
[ALTERNATE SECTION FOR MARKET-MAKING PROSPECTUS]
USE OF PROCEEDS
This prospectus is delivered in connection with the sale of the notes by a
broker-dealer in market-making transactions. We will not receive any of the
proceeds from such transactions.
<PAGE>
[ALTERNATE SECTION FOR MARKET-MAKING PROSPECTUS]
PLAN OF DISTRIBUTION
This prospectus is to be used by broker-dealers in connection with offers
and sales of Series B or Series D notes in market-making transactions effected
from time to time. We have agreed that we will make this prospectus, as amended
or supplemented, available to any broker-dealer for a period of up to one year
after the date of issuance of the Series B and Series D notes.
We will not receive any proceeds from any sale of Series B or Series D notes
by broker-dealers. Series B and Series D notes received by broker-dealers for
their own accounts pursuant to market-making transactions may be sold from time
to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Series B or
Series D notes or a combination of such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. Any such sale may be made directly to purchasers
or to or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers of
any Series B or Series D notes. A broker-dealer may act as a principal or agent
for one party when acting as principal or as agent for both parties, and may
receive compensation in the form of discounts and commissions, including from
both parties when it acts as agent for both.
We have been advised by some broker-dealers that, subject to applicable laws
and regulations, they currently intend to make a market in the Series B and
Series D notes following completion of the exchange offer. However, no
broker-dealer is under any obligation to do so and they may discontinue or
interrupt any such market-making activities at any time without notice. Any such
market-making activity also will be subject to the limits imposed by the
Securities Act and the Securities Exchange Act of 1934. We cannot assure you
that any market for the Series B or Series D notes will develop, or about your
ability to sell the notes you hold or the price at which you may be able to sell
them.
<PAGE>
[ALTERNATE BACK COVER FOR MARKET-MAKING PROSPECTUS]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$110,000,000
and
$19,000,000
COMPASS AEROSPACE CORPORATION
[LOGO]
10 1/8% Series B Senior Subordinated Notes due 2005
and
10 1/8% Series D Senior Subordinated Notes due 2005
---------------------
PROSPECTUS
, 1999
------------------------
UNTIL , 2000, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENT OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
COMPASS
Section 145 of the General Corporation Law of the State of Delaware permits
a corporation, under specified circumstances, to indemnify its directors,
officers, employees or agents against expenses (including attorney's fees),
judgments, fines and amounts paid in settlements actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties by reason of the fact that they were or are directors, officers,
employees or agents of the corporation or were or are serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, if such directors, officers, employees or agents acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reason to believe their conduct was unlawful. In a derivative
action, i.e., one by or in the right of the corporation, indemnification may be
made only for expenses actually and reasonably incurred by directors, officers,
employees or agents in connection with the defense or settlement of an action or
suit, and only with respect to a matter as to which they shall have acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the corporation, unless and only to the extent that the
court in which the action or suit was brought shall determine upon application
that the defendant directors, officers, employees, or agents are fairly and
reasonably entitled to indemnification for such expenses despite such
adjudication of liability.
Our by-laws provide that we shall, to the full extent authorized or
permitted by law, indemnify any current or former director or officer. Subject
to applicable law, we may indemnify an employee or agent of ours to the extent
that the Board of Directors may determine in its discretion.
Article Seven of our Certificate of Incorporation, as amended, provides that
a director of ours shall not be personally liable to us or our stockholders for
monetary damages for breach of fiduciary duty as a director, except to the
extent provided by applicable law for liability (a) for any breach of the duty
of loyalty to us or our stockholders, (b) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law, (c)
pursuant to Section 174 of the General Corporation Law of the State of Delaware,
or (d) for any transaction from which a director derived an improper personal
benefit.
Our directors and officers are covered by insurance policies indemnifying
them against some civil liabilities, including liabilities under the federal
securities laws, which might be incurred by them in such capacity.
THE GUARANTORS
The guarantors are incorporated under the laws of the States of California
(Pacific Hills, Western Methods and Wichita Manufacturing), Delaware (Aeromil,
Barnes, Brittain, Modern and Sea-Lect) and England and Wales (Trim, Trefn
Engineering, Trefn Fabrications, Trefn Metal Treatments and Diac). As with the
General Corporation Law of the State of Delaware, the California Corporations
Code and the private limited liability company act of England and Wales
authorize a corporation, under certain circumstances, to indemnify its directors
and officers (including to reimburse them for expenses incurred).
As with our Certificate of Incorporation, as amended, and our By-Laws, each
of the guarantor's organizational documents and bylaws generally provide for the
indemnification of officers and directors to the full extent permitted by law.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
**3.1 Certificate of Incorporation of Compass Aerospace Corporation ("Compass"), as amended to date.
**3.2 Amended and Restated By-Laws of Compass
**3.3 Certificate of Incorporation of AOM Acquisition Co. (which later changed its name to "Aeromil
Engineering Company"), as amended to date.
**3.4 Amended and Restated By-laws of Aeromil Engineering Company
**3.5 Articles of Incorporation of Western Methods Machinery Corporation.
**3.6 Amended and Restated Bylaws of Western Methods Machinery Corporation.
3.7 Certificate of Incorporation of Brittain Machine, Inc.
3.8 By-laws of Brittain Machine, Inc.
**3.9 Articles of Incorporation of Wichita Manufacturing, Inc.
**3.10 Amended and Restated Bylaws of Wichita Manufacturing, Inc.
3.11 Certificate of Incorporation of Barnes Machine, Inc.
3.12 By-laws of Barnes Machine, Inc.
**3.13 Certificate of Incorporation of SLP Acquisition Co. (which later changed its name to Sea-Lect Products,
Inc.), as amended to date.
**3.14 By-Laws of SLP Acquisition Co.
**3.15 Restated Articles of Incorporation of Pacific Hills Manufacturing Co.
**3.16 Amended and Restated Bylaws of Pacific Hills Manufacturing Co.
**3.17 Certificate of Incorporation of W.S.I. Inc. (which later changed its name first to Y.F. Americas, Inc.,
and then to Modern Manufacturing, Inc.), as amended to date.
**3.18 By-Laws of W.S.I. Inc.
3.19 Memorandum of Association of Compass Aerospace Limited
3.20 Articles of Association of Compass Aerospace Limited
3.21 Memorandum of Association of Diac Limited
3.22 Articles of Association of Diac Limited
3.23 Memorandum of Association of Trefn Engineering Limited
3.24 Articles of Association of Trefn Engineering Limited
3.25 Memorandum of Association of Trefn Engineering (Metal Treatments Division) Limited
3.26 Articles of Association of Trefn Engineering (Metal Treatments Division) Limited
3.27 Memorandum of Association of Trefn Fabrications Limited
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.28 Articles of Association of Trefn Fabrications Limited
3.29 Memorandum of Association of Trim Engineering Limited
3.30 Articles of Association of Trim Engineering Limited
**4.1 Indenture, dated April 21, 1998, by and among Compass, the Guarantors listed therein and IBJ Whitehall
Bank & Trust Company (formerly IBJ Schroder Bank & Trust Company) as Trustee, relating to the 10 1/8%
Series B Senior Subordinated Notes due 2005 of Compass and the 10 1/8% Series A Senior Subordinated
Notes due 2005 of Compass.
**4.2 Amended and Restated Credit Agreement, dated as of November 20, 1998 and amended and restated as of
February 11, 1999, by and among Compass, BankBoston, N.A. as agent and a lender, NationsBank, N.A. as
Co-Agent, the Lenders named therein, Royal Bank of Canada as Syndication Agent, General Electric Capital
Corporation as Documentation Agent and BancBoston Robertson Stephens, Inc. as arranger
**4.3 Security Agreement, dated November 20, 1998, by and among Compass, Compass' subsidiaries named therein,
BankBoston, N.A. as agent and the lenders identified therein.
**4.4 Stock Pledge Agreement, dated as of November 20, 1998 by and among Compass, Brittain Machine, Inc.,
Sea-Lect Products, Inc. and BankBoston, N.A. as agent.
**4.5 Amendment No. 1 to Credit Agreement, dated as of June 7, 1999 by and among Compass, Bank Boston, N.A. as
Issuing Bank, as Agent and as a lender, NationsBank, N.A. as Co-Agent, the Lenders named therein, Royal
Bank of Canada as Syndication Agent, General Electric Capital Corporation as Documentation Agent.
4.6 Consent, Waiver and Amendment No. 2 to Credit Agreement, dated as of July 30, 1999 by and among Compass,
Bank Boston, N.A. as Issuing Bank, as Agent and as a lender, Bank of America, N.A. (formerly known as
NationsBank, N.A.) as Co-Agent, the Lenders named therein, Royal Bank of Canada as Syndication Agent,
General Electric Capital Corporation as Documentation Agent.
4.7 Indenture, dated July 30, 1999, by and among Compass, the Guarantors listed therein and IBJ Whitehall
Bank & Trust Company as Trustee, relating to the 10 1/8% Series D Senior Subordinated Notes due 2005 of
Compass and the 10 1/8% Series C Senior Subordinated Notes due 2005 of Compass.
*5.1 Opinion of Morgan, Lewis & Bockius, LLP, counsel to Compass.
**10.1 Employment Agreement, dated as of November 26, 1997, by and between Compass and Alexander Hogg.
**10.2 Employment Agreement, dated as of September 21, 1998, by and between Compass and N. Paul Brost.
**10.4 Compass Aerospace Corporation 1998 Stock Incentive Plan.
**10.5 Management Agreement, dated November 26, 1997, by and among Compass, Dunhill Bank Caribbean Ltd. and
Hayes Capital Corporation, as amended to date.
12.1 Statement regarding the computation of ratio of earnings to fixed charges for Compass.
21.1 Subsidiaries of Compass.
23.1 Consent of Ernst & Young, LLP.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
23.2 Consent of Grant Thornton LLP.
23.3 Consent of McGladrey & Pullen, LLP.
*23.4 Consent of Morgan, Lewis & Bockius LLP, counsel to Compass (included in Exhibit 5.1).
23.5 Consent of Princecroft Redman.
23.6 Consent of Ernst & Young.
**24.1 Power of Attorney (included in signature page).
*25.1 Statement of Eligibility on Form T-1 of The Bank of New York, as successor Trustee under the Indentures
relating to the Series B and Series D Notes.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
**99.3 Form of Exchange Agency Agreement.
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
(b) Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts and Reserves
All other schedules have been omitted because the information is not
applicable or is not material or because the information required is set forth
in the financial statements on the notes thereto.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
II-4
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) If the registrants are foreign private issuers, to file a post-effective
amendment to the registration statement to include any financial statements
required by Rule 3-19 of this chapter at the start of any delayed offering or
throughout a continuous offering. Financial statements and information otherwise
required by Section 10(a)(3) of the Act need not be furnished, PROVIDED, that
the registrants include in the prospectus, by means of a post-effective
amendment, financial statements required pursuant to this paragraph (a)(4) and
other information necessary to ensure that all other information in the
prospectus is at least as current as the date of those financial statements.
Notwithstanding the foregoing, with respect to registration statements on Form
F-3, a post-effective amendment need not be filed to include financial
statements and information required by Section 10(a)(3) of the Act or Rule 3-19
of this chapter if such financial statements and information are contained in
periodic reports filed with or furnished to the Commission by the registrants
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the From F-3.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, and controlling persons of the Registrants
pursuant to the foregoing provisions, or otherwise, the Registrants have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrants of expenses incurred
or paid by a director, officer or controlling person of the Registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(d) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(e) The undersigned registrants hereby undertake to file, during any period in
which offers or sales are being made, a new registration statement if any new
guarantors of the Series B or Series D notes are added.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Los Angeles, State of
California, on October 26, 1999.
COMPASS AEROSPACE CORPORATION
BY: /S/ DOUGLAS M. HAYNES
-----------------------------------------
Douglas M. Hayes
CHAIRMAN OF THE BOARD OF DIRECTORS
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ DOUGLAS M. HAYES Chairman of the Board of October 26, 1999
- ------------------------------ Directors
Douglas M. Hayes
/s/ ALEXANDER HOGG* Director, President and October 26, 1999
- ------------------------------ Chief Executive Officer
Alexander Hogg
/s/ N. PAUL BROST* Vice President, Chief October 26, 1999
- ------------------------------ Financial Officer and
N. Paul Brost Treasurer (Principal
Financial and Accounting
Officer)
/s/ DOUGLAS B. SOLOMON* Director and Secretary October 26, 1999
- ------------------------------
Douglas B. Solomon
/s/ JAMES P. ANGUS* Director October 26, 1999
- ------------------------------
James P. Angus
/s/ MICHAEL DRITZ* Director October 26, 1999
- ------------------------------
Michael Dritz
/s/ HARALD H. LUDWIG* Director October 26, 1999
- ------------------------------
Harald H. Ludwig
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ WILLIAM R. MONKMAN* Director October 26, 1999
- ------------------------------
William R. Monkman
/s/ PHILIP J. OLSSON* Director October 26, 1999
- ------------------------------
Philip J. Olsson
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ DOUGLAS M. HAYES
-------------------------
Douglas M. Hayes
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, each Additional
Registrant listed on the cover page of this registration statement has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Los Angeles, State of
California, on October 26, 1999.
<TABLE>
<S> <C> <C>
AEROMIL ENGINEERING COMPANY
BARNES MACHINE, INC.
BRITTAIN MACHINE, INC.
COMPASS AEROSPACE LIMITED
DIAC LIMITED
MODERN MANUFACTURING, INC.
PACIFIC HILLS MANUFACTURING CO.
SEA-LECT PRODUCTS, INC.
TREFN ENGINEERING LIMITED
TREFN (METAL TREATMENTS DIVISION) LIMITED
TREFN FABRICATIONS LIMITED
TRIM ENGINEERING LIMITED
WESTERN METHODS MACHINERY CORPORATION
WICHITA MANUFACTURING, INC.
By: /s/ DOUGLAS M. HAYES
-----------------------------------------
Douglas M. Hayes
CHAIRMAN OF THE BOARD OF DIRECTORS
</TABLE>
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ DOUGLAS M. HAYES Chairman of the Board of October 26, 1999
- ------------------------------ Directors of each
Douglas M. Hayes Additional Registrant
/s/ ALEXANDER HOGG* Director of each Additional October 26, 1999
- ------------------------------ Registrant, Chief
Alexander Hogg Executive Officer and
President of Aeromil,
Barnes Machine, Brittain
Machine, Modern, Pacific
Hills, Sea-Lect, Western
Methods and Wichita
Manufacturing
/s/ N. PAUL BROST* Vice President, Chief October 26, 1999
- ------------------------------ Financial Officer and
N. Paul Brost Treasurer (Principal
Financial and Accounting
Officer) of Aeromil,
Barnes Machine, Brittain
Machine, Modern, Pacific
Hills, Sea-Lect, Western
Methods and Wichita
Manufacturing
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ DOUGLAS B. SOLOMON* Director and Secretary of October 26, 1999
- ------------------------------ Aeromil, Barnes Machine,
Douglas B. Solomon Brittain Machine, Modern,
Pacific Hills, Sea-Lect,
Western Methods and
Wichita Manufacturing
/s/ HARALD H. LUDWIG* Director of Aeromil, Barnes October 26, 1999
- ------------------------------ Machine, Brittain
Harald H. Ludwig Machine, Modern, Pacific
Hills, Sea-Lect, Western
Methods and Wichita
Manufacturing
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By /s/ DOUGLAS M. HAYES
-------------------------
Douglas M. Hayes
ATTORNEY-IN-FACT
</TABLE>
II-9
<PAGE>
COMPASS AEROSPACE CORPORATION
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING CHARGED TO CHARGED TO BALANCE AT
OF COSTS AND OTHER DEDUCTIONS END OF
DESCRIPTION PERIOD EXPENSES EXPENSES (1) PERIOD
- ---------------------------------------------------- ------------- --------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ADDITIONS
As Compass Aerospace Corporation
YEAR ENDED DECEMBER 31, 1997
Reserve and allowance deducted from asset accounts
Allowance for uncollectible accounts................ $ -- $ -- $ 49 $ 18 $ 31
YEAR ENDED DECEMBER 31, 1998
Reserve and allowance deducted from asset accounts
Allowance for uncollectible accounts................ $ 31 $ 3 $ 776 $ 54 $ 756
As Brittain Machine, Inc.(2)
YEAR ENDED JUNE 30, 1996
Reserve and allowances deducted from asset accounts
Allowance for uncollectible accounts................ $ -- $ -- $ -- $ -- $ --
YEAR ENDED JUNE 30, 1997
Reserve and allowance deducted from asset accounts
Allowance for uncollectible accounts................ $ -- $ -- $ -- $ -- $ --
YEAR ENDED APRIL 21, 1998
Reserve and allowances deducted from asset accounts
Allowance for uncollectible accounts................ $ -- $ -- $ -- $ -- $ --
</TABLE>
- ------------------------
(1) Net of recoveries.
(2) Brittain Machine, Inc. is included as the predecessor of Compass Aerospace
Corporation.
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
**3.1 Certificate of Incorporation of Compass Aerospace Corporation ("Compass"), as amended to date.
**3.2 Amended and Restated By-Laws of Compass
**3.3 Certificate of Incorporation of AOM Acquisition Co. (which later changed its name to "Aeromil
Engineering Company"), as amended to date.
**3.4 Amended and Restated By-laws of Aeromil Engineering Company
**3.5 Articles of Incorporation of Western Methods Machinery Corporation.
**3.6 Amended and Restated Bylaws of Western Methods Machinery Corporation.
3.7 Certificate of Incorporation of Brittain Machine, Inc.
3.8 By-laws of Brittain Machine, Inc.
**3.9 Articles of Incorporation of Wichita Manufacturing, Inc.
**3.10 Amended and Restated Bylaws of Wichita Manufacturing, Inc.
3.11 Certificate of Incorporation of Barnes Machine, Inc.
3.12 By-laws of Barnes Machine, Inc.
**3.13 Certificate of Incorporation of SLP Acquisition Co. (which later changed its name to Sea-Lect Products,
Inc.), as amended to date.
**3.14 By-Laws of SLP Acquisition Co.
**3.15 Restated Articles of Incorporation of Pacific Hills Manufacturing Co.
**3.16 Amended and Restated Bylaws of Pacific Hills Manufacturing Co.
**3.17 Certificate of Incorporation of W.S.I. Inc. (which later changed its name first to Y.F. Americas, Inc.,
and then to Modern Manufacturing, Inc.), as amended to date.
**3.18 By-Laws of W.S.I. Inc.
3.19 Memorandum of Association of Compass Aerospace Limited
3.20 Articles of Association of Compass Aerospace Limited
3.21 Memorandum of Association of Diac Limited
3.22 Articles of Association of Diac Limited
3.23 Memorandum of Association of Trefu Engineering Limited
3.24 Articles of Association of Trefu Engineering Limited
3.25 Memorandum of Association of Trefu Engineering (Metal Treatments Division) Limited
3.26 Articles of Association of Trefu Engineering (Metal Treatments Division) Limited
3.27 Memorandum of Association of Trefu Fabrications Limited
3.28 Articles of Association of Trefu Fabrications Limited
3.29 Memorandum of Association of Trim Engineering Limited
3.30 Articles of Association of Trim Engineering Limited
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
**4.1 Indenture, dated April 21, 1998, by and among Compass, the Guarantors listed therein and IBJ Whitehall
Bank & Trust Company (formerly IBJ Schroder Bank & Trust Company) as Trustee, relating to the 10 1/8%
Series B Senior Subordinated Notes due 2005 of Compass and the 10 1/8% Series A Senior Subordinated
Notes due 2005 of Compass.
**4.2 Amended and Restated Credit Agreement, dated as of November 20, 1998 and amended and restated as of
February 11, 1999, by and among Compass, BankBoston, N.A. as agent and a lender, NationsBank, N.A. as
Co-Agent, the Lenders named therein, Royal Bank of Canada as Syndication Agent, General Electric Capital
Corporation as Documentation Agent and BancBoston Robertson Stephens, Inc. as arranger
**4.3 Security Agreement, dated November 20, 1998, by and among Compass, Compass' subsidiaries named therein,
BankBoston, N.A. as agent and the lenders identified therein.
**4.4 Stock Pledge Agreement, dated as of November 20, 1998 by and among Compass, Brittain Machine, Inc.,
Sea-Lect Products, Inc. and BankBoston, N.A. as agent.
**4.5 Amendment No. 1 to Credit Agreement, dated as of June 7, 1999 by and among Compass, Bank Boston, N.A. as
Issuing Bank, as Agent and as a lender, NationsBank, N.A. as Co-Agent, the Lenders named therein, Royal
Bank of Canada as Syndication Agent, General Electric Capital Corporation as Documentation Agent.
4.6 Consent, Waiver and Amendment No. 2 to Credit Agreement, dated as of July 30, 1999 by and among Compass,
Bank Boston, N.A. as Issuing Bank, as Agent and as a lender, Bank of America, N.A. (formerly known as
NationsBank, N.A.) as Co-Agent, the Lenders named therein, Royal Bank of Canada as Syndication Agent,
General Electric Capital Corporation as Documentation Agent.
4.7 Indenture, dated July 30, 1999, by and among Compass, the Guarantors listed therein and IBJ Whitehall
Bank & Trust Company as Trustee, relating to the 10 1/8% Series D Senior Subordinated Notes due 2005 of
Compass and the 10 1/8% Series C Senior Subordinated Notes due 2005 of Compass.
*5.1 Opinion of Morgan, Lewis & Bockius, LLP, counsel to Compass.
**10.1 Employment Agreement, dated as of November 26, 1997, by and between Compass and Alexander Hogg.
**10.2 Employment Agreement, dated as of September 21, 1998, by and between Compass and N. Paul Brost.
**10.4 Compass Aerospace Corporation 1998 Stock Incentive Plan.
**10.5 Management Agreement, dated November 26, 1997, by and among Compass, Dunhill Bank Caribbean Ltd. and
Hayes Capital Corporation, as amended to date.
12.1 Statement regarding the computation of ratio of earnings to fixed charges for Compass.
21.1 Subsidiaries of Compass.
23.1 Consent of Ernst & Young, LLP.
23.2 Consent of Grant Thornton LLP.
23.3 Consent of McGladrey & Pullen, LLP.
*23.4 Consent of Morgan, Lewis & Bockius LLP, counsel to Compass (included in Exhibit 5.1).
23.5 Consent of Princecroft Redman.
23.6 Consent of Ernst & Young.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
**24.1 Power of Attorney (included in signature page).
*25.1 Statement of Eligibility on Form T-1 of The Bank of New York as successor Trustee under the Indentures
relating to the Series B and Series D Notes.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
**99.3 Form of Exchange Agency Agreement.
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
<PAGE>
EXHIBIT 3.7
CERTIFICATE OF INCORPORATION
OF
BRITTAIN MACHINE, INC.
--------------------------
FIRST: The name of the corporation shall be:
BRITTAIN MACHINE, INC.
SECOND: The address of the corporation's registered office in the State
of Delaware is to be located at 1013 Centre Road, in the City of Wilmington,
County of New Castle and its registered agent at such address is Corporation
Service Company.
THIRD: The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which this corporation is
authorized to issue is:
Three Thousand (3,000) shares without par value.
FIFTH: The name and address of the incorporator is as follows:
Takako Muramatsu
Morgan, Lewis & Bockius LLP
300 South Grand Avenue, 22nd Floor
Los Angeles, California 90071
SIXTH: The Board of Directors shall have the power to adopt, amend or
repeal the by-laws.
-1-
<PAGE>
SEVENTH: No director shall be personally liable to the corporation or
its stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law, (i) for breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions no in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article Seventh
shall apply to or have any effect on the liability or alleged liability of any
director of the corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
IN WITNESS WHEREOF, the undersigned, being the incorporator
hereinbefore named, has executed, signed and acknowledged this certificate of
incorporation this 1st day of September, 1999.
/s/ TAKAKO MURAMATSU
---------------------------
Takako Muramatsu
Incorporator
-2-
<PAGE>
EXHIBIT 3.8
BY-LAWS
OF
BRITTAIN MACHINE, INC.
****
INCORPORATED UNDER THE LAWS
OF THE
STATE OF DELAWARE
ON
SEPTEMBER 2, 1999
****
LAW OFFICES
OF
MORGAN, LEWIS & BOCKIUS LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071-3132
<PAGE>
TABLE OF CONTENTS
ARTICLE I Stockholders ............................................1
SECTION 1. Annual Meeting...........................................1
SECTION 2. Special Meetings.........................................1
SECTION 3. Notice of Meetings.......................................1
SECTION 4. Quorum...................................................1
SECTION 5. Adjourned Meetings.......................................2
SECTION 6. Organization.............................................2
SECTION 7. Voting...................................................2
SECTION 8. Inspectors...............................................3
SECTION 9. Consent of Stockholders in Lieu of Meeting...............3
ARTICLE II Board of Directors ......................................3
SECTION 1. Number and Term of Office................................3
SECTION 2. Removal, Vacancies and Additional Directors..............4
SECTION 3. Place of Meeting.........................................4
SECTION 4. Regular Meetings.........................................4
SECTION 5. Special Meetings.........................................4
SECTION 6. Quorum...................................................5
SECTION 7. Organization.............................................5
SECTION 8. Committees...............................................5
SECTION 9. Conference Telephone Meetings............................5
SECTION 10. Consent of Directors or Committee in Lieu of Meeting.....5
ARTICLE III Officers ................................................6
SECTION 1. Officers.................................................6
SECTION 2. Powers and Duties of the Chairman of the Board..........6
SECTION 3. Powers and Duties of the President.......................6
SECTION 4. Powers and Duties of the Vice Presidents.................7
SECTION 5. Powers and Duties of the Secretary.......................7
SECTION 6. Powers and Duties of the Treasurer.......................7
SECTION 7. Additional Officers......................................7
SECTION 8. Giving of Bond by Officers...............................8
SECTION 9. Voting Upon Stocks.......................................8
SECTION 10. Compensation of Officers.................................8
ARTICLE IV Indemnification of Directors and Officers ...............8
SECTION 1. Nature of Indemnity......................................8
SECTION 2. Successful Defense.......................................9
SECTION 3. Determination that Indemnification is Proper.............9
SECTION 4. Advance Payment of Expenses.............................10
-1-
<PAGE>
SECTION 5. Survival; Preservation of Other Rights..................10
SECTION 6. Severability............................................10
SECTION 7. Subrogation.............................................10
SECTION 8. No Duplication of Payments..............................11
ARTICLE V Stock-Seal-Fiscal Year .................................11
SECTION 1. Certificates For Shares of Stock........................11
SECTION 2. Lost, Stolen or Destroyed Certificates..................11
SECTION 3. Transfer of Shares......................................12
SECTION 4. Regulations.............................................12
SECTION 5. Record Date.............................................12
SECTION 6. Dividends...............................................12
SECTION 7. Corporate Seal..........................................13
SECTION 8. Fiscal Year.............................................13
ARTICLE VI Miscellaneous Provisions ...............................13
SECTION 1. Checks, Notes, Etc......................................13
SECTION 2. Loans...................................................13
SECTION 3. Contracts...............................................13
SECTION 4. Waivers of Notice.......................................14
SECTION 5. Offices Outside of Delaware.............................14
ARTICLE VII Amendments .............................................14
-2-
<PAGE>
BY-LAWS
OF
BRITTAIN MACHINE, INC.
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the
stockholders of the Corporation shall be held on such date, at such time and
at such place within or without the State of Delaware as may be designated by
the Board of Directors, for the purpose of electing Directors and for the
transaction of such other business as may be properly brought before the
meeting.
SECTION 2. SPECIAL MEETINGS. Except as otherwise provided in the
Certificate of Incorporation, a special meeting of the stockholders of the
Corporation may be called at any time by the Board of Directors, the Chairman
of the Board or the President. Any special meeting of the stockholders shall
be held on such date, at such time and at such place within or without the
State of Delaware as the Board of Directors or the officer calling the
meeting may designate. At a special meeting of the stockholders, no business
shall be transacted and no corporate action shall be taken other than that
stated in the notice of the meeting unless all of the stockholders are
present in person or by proxy, in which case any and all business may be
transacted at the meeting even though the meeting is held without notice.
SECTION 3. NOTICE OF MEETINGS. Except as otherwise provided in
these By-laws or by law, a written notice of each meeting of the stockholders
shall be given not less than ten (10) nor more than sixty (60) days before
the date of the meeting to each stockholder of the Corporation entitled to
vote at such meeting at his address as it appears on the records of the
Corporation. The notice shall state the place, date and hour of the meeting
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called.
SECTION 4. QUORUM. At any meeting of the stockholders, the
holders of a majority in number of the total outstanding shares of stock of
the Corporation entitled to vote at such meeting, present in person or
represented by proxy, shall constitute a quorum of the stockholders for all
purposes, unless the representation of a larger number of shares shall be
required by law, by the Certificate of Incorporation or by these By-laws, in
which case the representation of the number of shares so required shall
constitute a quorum; provided that at any meeting of the stockholders at
which the holders of any class of stock of the Corporation shall be entitled
to vote separately as a class, the holders of a majority in number of the
total outstanding shares of such class, present in person or represented by
proxy, shall constitute a quorum for purposes of such
-1-
<PAGE>
class vote unless the representation of a larger number of shares of such
class shall be required by law, by the Certificate of Incorporation or by
these By-laws.
SECTION 5. ADJOURNED MEETINGS. Whether or not a quorum shall be
present in person or represented at any meeting of the stockholders, the
holders of a majority in number of the shares of stock of the Corporation
present in person or represented by proxy and entitled to vote at such
meeting may adjourn from time to time; provided, however, that if the holders
of any class of stock of the Corporation are entitled to vote separately as a
class upon any matter at such meeting, any adjournment of the meeting in
respect of action by such class upon such matter shall be determined by the
holders of a majority of the shares of such class present in person or
represented by proxy and entitled to vote at such meeting. When a meeting is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which
the adjournment is taken. At the adjourned meeting the stockholders, or the
holders of any class of stock entitled to vote separately as a class, as the
case may be, may transact any business which might have been transacted by
them at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the adjourned meeting.
SECTION 6. ORGANIZATION. The Chairman of the Board or, in the
absence of the Chairman of the Board, the President shall call all meetings
of the stockholders to order, and shall act as Chairman of such meetings. In
the absence of the Chairman of the Board and the President, the holders of a
majority in number of the shares of stock of the Corporation present in
person or represented by proxy and entitled to vote at such meeting shall
elect a Chairman.
The Secretary of the Corporation shall act as Secretary of all
meetings of the stockholders; but in the absence of the Secretary, the
Chairman may appoint any person to act as Secretary of the meeting. It shall
be the duty of the Secretary to prepare and make, at least ten days before
every meeting of stockholders, a complete list of stockholders entitled to
vote at such meeting, arranged in alphabetical order and showing the address
of each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of
the meeting or, if not so specified, at the place where the meeting is to be
held, for the ten days next preceding the meeting, to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, and shall be produced and kept at the time and place of the meeting
during the whole time thereof and subject to the inspection of any
stockholder who may be present.
SECTION 7. VOTING. Except as otherwise provided in the
Certificate of Incorporation or by law, each stockholder shall be entitled to
one vote for each share of the capital stock of the Corporation registered in
the name of such stockholder upon the books of the Corporation. Each
stockholder entitled to vote at a meeting of stockholders or to express
consent or dissent to
-2-
<PAGE>
corporate action in writing without a meeting may authorize another person or
persons to act for him or her by proxy, but no such proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a
longer period. When directed by the presiding officer or upon the demand of
any stockholder, the vote upon any matter before a meeting of stockholders
shall be by ballot. Except as otherwise provided by law or by the Certificate
of Incorporation, Directors shall be elected by a plurality of the votes cast
at a meeting of stockholders by the stockholders entitled to vote in the
election and, whenever any corporate action, other than the election of
Directors is to be taken, it shall be authorized by a majority of the votes
cast at a meeting of stockholders by the stockholders entitled to vote
thereon.
Shares of the capital stock of the Corporation belonging to the
Corporation or to another corporation, if a majority of the shares entitled
to vote in the election of directors of such other corporation is held,
directly or indirectly, by the Corporation, shall neither be entitled to vote
nor be counted for quorum purposes.
SECTION 8. INSPECTORS. When required by law or directed by the
presiding officer or upon the demand of any stockholder entitled to vote, but
not otherwise, the polls shall be opened and closed, the proxies and ballots
shall be received and taken in charge, and all questions touching the
qualification of voters, the validity of proxies and the acceptance or
rejection of votes shall be decided at any meeting of the stockholders by two
or more Inspectors who may be appointed by the Board of Directors before the
meeting, or if not so appointed, shall be appointed by the presiding officer
at the meeting. If any person so appointed fails to appear or act, the
vacancy may be filled by appointment in like manner.
SECTION 9. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless
otherwise provided in the Certificate of Incorporation, any action required
to be taken or which may be taken at any annual or special meeting of the
stockholders of the Corporation, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of any such
corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. NUMBER AND TERM OF OFFICE. The business and affairs
of the Corporation shall be managed by or under the direction of a Board of
Directors, none of whom need be stockholders of the Corporation. The number
of Directors constituting the Board of Directors shall be fixed from time to
time by resolution passed by a majority of the Board of Directors. The
Directors shall, except as hereinafter otherwise provided for filling
vacancies, be
-3-
<PAGE>
elected at the annual meeting of stockholders, and shall hold office until
their respective successors are elected and qualified or until their earlier
resignation or removal.
SECTION 2. REMOVAL, VACANCIES AND ADDITIONAL DIRECTORS. The
stockholders may, at any special meeting the notice of which shall state that
it is called for that purpose, remove, with or without cause, any Director
and fill the vacancy; provided that whenever any Director shall have been
elected by the holders of any class of stock of the Corporation voting
separately as a class under the provisions of the Certificate of
Incorporation, such Director may be removed and the vacancy filled only by
the holders of that class of stock voting separately as a class. Vacancies
caused by any such removal and not filled by the stockholders at the meeting
at which such removal shall have been made, or any vacancy caused by the
death or resignation of any Director or for any other reason, and any newly
created directorship resulting from any increase in the authorized number of
Directors, may be filled by the affirmative vote of a majority of the
Directors then in office, although less than a quorum, and any Director so
elected to fill any such vacancy or newly created directorship shall hold
office until his successor is elected and qualified or until his earlier
resignation or removal.
When one or more Directors shall resign effective at a future
date, a majority of the Directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office as herein provided
in connection with the filling of other vacancies.
SECTION 3. PLACE OF MEETING. The Board of Directors may hold its
meetings in such place or places in the State of Delaware or outside the
state of Delaware as the Board from time to time shall determine.
SECTION 4. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such times and places as the Board from time to
time by resolution shall determine. No notice shall be required for any
regular meeting of the Board of Directors; but a copy of every resolution
fixing or changing the time or place of regular meetings shall be mailed to
every Director at least five days before the first meeting held in pursuance
thereof.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held whenever called by direction of the Chairman of the
Board, the President or by any two of the Directors then in office.
Notice of the day, hour and place of holding of each special
meeting shall be given by mailing the same at least two days before the
meeting or by causing the same to be transmitted by facsimile, telegram or
telephone at least one day before the meeting to each Director. Unless
otherwise indicated in the notice thereof, any and all business other than an
amendment of these By-laws may be transacted at any special meeting, and an
amendment of these By-laws may be acted upon if the notice of the meeting
shall have stated that the amendment of these By-laws is
-4-
<PAGE>
one of the purposes of the meeting. At any meeting at which every Director
shall be present, even though without any notice, any business may be
transacted, including the amendment of these By-laws.
SECTION 6. QUORUM. Subject to the provisions of Section 2 of
this Article II, a majority of the members of the Board of Directors in
office (but, unless the Board shall consist solely of one Director, in no
case less than one-third of the total number of Directors nor less than two
Directors) shall constitute a quorum for the transaction of business and the
vote of the majority of the Directors present at any meeting of the Board of
Directors at which a quorum is present shall be the act of the Board of
Directors. If at any meeting of the Board there is less than a quorum
present, a majority of those present may adjourn the meeting from time to
time.
SECTION 7. ORGANIZATION. The Chairman of the Board or, in the
absence of the Chairman of the Board, the President shall preside at all
meetings of the Board of Directors. In the absence of the Chairman of the
Board and the President, a Chairman shall be elected from the Directors
present. The Secretary of the Corporation shall act as Secretary of all
meetings of the Directors; but in the absence of the Secretary, the Chairman
may appoint any person to act as Secretary of the meeting.
SECTION 8. COMMITTEES. The Board of Directors may designate one
or more committees, each committee to consist of one or more of the Directors
of the Corporation. The Board may designate one or more Directors as
alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided in
the resolution of the Board, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and the
affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; but no such committee shall
have the power or authority in reference to approving or adopting; or
recommending to the stockholders, any action or matter expressly required by
law to be submitted to stockholders for approval, or adopting, amending or
repealing these By-laws.
SECTION 9. CONFERENCE TELEPHONE MEETINGS. Unless otherwise
restricted by the Certificate of Incorporation or by these By-laws, the
members of the Board of Directors or any committee designated by the Board,
may participate in a meeting of the Board or such committee, as the case may
be, by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other,
and such participation shall constitute presence in person at such meeting.
SECTION 10. CONSENT OF DIRECTORS OR COMMITTEE IN LIEU OF
MEETING. Unless otherwise restricted by the Certificate of Incorporation or
by these By-laws, any action required
-5-
<PAGE>
or permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board
or committee, as the case may be, consent thereto in writing and the writing
or writings are filed with the minutes of proceedings of the Board or
committee, as the case may be.
ARTICLE III
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be a
Chairman of the Board, a President, one or more Vice Presidents, a Secretary
and a Treasurer, and such additional officers, if any, as shall be elected by
the Board of Directors pursuant to the provisions of Section 7 of this
Article III. The Chairman of the Board, the President, one or more Vice
Presidents, the Secretary and the Treasurer shall be elected by the Board of
Directors at its first meeting after each annual meeting of the stockholders.
The failure to hold such election shall not of itself terminate the term of
office of any officer. All officers shall hold office at the pleasure of the
Board of Directors. Any officer may resign at any time upon written notice to
the Corporation. Officers may, but need not, be Directors. Any number of
offices may be held by the same person.
All officers, agents and employees shall be subject to removal,
with or without cause, at any time by the Board of Directors. The removal of
an officer without cause shall be without prejudice to his contract rights,
if any. The election or appointment of an officer shall not of itself create
contract rights. All agents and employees other than officers elected by the
Board of Directors shall also be subject to removal, with or without cause,
at any time by the officers appointing them.
Any vacancy caused by the death, resignation or removal of any
officer, or otherwise, may be filled by the Board of Directors, and any
officer so elected shall hold office at the pleasure of the Board of
Directors.
In addition to the powers and duties of the officers of the
Corporation as set forth in these By-laws, the officers shall have such
authority and shall perform such duties as from time to time may be
determined by the Board of Directors.
SECTION 2. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD. The
Chairman of the Board, subject to the control of the Board of Directors,
shall have general charge and control of all the Corporation's business and
affairs and shall have all powers and shall perform all duties incident to
the office of Chairman of the Board. The Chairman shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors
and shall have such other powers and perform such other duties as may from
time to time be assigned by these By-laws or by the Board of Directors.
SECTION 3. POWERS AND DUTIES OF THE PRESIDENT. The President,
subject to the control of the Board of Directors and the Chairman of the
Board, shall have general charge and
-6-
<PAGE>
control of all the Corporation's operations and shall have all powers and
shall perform all duties incident to the office of President. In the absence
of the Chairman of the Board, the President shall preside at all meetings of
the stockholders and at all meetings of the Board of Directors and shall have
such other powers and perform such other duties as may from time to time be
assigned by these By-laws or by the Board of Directors or the Chairman of the
Board.
SECTION 4. POWERS AND DUTIES OF THE VICE PRESIDENTS. Each Vice
President shall have all powers and shall perform all duties incident to the
office of Vice President and shall have such other powers and perform such
other duties as may from time to time be assigned by these By-laws or by the
Board of Directors, the Chairman of the Board or the President.
SECTION 5. POWERS AND DUTIES OF THE SECRETARY. The Secretary
shall keep the minutes of all meetings of the Board of Directors and the
minutes of all meetings of the stockholders in books provided for that
purpose. The Secretary shall attend to the giving or serving of all notices
of the Corporation; shall have custody of the corporate seal of the
Corporation and shall affix the same to such documents and other papers as
the Board of Directors or the President shall authorize and direct; shall
have charge of the stock certificate books, transfer books and stock ledgers
and such other books and papers as the Board of Directors or the President
shall direct, all of which shall at all reasonable times be open to the
examination of any Director, upon application, at the office of the
Corporation during business hours; and whenever required by the Board of
Directors or the President shall render statements of such accounts. The
Secretary shall have all powers and shall perform all duties incident to the
office of Secretary and shall also have such other powers and shall perform
such other duties as may from time to time be assigned by these By-laws or by
the Board of Directors, the Chairman of the Board or the President.
SECTION 6. POWERS AND DUTIES OF THE TREASURER. The Treasurer
shall have custody of, and when proper shall pay out, disburse or otherwise
dispose of, all funds and securities of the Corporation. The Treasurer may
endorse on behalf of the Corporation for collection checks, notes and other
obligations and shall deposit the same to the credit of the Corporation in
such bank or banks or depositary or depositaries as the Board of Directors
may designate; shall sign all receipts and vouchers for payments made to the
Corporation; shall enter or cause to be entered regularly in the books of the
Corporation kept for the purpose full and accurate accounts of all moneys
received or paid or otherwise disposed of and whenever required by the Board
of Directors or the President shall render statements of such accounts. The
Treasurer shall, at all reasonable times, exhibit the books and accounts to
any Director of the Corporation upon application at the office of the
Corporation during business hours; and shall have all powers and shall
perform all duties incident to the office of Treasurer and shall also have
such other powers and shall perform such other duties as may from time to
time be assigned by these By-laws or by the Board of Directors, the Chairman
of the Board or the President.
SECTION 7. ADDITIONAL OFFICERS. The Board of Directors may from
time to time elect such other officers (who may but need not be Directors),
including a Chief Executive
-7-
<PAGE>
Officer, Chief Financial Officer, Controller, Assistant Treasurers, Assistant
Secretaries and Assistant Controllers, as the Board may deem advisable and
such officers shall have such authority and shall perform such duties as may
from time to time be assigned by the Board of Directors, the Chairman of the
Board or the President.
The Board of Directors may from time to time by resolution
delegate to any Assistant Treasurer or Assistant Treasurers any of the powers
or duties herein assigned to the Treasurer; and may similarly delegate to any
Assistant Secretary or Assistant Secretaries any of the powers or duties
herein assigned to the Secretary.
SECTION 8. GIVING OF BOND BY OFFICERS. All officers of the
Corporation, if required to do so by the Board of Directors, shall furnish
bonds to the Corporation for the faithful performance of their duties, in
such penalties and with such conditions and security as the Board shall
require.
SECTION 9. VOTING UPON STOCKS. Unless otherwise ordered by the
Board of Directors, the Chairman of the Board, the President or any Vice
President shall have full power and authority on behalf of the Corporation to
attend and to act and to vote, or in the name of the Corporation to execute
proxies to vote, at any meeting of stockholders of any corporation in which
the Corporation may hold stock, and at any such meeting shall possess and may
exercise, in person or by proxy, any and all rights, powers and privileges
incident to the ownership of such stock. The Board of Directors may from time
to time, by resolution, confer like powers upon any other person or persons.
SECTION 10. COMPENSATION OF OFFICERS. The officers of the
Corporation shall be entitled to receive such compensation for their services
as shall from time to time be determined by the Board of Directors.
ARTICLE IV
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. NATURE OF INDEMNITY. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or
she is or was or has agreed to become a Director or officer of the
Corporation, or is or was serving or has agreed to serve at the request of
the Corporation as a Director or officer of another corporation, partnership,
joint venture, trust or other enterprise, or by reason of any action alleged
to have been taken or omitted in such capacity, and may indemnify any person
who was or is a party or is threatened to be made a party to such an action,
suit or proceeding by reason of the fact that he or she is or was or has
agreed to become an employee or agent of the Corporation, or is or was
serving or has agreed to serve at the request of the Corporation as an
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement
-8-
<PAGE>
actually and reasonably incurred by such person or on his or her behalf in
connection with such action, suit or proceeding and any appeal therefrom, if
the person acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful; except that in the case of an action
or suit by or in the right of the Corporation to procure a judgment in its
favor (1) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the
defense or settlement of such action or suit, and (2) no indemnification
shall be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the Corporation unless and
only to the extent that the Delaware Court of Chancery or the court in which
such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper.
The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that his or her conduct was unlawful.
SECTION 2. SUCCESSFUL DEFENSE. To the extent that a Director,
officer, employee or agent of the Corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to
in Section 1 of this Article IV or in defense of any claim, issue or matter
therein, he or she shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him or her in connection
therewith.
SECTION 3. DETERMINATION THAT INDEMNIFICATION IS PROPER. Any
indemnification of a Director or officer of the Corporation under Section 1
of this Article IV (unless ordered by a court) shall be made by the
Corporation unless a determination is made that indemnification of the
Director or officer is not proper in the circumstances because he or she has
not met the applicable standard of conduct set forth in Section 1. Any
indemnification of an employee or agent of the Corporation under Section 1
(unless ordered by a court) may be made by the Corporation upon a
determination that indemnification of the employee or agent is proper in the
circumstances because he or she has met the applicable standard of conduct
set forth in Section 1. Any such determination shall be made (1) by a
majority vote of the Directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (3) by the stockholders.
-9-
<PAGE>
SECTION 4. ADVANCE PAYMENT OF EXPENSES. Unless the Board of
Directors otherwise determines in a specific case, expenses incurred by a
Director or officer in defending a civil or criminal action, suit or
proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the Director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by
the Corporation as authorized in this Article IV. Such expenses incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the Board of Directors deems appropriate. The Board of Directors may
authorize the Corporation's legal counsel to represent such Director,
officer, employee or agent in any action, suit or proceeding, whether or not
the Corporation is a party to such action, suit or proceeding.
SECTION 5. SURVIVAL; PRESERVATION OF OTHER RIGHTS. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each Director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware General Corporation Law are in effect and any
repeal or modification thereof shall not affect any right or obligation then
existing with respect to any state of facts then or previously existing or
any action, suit, or proceeding previously or thereafter brought or
threatened based in whole or in part upon any such state of facts. Such a
contract right may not be modified retroactively without the consent of such
Director, officer, employee or agent.
The indemnification provided by this Article IV shall not be
deemed exclusive of any other rights to which a person indemnified may be
entitled under any By-law, agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in his or her official capacity and
as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a Director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and
administrators of such a person. The Corporation may enter into an agreement
with any of its Directors, officers, employees or agents providing for
indemnification and advancement of expenses, including attorneys fees, that
may change, enhance, qualify or limit any right to indemnification or
advancement of expenses created by this Article IV.
SECTION 6. SEVERABILITY. If this Article IV or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify each Director
or officer and may indemnify each employee or agent of the Corporation as to
costs, charges and expenses (including attorneys' fees), judgment, fines and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, including an action
by or in the right of the Corporation, to the fullest extent permitted by any
applicable portion of this Article IV that shall not have been invalidated
and to the fullest extent permitted by applicable law.
SECTION 7. SUBROGATION. In the event of payment of
indemnification to a person described in Section 1 of this Article IV, the
Corporation shall be subrogated to the extent of
-10-
<PAGE>
such payment to any right of recovery such person may have and such person,
as a condition of receiving indemnification from the Corporation, shall
execute all documents and do all things that the Corporation may deem
necessary or desirable to perfect such right of recovery, including the
execution of such documents necessary to enable the Corporation effectively
to enforce any such recovery.
SECTION 8. NO DUPLICATION OF PAYMENTS. The Corporation shall not
be liable under this Article IV to make any payment in connection with any
claim made against a person described in Section 1 of this Article IV to the
extent such person has otherwise received payment (under any insurance
policy, By-law or otherwise) of the amounts otherwise payable as indemnity
hereunder.
ARTICLE V
STOCK-SEAL-FISCAL YEAR
SECTION 1. CERTIFICATES FOR SHARES OF STOCK. The certificates
for shares of stock of the Corporation shall be in such form, not
inconsistent with the Certificate of Incorporation, as shall be approved by
the Board of Directors. All certificates shall be signed by the Chairman of
the Board or the President or a Vice President, and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and shall not
be valid unless so signed.
In case any officer or officers who shall have signed any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation,
such certificate or certificates may nevertheless be issued and delivered as
though the person or persons who signed such certificate or certificates had
not ceased to be such officer or officers of the Corporation.
All certificates for shares of stock shall be consecutively
numbered as the same are issued. The name of the person owning the shares
represented thereby with the number of such shares and the date of issue
thereof shall be entered on the books of the Corporation.
Except as hereinafter provided, all certificates surrendered to
the Corporation for transfer shall be canceled, and no new certificates shall
be issued until former certificates for the same number of shares have been
surrendered and canceled.
SECTION 2. LOST, STOLEN OR DESTROYED CERTIFICATES. Whenever a
person owning a certificate for shares of stock of the Corporation alleges
that it has been lost, stolen or destroyed, he or she shall file in the
office of the Corporation an affidavit setting forth, to the best of his or
her knowledge and belief, the time, place and circumstances of the loss,
theft or destruction, and, if required by the Board of Directors, a bond of
indemnity or other indemnification sufficient in the opinion of the Board of
Directors to indemnify the Corporation and its agents against any claim that
may be made against it or them on account of the alleged loss, theft or
destruction of
-11-
<PAGE>
any such certificate or the issuance of a new certificate in replacement
therefor. Thereupon the Corporation may cause to be issued to such person a
new certificate in replacement for the certificate alleged to have been lost,
stolen or destroyed. Upon the stub of every new certificate so issued shall
be noted the fact of such issue and the number, date and the name of the
registered owner of the lost, stolen or destroyed certificate in lieu of
which the new certificate is issued.
SECTION 3. TRANSFER OF SHARES. Shares of stock of the
Corporation shall be transferred on the books of the Corporation by the
holder thereof, in person or by his attorney duly authorized in writing, upon
surrender and cancellation of certificates for the number of shares of stock
to be transferred, except as provided in Section 2 of this Article V.
SECTION 4. REGULATIONS. The Board of Directors shall have power
and authority to make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
SECTION 5. RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting or to receive payment of any dividend or
other distribution or allotment of any rights, or to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, as the case may be, the Board of Directors may fix,
in advance, a record date, which shall not be (i) more than sixty (60) nor
less than ten (10) days before the date of such meeting, or (ii) in the case
of corporate action to be taken by consent in writing without a meeting,
prior to, or more than ten (10) days after, the date upon which the
resolution fixing the record date is adopted by the Board of Directors, or
(iii) more than sixty (60) days prior to any other action.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held; the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is delivered
to the Corporation; and the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board
of Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 6. DIVIDENDS. Subject to the provisions of the
Certificate of Incorporation, the Board of Directors shall have power to
declare and pay dividends upon shares of stock of the Corporation, but only
out of funds available for the payment of dividends as provided by law.
-12-
<PAGE>
Subject to the provisions of the Certificate of Incorporation,
any dividends declared upon the stock of the Corporation shall be payable on
such date or dates as the Board of Directors shall determine. If the date
fixed for the payment of any dividend shall in any year fall upon a legal
holiday, then the dividend payable on such date shall be paid on the next day
not a legal holiday.
SECTION 7. CORPORATE SEAL. The Board of Directors shall provide
a suitable seal, containing the name of the Corporation, which seal shall be
kept in the custody of the Secretary. A duplicate of the seal may be kept and
be used by any officer of the Corporation designated by the Board of
Directors, the Chairman of the Board or the President.
SECTION 8. FISCAL YEAR. The fiscal year of the Corporation shall
be such fiscal year as the Board of Directors from time to time by resolution
shall determine.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 1. CHECKS, NOTES, ETC. All checks, drafts, bills of
exchange, acceptances, notes or other obligations or orders for the payment
of money shall be signed and, if so required by the Board of Directors,
countersigned by such officers of the Corporation and/or other persons as the
Board of Directors from time to time shall designate.
Checks, drafts, bills of exchange, acceptances, notes,
obligations and orders for the payment of money made payable to the
Corporation may be endorsed for deposit to the credit of the Corporation with
a duly authorized depository by the Treasurer and/or such other officers or
persons as the Board of Directors from time to time may designate.
SECTION 2. LOANS. No loans and no renewals of any loans shall be
contracted on behalf of the Corporation except as authorized by the Board of
Directors. When authorized so to do, any officer or agent of the Corporation
may effect loans and advances for the Corporation from any bank, trust
company or other institution or from any firm, corporation or individual, and
for such loans and advances may make, execute and deliver promissory notes,
bonds or other evidences of indebtedness of the Corporation. When authorized
so to do, any officer or agent of the Corporation may pledge, hypothecate or
transfer, as security for the payment of any and all loans, advances,
indebtedness and liabilities of the Corporation, any and all stocks,
securities and other personal property at any time held by the Corporation,
and to that end may endorse, assign and deliver the same. Such authority may
be general or confined to specific instances.
SECTION 3. CONTRACTS. Except as otherwise provided in these
By-laws or by law or as otherwise directed by the Board of Directors, the
Chairman of the Board, the President or any Vice President shall be
authorized to execute and deliver, in the name and on behalf of the
Corporation, all agreements, bonds, contracts, deeds, mortgages, and other
instruments, either for the Corporation's own account or in a fiduciary or
other capacity, and the seal of the Corporation,
-13-
<PAGE>
if appropriate, shall be affixed thereto by any of such officers or the
Secretary or an Assistant Secretary. The Board of Directors, the Chairman of
the Board, the President or any Vice President designated by the Board of
Directors, the Chairman of the Board or the President may authorize any other
officer, employee or agent to execute and deliver, in the name and on behalf
of the Corporation, agreements, bonds, contracts, deeds, mortgages, and other
instruments, either for the Corporation's own account or in a fiduciary or
other capacity, and, if appropriate, to affix the seal of the Corporation
thereto. The grant of such authority by the Board or any such officer may be
general or confined to specific instances.
SECTION 4. WAIVERS OF NOTICE. Whenever any notice whatever is
required to be given by law, by the Certificate of Incorporation or by these
By-laws to any person or persons, a waiver thereof in writing, signed by the
person or persons entitled to the notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
SECTION 5. OFFICES OUTSIDE OF DELAWARE. Except as otherwise
required by the laws of the State of Delaware, the Corporation may have an
office or offices and keep its books, documents and papers outside of the
State of Delaware at such place or places as from time to time may be
determined by the Board of Directors or the Chairman of the Board.
ARTICLE VII
AMENDMENTS
These By-laws and any amendment thereof may be altered, amended
or repealed, or new By-laws may be adopted, by the Board of Directors at any
regular or special meeting by the affirmative vote of a majority of all of
the members of the Board, provided in the case of any special meeting at
which all of the members of the Board are not present, that the notice of
such meeting shall have stated that the amendment of these By-laws was one of
the purposes of the meeting; but these By-laws and any amendment thereof, may
be altered, amended or repealed or new By-laws may be adopted by the holders
of a majority of the total outstanding stock of the Corporation entitled to
vote at any annual meeting or at any special meeting, provided, in the case
of any special meeting, that notice of such proposed alteration, amendment,
repeal or adoption is included in the notice of the meeting.
-14-
<PAGE>
CERTIFICATE OF ADOPTION OF BY-LAWS
OF
BRITTAIN MACHINE, INC.
This is to certify:
That I am the duly elected, qualified and acting Secretary of
BRITTAIN MACHINE, INC. (the "Corporation") and the attached By-laws were
adopted as the By-laws of the Corporation on September 2, 1999 by the
Unanimous Written Consent of the Board of Directors.
Dated effective the 2nd day of September, 1999.
/s/ DOUGLAS B. SOLOMON
-----------------------------
Douglas B. Solomon, Secretary
(Seal)
-15-
<PAGE>
EXHIBIT 3.11
CERTIFICATE OF INCORPORATION
OF
BARNES MACHINE, INC.
------------------------
FIRST: The name of the corporation shall be:
BARNES MACHINE, INC.
SECOND: The address of the corporation's registered office in the State
of Delaware is to be located at 1013 Centre Road, in the City of Wilmington,
County of New Castle and its registered agent at such address is Corporation
Service Company.
THIRD: The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which this corporation is
authorized to issue is:
Three Thousand (3,000) shares without par value.
FIFTH: The name and address of the incorporator is as follows:
Takako Muramatsu
Morgan, Lewis & Bockius LLP
300 South Grand Avenue, 22nd Floor
Los Angeles, California 90071
SIXTH: The Board of Directors shall have the power to adopt, amend or
repeal the by-laws.
-1-
<PAGE>
SEVENTH: No director shall be personally liable to the corporation
or its stockholders for monetary damages for any breach of fiduciary duty by
such director as a director. Notwithstanding the foregoing sentence, a
director shall be liable to the extent provided by applicable law, (i) for
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions no in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to
section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit. No
amendment to or repeal of this Article Seventh shall apply to or have any
effect on the liability or alleged liability of any director of the
corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
IN WITNESS WHEREOF, the undersigned, being the incorporator
hereinbefore named, has executed, signed and acknowledged this certificate of
incorporation this 1st day of September, 1999.
/s/ TAKAKO MURAMATSU
---------------------------
Takako Muramatsu
Incorporator
-2-
<PAGE>
EXHIBIT 3.12
BY-LAWS
OF
BARNES MACHINE, INC.
****
INCORPORATED UNDER THE LAWS
OF THE
STATE OF DELAWARE
ON
SEPTEMBER 2, 1999
****
LAW OFFICES
OF
MORGAN, LEWIS & BOCKIUS LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071-3132
<PAGE>
TABLE OF CONTENTS
ARTICLE I Stockholders ...........................................1
SECTION 1. Annual Meeting..........................................1
SECTION 2. Special Meetings........................................1
SECTION 3. Notice of Meetings......................................1
SECTION 4. Quorum..................................................1
SECTION 5. Adjourned Meetings......................................2
SECTION 6. Organization............................................2
SECTION 7. Voting..................................................2
SECTION 8. Inspectors..............................................3
SECTION 9. Consent of Stockholders in Lieu of Meeting..............3
ARTICLE II Board of Directors .....................................3
SECTION 1. Number and Term of Office...............................3
SECTION 2. Removal, Vacancies and Additional Directors.............4
SECTION 3. Place of Meeting........................................4
SECTION 4. Regular Meetings........................................4
SECTION 5. Special Meetings........................................4
SECTION 6. Quorum..................................................5
SECTION 7. Organization............................................5
SECTION 8. Committees..............................................5
SECTION 9. Conference Telephone Meetings...........................5
SECTION 10. Consent of Directors or Committee in Lieu of Meeting....5
ARTICLE III Officers ...............................................6
SECTION 1. Officers................................................6
SECTION 2. Powers and Duties of the Chairman of the Board.........6
SECTION 3. Powers and Duties of the President......................6
SECTION 4. Powers and Duties of the Vice Presidents................7
SECTION 5. Powers and Duties of the Secretary......................7
SECTION 6. Powers and Duties of the Treasurer......................7
SECTION 7. Additional Officers.....................................7
SECTION 8. Giving of Bond by Officers..............................8
SECTION 9. Voting Upon Stocks......................................8
SECTION 10. Compensation of Officers................................8
ARTICLE IV Indemnification of Directors and Officers ..............8
SECTION 1. Nature of Indemnity.....................................8
SECTION 2. Successful Defense......................................9
SECTION 3. Determination that Indemnification is Proper............9
SECTION 4. Advance Payment of Expenses............................10
-1-
<PAGE>
SECTION 5. Survival; Preservation of Other Rights.....................10
SECTION 6. Severability...............................................10
SECTION 7. Subrogation................................................10
SECTION 8. No Duplication of Payments.................................11
ARTICLE V Stock-Seal-Fiscal Year ....................................11
SECTION 1. Certificates For Shares of Stock...........................11
SECTION 2. Lost, Stolen or Destroyed Certificates.....................11
SECTION 3. Transfer of Shares.........................................12
SECTION 4. Regulations................................................12
SECTION 5. Record Date................................................12
SECTION 6. Dividends..................................................12
SECTION 7. Corporate Seal.............................................13
SECTION 8. Fiscal Year................................................13
ARTICLE VI Miscellaneous Provisions ..................................13
SECTION 1. Checks, Notes, Etc.........................................13
SECTION 2. Loans......................................................13
SECTION 3. Contracts..................................................13
SECTION 4. Waivers of Notice..........................................14
SECTION 5. Offices Outside of Delaware................................14
ARTICLE VII Amendments ................................................14
-2-
<PAGE>
BY-LAWS
OF
BARNES MACHINE, INC.
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the
stockholders of the Corporation shall be held on such date, at such time and
at such place within or without the State of Delaware as may be designated by
the Board of Directors, for the purpose of electing Directors and for the
transaction of such other business as may be properly brought before the
meeting.
SECTION 2. SPECIAL MEETINGS. Except as otherwise provided in the
Certificate of Incorporation, a special meeting of the stockholders of the
Corporation may be called at any time by the Board of Directors, the Chairman
of the Board or the President. Any special meeting of the stockholders shall
be held on such date, at such time and at such place within or without the
State of Delaware as the Board of Directors or the officer calling the
meeting may designate. At a special meeting of the stockholders, no business
shall be transacted and no corporate action shall be taken other than that
stated in the notice of the meeting unless all of the stockholders are
present in person or by proxy, in which case any and all business may be
transacted at the meeting even though the meeting is held without notice.
SECTION 3. NOTICE OF MEETINGS. Except as otherwise provided in
these By-laws or by law, a written notice of each meeting of the stockholders
shall be given not less than ten (10) nor more than sixty (60) days before
the date of the meeting to each stockholder of the Corporation entitled to
vote at such meeting at his address as it appears on the records of the
Corporation. The notice shall state the place, date and hour of the meeting
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called.
SECTION 4. QUORUM. At any meeting of the stockholders, the
holders of a majority in number of the total outstanding shares of stock of
the Corporation entitled to vote at such meeting, present in person or
represented by proxy, shall constitute a quorum of the stockholders for all
purposes, unless the representation of a larger number of shares shall be
required by law, by the Certificate of Incorporation or by these By-laws, in
which case the representation of the number of shares so required shall
constitute a quorum; provided that at any meeting of the stockholders at
which the holders of any class of stock of the Corporation shall be entitled
to vote separately as a class, the holders of a majority in number of the
total outstanding shares of such class, present in person or represented by
proxy, shall constitute a quorum for purposes of such
-1-
<PAGE>
class vote unless the representation of a larger number of shares of such
class shall be required by law, by the Certificate of Incorporation or by
these By-laws.
SECTION 5. ADJOURNED MEETINGS. Whether or not a quorum shall be
present in person or represented at any meeting of the stockholders, the
holders of a majority in number of the shares of stock of the Corporation
present in person or represented by proxy and entitled to vote at such
meeting may adjourn from time to time; provided, however, that if the holders
of any class of stock of the Corporation are entitled to vote separately as a
class upon any matter at such meeting, any adjournment of the meeting in
respect of action by such class upon such matter shall be determined by the
holders of a majority of the shares of such class present in person or
represented by proxy and entitled to vote at such meeting. When a meeting is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which
the adjournment is taken. At the adjourned meeting the stockholders, or the
holders of any class of stock entitled to vote separately as a class, as the
case may be, may transact any business which might have been transacted by
them at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the adjourned meeting.
SECTION 6. ORGANIZATION. The Chairman of the Board or, in the
absence of the Chairman of the Board, the President shall call all meetings
of the stockholders to order, and shall act as Chairman of such meetings. In
the absence of the Chairman of the Board and the President, the holders of a
majority in number of the shares of stock of the Corporation present in
person or represented by proxy and entitled to vote at such meeting shall
elect a Chairman.
The Secretary of the Corporation shall act as Secretary of all
meetings of the stockholders; but in the absence of the Secretary, the
Chairman may appoint any person to act as Secretary of the meeting. It shall
be the duty of the Secretary to prepare and make, at least ten days before
every meeting of stockholders, a complete list of stockholders entitled to
vote at such meeting, arranged in alphabetical order and showing the address
of each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of
the meeting or, if not so specified, at the place where the meeting is to be
held, for the ten days next preceding the meeting, to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, and shall be produced and kept at the time and place of the meeting
during the whole time thereof and subject to the inspection of any
stockholder who may be present.
SECTION 7. VOTING. Except as otherwise provided in the
Certificate of Incorporation or by law, each stockholder shall be entitled to
one vote for each share of the capital stock of the Corporation registered in
the name of such stockholder upon the books of the Corporation. Each
stockholder entitled to vote at a meeting of stockholders or to express
consent or dissent to
-2-
<PAGE>
corporate action in writing without a meeting may authorize another person or
persons to act for him or her by proxy, but no such proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a
longer period. When directed by the presiding officer or upon the demand of
any stockholder, the vote upon any matter before a meeting of stockholders
shall be by ballot. Except as otherwise provided by law or by the Certificate
of Incorporation, Directors shall be elected by a plurality of the votes cast
at a meeting of stockholders by the stockholders entitled to vote in the
election and, whenever any corporate action, other than the election of
Directors is to be taken, it shall be authorized by a majority of the votes
cast at a meeting of stockholders by the stockholders entitled to vote
thereon.
Shares of the capital stock of the Corporation belonging to the
Corporation or to another corporation, if a majority of the shares entitled
to vote in the election of directors of such other corporation is held,
directly or indirectly, by the Corporation, shall neither be entitled to vote
nor be counted for quorum purposes.
SECTION 8. INSPECTORS. When required by law or directed by the
presiding officer or upon the demand of any stockholder entitled to vote, but
not otherwise, the polls shall be opened and closed, the proxies and ballots
shall be received and taken in charge, and all questions touching the
qualification of voters, the validity of proxies and the acceptance or
rejection of votes shall be decided at any meeting of the stockholders by two
or more Inspectors who may be appointed by the Board of Directors before the
meeting, or if not so appointed, shall be appointed by the presiding officer
at the meeting. If any person so appointed fails to appear or act, the
vacancy may be filled by appointment in like manner.
SECTION 9. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless
otherwise provided in the Certificate of Incorporation, any action required
to be taken or which may be taken at any annual or special meeting of the
stockholders of the Corporation, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of any such
corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. NUMBER AND TERM OF OFFICE. The business and affairs
of the Corporation shall be managed by or under the direction of a Board of
Directors, none of whom need be stockholders of the Corporation. The number
of Directors constituting the Board of Directors shall be fixed from time to
time by resolution passed by a majority of the Board of Directors. The
Directors shall, except as hereinafter otherwise provided for filling
vacancies, be
-3-
<PAGE>
elected at the annual meeting of stockholders, and shall hold office until
their respective successors are elected and qualified or until their earlier
resignation or removal.
SECTION 2. REMOVAL, VACANCIES AND ADDITIONAL DIRECTORS. The
stockholders may, at any special meeting the notice of which shall state that
it is called for that purpose, remove, with or without cause, any Director
and fill the vacancy; provided that whenever any Director shall have been
elected by the holders of any class of stock of the Corporation voting
separately as a class under the provisions of the Certificate of
Incorporation, such Director may be removed and the vacancy filled only by
the holders of that class of stock voting separately as a class. Vacancies
caused by any such removal and not filled by the stockholders at the meeting
at which such removal shall have been made, or any vacancy caused by the
death or resignation of any Director or for any other reason, and any newly
created directorship resulting from any increase in the authorized number of
Directors, may be filled by the affirmative vote of a majority of the
Directors then in office, although less than a quorum, and any Director so
elected to fill any such vacancy or newly created directorship shall hold
office until his successor is elected and qualified or until his earlier
resignation or removal.
When one or more Directors shall resign effective at a future
date, a majority of the Directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office as herein provided
in connection with the filling of other vacancies.
SECTION 3. PLACE OF MEETING. The Board of Directors may hold its
meetings in such place or places in the State of Delaware or outside the
state of Delaware as the Board from time to time shall determine.
SECTION 4. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such times and places as the Board from time to
time by resolution shall determine. No notice shall be required for any
regular meeting of the Board of Directors; but a copy of every resolution
fixing or changing the time or place of regular meetings shall be mailed to
every Director at least five days before the first meeting held in pursuance
thereof.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held whenever called by direction of the Chairman of the
Board, the President or by any two of the Directors then in office.
Notice of the day, hour and place of holding of each special
meeting shall be given by mailing the same at least two days before the
meeting or by causing the same to be transmitted by facsimile, telegram or
telephone at least one day before the meeting to each Director. Unless
otherwise indicated in the notice thereof, any and all business other than an
amendment of these By-laws may be transacted at any special meeting, and an
amendment of these By-laws may be acted upon if the notice of the meeting
shall have stated that the amendment of these By-laws is
-4-
<PAGE>
one of the purposes of the meeting. At any meeting at which every Director
shall be present, even though without any notice, any business may be
transacted, including the amendment of these By-laws.
SECTION 6. QUORUM. Subject to the provisions of Section 2 of
this Article II, a majority of the members of the Board of Directors in
office (but, unless the Board shall consist solely of one Director, in no
case less than one-third of the total number of Directors nor less than two
Directors) shall constitute a quorum for the transaction of business and the
vote of the majority of the Directors present at any meeting of the Board of
Directors at which a quorum is present shall be the act of the Board of
Directors. If at any meeting of the Board there is less than a quorum
present, a majority of those present may adjourn the meeting from time to
time.
SECTION 7. ORGANIZATION. The Chairman of the Board or, in the
absence of the Chairman of the Board, the President shall preside at all
meetings of the Board of Directors. In the absence of the Chairman of the
Board and the President, a Chairman shall be elected from the Directors
present. The Secretary of the Corporation shall act as Secretary of all
meetings of the Directors; but in the absence of the Secretary, the Chairman
may appoint any person to act as Secretary of the meeting.
SECTION 8. COMMITTEES. The Board of Directors may designate one
or more committees, each committee to consist of one or more of the Directors
of the Corporation. The Board may designate one or more Directors as
alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided in
the resolution of the Board, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and the
affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; but no such committee shall
have the power or authority in reference to approving or adopting; or
recommending to the stockholders, any action or matter expressly required by
law to be submitted to stockholders for approval, or adopting, amending or
repealing these By-laws.
SECTION 9. CONFERENCE TELEPHONE MEETINGS. Unless otherwise
restricted by the Certificate of Incorporation or by these By-laws, the
members of the Board of Directors or any committee designated by the Board,
may participate in a meeting of the Board or such committee, as the case may
be, by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other,
and such participation shall constitute presence in person at such meeting.
SECTION 10. CONSENT OF DIRECTORS OR COMMITTEE IN LIEU OF
MEETING. Unless otherwise restricted by the Certificate of Incorporation or
by these By-laws, any action required
-5-
<PAGE>
or permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board
or committee, as the case may be, consent thereto in writing and the writing
or writings are filed with the minutes of proceedings of the Board or
committee, as the case may be.
ARTICLE III
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be a
Chairman of the Board, a President, one or more Vice Presidents, a Secretary
and a Treasurer, and such additional officers, if any, as shall be elected by
the Board of Directors pursuant to the provisions of Section 7 of this
Article III. The Chairman of the Board, the President, one or more Vice
Presidents, the Secretary and the Treasurer shall be elected by the Board of
Directors at its first meeting after each annual meeting of the stockholders.
The failure to hold such election shall not of itself terminate the term of
office of any officer. All officers shall hold office at the pleasure of the
Board of Directors. Any officer may resign at any time upon written notice to
the Corporation. Officers may, but need not, be Directors. Any number of
offices may be held by the same person.
All officers, agents and employees shall be subject to removal,
with or without cause, at any time by the Board of Directors. The removal of
an officer without cause shall be without prejudice to his contract rights,
if any. The election or appointment of an officer shall not of itself create
contract rights. All agents and employees other than officers elected by the
Board of Directors shall also be subject to removal, with or without cause,
at any time by the officers appointing them.
Any vacancy caused by the death, resignation or removal of any
officer, or otherwise, may be filled by the Board of Directors, and any
officer so elected shall hold office at the pleasure of the Board of
Directors.
In addition to the powers and duties of the officers of the
Corporation as set forth in these By-laws, the officers shall have such
authority and shall perform such duties as from time to time may be
determined by the Board of Directors.
SECTION 2. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD. The
Chairman of the Board, subject to the control of the Board of Directors,
shall have general charge and control of all the Corporation's business and
affairs and shall have all powers and shall perform all duties incident to
the office of Chairman of the Board. The Chairman shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors
and shall have such other powers and perform such other duties as may from
time to time be assigned by these By-laws or by the Board of Directors.
SECTION 3. POWERS AND DUTIES OF THE PRESIDENT. The President,
subject to the control of the Board of Directors and the Chairman of the
Board, shall have general charge and
-6-
<PAGE>
control of all the Corporation's operations and shall have all powers and
shall perform all duties incident to the office of President. In the absence
of the Chairman of the Board, the President shall preside at all meetings of
the stockholders and at all meetings of the Board of Directors and shall have
such other powers and perform such other duties as may from time to time be
assigned by these By-laws or by the Board of Directors or the Chairman of the
Board.
SECTION 4. POWERS AND DUTIES OF THE VICE PRESIDENTS. Each Vice
President shall have all powers and shall perform all duties incident to the
office of Vice President and shall have such other powers and perform such
other duties as may from time to time be assigned by these By-laws or by the
Board of Directors, the Chairman of the Board or the President.
SECTION 5. POWERS AND DUTIES OF THE SECRETARY. The Secretary
shall keep the minutes of all meetings of the Board of Directors and the
minutes of all meetings of the stockholders in books provided for that
purpose. The Secretary shall attend to the giving or serving of all notices
of the Corporation; shall have custody of the corporate seal of the
Corporation and shall affix the same to such documents and other papers as
the Board of Directors or the President shall authorize and direct; shall
have charge of the stock certificate books, transfer books and stock ledgers
and such other books and papers as the Board of Directors or the President
shall direct, all of which shall at all reasonable times be open to the
examination of any Director, upon application, at the office of the
Corporation during business hours; and whenever required by the Board of
Directors or the President shall render statements of such accounts. The
Secretary shall have all powers and shall perform all duties incident to the
office of Secretary and shall also have such other powers and shall perform
such other duties as may from time to time be assigned by these By-laws or by
the Board of Directors, the Chairman of the Board or the President.
SECTION 6. POWERS AND DUTIES OF THE TREASURER. The Treasurer
shall have custody of, and when proper shall pay out, disburse or otherwise
dispose of, all funds and securities of the Corporation. The Treasurer may
endorse on behalf of the Corporation for collection checks, notes and other
obligations and shall deposit the same to the credit of the Corporation in
such bank or banks or depositary or depositaries as the Board of Directors
may designate; shall sign all receipts and vouchers for payments made to the
Corporation; shall enter or cause to be entered regularly in the books of the
Corporation kept for the purpose full and accurate accounts of all moneys
received or paid or otherwise disposed of and whenever required by the Board
of Directors or the President shall render statements of such accounts. The
Treasurer shall, at all reasonable times, exhibit the books and accounts to
any Director of the Corporation upon application at the office of the
Corporation during business hours; and shall have all powers and shall
perform all duties incident to the office of Treasurer and shall also have
such other powers and shall perform such other duties as may from time to
time be assigned by these By-laws or by the Board of Directors, the Chairman
of the Board or the President.
SECTION 7. ADDITIONAL OFFICERS. The Board of Directors may from
time to time elect such other officers (who may but need not be Directors),
including a Chief Executive
-7-
<PAGE>
Officer, Chief Financial Officer, Controller, Assistant Treasurers, Assistant
Secretaries and Assistant Controllers, as the Board may deem advisable and
such officers shall have such authority and shall perform such duties as may
from time to time be assigned by the Board of Directors, the Chairman of the
Board or the President.
The Board of Directors may from time to time by resolution
delegate to any Assistant Treasurer or Assistant Treasurers any of the powers
or duties herein assigned to the Treasurer; and may similarly delegate to any
Assistant Secretary or Assistant Secretaries any of the powers or duties
herein assigned to the Secretary.
SECTION 8. GIVING OF BOND BY OFFICERS. All officers of the
Corporation, if required to do so by the Board of Directors, shall furnish
bonds to the Corporation for the faithful performance of their duties, in
such penalties and with such conditions and security as the Board shall
require.
SECTION 9. VOTING UPON STOCKS. Unless otherwise ordered by the
Board of Directors, the Chairman of the Board, the President or any Vice
President shall have full power and authority on behalf of the Corporation to
attend and to act and to vote, or in the name of the Corporation to execute
proxies to vote, at any meeting of stockholders of any corporation in which
the Corporation may hold stock, and at any such meeting shall possess and may
exercise, in person or by proxy, any and all rights, powers and privileges
incident to the ownership of such stock. The Board of Directors may from time
to time, by resolution, confer like powers upon any other person or persons.
SECTION 10. COMPENSATION OF OFFICERS. The officers of the
Corporation shall be entitled to receive such compensation for their services
as shall from time to time be determined by the Board of Directors.
ARTICLE IV
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. NATURE OF INDEMNITY. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or
she is or was or has agreed to become a Director or officer of the
Corporation, or is or was serving or has agreed to serve at the request of
the Corporation as a Director or officer of another corporation, partnership,
joint venture, trust or other enterprise, or by reason of any action alleged
to have been taken or omitted in such capacity, and may indemnify any person
who was or is a party or is threatened to be made a party to such an action,
suit or proceeding by reason of the fact that he or she is or was or has
agreed to become an employee or agent of the Corporation, or is or was
serving or has agreed to serve at the request of the Corporation as an
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement
-8-
<PAGE>
actually and reasonably incurred by such person or on his or her behalf in
connection with such action, suit or proceeding and any appeal therefrom, if
the person acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful; except that in the case of an action
or suit by or in the right of the Corporation to procure a judgment in its
favor (1) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the
defense or settlement of such action or suit, and (2) no indemnification
shall be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the Corporation unless and
only to the extent that the Delaware Court of Chancery or the court in which
such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper.
The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that his or her conduct was unlawful.
SECTION 2. SUCCESSFUL DEFENSE. To the extent that a Director,
officer, employee or agent of the Corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to
in Section 1 of this Article IV or in defense of any claim, issue or matter
therein, he or she shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him or her in connection
therewith.
SECTION 3. DETERMINATION THAT INDEMNIFICATION IS PROPER. Any
indemnification of a Director or officer of the Corporation under Section 1
of this Article IV (unless ordered by a court) shall be made by the
Corporation unless a determination is made that indemnification of the
Director or officer is not proper in the circumstances because he or she has
not met the applicable standard of conduct set forth in Section 1. Any
indemnification of an employee or agent of the Corporation under Section 1
(unless ordered by a court) may be made by the Corporation upon a
determination that indemnification of the employee or agent is proper in the
circumstances because he or she has met the applicable standard of conduct
set forth in Section 1. Any such determination shall be made (1) by a
majority vote of the Directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (3) by the stockholders.
-9-
<PAGE>
SECTION 4. ADVANCE PAYMENT OF EXPENSES. Unless the Board of
Directors otherwise determines in a specific case, expenses incurred by a
Director or officer in defending a civil or criminal action, suit or
proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the Director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by
the Corporation as authorized in this Article IV. Such expenses incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the Board of Directors deems appropriate. The Board of Directors may
authorize the Corporation's legal counsel to represent such Director,
officer, employee or agent in any action, suit or proceeding, whether or not
the Corporation is a party to such action, suit or proceeding.
SECTION 5. SURVIVAL; PRESERVATION OF OTHER RIGHTS. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each Director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware General Corporation Law are in effect and any
repeal or modification thereof shall not affect any right or obligation then
existing with respect to any state of facts then or previously existing or
any action, suit, or proceeding previously or thereafter brought or
threatened based in whole or in part upon any such state of facts. Such a
contract right may not be modified retroactively without the consent of such
Director, officer, employee or agent.
The indemnification provided by this Article IV shall not be
deemed exclusive of any other rights to which a person indemnified may be
entitled under any By-law, agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in his or her official capacity and
as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a Director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and
administrators of such a person. The Corporation may enter into an agreement
with any of its Directors, officers, employees or agents providing for
indemnification and advancement of expenses, including attorneys fees, that
may change, enhance, qualify or limit any right to indemnification or
advancement of expenses created by this Article IV.
SECTION 6. SEVERABILITY. If this Article IV or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify each Director
or officer and may indemnify each employee or agent of the Corporation as to
costs, charges and expenses (including attorneys' fees), judgment, fines and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, including an action
by or in the right of the Corporation, to the fullest extent permitted by any
applicable portion of this Article IV that shall not have been invalidated
and to the fullest extent permitted by applicable law.
SECTION 7. SUBROGATION. In the event of payment of
indemnification to a person described in Section 1 of this Article IV, the
Corporation shall be subrogated to the extent of
-10-
<PAGE>
such payment to any right of recovery such person may have and such person,
as a condition of receiving indemnification from the Corporation, shall
execute all documents and do all things that the Corporation may deem
necessary or desirable to perfect such right of recovery, including the
execution of such documents necessary to enable the Corporation effectively
to enforce any such recovery.
SECTION 8. NO DUPLICATION OF PAYMENTS. The Corporation shall not
be liable under this Article IV to make any payment in connection with any
claim made against a person described in Section 1 of this Article IV to the
extent such person has otherwise received payment (under any insurance
policy, By-law or otherwise) of the amounts otherwise payable as indemnity
hereunder.
ARTICLE V
STOCK-SEAL-FISCAL YEAR
SECTION 1. CERTIFICATES FOR SHARES OF STOCK. The certificates
for shares of stock of the Corporation shall be in such form, not
inconsistent with the Certificate of Incorporation, as shall be approved by
the Board of Directors. All certificates shall be signed by the Chairman of
the Board or the President or a Vice President, and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and shall not
be valid unless so signed.
In case any officer or officers who shall have signed any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation,
such certificate or certificates may nevertheless be issued and delivered as
though the person or persons who signed such certificate or certificates had
not ceased to be such officer or officers of the Corporation.
All certificates for shares of stock shall be consecutively
numbered as the same are issued. The name of the person owning the shares
represented thereby with the number of such shares and the date of issue
thereof shall be entered on the books of the Corporation.
Except as hereinafter provided, all certificates surrendered to
the Corporation for transfer shall be canceled, and no new certificates shall
be issued until former certificates for the same number of shares have been
surrendered and canceled.
SECTION 2. LOST, STOLEN OR DESTROYED CERTIFICATES. Whenever a
person owning a certificate for shares of stock of the Corporation alleges
that it has been lost, stolen or destroyed, he or she shall file in the
office of the Corporation an affidavit setting forth, to the best of his or
her knowledge and belief, the time, place and circumstances of the loss,
theft or destruction, and, if required by the Board of Directors, a bond of
indemnity or other indemnification sufficient in the opinion of the Board of
Directors to indemnify the Corporation and its agents against any claim that
may be made against it or them on account of the alleged loss, theft or
destruction of
-11-
<PAGE>
any such certificate or the issuance of a new certificate in replacement
therefor. Thereupon the Corporation may cause to be issued to such person a
new certificate in replacement for the certificate alleged to have been lost,
stolen or destroyed. Upon the stub of every new certificate so issued shall
be noted the fact of such issue and the number, date and the name of the
registered owner of the lost, stolen or destroyed certificate in lieu of
which the new certificate is issued.
SECTION 3. TRANSFER OF SHARES. Shares of stock of the
Corporation shall be transferred on the books of the Corporation by the
holder thereof, in person or by his attorney duly authorized in writing, upon
surrender and cancellation of certificates for the number of shares of stock
to be transferred, except as provided in Section 2 of this Article V.
SECTION 4. REGULATIONS. The Board of Directors shall have power
and authority to make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
SECTION 5. RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting or to receive payment of any dividend or
other distribution or allotment of any rights, or to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, as the case may be, the Board of Directors may fix,
in advance, a record date, which shall not be (i) more than sixty (60) nor
less than ten (10) days before the date of such meeting, or (ii) in the case
of corporate action to be taken by consent in writing without a meeting,
prior to, or more than ten (10) days after, the date upon which the
resolution fixing the record date is adopted by the Board of Directors, or
(iii) more than sixty (60) days prior to any other action.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held; the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is delivered
to the Corporation; and the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board
of Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 6. DIVIDENDS. Subject to the provisions of the
Certificate of Incorporation, the Board of Directors shall have power to
declare and pay dividends upon shares of stock of the Corporation, but only
out of funds available for the payment of dividends as provided by law.
-12-
<PAGE>
Subject to the provisions of the Certificate of Incorporation,
any dividends declared upon the stock of the Corporation shall be payable on
such date or dates as the Board of Directors shall determine. If the date
fixed for the payment of any dividend shall in any year fall upon a legal
holiday, then the dividend payable on such date shall be paid on the next day
not a legal holiday.
SECTION 7. CORPORATE SEAL. The Board of Directors shall provide
a suitable seal, containing the name of the Corporation, which seal shall be
kept in the custody of the Secretary. A duplicate of the seal may be kept and
be used by any officer of the Corporation designated by the Board of
Directors, the Chairman of the Board or the President.
SECTION 8. FISCAL YEAR. The fiscal year of the Corporation shall
be such fiscal year as the Board of Directors from time to time by resolution
shall determine.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 1. CHECKS, NOTES, ETC. All checks, drafts, bills of
exchange, acceptances, notes or other obligations or orders for the payment
of money shall be signed and, if so required by the Board of Directors,
countersigned by such officers of the Corporation and/or other persons as the
Board of Directors from time to time shall designate.
Checks, drafts, bills of exchange, acceptances, notes,
obligations and orders for the payment of money made payable to the
Corporation may be endorsed for deposit to the credit of the Corporation with
a duly authorized depository by the Treasurer and/or such other officers or
persons as the Board of Directors from time to time may designate.
SECTION 2. LOANS. No loans and no renewals of any loans shall be
contracted on behalf of the Corporation except as authorized by the Board of
Directors. When authorized so to do, any officer or agent of the Corporation
may effect loans and advances for the Corporation from any bank, trust
company or other institution or from any firm, corporation or individual, and
for such loans and advances may make, execute and deliver promissory notes,
bonds or other evidences of indebtedness of the Corporation. When authorized
so to do, any officer or agent of the Corporation may pledge, hypothecate or
transfer, as security for the payment of any and all loans, advances,
indebtedness and liabilities of the Corporation, any and all stocks,
securities and other personal property at any time held by the Corporation,
and to that end may endorse, assign and deliver the same. Such authority may
be general or confined to specific instances.
SECTION 3. CONTRACTS. Except as otherwise provided in these
By-laws or by law or as otherwise directed by the Board of Directors, the
Chairman of the Board, the President or any Vice President shall be
authorized to execute and deliver, in the name and on behalf of the
Corporation, all agreements, bonds, contracts, deeds, mortgages, and other
instruments, either for the Corporation's own account or in a fiduciary or
other capacity, and the seal of the Corporation,
-13-
<PAGE>
if appropriate, shall be affixed thereto by any of such officers or the
Secretary or an Assistant Secretary. The Board of Directors, the Chairman of
the Board, the President or any Vice President designated by the Board of
Directors, the Chairman of the Board or the President may authorize any other
officer, employee or agent to execute and deliver, in the name and on behalf
of the Corporation, agreements, bonds, contracts, deeds, mortgages, and other
instruments, either for the Corporation's own account or in a fiduciary or
other capacity, and, if appropriate, to affix the seal of the Corporation
thereto. The grant of such authority by the Board or any such officer may be
general or confined to specific instances.
SECTION 4. WAIVERS OF NOTICE. Whenever any notice whatever is
required to be given by law, by the Certificate of Incorporation or by these
By-laws to any person or persons, a waiver thereof in writing, signed by the
person or persons entitled to the notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
SECTION 5. OFFICES OUTSIDE OF DELAWARE. Except as otherwise
required by the laws of the State of Delaware, the Corporation may have an
office or offices and keep its books, documents and papers outside of the
State of Delaware at such place or places as from time to time may be
determined by the Board of Directors or the Chairman of the Board.
ARTICLE VII
AMENDMENTS
These By-laws and any amendment thereof may be altered, amended
or repealed, or new By-laws may be adopted, by the Board of Directors at any
regular or special meeting by the affirmative vote of a majority of all of
the members of the Board, provided in the case of any special meeting at
which all of the members of the Board are not present, that the notice of
such meeting shall have stated that the amendment of these By-laws was one of
the purposes of the meeting; but these By-laws and any amendment thereof, may
be altered, amended or repealed or new By-laws may be adopted by the holders
of a majority of the total outstanding stock of the Corporation entitled to
vote at any annual meeting or at any special meeting, provided, in the case
of any special meeting, that notice of such proposed alteration, amendment,
repeal or adoption is included in the notice of the meeting.
-14-
<PAGE>
CERTIFICATE OF ADOPTION OF BY-LAWS
OF
BARNES MACHINE, INC.
This is to certify:
That I am the duly elected, qualified and acting Secretary of
BARNES MACHINE, INC. (the "Corporation") and the attached By-laws were adopted
as the By-laws of the Corporation on September 2, 1999 by the Unanimous Written
Consent of the Board of Directors.
Dated effective the 2nd day of September, 1999.
/s/ DOUGLAS B. SOLOMON
-----------------------------
Douglas B. Solomon, Secretary
(Seal)
-15-
<PAGE>
EXHIBIT 3.19
THE COMPANIES ACTS 1985 to 1989
PRIVATE COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION OF
COMPASS AEROSPACE LIMITED
1. The name of the Company is COMPASS AEROSPACE LIMITED.
2. The Company's registered office is to be situated in England and Wales.
3. (a) The Company's objects are:
(i) To carry on business as a general commercial company; and
(ii) any other trade or business which may seem to the
company and its directors to be advantageous and to directly or indirectly
enhance all or any of the business of the Company.
(b) To take or lease or in part exchange or purchase, hire or
otherwise acquire and hold for any estate or interest any buildings, lands,
rights, privileges, concessions, patents, patent rights, licences secret
processes, machinery and plant or personal property of any kind deemed
convenient or necessary or in connection with the Company's business or any
subsidiary thereof.
(c) To undertake and secure any part or whole of the business, its
assets or goodwill or any company, firm or person trading or proposing to
trade in any activity which the Company is authorised to carry on or propose
to carry on and as part of the consideration for such purchase to undertake
all or any of the liabilities of such company, firm or person, or to acquire
an interest in, combine with, or enter into any arrangement for profit
sharing, or for co-operation, or for mutual assistance with any such company,
firm or person or for subsidising or otherwise aiding any such company, firm
or person and to accept or give, by way of consideration for any of the acts
or things aforesaid or property acquired, any securities debentures,
debenture stock or shares that may be agreed upon, and to retain and hold or
mortgage sell and deal with any securities, debentures, debenture stock or
shares so received.
(d) To sell, charge, mortgage, construct, repair, improve, develop,
exchange, let on lease, grant privileges, options, rights and licences in
respect of all or any part of the property of the Company.
(e) To hold or otherwise deal with any Investments made for the
Company and as may be necessary and to be determined, to invest moneys not
immediately required by the Company.
<PAGE>
(f) To grant credit, loans or advances on such terms as may be
appropriate with or without security to clients and others, to enter into
indemnity, contracts or guarantees and suretyships of all kinds, to receive
money on loan or deposit or otherwise upon such terms as the Company may
approve and to secure or guarantee the payment of any sums of money or the
performance of an obligation by any company, firm or person including any
parent, subsidiary or fellow subsidiary company in such manner as the Company
may think fit.
(g) To raise and borrow money by any method and to secure the
payment of any money borrowed, raised or owing (including but not in any way
limited to the power to guarantee and to secure the guarantee of the
repayment of any money borrowed by any third party) as the Company shall
think fit for the purposes of or in connection with the Company's business.
(h) To issue discount, accept, draw or negotiate cheques, bills of
exchange, bills of lading, warrants, debentures, promissory notes and other
negotiable or transferable instruments.
(i) To purchase, take, subscribe of or otherwise obtain and retain
shares or other securities or interests in any other company having objects
similar or identical to those of the Company or carrying on any businesses
capable of being carried on so as to directly or indirectly benefit the
Company or increase the value of its property and manage, co-ordinate and
finance the businesses and operations of any organisation in which the
Company holds any such interest.
(j) To dispose of or sell the entire or any part of the property or
business of the Company either in portions or together for such consideration
as the Company may think fit especially for securities, debentures or shares
of any company purchasing the same.
(k) To act as brokers, agents or trustees of any company, firm or
person and to undertake and perform sub-contracts.
(l) To pay any company, firm or person supplying services to the
Company either by cash payment or by the allotment to him/her or them of
shares or other securities of the Company credited as paid up in full or in
part or otherwise as may be deemed appropriate.
(m) To assign to the Members of the Company in kind any assets of
the Company whatsoever.
(n) To grant pensions, allowances, gratuities and bonuses to
officers, ex-officers, employees, or ex-employees of the Company of its
predecessors in business or the dependents or connections of such persons, to
establish and maintain or concur in establishing and maintaining trusts,
funds or schemes (whether contributory or non-contributory) with a view to
providing pensions or other benefits for any such persons as aforesaid, their
dependants or connections, and to support or subscribe to any charitable
funds or institutions, the support of which may, in the opinion of the
Directors, be calculated directly or indirectly to benefit the Company or its
2
<PAGE>
employees, and to institute or maintain any club or other establishment or
profit sharing scheme calculated to advance the interests of the Company or
its officers or employees.
(o) To co-ordinate, manage, finance, control or otherwise aid any
company or companies in which the Company has any interest, whatsoever, to
provide consultative, managerial, administrative, technical, commercial and
services of all kinds for any such company or companies and to make payments
by way of subsidy or otherwise and any other arrangements which may be deemed
desirable with respect to any business or operations of or generally with
respect to any such company or companies.
(p) To amalgamate with any other company for the purpose of
purchasing the whole or any part of the property, undertaking or business or
any of the liabilities of the Company, or of undertaking any business
operations which may appear likely to assist or benefit the Company or to
enhance the value of any property or business of the Company, and to place or
guarantee the placing of, underwrite, subscribe for, or otherwise acquire all
or any part of the shares or securities of any such company as aforesaid.
(q) To comply with and be dependant to the provisions (in so far as
they are relevant) of sections 155 to 158 inclusive of the Act and to supply
both directly and indirectly any form of financial aid as defined in Section
152(1)(a) for any reason as defined in Section 151(1) and/or Section 151(2)
of the said Act.
(r) To secure the Company to be registered or known in any part of
the world.
(s) To do all or any of the things or matters aforesaid in any part
of the world and either principals, agents, contractors or otherwise, and by
or through agents, brokers, sub-contractors or otherwise and either alone or
in conjunction with others.
(t) To do all such other things as are incidental or conductive to
the above objects or any of them.
AND so that:
(1) None of the provisions set forth in any sub-clause of
this Clause shall be restrictively construed but the widest interpretation
shall be given to each such provision, and none of such provision shall,
except where the context expressly so requires, be in any way limited or
restricted by reference to or inference from any other provision set forth in
such sub-clause, or by reference to or inference from the terms of any other
sub-clause of this Clause, or by reference to or inference from the terms of
any other sub-clause of this Clause, or by reference to or inference from the
name of the Company.
3
<PAGE>
(2) The word "Company" in this clause, except where used in
reference to the Company, shall be deemed to include any partnership or other
body of persons, whether incorporated or unincorporated and whether domiciled
in the United Kingdom or elsewhere.
(3) In this Clause the expression "the Act" means the
Companies Act 1985, but so that any reference in this Clause to any provision
of the Act shall be deemed to include a reference to any statutory
modification or re-enactment of that provision for the time being in force.
4. The liability of the Members is limited.
5. The Company's share capital is $20,000,000 divided into 20,000,000
share of $1 each.
We, the Subscribers of this Memorandum of Association, wish to be formed into
a Company pursuant to this Memorandum and we agree to take the number of
shares shown opposite our respective names
- ------------------------------------------------------------------------------
Names, and addresses of Subscribers Number of
shares taken by
each Subscriber
- ------------------------------------------------------------------------------
GRAHAM STEPHENS One
16 Churchill Way
Cardiff
CF1 4DX
- ------------------------------------------------------------------------------
SIAN JONES One
Christopher Charles Hadler,
16 Churchill Way
Cardiff
CF1 4DX
- ------------------------------------------------------------------------------
Dated this First day of October 1998
Witness to the above Signatures - STEVEN BLACKMORE
16 Churchill Way
Cardiff
CF1 4DX
4
<PAGE>
EXHIBIT 3.20
THE COMPANIES ACTS 1985 AND 1989
___________________________________________
PRIVATE COMPANY LIMITED BY SHARES
___________________________________________
ARTICLES OF ASSOCIATION
OF
COMPASS AEROSPACE LIMITED
___________________________________________
(Incorporated on 17 November 1998)
___________________________________________
Company Number:3668754
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PRELIMINARY 1
INTERPRETATION 1
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
SHARE CAPITAL 3
2. Shares with special rights . . . . . . . . . . . . . . . . . . . . . .3
3. Allotment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
4. Redeemable shares. . . . . . . . . . . . . . . . . . . . . . . . . . .3
5. Commissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
6. Trusts not recognised. . . . . . . . . . . . . . . . . . . . . . . . .4
VARIATION OF RIGHTS 4
7. Method of varying rights . . . . . . . . . . . . . . . . . . . . . . .4
8. When rights deemed to be varied. . . . . . . . . . . . . . . . . . . .4
SHARE CERTIFICATES 4
9. Members' rights to certificates . . . . . . . . . . . . . . . . . . .4
10. Replacement certificates . . . . . . . . . . . . . . . . . . . . . . .5
LIEN 5
11. Company to have lien on shares . . . . . . . . . . . . . . . . . . . .5
12. Enforcement of lien by sale. . . . . . . . . . . . . . . . . . . . . .5
13. Giving effect to sale. . . . . . . . . . . . . . . . . . . . . . . . .5
14. Application of proceeds . . . . . . . . . . . . . . . . . . . . . . .5
CALLS ON SHARES 5
15. Power to make calls. . . . . . . . . . . . . . . . . . . . . . . . . .5
16. Time when call made . . . . . . . . . . . . . . . . . . . . . . . . .6
17. Liability of joint holders . . . . . . . . . . . . . . . . . . . . . .6
18. Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . .6
19. Deemed calls . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
20. Differentiation on calls . . . . . . . . . . . . . . . . . . . . . . .6
21. Payment of calls in advance. . . . . . . . . . . . . . . . . . . . . .6
FORFEITURE AND SURRENDER 6
22. Notice requiring payment of call . . . . . . . . . . . . . . . . . . .6
23. Forfeiture for non-compliance . . . . . . . . . . . . . . . . . . . .7
24. Sale of forfeited shares . . . . . . . . . . . . . . . . . . . . . . .7
25. Liability following forfeiture . . . . . . . . . . . . . . . . . . . .7
26. Surrender. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
27. Extinction of rights . . . . . . . . . . . . . . . . . . . . . . . . .7
28. Evidence of forfeiture . . . . . . . . . . . . . . . . . . . . . . . .7
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
TRANSFER OF SHARES 8
29. Form and execution of transfer . . . . . . . . . . . . . . . . . . . .8
30. Restrictions on transfer . . . . . . . . . . . . . . . . . . . . . . .8
31. Invalid transfers. . . . . . . . . . . . . . . . . . . . . . . . . . .8
32. Notice of refusal to register. . . . . . . . . . . . . . . . . . . . .8
33. Suspension of registration . . . . . . . . . . . . . . . . . . . . .9
34. No fee payable on registration . . . . . . . . . . . . . . . . . . . .9
35. Retention of transfers . . . . . . . . . . . . . . . . . . . . . . . .9
TRANSMISSION OF SHARES 9
36. Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
37. Elections following transmission . . . . . . . . . . . . . . . . . . .9
38. Rights of persons entitled by transmission . . . . . . . . . . . . . .9
ALTERATION OF SHARE CAPITAL 10
39. Alterations permitted by ordinary resolution . . . . . . . . . . . . 10
40. New shares subject to these Articles . . . . . . . . . . . . . . . . 10
41. Fractions arising. . . . . . . . . . . . . . . . . . . . . . . . . . 10
42. Power to reduce capital . . . . . . . . . . . . . . . . . . . . . . 10
PURCHASE OF OWN SHARES 11
43. Power to purchase own shares . . . . . . . . . . . . . . . . . . . . 11
GENERAL MEETINGS 11
44. Types of general meeting . . . . . . . . . . . . . . . . . . . . . . 11
45. Annual general meetings . . . . . . . . . . . . . . . . . . . . . . 11
46. Class meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
47. Convening general meetings . . . . . . . . . . . . . . . . . . . . . 11
NOTICE OF GENERAL MEETINGS 12
48. Period of notice . . . . . . . . . . . . . . . . . . . . . . . . . . 12
49. Provision of notice . . . . . . . . . . . . . . . . . . . . . . . . 12
50. Contents of notice . . . . . . . . . . . . . . . . . . . . . . . . . 12
51. Accidental omission to give notice . . . . . . . . . . . . . . . . . 13
PROCEEDINGS AT GENERAL MEETINGS 13
52. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
53. If quorum not present . . . . . . . . . . . . . . . . . . . . . . . 13
54. Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
55. Directors entitled to speak . . . . . . . . . . . . . . . . . . . . 13
56. Adjournments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
57. Amendments to resolutions . . . . . . . . . . . . . . . . . . . . . 14
58. Methods of voting . . . . . . . . . . . . . . . . . . . . . . . . . 14
59. Declaration of result . . . . . . . . . . . . . . . . . . . . . . . 14
60. Withdrawal of demand for poll . . . . . . . . . . . . . . . . . . . 14
61. Conduct of poll . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
62. Chairman's casting vote . . . . . . . . . . . . . . . . . . . . . . 15
63. When poll to be taken . . . . . . . . . . . . . . . . . . . . . . . 15
64. Notice of poll . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
65. Effectiveness of special and extraordinary resolutions . . . . . . . 15
66. Resolutions in writing . . . . . . . . . . . . . . . . . . . . . . . 15
VOTES OF MEMBERS 15
67. Right to vote . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
68. Votes of joint holders . . . . . . . . . . . . . . . . . . . . . . . 15
69. Member under incapacity . . . . . . . . . . . . . . . . . . . . . . 16
70. Calls in arrears . . . . . . . . . . . . . . . . . . . . . . . . . . 16
71. Objection to voting . . . . . . . . . . . . . . . . . . . . . . . . 16
72. Supplementary provisions on voting . . . . . . . . . . . . . . . . . 16
PROXIES AND CORPORATE REPRESENTATIVES 16
73. Appointment of proxy . . . . . . . . . . . . . . . . . . . . . . . . 16
74. Form of proxy - standard . . . . . . . . . . . . . . . . . . . . . . 16
75. Form of proxy - each way . . . . . . . . . . . . . . . . . . . . . . 17
76. Voting by appointor . . . . . . . . . . . . . . . . . . . . . . . . 17
77. Delivery of form of proxy . . . . . . . . . . . . . . . . . . . . . 17
78. Validity of form of proxy . . . . . . . . . . . . . . . . . . . . . 18
79. Corporate representatives . . . . . . . . . . . . . . . . . . . . . 18
80. Revocation of authority . . . . . . . . . . . . . . . . . . . . . . 18
NUMBER OF DIRECTORS 18
81. Limits on number of directors . . . . . . . . . . . . . . . . . . . 18
APPOINTMENT AND RETIREMENT OF DIRECTORS 18
82. No retirement by rotation . . . . . . . . . . . . . . . . . . . . . 18
83. Eligibility for election . . . . . . . . . . . . . . . . . . . . . . 18
84. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
85. Additional powers of the Company . . . . . . . . . . . . . . . . . . 19
86. Appointment by board . . . . . . . . . . . . . . . . . . . . . . . . 19
87. Age limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
88. No share qualification . . . . . . . . . . . . . . . . . . . . . . . 19
ALTERNATE DIRECTORS 20
89. Power to appoint alternates . . . . . . . . . . . . . . . . . . . . 20
90. Alternates entitled to receive notice . . . . . . . . . . . . . . . 20
91. Alternates representing more than one director . . . . . . . . . . . 20
92. Expenses and remuneration of alternates . . . . . . . . . . . . . . 20
93. Termination of appointment . . . . . . . . . . . . . . . . . . . . . 20
94. Method of appointment and revocation . . . . . . . . . . . . . . . . 20
95. Alternate not an agent of appointor . . . . . . . . . . . . . . . . 21
POWERS OF THE BOARD 21
96. Business to be managed by board . . . . . . . . . . . . . . . . . . 21
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
DELEGATION OF POWERS OF THE BOARD 21
97. Committees of the board . . . . . . . . . . . . . . . . . . . . . . 21
98. Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
99. Offices including the title "director" . . . . . . . . . . . . . . . 21
DISQUALIFICATION AND REMOVAL OF DIRECTORS 22
100. Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . 22
101. Power of Company to remove director . . . . . . . . . . . . . . . . 22
REMUNERATION OF NON-EXECUTIVE DIRECTORS 23
102. Ordinary remuneration . . . . . . . . . . . . . . . . . . . . . . . 23
103. Additional remuneration for special services . . . . . . . . . . . . 23
DIRECTORS' EXPENSES 23
104. Directors may be paid expenses . . . . . . . . . . . . . . . . . . . 23
EXECUTIVE DIRECTORS 23
105. Appointment to executive office . . . . . . . . . . . . . . . . . . 23
106. Termination of appointment to executive office . . . . . . . . . . . 23
107. Emoluments to be determined by the board . . . . . . . . . . . . . . 24
DIRECTORS' INTERESTS 24
108. Directors may contract with the Company . . . . . . . . . . . . . . 24
109. Notification of interests . . . . . . . . . . . . . . . . . . . . . 24
110. Exercise by Company of voting rights . . . . . . . . . . . . . . . . 25
GRATUITIES, PENSIONS AND INSURANCE 25
111. Gratuities and pensions . . . . . . . . . . . . . . . . . . . . . . 25
112. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
113. Directors not liable to account . . . . . . . . . . . . . . . . . . 25
PROCEEDINGS OF DIRECTORS 25
114. Convening meetings . . . . . . . . . . . . . . . . . . . . . . . . . 25
115. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
116. Powers of directors if number falls below minimum . . . . . . . . . 26
117. Chairman and deputy chairman . . . . . . . . . . . . . . . . . . . . 26
118. Validity of acts of the board . . . . . . . . . . . . . . . . . . . 26
119. Resolutions in writing . . . . . . . . . . . . . . . . . . . . . . . 26
120. Meetings by telephone, etc. . . . . . . . . . . . . . . . . . . . . 26
121. Directors' power to vote on contracts in which they are interested . 27
122. Exclusion of director from quorum . . . . . . . . . . . . . . . . . 27
123. Amendment of restrictions on voting . . . . . . . . . . . . . . . . 27
124. Division of proposals . . . . . . . . . . . . . . . . . . . . . . . 27
125. Decision of chairman final and conclusive . . . . . . . . . . . . . 27
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
SECRETARY 28
126. Appointment and removal of secretary . . . . . . . . . . . . . . . . 28
MINUTES 28
127. Minutes required to be kept . . . . . . . . . . . . . . . . . . . . 28
THE SEAL 28
128. Authority required for use of seal . . . . . . . . . . . . . . . . . 28
129. Official seal for use abroad . . . . . . . . . . . . . . . . . . . . 28
130. Execution of instrument as a deed under hand . . . . . . . . . . . . 28
131. Delivery of deeds . . . . . . . . . . . . . . . . . . . . . . . . . 28
CERTIFICATION 29
132. Certified copies . . . . . . . . . . . . . . . . . . . . . . . . . . 29
DIVIDENDS 29
133. Declaration of dividends . . . . . . . . . . . . . . . . . . . . . . 29
134. Interim dividends . . . . . . . . . . . . . . . . . . . . . . . . . 29
135. Apportionment of dividends . . . . . . . . . . . . . . . . . . . . . 29
136. Dividends in specie . . . . . . . . . . . . . . . . . . . . . . . . 29
137. Permitted deductions . . . . . . . . . . . . . . . . . . . . . . . . 30
138. Procedure for payment . . . . . . . . . . . . . . . . . . . . . . . 30
139. Interest not payable . . . . . . . . . . . . . . . . . . . . . . . . 30
140. Forfeiture of unclaimed dividends . . . . . . . . . . . . . . . . . 30
CAPITALISATION 30
141. Power to capitalise . . . . . . . . . . . . . . . . . . . . . . . . 30
RECORD DATES 31
142. Record dates for dividends, etc. . . . . . . . . . . . . . . . . . . 31
ACCOUNTS 31
143. Rights to inspect records . . . . . . . . . . . . . . . . . . . . . 31
144. Delivery of balance sheets and profit and loss accounts . . . . . . 32
NOTICES 32
145. When notice required to be in writing . . . . . . . . . . . . . . . 32
146. Method of giving notice . . . . . . . . . . . . . . . . . . . . . . 32
147. Deemed receipt of notice . . . . . . . . . . . . . . . . . . . . . . 32
148. Notice to persons entitled by transmission . . . . . . . . . . . . . 32
149. Notice to persons entitled by death or bankruptcy . . . . . . . . . 33
150. Transferees etc. bound by prior notice . . . . . . . . . . . . . . . 33
151. When notices deemed served . . . . . . . . . . . . . . . . . . . . . 33
WINDING UP 33
152. Liquidator may distribute in specie . . . . . . . . . . . . . . . . 33
153. Disposal of assets by liquidator . . . . . . . . . . . . . . . . . . 34
INDEMNITY 34
154. Indemnity to directors, officers, etc. . . . . . . . . . . . . . . . 34
</TABLE>
<PAGE>
COMPANY NO.: 3668754
THE COMPANIES ACTS 1985 AND 1989
PRIVATE COMPANY LIMITED BY SHARES
------------------------------------------------------------------------------
ARTICLES OF ASSOCIATION
OF
COMPASS AEROSPACE LIMITED
(INCORPORATED ON 17 NOVEMBER 1998)
------------------------------------------------------------------------------
PRELIMINARY
THE REGULATIONS IN TABLE A IN THE COMPANIES (TABLES A-F) REGULATIONS IN FORCE AT
THE DATE OF THE INCORPORATION OF THE COMPANY SHALL NOT APPLY TO THE COMPANY.
INTERPRETATION
1. DEFINITIONS
IN THESE ARTICLES, EXCEPT WHERE THE SUBJECT OR CONTEXT OTHERWISE REQUIRES, THE
WORDS DEFINED IN THE FIRST COLUMN OF THE FOLLOWING TABLE SHALL BEAR THE MEANINGS
SET OPPOSITE THEM RESPECTIVELY IN THE SECOND COLUMN.
THE ACT means The Companies Act 1985 including any modification or re-enactment
thereof for the time being in force.
THESE ARTICLES means these articles of association as altered from time to time
by special resolution.
THE AUDITORS means the auditors for the time being of the Company.
THE BOARD means the directors or any of them acting as the board of directors of
the Company.
CLEAR DAYS means the period excluding the day when a notice is given or deemed
to be given and the day for which it is given or on which it is to take effect.
THE COMPANIES ACTS has the meaning ascribed thereto by section 744 of the Act
and any enactment passed after those Acts which may, by virtue of that or any
other such enactment, be
2
<PAGE>
cited together with those Acts as the "Companies Acts" (with or without the
addition of an indication of the date of any such enactment).
A DIRECTOR means a director of the Company.
DIVIDEND means Dividend or bonus.
THE HOLDER means in relation to any shares the member whose name is entered in
the register as the holder of such shares.
A MEMBER means a member of the Company.
THE MEMORANDUM means the memorandum of association of the Company as amended
from time to time.
THE OFFICE means the registered office of the Company.
PAID means paid or credited as paid.
THE REGISTER means the register of members of the Company.
THE SEAL means the common seal of the Company and includes any official seal
kept by the Company by virtue of section 39 or 40 of the Act.
THE SECRETARY means the secretary of the Company and includes a joint,
assistant, deputy or temporary secretary and any other person appointed to
perform the duties of the secretary.
THE UNITED KINGDOM means Great Britain and Northern Ireland.
References to a document being executed include references to its being executed
under hand or under seal or by any other method.
References to writing include references to any visible substitute for writing
and to anything partly in one form and partly in another form.
Words denoting the singular number include the plural number and vice versa;
words denoting the masculine gender include the feminine gender; and words
denoting persons include corporations.
Save as aforesaid any words or expressions defined in the Act (but excluding any
statutory modification thereof not in force at the date of adoption of these
Articles) shall, if not inconsistent with the subject or context, bear the same
meaning in these Articles.
Subject to the preceding paragraph, references to any provision of any enactment
or of any subordinate legislation (as defined by section 21(1) of the
Interpretation Act 1978) include any modification or re-enactment of that
provision for the time being in force.
Headings are inserted for convenience only and do not affect the construction of
these Articles.
3
<PAGE>
In these Articles, (a) powers of delegation shall not be restrictively
construed but the widest interpretation shall be given thereto; (b) the word
"board" in the context of the exercise of any power contained in these
Articles includes any committee consisting of one or more directors, any
director holding executive office and any local or divisional board, manager
or agent of the Company to which or, as the case may be, to whom the power in
question has been delegated; (c) no power of delegation shall be limited by
the existence or, except where expressly provided by the terms of delegation,
the exercise of that or any other power of delegation; and (d) except where
expressly provided by the terms of delegation, the delegation of a power
shall not exclude the concurrent exercise of that power by any other body or
person who is for the time being authorised to exercise it under these
Articles or under another delegation of the power.
SHARE CAPITAL
2. SHARES WITH SPECIAL RIGHTS
Subject to the provisions of the Companies Acts and without prejudice to any
rights attached to any existing shares or class of shares, any share may be
issued with such rights or restrictions as the Company may by ordinary
resolution determine or, subject to and in default of such determination, as the
board shall determine.
3. ALLOTMENT
Any shares proposed to be issued after the date of adoption of these Articles
shall first be offered to the members in proportion as nearly as may be to the
number of the existing shares held by them respectively unless the Company shall
by Special Resolution otherwise direct. The offer shall be made by notice
specifying the number of shares offered, and limiting a period (not being less
than fourteen days) within which the offer, if not accepted, will be deemed to
be declined. After the expiration of that period, those shares so deemed to be
declined shall be offered in the proportion aforesaid to the persons who have,
within the said period, accepted all the shares offered to them; such further
offer shall be made in the same manner and limited by a like period as the
original offer. Any shares not accepted pursuant to such offer or further offer
as aforesaid or not capable of being offered as aforesaid except by way of
fractions and any shares released from the provisions of this Article by such
Special Resolution as aforesaid shall be under the control of the directors, who
may allot, grant options over or otherwise dispose of the same to such persons,
on such terms, and in such manner as they think fit, provided that, in the case
of shares not accepted as aforesaid, such shares shall not be disposed of on
terms which are more favourable to the subscribers thereof than the terms on
which they were offered to the members. Subject to this Clause the directors are
unconditionally authorised for the purposes of Section 80 of the Act, to allot,
grant options over, or otherwise dispose of relevant securities up to the amount
of the share capital as at the date of adoption of these Articles at any time or
times during the period of five years from the date of adoption and at any time
thereafter pursuant to any offer or agreement made by the Company before the
expiry of this authority. Sub-sections 89(1) and 90(1) inclusive of the Act
shall be excluded from applying to the Company.
4. REDEEMABLE SHARES
Subject to the provisions of the Companies Acts, and without prejudice to any
rights attached to any existing shares or class of shares, shares may be issued
which are to be redeemed or are to be liable to be redeemed at the option of the
Company or the holder on such terms and in such manner as may be provided by
these Articles.
4
<PAGE>
5. COMMISSIONS
The Company may exercise all powers of paying commissions or brokerage conferred
or permitted by the Companies Acts. Subject to the provisions of the Companies
Acts, any such commission or brokerage may be satisfied by the payment of cash
or by the allotment of fully or partly paid shares or partly in one way and
partly in the other.
6. TRUSTS NOT RECOGNISED
Except as required by law, no person shall be recognised by the Company as
holding any share upon any trust and (except as otherwise provided by these
Articles or by law) the Company shall not be bound by or recognise any interest
in any share (or in any fractional part of a share) except an absolute right to
the entirety thereof in the holder.
VARIATION OF RIGHTS
7. METHOD OF VARYING RIGHTS
Subject to the provisions of the Companies Acts, if at any time the capital of
the Company is divided into different classes of shares, the rights attached to
any class may (unless otherwise provided by the terms of issue of the shares of
that class) be varied or abrogated, whether or not the Company is being wound
up, either with the consent in writing of the holders of three-quarters in
nominal value of the issued shares of the class or with the sanction of an
extraordinary resolution passed at a separate general meeting of the holders of
the shares of the class (but not otherwise).
8. WHEN RIGHTS DEEMED TO BE VARIED
For the purposes of this Article, unless otherwise expressly provided by the
rights attached to any shares or class of shares, those rights shall be deemed
to be varied by the reduction of the capital paid up on those shares otherwise
than by a purchase or redemption by the Company of its own shares and by the
allotment of other shares ranking in priority for payment of a dividend or in
respect of capital or which confer on the holders voting rights more favourable
than those conferred by such first mentioned shares, but shall not otherwise be
deemed to be varied by the creation or issue of other shares ranking pari passu
with, or subsequent to, such first mentioned shares or by the purchase or
redemption by the Company of any of its own shares.
SHARE CERTIFICATES
9. MEMBERS' RIGHTS TO CERTIFICATES
Every member, upon becoming the holder of any shares, shall be entitled, without
payment, to one certificate for all the shares of each class held by him (and,
upon transferring a part of his holding of shares of any class, to a certificate
for the balance of such holding) or several certificates each for one or more of
his shares upon payment for every certificate after the first of such reasonable
sum as the board may from time to time determine. Every certificate shall
specify the number, class and distinguishing numbers (if any) of the shares to
which it relates and the amount or respective amounts paid up thereon and, where
the Company has adopted a seal, sealed with the seal. The Company shall not be
bound to issue more than one certificate for shares held jointly by several
persons and delivery of a certificate to one joint holder shall be a sufficient
delivery to all of them. Shares of different classes may not be included in the
same certificate.
5
<PAGE>
10. REPLACEMENT CERTIFICATES
If a share certificate is defaced, worn out, lost or destroyed, it may be
renewed on such terms (if any) as to evidence and indemnity (with or without
security) and payment of any exceptional out-of-pocket expenses reasonably
incurred by the Company in investigating evidence and preparing the requisite
form of indemnity as the board may determine but otherwise free of charge, and
(in the case of defacement or wearing out) on delivery up of the old
certificate.
LIEN
11. COMPANY TO HAVE LIEN ON SHARES
The Company shall have a first and paramount lien on every share (not being a
fully paid share) for all moneys payable to the Company (whether presently or
not) in respect of that share. The board may at any time (generally or in
particular cases) waive any lien or declare any share to be wholly or in part
exempt from the provisions of this Article. The Company's lien on a share shall
extend to any amount (including dividends) payable in respect of it.
12. ENFORCEMENT OF LIEN BY SALE
The Company may sell, in such manner as the board determines, any share on which
the Company has a lien if a sum in respect of which the lien exists is presently
payable and is not paid within fourteen clear days after notice has been given
to the holder of the share or to the person entitled to it in consequence of the
death or bankruptcy of the holder or otherwise by operation of law, demanding
payment and stating that if the notice is not complied with the shares may be
sold.
13. GIVING EFFECT TO SALE
To give effect to any such sale the board may authorise some person to execute
an instrument of transfer of the shares sold to, or in accordance with the
directions of, the purchaser. The transferee shall not be bound to see to the
application of the purchase money nor shall his title to the shares be affected
by any irregularity in or invalidity of the proceedings in relation to the sale.
14. APPLICATION OF PROCEEDS
The net proceeds of the sale, after payment of the costs, shall be applied in or
towards payment or satisfaction of so much of the sum in respect of which the
lien exists as is presently payable, and any residue shall (upon surrender to
the Company for cancellation of the certificate for the shares sold and subject
to a like lien for any moneys not presently payable as existed upon the shares
before the sale) be paid to the person entitled to the shares at the date of the
sale.
CALLS ON SHARES
15. POWER TO MAKE CALLS
Subject to the terms of allotment, the board may from time to time make calls
upon the members in respect of any moneys unpaid on their shares (whether in
respect of nominal value or premium) and each member shall (subject to receiving
at least fourteen clear days' notice specifying when and where payment is to be
made) pay to the Company as required by the notice the amount called on his
shares. A call may be required to be paid by instalments. A call may, before
receipt by the Company of any sum due thereunder, be revoked in whole or part
and the time fixed for payment of a call may be postponed in whole or part as
the
6
<PAGE>
board may determine. A person upon whom a call is made shall remain liable
for calls made upon him notwithstanding the subsequent transfer of the shares
in respect whereof the call was made.
16. TIME WHEN CALL MADE
A call shall be deemed to have been made at the time when the resolution of the
board authorising the call was passed.
17. LIABILITY OF JOINT HOLDERS
The joint holders of a share shall be jointly and severally liable to pay all
calls in respect thereof.
18. INTEREST PAYABLE
If a call or any instalment of a call remains unpaid in whole or in part after
it has become due and payable the person from whom it is due and payable shall
pay interest on the amount unpaid from the day it became due and payable until
it is paid at the rate fixed by the terms of allotment of the share or in the
notice of the call or, if no rate is fixed, such rate, not exceeding 15 per
cent. per annum or, if higher, the appropriate rate (as defined by the Act), as
may be determined by the board, but the board may waive payment of such interest
wholly or in part.
19. DEEMED CALLS
An amount payable in respect of a share on allotment or at any fixed date,
whether in respect of nominal value or premium or as an instalment of a call,
shall be deemed to be a call duly made and notified and payable on the date so
fixed or in accordance with the terms of the allotment, and if it is not paid
the provisions of these Articles shall apply as if that amount had become due
and payable by virtue of a call duly made and notified.
20. DIFFERENTIATION ON CALLS
Subject to the terms of allotment, the board may make arrangements on the issue
of shares for a difference between the allottees and/or holders in the amounts
and times of payment of calls on their shares.
21. PAYMENT OF CALLS IN ADVANCE
The board may, if it thinks fit, receive from any member willing to advance the
same all or any part of the moneys uncalled and unpaid upon any shares held by
him and such payment in advance of calls shall extinguish PRO TANTO the
liability upon the shares in respect of which it is made, and may pay upon all
or any of the moneys so advanced (until the same would but for such advance
become presently payable) interest at such rate not exceeding (unless the
Company by ordinary resolution may otherwise direct) 15 per cent. per annum or,
if higher, the appropriate rate (as defined in the Act) as may be agreed upon
between the board and such member.
FORFEITURE AND SURRENDER
22. NOTICE REQUIRING PAYMENT OF CALL
If a call or any instalment of a call remains unpaid in whole or in part
after it has become due and payable, the board may give to the person from
whom it is due not less than fourteen clear days' notice in writing requiring
payment of the amount unpaid together with any interest which may have
accrued and any costs, charges and expenses incurred by the Company by reason
of such non-payment. The notice shall name the place where payment is to be
made and shall state that
7
<PAGE>
if the notice is not complied with the shares in respect of which the
call was made will be liable to be forfeited.
23. FORFEITURE FOR NON-COMPLIANCE
If any such notice is not complied with, any share in respect of which it was
given may, at any time before the payment required by the notice has been made,
be forfeited by a resolution of the board and the forfeiture shall include all
dividends or other moneys payable in respect of the forfeited shares and not
paid before the forfeiture. When any share has been forfeited, notice of the
forfeiture shall be served upon the person who was before the forfeiture the
holder of the share, and an entry of such notice having been given and of the
forfeiture with the date thereof shall forthwith be made in the register
opposite the entry of the share; but no forfeiture shall be invalidated by any
omission or neglect to give such notice or to make such entries.
24. SALE OF FORFEITED SHARES
Subject to the provisions of the Companies Acts, a forfeited share shall be
deemed to belong to the Company and may be sold, re-allotted or otherwise
disposed of on such terms and in such manner as the board determines, either to
the person who was before the forfeiture the holder or to any other person, and
at any time before sale, re-allotment or other disposal, the forfeiture may be
cancelled on such terms as the board thinks fit. Where for the purposes of its
disposal a forfeited share is to be transferred to any person the board may
authorise some person to execute an instrument of transfer of the share to that
person. The Company may receive the consideration given for the share on its
disposal and may register the transferee as holder of the share.
25. LIABILITY FOLLOWING FORFEITURE
A person any of whose shares have been forfeited shall cease to be a member in
respect of them and shall surrender to the Company for cancellation the
certificate for the shares forfeited but shall remain liable to the Company for
all moneys which at the date of forfeiture were presently payable by him to the
Company in respect of those shares with interest thereon at the rate at which
interest was payable on those moneys before the forfeiture or, if no interest
was so payable, at such rate, not exceeding 15 per cent. per annum or, if
higher, the appropriate rate (as defined in the Act) as the board may determine,
from the date of forfeiture until payment, but the board may waive payment
wholly or in part or enforce payment without any allowance for the value of the
shares at the time of forfeiture or for any consideration received on their
disposal.
26. SURRENDER
The board may accept the surrender of any share which it is in a position to
forfeit upon such terms and conditions as may be agreed and, subject to any such
terms and conditions, a surrendered share shall be treated as if it had been
forfeited.
27. EXTINCTION OF RIGHTS
The forfeiture of a share shall involve the extinction at the time of forfeiture
of all interest in and all claims and demands against the Company in respect of
the share and all other rights and liabilities incidental to the share as
between the person whose share is forfeited and the Company, except only such of
those rights and liabilities as are by these Articles expressly saved, or as are
by the Companies Acts given or imposed in the case of past members.
28. EVIDENCE OF FORFEITURE
A statutory declaration by a director or the secretary that a share has been
duly forfeited or surrendered on a specified date shall be conclusive evidence
of the facts stated in it as against all
8
<PAGE>
persons claiming to be entitled to the share and the declaration shall
(subject to the execution of an instrument of transfer if necessary)
constitute a good title to the share and the person to whom the share is
disposed of shall not be bound to see to the application of the purchase
money, if any, nor shall his title to the share be affected by any
irregularity in, or invalidity of, the proceedings in reference to the
forfeiture, surrender, sale, re-allotment or disposal of the share.
TRANSFER OF SHARES
29. FORM AND EXECUTION OF TRANSFER
The instrument of transfer of a share may be in any usual form or in any other
form which the board may approve and shall be signed by or on behalf of the
transferor and, unless the share is fully paid, by or on behalf of the
transferee. An instrument of transfer need not be under seal.
30. RESTRICTIONS ON TRANSFER
Subject to Article 32 The board may, in its absolute discretion and without
giving any reason, refuse to register the transfer of a share which is not fully
paid, or does not otherwise comply with the provisions of Articles 31 or 32.
31. REGISTRATION OF TRANSFER
The directors must register the transfer of a share which is fully paid and
which:
(a) is lodged at the office or such other place as the directors may
reasonably appoint, is duly stamped and is accompanied by the certificate
for the shares to which it relates or such other evidence as the board
may reasonably require to show the right of transferor to make the
transfer;
(b) is in respect of only one class of shares; and
(c) is in favour of not more than four transferees.
32. TRANSFERS TO SECURED INSTITUTIONS
Notwithstanding anything contained in these Articles, the directors shall not
decline to and shall promptly register any transfer of shares, and they may not
suspend registration thereof where such transfer:
(a) is to any bank or institution to which such shares have been charged by
way of security, whether as agent and trustee for a group of banks or
institutions or otherwise or to any nominee or transferee of such a bank
or institution (a "Secured Institution"); or
(b) is delivered to the Company for registration by a Secured Institution or
its nominee in order to perfect its security over the shares; or
(c) is executed by a Secured Institution or its nominee pursuant to the power
of sale or other power under such security,
and furthermore notwithstanding anything to the contrary contained in these
Articles no transferor of any shares in the Company or proposed transferor of
such shares to a Secured
9
<PAGE>
Institution or its nominee and no Secured Institution or its nominee shall be
required to offer the shares which are or are to be the subject of any
transfer aforesaid to the shareholders for the time being of the Company or
any of them, and no such shareholder shall have any right under the Articles
of Association or otherwise howsoever to require such shares to be
transferred to them whether for consideration or not.
33. NOTICE OF REFUSAL TO REGISTER
If the board refuses to register the transfer, it shall within 30 days after the
date on which the instrument of transfer was lodged with the Company send to the
transferee notice of the refusal.
34. NO FEE PAYABLE ON REGISTRATION
No fee shall be charged for the registration of any instrument of transfer or
other document relating to or affecting the title to any share.
35. RETENTION OF TRANSFERS
The Company shall be entitled to retain any instrument of transfer which is
registered, but any instrument of transfer which the board refuses to register
shall be returned to the person lodging it when notice of the refusal is given.
TRANSMISSION OF SHARES
36. TRANSMISSION
If a member dies the survivor or survivors where he was a joint holder, and his
personal representatives where he was a sole holder or the only survivor of
joint holders, shall be the only persons recognised by the Company as having any
title to his interest; but nothing herein contained shall release the estate of
a deceased member (whether a sole or joint holder) from any liability in respect
of any share held by him.
37. ELECTIONS FOLLOWING TRANSMISSION
A person becoming entitled to a share in consequence of the death or bankruptcy
of a member or otherwise by operation of law may, upon such evidence being
produced as the board may properly require as to his entitlement, elect either
to become the holder of the share or to have some person nominated by him
registered as the transferee. If he elects to become the holder he shall give
notice to the Company to that effect. If he elects to have another person
registered, he shall execute an instrument of transfer of the share to that
person. All the provisions of these Articles relating to the transfer of shares
shall apply to any such notice or instrument of transfer as if it were an
instrument of transfer executed by the member and the death or bankruptcy of the
member or other event giving rise to the transmission had not occurred.
The board may at any time give notice requiring any such person to elect either
to be registered himself or to transfer the share and if the notice is not
complied with within sixty days the board may thereafter withhold payment of all
dividends or other moneys payable in respect of the share until the requirements
of the notice have been complied with.
38. RIGHTS OF PERSONS ENTITLED BY TRANSMISSION
A person becoming entitled to a share in consequence of the death or bankruptcy
of a member or otherwise by operation of law shall, upon such evidence being
produced as the board may properly require as to his entitlement and subject to
the requirements of Article 37, have the same
10
<PAGE>
rights in relation to the share as he would have had if he were the holder of
the share, and may give a discharge for all dividends and other moneys
payable in respect of the share, but he shall not, before being registered as
the holder of the share, be entitled in respect of it to receive notice of or
to attend or vote at any meeting of the Company or to receive notice of or to
attend or vote at any separate meeting of the holders of any class of shares
in the Company.
ALTERATION OF SHARE CAPITAL
39. ALTERATIONS PERMITTED BY ORDINARY RESOLUTION
The Company may by ordinary resolution:
(a) increase its share capital by such sum to be divided into shares of such
amount as the resolution prescribes;
(b) consolidate and divide all or any of its share capital into shares of
larger amount than its existing shares;
(c) subject to the provisions of the Companies Acts, sub-divide its shares,
or any of them, into shares of smaller amount than is fixed by the
Memorandum and the resolution may determine that, as between the shares
resulting from the sub-division, any of them may have any preference or
advantage as compared with the others; and
(d) cancel shares which, at the date of the passing of the resolution, have
not been taken or agreed to be taken by any person and diminish the
amount of its share capital by the amount of the shares so cancelled.
40. NEW SHARES SUBJECT TO THESE ARTICLES
All new shares shall be subject to the provisions of these Articles with
reference to payment of calls, lien, forfeiture, transfer, transmission and
otherwise, and, unless otherwise provided by these Articles, by the resolution
creating the new shares or by the conditions of issue, the new shares shall be
unclassified shares.
41. FRACTIONS ARISING
Whenever as a result of a consolidation or sub-division of shares any fractions
arise, the board may settle the matter in any manner it deems fit and in
particular may sell shares representing fractions to which any members would
otherwise become entitled to any person (including, subject to the provisions of
the Companies Acts, the Company) and distribute the net proceeds of sale in due
proportion among those members, and the board may authorise some person to
execute an instrument of transfer of the shares to, or in accordance with the
directions of, the purchaser. The transferee shall not be bound to see to the
application of the purchase moneys nor shall his title to the shares be affected
by any irregularity in or invalidity of the proceedings in relation to the sale.
42. POWER TO REDUCE CAPITAL
Subject to the provisions of the Companies Acts, the Company may by special
resolution reduce its share capital, any capital redemption reserve and any
share premium account in any way.
11
<PAGE>
PURCHASE OF OWN SHARES
43. POWER TO PURCHASE OWN SHARES
Subject to and in accordance with the provisions of the Companies Acts and
without prejudice to any relevant special rights attached to any class of
shares, the Company may purchase any of its own shares of any class (including
redeemable shares) and, if it is a private company, make a payment in respect of
the redemption or purchase of its own shares otherwise than out of distributable
profits of the company or the proceeds of a fresh issue of shares, at any price
(whether at par or above or below par), and so that any shares to be so
purchased may be selected in any manner whatsoever. Every contract for the
purchase of, or under which the Company may become entitled or obliged to
purchase, shares in the Company shall be authorised by such resolution of the
Company as may be required by the Companies Acts and by an extraordinary
resolution passed at a separate general meeting of the holders of each class of
shares (if any) which, at the date on which the contract is authorised by the
Company in general meeting, entitle them, either immediately or at any time
later on, to convert all or any of the shares of that class held by them into
equity share capital of the Company.
GENERAL MEETINGS
44. TYPES OF GENERAL MEETING
All general meetings of the Company other than annual general meetings shall be
called extraordinary general meetings.
45. ANNUAL GENERAL MEETINGS
The board shall convene and the Company shall hold general meetings as annual
general meetings in accordance with the requirements of the Act.
46. CLASS MEETINGS
All provisions of these Articles relating to general meetings of the Company
shall, mutatis mutandis, apply to every separate general meeting of the holders
of any class of shares in the capital of the Company, except that:
(a) the necessary quorum shall be two persons holding or representing by
proxy at least one-third in nominal value of the issued shares of the
class or, at any adjourned meeting of such holders, one holder present in
person or by proxy, whatever the amount of his holding, who shall be
deemed to constitute a meeting; and
(b) any holder of shares of the class present in person or by proxy may
demand a poll; and
(c) each holder of shares of the class shall, on a poll, have one vote in
respect of every share of the class held by him.
47. CONVENING GENERAL MEETINGS
Subject to the provisions of Article 48, the board may call general meetings
whenever and at such times and places as it shall determine and, on the
requisition of members pursuant to the provisions of the Companies Acts, shall
forthwith proceed to convene an extraordinary general
12
<PAGE>
meeting in accordance with the requirements of the Companies Acts. If there
are not within the United Kingdom sufficient directors to call a general
meeting, any director or any member of the Company may call a general meeting.
NOTICE OF GENERAL MEETINGS
48. PERIOD OF NOTICE
An annual general meeting and an extraordinary general meeting called for the
passing of a special resolution, elective resolution or a resolution appointing
a person as a director shall be called by at least twenty-one clear days'
notice. All other extraordinary general meetings shall be called by at least
fourteen clear days' notice but a general meeting may be called by shorter
notice if it is so agreed:
(a) in the case of an annual general meeting, by all the members entitled to
attend and vote thereat; and
(b) in the case of any other meeting by a majority in number of the members
having a right to attend and vote being a majority together holding not
less than ninety-five per cent. in nominal value of the shares giving
that right.
49. PROVISION OF NOTICE
Subject to the provisions of these Articles and to any restrictions imposed on
any shares, the notice shall be given to all the members, to all persons
entitled to a share in consequence of the death or bankruptcy of a member, to
each of the directors, to the auditors for the time being of the Company and if
required under the Companies Acts, the former auditors of the Company.
50. CONTENTS OF NOTICE
The notice shall specify the time and place of the meeting and, in the case of
special business, the general nature of such business. All business shall be
deemed special that is transacted at an extraordinary general meeting and also
all business that is transacted at an annual general meeting with the exception
of:-
(a) the declaration of dividends;
(b) the consideration and adoption of the accounts and balance sheet and the
reports of the directors and auditors and other documents required to be
annexed to the accounts;
(c) the appointment and re-appointment of directors;
(d) the appointment of auditors where special notice of the resolution for
such appointment is not required by the Companies Acts; and
(e) the fixing of, or the determining of the method of fixing, the
remuneration of the directors and/or auditors.
The notice shall, in the case of an annual general meeting, specify the meeting
as such, and, in the case of a meeting to pass a special, extraordinary or
elective resolution, specify the intention to propose the resolution as a
special, extraordinary, or elective resolution, as the case may be.
13
<PAGE>
The notice shall state with reasonable prominence that a member entitled to
attend and vote at the meeting being called is entitled to appoint one or
more proxies to attend and vote instead of him, and that a proxy need not
also be a member.
51. ACCIDENTAL OMISSION TO GIVE NOTICE
The accidental omission to give notice of a meeting to any person entitled to
receive the same, or the non-receipt of a notice of meeting by any such person,
shall not invalidate the proceedings at that meeting.
PROCEEDINGS AT GENERAL MEETINGS
52. QUORUM
No business shall be transacted at any general meeting unless a quorum is
present, but the absence of a quorum shall not preclude the choice or
appointment of a chairman, which shall not be treated as part of the business of
the meeting. Save as otherwise provided by these Articles, one person, if and
for so long as the Company has only one member, and one person being a member
and being a proxy for a member or two persons, if and for so long as the Company
has two or more members, entitled to vote upon the business to be transacted,
each being a member or a proxy for a member or a duly authorised representative
of a corporation, shall be a quorum.
53. IF QUORUM NOT PRESENT
If such a quorum is not present within five minutes (or such longer time not
exceeding thirty minutes as the chairman of the meeting may decide to wait) from
the time appointed for the meeting, or if during a meeting such a quorum ceases
to be present, the meeting, if convened on the requisition of members, shall be
dissolved, and in any other case shall stand adjourned to such time and place as
the chairman of the meeting may determine. If at the adjourned meeting a quorum
is not present within fifteen minutes after the time appointed for holding the
meeting, the meeting shall be dissolved.
54. CHAIRMAN
The chairman, if any, of the board or, in his absence, any deputy chairman of
the Company or, in his absence, some other director nominated by the board,
shall preside as chairman of the meeting, but if neither the chairman, deputy
chairman nor such other director (if any) is present within five minutes after
the time appointed for holding the meeting or is not willing to act as chairman,
the directors present shall elect one of their number to be chairman. If there
is only one director present and willing to act, he shall be chairman. If no
director is willing to act as chairman, or if no director is present within five
minutes after the time appointed for holding the meeting, the members present
and entitled to vote shall choose one of their number to be chairman.
55. DIRECTORS ENTITLED TO SPEAK
A director shall, notwithstanding that he is not a member, be entitled to attend
and speak at any general meeting and at any separate meeting of the holders of
any class of shares in the Company.
56. ADJOURNMENTS
The chairman may, with the consent of a meeting at which a quorum is present
(and shall if so directed by the meeting), adjourn the meeting from time to time
and from place to place, but no business shall be transacted at an adjourned
meeting other than business which might properly
14
<PAGE>
have been transacted at the meeting had the adjournment not taken place.
When a meeting is adjourned for thirty days or more or for an indefinite
period, at least seven Clear days' notice shall be given specifying the time
and place of the adjourned meeting and the general nature of the business to
be transacted. Otherwise it shall not be necessary to give any notice of an
adjournment or of the business to be transacted at an adjourned meeting.
57. AMENDMENTS TO RESOLUTIONS
If an amendment shall be proposed to any resolution under consideration but
shall in good faith be ruled out of order by the chairman of the meeting, the
proceedings on the substantive resolution shall not be invalidated by any error
in such ruling. With the consent of the chairman of the meeting, an amendment
may be withdrawn by its proposer before it is voted upon. In the case of a
resolution duly proposed as a special or extraordinary resolution, no amendment
thereto (other than a mere clerical amendment to correct a patent error) may in
any event be considered or voted upon.
58. METHODS OF VOTING
A resolution put to the vote of a general meeting shall be decided on a show of
hands unless, before or on the declaration of the result of a vote on the show
of hands or on the withdrawal of any other demand for a poll, a poll is duly
demanded. Subject to the provisions of the Companies Acts, a poll may be
demanded by:
(a) the chairman of the meeting; or
(b) at least two members present in person or by proxy having the right to
vote at the meeting; or
(c) any member or members present in person or by proxy representing not less
than one-tenth of the total voting rights of all the members having the
right to vote at the meeting; or
(d) any member or members present in person or by proxy holding shares
conferring a right to vote at the meeting being shares on which an
aggregate sum has been paid up equal to not less than one-tenth of the
total sum paid up on all the shares conferring that right,
and a demand by a person as proxy for a member shall be the same as a demand by
the member.
59. DECLARATION OF RESULT
Unless a poll is duly demanded a declaration by the chairman that a resolution
has been carried or carried unanimously, or by a particular majority, or lost,
or not carried by a particular majority and an entry to that effect in the
minutes of the meeting shall be conclusive evidence of the fact without proof of
the number or proportion of the votes recorded in favour of or against the
resolution.
60. WITHDRAWAL OF DEMAND FOR POLL
The demand for a poll may, before the poll is taken, be withdrawn but only with
the consent of the chairman and a demand so withdrawn shall not be taken to have
invalidated the result of a show of hands declared before the demand was made.
If the demand for a poll is withdrawn, the chairman or any other member entitled
may demand a poll.
15
<PAGE>
61. CONDUCT OF POLL
A poll shall be taken as the chairman directs and he may appoint scrutineers
(who need not be members) and fix a time and place for declaring the result of
the poll. The result of the poll shall be deemed to be the resolution of the
meeting at which the poll was demanded.
62. CHAIRMAN'S CASTING VOTE
In the case of an equality of votes, whether on a show of hands or on a poll,
the chairman shall not be entitled to a casting vote in addition to any other
vote he may have.
63. WHEN POLL TO BE TAKEN
A poll demanded on the election of a chairman or on a question of adjournment
shall be taken forthwith. A poll demanded on any other question shall be taken
either forthwith or at such time and place as the chairman directs not being
more than thirty days after the poll is demanded. The demand for a poll shall
not prevent the continuance of a meeting for the transaction of any business
other than the question on which the poll was demanded. If a poll is demanded
before the declaration of the result of a show of hands and the demand is duly
withdrawn, the meeting shall continue as if the demand had not been made.
64. NOTICE OF POLL
No notice need be given of a poll not taken forthwith if the time and place at
which it is to be taken are announced at the meeting at which it is demanded.
In any other case at least seven clear days' notice shall be given specifying
the time and place at which the poll is to be taken.
65. EFFECTIVENESS OF SPECIAL AND EXTRAORDINARY RESOLUTIONS
Where for any purpose an ordinary resolution of the Company is required, a
special or extraordinary resolution shall also be effective and where for any
purpose an extraordinary resolution is required a special resolution shall also
be effective.
66. RESOLUTIONS IN WRITING
Subject to the provisions of the Companies Acts, a resolution in writing
executed by or on behalf of each member who would have been entitled to vote
upon it if it had been proposed at a general meeting at which he was present
shall be as effectual as if it had been passed at a general meeting properly
convened and held and may consist of several instruments in the like form each
executed by or on behalf of one or more of the members.
VOTES OF MEMBERS
67. RIGHT TO VOTE
Subject to any rights or restrictions attached to any shares, on a show of hands
every member who is present in person or by proxy shall have one vote and on a
poll every member present in person or by proxy shall have one vote for every
share of which he is the holder.
68. VOTES OF JOINT HOLDERS
In the case of joint holders of a share the vote of the senior who tenders a
vote, whether in person or by proxy, shall be accepted to the exclusion of the
votes of the other joint holders and for this purpose seniority shall be
determined by the order in which the names of the holders stand in the register.
16
<PAGE>
69. MEMBER UNDER INCAPACITY
A member in respect of whom an order has been made by any court or official
having jurisdiction (whether in the United Kingdom or elsewhere) in matters
concerning mental disorder may vote, whether on a show of hands or on a poll, by
his receiver, curator bonis or other person authorised in that behalf appointed
by that court or official, and any such receiver, curator bonis or other person
may, on a poll, vote by proxy. Evidence to the satisfaction of the board of the
authority of the person claiming to exercise the right to vote shall be
deposited at the office, or at such other place as is specified in accordance
with these Articles for the deposit of instruments of proxy, not less than 48
hours before the time appointed for holding the meeting or adjourned meeting at
which the right to vote is to be exercised and in default the right to vote
shall not be exercisable.
70. CALLS IN ARREARS
No member shall be entitled to vote at any general meeting or at any separate
meeting of the holders of any class of shares in the Company, either in person
or by proxy, in respect of any share held by him unless all moneys presently
payable by him in respect of that share have been paid.
71. OBJECTION TO VOTING
No objection shall be raised to the qualification of any voter except at the
meeting or adjourned meeting or poll at which the vote objected to is tendered,
and every vote not disallowed at such meeting shall be valid. Any objection
made in due time shall be referred to the chairman whose decision shall be final
and conclusive.
72. SUPPLEMENTARY PROVISIONS ON VOTING
On a poll votes may be given either personally or by proxy. A member entitled to
more than one vote need not, if he votes, use all his votes or cast all the
votes he uses in the same way.
PROXIES AND CORPORATE REPRESENTATIVES
73. APPOINTMENT OF PROXY
An instrument appointing a proxy shall be in writing under the hand of the
appointor or his attorney or, if the appointor is a corporation, either under
its common seal or the hand of a duly authorised officer, attorney or other
person authorised to sign it.
74. FORM OF PROXY - STANDARD
The instrument appointing a proxy shall be executed by or on behalf of the
appointer and shall be in the following form (or in a form as near thereto as
circumstances allow or in any other form which is usual or which the directors
may approve):
"______________________ Limited
I/We, _____ _____ , of _____ _____ _____ being a member/members of the
above-named company, hereby appoint _____ _____ of _____ _____ _____, or
failing him, _____ _____ of _____ _____ _____, as my/our proxy to vote in
my/our names[s] and on my/our behalf at the annual/extraordinary general
meeting of the company to be held on _____ _____ 19__, and at any
adjournment thereof.
17
<PAGE>
Signed on _____ _____ 19__."
75. FORM OF PROXY - EACH WAY
Where it is desired to afford members an opportunity of instructing the proxy
how he shall act the instrument appointing a proxy shall be in the following
form (or in a form as near thereto as circumstances allow or in any other form
which is usual or which the directors may approve):
"_____________________ Limited
I/We, _____ _____ , of _____ _____ _____ being a member/members of the
above-named company, hereby appoint _____ _____ of _____ _____ _____, or
failing him, _____ _____ of _____ _____ _____, as my/our proxy to vote in
my/our names[s] and on my/our behalf at the annual/extraordinary general
meeting of the company to be held on _____ _____ 19__, and at any
adjournment thereof.
Signed on _____ _____ 19__."
This form is to be used in respect of the resolutions mentioned below as
follows:
Resolution No.1 *for*against
Resolution No.2 *for*against.
*Strike out whichever is not desired.
Unless otherwise instructed, the proxy may vote as he thinks fit or
abstain from voting.
Signed on _____ _____ 19__."
76. VOTING BY APPOINTOR
Delivery of an instrument appointing a proxy shall not preclude a member from
attending and voting in person at the meeting or poll concerned. A member may
appoint more than one proxy to attend on the same occasion.
77. DELIVERY OF FORM OF PROXY
The instrument appointing a proxy and any power of attorney or other written
authority under which it is executed or an office or notarially certified copy
or a copy certified in accordance with the Powers of Attorney Act 1971 of such
power or written authority shall be deposited at the office or at such other
place within the United Kingdom as is specified in the notice convening the
meeting or in any instrument of proxy sent out by the Company in relation to the
meeting not less than 48 hours before the time appointed for holding the meeting
or adjourned meeting at which the person named in the instrument proposes to
vote and an instrument of proxy which is not deposited or delivered in a manner
so permitted shall be invalid. No instrument of proxy shall be valid after the
expiration of twelve months from the date stated in it as the date of its
execution. When two or more valid but differing instruments of proxy are
delivered in respect of the same share for use at the same meeting, the one
which was delivered last (regardless of its date or of the date of its
execution) shall be treated as replacing and revoking the others as regards that
share; if the Company is unable to determine which was delivered last, none of
them shall be treated as valid in respect of that share.
18
<PAGE>
78. VALIDITY OF FORM OF PROXY
The instrument of proxy shall, unless the contrary is stated in it, be deemed
to confer authority to vote as the proxy thinks fit on any amendment of a
resolution put to the meeting for which the proxy is given and on any resolution
put to the meeting, whether or not notice of such resolution was given in the
notice of meeting. The instrument of proxy shall, unless the contrary is stated
therein, be valid as well for any adjournment of the meeting as for the meeting
to which it relates.
79. CORPORATE REPRESENTATIVES
Any corporation or corporation sole which is a member of the Company may (in the
case of a corporation, by resolution of its directors or other governing body or
by authority to be given under seal or under the hand of an officer duly
authorised by it) authorise such person as it thinks fit to act as its
representative at any meeting of the Company or at any separate meeting of the
holders of any class of shares. A person so authorised shall be entitled to
exercise the same power on behalf of the grantor of the authority as the grantor
could exercise if it were an individual member of the Company and the grantor
shall for the purposes of these Articles be deemed to be present in person at
any such meeting if a person so authorised is present at it.
80. REVOCATION OF AUTHORITY
A vote given or poll demanded by proxy or by the duly authorised representative
of a corporation shall be valid notwithstanding the previous determination of
the authority of the person voting or demanding a poll unless notice of the
determination was received by the Company at the office or at such other place
at which the instrument of proxy was duly deposited before the commencement of
the meeting or adjourned meeting at which the vote is given or the poll demanded
or (in the case of a poll taken otherwise than on the same day as the meeting or
adjourned meeting) the time appointed for taking the poll.
NUMBER OF DIRECTORS
81. LIMITS ON NUMBER OF DIRECTORS
Unless otherwise determined by ordinary resolution, the number of directors
(other than alternate directors) shall be not less than one but shall not be
subject to any maximum in number. Wheresoever the minimum number of directors
shall be one, a sole director shall have authority to exercise all the powers
and discretions by the Act and/or by these expressed to be vested in the
directors generally.
APPOINTMENT AND RETIREMENT OF DIRECTORS
82. NO RETIREMENT BY ROTATION
The directors shall not be required to retire by rotation.
83. ELIGIBILITY FOR ELECTION
No person shall be appointed a director at any general meeting unless:
(a) he is recommended by the board; or
19
<PAGE>
(b) not less than six nor more than thirty-five Clear days before the date
appointed for the meeting, notice executed by a member qualified to vote
at the meeting (not being the person to be proposed) has been given to
the Company of the intention to propose that person for appointment
stating the particulars which would, if he were so appointed or
reappointed, be required to be included in the Company's register of
directors, together with notice executed by that person of his
willingness to be appointed.
84. NOTICE
Not less than seven nor more than twenty-eight clear days before the date
appointed for holding a general meeting notice shall be given to all who are
entitled to receive notice of the meeting of any person who is recommended by
the directors for appointment as a director at the meeting or in respect of whom
notice has been duly given to the company of the intention to propose him at the
meeting for appointment or reappointment as a director. The notice shall give
the particulars of that person which would, if he were so appointed, be required
to be included in the company's register of directors.
85. ADDITIONAL POWERS OF THE COMPANY
Subject as aforesaid, the Company may appoint a person who is willing to act to
be a director either to fill a vacancy or as an additional director:
(a) by ordinary resolution of the members in general meeting; or
(b) by notice in writing left at the registered office.
86. APPOINTMENT BY BOARD
The board may appoint a person who is willing to act to be a director, either to
fill a vacancy or as an additional director, provided that the appointment does
not cause the number of directors to exceed the number, if any, fixed by or in
accordance with these Articles as the maximum number of directors. A director
so appointed shall hold office only until the next following annual general
meeting. If not reappointed at such annual general meeting, he shall vacate
office at the conclusion thereof.
87. AGE LIMIT
No person shall be disqualified from being appointed or reappointed a director,
and no director shall be required to vacate that office, by reason only of the
fact that he has attained the age of seventy years or any other age nor shall it
be necessary by reason of his age to give special notice under the Companies
Acts of any resolution. Where the board convenes any general meeting of the
Company at which (to the knowledge of the board) a director will be proposed for
appointment or reappointment who at the date for which the meeting is convened
will have attained the age of seventy years or more, the board shall give notice
of his age in years in the notice convening the meeting or in any document
accompanying the notice, but the accidental omission to do so shall not
invalidate any proceedings, or any appointment or reappointment of that
director, at that meeting.
88. NO SHARE QUALIFICATION
A director shall not be required to hold any shares of the Company by way of
qualification.
20
<PAGE>
ALTERNATE DIRECTORS
89. POWER TO APPOINT ALTERNATES
Any director (other than an alternate director) may appoint any other director,
or any other person approved by resolution of the board and willing to act, to
be an alternate director and may remove from office an alternate director so
appointed by him.
90. ALTERNATES ENTITLED TO RECEIVE NOTICE
An alternate director shall be entitled to receive notice of all meetings of the
board and of all meetings of committees of the board of which his appointor is a
member, to attend and vote at any such meeting at which his appointor is not
personally present, and generally to perform all the functions of his appointor
(except as regards power to appoint an alternate) as a director in his absence.
It shall not be necessary to give notice of such a meeting to an alternate
director who is absent from the United Kingdom.
91. ALTERNATES REPRESENTING MORE THAN ONE DIRECTOR
A director or any other person may act as alternate director to represent more
than one director, and an alternate director shall be entitled at meetings of
the board or any committee of the board to one vote for every director whom he
represents (and who is not present) in addition to his own vote (if any) as a
director, but he shall count as only one for the purpose of determining whether
a quorum is present.
92. EXPENSES AND REMUNERATION OF ALTERNATES
An alternate director may be repaid by the Company such expenses as might
properly have been repaid to him if he had been a director but shall not in
respect of his services as an alternate director be entitled to receive any
remuneration from the Company [except such part (if any) of the remuneration
otherwise payable to his appointer as such appointer may by notice in writing to
the Company from time to time direct]. An alternate director shall be entitled
to be indemnified by the Company to the same extent as if he were a director.
93. TERMINATION OF APPOINTMENT
An alternate director shall cease to be an alternate director:
(a) if his appointor ceases to be a director; but, if a director retires by
rotation or otherwise but is reappointed or deemed to have been
reappointed at the meeting at which he retires, any appointment of an
alternate director made by him which was in force immediately prior to
his retirement shall continue after his reappointment;
(b) on the happening of any event which, if he were a director, would cause
him to vacate his office as director; or
(c) if he resigns his office by notice to the Company.
94. METHOD OF APPOINTMENT AND REVOCATION
Any appointment or removal of an alternate director shall be by notice to the
Company signed by the director making or revoking the appointment and shall take
effect in accordance with the terms of the notice (subject to any approval
required by Article 89) upon receipt of such notice at the office.
21
<PAGE>
95. ALTERNATE NOT AN AGENT OF APPOINTOR
Save as otherwise expressly provided in these Articles, an alternate director
shall be deemed for all purposes to be a director and, accordingly, except where
the context otherwise requires, references to a director shall be deemed to
include a reference to an alternate director. An alternate director shall alone
be responsible for his own acts and defaults and he shall not be deemed to be
the agent of the director appointing him.
POWERS OF THE BOARD
96. BUSINESS TO BE MANAGED BY BOARD
Subject to the provisions of the Companies Acts, the Memorandum and these
Articles and to any directions given by special resolution, the business of the
Company shall be managed by the board which may pay all expenses incurred in
forming and registering the Company and may exercise all the powers of the
Company. No alteration of the Memorandum or Articles and no such direction
shall invalidate any prior act of the board which would have been valid if that
alteration had not been made or that direction had not been given. The powers
given by this Article shall not be limited by any special power given to the
board by these Articles and a meeting of the board at which a quorum is present
may exercise all powers exercisable by the board.
DELEGATION OF POWERS OF THE BOARD
97. COMMITTEES OF THE BOARD
The board may delegate any of its powers to any committee consisting of one or
more directors. The board may also delegate to any director holding any
executive office such of its powers as the board considers desirable to be
exercised by him. Any such delegation shall, in the absence of express
provision to the contrary in the terms of delegation, be deemed to include
authority to sub-delegate to one or more directors (whether or not acting as a
committee) or to any employee or agent of the Company all or any of the powers
delegated and may be made subject to such conditions as the board may specify,
and may be revoked or altered. The board may co-opt on to any such committee
persons other than directors, who may enjoy voting rights in the committee. The
co-opted members shall be less than one-half of the total membership of the
committee and a resolution of any committee shall be effective only if a
majority of the members present are directors. Subject to any conditions
imposed by the board, the proceedings of a committee with two or more members
shall be governed by these Articles regulating the proceedings of directors so
far as they are capable of applying.
98. AGENTS
The board may, by power of attorney or otherwise, appoint any person or persons
to be the agent or agents of the Company for such purposes, with such powers,
authorities and discretions (not exceeding those vested in the board) and on
such conditions as the board determines, including authority for the agent or
agents to delegate all or any of his or their powers, authorities and
discretions, and may revoke or vary such delegation.
99. OFFICES INCLUDING THE TITLE "DIRECTOR"
The board may appoint any person to any office or employment having a
designation or title including the word "director" or attach to any existing
office or employment with the Company
22
<PAGE>
such a designation or title and may terminate any such appointment or the use
of any such designation or title. The inclusion of the word "director" in
the designation or title of any such office or employment shall not imply
that the holder is a director of the Company, nor shall the holder thereby be
empowered in any respect to act as, or be deemed to be, a director of the
Company for any of the purposes of these Articles.
DISQUALIFICATION AND REMOVAL OF DIRECTORS
100. DISQUALIFICATION
The office of a director shall be vacated if:
(a) he ceases to be a director by virtue of any provisions of the Companies
Acts or these Articles or he becomes prohibited by law from being a
director; or
(b) he becomes bankrupt or makes any arrangement or composition with his
creditors generally or shall apply to the court for an interim order
under section 253 of the Insolvency Act 1986 in connection with a
voluntary arrangement under that Act; or
(c) he is, or may be, suffering from mental disorder and either:
(i) he is admitted to hospital in pursuance of an application for
admission for treatment under the Mental Health Act 1983 or, in
Scotland, an application for admission under the Mental Health
(Scotland) Act 1960; or
(ii) an order is made by a court having jurisdiction (whether in the
United Kingdom or elsewhere) in matters concerning mental disorder
for his detention or for the appointment of a receiver, curator
bonis or other person to exercise powers with respect to his
property or affairs; or
(d) (not being a director holding office as such for a fixed term) he resigns
his office by notice to the Company; or
(e) he shall for more than six consecutive months have been absent without
permission of the board from meetings of the board held during that
period and his alternate director (if any) shall not during such period
have attended in his stead and the board resolves that his office be
vacated.
101. POWER OF COMPANY TO REMOVE DIRECTOR
Subject to the provisions of the Companies Acts a director may be removed from
office forthwith by:-
(a) (and notwithstanding any provision of these Articles or of any
agreement between the Company and such director but without
prejudice to any claim he may have for damages for breach of any
such agreement) ordinary resolution of the members of the Company
passed at a general meeting of which special notice has been
given;
(b) written resolution of the members of the Company; or
23
<PAGE>
(c) notice in writing left at the registered office of the Company and
signed by the holder(s) of not less than 75% of the voting rights
attaching to the shares for the time being issued.
REMUNERATION OF NON-EXECUTIVE DIRECTORS
102. ORDINARY REMUNERATION
The ordinary remuneration of the directors who do not hold executive office for
their services (excluding amounts payable under any other provision of these
Articles) shall not exceed in aggregate L10,000 per annum or such higher amount
as the Company may from time to time by ordinary resolution determine. Subject
thereto, each such director shall be paid a fee (which shall be deemed to accrue
from day to day) at such rate as may from time to time be determined by the
board.
103. ADDITIONAL REMUNERATION FOR SPECIAL SERVICES
Any director who does not hold executive office and who serves on any committee
of the directors, by the request of the board goes or resides abroad for any
purpose of the Company or otherwise performs special services which in the
opinion of the directors are outside the scope of the ordinary duties of a
director, may (without prejudice to the provisions of Article 102) be paid such
extra remuneration by way of salary, commission or otherwise as the board may
determine.
DIRECTORS' EXPENSES
104. DIRECTORS MAY BE PAID EXPENSES
The directors may be paid all travelling, hotel, and other expenses properly
incurred by them in connection with their attendance at meetings of the board or
committees of the board or general meetings or separate meetings of the holders
of any class of shares or of debentures of the Company or otherwise in
connection with the discharge of their duties.
EXECUTIVE DIRECTORS
105. APPOINTMENT TO EXECUTIVE OFFICE
Subject to the provisions of the Companies Acts, the board may appoint one or
more of its body to be the holder of any executive office (except that of
auditor) under the Company and may enter into an agreement or arrangement with
any director for his employment by the Company or for the provision by him of
any services outside the scope of the ordinary duties of a director. Any such
appointment, agreement or arrangement may be made upon such terms, including
terms as to remuneration, as the board determines, and any remuneration which is
so determined may be in addition to or in lieu of any ordinary remuneration as a
director. The board may revoke or vary any such appointment but without
prejudice to any rights or claims which the person whose appointment is revoked
or varied may have against the Company by reason thereof.
106. TERMINATION OF APPOINTMENT TO EXECUTIVE OFFICE
Any appointment of a director to an executive office shall terminate if he
ceases to be a director but without prejudice to any rights or claims which he
may have against the Company by reason
24
<PAGE>
of such cesser. A director appointed to an executive office shall not ipso
facto cease to be a director if his appointment to such executive office
terminates.
107. EMOLUMENTS TO BE DETERMINED BY THE BOARD
The emoluments of any director holding executive office for his services as such
shall be determined by the board, and may be of any description, and (without
limiting the generality of the foregoing) may include admission to or
continuance of membership of any scheme (including any share acquisition scheme)
or fund instituted or established or financed or contributed to by the Company
for the provision of pensions, life assurance or other benefits for employees or
their dependants, or the payment of a pension or other benefits to him or his
dependants on or after retirement or death, apart from membership of any such
scheme or fund.
DIRECTORS' INTERESTS
108. DIRECTORS MAY CONTRACT WITH THE COMPANY
Subject to the provisions of the Companies Acts, and provided that he has
disclosed to the board the nature and extent of any material interest of his, a
director notwithstanding his office:
(a) may be a party to, or otherwise interested in, any transaction or
arrangement with the Company or in which the Company is otherwise
interested;
(b) may act by himself or his firm in a professional capacity for the Company
(otherwise than as auditor) and he or his firm shall be entitled to
remuneration for professional services as if he were not a director;
(c) may be a director or other officer of, or employed by, or a party to any
transaction or arrangement with, or otherwise interested in, any body
corporate promoted by the Company or in which the Company is otherwise
interested; and
(d) shall not, by reason of his office, be accountable to the Company for any
benefit which he derives from any such office or employment or from any
such transaction or arrangement or from any interest in any such body
corporate and no such transaction or arrangement shall be liable to be
avoided on the ground of any such interest or benefit.
109. NOTIFICATION OF INTERESTS
For the purposes of Article 108:
(a) a general notice given to the board that a director is to be regarded as
having an interest of the nature and extent specified in the notice in
any transaction or arrangement in which a specified person or class of
persons is interested shall be deemed to be a disclosure that the
director has an interest in any such transaction of the nature and extent
so specified; and
(b) an interest of which a director has no knowledge and of which it is
unreasonable to expect him to have knowledge shall not be treated as an
interest of his.
25
<PAGE>
110. EXERCISE BY COMPANY OF VOTING RIGHTS
The board may exercise the voting power conferred by the shares in any body
corporate held or owned by the Company in such manner in all respects as it
thinks fit (including the exercise thereof in favour of any resolution
appointing its members or any of them directors of such body corporate, or
voting or providing for the payment of remuneration to the directors of such
body corporate).
GRATUITIES, PENSIONS AND INSURANCE
111. GRATUITIES AND PENSIONS
The board may (by establishment of or maintenance of schemes or otherwise)
provide benefits, whether by the payment of gratuities or pensions or by
insurance or otherwise, for any past or present director or employee of the
Company or any of its subsidiaries or any body corporate associated with, or any
business acquired by, any of them, and for any member of his family (including a
spouse and a former spouse) or any person who is or was dependent on him, and
may (as well before as after he ceases to hold such office or employment)
contribute to any fund and pay premiums for the purchase or provision of any
such benefit.
112. INSURANCE
Without prejudice to the provisions of Article 154, the board shall have the
power to purchase and maintain insurance for or for the benefit of any persons
who are or were at any time directors, officers, or employees or auditors of the
Company, or of any other company which is its holding company or in which the
Company or such holding company has any interest whether direct or indirect or
which is in any way allied to or associated with the Company, or of any
subsidiary undertaking of the Company or any such other company, or who are or
were at any time trustees of any pension fund or employee share scheme in which
employees of the Company or any such other company or subsidiary undertaking are
interested, including (without prejudice to the generality of the foregoing)
insurance against any liability incurred by such persons in respect of any act
or omission in the actual or purported execution or discharge of their duties or
in the exercise or purported exercise of their powers or otherwise in relation
to their duties, powers or offices in relation to the Company or any such other
company, subsidiary undertaking, pension fund or employee share scheme.
113. DIRECTORS NOT LIABLE TO ACCOUNT
No director or former director shall be accountable to the Company or the
members for any benefit provided pursuant to this Article and the receipt of any
such benefit shall not disqualify any person from being or becoming a director
of the Company.
PROCEEDINGS OF DIRECTORS
114. CONVENING MEETINGS
Subject to the provisions of these Articles, the board may regulate its
proceedings as it thinks fit. A director may, and the secretary at the request
of a director shall, call a meeting of the board. Notice of a board meeting
shall be deemed to be properly given to a director if it is given to him
personally or by word of mouth or sent in writing to him at his last known
address or any other
26
<PAGE>
address given by him to the Company for this purpose. Questions arising at a
meeting shall be decided by a majority of votes. In the case of an equality
of votes, the chairman shall have a second or casting vote. Any director may
waive notice of a meeting and any such waiver may be retrospective.
115. QUORUM
The quorum for the transaction of the business of the board may be fixed by the
board and unless so fixed at any other number shall be two. A person who holds
office only as an alternate director shall, if his appointor is not present, be
counted in the quorum. Any director who ceases to be a director at a board
meeting may continue to be present and to act as a director and be counted in
the quorum until the termination of the board meeting if no director objects.
116. POWERS OF DIRECTORS IF NUMBER FALLS BELOW MINIMUM
The continuing directors or a sole continuing director may act notwithstanding
any vacancies in their number, but, if the number of directors is less than the
number fixed as the minimum, the continuing directors or director may act only
for the purpose of filling vacancies or of calling a general meeting.
117. CHAIRMAN AND DEPUTY CHAIRMAN
The board may appoint one of their number to be the chairman, and one of their
number to be the deputy chairman, of the board and may at any time remove either
of them from such office. Unless he is unwilling to do so, the director
appointed as chairman, or in his stead the director appointed as deputy
chairman, shall preside at every meeting of the board at which he is present.
If there is no director holding either of those offices, or if neither the
chairman nor the deputy chairman is willing to preside or neither of them is
present within five minutes after the time appointed for the meeting, the
directors present may appoint one of their number to be chairman of the meeting.
118. VALIDITY OF ACTS OF THE BOARD
All acts done by a meeting of the board, or of a committee of the board, or by a
person acting as a director or alternate director, shall, notwithstanding that
it be afterwards discovered that there was a defect in the appointment of any
director or any member of the committee or alternate director or that any of
them were disqualified from holding office, or had vacated office, or were not
entitled to vote, be as valid as if every such person had been duly appointed
and was qualified and had continued to be a director or, as the case may be, an
alternate director and had been entitled to vote.
119. RESOLUTIONS IN WRITING
A resolution in writing signed by all the directors entitled to receive notice
of a meeting of the board or of a committee of the board (not being less than
the number of directors required to form a quorum of the board) shall be as
valid and effectual as if it had been passed at a meeting of the board or (as
the case may be) a committee of the board duly convened and held and for this
purpose:
(a) a resolution may consist of several documents to the same effect each
signed by one or more directors;
(b) a resolution signed by an alternate director on behalf of his appointor
need not also be signed by his appointor; and
27
<PAGE>
(c) a resolution signed by a director who has appointed an alternate director
need not also be signed by the alternate director in that capacity.
120. MEETINGS BY TELEPHONE, ETC.
Without prejudice to the first sentence of Article 115, a meeting of the board
or of a committee of the board may consist of a conference between directors who
are not all in one place, but of whom each is able (directly by telephonic
communication, video link or via the internet) to speak to each of the others,
and to be heard by each of the others simultaneously. A director taking part in
such a conference shall be deemed to be present in person at the meeting and
shall be entitled to vote or be counted in a quorum accordingly. Such a meeting
shall be deemed to take place where the largest group of those participating in
the conference is assembled, or, if there is no such group, where the chairman
of the meeting then is. The word MEETING in these Articles shall be construed
accordingly.
121. DIRECTORS' POWER TO VOTE ON CONTRACTS IN WHICH THEY ARE INTERESTED
Save as otherwise provided by these Articles, a director may vote at a meeting
of the board or a committee of the board on any resolution of the board
concerning a matter in which he has, directly or indirectly, any kind of
interest whatsoever, and if he shall vote on any such resolution as aforesaid
his vote shall be counted; and in relation to any such vote as aforesaid he
shall (whether or not he shall vote on the same) be taken into account in the
quorum present at the meeting.
122. EXCLUSION OF DIRECTOR FROM QUORUM
A director shall not be counted in the quorum present at a meeting in relation
to a resolution on which he is not entitled to vote.
123. AMENDMENT OF RESTRICTIONS ON VOTING
The Company may by ordinary resolution suspend or relax to any extent, either
generally or in respect of any particular matter, any provision of these
Articles prohibiting a director from voting at a meeting of the board or of a
committee of the board, or ratify any transaction not duly authorised by reason
of a contravention of any such provision.
124. DIVISION OF PROPOSALS
Where proposals are under consideration concerning the appointment (including
fixing or varying the terms of appointment) of two or more directors to offices
or employments with the Company or any body corporate in which the Company is
interested, the proposals may be divided and considered in relation to each
director separately and in such cases each of the directors concerned shall be
entitled to vote and be counted in the quorum in respect of each resolution
except that concerning his own appointment.
125. DECISION OF CHAIRMAN FINAL AND CONCLUSIVE
If a question arises at a meeting of the board or of a committee of the board as
to the entitlement of a director to vote or be counted in a quorum, the question
may, before the conclusion of the meeting, be referred to the chairman of the
meeting and his ruling in relation to any director other than himself shall be
final and conclusive except in a case where the nature or extent of the
interests of the director concerned have not been fairly disclosed. If any such
question arises in respect of the chairman of the meeting, it shall be decided
by resolution of the board (on which the chairman shall not vote) and such
resolution will be final and conclusive except in a case where the nature and
extent of the interests of the chairman have not been fairly disclosed.
28
<PAGE>
SECRETARY
126. APPOINTMENT AND REMOVAL OF SECRETARY
Subject to the provisions of the Companies Acts, the secretary shall be
appointed by the board for such term, at such remuneration and upon such
conditions as it may think fit; and any secretary so appointed may be removed by
the board, but without prejudice to any claim for damages for breach of any
contract of service between him and the Company.
MINUTES
127. MINUTES REQUIRED TO BE KEPT
The board shall cause minutes to be made in books kept for the purpose:
(a) of all appointments of officers made by the board; and
(b) of all proceedings at meetings of the Company, of the holders of any
class of shares in the Company, of the board, and of committees of the
board, including the names of the directors present at each such meeting.
Any such minutes, if purporting to be signed by the chairman of the meeting to
which they relate or of the meeting at which they are read, shall be sufficient
evidence without any further proof of the facts therein stated.
THE SEAL
128. AUTHORITY REQUIRED FOR USE OF SEAL
The seal shall only be used by the authority of a resolution of the board or of
a committee of the board. The board may determine who shall sign any instrument
to which the seal is affixed and unless otherwise so determined it shall be
signed by at least one director and the secretary or by at least two directors.
129. OFFICIAL SEAL FOR USE ABROAD
The company may exercise the powers conferred by section 39 of the Act with
regard to having an official seal for use abroad.
130. EXECUTION OF INSTRUMENT AS A DEED UNDER HAND
Where the Act so permits, any instrument signed, with the authority of a
resolution of the board or of a committee of the board, by one director and the
secretary or by two directors and expressed to be executed by the Company as a
deed shall have the same effect as if executed under the seal, provided that no
instrument which makes it clear on its face that it is intended by the persons
making it to have effect as a deed shall be signed without the authority of the
board.
131. DELIVERY OF DEEDS
A document which is executed by the Company as a deed shall not be deemed to be
delivered by the Company solely as a result of its having been executed by the
Company.
29
<PAGE>
CERTIFICATION
132. CERTIFIED COPIES
Any director or the secretary or any person appointed by the board for the
purpose shall have power to authenticate any documents affecting the
constitution of the Company and any resolutions passed by the Company or the
holders of any class of shares of the Company or the board or any committee of
the board, and any books, records, documents and accounts relating to the
business of the Company, and to certify copies thereof or extracts therefrom as
true copies or extracts. A document purporting to be a copy of a resolution, or
the minutes of or an extract from the minutes of a meeting of the Company or the
holders of any class of shares of the Company or of the board or any committee
of the board that is certified as aforesaid shall be conclusive evidence in
favour of all persons dealing with the Company upon the faith thereof that such
resolution has been duly passed or, as the case may be, that such minutes or
extract is a true and accurate record of proceedings at a duly constituted
meeting.
DIVIDENDS
133. DECLARATION OF DIVIDENDS
Subject to the provisions of the Companies Acts, the Company may by ordinary
resolution declare dividends in accordance with the respective rights of the
members, but no dividend shall exceed the amount recommended by the board.
134. INTERIM DIVIDENDS
Subject to the provisions of the Companies Acts, the board may declare and
pay interim dividends if it appears to the board that they are justified by
the profits of the Company available for distribution. If the share capital
is divided into different classes, the board may declare and pay interim
dividends on shares which confer deferred or non-preferred rights with regard
to dividend as well as on shares which confer preferential rights with regard
to dividend, but no interim dividend shall be declared or paid on shares
carrying deferred or non-preferred rights if, at the time of declaration or
payment, any preferential dividend is in arrear. The board may also declare
and pay at intervals settled by it any dividend payable at a fixed rate if it
appears to the board that the profits available for distribution justify the
payment. Provided the board acts in good faith it shall not incur any
liability to the holders of shares conferring preferred rights for any loss
they may suffer by the declaration or lawful payment of an interim dividend
on any shares having deferred or non-preferred rights.
135. APPORTIONMENT OF DIVIDENDS
Except as otherwise provided by the rights attached to shares, all dividends
shall be declared and paid according to the amounts paid up on the shares on
which the dividend is paid; but no amount paid on a share in advance of the
date on which a call is payable shall be treated for the purposes of this
Article as paid on the share. All dividends shall be apportioned and paid
proportionately to the amounts paid up on the shares during any portion or
portions of the period in respect of which the dividend is paid; but, if any
share is issued on terms providing that it shall rank for dividend as from a
particular date, that share shall rank for dividend accordingly.
136. DIVIDENDS IN SPECIE
A general meeting declaring a dividend may, upon the recommendation of the
board, by ordinary resolution direct that it shall be satisfied wholly or partly
by the distribution of assets, and in
30
<PAGE>
particular of paid up shares or debentures of any other body corporate, and,
where any difficulty arises in regard to the distribution, the board may
settle the same as it thinks fit and in particular may issue fractional
certificates or authorise any person to sell and transfer any fractions or
disregard fractions altogether, and may fix the value for distribution of any
assets and may determine that cash shall be paid to any member upon the
footing of the value so fixed in order to adjust the rights of members and
may vest any assets in trustees.
137. PERMITTED DEDUCTIONS
The board may deduct from any dividend or other moneys payable to any member in
respect of a share any moneys presently payable by him to the Company in respect
of that share.
138. PROCEDURE FOR PAYMENT
Any dividend or other moneys payable in respect of a share may be paid by cheque
or warrant sent by post to the registered address of the holder or person
entitled or, if two or more persons are the holders of the share or are jointly
entitled to it by reason of the death or bankruptcy of the holder or otherwise
by operation of law, to the registered address of that one of those persons who
is first named in the register or to such person and to such address as the
person or persons entitled may in writing direct. Every such cheque or warrant
shall be made payable to the order of the person or persons entitled or to such
other person as the person or persons entitled may in writing direct and shall
be sent at the risk of the person entitled, and payment of the cheque shall be a
good discharge to the Company. Any joint holder or other person jointly
entitled to a share as aforesaid may give receipts for any dividend or other
moneys payable in respect of the share. Any such dividend or other money may
also be paid by any other method (including direct debit, bank transfer and
dividend warrant) which the board considers appropriate.
139. INTEREST NOT PAYABLE
No dividend or other moneys payable in respect of a share shall bear interest
against the Company unless otherwise provided by the rights attached to the
share.
140. FORFEITURE OF UNCLAIMED DIVIDENDS
Any dividend which has remained unclaimed for twelve years from the date when it
became due for payment shall, if the board so resolves, be forfeited and cease
to remain owing by the Company. The payment by the board of any unclaimed
dividend or other moneys payable in respect of a share into a separate account
shall not constitute the Company a trustee thereof.
CAPITALISATION OF PROFITS AND RESERVES
141. POWER TO CAPITALISE
The board may with the authority of an ordinary resolution of the Company:
(a) subject as hereinafter provided, resolve to capitalise any undistributed
profits of the Company not required for paying any preferential dividend
(whether or not they are available for distribution) or any sum standing
to the credit of any reserve or other fund, including the Company's share
premium account and capital redemption reserve, if any;
(b) appropriate the sum resolved to be capitalised to the members or any
class of members on the record date specified in the relevant resolution
who would have been entitled to it if it were distributed by way of
dividend and in the same proportions and apply
31
<PAGE>
such sum on their behalf either in or towards paying up the amounts, if
any, for the time being unpaid on any shares held by them respectively,
or in paying up in full unissued shares, debentures or other obligations
of the Company of a nominal amount equal to that sum, and allot the
shares, debentures or other obligations credited as fully paid to those
members, or as they may direct, in those proportions, or partly in one
way and partly in the other; but the share premium account, the capital
redemption reserve, and any profits which are not available for
distribution may, for the purposes of this Article, only be applied in
paying up unissued shares to be allotted to members credited as fully
paid;
(c) make such provision by authorising the sale and transfer to any person of
fractions to which any members would become entitled or may issue
fractional certificates or may resolve that the distribution be made as
nearly as practicable in the correct proportion but not exactly so or may
ignore fractions altogether or resolve that cash payments be made to any
members in order to adjust the rights of all parties or otherwise as (in
each case) the board determines where shares or debentures become, or
would otherwise become, distributable under this Article in fractions;
(d) authorise any person to enter on behalf of all the members concerned into
an agreement with the Company providing for either:-
(i) the allotment to such members respectively, credited as fully
paid, of any shares, debentures or other obligations to which they
are entitled upon such capitalisation; or
(ii) the payment up by the Company on behalf of such members (by the
application thereto of their respective proportions of the profits
resolved to be capitalised) of the amounts, or any part of the
amounts, remaining unpaid on their existing shares,
and any agreement made under such authority shall be binding on all such
members; and
(e) generally do all acts and things required to give effect to such
resolution as aforesaid.
RECORD DATES
142. RECORD DATES FOR DIVIDENDS, ETC.
Notwithstanding any other provision of these Articles, the Company or the board
may fix any date as the record date for any dividend, distribution, allotment or
issue, and such record date may be on or at any time before or after any date on
which the dividend, distribution, allotment or issue is declared, paid or made.
ACCOUNTS
143. RIGHTS TO INSPECT RECORDS
No member shall (as such) have any right of inspecting any accounting records or
other book or document of the Company except as conferred by statute or
authorised by the board or by ordinary resolution of the Company or order of a
court of competent jurisdiction.
32
<PAGE>
144. DELIVERY OF BALANCE SHEETS AND PROFIT AND LOSS ACCOUNTS
A copy of every balance sheet and profit and loss account (including any
documents required by law to be annexed thereto) which is to be laid before the
Company in general meeting and of the directors' and auditors' reports shall, at
least twenty-one days previously to the meeting, be delivered or sent by post to
every member and to every debenture holder of the Company of whose address the
Company is aware, and to every other person who is entitled to receive notice of
meetings from the Company under the provisions of the Companies Acts or of these
Articles or, in the case of joint holders of any share or debenture, to one of
the joint holders, provided that the requirements of this Article shall be
deemed satisfied in relation to any member by sending to such member, where
permitted by the Companies Acts and instead of such copies, a summary financial
statement derived from the Company's annual accounts and the report of the
directors and prepared in the form and containing the information prescribed by
the Companies Acts and any regulations made thereunder.
NOTICES
145. WHEN NOTICE REQUIRED TO BE IN WRITING
Any notice to be given to or by any person pursuant to these Articles shall be
in writing except that a notice calling a meeting of the board need not be in
writing.
146. METHOD OF GIVING NOTICE
The Company may serve or deliver any notice or other document on or to a member
either personally, by sending it by post in a prepaid envelope, or by facsimile
or telex addressed to the member at his registered address or by leaving it at
that address. In the case of joint holders of a share, all notices or other
documents shall be served on or delivered to the joint holder whose name stands
first in the register in respect of the joint holding and any notice or other
document so served or delivered shall be deemed for all purposes sufficient
service on or delivery to all the joint holders. A member whose registered
address is not within the United Kingdom and who gives to the Company an address
within the United Kingdom at which notices may be given to him shall be entitled
to have notices given to him at that address, but otherwise:
(a) no such members shall be entitled to receive any notice from the Company;
and
(b) without prejudice to the generality of the foregoing, any notice of a
general meeting of the Company which is in fact given or purports to be
given to such members shall be ignored for the purpose of determining the
validity of the proceedings at such general meeting.
147. DEEMED RECEIPT OF NOTICE
A member present, either in person or by proxy, at any meeting of the Company or
of the holders of any class of shares in the Company shall be deemed to have
received notice of the meeting and, where requisite, of the purposes for which
it was called.
148. NOTICE TO PERSONS ENTITLED BY TRANSMISSION
A notice or other document may be served or delivered by the Company on or to
the persons entitled by transmission to a share, whether in consequence of the
death or bankruptcy of a member or otherwise by sending or delivering it, in any
manner authorised by these Articles for the service or delivery of a notice or
other document on or to a member, addressed to them by
33
<PAGE>
name, or by the title of representatives of the deceased, or trustee of the
bankrupt or by any like description at the address, if any, within the United
Kingdom supplied for that purpose by the persons claiming to be so entitled.
Until such an address has been supplied, a notice or other document may be
served or delivered in any manner in which it might have been served or
delivered if the death or bankruptcy or other event giving rise to the
transmission had not occurred.
149. NOTICE TO PERSONS ENTITLED BY DEATH OR BANKRUPTCY
A notice may be given by the Company to the persons entitled to a share in
consequence of the death or bankruptcy of a member by sending or delivering it,
in any manner authorised by these Articles for the giving of notice to a member,
addressed to them by name, or by the title of representatives of the deceased,
or trustee of the bankrupt or by any like description at the address, if any,
within the United Kingdom supplied for that purpose by the persons claiming to
be so entitled. Until such an address has been supplied, a notice may be given
in any manner in which it might have been given if the death or bankruptcy had
not occurred.
150. TRANSFEREES ETC. BOUND BY PRIOR NOTICE
Every person who becomes entitled to a share shall be bound by any notice in
respect of that share which, before his name is entered in the register, has
been duly given to a person from whom he derives his title.
151. WHEN NOTICES DEEMED SERVED
Proof that an envelope containing a notice was properly addressed, prepaid and
posted shall be conclusive evidence that the notice was given. A notice sent by
post shall be deemed to be given:
(a) if sent by first class post from an address in the United Kingdom or
another country to another address in the United Kingdom or, as the case
may be, that other country, on the day following that on which the
envelope containing it was posted;
(b) if sent by airmail from an address in the United Kingdom to an address
outside the United Kingdom, on the day following that on which the
envelope containing it was posted; and
(c) in any other case, on the second day following that on which the envelope
containing it was posted.
A notice sent by facsimile transmission shall be deemed given at the time the
notice is received.
WINDING UP
152. LIQUIDATOR MAY DISTRIBUTE IN SPECIE
If the Company is wound up, the liquidator may, with the sanction of an
extraordinary resolution of the Company and any other sanction required by the
Insolvency Act 1986, divide among the members in specie the whole or any part of
the assets of the Company and may, for that purpose, value any assets and
determine how the division shall be carried out as between the members or
different classes of members. The liquidator may, with the like sanction, vest
the whole or any part of the assets in trustees upon such trusts for the benefit
of the members as he with the like sanction determines, but no member shall be
compelled to accept any assets upon which there is a liability.
34
<PAGE>
153. DISPOSAL OF ASSETS BY LIQUIDATOR
The power of sale of a liquidator shall include a power to sell wholly or
partially for shares or debentures or other obligations of another body
corporate, either then already constituted or about to be constituted for the
purpose of carrying out the sale.
INDEMNITY
154. INDEMNITY TO DIRECTORS, OFFICERS, ETC.
Subject to the provisions of the Companies Acts but without prejudice to any
indemnity to which a director may otherwise be entitled, every director or other
officer or auditor of the Company shall be indemnified out of the assets of the
Company against all costs, charges, losses, expenses and liabilities incurred by
him in the execution or discharge of his duties or the exercise of his powers or
otherwise in relation thereto, including (but without limitation) any liability
incurred by him in defending any proceedings, whether civil or criminal, in
which judgment is given in his favour (or the proceedings are otherwise disposed
of without any finding or admission of any material breach of duty on his part)
or in which he is acquitted or in connection with any application in which
relief is granted to him by the court from liability for negligence, default,
breach of duty or breach of trust in relation to the affairs of the Company.
35
<PAGE>
-------------------------------------------------------------------
Name and Address of the Signature(s) of the Subscriber(s)
Subscriber(s)
-------------------------------------------------------------------
NAME Graham Stephens Graham Stephens
ADDRESS 16 Churchill Way
Cardiff
CF1 4DX
NAME Sian Jones
ADDRESS 16 Churchill Way Sian Jones
Cardiff
CF1 4DX
-------------------------------------------------------------------
-------------------------------------------------------------------
DATED this 1st day of October 1998
Witness to the above signature: Steven Blackmore
Witness Signature: Steven Blackmore
Witness Address: 16 Churchill Way
Cardiff
CF1 4DX
36
<PAGE>
EXHIBIT 3.21
The Companies Act, 1943
-----------------
COMPANY LIMITED BY SHARES
-----------------
MEMORANDUM OF ASSOCIATION
of
PLESSEY DIAC LIMITED
-----------------
l. The Name of the Company is "DIAC (AIRCRAFT) LIMITED".
2. The Registered Office of the Company will be situated in England.
3. The Objects for which the Company is established are:
(A) To carry on all or any of the businesses of Designers,
Manufacturers, Fitters, and Repairers of and Dealers in
Components, Parts, Engines, Machinery, and other accessors,
supplies, and apparatus of every description used or required in
connection with Prototype and experimental Aircraft, Aircraft of
all types, Aeronautical Experts in all branches of the Aircraft
Industry, Aeronautical, Electrical, Motor, Consulting, Mechanical
and General Engineers, Engineering Contractors and Designers,
Electricians, Tool Makers, Metal Workers, Machinists, Wood
Workers, Wireworkers, Galvanisers, and Painters, Proprietors of
Aerodromes, Hangars, Landing Places, Piers, Jetties, Repairing and
Petrol Filling Stations, Garages, Boat Houses, Factories and
Works, and to promote, assist, and encourage by investigation,
experiment, and all other means whatsoever, aircraft construction
in all its branches.
(B) To manufacture, buy, sell, let on hire, repair, alter, adapt, and
deal in all kinds of engines, plant, machinery tools, implements,
apparatus, accessories, storage articles, substances, materials,
produce and things capable of being used in connection with the
foregoing businesses or any of them or solely to be required by
customers of or persons having dealings with the Company.
(C) To carry on any other business (whether manufacturing or
otherwise) which may seem to the Company capable of being
conveniently carried on in connection with
1
<PAGE>
the above objects, or calculated directly or indirectly to
enhance the value of or render more profitable any of the
Company's property.
(D) To purchase or by any other means acquire any freehold, leasehold,
or other property for any estate or interest whatever, and any
rights, privileges or easements over or in respect of any
property, and any buildings, offices, factories, mills, works,
wharves, roads, railways, tramways, machinery, engines, rolling
stock, vehicles, plant, live and dead stock, barges, vessels, or
things, and any real or personal property or rights whatsoever
which may be necessary for, or may be conveniently used with, or
may enhance the value of any other property of the Company.
(E) To build, construct, maintain, alter, enlarge, pull down, and
remove or replace any buildings, offices, factories, mills, works,
wharves, roads, railways, tramways, machinery, engines, walls,
fences, banks, dams, sluices, or watercourses and to clear sites
for the same or to join with any person, firm, or company in doing
any of the things aforesaid, and to work, manage, and control the
same or join with others in so doing.
(F) To apply for, register, purchase, or by other means acquire and
protect, prolong, and renew, whether in the United Kingdom, or
elsewhere, any patents, patent rights, brevets d'invention,
licences, trade marks, designs, protections, and concessions which
may appear likely to be advantageous or useful to the Company, and
to use and turn to account and to manufacture under or grant
licences or privileges in respect of the same, and to expend money
in experimenting upon and testing and in improving or seeking to
improve any patents, inventions, or rights which the Company may
acquire or propose to acquire.
(G) To acquire and undertake the whole or any part of the business,
goodwill, and assets of any person, firm or company carrying on or
proposing to carry on any of the businesses which this Company is
authorised to carry on, and as part of the consideration for such
acquisition to undertake all or any of the liabilities of such
person, firm or company, or to acquire an interest in, amalgamate
with, or enter into partnership or into any arrangement for
sharing profits, or for cooperation, or for limiting competition
or for mutual assistance with any such person, firm, or company,
and to give or accept, by way of consideration for any of the acts
or things aforesaid or property acquired, any Shares, Debentures,
Debenture Stock, or securities that may be agreed upon, and to
hold and retain, or sell mortgage, and deal with any shares,
debentures, debenture stock, or securities so received.
(H) To improve, manage, cultivate, develop, exchange, let on lease or
otherwise, mortgage, charge, sell, dispose of, turn to account,
grant rights and privileges in
2
<PAGE>
respect of, or otherwise deal with all or any part of the property
and rights of the Company.
(I) To invest and deal with the moneys of the Company not immediately
required in such shares or upon such securities and in such manner
as may from time to time be determined.
(J) To lend and advance money or give credit to such persons, firms,
or companies and on such terms as may seem expedient, and in
particular to customers of and others having dealings with the
Company, and to give guarantees or become security for any such
persons, firms, or companies.
(K) To borrow or raise money in such manner as the Company shall think
fit, and in particular by the issue of Debentures or Debenture
Stock (perpetual or otherwise), and to secure the repayment of any
money borrowed, raised, or owing, by mortgage, charge, or lien
upon the whole or any part of the Company's property or assets
(whether present or future), including its uncalled Capital and
also by a similar mortgage, charge or lien to secure and guarantee
the performance by the Company of any obligation or liability it
may undertake.
(L) To draw, make, accept, endorse, discount, execute, and issue
promissory notes, bills of exchange, bills of lading, warrants,
debentures, and other negotiable or transferable instruments.
(M) To apply for, promote, and obtain any Act of Parliament,
Provisional Order, or Licence of the Board of Trade or other
authority for enabling the Company to carry any of its objects
into effect, or for effecting any modification of the Company's
constitution, or for any other purpose which may seem expedient,
and to oppose any proceedings or applications which may seem
calculated directly or indirectly to prejudice the Company's
interests.
(N) To enter into any arrangements with any Governments or authorities
supreme, municipal, local, or otherwise, or any companies, firms,
or persons that may seem conducive to the attainment of the
Company's objects or any of them, and to obtain from any such
Government, authority, company, firm, or person any charters,
contracts, decrees, rights, privileges, and concessions which the
Company may think desirable, and to carry out, exercise, and
comply with any such charters, contracts, decrees, rights,
privileges, and concessions.
(O) To subscribe for, take, purchase, or otherwise acquire and hold
shares or other interests in or securities of any other company
having objects altogether or in part similar to those of this
Company or carrying on any business capable of being carried on so
as directly or indirectly to benefit this Company.
3
<PAGE>
(P) To act as agents or brokers and as trustees for any person, firm,
or company, and to undertake and perform sub-contracts, and also
to act in any of the businesses of the Company through or by means
of agents, brokers, sub-contractors, or others.
(Q) To remunerate any person, firm, or company rendering services to
this Company, either by cash payment or by the allotment to him or
them of Shares or securities of the Company credited as paid up in
full or in part or otherwise as may be thought expedient.
(R) To pay all or any expenses incurred in connection with the
promotion, formation, and incorporation of the Company, or to
contract with any person, firm, or company to pay the same, and to
pay commissions to brokers and others for underwriting, placing,
selling, or guaranteeing the subscription of any Shares,
Debentures, Debenture Stock, or securities of this Company.
(S) To support and subscribe to any charitable or public object, and
any institution, society, or club which may be for the benefit of
the Company or its employees, or may be connected with any town or
place where the Company carries on business, to give or award
pensions, annuities, gratuities, and superannuation or other
allowances or benefits or charitable aid to any persons who are or
have been Directors of, or who are or have been employed by, or
who are serving or have served the Company, and to the wives,
widows, children, and other relatives and dependents of such
persons; to make payments towards insurance; and to set up,
establish, support, and maintain superannuation and other funds or
schemes (whether contributory or non-contributory) for the benefit
of any of such persons and of their wives, widows, children, and
other relatives and dependents.
(T) To promote any other company for the purpose of acquiring the
whole or any part of the business or property and undertaking any
of the liabilities of this Company, or of undertaking any business
or operations which may appear likely to assist or benefit this
Company or to enhance the value of any property or business of
this Company, and to place or guarantee the placing of,
underwrite, subscribe to, or otherwise acquire all or any part of
the shares or securities of any such company as aforesaid.
(U) To sell or otherwise dispose of the whole or any part of the
business or property of the Company, either together or in
portions, for such consideration as the Company may think fit, and
in particular for shares, debentures, or securities of any company
purchasing the same.
(V) To distribute among the Members of the Company in kind any
property of the Company, and in particular any shares, debentures,
or securities of other
4
<PAGE>
companies belonging to this Company or of which this Company may
have the power of disposing.
(W) To procure the Company to be registered or recognised in any
Dominion or Dependency and in any Foreign Country or place.
(X) To do all such other things as may be deemed incidental or
conducive to the attainment of the above objects or any of them.
It is hereby expressly declared that each Sub-Clause of this Clause shall be
construed independently of the other Sub-Clauses hereof, and that none of the
objects mentioned in any Sub-Clause shall be deemed to be merely subsidiary to
the objects mentioned in any other Sub-Clause.
4. The Liability of the Members is Limited.
5. The Share Capital of the Company is One Thousand Pounds, divided into
One Thousand Shares of One Pound each.
5
<PAGE>
WE, the several persons whose Names, Addresses, and Descriptions are subscribed
are desirous of being formed into a Company in pursuance of this Memorandum of
Association; and we respectively agree to take the number of Shares in the
Capital of the Company set opposite our respective names.
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------------------------
NAMES, ADDRESSES AND DESCRIPTIONS OF SUBSCRIBERS No. of Shares taken
by each Subscriber
- ----------------------------------------------------------------------------
WILFRED THOMPSON NEWTON One
105 Kingswood Road
Bromley, Kent,
Engineer
- ----------------------------------------------------------------------------
KURT WHITBY One
30 Fitzjames Avenue
Croydon, Surrey
Timber Merchant
- ----------------------------------------------------------------------------
TOTAL SHARES TAKEN Two
- ----------------------------------------------------------------------------
</TABLE>
Dated the 1st day of July, 1955.
WITNESS to the above Signatures:
DEREK D. WILLIAMSON
6
<PAGE>
EXHIBIT 3.22
THE COMPANIES ACTS 1985 AND 1989
--------------------------------------
PRIVATE COMPANY LIMITED BY SHARES
--------------------------------------
ARTICLES OF ASSOCIATION
OF
DIAC LIMITED
--------------------------------------
(Incorporated on 14 July 1955)
--------------------------------------
Company Number: 552029
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PRELIMINARY 1
INTERPRETATION 1
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SHARE CAPITAL 3
2. Shares with special rights . . . . . . . . . . . . . . . . . . . . . 3
3. Allotment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Redeemable shares. . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. Commissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6. Trusts not recognised. . . . . . . . . . . . . . . . . . . . . . . . 4
VARIATION OF RIGHTS 4
7. Method of varying rights . . . . . . . . . . . . . . . . . . . . . . 4
8. When rights deemed to be varied. . . . . . . . . . . . . . . . . . . 4
SHARE CERTIFICATES 4
9. Members' rights to certificates . . . . . . . . . . . . . . . . . . 4
10. Replacement certificates . . . . . . . . . . . . . . . . . . . . . . 5
LIEN 5
11. Company to have lien on shares . . . . . . . . . . . . . . . . . . . 5
12. Enforcement of lien by sale. . . . . . . . . . . . . . . . . . . . . 5
13. Giving effect to sale. . . . . . . . . . . . . . . . . . . . . . . . 5
14. Application of proceeds . . . . . . . . . . . . . . . . . . . . . . 5
CALLS ON SHARES 5
15. Power to make calls. . . . . . . . . . . . . . . . . . . . . . . . . 5
16. Time when call made . . . . . . . . . . . . . . . . . . . . . . . . 6
17. Liability of joint holders . . . . . . . . . . . . . . . . . . . . . 6
18. Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . 6
19. Deemed calls . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
20. Differentiation on calls . . . . . . . . . . . . . . . . . . . . . . 6
21. Payment of calls in advance. . . . . . . . . . . . . . . . . . . . . 6
FORFEITURE AND SURRENDER 6
22. Notice requiring payment of call . . . . . . . . . . . . . . . . . . 6
23. Forfeiture for non-compliance . . . . . . . . . . . . . . . . . . . 7
24. Sale of forfeited shares . . . . . . . . . . . . . . . . . . . . . . 7
25. Liability following forfeiture . . . . . . . . . . . . . . . . . . . 7
26. Surrender. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
27. Extinction of rights . . . . . . . . . . . . . . . . . . . . . . . . 7
28. Evidence of forfeiture . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE>
<TABLE>
<S> <C>
TRANSFER OF SHARES 8
29. Form and execution of transfer . . . . . . . . . . . . . . . . . . . 8
30. Restrictions on transfer . . . . . . . . . . . . . . . . . . . . . . 8
31. Invalid transfers. . . . . . . . . . . . . . . . . . . . . . . . . . 8
32. Notice of refusal to register. . . . . . . . . . . . . . . . . . . . 8
33. Suspension of registration . . . . . . . . . . . . . . . . . . . . 9
34. No fee payable on registration . . . . . . . . . . . . . . . . . . . 9
35. Retention of transfers . . . . . . . . . . . . . . . . . . . . . . . 9
TRANSMISSION OF SHARES 9
36. Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
37. Elections following transmission . . . . . . . . . . . . . . . . . . 9
38. Rights of persons entitled by transmission . . . . . . . . . . . . . 9
ALTERATION OF SHARE CAPITAL 10
39. Alterations permitted by ordinary resolution . . . . . . . . . . . . 10
40. New shares subject to these Articles . . . . . . . . . . . . . . . . 10
41. Fractions arising. . . . . . . . . . . . . . . . . . . . . . . . . . 10
42. Power to reduce capital . . . . . . . . . . . . . . . . . . . . . . 10
PURCHASE OF OWN SHARES 11
43. Power to purchase own shares . . . . . . . . . . . . . . . . . . . . 11
GENERAL MEETINGS 11
44. Types of general meeting . . . . . . . . . . . . . . . . . . . . . . 11
45. Annual general meetings . . . . . . . . . . . . . . . . . . . . . . 11
46. Class meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
47. Convening general meetings . . . . . . . . . . . . . . . . . . . . . 11
NOTICE OF GENERAL MEETINGS 12
48. Period of notice . . . . . . . . . . . . . . . . . . . . . . . . . . 12
49. Provision of notice . . . . . . . . . . . . . . . . . . . . . . . . 12
50. Contents of notice . . . . . . . . . . . . . . . . . . . . . . . . . 12
51. Accidental omission to give notice . . . . . . . . . . . . . . . . . 13
PROCEEDINGS AT GENERAL MEETINGS 13
52. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
53. If quorum not present . . . . . . . . . . . . . . . . . . . . . . . 13
54. Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
55. Directors entitled to speak . . . . . . . . . . . . . . . . . . . . 13
56. Adjournments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
57. Amendments to resolutions . . . . . . . . . . . . . . . . . . . . . 14
58. Methods of voting . . . . . . . . . . . . . . . . . . . . . . . . . 14
59. Declaration of result . . . . . . . . . . . . . . . . . . . . . . . 14
60. Withdrawal of demand for poll . . . . . . . . . . . . . . . . . . . 14
61. Conduct of poll . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE>
<TABLE>
<S> <C>
62. Chairman's casting vote . . . . . . . . . . . . . . . . . . . . . . 15
63. When poll to be taken . . . . . . . . . . . . . . . . . . . . . . . 15
64. Notice of poll . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
65. Effectiveness of special and extraordinary resolutions . . . . . . . 15
66. Resolutions in writing . . . . . . . . . . . . . . . . . . . . . . . 15
VOTES OF MEMBERS 15
67. Right to vote . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
68. Votes of joint holders . . . . . . . . . . . . . . . . . . . . . . . 15
69. Member under incapacity . . . . . . . . . . . . . . . . . . . . . . 16
70. Calls in arrears . . . . . . . . . . . . . . . . . . . . . . . . . . 16
71. Objection to voting . . . . . . . . . . . . . . . . . . . . . . . . 16
72. Supplementary provisions on voting . . . . . . . . . . . . . . . . . 16
PROXIES AND CORPORATE REPRESENTATIVES 16
73. Appointment of proxy . . . . . . . . . . . . . . . . . . . . . . . . 16
74. Form of proxy - standard . . . . . . . . . . . . . . . . . . . . . . 16
75. Form of proxy - each way . . . . . . . . . . . . . . . . . . . . . . 17
76. Voting by appointor . . . . . . . . . . . . . . . . . . . . . . . . 17
77. Delivery of form of proxy . . . . . . . . . . . . . . . . . . . . . 17
78. Validity of form of proxy . . . . . . . . . . . . . . . . . . . . . 18
79. Corporate representatives . . . . . . . . . . . . . . . . . . . . . 18
80. Revocation of authority . . . . . . . . . . . . . . . . . . . . . . 18
NUMBER OF DIRECTORS 18
81. Limits on number of directors . . . . . . . . . . . . . . . . . . . 18
APPOINTMENT AND RETIREMENT OF DIRECTORS 18
82. No retirement by rotation . . . . . . . . . . . . . . . . . . . . . 18
83. Eligibility for election . . . . . . . . . . . . . . . . . . . . . . 18
84. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
85. Additional powers of the Company . . . . . . . . . . . . . . . . . . 19
86. Appointment by board . . . . . . . . . . . . . . . . . . . . . . . . 19
87. Age limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
88. No share qualification . . . . . . . . . . . . . . . . . . . . . . . 19
ALTERNATE DIRECTORS 20
89. Power to appoint alternates . . . . . . . . . . . . . . . . . . . . 20
90. Alternates entitled to receive notice . . . . . . . . . . . . . . . 20
91. Alternates representing more than one director . . . . . . . . . . . 20
92. Expenses and remuneration of alternates . . . . . . . . . . . . . . 20
93. Termination of appointment . . . . . . . . . . . . . . . . . . . . . 20
94. Method of appointment and revocation . . . . . . . . . . . . . . . . 20
95. Alternate not an agent of appointor . . . . . . . . . . . . . . . . 21
POWERS OF THE BOARD 21
96. Business to be managed by board . . . . . . . . . . . . . . . . . . 21
</TABLE>
<PAGE>
<TABLE>
<S> <C>
DELEGATION OF POWERS OF THE BOARD 21
97. Committees of the board . . . . . . . . . . . . . . . . . . . . . . 21
98. Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
99. Offices including the title "director" . . . . . . . . . . . . . . . 21
DISQUALIFICATION AND REMOVAL OF DIRECTORS 22
100. Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . 22
101. Power of Company to remove director . . . . . . . . . . . . . . . . 22
REMUNERATION OF NON-EXECUTIVE DIRECTORS 23
102. Ordinary remuneration . . . . . . . . . . . . . . . . . . . . . . . 23
103. Additional remuneration for special services . . . . . . . . . . . . 23
DIRECTORS' EXPENSES 23
104. Directors may be paid expenses . . . . . . . . . . . . . . . . . . . 23
EXECUTIVE DIRECTORS 23
105. Appointment to executive office . . . . . . . . . . . . . . . . . . 23
106. Termination of appointment to executive office . . . . . . . . . . . 23
107. Emoluments to be determined by the board . . . . . . . . . . . . . . 24
DIRECTORS' INTERESTS 24
108. Directors may contract with the Company . . . . . . . . . . . . . . 24
109. Notification of interests . . . . . . . . . . . . . . . . . . . . . 24
110. Exercise by Company of voting rights . . . . . . . . . . . . . . . . 25
GRATUITIES, PENSIONS AND INSURANCE 25
111. Gratuities and pensions . . . . . . . . . . . . . . . . . . . . . . 25
112. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
113. Directors not liable to account . . . . . . . . . . . . . . . . . . 25
PROCEEDINGS OF DIRECTORS 25
114. Convening meetings . . . . . . . . . . . . . . . . . . . . . . . . . 25
115. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
116. Powers of directors if number falls below minimum . . . . . . . . . 26
117. Chairman and deputy chairman . . . . . . . . . . . . . . . . . . . . 26
118. Validity of acts of the board . . . . . . . . . . . . . . . . . . . 26
119. Resolutions in writing . . . . . . . . . . . . . . . . . . . . . . . 26
120. Meetings by telephone, etc. . . . . . . . . . . . . . . . . . . . . 26
121. Directors' power to vote on contracts
in which they are interested . . . . . . . . . . . . . . . . . . 27
122. Exclusion of director from quorum . . . . . . . . . . . . . . . . . 27
123. Amendment of restrictions on voting . . . . . . . . . . . . . . . . 27
124. Division of proposals . . . . . . . . . . . . . . . . . . . . . . . 27
125. Decision of chairman final and conclusive . . . . . . . . . . . . . 27
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECRETARY 28
126. Appointment and removal of secretary . . . . . . . . . . . . . . . . 28
MINUTES 28
127. Minutes required to be kept . . . . . . . . . . . . . . . . . . . . 28
THE SEAL 28
128. Authority required for use of seal . . . . . . . . . . . . . . . . . 28
129. Official seal for use abroad . . . . . . . . . . . . . . . . . . . . 28
130. Execution of instrument as a deed under hand . . . . . . . . . . . . 28
131. Delivery of deeds . . . . . . . . . . . . . . . . . . . . . . . . . 28
CERTIFICATION 29
132. Certified copies . . . . . . . . . . . . . . . . . . . . . . . . . . 29
DIVIDENDS 29
133. Declaration of dividends . . . . . . . . . . . . . . . . . . . . . . 29
134. Interim dividends . . . . . . . . . . . . . . . . . . . . . . . . . 29
135. Apportionment of dividends . . . . . . . . . . . . . . . . . . . . . 29
136. Dividends in specie . . . . . . . . . . . . . . . . . . . . . . . . 29
137. Permitted deductions . . . . . . . . . . . . . . . . . . . . . . . . 30
138. Procedure for payment . . . . . . . . . . . . . . . . . . . . . . . 30
139. Interest not payable . . . . . . . . . . . . . . . . . . . . . . . . 30
140. Forfeiture of unclaimed dividends . . . . . . . . . . . . . . . . . 30
CAPITALISATION 30
141. Power to capitalise . . . . . . . . . . . . . . . . . . . . . . . . 30
RECORD DATES 31
142. Record dates for dividends, etc. . . . . . . . . . . . . . . . . . . 31
ACCOUNTS 31
143. Rights to inspect records . . . . . . . . . . . . . . . . . . . . . 31
144. Delivery of balance sheets and profit and loss accounts . . . . . . 32
NOTICES 32
145. When notice required to be in writing . . . . . . . . . . . . . . . 32
146. Method of giving notice . . . . . . . . . . . . . . . . . . . . . . 32
147. Deemed receipt of notice . . . . . . . . . . . . . . . . . . . . . . 32
148. Notice to persons entitled by transmission . . . . . . . . . . . . . 32
149. Notice to persons entitled by death or bankruptcy . . . . . . . . . 33
150. Transferees etc. bound by prior notice . . . . . . . . . . . . . . . 33
151. When notices deemed served . . . . . . . . . . . . . . . . . . . . . 33
WINDING UP 33
152. Liquidator may distribute in specie . . . . . . . . . . . . . . . . 33
153. Disposal of assets by liquidator . . . . . . . . . . . . . . . . . . 34
INDEMNITY 34
154. Indemnity to directors, officers, etc. . . . . . . . . . . . . . . . 34
</TABLE>
<PAGE>
COMPANY NO.: 552029
THE COMPANIES ACTS 1985 AND 1989
PRIVATE COMPANY LIMITED BY SHARES
- ------------------------------------------------------------------------------
ARTICLES OF ASSOCIATION
OF
DIAC LIMITED
(INCORPORATED ON 14 JULY 1955)
- ------------------------------------------------------------------------------
PRELIMINARY
THE REGULATIONS IN TABLE A IN THE COMPANIES (TABLES A-F) REGULATIONS IN FORCE
AT THE DATE OF THE INCORPORATION OF THE COMPANY SHALL NOT APPLY TO THE
COMPANY.
INTERPRETATION
1. DEFINITIONS
IN THESE ARTICLES, EXCEPT WHERE THE SUBJECT OR CONTEXT OTHERWISE REQUIRES,
THE WORDS DEFINED IN THE FIRST COLUMN OF THE FOLLOWING TABLE SHALL BEAR THE
MEANINGS SET OPPOSITE THEM RESPECTIVELY IN THE SECOND COLUMN.
THE ACT means The Companies Act 1985 including any modification or
re-enactment thereof for the time being in force.
THESE ARTICLES means these articles of association as altered from time to
time by special resolution.
THE AUDITORS means the auditors for the time being of the Company.
THE BOARD means the directors or any of them acting as the board of directors
of the Company.
CLEAR DAYS means the period excluding the day when a notice is given or
deemed to be given and the day for which it is given or on which it is to
take effect.
THE COMPANIES ACTS has the meaning ascribed thereto by section 744 of the Act
and any enactment passed after those Acts which may, by virtue of that or any
other such enactment, be
1
<PAGE>
cited together with those Acts as the "Companies Acts" (with or without the
addition of an indication of the date of any such enactment).
A DIRECTOR means a director of the Company.
DIVIDEND means Dividend or bonus.
THE HOLDER means in relation to any shares the member whose name is entered
in the register as the holder of such shares.
A MEMBER means a member of the Company.
THE MEMORANDUM means the memorandum of association of the Company as amended
from time to time.
THE OFFICE means the registered office of the Company.
PAID means paid or credited as paid.
THE REGISTER means the register of members of the Company.
THE SEAL means the common seal of the Company and includes any official seal
kept by the Company by virtue of section 39 or 40 of the Act.
THE SECRETARY means the secretary of the Company and includes a joint,
assistant, deputy or temporary secretary and any other person appointed to
perform the duties of the secretary.
THE UNITED KINGDOM means Great Britain and Northern Ireland.
References to a document being executed include references to its being
executed under hand or under seal or by any other method.
References to writing include references to any visible substitute for
writing and to anything partly in one form and partly in another form.
Words denoting the singular number include the plural number and vice versa;
words denoting the masculine gender include the feminine gender; and words
denoting persons include corporations.
Save as aforesaid any words or expressions defined in the Act (but excluding
any statutory modification thereof not in force at the date of adoption of
these Articles) shall, if not inconsistent with the subject or context, bear
the same meaning in these Articles.
Subject to the preceding paragraph, references to any provision of any
enactment or of any subordinate legislation (as defined by section 21(1) of
the Interpretation Act 1978) include any modification or re-enactment of that
provision for the time being in force.
Headings are inserted for convenience only and do not affect the construction
of these Articles.
2
<PAGE>
In these Articles, (a) powers of delegation shall not be restrictively
construed but the widest interpretation shall be given thereto; (b) the word
"board" in the context of the exercise of any power contained in these
Articles includes any committee consisting of one or more directors, any
director holding executive office and any local or divisional board, manager
or agent of the Company to which or, as the case may be, to whom the power in
question has been delegated; (c) no power of delegation shall be limited by
the existence or, except where expressly provided by the terms of delegation,
the exercise of that or any other power of delegation; and (d) except where
expressly provided by the terms of delegation, the delegation of a power
shall not exclude the concurrent exercise of that power by any other body or
person who is for the time being authorised to exercise it under these
Articles or under another delegation of the power.
SHARE CAPITAL
2. SHARES WITH SPECIAL RIGHTS
Subject to the provisions of the Companies Acts and without prejudice to any
rights attached to any existing shares or class of shares, any share may be
issued with such rights or restrictions as the Company may by ordinary
resolution determine or, subject to and in default of such determination, as
the board shall determine.
3. ALLOTMENT
Any shares proposed to be issued after the date of adoption of these Articles
shall first be offered to the members in proportion as nearly as may be to the
number of the existing shares held by them respectively unless the Company shall
by Special Resolution otherwise direct. The offer shall be made by notice
specifying the number of shares offered, and limiting a period (not being less
than fourteen days) within which the offer, if not accepted, will be deemed to
be declined. After the expiration of that period, those shares so deemed to be
declined shall be offered in the proportion aforesaid to the persons who have,
within the said period, accepted all the shares offered to them; such further
offer shall be made in the same manner and limited by a like period as the
original offer. Any shares not accepted pursuant to such offer or further offer
as aforesaid or not capable of being offered as aforesaid except by way of
fractions and any shares released from the provisions of this Article by such
Special Resolution as aforesaid shall be under the control of the directors, who
may allot, grant options over or otherwise dispose of the same to such persons,
on such terms, and in such manner as they think fit, provided that, in the case
of shares not accepted as aforesaid, such shares shall not be disposed of on
terms which are more favourable to the subscribers thereof than the terms on
which they were offered to the members. Subject to this Clause the directors are
unconditionally authorised for the purposes of Section 80 of the Act, to allot,
grant options over, or otherwise dispose of relevant securities up to the amount
of the share capital as at the date of adoption of these Articles at any time or
times during the period of five years from the date of adoption and at any time
thereafter pursuant to any offer or agreement made by the Company before the
expiry of this authority. Sub-sections 89(1) and 90(1) inclusive of the Act
shall be excluded from applying to the Company.
4. REDEEMABLE SHARES
Subject to the provisions of the Companies Acts, and without prejudice to any
rights attached to any existing shares or class of shares, shares may be issued
which are to be redeemed or are to be liable to be redeemed at the option of the
Company or the holder on such terms and in such manner as may be provided by
these Articles.
3
<PAGE>
5. COMMISSIONS
The Company may exercise all powers of paying commissions or brokerage conferred
or permitted by the Companies Acts. Subject to the provisions of the Companies
Acts, any such commission or brokerage may be satisfied by the payment of cash
or by the allotment of fully or partly paid shares or partly in one way and
partly in the other.
6. TRUSTS NOT RECOGNISED
Except as required by law, no person shall be recognised by the Company as
holding any share upon any trust and (except as otherwise provided by these
Articles or by law) the Company shall not be bound by or recognise any interest
in any share (or in any fractional part of a share) except an absolute right to
the entirety thereof in the holder.
VARIATION OF RIGHTS
7. METHOD OF VARYING RIGHTS
Subject to the provisions of the Companies Acts, if at any time the capital of
the Company is divided into different classes of shares, the rights attached to
any class may (unless otherwise provided by the terms of issue of the shares of
that class) be varied or abrogated, whether or not the Company is being wound
up, either with the consent in writing of the holders of three-quarters in
nominal value of the issued shares of the class or with the sanction of an
extraordinary resolution passed at a separate general meeting of the holders of
the shares of the class (but not otherwise).
8. WHEN RIGHTS DEEMED TO BE VARIED
For the purposes of this Article, unless otherwise expressly provided by the
rights attached to any shares or class of shares, those rights shall be deemed
to be varied by the reduction of the capital paid up on those shares otherwise
than by a purchase or redemption by the Company of its own shares and by the
allotment of other shares ranking in priority for payment of a dividend or in
respect of capital or which confer on the holders voting rights more favourable
than those conferred by such first mentioned shares, but shall not otherwise be
deemed to be varied by the creation or issue of other shares ranking pari passu
with, or subsequent to, such first mentioned shares or by the purchase or
redemption by the Company of any of its own shares.
SHARE CERTIFICATES
9. MEMBERS' RIGHTS TO CERTIFICATES
Every member, upon becoming the holder of any shares, shall be entitled, without
payment, to one certificate for all the shares of each class held by him (and,
upon transferring a part of his holding of shares of any class, to a certificate
for the balance of such holding) or several certificates each for one or more of
his shares upon payment for every certificate after the first of such reasonable
sum as the board may from time to time determine. Every certificate shall
specify the number, class and distinguishing numbers (if any) of the shares to
which it relates and the amount or respective amounts paid up thereon and, where
the Company has adopted a seal, sealed with the seal. The Company shall not be
bound to issue more than one certificate for shares held jointly by several
persons and delivery of a certificate to one joint holder shall be a sufficient
delivery to all of them. Shares of different classes may not be included in the
same certificate.
4
<PAGE>
10. REPLACEMENT CERTIFICATES
If a share certificate is defaced, worn out, lost or destroyed, it may be
renewed on such terms (if any) as to evidence and indemnity (with or without
security) and payment of any exceptional out-of-pocket expenses reasonably
incurred by the Company in investigating evidence and preparing the requisite
form of indemnity as the board may determine but otherwise free of charge, and
(in the case of defacement or wearing out) on delivery up of the old
certificate.
LIEN
11. COMPANY TO HAVE LIEN ON SHARES
The Company shall have a first and paramount lien on every share (not being a
fully paid share) for all moneys payable to the Company (whether presently or
not) in respect of that share. The board may at any time (generally or in
particular cases) waive any lien or declare any share to be wholly or in part
exempt from the provisions of this Article. The Company's lien on a share shall
extend to any amount (including dividends) payable in respect of it.
12. ENFORCEMENT OF LIEN BY SALE
The Company may sell, in such manner as the board determines, any share on which
the Company has a lien if a sum in respect of which the lien exists is presently
payable and is not paid within fourteen clear days after notice has been given
to the holder of the share or to the person entitled to it in consequence of the
death or bankruptcy of the holder or otherwise by operation of law, demanding
payment and stating that if the notice is not complied with the shares may be
sold.
13. GIVING EFFECT TO SALE
To give effect to any such sale the board may authorise some person to execute
an instrument of transfer of the shares sold to, or in accordance with the
directions of, the purchaser. The transferee shall not be bound to see to the
application of the purchase money nor shall his title to the shares be affected
by any irregularity in or invalidity of the proceedings in relation to the sale.
14. APPLICATION OF PROCEEDS
The net proceeds of the sale, after payment of the costs, shall be applied in or
towards payment or satisfaction of so much of the sum in respect of which the
lien exists as is presently payable, and any residue shall (upon surrender to
the Company for cancellation of the certificate for the shares sold and subject
to a like lien for any moneys not presently payable as existed upon the shares
before the sale) be paid to the person entitled to the shares at the date of the
sale.
CALLS ON SHARES
15. POWER TO MAKE CALLS
Subject to the terms of allotment, the board may from time to time make calls
upon the members in respect of any moneys unpaid on their shares (whether in
respect of nominal value or premium) and each member shall (subject to receiving
at least fourteen clear days' notice specifying when and where payment is to be
made) pay to the Company as required by the notice the amount called on his
shares. A call may be required to be paid by instalments. A call may, before
receipt by the Company of any sum due thereunder, be revoked in whole or part
and the time fixed for payment of a call may be postponed in whole or part as
the board may determine. A person upon
5
<PAGE>
whom a call is made shall remain liable for calls made upon him
notwithstanding the subsequent transfer of the shares in respect whereof the
call was made.
16. TIME WHEN CALL MADE
A call shall be deemed to have been made at the time when the resolution of the
board authorising the call was passed.
17. LIABILITY OF JOINT HOLDERS
The joint holders of a share shall be jointly and severally liable to pay all
calls in respect thereof.
18. INTEREST PAYABLE
If a call or any instalment of a call remains unpaid in whole or in part after
it has become due and payable the person from whom it is due and payable shall
pay interest on the amount unpaid from the day it became due and payable until
it is paid at the rate fixed by the terms of allotment of the share or in the
notice of the call or, if no rate is fixed, such rate, not exceeding 15 per
cent. per annum or, if higher, the appropriate rate (as defined by the Act), as
may be determined by the board, but the board may waive payment of such interest
wholly or in part.
19. DEEMED CALLS
An amount payable in respect of a share on allotment or at any fixed date,
whether in respect of nominal value or premium or as an instalment of a call,
shall be deemed to be a call duly made and notified and payable on the date so
fixed or in accordance with the terms of the allotment, and if it is not paid
the provisions of these Articles shall apply as if that amount had become due
and payable by virtue of a call duly made and notified.
20. DIFFERENTIATION ON CALLS
Subject to the terms of allotment, the board may make arrangements on the issue
of shares for a difference between the allottees and/or holders in the amounts
and times of payment of calls on their shares.
21. PAYMENT OF CALLS IN ADVANCE
The board may, if it thinks fit, receive from any member willing to advance the
same all or any part of the moneys uncalled and unpaid upon any shares held by
him and such payment in advance of calls shall extinguish PRO TANTO the
liability upon the shares in respect of which it is made, and may pay upon all
or any of the moneys so advanced (until the same would but for such advance
become presently payable) interest at such rate not exceeding (unless the
Company by ordinary resolution may otherwise direct) 15 per cent. per annum or,
if higher, the appropriate rate (as defined in the Act) as may be agreed upon
between the board and such member.
FORFEITURE AND SURRENDER
22. NOTICE REQUIRING PAYMENT OF CALL
If a call or any instalment of a call remains unpaid in whole or in part
after it has become due and payable, the board may give to the person from
whom it is due not less than fourteen clear days' notice in writing requiring
payment of the amount unpaid together with any interest which may have
accrued and any costs, charges and expenses incurred by the Company by reason
of such non-payment. The notice shall name the place where payment is to be
made and shall state that
6
<PAGE>
if the notice is not complied with the shares in respect of which the call
was made will be liable to be forfeited.
23. FORFEITURE FOR NON-COMPLIANCE
If any such notice is not complied with, any share in respect of which it was
given may, at any time before the payment required by the notice has been made,
be forfeited by a resolution of the board and the forfeiture shall include all
dividends or other moneys payable in respect of the forfeited shares and not
paid before the forfeiture. When any share has been forfeited, notice of the
forfeiture shall be served upon the person who was before the forfeiture the
holder of the share, and an entry of such notice having been given and of the
forfeiture with the date thereof shall forthwith be made in the register
opposite the entry of the share; but no forfeiture shall be invalidated by any
omission or neglect to give such notice or to make such entries.
24. SALE OF FORFEITED SHARES
Subject to the provisions of the Companies Acts, a forfeited share shall be
deemed to belong to the Company and may be sold, re-allotted or otherwise
disposed of on such terms and in such manner as the board determines, either to
the person who was before the forfeiture the holder or to any other person, and
at any time before sale, re-allotment or other disposal, the forfeiture may be
cancelled on such terms as the board thinks fit. Where for the purposes of its
disposal a forfeited share is to be transferred to any person the board may
authorise some person to execute an instrument of transfer of the share to that
person. The Company may receive the consideration given for the share on its
disposal and may register the transferee as holder of the share.
25. LIABILITY FOLLOWING FORFEITURE
A person any of whose shares have been forfeited shall cease to be a member in
respect of them and shall surrender to the Company for cancellation the
certificate for the shares forfeited but shall remain liable to the Company for
all moneys which at the date of forfeiture were presently payable by him to the
Company in respect of those shares with interest thereon at the rate at which
interest was payable on those moneys before the forfeiture or, if no interest
was so payable, at such rate, not exceeding 15 per cent. per annum or, if
higher, the appropriate rate (as defined in the Act) as the board may determine,
from the date of forfeiture until payment, but the board may waive payment
wholly or in part or enforce payment without any allowance for the value of the
shares at the time of forfeiture or for any consideration received on their
disposal.
26. SURRENDER
The board may accept the surrender of any share which it is in a position to
forfeit upon such terms and conditions as may be agreed and, subject to any such
terms and conditions, a surrendered share shall be treated as if it had been
forfeited.
27. EXTINCTION OF RIGHTS
The forfeiture of a share shall involve the extinction at the time of forfeiture
of all interest in and all claims and demands against the Company in respect of
the share and all other rights and liabilities incidental to the share as
between the person whose share is forfeited and the Company, except only such of
those rights and liabilities as are by these Articles expressly saved, or as are
by the Companies Acts given or imposed in the case of past members.
28. EVIDENCE OF FORFEITURE
A statutory declaration by a director or the secretary that a share has been
duly forfeited or surrendered on a specified date shall be conclusive evidence
of the facts stated in it as against all
7
<PAGE>
persons claiming to be entitled to the share and the declaration shall
(subject to the execution of an instrument of transfer if necessary)
constitute a good title to the share and the person to whom the share is
disposed of shall not be bound to see to the application of the purchase
money, if any, nor shall his title to the share be affected by any
irregularity in, or invalidity of, the proceedings in reference to the
forfeiture, surrender, sale, re-allotment or disposal of the share.
TRANSFER OF SHARES
29. FORM AND EXECUTION OF TRANSFER
The instrument of transfer of a share may be in any usual form or in any other
form which the board may approve and shall be signed by or on behalf of the
transferor and, unless the share is fully paid, by or on behalf of the
transferee. An instrument of transfer need not be under seal.
30. RESTRICTIONS ON TRANSFER
Subject to Article 32 The board may, in its absolute discretion and without
giving any reason, refuse to register the transfer of a share which is not fully
paid, or does not otherwise comply with the provisions of Articles 31 or 32.
31. REGISTRATION OF TRANSFER
The directors must register the transfer of a share which is fully paid and
which:
(a) is lodged at the office or such other place as the directors may
reasonably appoint, is duly stamped and is accompanied by the certificate
for the shares to which it relates or such other evidence as the board
may reasonably require to show the right of transferor to make the
transfer;
(b) is in respect of only one class of shares; and
(c) is in favour of not more than four transferees.
32. TRANSFERS TO SECURED INSTITUTIONS
Notwithstanding anything contained in these Articles, the directors shall not
decline to and shall promptly register any transfer of shares, and they may not
suspend registration thereof where such transfer:
(a) is to any bank or institution to which such shares have been charged by
way of security, whether as agent and trustee for a group of banks or
institutions or otherwise or to any nominee or transferee of such a bank
or institution (a "Secured Institution"); or
(b) is delivered to the Company for registration by a Secured Institution or
its nominee in order to perfect its security over the shares; or
(c) is executed by a Secured Institution or its nominee pursuant to the power
of sale or other power under such security,
and furthermore notwithstanding anything to the contrary contained in these
Articles no transferor of any shares in the Company or proposed transferor of
such shares to a Secured Institution or its nominee and no Secured Institution
or its nominee shall be required to offer the shares which
8
<PAGE>
are or are to be the subject of any transfer aforesaid to the shareholders
for the time being of the Company or any of them, and no such shareholder
shall have any right under the Articles of Association or otherwise howsoever
to require such shares to be transferred to them whether for consideration or
not.
33. NOTICE OF REFUSAL TO REGISTER
If the board refuses to register the transfer, it shall within 30 days after the
date on which the instrument of transfer was lodged with the Company send to the
transferee notice of the refusal.
34. NO FEE PAYABLE ON REGISTRATION
No fee shall be charged for the registration of any instrument of transfer or
other document relating to or affecting the title to any share.
35. RETENTION OF TRANSFERS
The Company shall be entitled to retain any instrument of transfer which is
registered, but any instrument of transfer which the board refuses to register
shall be returned to the person lodging it when notice of the refusal is given.
TRANSMISSION OF SHARES
36. TRANSMISSION
If a member dies the survivor or survivors where he was a joint holder, and his
personal representatives where he was a sole holder or the only survivor of
joint holders, shall be the only persons recognised by the Company as having any
title to his interest; but nothing herein contained shall release the estate of
a deceased member (whether a sole or joint holder) from any liability in respect
of any share held by him.
37. ELECTIONS FOLLOWING TRANSMISSION
A person becoming entitled to a share in consequence of the death or bankruptcy
of a member or otherwise by operation of law may, upon such evidence being
produced as the board may properly require as to his entitlement, elect either
to become the holder of the share or to have some person nominated by him
registered as the transferee. If he elects to become the holder he shall give
notice to the Company to that effect. If he elects to have another person
registered, he shall execute an instrument of transfer of the share to that
person. All the provisions of these Articles relating to the transfer of shares
shall apply to any such notice or instrument of transfer as if it were an
instrument of transfer executed by the member and the death or bankruptcy of the
member or other event giving rise to the transmission had not occurred.
The board may at any time give notice requiring any such person to elect either
to be registered himself or to transfer the share and if the notice is not
complied with within sixty days the board may thereafter withhold payment of all
dividends or other moneys payable in respect of the share until the requirements
of the notice have been complied with.
38. RIGHTS OF PERSONS ENTITLED BY TRANSMISSION
A person becoming entitled to a share in consequence of the death or bankruptcy
of a member or otherwise by operation of law shall, upon such evidence being
produced as the board may properly require as to his entitlement and subject to
the requirements of Article 37, have the same rights in relation to the share as
he would have had if he were the holder of the share, and may
9
<PAGE>
give a discharge for all dividends and other moneys payable in respect of the
share, but he shall not, before being registered as the holder of the share,
be entitled in respect of it to receive notice of or to attend or vote at any
meeting of the Company or to receive notice of or to attend or vote at any
separate meeting of the holders of any class of shares in the Company.
ALTERATION OF SHARE CAPITAL
39. ALTERATIONS PERMITTED BY ORDINARY RESOLUTION
The Company may by ordinary resolution:
(a) increase its share capital by such sum to be divided into shares of such
amount as the resolution prescribes;
(b) consolidate and divide all or any of its share capital into shares of
larger amount than its existing shares;
(c) subject to the provisions of the Companies Acts, sub-divide its shares,
or any of them, into shares of smaller amount than is fixed by the
Memorandum and the resolution may determine that, as between the shares
resulting from the sub-division, any of them may have any preference or
advantage as compared with the others; and
(d) cancel shares which, at the date of the passing of the resolution, have
not been taken or agreed to be taken by any person and diminish the
amount of its share capital by the amount of the shares so cancelled.
40. NEW SHARES SUBJECT TO THESE ARTICLES
All new shares shall be subject to the provisions of these Articles with
reference to payment of calls, lien, forfeiture, transfer, transmission and
otherwise, and, unless otherwise provided by these Articles, by the resolution
creating the new shares or by the conditions of issue, the new shares shall be
unclassified shares.
41. FRACTIONS ARISING
Whenever as a result of a consolidation or sub-division of shares any fractions
arise, the board may settle the matter in any manner it deems fit and in
particular may sell shares representing fractions to which any members would
otherwise become entitled to any person (including, subject to the provisions of
the Companies Acts, the Company) and distribute the net proceeds of sale in due
proportion among those members, and the board may authorise some person to
execute an instrument of transfer of the shares to, or in accordance with the
directions of, the purchaser. The transferee shall not be bound to see to the
application of the purchase moneys nor shall his title to the shares be affected
by any irregularity in or invalidity of the proceedings in relation to the sale.
42. POWER TO REDUCE CAPITAL
Subject to the provisions of the Companies Acts, the Company may by special
resolution reduce its share capital, any capital redemption reserve and any
share premium account in any way.
10
<PAGE>
PURCHASE OF OWN SHARES
43. POWER TO PURCHASE OWN SHARES
Subject to and in accordance with the provisions of the Companies Acts and
without prejudice to any relevant special rights attached to any class of
shares, the Company may purchase any of its own shares of any class (including
redeemable shares) and, if it is a private company, make a payment in respect of
the redemption or purchase of its own shares otherwise than out of distributable
profits of the company or the proceeds of a fresh issue of shares, at any price
(whether at par or above or below par), and so that any shares to be so
purchased may be selected in any manner whatsoever. Every contract for the
purchase of, or under which the Company may become entitled or obliged to
purchase, shares in the Company shall be authorised by such resolution of the
Company as may be required by the Companies Acts and by an extraordinary
resolution passed at a separate general meeting of the holders of each class of
shares (if any) which, at the date on which the contract is authorised by the
Company in general meeting, entitle them, either immediately or at any time
later on, to convert all or any of the shares of that class held by them into
equity share capital of the Company.
GENERAL MEETINGS
44. TYPES OF GENERAL MEETING
All general meetings of the Company other than annual general meetings shall be
called extraordinary general meetings.
45. ANNUAL GENERAL MEETINGS
The board shall convene and the Company shall hold general meetings as annual
general meetings in accordance with the requirements of the Act.
46. CLASS MEETINGS
All provisions of these Articles relating to general meetings of the Company
shall, mutatis mutandis, apply to every separate general meeting of the holders
of any class of shares in the capital of the Company, except that:
(a) the necessary quorum shall be two persons holding or representing by
proxy at least one-third in nominal value of the issued shares of the
class or, at any adjourned meeting of such holders, one holder present in
person or by proxy, whatever the amount of his holding, who shall be
deemed to constitute a meeting; and
(b) any holder of shares of the class present in person or by proxy may
demand a poll; and
(c) each holder of shares of the class shall, on a poll, have one vote in
respect of every share of the class held by him.
47. CONVENING GENERAL MEETINGS
Subject to the provisions of Article 48, the board may call general meetings
whenever and at such times and places as it shall determine and, on the
requisition of members pursuant to the provisions of the Companies Acts, shall
forthwith proceed to convene an extraordinary general meeting in accordance with
the requirements of the Companies Acts. If there are not within the
11
<PAGE>
United Kingdom sufficient directors to call a general meeting, any director
or any member of the Company may call a general meeting.
NOTICE OF GENERAL MEETINGS
48. PERIOD OF NOTICE
An annual general meeting and an extraordinary general meeting called for the
passing of a special resolution, elective resolution or a resolution appointing
a person as a director shall be called by at least twenty-one clear days'
notice. All other extraordinary general meetings shall be called by at least
fourteen clear days' notice but a general meeting may be called by shorter
notice if it is so agreed:
(a) in the case of an annual general meeting, by all the members entitled to
attend and vote thereat; and
(b) in the case of any other meeting by a majority in number of the members
having a right to attend and vote being a majority together holding not
less than ninety-five per cent. in nominal value of the shares giving
that right.
49. PROVISION OF NOTICE
Subject to the provisions of these Articles and to any restrictions imposed on
any shares, the notice shall be given to all the members, to all persons
entitled to a share in consequence of the death or bankruptcy of a member, to
each of the directors, to the auditors for the time being of the Company and if
required under the Companies Acts, the former auditors of the Company.
50. CONTENTS OF NOTICE
The notice shall specify the time and place of the meeting and, in the case of
special business, the general nature of such business. All business shall be
deemed special that is transacted at an extraordinary general meeting and also
all business that is transacted at an annual general meeting with the exception
of:-
(a) the declaration of dividends;
(b) the consideration and adoption of the accounts and balance sheet and the
reports of the directors and auditors and other documents required to be
annexed to the accounts;
(c) the appointment and re-appointment of directors;
(d) the appointment of auditors where special notice of the resolution for
such appointment is not required by the Companies Acts; and
(e) the fixing of, or the determining of the method of fixing, the
remuneration of the directors and/or auditors.
The notice shall, in the case of an annual general meeting, specify the meeting
as such, and, in the case of a meeting to pass a special, extraordinary or
elective resolution, specify the intention to propose the resolution as a
special, extraordinary, or elective resolution, as the case may be.
12
<PAGE>
The notice shall state with reasonable prominence that a member entitled to
attend and vote at the meeting being called is entitled to appoint one or more
proxies to attend and vote instead of him, and that a proxy need not also be a
member.
51. ACCIDENTAL OMISSION TO GIVE NOTICE
The accidental omission to give notice of a meeting to any person entitled to
receive the same, or the non-receipt of a notice of meeting by any such person,
shall not invalidate the proceedings at that meeting.
PROCEEDINGS AT GENERAL MEETINGS
52. QUORUM
No business shall be transacted at any general meeting unless a quorum is
present, but the absence of a quorum shall not preclude the choice or
appointment of a chairman, which shall not be treated as part of the business of
the meeting. Save as otherwise provided by these Articles, one person, if and
for so long as the Company has only one member, and one person being a member
and being a proxy for a member or two persons, if and for so long as the Company
has two or more members, entitled to vote upon the business to be transacted,
each being a member or a proxy for a member or a duly authorised representative
of a corporation, shall be a quorum.
53. IF QUORUM NOT PRESENT
If such a quorum is not present within five minutes (or such longer time not
exceeding thirty minutes as the chairman of the meeting may decide to wait) from
the time appointed for the meeting, or if during a meeting such a quorum ceases
to be present, the meeting, if convened on the requisition of members, shall be
dissolved, and in any other case shall stand adjourned to such time and place as
the chairman of the meeting may determine. If at the adjourned meeting a quorum
is not present within fifteen minutes after the time appointed for holding the
meeting, the meeting shall be dissolved.
54. CHAIRMAN
The chairman, if any, of the board or, in his absence, any deputy chairman of
the Company or, in his absence, some other director nominated by the board,
shall preside as chairman of the meeting, but if neither the chairman, deputy
chairman nor such other director (if any) is present within five minutes after
the time appointed for holding the meeting or is not willing to act as chairman,
the directors present shall elect one of their number to be chairman. If there
is only one director present and willing to act, he shall be chairman. If no
director is willing to act as chairman, or if no director is present within five
minutes after the time appointed for holding the meeting, the members present
and entitled to vote shall choose one of their number to be chairman.
55. DIRECTORS ENTITLED TO SPEAK
A director shall, notwithstanding that he is not a member, be entitled to attend
and speak at any general meeting and at any separate meeting of the holders of
any class of shares in the Company.
56. ADJOURNMENTS
The chairman may, with the consent of a meeting at which a quorum is present
(and shall if so directed by the meeting), adjourn the meeting from time to time
and from place to place, but no business shall be transacted at an adjourned
meeting other than business which might properly have been transacted at the
meeting had the adjournment not taken place. When a meeting is
13
<PAGE>
adjourned for thirty days or more or for an indefinite period, at least seven
Clear days' notice shall be given specifying the time and place of the
adjourned meeting and the general nature of the business to be transacted.
Otherwise it shall not be necessary to give any notice of an adjournment or
of the business to be transacted at an adjourned meeting.
57. AMENDMENTS TO RESOLUTIONS
If an amendment shall be proposed to any resolution under consideration but
shall in good faith be ruled out of order by the chairman of the meeting, the
proceedings on the substantive resolution shall not be invalidated by any error
in such ruling. With the consent of the chairman of the meeting, an amendment
may be withdrawn by its proposer before it is voted upon. In the case of a
resolution duly proposed as a special or extraordinary resolution, no amendment
thereto (other than a mere clerical amendment to correct a patent error) may in
any event be considered or voted upon.
58. METHODS OF VOTING
A resolution put to the vote of a general meeting shall be decided on a show of
hands unless, before or on the declaration of the result of a vote on the show
of hands or on the withdrawal of any other demand for a poll, a poll is duly
demanded. Subject to the provisions of the Companies Acts, a poll may be
demanded by:
(a) the chairman of the meeting; or
(b) at least two members present in person or by proxy having the right to
vote at the meeting; or
(c) any member or members present in person or by proxy representing not less
than one-tenth of the total voting rights of all the members having the
right to vote at the meeting; or
(d) any member or members present in person or by proxy holding shares
conferring a right to vote at the meeting being shares on which an
aggregate sum has been paid up equal to not less than one-tenth of the
total sum paid up on all the shares conferring that right,
and a demand by a person as proxy for a member shall be the same as a demand by
the member.
59. DECLARATION OF RESULT
Unless a poll is duly demanded a declaration by the chairman that a resolution
has been carried or carried unanimously, or by a particular majority, or lost,
or not carried by a particular majority and an entry to that effect in the
minutes of the meeting shall be conclusive evidence of the fact without proof of
the number or proportion of the votes recorded in favour of or against the
resolution.
60. WITHDRAWAL OF DEMAND FOR POLL
The demand for a poll may, before the poll is taken, be withdrawn but only with
the consent of the chairman and a demand so withdrawn shall not be taken to have
invalidated the result of a show of hands declared before the demand was made.
If the demand for a poll is withdrawn, the chairman or any other member entitled
may demand a poll.
14
<PAGE>
61. CONDUCT OF POLL
A poll shall be taken as the chairman directs and he may appoint scrutineers
(who need not be members) and fix a time and place for declaring the result of
the poll. The result of the poll shall be deemed to be the resolution of the
meeting at which the poll was demanded.
62. CHAIRMAN'S CASTING VOTE
In the case of an equality of votes, whether on a show of hands or on a poll,
the chairman shall not be entitled to a casting vote in addition to any other
vote he may have.
63. WHEN POLL TO BE TAKEN
A poll demanded on the election of a chairman or on a question of adjournment
shall be taken forthwith. A poll demanded on any other question shall be taken
either forthwith or at such time and place as the chairman directs not being
more than thirty days after the poll is demanded. The demand for a poll shall
not prevent the continuance of a meeting for the transaction of any business
other than the question on which the poll was demanded. If a poll is demanded
before the declaration of the result of a show of hands and the demand is duly
withdrawn, the meeting shall continue as if the demand had not been made.
64. NOTICE OF POLL
No notice need be given of a poll not taken forthwith if the time and place at
which it is to be taken are announced at the meeting at which it is demanded.
In any other case at least seven clear days' notice shall be given specifying
the time and place at which the poll is to be taken.
65. EFFECTIVENESS OF SPECIAL AND EXTRAORDINARY RESOLUTIONS
Where for any purpose an ordinary resolution of the Company is required, a
special or extraordinary resolution shall also be effective and where for any
purpose an extraordinary resolution is required a special resolution shall also
be effective.
66. RESOLUTIONS IN WRITING
Subject to the provisions of the Companies Acts, a resolution in writing
executed by or on behalf of each member who would have been entitled to vote
upon it if it had been proposed at a general meeting at which he was present
shall be as effectual as if it had been passed at a general meeting properly
convened and held and may consist of several instruments in the like form each
executed by or on behalf of one or more of the members.
VOTES OF MEMBERS
67. RIGHT TO VOTE
Subject to any rights or restrictions attached to any shares, on a show of hands
every member who is present in person or by proxy shall have one vote and on a
poll every member present in person or by proxy shall have one vote for every
share of which he is the holder.
68. VOTES OF JOINT HOLDERS
In the case of joint holders of a share the vote of the senior who tenders a
vote, whether in person or by proxy, shall be accepted to the exclusion of the
votes of the other joint holders and for this purpose seniority shall be
determined by the order in which the names of the holders stand in the register.
15
<PAGE>
69. MEMBER UNDER INCAPACITY
A member in respect of whom an order has been made by any court or official
having jurisdiction (whether in the United Kingdom or elsewhere) in matters
concerning mental disorder may vote, whether on a show of hands or on a poll, by
his receiver, curator bonis or other person authorised in that behalf appointed
by that court or official, and any such receiver, curator bonis or other person
may, on a poll, vote by proxy. Evidence to the satisfaction of the board of the
authority of the person claiming to exercise the right to vote shall be
deposited at the office, or at such other place as is specified in accordance
with these Articles for the deposit of instruments of proxy, not less than 48
hours before the time appointed for holding the meeting or adjourned meeting at
which the right to vote is to be exercised and in default the right to vote
shall not be exercisable.
70. CALLS IN ARREARS
No member shall be entitled to vote at any general meeting or at any separate
meeting of the holders of any class of shares in the Company, either in person
or by proxy, in respect of any share held by him unless all moneys presently
payable by him in respect of that share have been paid.
71. OBJECTION TO VOTING
No objection shall be raised to the qualification of any voter except at the
meeting or adjourned meeting or poll at which the vote objected to is tendered,
and every vote not disallowed at such meeting shall be valid. Any objection
made in due time shall be referred to the chairman whose decision shall be final
and conclusive.
72. SUPPLEMENTARY PROVISIONS ON VOTING
On a poll votes may be given either personally or by proxy. A member entitled to
more than one vote need not, if he votes, use all his votes or cast all the
votes he uses in the same way.
PROXIES AND CORPORATE REPRESENTATIVES
73. APPOINTMENT OF PROXY
An instrument appointing a proxy shall be in writing under the hand of the
appointor or his attorney or, if the appointor is a corporation, either under
its common seal or the hand of a duly authorised officer, attorney or other
person authorised to sign it.
74. FORM OF PROXY - STANDARD
The instrument appointing a proxy shall be executed by or on behalf of the
appointer and shall be in the following form (or in a form as near thereto as
circumstances allow or in any other form which is usual or which the directors
may approve):
"______________________ Limited
I/We, _____ _____ , of _____ _____ _____ being a member/members of the
above-named company, hereby appoint _____ _____ of _____ _____ _____, or
failing him, _____ _____ of _____ _____ _____, as my/our proxy to vote in
my/our names[s] and on my/our behalf at the annual/extraordinary general
meeting of the company to be held on _____ _____ 19__, and at any
adjournment thereof.
16
<PAGE>
Signed on _____ _____ 19__."
75. FORM OF PROXY - EACH WAY
Where it is desired to afford members an opportunity of instructing the proxy
how he shall act the instrument appointing a proxy shall be in the following
form (or in a form as near thereto as circumstances allow or in any other form
which is usual or which the directors may approve):
"_____________________ Limited
I/We, _____ _____ , of _____ _____ _____ being a member/members of the
above-named company, hereby appoint _____ _____ of _____ _____ _____, or
failing him, _____ _____ of _____ _____ _____, as my/our proxy to vote in
my/our names[s] and on my/our behalf at the annual/extraordinary general
meeting of the company to be held on _____ _____ 19__, and at any
adjournment thereof.
Signed on _____ _____ 19__."
This form is to be used in respect of the resolutions mentioned below as
follows:
Resolution No.1 *for*against
Resolution No.2 *for*against.
*Strike out whichever is not desired.
Unless otherwise instructed, the proxy may vote as he thinks fit or
abstain from voting.
Signed on _____ _____ 19__."
76. VOTING BY APPOINTOR
Delivery of an instrument appointing a proxy shall not preclude a member from
attending and voting in person at the meeting or poll concerned. A member may
appoint more than one proxy to attend on the same occasion.
77. DELIVERY OF FORM OF PROXY
The instrument appointing a proxy and any power of attorney or other written
authority under which it is executed or an office or notarially certified copy
or a copy certified in accordance with the Powers of Attorney Act 1971 of such
power or written authority shall be deposited at the office or at such other
place within the United Kingdom as is specified in the notice convening the
meeting or in any instrument of proxy sent out by the Company in relation to the
meeting not less than 48 hours before the time appointed for holding the meeting
or adjourned meeting at which the person named in the instrument proposes to
vote and an instrument of proxy which is not deposited or delivered in a manner
so permitted shall be invalid. No instrument of proxy shall be valid after the
expiration of twelve months from the date stated in it as the date of its
execution. When two or more valid but differing instruments of proxy are
delivered in respect of the same share for use at the same meeting, the one
which was delivered last (regardless of its date or of the date of its
execution) shall be treated as replacing and revoking the others as regards that
share; if the Company is unable to determine which was delivered last, none of
them shall be treated as valid in respect of that share.
17
<PAGE>
78. VALIDITY OF FORM OF PROXY
The instrument of proxy shall, unless the contrary is stated in it, be deemed
to confer authority to vote as the proxy thinks fit on any amendment of a
resolution put to the meeting for which the proxy is given and on any resolution
put to the meeting, whether or not notice of such resolution was given in the
notice of meeting. The instrument of proxy shall, unless the contrary is stated
therein, be valid as well for any adjournment of the meeting as for the meeting
to which it relates.
79. CORPORATE REPRESENTATIVES
Any corporation or corporation sole which is a member of the Company may (in the
case of a corporation, by resolution of its directors or other governing body or
by authority to be given under seal or under the hand of an officer duly
authorised by it) authorise such person as it thinks fit to act as its
representative at any meeting of the Company or at any separate meeting of the
holders of any class of shares. A person so authorised shall be entitled to
exercise the same power on behalf of the grantor of the authority as the grantor
could exercise if it were an individual member of the Company and the grantor
shall for the purposes of these Articles be deemed to be present in person at
any such meeting if a person so authorised is present at it.
80. REVOCATION OF AUTHORITY
A vote given or poll demanded by proxy or by the duly authorised representative
of a corporation shall be valid notwithstanding the previous determination of
the authority of the person voting or demanding a poll unless notice of the
determination was received by the Company at the office or at such other place
at which the instrument of proxy was duly deposited before the commencement of
the meeting or adjourned meeting at which the vote is given or the poll demanded
or (in the case of a poll taken otherwise than on the same day as the meeting or
adjourned meeting) the time appointed for taking the poll.
NUMBER OF DIRECTORS
81. LIMITS ON NUMBER OF DIRECTORS
Unless otherwise determined by ordinary resolution, the number of directors
(other than alternate directors) shall be not less than one but shall not be
subject to any maximum in number. Wheresoever the minimum number of directors
shall be one, a sole director shall have authority to exercise all the powers
and discretions by the Act and/or by these expressed to be vested in the
directors generally.
APPOINTMENT AND RETIREMENT OF DIRECTORS
82. NO RETIREMENT BY ROTATION
The directors shall not be required to retire by rotation.
83. ELIGIBILITY FOR ELECTION
No person shall be appointed a director at any general meeting unless:
(a) he is recommended by the board; or
18
<PAGE>
(b) not less than six nor more than thirty-five Clear days before the date
appointed for the meeting, notice executed by a member qualified to vote
at the meeting (not being the person to be proposed) has been given to
the Company of the intention to propose that person for appointment
stating the particulars which would, if he were so appointed or
reappointed, be required to be included in the Company's register of
directors, together with notice executed by that person of his
willingness to be appointed.
84. NOTICE
Not less than seven nor more than twenty-eight clear days before the date
appointed for holding a general meeting notice shall be given to all who are
entitled to receive notice of the meeting of any person who is recommended by
the directors for appointment as a director at the meeting or in respect of whom
notice has been duly given to the company of the intention to propose him at the
meeting for appointment or reappointment as a director. The notice shall give
the particulars of that person which would, if he were so appointed, be required
to be included in the company's register of directors.
85. ADDITIONAL POWERS OF THE COMPANY
Subject as aforesaid, the Company may appoint a person who is willing to act to
be a director either to fill a vacancy or as an additional director:
(a) by ordinary resolution of the members in general meeting; or
(b) by notice in writing left at the registered office.
86. APPOINTMENT BY BOARD
The board may appoint a person who is willing to act to be a director, either to
fill a vacancy or as an additional director, provided that the appointment does
not cause the number of directors to exceed the number, if any, fixed by or in
accordance with these Articles as the maximum number of directors. A director
so appointed shall hold office only until the next following annual general
meeting. If not reappointed at such annual general meeting, he shall vacate
office at the conclusion thereof.
87. AGE LIMIT
No person shall be disqualified from being appointed or reappointed a director,
and no director shall be required to vacate that office, by reason only of the
fact that he has attained the age of seventy years or any other age nor shall it
be necessary by reason of his age to give special notice under the Companies
Acts of any resolution. Where the board convenes any general meeting of the
Company at which (to the knowledge of the board) a director will be proposed for
appointment or reappointment who at the date for which the meeting is convened
will have attained the age of seventy years or more, the board shall give notice
of his age in years in the notice convening the meeting or in any document
accompanying the notice, but the accidental omission to do so shall not
invalidate any proceedings, or any appointment or reappointment of that
director, at that meeting.
88. NO SHARE QUALIFICATION
A director shall not be required to hold any shares of the Company by way of
qualification.
19
<PAGE>
ALTERNATE DIRECTORS
89. POWER TO APPOINT ALTERNATES
Any director (other than an alternate director) may appoint any other director,
or any other person approved by resolution of the board and willing to act, to
be an alternate director and may remove from office an alternate director so
appointed by him.
90. ALTERNATES ENTITLED TO RECEIVE NOTICE
An alternate director shall be entitled to receive notice of all meetings of the
board and of all meetings of committees of the board of which his appointor is a
member, to attend and vote at any such meeting at which his appointor is not
personally present, and generally to perform all the functions of his appointor
(except as regards power to appoint an alternate) as a director in his absence.
It shall not be necessary to give notice of such a meeting to an alternate
director who is absent from the United Kingdom.
91. ALTERNATES REPRESENTING MORE THAN ONE DIRECTOR
A director or any other person may act as alternate director to represent more
than one director, and an alternate director shall be entitled at meetings of
the board or any committee of the board to one vote for every director whom he
represents (and who is not present) in addition to his own vote (if any) as a
director, but he shall count as only one for the purpose of determining whether
a quorum is present.
92. EXPENSES AND REMUNERATION OF ALTERNATES
An alternate director may be repaid by the Company such expenses as might
properly have been repaid to him if he had been a director but shall not in
respect of his services as an alternate director be entitled to receive any
remuneration from the Company [except such part (if any) of the remuneration
otherwise payable to his appointer as such appointer may by notice in writing to
the Company from time to time direct]. An alternate director shall be entitled
to be indemnified by the Company to the same extent as if he were a director.
93. TERMINATION OF APPOINTMENT
An alternate director shall cease to be an alternate director:
(a) if his appointor ceases to be a director; but, if a director retires by
rotation or otherwise but is reappointed or deemed to have been
reappointed at the meeting at which he retires, any appointment of an
alternate director made by him which was in force immediately prior to
his retirement shall continue after his reappointment;
(b) on the happening of any event which, if he were a director, would cause
him to vacate his office as director; or
(c) if he resigns his office by notice to the Company.
94. METHOD OF APPOINTMENT AND REVOCATION
Any appointment or removal of an alternate director shall be by notice to the
Company signed by the director making or revoking the appointment and shall take
effect in accordance with the terms of the notice (subject to any approval
required by Article 89) upon receipt of such notice at the office.
20
<PAGE>
95. ALTERNATE NOT AN AGENT OF APPOINTOR
Save as otherwise expressly provided in these Articles, an alternate director
shall be deemed for all purposes to be a director and, accordingly, except where
the context otherwise requires, references to a director shall be deemed to
include a reference to an alternate director. An alternate director shall alone
be responsible for his own acts and defaults and he shall not be deemed to be
the agent of the director appointing him.
POWERS OF THE BOARD
96. BUSINESS TO BE MANAGED BY BOARD
Subject to the provisions of the Companies Acts, the Memorandum and these
Articles and to any directions given by special resolution, the business of the
Company shall be managed by the board which may pay all expenses incurred in
forming and registering the Company and may exercise all the powers of the
Company. No alteration of the Memorandum or Articles and no such direction
shall invalidate any prior act of the board which would have been valid if that
alteration had not been made or that direction had not been given. The powers
given by this Article shall not be limited by any special power given to the
board by these Articles and a meeting of the board at which a quorum is present
may exercise all powers exercisable by the board.
DELEGATION OF POWERS OF THE BOARD
97. COMMITTEES OF THE BOARD
The board may delegate any of its powers to any committee consisting of one or
more directors. The board may also delegate to any director holding any
executive office such of its powers as the board considers desirable to be
exercised by him. Any such delegation shall, in the absence of express
provision to the contrary in the terms of delegation, be deemed to include
authority to sub-delegate to one or more directors (whether or not acting as a
committee) or to any employee or agent of the Company all or any of the powers
delegated and may be made subject to such conditions as the board may specify,
and may be revoked or altered. The board may co-opt on to any such committee
persons other than directors, who may enjoy voting rights in the committee. The
co-opted members shall be less than one-half of the total membership of the
committee and a resolution of any committee shall be effective only if a
majority of the members present are directors. Subject to any conditions
imposed by the board, the proceedings of a committee with two or more members
shall be governed by these Articles regulating the proceedings of directors so
far as they are capable of applying.
98. AGENTS
The board may, by power of attorney or otherwise, appoint any person or persons
to be the agent or agents of the Company for such purposes, with such powers,
authorities and discretions (not exceeding those vested in the board) and on
such conditions as the board determines, including authority for the agent or
agents to delegate all or any of his or their powers, authorities and
discretions, and may revoke or vary such delegation.
99. OFFICES INCLUDING THE TITLE "DIRECTOR"
The board may appoint any person to any office or employment having a
designation or title including the word "director" or attach to any existing
office or employment with the Company such a designation or title and may
terminate any such appointment or the use of any such
21
<PAGE>
designation or title. The inclusion of the word "director" in the
designation or title of any such office or employment shall not imply that
the holder is a director of the Company, nor shall the holder thereby be
empowered in any respect to act as, or be deemed to be, a director of the
Company for any of the purposes of these Articles.
DISQUALIFICATION AND REMOVAL OF DIRECTORS
100. DISQUALIFICATION
The office of a director shall be vacated if:
(a) he ceases to be a director by virtue of any provisions of the Companies
Acts or these Articles or he becomes prohibited by law from being a
director; or
(b) he becomes bankrupt or makes any arrangement or composition with his
creditors generally or shall apply to the court for an interim order
under section 253 of the Insolvency Act 1986 in connection with a
voluntary arrangement under that Act; or
(c) he is, or may be, suffering from mental disorder and either:
(i) he is admitted to hospital in pursuance of an application for
admission for treatment under the Mental Health Act 1983 or, in
Scotland, an application for admission under the Mental Health
(Scotland) Act 1960; or
(ii) an order is made by a court having jurisdiction (whether in the
United Kingdom or elsewhere) in matters concerning mental disorder
for his detention or for the appointment of a receiver, curator
bonis or other person to exercise powers with respect to his
property or affairs; or
(d) (not being a director holding office as such for a fixed term) he resigns
his office by notice to the Company; or
(e) he shall for more than six consecutive months have been absent without
permission of the board from meetings of the board held during that
period and his alternate director (if any) shall not during such period
have attended in his stead and the board resolves that his office be
vacated.
101. POWER OF COMPANY TO REMOVE DIRECTOR
Subject to the provisions of the Companies Acts a director may be removed from
office forthwith by:-
(a) (and notwithstanding any provision of these Articles or of any
agreement between the Company and such director but without
prejudice to any claim he may have for damages for breach of any
such agreement) ordinary resolution of the members of the Company
passed at a general meeting of which special notice has been
given;
(b) written resolution of the members of the Company; or
22
<PAGE>
(c) notice in writing left at the registered office of the Company and
signed by the holder(s) of not less than 75% of the voting rights
attaching to the shares for the time being issued.
REMUNERATION OF NON-EXECUTIVE DIRECTORS
102. ORDINARY REMUNERATION
The ordinary remuneration of the directors who do not hold executive office for
their services (excluding amounts payable under any other provision of these
Articles) shall not exceed in aggregate L10,000 per annum or such higher amount
as the Company may from time to time by ordinary resolution determine. Subject
thereto, each such director shall be paid a fee (which shall be deemed to accrue
from day to day) at such rate as may from time to time be determined by the
board.
103. ADDITIONAL REMUNERATION FOR SPECIAL SERVICES
Any director who does not hold executive office and who serves on any committee
of the directors, by the request of the board goes or resides abroad for any
purpose of the Company or otherwise performs special services which in the
opinion of the directors are outside the scope of the ordinary duties of a
director, may (without prejudice to the provisions of Article 102) be paid such
extra remuneration by way of salary, commission or otherwise as the board may
determine.
DIRECTORS' EXPENSES
104. DIRECTORS MAY BE PAID EXPENSES
The directors may be paid all travelling, hotel, and other expenses properly
incurred by them in connection with their attendance at meetings of the board or
committees of the board or general meetings or separate meetings of the holders
of any class of shares or of debentures of the Company or otherwise in
connection with the discharge of their duties.
EXECUTIVE DIRECTORS
105. APPOINTMENT TO EXECUTIVE OFFICE
Subject to the provisions of the Companies Acts, the board may appoint one or
more of its body to be the holder of any executive office (except that of
auditor) under the Company and may enter into an agreement or arrangement with
any director for his employment by the Company or for the provision by him of
any services outside the scope of the ordinary duties of a director. Any such
appointment, agreement or arrangement may be made upon such terms, including
terms as to remuneration, as the board determines, and any remuneration which is
so determined may be in addition to or in lieu of any ordinary remuneration as a
director. The board may revoke or vary any such appointment but without
prejudice to any rights or claims which the person whose appointment is revoked
or varied may have against the Company by reason thereof.
106. TERMINATION OF APPOINTMENT TO EXECUTIVE OFFICE
Any appointment of a director to an executive office shall terminate if he
ceases to be a director but without prejudice to any rights or claims which he
may have against the Company by reason
23
<PAGE>
of such cesser. A director appointed to an executive office shall not ipso
facto cease to be a director if his appointment to such executive office
terminates.
107. EMOLUMENTS TO BE DETERMINED BY THE BOARD
The emoluments of any director holding executive office for his services as such
shall be determined by the board, and may be of any description, and (without
limiting the generality of the foregoing) may include admission to or
continuance of membership of any scheme (including any share acquisition scheme)
or fund instituted or established or financed or contributed to by the Company
for the provision of pensions, life assurance or other benefits for employees or
their dependants, or the payment of a pension or other benefits to him or his
dependants on or after retirement or death, apart from membership of any such
scheme or fund.
DIRECTORS' INTERESTS
108. DIRECTORS MAY CONTRACT WITH THE COMPANY
Subject to the provisions of the Companies Acts, and provided that he has
disclosed to the board the nature and extent of any material interest of his, a
director notwithstanding his office:
(a) may be a party to, or otherwise interested in, any transaction or
arrangement with the Company or in which the Company is otherwise
interested;
(b) may act by himself or his firm in a professional capacity for the Company
(otherwise than as auditor) and he or his firm shall be entitled to
remuneration for professional services as if he were not a director;
(c) may be a director or other officer of, or employed by, or a party to any
transaction or arrangement with, or otherwise interested in, any body
corporate promoted by the Company or in which the Company is otherwise
interested; and
(d) shall not, by reason of his office, be accountable to the Company for any
benefit which he derives from any such office or employment or from any
such transaction or arrangement or from any interest in any such body
corporate and no such transaction or arrangement shall be liable to be
avoided on the ground of any such interest or benefit.
109. NOTIFICATION OF INTERESTS
For the purposes of Article 108:
(a) a general notice given to the board that a director is to be regarded as
having an interest of the nature and extent specified in the notice in
any transaction or arrangement in which a specified person or class of
persons is interested shall be deemed to be a disclosure that the
director has an interest in any such transaction of the nature and extent
so specified; and
(b) an interest of which a director has no knowledge and of which it is
unreasonable to expect him to have knowledge shall not be treated as an
interest of his.
24
<PAGE>
110. EXERCISE BY COMPANY OF VOTING RIGHTS
The board may exercise the voting power conferred by the shares in any body
corporate held or owned by the Company in such manner in all respects as it
thinks fit (including the exercise thereof in favour of any resolution
appointing its members or any of them directors of such body corporate, or
voting or providing for the payment of remuneration to the directors of such
body corporate).
GRATUITIES, PENSIONS AND INSURANCE
111. GRATUITIES AND PENSIONS
The board may (by establishment of or maintenance of schemes or otherwise)
provide benefits, whether by the payment of gratuities or pensions or by
insurance or otherwise, for any past or present director or employee of the
Company or any of its subsidiaries or any body corporate associated with, or any
business acquired by, any of them, and for any member of his family (including a
spouse and a former spouse) or any person who is or was dependent on him, and
may (as well before as after he ceases to hold such office or employment)
contribute to any fund and pay premiums for the purchase or provision of any
such benefit.
112. INSURANCE
Without prejudice to the provisions of Article 154, the board shall have the
power to purchase and maintain insurance for or for the benefit of any persons
who are or were at any time directors, officers, or employees or auditors of the
Company, or of any other company which is its holding company or in which the
Company or such holding company has any interest whether direct or indirect or
which is in any way allied to or associated with the Company, or of any
subsidiary undertaking of the Company or any such other company, or who are or
were at any time trustees of any pension fund or employee share scheme in which
employees of the Company or any such other company or subsidiary undertaking are
interested, including (without prejudice to the generality of the foregoing)
insurance against any liability incurred by such persons in respect of any act
or omission in the actual or purported execution or discharge of their duties or
in the exercise or purported exercise of their powers or otherwise in relation
to their duties, powers or offices in relation to the Company or any such other
company, subsidiary undertaking, pension fund or employee share scheme.
113. DIRECTORS NOT LIABLE TO ACCOUNT
No director or former director shall be accountable to the Company or the
members for any benefit provided pursuant to this Article and the receipt of any
such benefit shall not disqualify any person from being or becoming a director
of the Company.
PROCEEDINGS OF DIRECTORS
114. CONVENING MEETINGS
Subject to the provisions of these Articles, the board may regulate its
proceedings as it thinks fit. A director may, and the secretary at the request
of a director shall, call a meeting of the board. Notice of a board meeting
shall be deemed to be properly given to a director if it is given to him
personally or by word of mouth or sent in writing to him at his last known
address or any other
25
<PAGE>
address given by him to the Company for this purpose. Questions arising at a
meeting shall be decided by a majority of votes. In the case of an equality
of votes, the chairman shall have a second or casting vote. Any director may
waive notice of a meeting and any such waiver may be retrospective.
115. QUORUM The quorum for the transaction of the business of the board may
be fixed by the board and unless so fixed at any other number shall be two.
A person who holds office only as an alternate director shall, if his
appointor is not present, be counted in the quorum. Any director who ceases
to be a director at a board meeting may continue to be present and to act as
a director and be counted in the quorum until the termination of the board
meeting if no director objects.
116. POWERS OF DIRECTORS IF NUMBER FALLS BELOW MINIMUM
The continuing directors or a sole continuing director may act notwithstanding
any vacancies in their number, but, if the number of directors is less than the
number fixed as the minimum, the continuing directors or director may act only
for the purpose of filling vacancies or of calling a general meeting.
117. CHAIRMAN AND DEPUTY CHAIRMAN
The board may appoint one of their number to be the chairman, and one of their
number to be the deputy chairman, of the board and may at any time remove either
of them from such office. Unless he is unwilling to do so, the director
appointed as chairman, or in his stead the director appointed as deputy
chairman, shall preside at every meeting of the board at which he is present.
If there is no director holding either of those offices, or if neither the
chairman nor the deputy chairman is willing to preside or neither of them is
present within five minutes after the time appointed for the meeting, the
directors present may appoint one of their number to be chairman of the meeting.
118. VALIDITY OF ACTS OF THE BOARD
All acts done by a meeting of the board, or of a committee of the board, or by a
person acting as a director or alternate director, shall, notwithstanding that
it be afterwards discovered that there was a defect in the appointment of any
director or any member of the committee or alternate director or that any of
them were disqualified from holding office, or had vacated office, or were not
entitled to vote, be as valid as if every such person had been duly appointed
and was qualified and had continued to be a director or, as the case may be, an
alternate director and had been entitled to vote.
119. RESOLUTIONS IN WRITING
A resolution in writing signed by all the directors entitled to receive notice
of a meeting of the board or of a committee of the board (not being less than
the number of directors required to form a quorum of the board) shall be as
valid and effectual as if it had been passed at a meeting of the board or (as
the case may be) a committee of the board duly convened and held and for this
purpose:
(a) a resolution may consist of several documents to the same effect each
signed by one or more directors;
(b) a resolution signed by an alternate director on behalf of his appointor
need not also be signed by his appointor; and
26
<PAGE>
(c) a resolution signed by a director who has appointed an alternate director
need not also be signed by the alternate director in that capacity.
120. MEETINGS BY TELEPHONE, ETC.
Without prejudice to the first sentence of Article 115, a meeting of the board
or of a committee of the board may consist of a conference between directors who
are not all in one place, but of whom each is able (directly by telephonic
communication, video link or via the internet) to speak to each of the others,
and to be heard by each of the others simultaneously. A director taking part in
such a conference shall be deemed to be present in person at the meeting and
shall be entitled to vote or be counted in a quorum accordingly. Such a meeting
shall be deemed to take place where the largest group of those participating in
the conference is assembled, or, if there is no such group, where the chairman
of the meeting then is. The word MEETING in these Articles shall be construed
accordingly.
121. DIRECTORS' POWER TO VOTE ON CONTRACTS IN WHICH THEY ARE INTERESTED
Save as otherwise provided by these Articles, a director may vote at a meeting
of the board or a committee of the board on any resolution of the board
concerning a matter in which he has, directly or indirectly, any kind of
interest whatsoever, and if he shall vote on any such resolution as aforesaid
his vote shall be counted; and in relation to any such vote as aforesaid he
shall (whether or not he shall vote on the same) be taken into account in the
quorum present at the meeting.
122. EXCLUSION OF DIRECTOR FROM QUORUM
A director shall not be counted in the quorum present at a meeting in relation
to a resolution on which he is not entitled to vote.
123. AMENDMENT OF RESTRICTIONS ON VOTING
The Company may by ordinary resolution suspend or relax to any extent, either
generally or in respect of any particular matter, any provision of these
Articles prohibiting a director from voting at a meeting of the board or of a
committee of the board, or ratify any transaction not duly authorised by reason
of a contravention of any such provision.
124. DIVISION OF PROPOSALS
Where proposals are under consideration concerning the appointment (including
fixing or varying the terms of appointment) of two or more directors to offices
or employments with the Company or any body corporate in which the Company is
interested, the proposals may be divided and considered in relation to each
director separately and in such cases each of the directors concerned shall be
entitled to vote and be counted in the quorum in respect of each resolution
except that concerning his own appointment.
125. DECISION OF CHAIRMAN FINAL AND CONCLUSIVE
If a question arises at a meeting of the board or of a committee of the board as
to the entitlement of a director to vote or be counted in a quorum, the question
may, before the conclusion of the meeting, be referred to the chairman of the
meeting and his ruling in relation to any director other than himself shall be
final and conclusive except in a case where the nature or extent of the
interests of the director concerned have not been fairly disclosed. If any such
question arises in respect of the chairman of the meeting, it shall be decided
by resolution of the board (on which the chairman shall not vote) and such
resolution will be final and conclusive except in a case where the nature and
extent of the interests of the chairman have not been fairly disclosed.
27
<PAGE>
SECRETARY
126. APPOINTMENT AND REMOVAL OF SECRETARY
Subject to the provisions of the Companies Acts, the secretary shall be
appointed by the board for such term, at such remuneration and upon such
conditions as it may think fit; and any secretary so appointed may be removed by
the board, but without prejudice to any claim for damages for breach of any
contract of service between him and the Company.
MINUTES
127. MINUTES REQUIRED TO BE KEPT
The board shall cause minutes to be made in books kept for the purpose:
(a) of all appointments of officers made by the board; and
(b) of all proceedings at meetings of the Company, of the holders of any
class of shares in the Company, of the board, and of committees of the
board, including the names of the directors present at each such meeting.
Any such minutes, if purporting to be signed by the chairman of the meeting to
which they relate or of the meeting at which they are read, shall be sufficient
evidence without any further proof of the facts therein stated.
THE SEAL
128. AUTHORITY REQUIRED FOR USE OF SEAL
The seal shall only be used by the authority of a resolution of the board or of
a committee of the board. The board may determine who shall sign any instrument
to which the seal is affixed and unless otherwise so determined it shall be
signed by at least one director and the secretary or by at least two directors.
129. OFFICIAL SEAL FOR USE ABROAD
The company may exercise the powers conferred by section 39 of the Act with
regard to having an official seal for use abroad.
130. EXECUTION OF INSTRUMENT AS A DEED UNDER HAND
Where the Act so permits, any instrument signed, with the authority of a
resolution of the board or of a committee of the board, by one director and the
secretary or by two directors and expressed to be executed by the Company as a
deed shall have the same effect as if executed under the seal, provided that no
instrument which makes it clear on its face that it is intended by the persons
making it to have effect as a deed shall be signed without the authority of the
board.
131. DELIVERY OF DEEDS
A document which is executed by the Company as a deed shall not be deemed to be
delivered by the Company solely as a result of its having been executed by the
Company.
28
<PAGE>
CERTIFICATION
132. CERTIFIED COPIES
Any director or the secretary or any person appointed by the board for the
purpose shall have power to authenticate any documents affecting the
constitution of the Company and any resolutions passed by the Company or the
holders of any class of shares of the Company or the board or any committee of
the board, and any books, records, documents and accounts relating to the
business of the Company, and to certify copies thereof or extracts therefrom as
true copies or extracts. A document purporting to be a copy of a resolution, or
the minutes of or an extract from the minutes of a meeting of the Company or the
holders of any class of shares of the Company or of the board or any committee
of the board that is certified as aforesaid shall be conclusive evidence in
favour of all persons dealing with the Company upon the faith thereof that such
resolution has been duly passed or, as the case may be, that such minutes or
extract is a true and accurate record of proceedings at a duly constituted
meeting.
DIVIDENDS
133. DECLARATION OF DIVIDENDS
Subject to the provisions of the Companies Acts, the Company may by ordinary
resolution declare dividends in accordance with the respective rights of the
members, but no dividend shall exceed the amount recommended by the board.
134. INTERIM DIVIDENDS
Subject to the provisions of the Companies Acts, the board may declare and
pay interim dividends if it appears to the board that they are justified by
the profits of the Company available for distribution. If the share capital
is divided into different classes, the board may declare and pay interim
dividends on shares which confer deferred or non-preferred rights with regard
to dividend as well as on shares which confer preferential rights with regard
to dividend, but no interim dividend shall be declared or paid on shares
carrying deferred or non-preferred rights if, at the time of declaration or
payment, any preferential dividend is in arrear. The board may also declare
and pay at intervals settled by it any dividend payable at a fixed rate if it
appears to the board that the profits available for distribution justify the
payment. Provided the board acts in good faith it shall not incur any
liability to the holders of shares conferring preferred rights for any loss
they may suffer by the declaration or lawful payment of an interim dividend
on any shares having deferred or non-preferred rights.
135. APPORTIONMENT OF DIVIDENDS
Except as otherwise provided by the rights attached to shares, all dividends
shall be declared and paid according to the amounts paid up on the shares on
which the dividend is paid; but no amount paid on a share in advance of the
date on which a call is payable shall be treated for the purposes of this
Article as paid on the share. All dividends shall be apportioned and paid
proportionately to the amounts paid up on the shares during any portion or
portions of the period in respect of which the dividend is paid; but, if any
share is issued on terms providing that it shall rank for dividend as from a
particular date, that share shall rank for dividend accordingly.
136. DIVIDENDS IN SPECIE
A general meeting declaring a dividend may, upon the recommendation of the
board, by ordinary resolution direct that it shall be satisfied wholly or partly
by the distribution of assets, and in
29
<PAGE>
particular of paid up shares or debentures of any other body corporate, and,
where any difficulty arises in regard to the distribution, the board may
settle the same as it thinks fit and in particular may issue fractional
certificates or authorise any person to sell and transfer any fractions or
disregard fractions altogether, and may fix the value for distribution of any
assets and may determine that cash shall be paid to any member upon the
footing of the value so fixed in order to adjust the rights of members and
may vest any assets in trustees.
137. PERMITTED DEDUCTIONS
The board may deduct from any dividend or other moneys payable to any member in
respect of a share any moneys presently payable by him to the Company in respect
of that share.
138. PROCEDURE FOR PAYMENT
Any dividend or other moneys payable in respect of a share may be paid by cheque
or warrant sent by post to the registered address of the holder or person
entitled or, if two or more persons are the holders of the share or are jointly
entitled to it by reason of the death or bankruptcy of the holder or otherwise
by operation of law, to the registered address of that one of those persons who
is first named in the register or to such person and to such address as the
person or persons entitled may in writing direct. Every such cheque or warrant
shall be made payable to the order of the person or persons entitled or to such
other person as the person or persons entitled may in writing direct and shall
be sent at the risk of the person entitled, and payment of the cheque shall be a
good discharge to the Company. Any joint holder or other person jointly
entitled to a share as aforesaid may give receipts for any dividend or other
moneys payable in respect of the share. Any such dividend or other money may
also be paid by any other method (including direct debit, bank transfer and
dividend warrant) which the board considers appropriate.
139. INTEREST NOT PAYABLE
No dividend or other moneys payable in respect of a share shall bear interest
against the Company unless otherwise provided by the rights attached to the
share.
140. FORFEITURE OF UNCLAIMED DIVIDENDS
Any dividend which has remained unclaimed for twelve years from the date when it
became due for payment shall, if the board so resolves, be forfeited and cease
to remain owing by the Company. The payment by the board of any unclaimed
dividend or other moneys payable in respect of a share into a separate account
shall not constitute the Company a trustee thereof.
CAPITALISATION OF PROFITS AND RESERVES
141. POWER TO CAPITALISE
The board may with the authority of an ordinary resolution of the Company:
(a) subject as hereinafter provided, resolve to capitalise any undistributed
profits of the Company not required for paying any preferential dividend
(whether or not they are available for distribution) or any sum standing
to the credit of any reserve or other fund, including the Company's share
premium account and capital redemption reserve, if any;
(b) appropriate the sum resolved to be capitalised to the members or any
class of members on the record date specified in the relevant resolution
who would have been entitled to it if it were distributed by way of
dividend and in the same proportions and apply such sum
30
<PAGE>
on their behalf either in or towards paying up the amounts, if any,
for the time being unpaid on any shares held by them respectively, or
in paying up in full unissued shares, debentures or other obligations
of the Company of a nominal amount equal to that sum, and allot the
shares, debentures or other obligations credited as fully paid to
those members, or as they may direct, in those proportions, or partly
in one way and partly in the other; but the share premium account, the
capital redemption reserve, and any profits which are not available
for distribution may, for the purposes of this Article, only be
applied in paying up unissued shares to be allotted to members
credited as fully paid;
(c) make such provision by authorising the sale and transfer to any person of
fractions to which any members would become entitled or may issue
fractional certificates or may resolve that the distribution be made as
nearly as practicable in the correct proportion but not exactly so or may
ignore fractions altogether or resolve that cash payments be made to any
members in order to adjust the rights of all parties or otherwise as (in
each case) the board determines where shares or debentures become, or
would otherwise become, distributable under this Article in fractions;
(d) authorise any person to enter on behalf of all the members concerned into
an agreement with the Company providing for either:-
(i) the allotment to such members respectively, credited as fully
paid, of any shares, debentures or other obligations to which they
are entitled upon such capitalisation; or
(ii) the payment up by the Company on behalf of such members (by the
application thereto of their respective proportions of the profits
resolved to be capitalised) of the amounts, or any part of the
amounts, remaining unpaid on their existing shares,
and any agreement made under such authority shall be binding on all such
members; and
(e) generally do all acts and things required to give effect to such
resolution as aforesaid.
RECORD DATES
142. RECORD DATES FOR DIVIDENDS, ETC.
Notwithstanding any other provision of these Articles, the Company or the board
may fix any date as the record date for any dividend, distribution, allotment or
issue, and such record date may be on or at any time before or after any date on
which the dividend, distribution, allotment or issue is declared, paid or made.
ACCOUNTS
143. RIGHTS TO INSPECT RECORDS
No member shall (as such) have any right of inspecting any accounting records or
other book or document of the Company except as conferred by statute or
authorised by the board or by ordinary resolution of the Company or order of a
court of competent jurisdiction.
31
<PAGE>
144. DELIVERY OF BALANCE SHEETS AND PROFIT AND LOSS ACCOUNTS
A copy of every balance sheet and profit and loss account (including any
documents required by law to be annexed thereto) which is to be laid before the
Company in general meeting and of the directors' and auditors' reports shall, at
least twenty-one days previously to the meeting, be delivered or sent by post to
every member and to every debenture holder of the Company of whose address the
Company is aware, and to every other person who is entitled to receive notice of
meetings from the Company under the provisions of the Companies Acts or of these
Articles or, in the case of joint holders of any share or debenture, to one of
the joint holders, provided that the requirements of this Article shall be
deemed satisfied in relation to any member by sending to such member, where
permitted by the Companies Acts and instead of such copies, a summary financial
statement derived from the Company's annual accounts and the report of the
directors and prepared in the form and containing the information prescribed by
the Companies Acts and any regulations made thereunder.
NOTICES
145. WHEN NOTICE REQUIRED TO BE IN WRITING
Any notice to be given to or by any person pursuant to these Articles shall be
in writing except that a notice calling a meeting of the board need not be in
writing.
146. METHOD OF GIVING NOTICE
The Company may serve or deliver any notice or other document on or to a member
either personally, by sending it by post in a prepaid envelope, or by facsimile
or telex addressed to the member at his registered address or by leaving it at
that address. In the case of joint holders of a share, all notices or other
documents shall be served on or delivered to the joint holder whose name stands
first in the register in respect of the joint holding and any notice or other
document so served or delivered shall be deemed for all purposes sufficient
service on or delivery to all the joint holders. A member whose registered
address is not within the United Kingdom and who gives to the Company an address
within the United Kingdom at which notices may be given to him shall be entitled
to have notices given to him at that address, but otherwise:
(a) no such members shall be entitled to receive any notice from the Company;
and
(b) without prejudice to the generality of the foregoing, any notice of a
general meeting of the Company which is in fact given or purports to be
given to such members shall be ignored for the purpose of determining the
validity of the proceedings at such general meeting.
147. DEEMED RECEIPT OF NOTICE
A member present, either in person or by proxy, at any meeting of the Company or
of the holders of any class of shares in the Company shall be deemed to have
received notice of the meeting and, where requisite, of the purposes for which
it was called.
148. NOTICE TO PERSONS ENTITLED BY TRANSMISSION
A notice or other document may be served or delivered by the Company on or to
the persons entitled by transmission to a share, whether in consequence of the
death or bankruptcy of a member or otherwise by sending or delivering it, in any
manner authorised by these Articles for the service or delivery of a notice or
other document on or to a member, addressed to them by name, or by the title of
representatives of the deceased, or trustee of the bankrupt or by any like
32
<PAGE>
description at the address, if any, within the United Kingdom supplied for that
purpose by the persons claiming to be so entitled. Until such an address has
been supplied, a notice or other document may be served or delivered in any
manner in which it might have been served or delivered if the death or
bankruptcy or other event giving rise to the transmission had not occurred.
149. NOTICE TO PERSONS ENTITLED BY DEATH OR BANKRUPTCY
A notice may be given by the Company to the persons entitled to a share in
consequence of the death or bankruptcy of a member by sending or delivering it,
in any manner authorised by these Articles for the giving of notice to a member,
addressed to them by name, or by the title of representatives of the deceased,
or trustee of the bankrupt or by any like description at the address, if any,
within the United Kingdom supplied for that purpose by the persons claiming to
be so entitled. Until such an address has been supplied, a notice may be given
in any manner in which it might have been given if the death or bankruptcy had
not occurred.
150. TRANSFEREES ETC. BOUND BY PRIOR NOTICE
Every person who becomes entitled to a share shall be bound by any notice in
respect of that share which, before his name is entered in the register, has
been duly given to a person from whom he derives his title.
151. WHEN NOTICES DEEMED SERVED
Proof that an envelope containing a notice was properly addressed, prepaid and
posted shall be conclusive evidence that the notice was given. A notice sent by
post shall be deemed to be given:
(a) if sent by first class post from an address in the United Kingdom or
another country to another address in the United Kingdom or, as the case
may be, that other country, on the day following that on which the
envelope containing it was posted;
(b) if sent by airmail from an address in the United Kingdom to an address
outside the United Kingdom, on the day following that on which the
envelope containing it was posted; and
(c) in any other case, on the second day following that on which the envelope
containing it was posted.
A notice sent by facsimile transmission shall be deemed given at the time the
notice is received.
WINDING UP
152. LIQUIDATOR MAY DISTRIBUTE IN SPECIE
If the Company is wound up, the liquidator may, with the sanction of an
extraordinary resolution of the Company and any other sanction required by the
Insolvency Act 1986, divide among the members in specie the whole or any part of
the assets of the Company and may, for that purpose, value any assets and
determine how the division shall be carried out as between the members or
different classes of members. The liquidator may, with the like sanction, vest
the whole or any part of the assets in trustees upon such trusts for the benefit
of the members as he with the like sanction determines, but no member shall be
compelled to accept any assets upon which there is a liability.
33
<PAGE>
153. DISPOSAL OF ASSETS BY LIQUIDATOR
The power of sale of a liquidator shall include a power to sell wholly or
partially for shares or debentures or other obligations of another body
corporate, either then already constituted or about to be constituted for the
purpose of carrying out the sale.
INDEMNITY
154. INDEMNITY TO DIRECTORS, OFFICERS, ETC.
Subject to the provisions of the Companies Acts but without prejudice to any
indemnity to which a director may otherwise be entitled, every director or other
officer or auditor of the Company shall be indemnified out of the assets of the
Company against all costs, charges, losses, expenses and liabilities incurred by
him in the execution or discharge of his duties or the exercise of his powers or
otherwise in relation thereto, including (but without limitation) any liability
incurred by him in defending any proceedings, whether civil or criminal, in
which judgment is given in his favour (or the proceedings are otherwise disposed
of without any finding or admission of any material breach of duty on his part)
or in which he is acquitted or in connection with any application in which
relief is granted to him by the court from liability for negligence, default,
breach of duty or breach of trust in relation to the affairs of the Company.
34
<PAGE>
Name and Address of the Subscriber(s) Signature(s) of the Subscriber(s)
NAME Wilfred Thompson Newton Wilfred Thompson Newton
ADDRESS 105 Kingswood Road
Bromley
Kent
(Engineer)
NAME Kurt Whitby Kurt Whitby
ADDRESS 30 Fitzjames Avenue
Croydon
Surrey
(Timber Merchant)
DATED this 1st day of July 1955
Witness to the above signature: Derek D Williamson
Witness Signature: Derek D Williamson
Witness Occupation: Chartered Accountant
Witness Address: 3 Drapers Gardens
Throgmorton Avenue
London EC2
35
<PAGE>
EXHIBIT 3.23
Memorandum
of Association
of TREFN ENGINEERING LIMITED
1. The name of the Company is TREFN ENGINEERING LIMITED.
2. The Registered Office of the Company will be situate in England
3. The objects for which the Company is established are:
(A) To carry on the trade or business of precision engineers,
fabricating engineers, shuttering engineers and general
engineering contractors of every and any description, including
the business of founders, smiths, machinists, manufacturers and
patentees, gauge, tool and instrument makers, electrical and
electronic engineers; to act as principal contractors and sub
contractors, and to carry out work on the premises of the Company
or on the premises of persons having dealings with the Company; to
carry on the business of manufacturers and dealers in precision
instruments, meters and equipment of all kinds; and to carry on
any other trade or business, whatever of a like and similar
nature.
(B) To guarantee or give security for the payment or performance of
any debts, contracts or obligations of any person, firm or
company, for any purpose whatsoever, and to act as agents for the
collection, receipt or payment of money and generally to act as
agents for and render services to customer and others and
generally to give any guarantee, security or indemnity.
(C) To carry on any other trade or business which can, in the opinion
of the Board of Directors be advantageously carried on by the
Company.
(D) To purchase, take on lease or in exchange, hire or otherwise
acquire and hold for any estate or interest any lands, buildings,
easements, rights, privileges, concessions, patents, patent
rights, licences, secret processes, machinery, plant,
stock-in-trade, and any real or personal property of any kind
necessary or convenient for the purposes of or in connection with
the Company's business or any branch or department thereof.
(E) To erect, construct, lay down, enlarge, alter and maintain any
shops, stores, factories, buildings, works, plant and machinery
necessary or convenient for the Company's business, and to
contribute to or subsidize the erection, construction and
maintenance of any of the above.
<PAGE>
(F) To acquire by original subscription, tender, purchase or otherwise
and hold, sell, deal with or dispose of any Shares, Stocks,
Debentures, Debenture Stocks, Bonds, Obligations and Securities,
guaranteed by any Company constituted or carrying on business in
any part of the world and Debentures, Debenture Stock, Bonds,
Obligations and Securities guaranteed by any Government or
Authority, Municipal, Local or otherwise, whether at home or
abroad, and to subscribe for the same either conditionally or
otherwise and to guarantee the subscription thereof and to
exercise and enforce all rights and powers conferred by the
ownership thereof.
(G) To borrow money and raise money and secure or discharge any debt
or obligation of or binding on the Company in such manner as may
be thought fit and in particular by mortgages of or charges upon
the undertaking and all or any of the real or heritable and
personal or moveable property (present and future) and the
uncalled capital for the time being of the Company or by the
creation and issue of debentures, debenture stock or other
obligations or securities of any description.
(H) To guarantee support and/or secure either with or without
consideration the payment of any debentures, debenture stock,
bonds, mortgages, charges, obligations, interest, dividends,
securities, moneys or shares or the performance of contracts or
engagements of any other company or person and in particular (but
without prejudice to the generality of the foregoing) of any
company which is, for the time being, the company's holding
company as defined by Section 154 of the Companies Act 1948 or
another subsidiary, as defined by the said section of the
company's holding company or otherwise associated with the company
in business and to give indemnities and guarantees of all kinds
and by way of security as aforesaid either with or without
consideration to mortgage and charge the undertaking and all or
any of the real and personal property and assets present or
future, to issue debentures and debenture stock and collaterally
or further to secure any securities of the company by a Trust Deed
or other assurance and to enter into partnership or any joint
purse arrangement with any person, persons, firm or company.
(I) To make advances to customers and others with or without security,
and upon such terms as the Company may approve, and to guarantee
the dividends, interest and capital of the shares, stocks or
securities of any company of or in which this Company is a member
or is otherwise interested.
(J) To receive money on deposit or loan upon such term as the Company
may approve, and generally to act as bankers for customers and
others.
(K) To apply for, purchase or otherwise acquire and hold any patents,
brevets invention, licences, concessions, copyrights and the like,
conferring any right to
-2-
<PAGE>
use or publish any secret or other information and to use,
exercise, develop or grant licences in respect of the property,
rights, information so acquired.
(L) To take part in the formation, management, supervision or control
of the business or operation of any Company or undertaking and for
that purpose to appoint and remunerate any Directors, Accountants
or experts or agents.
(M) To employ experts to investigate and examine into the condition,
prospects, value, character, and circumstances of any business
concerns and undertakings and generally of any assets, property or
rights.
(N) To establish or promote or concur in establishing or promoting any
other Company whose objects shall include the acquisition or
taking over of all or any of the assets or liabilities of this
Company or the promotion of which shall be in any manner
calculated to advance directly or indirectly the objects or
interests of this Company and to acquire, hold, dispose of shares,
stocks, or securities issued by or any other obligations of any
such Company.
(O) To draw, make, accept, endorse, negotiate, discount and execute
promissory notes, bills of exchange, and other negotiable
instruments.
(P) To invest and deal with the moneys of the Company not immediately
required for the purposes of the business of the Company in or
upon such investments and in such manner as the Company may
approve.
(Q) To pay for any property or rights acquired by the Company either
in cash or fully or partly paid up shares, with or without
preferred or deferred or special rights or restrictions in respect
of dividend repayment of capital, voting or otherwise, or by any
securities which the Company has power to issue, or partly in one
mode and partly in another, and generally on such terms as the
Company may determine.
(R) To accept payment for any property or rights sold or otherwise
disposed of or dealt with by the Company, either in cash, by
installments or otherwise, or in fully or partly paid-up shares or
stock of any company or corporation, with or without preferred or
deferred or special rights or restrictions in respect of dividend,
repayment of capital, voting or otherwise, or in debentures or
mortgages or other securities of any company or corporation or
partly in one mode and partly in another, and generally on such
terms as the Company may determine, and to hold, dispose of or
otherwise deal with any shares, stock or securities so acquired.
(S) To amalgamate with or enter into any partnership or arrangement
for sharing profits, union of interests, reciprocal concessions or
co-operation with any company, firm or person carrying on or
proposed to carry on any business within
-3-
<PAGE>
the objects of this Company or which is capable of being carried
on so as directly or indirectly to benefit this Company, and to
acquire and hold, sell, deal with or dispose of any shares, stock
or securities of or other interests in any such company, and to
guarantee the contracts or liabilities of, subsidize or otherwise
assist, any such company.
(T) To purchase or otherwise acquire, take over and undertake all or
any part of the business, property, liabilities and transactions
of any person, firm or company carrying on any business the
carrying on of which is calculated to benefit this Company or to
advance its interests, or possessed of property suitable for the
purposes of the Company.
(U) To sell, improve, manage, develop, turn to account, exchange, let
on rent, royalty, share of profits or otherwise, grant licenses,
easements and other rights in or over, and in any other manner
deal with or dispose of undertaking and all or any of the property
and assets for the time being of the Company for such
consideration as the Company may think fit.
(V) To grant pensions, allowances, gratuities and bonuses to officers
or ex-officers, employees or ex-employees of the Company or its
predecessors in business or the dependents of such persons and to
establish and maintain or concur in maintaining trusts, funds or
schemes, (whether contributory or non-contributory), with a view
to providing pensions or other funds for any such persons as
aforesaid or their dependents.
(W) To aid in the establishment and support of, any schools and any
educational, scientific, literary, religious or charitable
institutions or trade societies, whether such institutions or
societies be solely connected with the business carried on by the
Company or its predecessors in business or not, and to institute
and maintain any club or other establishment.
(X) To distribute among the members in specie any property of the
Company, or any proceeds of sale or disposal of any property of
the Company, but so that no distribution amounting to a reduction
of capital be made except with the sanction (if any) for the time
being required by law.
(Y) To do all or any of the above things in any part of the world, and
either as principals, agents, trustees, contractors or otherwise,
and either alone or in conjunction with others, and either by or
through agents, trustees, subcontractors or otherwise.
(Z) To do all such other things as are incidental or conducive to the
above objects or any of them.
-4-
<PAGE>
It is hereby declared that the objects of the Company as specified in
each of the foregoing paragraphs of this clause shall be separate and
distinct objects of the Company and shall not be in any way limited by
reference to any other paragraphs or the order in which the same occur.
4. The liability of the members is limited.
5. The share capital of the Company is L5,000 divided into 5,000
shares of L1 each.
We, the several persons whose names and addresses are subscribed, are desirous
of being formed into a Company in pursuance of this Memorandum of Association,
and we respectively agree to take the number of shares in the capital of the
Company set opposite our respective names.
- -----------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Names, Addresses and Descriptions of Subscribers Number of Shares taken by each Shareholder
DAVID ORDISH One
22-24 Cowper Street
City Road
London EC2A 4AP.
Company Director
DEREK PATTISON One
22-24 Cowper Street
City Road
London EC2A 4AP.
Company Director.
</TABLE>
- -----------------------------------------------
Dated this - 2nd day of October 1978
Witness to the above Signatures
RACHEL FUTERMAN
22-24 Cowper Street
City Road
London EC2A 4AP.
Company Director.
-5-
<PAGE>
EXHIBIT 3.24
THE COMPANIES ACTS 1985 AND 1989
-------------------------------------------
PRIVATE COMPANY LIMITED BY SHARES
-------------------------------------------
ARTICLES OF ASSOCIATION
OF
TREFN ENGINEERING LIMITED
-------------------------------------------
(Incorporated on 30 October 1978)
-------------------------------------------
Company Number:1396688
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PRELIMINARY 1
INTERPRETATION 1
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
SHARE CAPITAL 3
2. Shares with special rights . . . . . . . . . . . . . . . . . . . . . .3
3. Allotment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
4. Redeemable shares. . . . . . . . . . . . . . . . . . . . . . . . . . .3
5. Commissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
6. Trusts not recognised. . . . . . . . . . . . . . . . . . . . . . . . .4
VARIATION OF RIGHTS 4
7. Method of varying rights . . . . . . . . . . . . . . . . . . . . . . .4
8. When rights deemed to be varied. . . . . . . . . . . . . . . . . . . .4
SHARE CERTIFICATES 4
9. Members' rights to certificates . . . . . . . . . . . . . . . . . . .4
10. Replacement certificates . . . . . . . . . . . . . . . . . . . . . . .5
LIEN 5
11. Company to have lien on shares . . . . . . . . . . . . . . . . . . . .5
12. Enforcement of lien by sale. . . . . . . . . . . . . . . . . . . . . .5
13. Giving effect to sale. . . . . . . . . . . . . . . . . . . . . . . . .5
14. Application of proceeds . . . . . . . . . . . . . . . . . . . . . . .5
CALLS ON SHARES 5
15. Power to make calls. . . . . . . . . . . . . . . . . . . . . . . . . .5
16. Time when call made . . . . . . . . . . . . . . . . . . . . . . . . .6
17. Liability of joint holders . . . . . . . . . . . . . . . . . . . . . .6
18. Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . .6
19. Deemed calls . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
20. Differentiation on calls . . . . . . . . . . . . . . . . . . . . . . .6
21. Payment of calls in advance. . . . . . . . . . . . . . . . . . . . . .6
FORFEITURE AND SURRENDER 6
22. Notice requiring payment of call . . . . . . . . . . . . . . . . . . .6
23. Forfeiture for non-compliance . . . . . . . . . . . . . . . . . . . .7
24. Sale of forfeited shares . . . . . . . . . . . . . . . . . . . . . . .7
25. Liability following forfeiture . . . . . . . . . . . . . . . . . . . .7
26. Surrender. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
27. Extinction of rights . . . . . . . . . . . . . . . . . . . . . . . . .7
28. Evidence of forfeiture . . . . . . . . . . . . . . . . . . . . . . . .7
<PAGE>
TRANSFER OF SHARES 8
29. Form and execution of transfer . . . . . . . . . . . . . . . . . . . .8
30. Restrictions on transfer . . . . . . . . . . . . . . . . . . . . . . .8
31. Invalid transfers. . . . . . . . . . . . . . . . . . . . . . . . . . .8
32. Notice of refusal to register. . . . . . . . . . . . . . . . . . . . .8
33. Suspension of registration . . . . . . . . . . . . . . . . . . . . .9
34. No fee payable on registration . . . . . . . . . . . . . . . . . . . .9
35. Retention of transfers . . . . . . . . . . . . . . . . . . . . . . . .9
TRANSMISSION OF SHARES 9
36. Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
37. Elections following transmission . . . . . . . . . . . . . . . . . . .9
38. Rights of persons entitled by transmission . . . . . . . . . . . . . .9
ALTERATION OF SHARE CAPITAL 10
39. Alterations permitted by ordinary resolution . . . . . . . . . . . . 10
40. New shares subject to these Articles . . . . . . . . . . . . . . . . 10
41. Fractions arising. . . . . . . . . . . . . . . . . . . . . . . . . . 10
42. Power to reduce capital . . . . . . . . . . . . . . . . . . . . . . 10
PURCHASE OF OWN SHARES 11
43. Power to purchase own shares . . . . . . . . . . . . . . . . . . . . 11
GENERAL MEETINGS 11
44. Types of general meeting . . . . . . . . . . . . . . . . . . . . . . 11
45. Annual general meetings . . . . . . . . . . . . . . . . . . . . . . 11
46. Class meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
47. Convening general meetings . . . . . . . . . . . . . . . . . . . . . 11
NOTICE OF GENERAL MEETINGS 12
48. Period of notice . . . . . . . . . . . . . . . . . . . . . . . . . . 12
49. Provision of notice . . . . . . . . . . . . . . . . . . . . . . . . 12
50. Contents of notice . . . . . . . . . . . . . . . . . . . . . . . . . 12
51. Accidental omission to give notice . . . . . . . . . . . . . . . . . 13
PROCEEDINGS AT GENERAL MEETINGS 13
52. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
53. If quorum not present . . . . . . . . . . . . . . . . . . . . . . . 13
54. Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
55. Directors entitled to speak . . . . . . . . . . . . . . . . . . . . 13
56. Adjournments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
57. Amendments to resolutions . . . . . . . . . . . . . . . . . . . . . 14
58. Methods of voting . . . . . . . . . . . . . . . . . . . . . . . . . 14
59. Declaration of result . . . . . . . . . . . . . . . . . . . . . . . 14
60. Withdrawal of demand for poll . . . . . . . . . . . . . . . . . . . 14
61. Conduct of poll . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
62. Chairman's casting vote . . . . . . . . . . . . . . . . . . . . . . 15
63. When poll to be taken . . . . . . . . . . . . . . . . . . . . . . . 15
64. Notice of poll . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
65. Effectiveness of special and extraordinary resolutions . . . . . . . 15
66. Resolutions in writing . . . . . . . . . . . . . . . . . . . . . . . 15
VOTES OF MEMBERS 15
67. Right to vote . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
68. Votes of joint holders . . . . . . . . . . . . . . . . . . . . . . . 15
69. Member under incapacity . . . . . . . . . . . . . . . . . . . . . . 16
70. Calls in arrears . . . . . . . . . . . . . . . . . . . . . . . . . . 16
71. Objection to voting . . . . . . . . . . . . . . . . . . . . . . . . 16
72. Supplementary provisions on voting . . . . . . . . . . . . . . . . . 16
PROXIES AND CORPORATE REPRESENTATIVES 16
73. Appointment of proxy . . . . . . . . . . . . . . . . . . . . . . . . 16
74. Form of proxy - standard . . . . . . . . . . . . . . . . . . . . . . 16
75. Form of proxy - each way . . . . . . . . . . . . . . . . . . . . . . 17
76. Voting by appointor . . . . . . . . . . . . . . . . . . . . . . . . 17
77. Delivery of form of proxy . . . . . . . . . . . . . . . . . . . . . 17
78. Validity of form of proxy . . . . . . . . . . . . . . . . . . . . . 18
79. Corporate representatives . . . . . . . . . . . . . . . . . . . . . 18
80. Revocation of authority . . . . . . . . . . . . . . . . . . . . . . 18
NUMBER OF DIRECTORS 18
81. Limits on number of directors . . . . . . . . . . . . . . . . . . . 18
APPOINTMENT AND RETIREMENT OF DIRECTORS 18
82. No retirement by rotation . . . . . . . . . . . . . . . . . . . . . 18
83. Eligibility for election . . . . . . . . . . . . . . . . . . . . . . 18
84. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
85. Additional powers of the Company . . . . . . . . . . . . . . . . . . 19
86. Appointment by board . . . . . . . . . . . . . . . . . . . . . . . . 19
87. Age limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
88. No share qualification . . . . . . . . . . . . . . . . . . . . . . . 19
ALTERNATE DIRECTORS 20
89. Power to appoint alternates . . . . . . . . . . . . . . . . . . . . 20
90. Alternates entitled to receive notice . . . . . . . . . . . . . . . 20
91. Alternates representing more than one director . . . . . . . . . . . 20
92. Expenses and remuneration of alternates . . . . . . . . . . . . . . 20
93. Termination of appointment . . . . . . . . . . . . . . . . . . . . . 20
94. Method of appointment and revocation . . . . . . . . . . . . . . . . 20
95. Alternate not an agent of appointor . . . . . . . . . . . . . . . . 21
POWERS OF THE BOARD 21
96. Business to be managed by board . . . . . . . . . . . . . . . . . . 21
<PAGE>
DELEGATION OF POWERS OF THE BOARD 21
97. Committees of the board . . . . . . . . . . . . . . . . . . . . . . 21
98. Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
99. Offices including the title "director" . . . . . . . . . . . . . . . 21
DISQUALIFICATION AND REMOVAL OF DIRECTORS 22
100. Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . 22
101. Power of Company to remove director . . . . . . . . . . . . . . . . 22
REMUNERATION OF NON-EXECUTIVE DIRECTORS 23
102. Ordinary remuneration . . . . . . . . . . . . . . . . . . . . . . . 23
103. Additional remuneration for special services . . . . . . . . . . . . 23
DIRECTORS' EXPENSES 23
104. Directors may be paid expenses . . . . . . . . . . . . . . . . . . . 23
EXECUTIVE DIRECTORS 23
105. Appointment to executive office . . . . . . . . . . . . . . . . . . 23
106. Termination of appointment to executive office . . . . . . . . . . . 23
107. Emoluments to be determined by the board . . . . . . . . . . . . . . 24
DIRECTORS' INTERESTS 24
108. Directors may contract with the Company . . . . . . . . . . . . . . 24
109. Notification of interests . . . . . . . . . . . . . . . . . . . . . 24
110. Exercise by Company of voting rights . . . . . . . . . . . . . . . . 25
GRATUITIES, PENSIONS AND INSURANCE 25
111. Gratuities and pensions . . . . . . . . . . . . . . . . . . . . . . 25
112. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
113. Directors not liable to account . . . . . . . . . . . . . . . . . . 25
PROCEEDINGS OF DIRECTORS 25
114. Convening meetings . . . . . . . . . . . . . . . . . . . . . . . . . 25
115. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
116. Powers of directors if number falls below minimum . . . . . . . . . 26
117. Chairman and deputy chairman . . . . . . . . . . . . . . . . . . . . 26
118. Validity of acts of the board . . . . . . . . . . . . . . . . . . . 26
119. Resolutions in writing . . . . . . . . . . . . . . . . . . . . . . . 26
120. Meetings by telephone, etc. . . . . . . . . . . . . . . . . . . . . 26
121. Directors' power to vote on contracts
in which they are interested . . . . . . . . . . . . . . . . . . 27
122. Exclusion of director from quorum . . . . . . . . . . . . . . . . . 27
123. Amendment of restrictions on voting . . . . . . . . . . . . . . . . 27
124. Division of proposals . . . . . . . . . . . . . . . . . . . . . . . 27
125. Decision of chairman final and conclusive . . . . . . . . . . . . . 27
<PAGE>
SECRETARY 28
126. Appointment and removal of secretary . . . . . . . . . . . . . . . . 28
MINUTES 28
127. Minutes required to be kept . . . . . . . . . . . . . . . . . . . . 28
THE SEAL 28
128. Authority required for use of seal . . . . . . . . . . . . . . . . . 28
129. Official seal for use abroad . . . . . . . . . . . . . . . . . . . . 28
130. Execution of instrument as a deed under hand . . . . . . . . . . . . 28
131. Delivery of deeds . . . . . . . . . . . . . . . . . . . . . . . . . 28
CERTIFICATION 29
132. Certified copies . . . . . . . . . . . . . . . . . . . . . . . . . . 29
DIVIDENDS 29
133. Declaration of dividends . . . . . . . . . . . . . . . . . . . . . . 29
134. Interim dividends . . . . . . . . . . . . . . . . . . . . . . . . . 29
135. Apportionment of dividends . . . . . . . . . . . . . . . . . . . . . 29
136. Dividends in specie . . . . . . . . . . . . . . . . . . . . . . . . 29
137. Permitted deductions . . . . . . . . . . . . . . . . . . . . . . . . 30
138. Procedure for payment . . . . . . . . . . . . . . . . . . . . . . . 30
139. Interest not payable . . . . . . . . . . . . . . . . . . . . . . . . 30
140. Forfeiture of unclaimed dividends . . . . . . . . . . . . . . . . . 30
CAPITALISATION 30
141. Power to capitalise . . . . . . . . . . . . . . . . . . . . . . . . 30
RECORD DATES 31
142. Record dates for dividends, etc. . . . . . . . . . . . . . . . . . . 31
ACCOUNTS 31
143. Rights to inspect records . . . . . . . . . . . . . . . . . . . . . 31
144. Delivery of balance sheets and profit and loss accounts . . . . . . 32
NOTICES 32
145. When notice required to be in writing . . . . . . . . . . . . . . . 32
146. Method of giving notice . . . . . . . . . . . . . . . . . . . . . . 32
147. Deemed receipt of notice . . . . . . . . . . . . . . . . . . . . . . 32
148. Notice to persons entitled by transmission . . . . . . . . . . . . . 32
149. Notice to persons entitled by death or bankruptcy . . . . . . . . . 33
150. Transferees etc. bound by prior notice . . . . . . . . . . . . . . . 33
151. When notices deemed served . . . . . . . . . . . . . . . . . . . . . 33
WINDING UP 33
152. Liquidator may distribute in specie . . . . . . . . . . . . . . . . 33
153. Disposal of assets by liquidator . . . . . . . . . . . . . . . . . . 34
INDEMNITY 34
154. Indemnity to directors, officers, etc. . . . . . . . . . . . . . . . 34
</TABLE>
<PAGE>
COMPANY NO.: 1396688
THE COMPANIES ACTS 1985 AND 1989
PRIVATE COMPANY LIMITED BY SHARES
-------------------------------------------
ARTICLES OF ASSOCIATION
OF
TREFN ENGINEERING LIMITED
(INCORPORATED ON 30 OCTOBER 1978)
-------------------------------------------
PRELIMINARY
THE REGULATIONS IN TABLE A IN THE COMPANIES (TABLES A-F) REGULATIONS IN FORCE AT
THE DATE OF THE INCORPORATION OF THE COMPANY SHALL NOT APPLY TO THE COMPANY.
INTERPRETATION
1. DEFINITIONS
IN THESE ARTICLES, EXCEPT WHERE THE SUBJECT OR CONTEXT OTHERWISE REQUIRES, THE
WORDS DEFINED IN THE FIRST COLUMN OF THE FOLLOWING TABLE SHALL BEAR THE MEANINGS
SET OPPOSITE THEM RESPECTIVELY IN THE SECOND COLUMN.
THE ACT means The Companies Act 1985 including any modification or re-enactment
thereof for the time being in force.
THESE ARTICLES means these articles of association as altered from time to time
by special resolution.
THE AUDITORS means the auditors for the time being of the Company.
THE BOARD means the directors or any of them acting as the board of directors of
the Company.
CLEAR DAYS means the period excluding the day when a notice is given or deemed
to be given and the day for which it is given or on which it is to take effect.
THE COMPANIES ACTS has the meaning ascribed thereto by section 744 of the Act
and any enactment passed after those Acts which may, by virtue of that or any
other such enactment, be
1
<PAGE>
cited together with those Acts as the "Companies Acts" (with or without the
addition of an indication of the date of any such enactment).
A DIRECTOR means a director of the Company.
DIVIDEND means Dividend or bonus.
THE HOLDER means in relation to any shares the member whose name is entered in
the register as the holder of such shares.
A MEMBER means a member of the Company.
THE MEMORANDUM means the memorandum of association of the Company as amended
from time to time.
THE OFFICE means the registered office of the Company.
PAID means paid or credited as paid.
THE REGISTER means the register of members of the Company.
THE SEAL means the common seal of the Company and includes any official seal
kept by the Company by virtue of section 39 or 40 of the Act.
THE SECRETARY means the secretary of the Company and includes a joint,
assistant, deputy or temporary secretary and any other person appointed to
perform the duties of the secretary.
THE UNITED KINGDOM means Great Britain and Northern Ireland.
References to a document being executed include references to its being executed
under hand or under seal or by any other method.
References to writing include references to any visible substitute for writing
and to anything partly in one form and partly in another form.
Words denoting the singular number include the plural number and vice versa;
words denoting the masculine gender include the feminine gender; and words
denoting persons include corporations.
Save as aforesaid any words or expressions defined in the Act (but excluding any
statutory modification thereof not in force at the date of adoption of these
Articles) shall, if not inconsistent with the subject or context, bear the same
meaning in these Articles.
Subject to the preceding paragraph, references to any provision of any enactment
or of any subordinate legislation (as defined by section 21(1) of the
Interpretation Act 1978) include any modification or re-enactment of that
provision for the time being in force.
Headings are inserted for convenience only and do not affect the construction of
these Articles.
2
<PAGE>
In these Articles, (a) powers of delegation shall not be restrictively construed
but the widest interpretation shall be given thereto; (b) the word "board" in
the context of the exercise of any power contained in these Articles includes
any committee consisting of one or more directors, any director holding
executive office and any local or divisional board, manager or agent of the
Company to which or, as the case may be, to whom the power in question has been
delegated; (c) no power of delegation shall be limited by the existence or,
except where expressly provided by the terms of delegation, the exercise of
that or any other power of delegation; and (d) except where expressly provided
by the terms of delegation, the delegation of a power shall not exclude the
concurrent exercise of that power by any other body or person who is for the
time being authorised to exercise it under these Articles or under another
delegation of the power.
SHARE CAPITAL
2. SHARES WITH SPECIAL RIGHTS
Subject to the provisions of the Companies Acts and without prejudice to any
rights attached to any existing shares or class of shares, any share may be
issued with such rights or restrictions as the Company may by ordinary
resolution determine or, subject to and in default of such determination, as the
board shall determine.
3. ALLOTMENT
Any shares proposed to be issued after the date of adoption of these Articles
shall first be offered to the members in proportion as nearly as may be to the
number of the existing shares held by them respectively unless the Company shall
by Special Resolution otherwise direct. The offer shall be made by notice
specifying the number of shares offered, and limiting a period (not being less
than fourteen days) within which the offer, if not accepted, will be deemed to
be declined. After the expiration of that period, those shares so deemed to be
declined shall be offered in the proportion aforesaid to the persons who have,
within the said period, accepted all the shares offered to them; such further
offer shall be made in the same manner and limited by a like period as the
original offer. Any shares not accepted pursuant to such offer or further offer
as aforesaid or not capable of being offered as aforesaid except by way of
fractions and any shares released from the provisions of this Article by such
Special Resolution as aforesaid shall be under the control of the directors, who
may allot, grant options over or otherwise dispose of the same to such persons,
on such terms, and in such manner as they think fit, provided that, in the case
of shares not accepted as aforesaid, such shares shall not be disposed of on
terms which are more favourable to the subscribers thereof than the terms on
which they were offered to the members. Subject to this Clause the directors are
unconditionally authorised for the purposes of Section 80 of the Act, to allot,
grant options over, or otherwise dispose of relevant securities up to the amount
of the share capital as at the date of adoption of these Articles at any time or
times during the period of five years from the date of adoption and at any time
thereafter pursuant to any offer or agreement made by the Company before the
expiry of this authority. Sub-sections 89(1) and 90(1) inclusive of the Act
shall be excluded from applying to the Company.
4. REDEEMABLE SHARES
Subject to the provisions of the Companies Acts, and without prejudice to any
rights attached to any existing shares or class of shares, shares may be issued
which are to be redeemed or are to be liable to be redeemed at the option of the
Company or the holder on such terms and in such manner as may be provided by
these Articles.
3
<PAGE>
5. COMMISSIONS
The Company may exercise all powers of paying commissions or brokerage conferred
or permitted by the Companies Acts. Subject to the provisions of the Companies
Acts, any such commission or brokerage may be satisfied by the payment of cash
or by the allotment of fully or partly paid shares or partly in one way and
partly in the other.
6. TRUSTS NOT RECOGNISED
Except as required by law, no person shall be recognised by the Company as
holding any share upon any trust and (except as otherwise provided by these
Articles or by law) the Company shall not be bound by or recognise any interest
in any share (or in any fractional part of a share) except an absolute right to
the entirety thereof in the holder.
VARIATION OF RIGHTS
7. METHOD OF VARYING RIGHTS
Subject to the provisions of the Companies Acts, if at any time the capital of
the Company is divided into different classes of shares, the rights attached to
any class may (unless otherwise provided by the terms of issue of the shares of
that class) be varied or abrogated, whether or not the Company is being wound
up, either with the consent in writing of the holders of three-quarters in
nominal value of the issued shares of the class or with the sanction of an
extraordinary resolution passed at a separate general meeting of the holders of
the shares of the class (but not otherwise).
8. WHEN RIGHTS DEEMED TO BE VARIED
For the purposes of this Article, unless otherwise expressly provided by the
rights attached to any shares or class of shares, those rights shall be deemed
to be varied by the reduction of the capital paid up on those shares otherwise
than by a purchase or redemption by the Company of its own shares and by the
allotment of other shares ranking in priority for payment of a dividend or in
respect of capital or which confer on the holders voting rights more favourable
than those conferred by such first mentioned shares, but shall not otherwise be
deemed to be varied by the creation or issue of other shares ranking pari passu
with, or subsequent to, such first mentioned shares or by the purchase or
redemption by the Company of any of its own shares.
SHARE CERTIFICATES
9. MEMBERS' RIGHTS TO CERTIFICATES
Every member, upon becoming the holder of any shares, shall be entitled, without
payment, to one certificate for all the shares of each class held by him (and,
upon transferring a part of his holding of shares of any class, to a certificate
for the balance of such holding) or several certificates each for one or more of
his shares upon payment for every certificate after the first of such reasonable
sum as the board may from time to time determine. Every certificate shall
specify the number, class and distinguishing numbers (if any) of the shares to
which it relates and the amount or respective amounts paid up thereon and, where
the Company has adopted a seal, sealed with the seal. The Company shall not be
bound to issue more than one certificate for shares held jointly by several
persons and delivery of a certificate to one joint holder shall be a sufficient
delivery to all of them. Shares of different classes may not be included in the
same certificate.
4
<PAGE>
10. REPLACEMENT CERTIFICATES
If a share certificate is defaced, worn out, lost or destroyed, it may be
renewed on such terms (if any) as to evidence and indemnity (with or without
security) and payment of any exceptional out-of-pocket expenses reasonably
incurred by the Company in investigating evidence and preparing the requisite
form of indemnity as the board may determine but otherwise free of charge, and
(in the case of defacement or wearing out) on delivery up of the old
certificate.
LIEN
11. COMPANY TO HAVE LIEN ON SHARES
The Company shall have a first and paramount lien on every share (not being a
fully paid share) for all moneys payable to the Company (whether presently or
not) in respect of that share. The board may at any time (generally or in
particular cases) waive any lien or declare any share to be wholly or in part
exempt from the provisions of this Article. The Company's lien on a share shall
extend to any amount (including dividends) payable in respect of it.
12. ENFORCEMENT OF LIEN BY SALE
The Company may sell, in such manner as the board determines, any share on which
the Company has a lien if a sum in respect of which the lien exists is presently
payable and is not paid within fourteen clear days after notice has been given
to the holder of the share or to the person entitled to it in consequence of the
death or bankruptcy of the holder or otherwise by operation of law, demanding
payment and stating that if the notice is not complied with the shares may be
sold.
13. GIVING EFFECT TO SALE
To give effect to any such sale the board may authorise some person to execute
an instrument of transfer of the shares sold to, or in accordance with the
directions of, the purchaser. The transferee shall not be bound to see to the
application of the purchase money nor shall his title to the shares be affected
by any irregularity in or invalidity of the proceedings in relation to the sale.
14. APPLICATION OF PROCEEDS
The net proceeds of the sale, after payment of the costs, shall be applied in or
towards payment or satisfaction of so much of the sum in respect of which the
lien exists as is presently payable, and any residue shall (upon surrender to
the Company for cancellation of the certificate for the shares sold and subject
to a like lien for any moneys not presently payable as existed upon the shares
before the sale) be paid to the person entitled to the shares at the date of the
sale.
CALLS ON SHARES
15. POWER TO MAKE CALLS
Subject to the terms of allotment, the board may from time to time make calls
upon the members in respect of any moneys unpaid on their shares (whether in
respect of nominal value or premium) and each member shall (subject to receiving
at least fourteen clear days' notice specifying when and where payment is to be
made) pay to the Company as required by the notice the amount called on his
shares. A call may be required to be paid by instalments. A call may, before
receipt by the Company of any sum due thereunder, be revoked in whole or part
and the
5
<PAGE>
time fixed for payment of a call may be postponed in whole or part as the
board may determine. A person upon whom a call is made shall remain liable
for calls made upon him notwithstanding the subsequent transfer of the shares
in respect whereof the call was made.
16. TIME WHEN CALL MADE
A call shall be deemed to have been made at the time when the resolution of the
board authorising the call was passed.
17. LIABILITY OF JOINT HOLDERS
The joint holders of a share shall be jointly and severally liable to pay all
calls in respect thereof.
18. INTEREST PAYABLE
If a call or any instalment of a call remains unpaid in whole or in part after
it has become due and payable the person from whom it is due and payable shall
pay interest on the amount unpaid from the day it became due and payable until
it is paid at the rate fixed by the terms of allotment of the share or in the
notice of the call or, if no rate is fixed, such rate, not exceeding 15 per
cent. per annum or, if higher, the appropriate rate (as defined by the Act), as
may be determined by the board, but the board may waive payment of such interest
wholly or in part.
19. DEEMED CALLS
An amount payable in respect of a share on allotment or at any fixed date,
whether in respect of nominal value or premium or as an instalment of a call,
shall be deemed to be a call duly made and notified and payable on the date so
fixed or in accordance with the terms of the allotment, and if it is not paid
the provisions of these Articles shall apply as if that amount had become due
and payable by virtue of a call duly made and notified.
20. DIFFERENTIATION ON CALLS
Subject to the terms of allotment, the board may make arrangements on the issue
of shares for a difference between the allottees and/or holders in the amounts
and times of payment of calls on their shares.
21. PAYMENT OF CALLS IN ADVANCE
The board may, if it thinks fit, receive from any member willing to advance the
same all or any part of the moneys uncalled and unpaid upon any shares held by
him and such payment in advance of calls shall extinguish PRO TANTO the
liability upon the shares in respect of which it is made, and may pay upon all
or any of the moneys so advanced (until the same would but for such advance
become presently payable) interest at such rate not exceeding (unless the
Company by ordinary resolution may otherwise direct) 15 per cent. per annum or,
if higher, the appropriate rate (as defined in the Act) as may be agreed upon
between the board and such member.
FORFEITURE AND SURRENDER
22. NOTICE REQUIRING PAYMENT OF CALL If a call or any instalment of a call
remains unpaid in whole or in part after it has become due and payable, the
board may give to the person from whom it is due not less than fourteen clear
days' notice in writing requiring payment of the amount unpaid together with
any interest which may have accrued and any costs, charges and expenses
incurred by the Company by reason of such non-payment. The notice shall name
the place where payment is to be made and shall state that
6
<PAGE>
if the notice is not complied with the shares in respect of which the call
was made will be liable to be forfeited.
23. FORFEITURE FOR NON-COMPLIANCE
If any such notice is not complied with, any share in respect of which it was
given may, at any time before the payment required by the notice has been made,
be forfeited by a resolution of the board and the forfeiture shall include all
dividends or other moneys payable in respect of the forfeited shares and not
paid before the forfeiture. When any share has been forfeited, notice of the
forfeiture shall be served upon the person who was before the forfeiture the
holder of the share, and an entry of such notice having been given and of the
forfeiture with the date thereof shall forthwith be made in the register
opposite the entry of the share; but no forfeiture shall be invalidated by any
omission or neglect to give such notice or to make such entries.
24. SALE OF FORFEITED SHARES
Subject to the provisions of the Companies Acts, a forfeited share shall be
deemed to belong to the Company and may be sold, re-allotted or otherwise
disposed of on such terms and in such manner as the board determines, either to
the person who was before the forfeiture the holder or to any other person, and
at any time before sale, re-allotment or other disposal, the forfeiture may be
cancelled on such terms as the board thinks fit. Where for the purposes of its
disposal a forfeited share is to be transferred to any person the board may
authorise some person to execute an instrument of transfer of the share to that
person. The Company may receive the consideration given for the share on its
disposal and may register the transferee as holder of the share.
25. LIABILITY FOLLOWING FORFEITURE
A person any of whose shares have been forfeited shall cease to be a member in
respect of them and shall surrender to the Company for cancellation the
certificate for the shares forfeited but shall remain liable to the Company for
all moneys which at the date of forfeiture were presently payable by him to the
Company in respect of those shares with interest thereon at the rate at which
interest was payable on those moneys before the forfeiture or, if no interest
was so payable, at such rate, not exceeding 15 per cent. per annum or, if
higher, the appropriate rate (as defined in the Act) as the board may determine,
from the date of forfeiture until payment, but the board may waive payment
wholly or in part or enforce payment without any allowance for the value of the
shares at the time of forfeiture or for any consideration received on their
disposal.
26. SURRENDER
The board may accept the surrender of any share which it is in a position to
forfeit upon such terms and conditions as may be agreed and, subject to any such
terms and conditions, a surrendered share shall be treated as if it had been
forfeited.
27. EXTINCTION OF RIGHTS
The forfeiture of a share shall involve the extinction at the time of forfeiture
of all interest in and all claims and demands against the Company in respect of
the share and all other rights and liabilities incidental to the share as
between the person whose share is forfeited and the Company, except only such of
those rights and liabilities as are by these Articles expressly saved, or as are
by the Companies Acts given or imposed in the case of past members.
28. EVIDENCE OF FORFEITURE
A statutory declaration by a director or the secretary that a share has been
duly forfeited or surrendered on a specified date shall be conclusive evidence
of the facts stated in it as against all
7
<PAGE>
persons claiming to be entitled to the share and the declaration shall
(subject to the execution of an instrument of transfer if necessary)
constitute a good title to the share and the person to whom the share is
disposed of shall not be bound to see to the application of the purchase
money, if any, nor shall his title to the share be affected by any
irregularity in, or invalidity of, the proceedings in reference to the
forfeiture, surrender, sale, re-allotment or disposal of the share.
TRANSFER OF SHARES
29. FORM AND EXECUTION OF TRANSFER
The instrument of transfer of a share may be in any usual form or in any other
form which the board may approve and shall be signed by or on behalf of the
transferor and, unless the share is fully paid, by or on behalf of the
transferee. An instrument of transfer need not be under seal.
30. RESTRICTIONS ON TRANSFER
Subject to Article 32 The board may, in its absolute discretion and without
giving any reason, refuse to register the transfer of a share which is not fully
paid, or does not otherwise comply with the provisions of Articles 31 or 32.
31. REGISTRATION OF TRANSFER
The directors must register the transfer of a share which is fully paid and
which:
(a) is lodged at the office or such other place as the directors may
reasonably appoint, is duly stamped and is accompanied by the certificate
for the shares to which it relates or such other evidence as the board
may reasonably require to show the right of transferor to make the
transfer;
(b) is in respect of only one class of shares; and
(c) is in favour of not more than four transferees.
32. TRANSFERS TO SECURED INSTITUTIONS
Notwithstanding anything contained in these Articles, the directors shall not
decline to and shall promptly register any transfer of shares, and they may not
suspend registration thereof where such transfer:
(a) is to any bank or institution to which such shares have been charged by
way of security, whether as agent and trustee for a group of banks or
institutions or otherwise or to any nominee or transferee of such a bank
or institution (a "Secured Institution"); or
(b) is delivered to the Company for registration by a Secured Institution or
its nominee in order to perfect its security over the shares; or
(c) is executed by a Secured Institution or its nominee pursuant to the power
of sale or other power under such security,
and furthermore notwithstanding anything to the contrary contained in these
Articles no transferor of any shares in the Company or proposed transferor of
such shares to a Secured
8
<PAGE>
Institution or its nominee and no Secured Institution or its nominee shall be
required to offer the shares which are or are to be the subject of any
transfer aforesaid to the shareholders for the time being of the Company or
any of them, and no such shareholder shall have any right under the Articles
of Association or otherwise howsoever to require such shares to be
transferred to them whether for consideration or not.
33. NOTICE OF REFUSAL TO REGISTER
If the board refuses to register the transfer, it shall within 30 days after the
date on which the instrument of transfer was lodged with the Company send to the
transferee notice of the refusal.
34. NO FEE PAYABLE ON REGISTRATION
No fee shall be charged for the registration of any instrument of transfer or
other document relating to or affecting the title to any share.
35. RETENTION OF TRANSFERS
The Company shall be entitled to retain any instrument of transfer which is
registered, but any instrument of transfer which the board refuses to register
shall be returned to the person lodging it when notice of the refusal is given.
TRANSMISSION OF SHARES
36. TRANSMISSION
If a member dies the survivor or survivors where he was a joint holder, and his
personal representatives where he was a sole holder or the only survivor of
joint holders, shall be the only persons recognised by the Company as having any
title to his interest; but nothing herein contained shall release the estate of
a deceased member (whether a sole or joint holder) from any liability in respect
of any share held by him.
37. ELECTIONS FOLLOWING TRANSMISSION
A person becoming entitled to a share in consequence of the death or bankruptcy
of a member or otherwise by operation of law may, upon such evidence being
produced as the board may properly require as to his entitlement, elect either
to become the holder of the share or to have some person nominated by him
registered as the transferee. If he elects to become the holder he shall give
notice to the Company to that effect. If he elects to have another person
registered, he shall execute an instrument of transfer of the share to that
person. All the provisions of these Articles relating to the transfer of shares
shall apply to any such notice or instrument of transfer as if it were an
instrument of transfer executed by the member and the death or bankruptcy of the
member or other event giving rise to the transmission had not occurred.
The board may at any time give notice requiring any such person to elect either
to be registered himself or to transfer the share and if the notice is not
complied with within sixty days the board may thereafter withhold payment of all
dividends or other moneys payable in respect of the share until the requirements
of the notice have been complied with.
38. RIGHTS OF PERSONS ENTITLED BY TRANSMISSION
A person becoming entitled to a share in consequence of the death or bankruptcy
of a member or otherwise by operation of law shall, upon such evidence being
produced as the board may properly require as to his entitlement and subject to
the requirements of Article 37, have the same
9
<PAGE>
rights in relation to the share as he would have had if he were the holder of
the share, and may give a discharge for all dividends and other moneys
payable in respect of the share, but he shall not, before being registered as
the holder of the share, be entitled in respect of it to receive notice of or
to attend or vote at any meeting of the Company or to receive notice of or to
attend or vote at any separate meeting of the holders of any class of shares
in the Company.
ALTERATION OF SHARE CAPITAL
39. ALTERATIONS PERMITTED BY ORDINARY RESOLUTION
The Company may by ordinary resolution:
(a) increase its share capital by such sum to be divided into shares of such
amount as the resolution prescribes;
(b) consolidate and divide all or any of its share capital into shares of
larger amount than its existing shares;
(c) subject to the provisions of the Companies Acts, sub-divide its shares,
or any of them, into shares of smaller amount than is fixed by the
Memorandum and the resolution may determine that, as between the shares
resulting from the sub-division, any of them may have any preference or
advantage as compared with the others; and
(d) cancel shares which, at the date of the passing of the resolution, have
not been taken or agreed to be taken by any person and diminish the
amount of its share capital by the amount of the shares so cancelled.
40. NEW SHARES SUBJECT TO THESE ARTICLES
All new shares shall be subject to the provisions of these Articles with
reference to payment of calls, lien, forfeiture, transfer, transmission and
otherwise, and, unless otherwise provided by these Articles, by the resolution
creating the new shares or by the conditions of issue, the new shares shall be
unclassified shares.
41. FRACTIONS ARISING
Whenever as a result of a consolidation or sub-division of shares any fractions
arise, the board may settle the matter in any manner it deems fit and in
particular may sell shares representing fractions to which any members would
otherwise become entitled to any person (including, subject to the provisions of
the Companies Acts, the Company) and distribute the net proceeds of sale in due
proportion among those members, and the board may authorise some person to
execute an instrument of transfer of the shares to, or in accordance with the
directions of, the purchaser. The transferee shall not be bound to see to the
application of the purchase moneys nor shall his title to the shares be affected
by any irregularity in or invalidity of the proceedings in relation to the sale.
42. POWER TO REDUCE CAPITAL
Subject to the provisions of the Companies Acts, the Company may by special
resolution reduce its share capital, any capital redemption reserve and any
share premium account in any way.
10
<PAGE>
PURCHASE OF OWN SHARES
43. POWER TO PURCHASE OWN SHARES
Subject to and in accordance with the provisions of the Companies Acts and
without prejudice to any relevant special rights attached to any class of
shares, the Company may purchase any of its own shares of any class (including
redeemable shares) and, if it is a private company, make a payment in respect of
the redemption or purchase of its own shares otherwise than out of distributable
profits of the company or the proceeds of a fresh issue of shares, at any price
(whether at par or above or below par), and so that any shares to be so
purchased may be selected in any manner whatsoever. Every contract for the
purchase of, or under which the Company may become entitled or obliged to
purchase, shares in the Company shall be authorised by such resolution of the
Company as may be required by the Companies Acts and by an extraordinary
resolution passed at a separate general meeting of the holders of each class of
shares (if any) which, at the date on which the contract is authorised by the
Company in general meeting, entitle them, either immediately or at any time
later on, to convert all or any of the shares of that class held by them into
equity share capital of the Company.
GENERAL MEETINGS
44. TYPES OF GENERAL MEETING
All general meetings of the Company other than annual general meetings shall be
called extraordinary general meetings.
45. ANNUAL GENERAL MEETINGS
The board shall convene and the Company shall hold general meetings as annual
general meetings in accordance with the requirements of the Act.
46. CLASS MEETINGS
All provisions of these Articles relating to general meetings of the Company
shall, mutatis mutandis, apply to every separate general meeting of the holders
of any class of shares in the capital of the Company, except that:
(a) the necessary quorum shall be two persons holding or representing by
proxy at least one-third in nominal value of the issued shares of the
class or, at any adjourned meeting of such holders, one holder present in
person or by proxy, whatever the amount of his holding, who shall be
deemed to constitute a meeting; and
(b) any holder of shares of the class present in person or by proxy may
demand a poll; and
(c) each holder of shares of the class shall, on a poll, have one vote in
respect of every share of the class held by him.
47. CONVENING GENERAL MEETINGS
Subject to the provisions of Article 48, the board may call general meetings
whenever and at such times and places as it shall determine and, on the
requisition of members pursuant to the provisions of the Companies Acts, shall
forthwith proceed to convene an extraordinary general
11
<PAGE>
meeting in accordance with the requirements of the Companies Acts. If there
are not within the United Kingdom sufficient directors to call a general
meeting, any director or any member of the Company may call a general meeting.
NOTICE OF GENERAL MEETINGS
48. PERIOD OF NOTICE
An annual general meeting and an extraordinary general meeting called for the
passing of a special resolution, elective resolution or a resolution appointing
a person as a director shall be called by at least twenty-one clear days'
notice. All other extraordinary general meetings shall be called by at least
fourteen clear days' notice but a general meeting may be called by shorter
notice if it is so agreed:
(a) in the case of an annual general meeting, by all the members entitled to
attend and vote thereat; and
(b) in the case of any other meeting by a majority in number of the members
having a right to attend and vote being a majority together holding not
less than ninety-five per cent. in nominal value of the shares giving
that right.
49. PROVISION OF NOTICE
Subject to the provisions of these Articles and to any restrictions imposed on
any shares, the notice shall be given to all the members, to all persons
entitled to a share in consequence of the death or bankruptcy of a member, to
each of the directors, to the auditors for the time being of the Company and if
required under the Companies Acts, the former auditors of the Company.
50. CONTENTS OF NOTICE
The notice shall specify the time and place of the meeting and, in the case of
special business, the general nature of such business. All business shall be
deemed special that is transacted at an extraordinary general meeting and also
all business that is transacted at an annual general meeting with the exception
of:-
(a) the declaration of dividends;
(b) the consideration and adoption of the accounts and balance sheet and the
reports of the directors and auditors and other documents required to be
annexed to the accounts;
(c) the appointment and re-appointment of directors;
(d) the appointment of auditors where special notice of the resolution for
such appointment is not required by the Companies Acts; and
(e) the fixing of, or the determining of the method of fixing, the
remuneration of the directors and/or auditors.
The notice shall, in the case of an annual general meeting, specify the meeting
as such, and, in the case of a meeting to pass a special, extraordinary or
elective resolution, specify the intention to propose the resolution as a
special, extraordinary, or elective resolution, as the case may be.
12
<PAGE>
The notice shall state with reasonable prominence that a member entitled to
attend and vote at the meeting being called is entitled to appoint one or more
proxies to attend and vote instead of him, and that a proxy need not also be a
member.
51. ACCIDENTAL OMISSION TO GIVE NOTICE
The accidental omission to give notice of a meeting to any person entitled to
receive the same, or the non-receipt of a notice of meeting by any such person,
shall not invalidate the proceedings at that meeting.
PROCEEDINGS AT GENERAL MEETINGS
52. QUORUM
No business shall be transacted at any general meeting unless a quorum is
present, but the absence of a quorum shall not preclude the choice or
appointment of a chairman, which shall not be treated as part of the business of
the meeting. Save as otherwise provided by these Articles, one person, if and
for so long as the Company has only one member, and one person being a member
and being a proxy for a member or two persons, if and for so long as the Company
has two or more members, entitled to vote upon the business to be transacted,
each being a member or a proxy for a member or a duly authorised representative
of a corporation, shall be a quorum.
53. IF QUORUM NOT PRESENT
If such a quorum is not present within five minutes (or such longer time not
exceeding thirty minutes as the chairman of the meeting may decide to wait) from
the time appointed for the meeting, or if during a meeting such a quorum ceases
to be present, the meeting, if convened on the requisition of members, shall be
dissolved, and in any other case shall stand adjourned to such time and place as
the chairman of the meeting may determine. If at the adjourned meeting a quorum
is not present within fifteen minutes after the time appointed for holding the
meeting, the meeting shall be dissolved.
54. CHAIRMAN
The chairman, if any, of the board or, in his absence, any deputy chairman of
the Company or, in his absence, some other director nominated by the board,
shall preside as chairman of the meeting, but if neither the chairman, deputy
chairman nor such other director (if any) is present within five minutes after
the time appointed for holding the meeting or is not willing to act as chairman,
the directors present shall elect one of their number to be chairman. If there
is only one director present and willing to act, he shall be chairman. If no
director is willing to act as chairman, or if no director is present within five
minutes after the time appointed for holding the meeting, the members present
and entitled to vote shall choose one of their number to be chairman.
55. DIRECTORS ENTITLED TO SPEAK
A director shall, notwithstanding that he is not a member, be entitled to attend
and speak at any general meeting and at any separate meeting of the holders of
any class of shares in the Company.
56. ADJOURNMENTS
The chairman may, with the consent of a meeting at which a quorum is present
(and shall if so directed by the meeting), adjourn the meeting from time to time
and from place to place, but no business shall be transacted at an adjourned
meeting other than business which might properly
13
<PAGE>
have been transacted at the meeting had the adjournment not taken place.
When a meeting is adjourned for thirty days or more or for an indefinite
period, at least seven Clear days' notice shall be given specifying the time
and place of the adjourned meeting and the general nature of the business to
be transacted. Otherwise it shall not be necessary to give any notice of an
adjournment or of the business to be transacted at an adjourned meeting.
57. AMENDMENTS TO RESOLUTIONS
If an amendment shall be proposed to any resolution under consideration but
shall in good faith be ruled out of order by the chairman of the meeting, the
proceedings on the substantive resolution shall not be invalidated by any error
in such ruling. With the consent of the chairman of the meeting, an amendment
may be withdrawn by its proposer before it is voted upon. In the case of a
resolution duly proposed as a special or extraordinary resolution, no amendment
thereto (other than a mere clerical amendment to correct a patent error) may in
any event be considered or voted upon.
58. METHODS OF VOTING
A resolution put to the vote of a general meeting shall be decided on a show of
hands unless, before or on the declaration of the result of a vote on the show
of hands or on the withdrawal of any other demand for a poll, a poll is duly
demanded. Subject to the provisions of the Companies Acts, a poll may be
demanded by:
(a) the chairman of the meeting; or
(b) at least two members present in person or by proxy having the right to
vote at the meeting; or
(c) any member or members present in person or by proxy representing not less
than one-tenth of the total voting rights of all the members having the
right to vote at the meeting; or
(d) any member or members present in person or by proxy holding shares
conferring a right to vote at the meeting being shares on which an
aggregate sum has been paid up equal to not less than one-tenth of the
total sum paid up on all the shares conferring that right,
and a demand by a person as proxy for a member shall be the same as a demand by
the member.
59. DECLARATION OF RESULT
Unless a poll is duly demanded a declaration by the chairman that a resolution
has been carried or carried unanimously, or by a particular majority, or lost,
or not carried by a particular majority and an entry to that effect in the
minutes of the meeting shall be conclusive evidence of the fact without proof of
the number or proportion of the votes recorded in favour of or against the
resolution.
60. WITHDRAWAL OF DEMAND FOR POLL
The demand for a poll may, before the poll is taken, be withdrawn but only with
the consent of the chairman and a demand so withdrawn shall not be taken to have
invalidated the result of a show of hands declared before the demand was made.
If the demand for a poll is withdrawn, the chairman or any other member entitled
may demand a poll.
14
<PAGE>
61. CONDUCT OF POLL
A poll shall be taken as the chairman directs and he may appoint scrutineers
(who need not be members) and fix a time and place for declaring the result of
the poll. The result of the poll shall be deemed to be the resolution of the
meeting at which the poll was demanded.
62. CHAIRMAN'S CASTING VOTE
In the case of an equality of votes, whether on a show of hands or on a poll,
the chairman shall not be entitled to a casting vote in addition to any other
vote he may have.
63. WHEN POLL TO BE TAKEN
A poll demanded on the election of a chairman or on a question of adjournment
shall be taken forthwith. A poll demanded on any other question shall be taken
either forthwith or at such time and place as the chairman directs not being
more than thirty days after the poll is demanded. The demand for a poll shall
not prevent the continuance of a meeting for the transaction of any business
other than the question on which the poll was demanded. If a poll is demanded
before the declaration of the result of a show of hands and the demand is duly
withdrawn, the meeting shall continue as if the demand had not been made.
64. NOTICE OF POLL
No notice need be given of a poll not taken forthwith if the time and place at
which it is to be taken are announced at the meeting at which it is demanded.
In any other case at least seven clear days' notice shall be given specifying
the time and place at which the poll is to be taken.
65. EFFECTIVENESS OF SPECIAL AND EXTRAORDINARY RESOLUTIONS
Where for any purpose an ordinary resolution of the Company is required, a
special or extraordinary resolution shall also be effective and where for any
purpose an extraordinary resolution is required a special resolution shall also
be effective.
66. RESOLUTIONS IN WRITING
Subject to the provisions of the Companies Acts, a resolution in writing
executed by or on behalf of each member who would have been entitled to vote
upon it if it had been proposed at a general meeting at which he was present
shall be as effectual as if it had been passed at a general meeting properly
convened and held and may consist of several instruments in the like form each
executed by or on behalf of one or more of the members.
VOTES OF MEMBERS
67. RIGHT TO VOTE
Subject to any rights or restrictions attached to any shares, on a show of hands
every member who is present in person or by proxy shall have one vote and on a
poll every member present in person or by proxy shall have one vote for every
share of which he is the holder.
68. VOTES OF JOINT HOLDERS
In the case of joint holders of a share the vote of the senior who tenders a
vote, whether in person or by proxy, shall be accepted to the exclusion of the
votes of the other joint holders and for this purpose seniority shall be
determined by the order in which the names of the holders stand in the register.
15
<PAGE>
69. MEMBER UNDER INCAPACITY
A member in respect of whom an order has been made by any court or official
having jurisdiction (whether in the United Kingdom or elsewhere) in matters
concerning mental disorder may vote, whether on a show of hands or on a poll, by
his receiver, curator bonis or other person authorised in that behalf appointed
by that court or official, and any such receiver, curator bonis or other person
may, on a poll, vote by proxy. Evidence to the satisfaction of the board of the
authority of the person claiming to exercise the right to vote shall be
deposited at the office, or at such other place as is specified in accordance
with these Articles for the deposit of instruments of proxy, not less than 48
hours before the time appointed for holding the meeting or adjourned meeting at
which the right to vote is to be exercised and in default the right to vote
shall not be exercisable.
70. CALLS IN ARREARS
No member shall be entitled to vote at any general meeting or at any separate
meeting of the holders of any class of shares in the Company, either in person
or by proxy, in respect of any share held by him unless all moneys presently
payable by him in respect of that share have been paid.
71. OBJECTION TO VOTING
No objection shall be raised to the qualification of any voter except at the
meeting or adjourned meeting or poll at which the vote objected to is tendered,
and every vote not disallowed at such meeting shall be valid. Any objection
made in due time shall be referred to the chairman whose decision shall be final
and conclusive.
72. SUPPLEMENTARY PROVISIONS ON VOTING
On a poll votes may be given either personally or by proxy. A member entitled to
more than one vote need not, if he votes, use all his votes or cast all the
votes he uses in the same way.
PROXIES AND CORPORATE REPRESENTATIVES
73. APPOINTMENT OF PROXY
An instrument appointing a proxy shall be in writing under the hand of the
appointor or his attorney or, if the appointor is a corporation, either under
its common seal or the hand of a duly authorised officer, attorney or other
person authorised to sign it.
74. FORM OF PROXY - STANDARD
The instrument appointing a proxy shall be executed by or on behalf of the
appointer and shall be in the following form (or in a form as near thereto as
circumstances allow or in any other form which is usual or which the directors
may approve):
"______________________ Limited
I/We, _____ _____ , of _____ _____ _____ being a member/members of the
above-named company, hereby appoint _____ _____ of _____ _____ _____, or
failing him, _____ _____ of _____ _____ _____, as my/our proxy to vote in
my/our names[s] and on my/our behalf at the annual/extraordinary general
meeting of the company to be held on _____ _____ 19__, and at any
adjournment thereof.
16
<PAGE>
Signed on _____ _____ 19__."
75. FORM OF PROXY - EACH WAY
Where it is desired to afford members an opportunity of instructing the proxy
how he shall act the instrument appointing a proxy shall be in the following
form (or in a form as near thereto as circumstances allow or in any other form
which is usual or which the directors may approve):
"_____________________ Limited
I/We, _____ _____ , of _____ _____ _____ being a member/members of the
above-named company, hereby appoint _____ _____ of _____ _____ _____, or
failing him, _____ _____ of _____ _____ _____, as my/our proxy to vote in
my/our names[s] and on my/our behalf at the annual/extraordinary general
meeting of the company to be held on _____ _____ 19__, and at any
adjournment thereof.
Signed on _____ _____ 19__."
This form is to be used in respect of the resolutions mentioned below as
follows:
Resolution No.1 *for*against
Resolution No.2 *for*against.
*Strike out whichever is not desired.
Unless otherwise instructed, the proxy may vote as he thinks fit or
abstain from voting.
Signed on _____ _____ 19__."
76. VOTING BY APPOINTOR
Delivery of an instrument appointing a proxy shall not preclude a member from
attending and voting in person at the meeting or poll concerned. A member may
appoint more than one proxy to attend on the same occasion.
77. DELIVERY OF FORM OF PROXY
The instrument appointing a proxy and any power of attorney or other written
authority under which it is executed or an office or notarially certified copy
or a copy certified in accordance with the Powers of Attorney Act 1971 of such
power or written authority shall be deposited at the office or at such other
place within the United Kingdom as is specified in the notice convening the
meeting or in any instrument of proxy sent out by the Company in relation to the
meeting not less than 48 hours before the time appointed for holding the meeting
or adjourned meeting at which the person named in the instrument proposes to
vote and an instrument of proxy which is not deposited or delivered in a manner
so permitted shall be invalid. No instrument of proxy shall be valid after the
expiration of twelve months from the date stated in it as the date of its
execution. When two or more valid but differing instruments of proxy are
delivered in respect of the same share for use at the same meeting, the one
which was delivered last (regardless of its date or of the date of its
execution) shall be treated as replacing and revoking the others as regards that
share; if the Company is unable to determine which was delivered last, none of
them shall be treated as valid in respect of that share.
17
<PAGE>
78. VALIDITY OF FORM OF PROXY
The instrument of proxy shall, unless the contrary is stated in it, be
deemed to confer authority to vote as the proxy thinks fit on any amendment
of a resolution put to the meeting for which the proxy is given and on any
resolution put to the meeting, whether or not notice of such resolution was
given in the notice of meeting. The instrument of proxy shall, unless the
contrary is stated therein, be valid as well for any adjournment of the
meeting as for the meeting to which it relates.
79. CORPORATE REPRESENTATIVES
Any corporation or corporation sole which is a member of the Company may (in
the case of a corporation, by resolution of its directors or other governing
body or by authority to be given under seal or under the hand of an officer
duly authorised by it) authorise such person as it thinks fit to act as its
representative at any meeting of the Company or at any separate meeting of
the holders of any class of shares. A person so authorised shall be entitled
to exercise the same power on behalf of the grantor of the authority as the
grantor could exercise if it were an individual member of the Company and the
grantor shall for the purposes of these Articles be deemed to be present in
person at any such meeting if a person so authorised is present at it.
80. REVOCATION OF AUTHORITY
A vote given or poll demanded by proxy or by the duly authorised representative
of a corporation shall be valid notwithstanding the previous determination of
the authority of the person voting or demanding a poll unless notice of the
determination was received by the Company at the office or at such other place
at which the instrument of proxy was duly deposited before the commencement of
the meeting or adjourned meeting at which the vote is given or the poll demanded
or (in the case of a poll taken otherwise than on the same day as the meeting or
adjourned meeting) the time appointed for taking the poll.
NUMBER OF DIRECTORS
81. LIMITS ON NUMBER OF DIRECTORS
Unless otherwise determined by ordinary resolution, the number of directors
(other than alternate directors) shall be not less than one but shall not be
subject to any maximum in number. Wheresoever the minimum number of directors
shall be one, a sole director shall have authority to exercise all the powers
and discretions by the Act and/or by these expressed to be vested in the
directors generally.
APPOINTMENT AND RETIREMENT OF DIRECTORS
82. NO RETIREMENT BY ROTATION
The directors shall not be required to retire by rotation.
83. ELIGIBILITY FOR ELECTION
No person shall be appointed a director at any general meeting unless:
(a) he is recommended by the board; or
18
<PAGE>
(b) not less than six nor more than thirty-five Clear days before the date
appointed for the meeting, notice executed by a member qualified to vote
at the meeting (not being the person to be proposed) has been given to
the Company of the intention to propose that person for appointment
stating the particulars which would, if he were so appointed or
reappointed, be required to be included in the Company's register of
directors, together with notice executed by that person of his
willingness to be appointed.
84. NOTICE
Not less than seven nor more than twenty-eight clear days before the date
appointed for holding a general meeting notice shall be given to all who are
entitled to receive notice of the meeting of any person who is recommended by
the directors for appointment as a director at the meeting or in respect of whom
notice has been duly given to the company of the intention to propose him at the
meeting for appointment or reappointment as a director. The notice shall give
the particulars of that person which would, if he were so appointed, be required
to be included in the company's register of directors.
85. ADDITIONAL POWERS OF THE COMPANY
Subject as aforesaid, the Company may appoint a person who is willing to act to
be a director either to fill a vacancy or as an additional director:
(a) by ordinary resolution of the members in general meeting; or
(b) by notice in writing left at the registered office.
86. APPOINTMENT BY BOARD
The board may appoint a person who is willing to act to be a director, either to
fill a vacancy or as an additional director, provided that the appointment does
not cause the number of directors to exceed the number, if any, fixed by or in
accordance with these Articles as the maximum number of directors. A director
so appointed shall hold office only until the next following annual general
meeting. If not reappointed at such annual general meeting, he shall vacate
office at the conclusion thereof.
87. AGE LIMIT
No person shall be disqualified from being appointed or reappointed a director,
and no director shall be required to vacate that office, by reason only of the
fact that he has attained the age of seventy years or any other age nor shall it
be necessary by reason of his age to give special notice under the Companies
Acts of any resolution. Where the board convenes any general meeting of the
Company at which (to the knowledge of the board) a director will be proposed for
appointment or reappointment who at the date for which the meeting is convened
will have attained the age of seventy years or more, the board shall give notice
of his age in years in the notice convening the meeting or in any document
accompanying the notice, but the accidental omission to do so shall not
invalidate any proceedings, or any appointment or reappointment of that
director, at that meeting.
88. NO SHARE QUALIFICATION
A director shall not be required to hold any shares of the Company by way of
qualification.
19
<PAGE>
ALTERNATE DIRECTORS
89. POWER TO APPOINT ALTERNATES
Any director (other than an alternate director) may appoint any other director,
or any other person approved by resolution of the board and willing to act, to
be an alternate director and may remove from office an alternate director so
appointed by him.
90. ALTERNATES ENTITLED TO RECEIVE NOTICE
An alternate director shall be entitled to receive notice of all meetings of the
board and of all meetings of committees of the board of which his appointor is a
member, to attend and vote at any such meeting at which his appointor is not
personally present, and generally to perform all the functions of his appointor
(except as regards power to appoint an alternate) as a director in his absence.
It shall not be necessary to give notice of such a meeting to an alternate
director who is absent from the United Kingdom.
91. ALTERNATES REPRESENTING MORE THAN ONE DIRECTOR
A director or any other person may act as alternate director to represent more
than one director, and an alternate director shall be entitled at meetings of
the board or any committee of the board to one vote for every director whom he
represents (and who is not present) in addition to his own vote (if any) as a
director, but he shall count as only one for the purpose of determining whether
a quorum is present.
92. EXPENSES AND REMUNERATION OF ALTERNATES
An alternate director may be repaid by the Company such expenses as might
properly have been repaid to him if he had been a director but shall not in
respect of his services as an alternate director be entitled to receive any
remuneration from the Company [except such part (if any) of the remuneration
otherwise payable to his appointer as such appointer may by notice in writing to
the Company from time to time direct]. An alternate director shall be entitled
to be indemnified by the Company to the same extent as if he were a director.
93. TERMINATION OF APPOINTMENT
An alternate director shall cease to be an alternate director:
(a) if his appointor ceases to be a director; but, if a director retires by
rotation or otherwise but is reappointed or deemed to have been
reappointed at the meeting at which he retires, any appointment of an
alternate director made by him which was in force immediately prior to
his retirement shall continue after his reappointment;
(b) on the happening of any event which, if he were a director, would cause
him to vacate his office as director; or
(c) if he resigns his office by notice to the Company.
94. METHOD OF APPOINTMENT AND REVOCATION
Any appointment or removal of an alternate director shall be by notice to the
Company signed by the director making or revoking the appointment and shall take
effect in accordance with the terms of the notice (subject to any approval
required by Article 89) upon receipt of such notice at the office.
20
<PAGE>
95. ALTERNATE NOT AN AGENT OF APPOINTOR
Save as otherwise expressly provided in these Articles, an alternate director
shall be deemed for all purposes to be a director and, accordingly, except where
the context otherwise requires, references to a director shall be deemed to
include a reference to an alternate director. An alternate director shall alone
be responsible for his own acts and defaults and he shall not be deemed to be
the agent of the director appointing him.
POWERS OF THE BOARD
96. BUSINESS TO BE MANAGED BY BOARD
Subject to the provisions of the Companies Acts, the Memorandum and these
Articles and to any directions given by special resolution, the business of the
Company shall be managed by the board which may pay all expenses incurred in
forming and registering the Company and may exercise all the powers of the
Company. No alteration of the Memorandum or Articles and no such direction
shall invalidate any prior act of the board which would have been valid if that
alteration had not been made or that direction had not been given. The powers
given by this Article shall not be limited by any special power given to the
board by these Articles and a meeting of the board at which a quorum is present
may exercise all powers exercisable by the board.
DELEGATION OF POWERS OF THE BOARD
97. COMMITTEES OF THE BOARD
The board may delegate any of its powers to any committee consisting of one or
more directors. The board may also delegate to any director holding any
executive office such of its powers as the board considers desirable to be
exercised by him. Any such delegation shall, in the absence of express
provision to the contrary in the terms of delegation, be deemed to include
authority to sub-delegate to one or more directors (whether or not acting as a
committee) or to any employee or agent of the Company all or any of the powers
delegated and may be made subject to such conditions as the board may specify,
and may be revoked or altered. The board may co-opt on to any such committee
persons other than directors, who may enjoy voting rights in the committee. The
co-opted members shall be less than one-half of the total membership of the
committee and a resolution of any committee shall be effective only if a
majority of the members present are directors. Subject to any conditions
imposed by the board, the proceedings of a committee with two or more members
shall be governed by these Articles regulating the proceedings of directors so
far as they are capable of applying.
98. AGENTS
The board may, by power of attorney or otherwise, appoint any person or persons
to be the agent or agents of the Company for such purposes, with such powers,
authorities and discretions (not exceeding those vested in the board) and on
such conditions as the board determines, including authority for the agent or
agents to delegate all or any of his or their powers, authorities and
discretions, and may revoke or vary such delegation.
99. OFFICES INCLUDING THE TITLE "DIRECTOR"
The board may appoint any person to any office or employment having a
designation or title including the word "director" or attach to any existing
office or employment with the Company
21
<PAGE>
such a designation or title and may terminate any such appointment or the use
of any such designation or title. The inclusion of the word "director" in
the designation or title of any such office or employment shall not imply
that the holder is a director of the Company, nor shall the holder thereby be
empowered in any respect to act as, or be deemed to be, a director of the
Company for any of the purposes of these Articles.
DISQUALIFICATION AND REMOVAL OF DIRECTORS
100. DISQUALIFICATION
The office of a director shall be vacated if:
(a) he ceases to be a director by virtue of any provisions of the Companies
Acts or these Articles or he becomes prohibited by law from being a
director; or
(b) he becomes bankrupt or makes any arrangement or composition with his
creditors generally or shall apply to the court for an interim order
under section 253 of the Insolvency Act 1986 in connection with a
voluntary arrangement under that Act; or
(c) he is, or may be, suffering from mental disorder and either:
(i) he is admitted to hospital in pursuance of an application for
admission for treatment under the Mental Health Act 1983 or, in
Scotland, an application for admission under the Mental Health
(Scotland) Act 1960; or
(ii) an order is made by a court having jurisdiction (whether in the
United Kingdom or elsewhere) in matters concerning mental disorder
for his detention or for the appointment of a receiver, curator
bonis or other person to exercise powers with respect to his
property or affairs; or
(d) (not being a director holding office as such for a fixed term) he resigns
his office by notice to the Company; or
(e) he shall for more than six consecutive months have been absent without
permission of the board from meetings of the board held during that
period and his alternate director (if any) shall not during such period
have attended in his stead and the board resolves that his office be
vacated.
101. POWER OF COMPANY TO REMOVE DIRECTOR
Subject to the provisions of the Companies Acts a director may be removed from
office forthwith by:-
(a) (and notwithstanding any provision of these Articles or of any
agreement between the Company and such director but without
prejudice to any claim he may have for damages for breach of any
such agreement) ordinary resolution of the members of the Company
passed at a general meeting of which special notice has been
given;
(b) written resolution of the members of the Company; or
22
<PAGE>
(c) notice in writing left at the registered office of the Company and
signed by the holder(s) of not less than 75% of the voting rights
attaching to the shares for the time being issued.
REMUNERATION OF NON-EXECUTIVE DIRECTORS
102. ORDINARY REMUNERATION
The ordinary remuneration of the directors who do not hold executive office for
their services (excluding amounts payable under any other provision of these
Articles) shall not exceed in aggregate L10,000 per annum or such higher amount
as the Company may from time to time by ordinary resolution determine. Subject
thereto, each such director shall be paid a fee (which shall be deemed to accrue
from day to day) at such rate as may from time to time be determined by the
board.
103. ADDITIONAL REMUNERATION FOR SPECIAL SERVICES
Any director who does not hold executive office and who serves on any committee
of the directors, by the request of the board goes or resides abroad for any
purpose of the Company or otherwise performs special services which in the
opinion of the directors are outside the scope of the ordinary duties of a
director, may (without prejudice to the provisions of Article 102) be paid such
extra remuneration by way of salary, commission or otherwise as the board may
determine.
DIRECTORS' EXPENSES
104. DIRECTORS MAY BE PAID EXPENSES
The directors may be paid all travelling, hotel, and other expenses properly
incurred by them in connection with their attendance at meetings of the board or
committees of the board or general meetings or separate meetings of the holders
of any class of shares or of debentures of the Company or otherwise in
connection with the discharge of their duties.
EXECUTIVE DIRECTORS
105. APPOINTMENT TO EXECUTIVE OFFICE
Subject to the provisions of the Companies Acts, the board may appoint one or
more of its body to be the holder of any executive office (except that of
auditor) under the Company and may enter into an agreement or arrangement with
any director for his employment by the Company or for the provision by him of
any services outside the scope of the ordinary duties of a director. Any such
appointment, agreement or arrangement may be made upon such terms, including
terms as to remuneration, as the board determines, and any remuneration which is
so determined may be in addition to or in lieu of any ordinary remuneration as a
director. The board may revoke or vary any such appointment but without
prejudice to any rights or claims which the person whose appointment is revoked
or varied may have against the Company by reason thereof.
106. TERMINATION OF APPOINTMENT TO EXECUTIVE OFFICE
Any appointment of a director to an executive office shall terminate if he
ceases to be a director but without prejudice to any rights or claims which he
may have against the Company by reason of
23
<PAGE>
such cesser. A director appointed to an executive office shall not ipso
facto cease to be a director if his appointment to such executive office
terminates.
107. EMOLUMENTS TO BE DETERMINED BY THE BOARD
The emoluments of any director holding executive office for his services as such
shall be determined by the board, and may be of any description, and (without
limiting the generality of the foregoing) may include admission to or
continuance of membership of any scheme (including any share acquisition scheme)
or fund instituted or established or financed or contributed to by the Company
for the provision of pensions, life assurance or other benefits for employees or
their dependants, or the payment of a pension or other benefits to him or his
dependants on or after retirement or death, apart from membership of any such
scheme or fund.
DIRECTORS' INTERESTS
108. DIRECTORS MAY CONTRACT WITH THE COMPANY
Subject to the provisions of the Companies Acts, and provided that he has
disclosed to the board the nature and extent of any material interest of his, a
director notwithstanding his office:
(a) may be a party to, or otherwise interested in, any transaction or
arrangement with the Company or in which the Company is otherwise
interested;
(b) may act by himself or his firm in a professional capacity for the Company
(otherwise than as auditor) and he or his firm shall be entitled to
remuneration for professional services as if he were not a director;
(c) may be a director or other officer of, or employed by, or a party to any
transaction or arrangement with, or otherwise interested in, any body
corporate promoted by the Company or in which the Company is otherwise
interested; and
(d) shall not, by reason of his office, be accountable to the Company for any
benefit which he derives from any such office or employment or from any
such transaction or arrangement or from any interest in any such body
corporate and no such transaction or arrangement shall be liable to be
avoided on the ground of any such interest or benefit.
109. NOTIFICATION OF INTERESTS
For the purposes of Article 108:
(a) a general notice given to the board that a director is to be regarded as
having an interest of the nature and extent specified in the notice in
any transaction or arrangement in which a specified person or class of
persons is interested shall be deemed to be a disclosure that the
director has an interest in any such transaction of the nature and extent
so specified; and
(b) an interest of which a director has no knowledge and of which it is
unreasonable to expect him to have knowledge shall not be treated as an
interest of his.
24
<PAGE>
110. EXERCISE BY COMPANY OF VOTING RIGHTS
The board may exercise the voting power conferred by the shares in any body
corporate held or owned by the Company in such manner in all respects as it
thinks fit (including the exercise thereof in favour of any resolution
appointing its members or any of them directors of such body corporate, or
voting or providing for the payment of remuneration to the directors of such
body corporate).
GRATUITIES, PENSIONS AND INSURANCE
111. GRATUITIES AND PENSIONS
The board may (by establishment of or maintenance of schemes or otherwise)
provide benefits, whether by the payment of gratuities or pensions or by
insurance or otherwise, for any past or present director or employee of the
Company or any of its subsidiaries or any body corporate associated with, or any
business acquired by, any of them, and for any member of his family (including a
spouse and a former spouse) or any person who is or was dependent on him, and
may (as well before as after he ceases to hold such office or employment)
contribute to any fund and pay premiums for the purchase or provision of any
such benefit.
112. INSURANCE
Without prejudice to the provisions of Article 154, the board shall have the
power to purchase and maintain insurance for or for the benefit of any persons
who are or were at any time directors, officers, or employees or auditors of the
Company, or of any other company which is its holding company or in which the
Company or such holding company has any interest whether direct or indirect or
which is in any way allied to or associated with the Company, or of any
subsidiary undertaking of the Company or any such other company, or who are or
were at any time trustees of any pension fund or employee share scheme in which
employees of the Company or any such other company or subsidiary undertaking are
interested, including (without prejudice to the generality of the foregoing)
insurance against any liability incurred by such persons in respect of any act
or omission in the actual or purported execution or discharge of their duties or
in the exercise or purported exercise of their powers or otherwise in relation
to their duties, powers or offices in relation to the Company or any such other
company, subsidiary undertaking, pension fund or employee share scheme.
113. DIRECTORS NOT LIABLE TO ACCOUNT
No director or former director shall be accountable to the Company or the
members for any benefit provided pursuant to this Article and the receipt of any
such benefit shall not disqualify any person from being or becoming a director
of the Company.
PROCEEDINGS OF DIRECTORS
114. CONVENING MEETINGS
Subject to the provisions of these Articles, the board may regulate its
proceedings as it thinks fit. A director may, and the secretary at the request
of a director shall, call a meeting of the board. Notice of a board meeting
shall be deemed to be properly given to a director if it is given to him
personally or by word of mouth or sent in writing to him at his last known
address or any other
25
<PAGE>
address given by him to the Company for this purpose. Questions arising at a
meeting shall be decided by a majority of votes. In the case of an equality
of votes, the chairman shall have a second or casting vote. Any director may
waive notice of a meeting and any such waiver may be retrospective.
115. QUORUM
The quorum for the transaction of the business of the board may be fixed by the
board and unless so fixed at any other number shall be two. A person who holds
office only as an alternate director shall, if his appointor is not present, be
counted in the quorum. Any director who ceases to be a director at a board
meeting may continue to be present and to act as a director and be counted in
the quorum until the termination of the board meeting if no director objects.
116. POWERS OF DIRECTORS IF NUMBER FALLS BELOW MINIMUM
The continuing directors or a sole continuing director may act notwithstanding
any vacancies in their number, but, if the number of directors is less than the
number fixed as the minimum, the continuing directors or director may act only
for the purpose of filling vacancies or of calling a general meeting.
117. CHAIRMAN AND DEPUTY CHAIRMAN
The board may appoint one of their number to be the chairman, and one of their
number to be the deputy chairman, of the board and may at any time remove either
of them from such office. Unless he is unwilling to do so, the director
appointed as chairman, or in his stead the director appointed as deputy
chairman, shall preside at every meeting of the board at which he is present.
If there is no director holding either of those offices, or if neither the
chairman nor the deputy chairman is willing to preside or neither of them is
present within five minutes after the time appointed for the meeting, the
directors present may appoint one of their number to be chairman of the meeting.
118. VALIDITY OF ACTS OF THE BOARD
All acts done by a meeting of the board, or of a committee of the board, or by a
person acting as a director or alternate director, shall, notwithstanding that
it be afterwards discovered that there was a defect in the appointment of any
director or any member of the committee or alternate director or that any of
them were disqualified from holding office, or had vacated office, or were not
entitled to vote, be as valid as if every such person had been duly appointed
and was qualified and had continued to be a director or, as the case may be, an
alternate director and had been entitled to vote.
119. RESOLUTIONS IN WRITING
A resolution in writing signed by all the directors entitled to receive notice
of a meeting of the board or of a committee of the board (not being less than
the number of directors required to form a quorum of the board) shall be as
valid and effectual as if it had been passed at a meeting of the board or (as
the case may be) a committee of the board duly convened and held and for this
purpose:
(a) a resolution may consist of several documents to the same effect each
signed by one or more directors;
(b) a resolution signed by an alternate director on behalf of his appointor
need not also be signed by his appointor; and
26
<PAGE>
(c) a resolution signed by a director who has appointed an alternate director
need not also be signed by the alternate director in that capacity.
120. MEETINGS BY TELEPHONE, ETC.
Without prejudice to the first sentence of Article 115, a meeting of the board
or of a committee of the board may consist of a conference between directors who
are not all in one place, but of whom each is able (directly by telephonic
communication, video link or via the internet) to speak to each of the others,
and to be heard by each of the others simultaneously. A director taking part in
such a conference shall be deemed to be present in person at the meeting and
shall be entitled to vote or be counted in a quorum accordingly. Such a meeting
shall be deemed to take place where the largest group of those participating in
the conference is assembled, or, if there is no such group, where the chairman
of the meeting then is. The word MEETING in these Articles shall be construed
accordingly.
121. DIRECTORS' POWER TO VOTE ON CONTRACTS IN WHICH THEY ARE INTERESTED
Save as otherwise provided by these Articles, a director may vote at a meeting
of the board or a committee of the board on any resolution of the board
concerning a matter in which he has, directly or indirectly, any kind of
interest whatsoever, and if he shall vote on any such resolution as aforesaid
his vote shall be counted; and in relation to any such vote as aforesaid he
shall (whether or not he shall vote on the same) be taken into account in the
quorum present at the meeting.
122. EXCLUSION OF DIRECTOR FROM QUORUM
A director shall not be counted in the quorum present at a meeting in relation
to a resolution on which he is not entitled to vote.
123. AMENDMENT OF RESTRICTIONS ON VOTING
The Company may by ordinary resolution suspend or relax to any extent, either
generally or in respect of any particular matter, any provision of these
Articles prohibiting a director from voting at a meeting of the board or of a
committee of the board, or ratify any transaction not duly authorised by reason
of a contravention of any such provision.
124. DIVISION OF PROPOSALS
Where proposals are under consideration concerning the appointment (including
fixing or varying the terms of appointment) of two or more directors to offices
or employments with the Company or any body corporate in which the Company is
interested, the proposals may be divided and considered in relation to each
director separately and in such cases each of the directors concerned shall be
entitled to vote and be counted in the quorum in respect of each resolution
except that concerning his own appointment.
125. DECISION OF CHAIRMAN FINAL AND CONCLUSIVE
If a question arises at a meeting of the board or of a committee of the board as
to the entitlement of a director to vote or be counted in a quorum, the question
may, before the conclusion of the meeting, be referred to the chairman of the
meeting and his ruling in relation to any director other than himself shall be
final and conclusive except in a case where the nature or extent of the
interests of the director concerned have not been fairly disclosed. If any such
question arises in respect of the chairman of the meeting, it shall be decided
by resolution of the board (on which the chairman shall not vote) and such
resolution will be final and conclusive except in a case where the nature and
extent of the interests of the chairman have not been fairly disclosed.
27
<PAGE>
SECRETARY
126. APPOINTMENT AND REMOVAL OF SECRETARY
Subject to the provisions of the Companies Acts, the secretary shall be
appointed by the board for such term, at such remuneration and upon such
conditions as it may think fit; and any secretary so appointed may be removed by
the board, but without prejudice to any claim for damages for breach of any
contract of service between him and the Company.
MINUTES
127. MINUTES REQUIRED TO BE KEPT
The board shall cause minutes to be made in books kept for the purpose:
(a) of all appointments of officers made by the board; and
(b) of all proceedings at meetings of the Company, of the holders of any
class of shares in the Company, of the board, and of committees of the
board, including the names of the directors present at each such meeting.
Any such minutes, if purporting to be signed by the chairman of the meeting to
which they relate or of the meeting at which they are read, shall be sufficient
evidence without any further proof of the facts therein stated.
THE SEAL
128. AUTHORITY REQUIRED FOR USE OF SEAL
The seal shall only be used by the authority of a resolution of the board or of
a committee of the board. The board may determine who shall sign any instrument
to which the seal is affixed and unless otherwise so determined it shall be
signed by at least one director and the secretary or by at least two directors.
129. OFFICIAL SEAL FOR USE ABROAD
The company may exercise the powers conferred by section 39 of the Act with
regard to having an official seal for use abroad.
130. EXECUTION OF INSTRUMENT AS A DEED UNDER HAND
Where the Act so permits, any instrument signed, with the authority of a
resolution of the board or of a committee of the board, by one director and the
secretary or by two directors and expressed to be executed by the Company as a
deed shall have the same effect as if executed under the seal, provided that no
instrument which makes it clear on its face that it is intended by the persons
making it to have effect as a deed shall be signed without the authority of the
board.
131. DELIVERY OF DEEDS
A document which is executed by the Company as a deed shall not be deemed to be
delivered by the Company solely as a result of its having been executed by the
Company.
28
<PAGE>
CERTIFICATION
132. CERTIFIED COPIES
Any director or the secretary or any person appointed by the board for the
purpose shall have power to authenticate any documents affecting the
constitution of the Company and any resolutions passed by the Company or the
holders of any class of shares of the Company or the board or any committee of
the board, and any books, records, documents and accounts relating to the
business of the Company, and to certify copies thereof or extracts therefrom as
true copies or extracts. A document purporting to be a copy of a resolution, or
the minutes of or an extract from the minutes of a meeting of the Company or the
holders of any class of shares of the Company or of the board or any committee
of the board that is certified as aforesaid shall be conclusive evidence in
favour of all persons dealing with the Company upon the faith thereof that such
resolution has been duly passed or, as the case may be, that such minutes or
extract is a true and accurate record of proceedings at a duly constituted
meeting.
DIVIDENDS
133. DECLARATION OF DIVIDENDS
Subject to the provisions of the Companies Acts, the Company may by ordinary
resolution declare dividends in accordance with the respective rights of the
members, but no dividend shall exceed the amount recommended by the board.
134. INTERIM DIVIDENDS
Subject to the provisions of the Companies Acts, the board may declare and
pay interim dividends if it appears to the board that they are justified by
the profits of the Company available for distribution. If the share capital
is divided into different classes, the board may declare and pay interim
dividends on shares which confer deferred or non-preferred rights with regard
to dividend as well as on shares which confer preferential rights with regard
to dividend, but no interim dividend shall be declared or paid on shares
carrying deferred or non-preferred rights if, at the time of declaration or
payment, any preferential dividend is in arrear. The board may also declare
and pay at intervals settled by it any dividend payable at a fixed rate if it
appears to the board that the profits available for distribution justify the
payment. Provided the board acts in good faith it shall not incur any
liability to the holders of shares conferring preferred rights for any loss
they may suffer by the declaration or lawful payment of an interim dividend
on any shares having deferred or non-preferred rights.
135. APPORTIONMENT OF DIVIDENDS
Except as otherwise provided by the rights attached to shares, all dividends
shall be declared and paid according to the amounts paid up on the shares on
which the dividend is paid; but no amount paid on a share in advance of the
date on which a call is payable shall be treated for the purposes of this
Article as paid on the share. All dividends shall be apportioned and paid
proportionately to the amounts paid up on the shares during any portion or
portions of the period in respect of which the dividend is paid; but, if any
share is issued on terms providing that it shall rank for dividend as from a
particular date, that share shall rank for dividend accordingly.
136. DIVIDENDS IN SPECIE
A general meeting declaring a dividend may, upon the recommendation of the
board, by ordinary resolution direct that it shall be satisfied wholly or partly
by the distribution of assets, and in
29
<PAGE>
particular of paid up shares or debentures of any other body corporate, and,
where any difficulty arises in regard to the distribution, the board may
settle the same as it thinks fit and in particular may issue fractional
certificates or authorise any person to sell and transfer any fractions or
disregard fractions altogether, and may fix the value for distribution of any
assets and may determine that cash shall be paid to any member upon the
footing of the value so fixed in order to adjust the rights of members and
may vest any assets in trustees.
137. PERMITTED DEDUCTIONS
The board may deduct from any dividend or other moneys payable to any member in
respect of a share any moneys presently payable by him to the Company in respect
of that share.
138. PROCEDURE FOR PAYMENT
Any dividend or other moneys payable in respect of a share may be paid by cheque
or warrant sent by post to the registered address of the holder or person
entitled or, if two or more persons are the holders of the share or are jointly
entitled to it by reason of the death or bankruptcy of the holder or otherwise
by operation of law, to the registered address of that one of those persons who
is first named in the register or to such person and to such address as the
person or persons entitled may in writing direct. Every such cheque or warrant
shall be made payable to the order of the person or persons entitled or to such
other person as the person or persons entitled may in writing direct and shall
be sent at the risk of the person entitled, and payment of the cheque shall be a
good discharge to the Company. Any joint holder or other person jointly
entitled to a share as aforesaid may give receipts for any dividend or other
moneys payable in respect of the share. Any such dividend or other money may
also be paid by any other method (including direct debit, bank transfer and
dividend warrant) which the board considers appropriate.
139. INTEREST NOT PAYABLE
No dividend or other moneys payable in respect of a share shall bear interest
against the Company unless otherwise provided by the rights attached to the
share.
140. FORFEITURE OF UNCLAIMED DIVIDENDS
Any dividend which has remained unclaimed for twelve years from the date when it
became due for payment shall, if the board so resolves, be forfeited and cease
to remain owing by the Company. The payment by the board of any unclaimed
dividend or other moneys payable in respect of a share into a separate account
shall not constitute the Company a trustee thereof.
CAPITALISATION OF PROFITS AND RESERVES
141. POWER TO CAPITALISE
The board may with the authority of an ordinary resolution of the Company:
(a) subject as hereinafter provided, resolve to capitalise any undistributed
profits of the Company not required for paying any preferential dividend
(whether or not they are available for distribution) or any sum standing
to the credit of any reserve or other fund, including the Company's share
premium account and capital redemption reserve, if any;
(b) appropriate the sum resolved to be capitalised to the members or any
class of members on the record date specified in the relevant resolution
who would have been entitled to it if it were distributed by way of
dividend and in the same proportions and apply such
30
<PAGE>
sum on their behalf either in or towards paying up the amounts, if any,
for the time being unpaid on any shares held by them respectively, or
in paying up in full unissued shares, debentures or other obligations of
the Company of a nominal amount equal to that sum, and allot the shares,
debentures or other obligations credited as fully paid to those members,
or as they may direct, in those proportions, or partly in one way and
partly in the other; but the share premium account, the capital
redemption reserve, and any profits which are not available for
distribution may, for the purposes of this Article, only be applied in
paying up unissued shares to be allotted to members credited as fully
paid;
(c) make such provision by authorising the sale and transfer to any person of
fractions to which any members would become entitled or may issue
fractional certificates or may resolve that the distribution be made as
nearly as practicable in the correct proportion but not exactly so or may
ignore fractions altogether or resolve that cash payments be made to any
members in order to adjust the rights of all parties or otherwise as (in
each case) the board determines where shares or debentures become, or
would otherwise become, distributable under this Article in fractions;
(d) authorise any person to enter on behalf of all the members concerned into
an agreement with the Company providing for either:-
(i) the allotment to such members respectively, credited as fully
paid, of any shares, debentures or other obligations to which they
are entitled upon such capitalisation; or
(ii) the payment up by the Company on behalf of such members (by the
application thereto of their respective proportions of the profits
resolved to be capitalised) of the amounts, or any part of the
amounts, remaining unpaid on their existing shares,
and any agreement made under such authority shall be binding on all such
members; and
(e) generally do all acts and things required to give effect to such
resolution as aforesaid.
RECORD DATES
142. RECORD DATES FOR DIVIDENDS, ETC.
Notwithstanding any other provision of these Articles, the Company or the board
may fix any date as the record date for any dividend, distribution, allotment or
issue, and such record date may be on or at any time before or after any date on
which the dividend, distribution, allotment or issue is declared, paid or made.
ACCOUNTS
143. RIGHTS TO INSPECT RECORDS
No member shall (as such) have any right of inspecting any accounting records or
other book or document of the Company except as conferred by statute or
authorised by the board or by ordinary resolution of the Company or order of a
court of competent jurisdiction.
31
<PAGE>
144. DELIVERY OF BALANCE SHEETS AND PROFIT AND LOSS ACCOUNTS
A copy of every balance sheet and profit and loss account (including any
documents required by law to be annexed thereto) which is to be laid before the
Company in general meeting and of the directors' and auditors' reports shall, at
least twenty-one days previously to the meeting, be delivered or sent by post to
every member and to every debenture holder of the Company of whose address the
Company is aware, and to every other person who is entitled to receive notice of
meetings from the Company under the provisions of the Companies Acts or of these
Articles or, in the case of joint holders of any share or debenture, to one of
the joint holders, provided that the requirements of this Article shall be
deemed satisfied in relation to any member by sending to such member, where
permitted by the Companies Acts and instead of such copies, a summary financial
statement derived from the Company's annual accounts and the report of the
directors and prepared in the form and containing the information prescribed by
the Companies Acts and any regulations made thereunder.
NOTICES
145. WHEN NOTICE REQUIRED TO BE IN WRITING
Any notice to be given to or by any person pursuant to these Articles shall be
in writing except that a notice calling a meeting of the board need not be in
writing.
146. METHOD OF GIVING NOTICE
The Company may serve or deliver any notice or other document on or to a member
either personally, by sending it by post in a prepaid envelope, or by facsimile
or telex addressed to the member at his registered address or by leaving it at
that address. In the case of joint holders of a share, all notices or other
documents shall be served on or delivered to the joint holder whose name stands
first in the register in respect of the joint holding and any notice or other
document so served or delivered shall be deemed for all purposes sufficient
service on or delivery to all the joint holders. A member whose registered
address is not within the United Kingdom and who gives to the Company an address
within the United Kingdom at which notices may be given to him shall be entitled
to have notices given to him at that address, but otherwise:
(a) no such members shall be entitled to receive any notice from the Company;
and
(b) without prejudice to the generality of the foregoing, any notice of a
general meeting of the Company which is in fact given or purports to be
given to such members shall be ignored for the purpose of determining the
validity of the proceedings at such general meeting.
147. DEEMED RECEIPT OF NOTICE
A member present, either in person or by proxy, at any meeting of the Company or
of the holders of any class of shares in the Company shall be deemed to have
received notice of the meeting and, where requisite, of the purposes for which
it was called.
148. NOTICE TO PERSONS ENTITLED BY TRANSMISSION
A notice or other document may be served or delivered by the Company on or to
the persons entitled by transmission to a share, whether in consequence of the
death or bankruptcy of a member or otherwise by sending or delivering it, in any
manner authorised by these Articles for the service or delivery of a notice or
other document on or to a member, addressed to them by
32
<PAGE>
name, or by the title of representatives of the deceased, or trustee of the
bankrupt or by any like description at the address, if any, within the United
Kingdom supplied for that purpose by the persons claiming to be so entitled.
Until such an address has been supplied, a notice or other document may be
served or delivered in any manner in which it might have been served or
delivered if the death or bankruptcy or other event giving rise to the
transmission had not occurred.
149. NOTICE TO PERSONS ENTITLED BY DEATH OR BANKRUPTCY
A notice may be given by the Company to the persons entitled to a share in
consequence of the death or bankruptcy of a member by sending or delivering it,
in any manner authorised by these Articles for the giving of notice to a member,
addressed to them by name, or by the title of representatives of the deceased,
or trustee of the bankrupt or by any like description at the address, if any,
within the United Kingdom supplied for that purpose by the persons claiming to
be so entitled. Until such an address has been supplied, a notice may be given
in any manner in which it might have been given if the death or bankruptcy had
not occurred.
150. TRANSFEREES ETC. BOUND BY PRIOR NOTICE
Every person who becomes entitled to a share shall be bound by any notice in
respect of that share which, before his name is entered in the register, has
been duly given to a person from whom he derives his title.
151. WHEN NOTICES DEEMED SERVED
Proof that an envelope containing a notice was properly addressed, prepaid and
posted shall be conclusive evidence that the notice was given. A notice sent by
post shall be deemed to be given:
(a) if sent by first class post from an address in the United Kingdom or
another country to another address in the United Kingdom or, as the case
may be, that other country, on the day following that on which the
envelope containing it was posted;
(b) if sent by airmail from an address in the United Kingdom to an address
outside the United Kingdom, on the day following that on which the
envelope containing it was posted; and
(c) in any other case, on the second day following that on which the envelope
containing it was posted.
A notice sent by facsimile transmission shall be deemed given at the time the
notice is received.
WINDING UP
152. LIQUIDATOR MAY DISTRIBUTE IN SPECIE
If the Company is wound up, the liquidator may, with the sanction of an
extraordinary resolution of the Company and any other sanction required by the
Insolvency Act 1986, divide among the members in specie the whole or any part of
the assets of the Company and may, for that purpose, value any assets and
determine how the division shall be carried out as between the members or
different classes of members. The liquidator may, with the like sanction, vest
the whole or any part of the assets in trustees upon such trusts for the benefit
of the members as he with the like sanction determines, but no member shall be
compelled to accept any assets upon which there is a liability.
33
<PAGE>
153. DISPOSAL OF ASSETS BY LIQUIDATOR
The power of sale of a liquidator shall include a power to sell wholly or
partially for shares or debentures or other obligations of another body
corporate, either then already constituted or about to be constituted for the
purpose of carrying out the sale.
INDEMNITY
154. INDEMNITY TO DIRECTORS, OFFICERS, ETC.
Subject to the provisions of the Companies Acts but without prejudice to any
indemnity to which a director may otherwise be entitled, every director or other
officer or auditor of the Company shall be indemnified out of the assets of the
Company against all costs, charges, losses, expenses and liabilities incurred by
him in the execution or discharge of his duties or the exercise of his powers or
otherwise in relation thereto, including (but without limitation) any liability
incurred by him in defending any proceedings, whether civil or criminal, in
which judgment is given in his favour (or the proceedings are otherwise disposed
of without any finding or admission of any material breach of duty on his part)
or in which he is acquitted or in connection with any application in which
relief is granted to him by the court from liability for negligence, default,
breach of duty or breach of trust in relation to the affairs of the Company.
34
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
NAME AND ADDRESS OF THE SUBSCRIBER(S) SIGNATURE(S) OF THE SUBSCRIBER(S)
- -------------------------------------------------------------------------------
<S> <C>
NAME David Ordish David Ordish
ADDRESS 22-24 Cowper Street
City Road
London EC2A 4AP
(Company Director)
NAME Derek Pattison Derek Pattison
ADDRESS 22-24 Cowper Street
City Road
London EC2A 4AP
(Company Director)
</TABLE>
DATED this 2nd day of October 1978
Witness to the above signature: Rachel Futerman
Witness Signature: Rachel Futerman
Witness Occupation: Company Director
Witness Address: 22-24 Cowper Street
City Road
London EC2A 4AP
35
<PAGE>
EXHIBIT 3.25
THE COMPANIES ACTS 1948 to 1984
COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION OF
TREFN ENGINEERING (METAL TREATMENTS DIVISION) LIMITED
1. The name of the Company is TREFN ENGINEERING (METAL TREATMENTS DIVISION)
LIMITED.
2. The registered office of the Company will be situate in England.
3. The objects for which the Company is established are:
(a) To carry on all or any of the businesses of precision engineers,
repairers, reconditioners, maintainers, servicers, fitters, installers,
manufacturers, designers, assemblers, grinders, importers, exporters, hirers,
letters on hire, distributors, and agents for the sale of, and dealers in
machine and other tools and jigs, dies and fixtures of all kinds, and of, and in
engineering equipment, plant, machinery, components, accessories and supplies of
every description, engineering consultants, production planners, prototype
designers, draughtsmen, and technicians, designers, distributors, factors,
manufacturers and merchants of, and dealers in mouldings, shapings, weldings,
pressings, assemblies, repetition work and machined castings, iron, steel and
brass founders, converters and moulders, millwrights, grinders, metallurgists,
boilermakers, smiths and fitters, wiredrawers, tube makers, tin-plate workers,
sheet metal manufacturers, workers and dealers, tinners, galvanisers, platers,
annealers and enamellers, pattern makers, foundrymen, plastic workers and
moulders, motor, mechanical, electrical, civil and general engineers,
proprietors and letters on hire, designers, builders and repairers of, and
dealers in motor and other vehicles, garage and petrol filling station
proprietors, carriers, haulage and transport contractors, electrical and
mechanical plant movers, railway, forwarding, passenger and freight agents,
insurance and general commission agents and general merchants; and to buy, sell,
manufacture, repair, alter, manipulate, and otherwise deal in apparatus, plant,
machinery, fittings, furnishings and implements, tools, materials products,
articles and things capable of being used for the purpose of the foregoing
businesses or any of them, or likely to be required by customers of, or persons
having dealings with the Company.
(b) To carry on any other trade or business whatever which can in the
opinion of the Board of Directors be advantageously carried on in connection
with or ancillary to any of the businesses of the Company.
(c) To purchase or by any other means acquire and take options over
any property whatever, and any rights or privileges of any kind over in respect
of any property.
<PAGE>
(d) To apply for, register, purchase, or by other means acquire and
protect, prolong and renew, whether in the United Kingdom or elsewhere any
patents, patent rights, brevets d'invention, licences, secret processes, trade
marks, designs, protections and concessions and to disclaim, alter, modify, use
and turn to account and to manufacture under or grant licences or privileges in
respect of the same, and to expend money in experimenting upon, testing and
improving any patents, inventions or rights which the Company may acquire or
propose to acquire.
(e) To acquire or undertake the whole or any part of the business,
goodwill, and assets of any person, firm, or company carrying on or proposing to
carry on any of the businesses which the Company is authorised to carry on and
as part of the consideration for such acquisition to undertake all or any of the
liabilities of such person, firm or company, or to acquire an interest in,
amalgamate with, or enter into partnership or into any arrangement for sharing
profits, or for co-operation, or for mutual assistance with any such person,
firm or company, or for subsidising or otherwise assisting any such person, firm
or company, and to give or accept, by way of consideration for any of the acts
or things aforesaid or property acquired, any shares, debentures, debenture
stock or securities that may be agreed upon, and to hold and retain, or sell,
mortgage and deal with any shares, debentures, debenture stock or securities so
received.
(f) To improve, manage, construct, repair, develop, exchange, let on
lease or otherwise, mortgage, charge, sell, dispose of, turn to account, grant
licences, options, rights and privileges in respect of, or otherwise deal with
all or any part of the property and rights ot the Company.
(g) To invest and deal with the moneys of the Company not immediately
required in such manner as may from time to time be determined and to hold or
otherwise deal with any investments made.
(h) To lend and advance money or give credit on such terms as may seem
expedient and with or without security to customers and others, to enter into
guarantees, contracts of indemnity and suretyships of all kinds, to receive
money on deposit or loan upon any terms and to secure or guarantee the payment
of any sums of money or the performance of any obligation by any company, firm
or person including any holding company, subsidiary or fellow subsidiary company
in any manner.
(i) To borrow and raise money in any manner and to secure the
repayment of any money borrowed, raised or owing by mortgage, charge, standard
security, lien or other security upon the whole or any part of the Company's
property or assets (whether present or future), including its uncalled capital,
and also by a similar mortgage, charge, standard security, lien or security to
secure and guarantee the performance by the Company of any obligation or
liability it may undertake or which may become binding on it.
2
<PAGE>
(j) To draw, make, accept, endorse, discount, negotiate, execute and
issue cheques, bills of exchange, promissory notes, bills of lading, warrants,
debentures, and other negotiable or transferable instruments.
(k) To apply for, promote, and obtain any Act of Parliament, order, or
licence of the Department of Trade or other authority for enabling the Company
to carry any of its objects into effect, or for effecting any modification of
the Company's constitution, or for any other purpose which may seem calculated
directly or indirectly to promote the Company's interests, and to oppose any
proceedings or application which may seem calculated directly or indirectly to
prejudice the Company's interests.
(l) To enter into any arrangements with any government or authority
(supreme, municipal, local, or otherwise) that may seem conducive to the
attainment of the Company's objects or any of them, and to obtain from any such
government or authority any charters, decrees, rights, privileges or concessions
which the Company may think desirable and to carry out, exercise, and comply
with any such charters, decrees, rights, privileges, and concessions.
(m) To subscribe for, take, purchase, or otherwise acquire, hold,
sell, deal with and dispose of, place and underwrite shares, stocks, debentures,
debenture stocks, bonds, obligations or securities issued or guaranteed by any
other company constituted or carrying on business in any part of the world, and
debentures, debenture stocks, bonds, obligations or securities issued or
guaranteed by any government or authority, municipal, local or otherwise, in any
part of the world.
(n) To control, manage, finance, subsidise, co-ordinate or otherwise
assist any company or companies in which the Company has a direct or indirect
financial interest, to provide secretarial, administrative, technical,
commercial and other services and facilities of all kinds for any such company
or companies and to make payments by way of subvention or otherwise and any
other arrangements which may seem desirable with respect to any business or
operations of or generally with respect to any such company or companies.
(o) To promote any other company for the purpose of acquiring the
whole or any part of the business or property or undertaking or any of the
liabilities of the Company, or of undertaking any business or operations which
may appear likely to assist or benefit the Company or to enhance the value of
any property or business of the Company, and to place or guarantee the placing
of, underwrite, subscribe for, or otherwise acquire all or any part of the
shares or securities of any such company as aforesaid.
(p) To sell or otherwise dispose of the whole or any part of the
business or property of the Company, either together or in portions, for such
consideration as the Company may think fit, and in particular for shares,
debentures, or securities of any company purchasing the same.
3
<PAGE>
(q) To act as agents or brokers and as trustees for any person, firm
or company, and to undertake and perform sub-contracts.
(r) To remunerate any person, firm or company rendering services to
the Company either by cash payment or by the allotment to him or them of shares
or other securities of the Company credited as paid up in full or in part or
otherwise as may be thought expedient.
(s) To pay all or any expenses incurred in connection with the
promotion, formation and incorporation of the Company, or to contract with any
person, firm or company to pay the same, and to pay commissions to brokers and
others for underwriting, placing, selling, or guaranteeing the subscription of
any shares or other securities of the Company.
(t) To support and subscribe to any charitable or public object and
to support and subscribe to any institution, society, or club which may be
for the benefit of the Company or its Directors or employees, or may be
connected with any town or place where the Company carries on business; to
give or award pensions, annuities, gratuities, and superannuation or other
allowances or benefits or charitable aid and generally to provide advantages,
facilities and services for any person who are or have been Directors of, or
who are or have been employed by, or who are serving or have served the
Company, or any company which is a subsidiary of the Company or the holding
company of the Company or a fellow subsidiary of the Company or the
predecessors in business of the Company or any such subsidiary, holding or
fellow subsidiary company and to the wives, widows, children and other
relatives and dependants of such persons; to make payments towards insurance;
and to set up, establish, support and maintain superannuation and other funds
or schemes (whether contributory or non-contributory) for the benefit of any
of such persons and of their wives, widows, children and other relatives and
dependants; and to set up, establish, support and maintain profit sharing or
share purchase schemes for the benefit of any of the employees of the Company
or of any such subsidiary, holding or fellow subsidiary company and to lend
money to any such employees or to trustees on their behalf to enable any such
purchase schemes to be established or maintained.
(u) To distribute among the Members of the Company in kind any
property of the Company of whatever nature.
(v) To procure the Company to be registered or recognised in any part
of the world.
(w) To do all or any of the things aforesaid in any part of the world
and either as principals, agents, contractors or otherwise, and by or through
agents, brokers, sub-contractors or otherwise and either alone or in conjunction
with others.
(x) To do all such other things as may be deemed incidental or
conducive to the attainment of the Company's objects or any of them.
4
<PAGE>
The objects set forth in each sub-clause of this Clause shall not be
restrictively construed but the widest interpretation shall be given thereto,
and they shall not, except where the context expressly so requires, be in any
way limited or restricted by reference to or inference from any other object
or objects set forth in such sub-clause or from the terms of any other
sub-clause or from the name of the Company. None of such sub-clauses or the
object or objects therein specified or the powers thereby conferred shall be
deemed subsidiary or ancillary to the objects or powers mentioned in any
other sub-clause, but the Company shall have as full a power to exercise all
or any of the objects conferred by and provided in each of the said
sub-clauses as if each sub-clause contained the objects of a separate
company. The word "company" in this Clause, except where used in reference
to the Company, shall be deemed to include any partnership or other body of
persons, whether incorporated or unincorporated and whether domiciled in the
United Kingdom or elsewhere.
4. The liability of the Members is limited.
5. The share capital of the Company is L1,000,000 divided into 1,000,000
shares of L1 each.
WE, the several persons whose names and addresses are subscribed, are desirous
of being formed into a Company, in pursuance of this Memorandum of Association,
and we respectively agree to take the number of shares in the capital of the
Company set opposite our respective names.
- -------------------------------------------------------------------------------
Names, addresses and descriptions of Subscribers Number of shares taken
by each Subscriber
- -------------------------------------------------------------------------------
Michael Richard Counsell, One
15, Pembroke Road,
Bristol. BS99 7DX
Commercial Manager.
- --------------------------------------------------------------------------------
Christopher Charles Hadler, One
15, Pembroke Road
Bristol. BS99 7DX
Commercial Manager.
- --------------------------------------------------------------------------------
Dated 1/6/82.
Witness to the above Signatures - Dawn Bennett,
15, Pembroke Road
Bristol. BS99 7DX
Clerk.
5
<PAGE>
EXHIBIT 3.26
THE COMPANIES ACTS 1985 AND 1989
--------------------------------------
PRIVATE COMPANY LIMITED BY SHARES
--------------------------------------
ARTICLES OF ASSOCIATION
OF
TREFN ENGINEERING
(METAL TREATMENTS DIVISION) LIMITED
--------------------------------------
(Incorporated on 21 September 1982)
--------------------------------------
Company Number: 1665930
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PRELIMINARY 1
INTERPRETATION 1
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
SHARE CAPITAL 3
2. Shares with special rights . . . . . . . . . . . . . . . . . . . . . .3
3. Allotment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
4. Redeemable shares. . . . . . . . . . . . . . . . . . . . . . . . . . .3
5. Commissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
6. Trusts not recognised. . . . . . . . . . . . . . . . . . . . . . . . .4
VARIATION OF RIGHTS 4
7. Method of varying rights . . . . . . . . . . . . . . . . . . . . . . .4
8. When rights deemed to be varied. . . . . . . . . . . . . . . . . . . .4
SHARE CERTIFICATES 4
9. Members' rights to certificates . . . . . . . . . . . . . . . . . . .4
10. Replacement certificates . . . . . . . . . . . . . . . . . . . . . . .5
LIEN 5
11. Company to have lien on shares . . . . . . . . . . . . . . . . . . . .5
12. Enforcement of lien by sale. . . . . . . . . . . . . . . . . . . . . .5
13. Giving effect to sale. . . . . . . . . . . . . . . . . . . . . . . . .5
14. Application of proceeds . . . . . . . . . . . . . . . . . . . . . . .5
CALLS ON SHARES 5
15. Power to make calls. . . . . . . . . . . . . . . . . . . . . . . . . .5
16. Time when call made . . . . . . . . . . . . . . . . . . . . . . . . .6
17. Liability of joint holders . . . . . . . . . . . . . . . . . . . . . .6
18. Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . .6
19. Deemed calls . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
20. Differentiation on calls . . . . . . . . . . . . . . . . . . . . . . .6
21. Payment of calls in advance. . . . . . . . . . . . . . . . . . . . . .6
FORFEITURE AND SURRENDER 6
22. Notice requiring payment of call . . . . . . . . . . . . . . . . . . .6
23. Forfeiture for non-compliance . . . . . . . . . . . . . . . . . . . .7
24. Sale of forfeited shares . . . . . . . . . . . . . . . . . . . . . . .7
25. Liability following forfeiture . . . . . . . . . . . . . . . . . . . .7
26. Surrender. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
27. Extinction of rights . . . . . . . . . . . . . . . . . . . . . . . . .7
28. Evidence of forfeiture . . . . . . . . . . . . . . . . . . . . . . . .7
</TABLE>
<PAGE>
<TABLE>
<S> <C>
TRANSFER OF SHARES 8
29. Form and execution of transfer . . . . . . . . . . . . . . . . . . . .8
30. Restrictions on transfer . . . . . . . . . . . . . . . . . . . . . . .8
31. Invalid transfers. . . . . . . . . . . . . . . . . . . . . . . . . . .8
32. Notice of refusal to register. . . . . . . . . . . . . . . . . . . . .8
33. Suspension of registration . . . . . . . . . . . . . . . . . . . . .9
34. No fee payable on registration . . . . . . . . . . . . . . . . . . . .9
35. Retention of transfers . . . . . . . . . . . . . . . . . . . . . . . .9
TRANSMISSION OF SHARES 9
36. Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
37. Elections following transmission . . . . . . . . . . . . . . . . . . .9
38. Rights of persons entitled by transmission . . . . . . . . . . . . . .9
ALTERATION OF SHARE CAPITAL 10
39. Alterations permitted by ordinary resolution . . . . . . . . . . . . 10
40. New shares subject to these Articles . . . . . . . . . . . . . . . . 10
41. Fractions arising. . . . . . . . . . . . . . . . . . . . . . . . . . 10
42. Power to reduce capital . . . . . . . . . . . . . . . . . . . . . . 10
PURCHASE OF OWN SHARES 11
43. Power to purchase own shares . . . . . . . . . . . . . . . . . . . . 11
GENERAL MEETINGS 11
44. Types of general meeting . . . . . . . . . . . . . . . . . . . . . . 11
45. Annual general meetings . . . . . . . . . . . . . . . . . . . . . . 11
46. Class meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
47. Convening general meetings . . . . . . . . . . . . . . . . . . . . . 11
NOTICE OF GENERAL MEETINGS 12
48. Period of notice . . . . . . . . . . . . . . . . . . . . . . . . . . 12
49. Provision of notice . . . . . . . . . . . . . . . . . . . . . . . . 12
50. Contents of notice . . . . . . . . . . . . . . . . . . . . . . . . . 12
51. Accidental omission to give notice . . . . . . . . . . . . . . . . . 13
PROCEEDINGS AT GENERAL MEETINGS 13
52. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
53. If quorum not present . . . . . . . . . . . . . . . . . . . . . . . 13
54. Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
55. Directors entitled to speak . . . . . . . . . . . . . . . . . . . . 13
56. Adjournments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
57. Amendments to resolutions . . . . . . . . . . . . . . . . . . . . . 14
58. Methods of voting . . . . . . . . . . . . . . . . . . . . . . . . . 14
59. Declaration of result . . . . . . . . . . . . . . . . . . . . . . . 14
60. Withdrawal of demand for poll . . . . . . . . . . . . . . . . . . . 14
61. Conduct of poll . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE>
<TABLE>
<S> <C>
62. Chairman's casting vote . . . . . . . . . . . . . . . . . . . . . . 15
63. When poll to be taken . . . . . . . . . . . . . . . . . . . . . . . 15
64. Notice of poll . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
65. Effectiveness of special and extraordinary resolutions . . . . . . . 15
66. Resolutions in writing . . . . . . . . . . . . . . . . . . . . . . . 15
VOTES OF MEMBERS 15
67. Right to vote . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
68. Votes of joint holders . . . . . . . . . . . . . . . . . . . . . . . 15
69. Member under incapacity . . . . . . . . . . . . . . . . . . . . . . 16
70. Calls in arrears . . . . . . . . . . . . . . . . . . . . . . . . . . 16
71. Objection to voting . . . . . . . . . . . . . . . . . . . . . . . . 16
72. Supplementary provisions on voting . . . . . . . . . . . . . . . . . 16
PROXIES AND CORPORATE REPRESENTATIVES 16
73. Appointment of proxy . . . . . . . . . . . . . . . . . . . . . . . . 16
74. Form of proxy - standard . . . . . . . . . . . . . . . . . . . . . . 16
75. Form of proxy - each way . . . . . . . . . . . . . . . . . . . . . . 17
76. Voting by appointor . . . . . . . . . . . . . . . . . . . . . . . . 17
77. Delivery of form of proxy . . . . . . . . . . . . . . . . . . . . . 17
78. Validity of form of proxy . . . . . . . . . . . . . . . . . . . . . 18
79. Corporate representatives . . . . . . . . . . . . . . . . . . . . . 18
80. Revocation of authority . . . . . . . . . . . . . . . . . . . . . . 18
NUMBER OF DIRECTORS 18
81. Limits on number of directors . . . . . . . . . . . . . . . . . . . 18
APPOINTMENT AND RETIREMENT OF DIRECTORS 18
82. No retirement by rotation . . . . . . . . . . . . . . . . . . . . . 18
83. Eligibility for election . . . . . . . . . . . . . . . . . . . . . . 18
84. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
85. Additional powers of the Company . . . . . . . . . . . . . . . . . . 19
86. Appointment by board . . . . . . . . . . . . . . . . . . . . . . . . 19
87. Age limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
88. No share qualification . . . . . . . . . . . . . . . . . . . . . . . 19
ALTERNATE DIRECTORS 20
89. Power to appoint alternates . . . . . . . . . . . . . . . . . . . . 20
90. Alternates entitled to receive notice . . . . . . . . . . . . . . . 20
91. Alternates representing more than one director . . . . . . . . . . . 20
92. Expenses and remuneration of alternates . . . . . . . . . . . . . . 20
93. Termination of appointment . . . . . . . . . . . . . . . . . . . . . 20
94. Method of appointment and revocation . . . . . . . . . . . . . . . . 20
95. Alternate not an agent of appointor . . . . . . . . . . . . . . . . 21
POWERS OF THE BOARD 21
96. Business to be managed by board . . . . . . . . . . . . . . . . . . 21
</TABLE>
<PAGE>
<TABLE>
<S> <C>
DELEGATION OF POWERS OF THE BOARD 21
97. Committees of the board . . . . . . . . . . . . . . . . . . . . . . 21
98. Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
99. Offices including the title "director" . . . . . . . . . . . . . . . 21
DISQUALIFICATION AND REMOVAL OF DIRECTORS 22
100. Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . 22
101. Power of Company to remove director . . . . . . . . . . . . . . . . 22
REMUNERATION OF NON-EXECUTIVE DIRECTORS 23
102. Ordinary remuneration . . . . . . . . . . . . . . . . . . . . . . . 23
103. Additional remuneration for special services . . . . . . . . . . . . 23
DIRECTORS' EXPENSES 23
104. Directors may be paid expenses . . . . . . . . . . . . . . . . . . . 23
EXECUTIVE DIRECTORS 23
105. Appointment to executive office . . . . . . . . . . . . . . . . . . 23
106. Termination of appointment to executive office . . . . . . . . . . . 23
107. Emoluments to be determined by the board . . . . . . . . . . . . . . 24
DIRECTORS' INTERESTS 24
108. Directors may contract with the Company . . . . . . . . . . . . . . 24
109. Notification of interests . . . . . . . . . . . . . . . . . . . . . 24
110. Exercise by Company of voting rights . . . . . . . . . . . . . . . . 25
GRATUITIES, PENSIONS AND INSURANCE 25
111. Gratuities and pensions . . . . . . . . . . . . . . . . . . . . . . 25
112. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
113. Directors not liable to account . . . . . . . . . . . . . . . . . . 25
PROCEEDINGS OF DIRECTORS 25
114. Convening meetings . . . . . . . . . . . . . . . . . . . . . . . . . 25
115. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
116. Powers of directors if number falls below minimum . . . . . . . . . 26
117. Chairman and deputy chairman . . . . . . . . . . . . . . . . . . . . 26
118. Validity of acts of the board . . . . . . . . . . . . . . . . . . . 26
119. Resolutions in writing . . . . . . . . . . . . . . . . . . . . . . . 26
120. Meetings by telephone, etc. . . . . . . . . . . . . . . . . . . . . 26
121. Directors' power to vote on contracts
in which they are interested . . . . . . . . . . . . . . . . . . 27
122. Exclusion of director from quorum . . . . . . . . . . . . . . . . . 27
123. Amendment of restrictions on voting . . . . . . . . . . . . . . . . 27
124. Division of proposals . . . . . . . . . . . . . . . . . . . . . . . 27
125. Decision of chairman final and conclusive . . . . . . . . . . . . . 27
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECRETARY 28
126. Appointment and removal of secretary . . . . . . . . . . . . . . . . 28
MINUTES 28
127. Minutes required to be kept . . . . . . . . . . . . . . . . . . . . 28
THE SEAL 28
128. Authority required for use of seal . . . . . . . . . . . . . . . . . 28
129. Official seal for use abroad . . . . . . . . . . . . . . . . . . . . 28
130. Execution of instrument as a deed under hand . . . . . . . . . . . . 28
131. Delivery of deeds . . . . . . . . . . . . . . . . . . . . . . . . . 28
CERTIFICATION 29
132. Certified copies . . . . . . . . . . . . . . . . . . . . . . . . . . 29
DIVIDENDS 29
133. Declaration of dividends . . . . . . . . . . . . . . . . . . . . . . 29
134. Interim dividends . . . . . . . . . . . . . . . . . . . . . . . . . 29
135. Apportionment of dividends . . . . . . . . . . . . . . . . . . . . . 29
136. Dividends in specie . . . . . . . . . . . . . . . . . . . . . . . . 29
137. Permitted deductions . . . . . . . . . . . . . . . . . . . . . . . . 30
138. Procedure for payment . . . . . . . . . . . . . . . . . . . . . . . 30
139. Interest not payable . . . . . . . . . . . . . . . . . . . . . . . . 30
140. Forfeiture of unclaimed dividends . . . . . . . . . . . . . . . . . 30
CAPITALISATION 30
141. Power to capitalise . . . . . . . . . . . . . . . . . . . . . . . . 30
RECORD DATES 31
142. Record dates for dividends, etc. . . . . . . . . . . . . . . . . . . 31
ACCOUNTS 31
143. Rights to inspect records . . . . . . . . . . . . . . . . . . . . . 31
144. Delivery of balance sheets and profit and loss accounts . . . . . . 32
NOTICES 32
145. When notice required to be in writing . . . . . . . . . . . . . . . 32
146. Method of giving notice . . . . . . . . . . . . . . . . . . . . . . 32
147. Deemed receipt of notice . . . . . . . . . . . . . . . . . . . . . . 32
148. Notice to persons entitled by transmission . . . . . . . . . . . . . 32
149. Notice to persons entitled by death or bankruptcy . . . . . . . . . 33
150. Transferees etc. bound by prior notice . . . . . . . . . . . . . . . 33
151. When notices deemed served . . . . . . . . . . . . . . . . . . . . . 33
WINDING UP 33
152. Liquidator may distribute in specie . . . . . . . . . . . . . . . . 33
153. Disposal of assets by liquidator . . . . . . . . . . . . . . . . . . 34
INDEMNITY 34
154. Indemnity to directors, officers, etc. . . . . . . . . . . . . . . . 34
</TABLE>
<PAGE>
COMPANY NO.: 1665930
THE COMPANIES ACTS 1985 AND 1989
PRIVATE COMPANY LIMITED BY SHARES
- -------------------------------------------------------------------------------
ARTICLES OF ASSOCIATION
OF
TREFN ENGINEERING
(METAL TREATMENTS DIVISION) LIMITED
(INCORPORATED ON 21 SEPTEMBER 1982)
- -------------------------------------------------------------------------------
PRELIMINARY
THE REGULATIONS IN TABLE A IN THE COMPANIES (TABLES A-F) REGULATIONS IN FORCE
AT THE DATE OF THE INCORPORATION OF THE COMPANY SHALL NOT APPLY TO THE
COMPANY.
INTERPRETATION
1. DEFINITIONS
IN THESE ARTICLES, EXCEPT WHERE THE SUBJECT OR CONTEXT OTHERWISE REQUIRES, THE
WORDS DEFINED IN THE FIRST COLUMN OF THE FOLLOWING TABLE SHALL BEAR THE MEANINGS
SET OPPOSITE THEM RESPECTIVELY IN THE SECOND COLUMN.
THE ACT means The Companies Act 1985 including any modification or re-enactment
thereof for the time being in force.
THESE ARTICLES means these articles of association as altered from time to time
by special resolution.
THE AUDITORS means the auditors for the time being of the Company.
THE BOARD means the directors or any of them acting as the board of directors of
the Company.
CLEAR DAYS means the period excluding the day when a notice is given or deemed
to be given and the day for which it is given or on which it is to take effect.
THE COMPANIES ACTS has the meaning ascribed thereto by section 744 of the Act
and any enactment passed after those Acts which may, by virtue of that or any
other such enactment, be
1
<PAGE>
cited together with those Acts as the "Companies Acts" (with or without the
addition of an indication of the date of any such enactment).
A DIRECTOR means a director of the Company.
DIVIDEND means Dividend or bonus.
THE HOLDER means in relation to any shares the member whose name is entered in
the register as the holder of such shares.
A MEMBER means a member of the Company.
THE MEMORANDUM means the memorandum of association of the Company as amended
from time to time.
THE OFFICE means the registered office of the Company.
PAID means paid or credited as paid.
THE REGISTER means the register of members of the Company.
THE SEAL means the common seal of the Company and includes any official seal
kept by the Company by virtue of section 39 or 40 of the Act.
THE SECRETARY means the secretary of the Company and includes a joint,
assistant, deputy or temporary secretary and any other person appointed to
perform the duties of the secretary.
THE UNITED KINGDOM means Great Britain and Northern Ireland.
References to a document being executed include references to its being executed
under hand or under seal or by any other method.
References to writing include references to any visible substitute for writing
and to anything partly in one form and partly in another form.
Words denoting the singular number include the plural number and vice versa;
words denoting the masculine gender include the feminine gender; and words
denoting persons include corporations.
Save as aforesaid any words or expressions defined in the Act (but excluding any
statutory modification thereof not in force at the date of adoption of these
Articles) shall, if not inconsistent with the subject or context, bear the same
meaning in these Articles.
Subject to the preceding paragraph, references to any provision of any enactment
or of any subordinate legislation (as defined by section 21(1) of the
Interpretation Act 1978) include any modification or re-enactment of that
provision for the time being in force.
Headings are inserted for convenience only and do not affect the construction of
these Articles.
2
<PAGE>
In these Articles, (a) powers of delegation shall not be restrictively
construed but the widest interpretation shall be given thereto; (b) the word
"board" in the context of the exercise of any power contained in these
Articles includes any committee consisting of one or more directors, any
director holding executive office and any local or divisional board, manager
or agent of the Company to which or, as the case may be, to whom the power in
question has been delegated; (c) no power of delegation shall be limited by
the existence or, except where expressly provided by the terms of delegation,
the exercise of that or any other power of delegation; and (d) except where
expressly provided by the terms of delegation, the delegation of a power
shall not exclude the concurrent exercise of that power by any other body or
person who is for the time being authorised to exercise it under these
Articles or under another delegation of the power.
SHARE CAPITAL
2. SHARES WITH SPECIAL RIGHTS
Subject to the provisions of the Companies Acts and without prejudice to any
rights attached to any existing shares or class of shares, any share may be
issued with such rights or restrictions as the Company may by ordinary
resolution determine or, subject to and in default of such determination, as the
board shall determine.
3. ALLOTMENT
Any shares proposed to be issued after the date of adoption of these Articles
shall first be offered to the members in proportion as nearly as may be to the
number of the existing shares held by them respectively unless the Company shall
by Special Resolution otherwise direct. The offer shall be made by notice
specifying the number of shares offered, and limiting a period (not being less
than fourteen days) within which the offer, if not accepted, will be deemed to
be declined. After the expiration of that period, those shares so deemed to be
declined shall be offered in the proportion aforesaid to the persons who have,
within the said period, accepted all the shares offered to them; such further
offer shall be made in the same manner and limited by a like period as the
original offer. Any shares not accepted pursuant to such offer or further offer
as aforesaid or not capable of being offered as aforesaid except by way of
fractions and any shares released from the provisions of this Article by such
Special Resolution as aforesaid shall be under the control of the directors, who
may allot, grant options over or otherwise dispose of the same to such persons,
on such terms, and in such manner as they think fit, provided that, in the case
of shares not accepted as aforesaid, such shares shall not be disposed of on
terms which are more favourable to the subscribers thereof than the terms on
which they were offered to the members. Subject to this Clause the directors are
unconditionally authorised for the purposes of Section 80 of the Act, to allot,
grant options over, or otherwise dispose of relevant securities up to the amount
of the share capital as at the date of adoption of these Articles at any time or
times during the period of five years from the date of adoption and at any time
thereafter pursuant to any offer or agreement made by the Company before the
expiry of this authority. Sub-sections 89(1) and 90(1) inclusive of the Act
shall be excluded from applying to the Company.
4. REDEEMABLE SHARES
Subject to the provisions of the Companies Acts, and without prejudice to any
rights attached to any existing shares or class of shares, shares may be issued
which are to be redeemed or are to be liable to be redeemed at the option of the
Company or the holder on such terms and in such manner as may be provided by
these Articles.
3
<PAGE>
5. COMMISSIONS
The Company may exercise all powers of paying commissions or brokerage conferred
or permitted by the Companies Acts. Subject to the provisions of the Companies
Acts, any such commission or brokerage may be satisfied by the payment of cash
or by the allotment of fully or partly paid shares or partly in one way and
partly in the other.
6. TRUSTS NOT RECOGNISED
Except as required by law, no person shall be recognised by the Company as
holding any share upon any trust and (except as otherwise provided by these
Articles or by law) the Company shall not be bound by or recognise any interest
in any share (or in any fractional part of a share) except an absolute right to
the entirety thereof in the holder.
VARIATION OF RIGHTS
7. METHOD OF VARYING RIGHTS
Subject to the provisions of the Companies Acts, if at any time the capital of
the Company is divided into different classes of shares, the rights attached to
any class may (unless otherwise provided by the terms of issue of the shares of
that class) be varied or abrogated, whether or not the Company is being wound
up, either with the consent in writing of the holders of three-quarters in
nominal value of the issued shares of the class or with the sanction of an
extraordinary resolution passed at a separate general meeting of the holders of
the shares of the class (but not otherwise).
8. WHEN RIGHTS DEEMED TO BE VARIED
For the purposes of this Article, unless otherwise expressly provided by the
rights attached to any shares or class of shares, those rights shall be deemed
to be varied by the reduction of the capital paid up on those shares otherwise
than by a purchase or redemption by the Company of its own shares and by the
allotment of other shares ranking in priority for payment of a dividend or in
respect of capital or which confer on the holders voting rights more favourable
than those conferred by such first mentioned shares, but shall not otherwise be
deemed to be varied by the creation or issue of other shares ranking pari passu
with, or subsequent to, such first mentioned shares or by the purchase or
redemption by the Company of any of its own shares.
SHARE CERTIFICATES
9. MEMBERS' RIGHTS TO CERTIFICATES
Every member, upon becoming the holder of any shares, shall be entitled, without
payment, to one certificate for all the shares of each class held by him (and,
upon transferring a part of his holding of shares of any class, to a certificate
for the balance of such holding) or several certificates each for one or more of
his shares upon payment for every certificate after the first of such reasonable
sum as the board may from time to time determine. Every certificate shall
specify the number, class and distinguishing numbers (if any) of the shares to
which it relates and the amount or respective amounts paid up thereon and, where
the Company has adopted a seal, sealed with the seal. The Company shall not be
bound to issue more than one certificate for shares held jointly by several
persons and delivery of a certificate to one joint holder shall be a sufficient
delivery to all of them. Shares of different classes may not be included in the
same certificate.
4
<PAGE>
10. REPLACEMENT CERTIFICATES
If a share certificate is defaced, worn out, lost or destroyed, it may be
renewed on such terms (if any) as to evidence and indemnity (with or without
security) and payment of any exceptional out-of-pocket expenses reasonably
incurred by the Company in investigating evidence and preparing the requisite
form of indemnity as the board may determine but otherwise free of charge, and
(in the case of defacement or wearing out) on delivery up of the old
certificate.
LIEN
11. COMPANY TO HAVE LIEN ON SHARES
The Company shall have a first and paramount lien on every share (not being a
fully paid share) for all moneys payable to the Company (whether presently or
not) in respect of that share. The board may at any time (generally or in
particular cases) waive any lien or declare any share to be wholly or in part
exempt from the provisions of this Article. The Company's lien on a share shall
extend to any amount (including dividends) payable in respect of it.
12. ENFORCEMENT OF LIEN BY SALE
The Company may sell, in such manner as the board determines, any share on which
the Company has a lien if a sum in respect of which the lien exists is presently
payable and is not paid within fourteen clear days after notice has been given
to the holder of the share or to the person entitled to it in consequence of the
death or bankruptcy of the holder or otherwise by operation of law, demanding
payment and stating that if the notice is not complied with the shares may be
sold.
13. GIVING EFFECT TO SALE
To give effect to any such sale the board may authorise some person to execute
an instrument of transfer of the shares sold to, or in accordance with the
directions of, the purchaser. The transferee shall not be bound to see to the
application of the purchase money nor shall his title to the shares be affected
by any irregularity in or invalidity of the proceedings in relation to the sale.
14. APPLICATION OF PROCEEDS
The net proceeds of the sale, after payment of the costs, shall be applied in or
towards payment or satisfaction of so much of the sum in respect of which the
lien exists as is presently payable, and any residue shall (upon surrender to
the Company for cancellation of the certificate for the shares sold and subject
to a like lien for any moneys not presently payable as existed upon the shares
before the sale) be paid to the person entitled to the shares at the date of the
sale.
CALLS ON SHARES
15. POWER TO MAKE CALLS
Subject to the terms of allotment, the board may from time to time make calls
upon the members in respect of any moneys unpaid on their shares (whether in
respect of nominal value or premium) and each member shall (subject to receiving
at least fourteen clear days' notice specifying when and where payment is to be
made) pay to the Company as required by the notice the amount called on his
shares. A call may be required to be paid by instalments. A call may, before
receipt by the Company of any sum due thereunder, be revoked in whole or part
and the time fixed for payment of a call may be postponed in whole or part as
the board may determine. A person upon
5
<PAGE>
whom a call is made shall remain liable for calls made upon him
notwithstanding the subsequent transfer of the shares in respect whereof the
call was made.
16. TIME WHEN CALL MADE
A call shall be deemed to have been made at the time when the resolution of the
board authorising the call was passed.
17. LIABILITY OF JOINT HOLDERS
The joint holders of a share shall be jointly and severally liable to pay all
calls in respect thereof.
18. INTEREST PAYABLE
If a call or any instalment of a call remains unpaid in whole or in part after
it has become due and payable the person from whom it is due and payable shall
pay interest on the amount unpaid from the day it became due and payable until
it is paid at the rate fixed by the terms of allotment of the share or in the
notice of the call or, if no rate is fixed, such rate, not exceeding 15 per
cent. per annum or, if higher, the appropriate rate (as defined by the Act), as
may be determined by the board, but the board may waive payment of such interest
wholly or in part.
19. DEEMED CALLS
An amount payable in respect of a share on allotment or at any fixed date,
whether in respect of nominal value or premium or as an instalment of a call,
shall be deemed to be a call duly made and notified and payable on the date so
fixed or in accordance with the terms of the allotment, and if it is not paid
the provisions of these Articles shall apply as if that amount had become due
and payable by virtue of a call duly made and notified.
20. DIFFERENTIATION ON CALLS
Subject to the terms of allotment, the board may make arrangements on the issue
of shares for a difference between the allottees and/or holders in the amounts
and times of payment of calls on their shares.
21. PAYMENT OF CALLS IN ADVANCE
The board may, if it thinks fit, receive from any member willing to advance the
same all or any part of the moneys uncalled and unpaid upon any shares held by
him and such payment in advance of calls shall extinguish PRO TANTO the
liability upon the shares in respect of which it is made, and may pay upon all
or any of the moneys so advanced (until the same would but for such advance
become presently payable) interest at such rate not exceeding (unless the
Company by ordinary resolution may otherwise direct) 15 per cent. per annum or,
if higher, the appropriate rate (as defined in the Act) as may be agreed upon
between the board and such member.
FORFEITURE AND SURRENDER
22. NOTICE REQUIRING PAYMENT OF CALL
If a call or any instalment of a call remains unpaid in whole or in part
after it has become due and payable, the board may give to the person from
whom it is due not less than fourteen clear days' notice in writing requiring
payment of the amount unpaid together with any interest which may have
accrued and any costs, charges and expenses incurred by the Company by reason
of such non-payment. The notice shall name the place where payment is to be
made and shall state that
6
<PAGE>
if the notice is not complied with the shares in respect of which the call
was made will be liable to be forfeited.
23. FORFEITURE FOR NON-COMPLIANCE
If any such notice is not complied with, any share in respect of which it was
given may, at any time before the payment required by the notice has been
made, be forfeited by a resolution of the board and the forfeiture shall
include all dividends or other moneys payable in respect of the forfeited
shares and not paid before the forfeiture. When any share has been
forfeited, notice of the forfeiture shall be served upon the person who was
before the forfeiture the holder of the share, and an entry of such notice
having been given and of the forfeiture with the date thereof shall forthwith
be made in the register opposite the entry of the share; but no forfeiture
shall be invalidated by any omission or neglect to give such notice or to
make such entries.
24. SALE OF FORFEITED SHARES
Subject to the provisions of the Companies Acts, a forfeited share shall be
deemed to belong to the Company and may be sold, re-allotted or otherwise
disposed of on such terms and in such manner as the board determines, either to
the person who was before the forfeiture the holder or to any other person, and
at any time before sale, re-allotment or other disposal, the forfeiture may be
cancelled on such terms as the board thinks fit. Where for the purposes of its
disposal a forfeited share is to be transferred to any person the board may
authorise some person to execute an instrument of transfer of the share to that
person. The Company may receive the consideration given for the share on its
disposal and may register the transferee as holder of the share.
25. LIABILITY FOLLOWING FORFEITURE
A person any of whose shares have been forfeited shall cease to be a member in
respect of them and shall surrender to the Company for cancellation the
certificate for the shares forfeited but shall remain liable to the Company for
all moneys which at the date of forfeiture were presently payable by him to the
Company in respect of those shares with interest thereon at the rate at which
interest was payable on those moneys before the forfeiture or, if no interest
was so payable, at such rate, not exceeding 15 per cent. per annum or, if
higher, the appropriate rate (as defined in the Act) as the board may determine,
from the date of forfeiture until payment, but the board may waive payment
wholly or in part or enforce payment without any allowance for the value of the
shares at the time of forfeiture or for any consideration received on their
disposal.
26. SURRENDER
The board may accept the surrender of any share which it is in a position to
forfeit upon such terms and conditions as may be agreed and, subject to any such
terms and conditions, a surrendered share shall be treated as if it had been
forfeited.
27. EXTINCTION OF RIGHTS
The forfeiture of a share shall involve the extinction at the time of forfeiture
of all interest in and all claims and demands against the Company in respect of
the share and all other rights and liabilities incidental to the share as
between the person whose share is forfeited and the Company, except only such of
those rights and liabilities as are by these Articles expressly saved, or as are
by the Companies Acts given or imposed in the case of past members.
28. EVIDENCE OF FORFEITURE
A statutory declaration by a director or the secretary that a share has been
duly forfeited or surrendered on a specified date shall be conclusive evidence
of the facts stated in it as against all
7
<PAGE>
persons claiming to be entitled to the share and the declaration shall
(subject to the execution of an instrument of transfer if necessary)
constitute a good title to the share and the person to whom the share is
disposed of shall not be bound to see to the application of the purchase
money, if any, nor shall his title to the share be affected by any
irregularity in, or invalidity of, the proceedings in reference to the
forfeiture, surrender, sale, re-allotment or disposal of the share.
TRANSFER OF SHARES
29. FORM AND EXECUTION OF TRANSFER
The instrument of transfer of a share may be in any usual form or in any other
form which the board may approve and shall be signed by or on behalf of the
transferor and, unless the share is fully paid, by or on behalf of the
transferee. An instrument of transfer need not be under seal.
30. RESTRICTIONS ON TRANSFER
Subject to Article 32 The board may, in its absolute discretion and without
giving any reason, refuse to register the transfer of a share which is not fully
paid, or does not otherwise comply with the provisions of Articles 31 or 32.
31. REGISTRATION OF TRANSFER
The directors must register the transfer of a share which is fully paid and
which:
(a) is lodged at the office or such other place as the directors may
reasonably appoint, is duly stamped and is accompanied by the certificate
for the shares to which it relates or such other evidence as the board
may reasonably require to show the right of transferor to make the
transfer;
(b) is in respect of only one class of shares; and
(c) is in favour of not more than four transferees.
32. TRANSFERS TO SECURED INSTITUTIONS
Notwithstanding anything contained in these Articles, the directors shall not
decline to and shall promptly register any transfer of shares, and they may not
suspend registration thereof where such transfer:
(a) is to any bank or institution to which such shares have been charged by
way of security, whether as agent and trustee for a group of banks or
institutions or otherwise or to any nominee or transferee of such a bank
or institution (a "Secured Institution"); or
(b) is delivered to the Company for registration by a Secured Institution or
its nominee in order to perfect its security over the shares; or
(c) is executed by a Secured Institution or its nominee pursuant to the power
of sale or other power under such security,
and furthermore notwithstanding anything to the contrary contained in these
Articles no transferor of any shares in the Company or proposed transferor of
such shares to a Secured Institution or its nominee and no Secured Institution
or its nominee shall be required to offer the shares which
8
<PAGE>
are or are to be the subject of any transfer aforesaid to the shareholders
for the time being of the Company or any of them, and no such shareholder
shall have any right under the Articles of Association or otherwise howsoever
to require such shares to be transferred to them whether for consideration or
not.
33. NOTICE OF REFUSAL TO REGISTER
If the board refuses to register the transfer, it shall within 30 days after the
date on which the instrument of transfer was lodged with the Company send to the
transferee notice of the refusal.
34. NO FEE PAYABLE ON REGISTRATION
No fee shall be charged for the registration of any instrument of transfer or
other document relating to or affecting the title to any share.
35. RETENTION OF TRANSFERS
The Company shall be entitled to retain any instrument of transfer which is
registered, but any instrument of transfer which the board refuses to register
shall be returned to the person lodging it when notice of the refusal is given.
TRANSMISSION OF SHARES
36. TRANSMISSION
If a member dies the survivor or survivors where he was a joint holder, and his
personal representatives where he was a sole holder or the only survivor of
joint holders, shall be the only persons recognised by the Company as having any
title to his interest; but nothing herein contained shall release the estate of
a deceased member (whether a sole or joint holder) from any liability in respect
of any share held by him.
37. ELECTIONS FOLLOWING TRANSMISSION
A person becoming entitled to a share in consequence of the death or bankruptcy
of a member or otherwise by operation of law may, upon such evidence being
produced as the board may properly require as to his entitlement, elect either
to become the holder of the share or to have some person nominated by him
registered as the transferee. If he elects to become the holder he shall give
notice to the Company to that effect. If he elects to have another person
registered, he shall execute an instrument of transfer of the share to that
person. All the provisions of these Articles relating to the transfer of shares
shall apply to any such notice or instrument of transfer as if it were an
instrument of transfer executed by the member and the death or bankruptcy of the
member or other event giving rise to the transmission had not occurred.
The board may at any time give notice requiring any such person to elect either
to be registered himself or to transfer the share and if the notice is not
complied with within sixty days the board may thereafter withhold payment of all
dividends or other moneys payable in respect of the share until the requirements
of the notice have been complied with.
38. RIGHTS OF PERSONS ENTITLED BY TRANSMISSION
A person becoming entitled to a share in consequence of the death or bankruptcy
of a member or otherwise by operation of law shall, upon such evidence being
produced as the board may properly require as to his entitlement and subject to
the requirements of Article 37, have the same rights in relation to the share as
he would have had if he were the holder of the share, and may
9
<PAGE>
give a discharge for all dividends and other moneys payable in respect of the
share, but he shall not, before being registered as the holder of the share,
be entitled in respect of it to receive notice of or to attend or vote at any
meeting of the Company or to receive notice of or to attend or vote at any
separate meeting of the holders of any class of shares in the Company.
ALTERATION OF SHARE CAPITAL
39. ALTERATIONS PERMITTED BY ORDINARY RESOLUTION
The Company may by ordinary resolution:
(a) increase its share capital by such sum to be divided into shares of such
amount as the resolution prescribes;
(b) consolidate and divide all or any of its share capital into shares of
larger amount than its existing shares;
(c) subject to the provisions of the Companies Acts, sub-divide its shares,
or any of them, into shares of smaller amount than is fixed by the
Memorandum and the resolution may determine that, as between the shares
resulting from the sub-division, any of them may have any preference or
advantage as compared with the others; and
(d) cancel shares which, at the date of the passing of the resolution, have
not been taken or agreed to be taken by any person and diminish the
amount of its share capital by the amount of the shares so cancelled.
40. NEW SHARES SUBJECT TO THESE ARTICLES
All new shares shall be subject to the provisions of these Articles with
reference to payment of calls, lien, forfeiture, transfer, transmission and
otherwise, and, unless otherwise provided by these Articles, by the resolution
creating the new shares or by the conditions of issue, the new shares shall be
unclassified shares.
41. FRACTIONS ARISING
Whenever as a result of a consolidation or sub-division of shares any fractions
arise, the board may settle the matter in any manner it deems fit and in
particular may sell shares representing fractions to which any members would
otherwise become entitled to any person (including, subject to the provisions of
the Companies Acts, the Company) and distribute the net proceeds of sale in due
proportion among those members, and the board may authorise some person to
execute an instrument of transfer of the shares to, or in accordance with the
directions of, the purchaser. The transferee shall not be bound to see to the
application of the purchase moneys nor shall his title to the shares be affected
by any irregularity in or invalidity of the proceedings in relation to the sale.
42. POWER TO REDUCE CAPITAL
Subject to the provisions of the Companies Acts, the Company may by special
resolution reduce its share capital, any capital redemption reserve and any
share premium account in any way.
10
<PAGE>
PURCHASE OF OWN SHARES
43. POWER TO PURCHASE OWN SHARES
Subject to and in accordance with the provisions of the Companies Acts and
without prejudice to any relevant special rights attached to any class of
shares, the Company may purchase any of its own shares of any class (including
redeemable shares) and, if it is a private company, make a payment in respect of
the redemption or purchase of its own shares otherwise than out of distributable
profits of the company or the proceeds of a fresh issue of shares, at any price
(whether at par or above or below par), and so that any shares to be so
purchased may be selected in any manner whatsoever. Every contract for the
purchase of, or under which the Company may become entitled or obliged to
purchase, shares in the Company shall be authorised by such resolution of the
Company as may be required by the Companies Acts and by an extraordinary
resolution passed at a separate general meeting of the holders of each class of
shares (if any) which, at the date on which the contract is authorised by the
Company in general meeting, entitle them, either immediately or at any time
later on, to convert all or any of the shares of that class held by them into
equity share capital of the Company.
GENERAL MEETINGS
44. TYPES OF GENERAL MEETING
All general meetings of the Company other than annual general meetings shall be
called extraordinary general meetings.
45. ANNUAL GENERAL MEETINGS
The board shall convene and the Company shall hold general meetings as annual
general meetings in accordance with the requirements of the Act.
46. CLASS MEETINGS
All provisions of these Articles relating to general meetings of the Company
shall, mutatis mutandis, apply to every separate general meeting of the holders
of any class of shares in the capital of the Company, except that:
(a) the necessary quorum shall be two persons holding or representing by
proxy at least one-third in nominal value of the issued shares of the
class or, at any adjourned meeting of such holders, one holder present in
person or by proxy, whatever the amount of his holding, who shall be
deemed to constitute a meeting; and
(b) any holder of shares of the class present in person or by proxy may
demand a poll; and
(c) each holder of shares of the class shall, on a poll, have one vote in
respect of every share of the class held by him.
47. CONVENING GENERAL MEETINGS
Subject to the provisions of Article 48, the board may call general meetings
whenever and at such times and places as it shall determine and, on the
requisition of members pursuant to the provisions of the Companies Acts, shall
forthwith proceed to convene an extraordinary general meeting in accordance with
the requirements of the Companies Acts. If there are not within the
11
<PAGE>
United Kingdom sufficient directors to call a general meeting, any director
or any member of the Company may call a general meeting.
NOTICE OF GENERAL MEETINGS
48. PERIOD OF NOTICE
An annual general meeting and an extraordinary general meeting called for the
passing of a special resolution, elective resolution or a resolution appointing
a person as a director shall be called by at least twenty-one clear days'
notice. All other extraordinary general meetings shall be called by at least
fourteen clear days' notice but a general meeting may be called by shorter
notice if it is so agreed:
(a) in the case of an annual general meeting, by all the members entitled to
attend and vote thereat; and
(b) in the case of any other meeting by a majority in number of the members
having a right to attend and vote being a majority together holding not
less than ninety-five per cent. in nominal value of the shares giving
that right.
49. PROVISION OF NOTICE
Subject to the provisions of these Articles and to any restrictions imposed on
any shares, the notice shall be given to all the members, to all persons
entitled to a share in consequence of the death or bankruptcy of a member, to
each of the directors, to the auditors for the time being of the Company and if
required under the Companies Acts, the former auditors of the Company.
50. CONTENTS OF NOTICE
The notice shall specify the time and place of the meeting and, in the case of
special business, the general nature of such business. All business shall be
deemed special that is transacted at an extraordinary general meeting and also
all business that is transacted at an annual general meeting with the exception
of:-
(a) the declaration of dividends;
(b) the consideration and adoption of the accounts and balance sheet and the
reports of the directors and auditors and other documents required to be
annexed to the accounts;
(c) the appointment and re-appointment of directors;
(d) the appointment of auditors where special notice of the resolution for
such appointment is not required by the Companies Acts; and
(e) the fixing of, or the determining of the method of fixing, the
remuneration of the directors and/or auditors.
The notice shall, in the case of an annual general meeting, specify the meeting
as such, and, in the case of a meeting to pass a special, extraordinary or
elective resolution, specify the intention to propose the resolution as a
special, extraordinary, or elective resolution, as the case may be.
12
<PAGE>
The notice shall state with reasonable prominence that a member entitled to
attend and vote at the meeting being called is entitled to appoint one or more
proxies to attend and vote instead of him, and that a proxy need not also be a
member.
51. ACCIDENTAL OMISSION TO GIVE NOTICE
The accidental omission to give notice of a meeting to any person entitled to
receive the same, or the non-receipt of a notice of meeting by any such person,
shall not invalidate the proceedings at that meeting.
PROCEEDINGS AT GENERAL MEETINGS
52. QUORUM
No business shall be transacted at any general meeting unless a quorum is
present, but the absence of a quorum shall not preclude the choice or
appointment of a chairman, which shall not be treated as part of the business of
the meeting. Save as otherwise provided by these Articles, one person, if and
for so long as the Company has only one member, and one person being a member
and being a proxy for a member or two persons, if and for so long as the Company
has two or more members, entitled to vote upon the business to be transacted,
each being a member or a proxy for a member or a duly authorised representative
of a corporation, shall be a quorum.
53. IF QUORUM NOT PRESENT
If such a quorum is not present within five minutes (or such longer time not
exceeding thirty minutes as the chairman of the meeting may decide to wait) from
the time appointed for the meeting, or if during a meeting such a quorum ceases
to be present, the meeting, if convened on the requisition of members, shall be
dissolved, and in any other case shall stand adjourned to such time and place as
the chairman of the meeting may determine. If at the adjourned meeting a quorum
is not present within fifteen minutes after the time appointed for holding the
meeting, the meeting shall be dissolved.
54. CHAIRMAN
The chairman, if any, of the board or, in his absence, any deputy chairman of
the Company or, in his absence, some other director nominated by the board,
shall preside as chairman of the meeting, but if neither the chairman, deputy
chairman nor such other director (if any) is present within five minutes after
the time appointed for holding the meeting or is not willing to act as chairman,
the directors present shall elect one of their number to be chairman. If there
is only one director present and willing to act, he shall be chairman. If no
director is willing to act as chairman, or if no director is present within five
minutes after the time appointed for holding the meeting, the members present
and entitled to vote shall choose one of their number to be chairman.
55. DIRECTORS ENTITLED TO SPEAK
A director shall, notwithstanding that he is not a member, be entitled to attend
and speak at any general meeting and at any separate meeting of the holders of
any class of shares in the Company.
56. ADJOURNMENTS
The chairman may, with the consent of a meeting at which a quorum is present
(and shall if so directed by the meeting), adjourn the meeting from time to time
and from place to place, but no business shall be transacted at an adjourned
meeting other than business which might properly have been transacted at the
meeting had the adjournment not taken place. When a meeting is
13
<PAGE>
adjourned for thirty days or more or for an indefinite period, at least seven
Clear days' notice shall be given specifying the time and place of the
adjourned meeting and the general nature of the business to be transacted.
Otherwise it shall not be necessary to give any notice of an adjournment or
of the business to be transacted at an adjourned meeting.
57. AMENDMENTS TO RESOLUTIONS
If an amendment shall be proposed to any resolution under consideration but
shall in good faith be ruled out of order by the chairman of the meeting, the
proceedings on the substantive resolution shall not be invalidated by any error
in such ruling. With the consent of the chairman of the meeting, an amendment
may be withdrawn by its proposer before it is voted upon. In the case of a
resolution duly proposed as a special or extraordinary resolution, no amendment
thereto (other than a mere clerical amendment to correct a patent error) may in
any event be considered or voted upon.
58. METHODS OF VOTING
A resolution put to the vote of a general meeting shall be decided on a show of
hands unless, before or on the declaration of the result of a vote on the show
of hands or on the withdrawal of any other demand for a poll, a poll is duly
demanded. Subject to the provisions of the Companies Acts, a poll may be
demanded by:
(a) the chairman of the meeting; or
(b) at least two members present in person or by proxy having the right to
vote at the meeting; or
(c) any member or members present in person or by proxy representing not less
than one-tenth of the total voting rights of all the members having the
right to vote at the meeting; or
(d) any member or members present in person or by proxy holding shares
conferring a right to vote at the meeting being shares on which an
aggregate sum has been paid up equal to not less than one-tenth of the
total sum paid up on all the shares conferring that right,
and a demand by a person as proxy for a member shall be the same as a demand by
the member.
59. DECLARATION OF RESULT
Unless a poll is duly demanded a declaration by the chairman that a resolution
has been carried or carried unanimously, or by a particular majority, or lost,
or not carried by a particular majority and an entry to that effect in the
minutes of the meeting shall be conclusive evidence of the fact without proof of
the number or proportion of the votes recorded in favour of or against the
resolution.
60. WITHDRAWAL OF DEMAND FOR POLL
The demand for a poll may, before the poll is taken, be withdrawn but only with
the consent of the chairman and a demand so withdrawn shall not be taken to have
invalidated the result of a show of hands declared before the demand was made.
If the demand for a poll is withdrawn, the chairman or any other member entitled
may demand a poll.
14
<PAGE>
61. CONDUCT OF POLL
A poll shall be taken as the chairman directs and he may appoint scrutineers
(who need not be members) and fix a time and place for declaring the result of
the poll. The result of the poll shall be deemed to be the resolution of the
meeting at which the poll was demanded.
62. CHAIRMAN'S CASTING VOTE
In the case of an equality of votes, whether on a show of hands or on a poll,
the chairman shall not be entitled to a casting vote in addition to any other
vote he may have.
63. WHEN POLL TO BE TAKEN
A poll demanded on the election of a chairman or on a question of adjournment
shall be taken forthwith. A poll demanded on any other question shall be taken
either forthwith or at such time and place as the chairman directs not being
more than thirty days after the poll is demanded. The demand for a poll shall
not prevent the continuance of a meeting for the transaction of any business
other than the question on which the poll was demanded. If a poll is demanded
before the declaration of the result of a show of hands and the demand is duly
withdrawn, the meeting shall continue as if the demand had not been made.
64. NOTICE OF POLL
No notice need be given of a poll not taken forthwith if the time and place at
which it is to be taken are announced at the meeting at which it is demanded.
In any other case at least seven clear days' notice shall be given specifying
the time and place at which the poll is to be taken.
65. EFFECTIVENESS OF SPECIAL AND EXTRAORDINARY RESOLUTIONS
Where for any purpose an ordinary resolution of the Company is required, a
special or extraordinary resolution shall also be effective and where for any
purpose an extraordinary resolution is required a special resolution shall also
be effective.
66. RESOLUTIONS IN WRITING
Subject to the provisions of the Companies Acts, a resolution in writing
executed by or on behalf of each member who would have been entitled to vote
upon it if it had been proposed at a general meeting at which he was present
shall be as effectual as if it had been passed at a general meeting properly
convened and held and may consist of several instruments in the like form each
executed by or on behalf of one or more of the members.
VOTES OF MEMBERS
67. RIGHT TO VOTE
Subject to any rights or restrictions attached to any shares, on a show of hands
every member who is present in person or by proxy shall have one vote and on a
poll every member present in person or by proxy shall have one vote for every
share of which he is the holder.
68. VOTES OF JOINT HOLDERS
In the case of joint holders of a share the vote of the senior who tenders a
vote, whether in person or by proxy, shall be accepted to the exclusion of the
votes of the other joint holders and for this purpose seniority shall be
determined by the order in which the names of the holders stand in the register.
15
<PAGE>
69. MEMBER UNDER INCAPACITY
A member in respect of whom an order has been made by any court or official
having jurisdiction (whether in the United Kingdom or elsewhere) in matters
concerning mental disorder may vote, whether on a show of hands or on a poll, by
his receiver, curator bonis or other person authorised in that behalf appointed
by that court or official, and any such receiver, curator bonis or other person
may, on a poll, vote by proxy. Evidence to the satisfaction of the board of the
authority of the person claiming to exercise the right to vote shall be
deposited at the office, or at such other place as is specified in accordance
with these Articles for the deposit of instruments of proxy, not less than 48
hours before the time appointed for holding the meeting or adjourned meeting at
which the right to vote is to be exercised and in default the right to vote
shall not be exercisable.
70. CALLS IN ARREARS
No member shall be entitled to vote at any general meeting or at any separate
meeting of the holders of any class of shares in the Company, either in person
or by proxy, in respect of any share held by him unless all moneys presently
payable by him in respect of that share have been paid.
71. OBJECTION TO VOTING
No objection shall be raised to the qualification of any voter except at the
meeting or adjourned meeting or poll at which the vote objected to is tendered,
and every vote not disallowed at such meeting shall be valid. Any objection
made in due time shall be referred to the chairman whose decision shall be final
and conclusive.
72. SUPPLEMENTARY PROVISIONS ON VOTING
On a poll votes may be given either personally or by proxy. A member entitled to
more than one vote need not, if he votes, use all his votes or cast all the
votes he uses in the same way.
PROXIES AND CORPORATE REPRESENTATIVES
73. APPOINTMENT OF PROXY
An instrument appointing a proxy shall be in writing under the hand of the
appointor or his attorney or, if the appointor is a corporation, either under
its common seal or the hand of a duly authorised officer, attorney or other
person authorised to sign it.
74. FORM OF PROXY - STANDARD
The instrument appointing a proxy shall be executed by or on behalf of the
appointer and shall be in the following form (or in a form as near thereto as
circumstances allow or in any other form which is usual or which the directors
may approve):
"______________________ Limited
I/We, _____ _____ , of _____ _____ _____ being a member/members of the
above-named company, hereby appoint _____ _____ of _____ _____ _____, or
failing him, _____ _____ of _____ _____ _____, as my/our proxy to vote in
my/our names[s] and on my/our behalf at the annual/extraordinary general
meeting of the company to be held on _____ _____ 19__, and at any
adjournment thereof.
16
<PAGE>
Signed on _____ _____ 19__."
75. FORM OF PROXY - EACH WAY
Where it is desired to afford members an opportunity of instructing the proxy
how he shall act the instrument appointing a proxy shall be in the following
form (or in a form as near thereto as circumstances allow or in any other form
which is usual or which the directors may approve):
"_____________________ Limited
I/We, _____ _____ , of _____ _____ _____ being a member/members of the
above-named company, hereby appoint _____ _____ of _____ _____ _____, or
failing him, _____ _____ of _____ _____ _____, as my/our proxy to vote in
my/our names[s] and on my/our behalf at the annual/extraordinary general
meeting of the company to be held on _____ _____ 19__, and at any
adjournment thereof.
Signed on _____ _____ 19__."
This form is to be used in respect of the resolutions mentioned below as
follows:
Resolution No.1 *for*against
Resolution No.2 *for*against.
*Strike out whichever is not desired.
Unless otherwise instructed, the proxy may vote as he thinks fit or
abstain from voting.
Signed on _____ _____ 19__."
76. VOTING BY APPOINTOR
Delivery of an instrument appointing a proxy shall not preclude a member from
attending and voting in person at the meeting or poll concerned. A member may
appoint more than one proxy to attend on the same occasion.
77. DELIVERY OF FORM OF PROXY
The instrument appointing a proxy and any power of attorney or other written
authority under which it is executed or an office or notarially certified copy
or a copy certified in accordance with the Powers of Attorney Act 1971 of such
power or written authority shall be deposited at the office or at such other
place within the United Kingdom as is specified in the notice convening the
meeting or in any instrument of proxy sent out by the Company in relation to the
meeting not less than 48 hours before the time appointed for holding the meeting
or adjourned meeting at which the person named in the instrument proposes to
vote and an instrument of proxy which is not deposited or delivered in a manner
so permitted shall be invalid. No instrument of proxy shall be valid after the
expiration of twelve months from the date stated in it as the date of its
execution. When two or more valid but differing instruments of proxy are
delivered in respect of the same share for use at the same meeting, the one
which was delivered last (regardless of its date or of the date of its
execution) shall be treated as replacing and revoking the others as regards that
share; if the Company is unable to determine which was delivered last, none of
them shall be treated as valid in respect of that share.
17
<PAGE>
78. VALIDITY OF FORM OF PROXY
The instrument of proxy shall, unless the contrary is stated in it, be deemed
to confer authority to vote as the proxy thinks fit on any amendment of a
resolution put to the meeting for which the proxy is given and on any resolution
put to the meeting, whether or not notice of such resolution was given in the
notice of meeting. The instrument of proxy shall, unless the contrary is stated
therein, be valid as well for any adjournment of the meeting as for the meeting
to which it relates.
79. CORPORATE REPRESENTATIVES
Any corporation or corporation sole which is a member of the Company may (in the
case of a corporation, by resolution of its directors or other governing body or
by authority to be given under seal or under the hand of an officer duly
authorised by it) authorise such person as it thinks fit to act as its
representative at any meeting of the Company or at any separate meeting of the
holders of any class of shares. A person so authorised shall be entitled to
exercise the same power on behalf of the grantor of the authority as the grantor
could exercise if it were an individual member of the Company and the grantor
shall for the purposes of these Articles be deemed to be present in person at
any such meeting if a person so authorised is present at it.
80. REVOCATION OF AUTHORITY
A vote given or poll demanded by proxy or by the duly authorised representative
of a corporation shall be valid notwithstanding the previous determination of
the authority of the person voting or demanding a poll unless notice of the
determination was received by the Company at the office or at such other place
at which the instrument of proxy was duly deposited before the commencement of
the meeting or adjourned meeting at which the vote is given or the poll demanded
or (in the case of a poll taken otherwise than on the same day as the meeting or
adjourned meeting) the time appointed for taking the poll.
NUMBER OF DIRECTORS
81. LIMITS ON NUMBER OF DIRECTORS
Unless otherwise determined by ordinary resolution, the number of directors
(other than alternate directors) shall be not less than one but shall not be
subject to any maximum in number. Wheresoever the minimum number of directors
shall be one, a sole director shall have authority to exercise all the powers
and discretions by the Act and/or by these expressed to be vested in the
directors generally.
APPOINTMENT AND RETIREMENT OF DIRECTORS
82. NO RETIREMENT BY ROTATION
The directors shall not be required to retire by rotation.
83. ELIGIBILITY FOR ELECTION
No person shall be appointed a director at any general meeting unless:
(a) he is recommended by the board; or
18
<PAGE>
(b) not less than six nor more than thirty-five Clear days before the date
appointed for the meeting, notice executed by a member qualified to vote
at the meeting (not being the person to be proposed) has been given to
the Company of the intention to propose that person for appointment
stating the particulars which would, if he were so appointed or
reappointed, be required to be included in the Company's register of
directors, together with notice executed by that person of his
willingness to be appointed.
84. NOTICE
Not less than seven nor more than twenty-eight clear days before the date
appointed for holding a general meeting notice shall be given to all who are
entitled to receive notice of the meeting of any person who is recommended by
the directors for appointment as a director at the meeting or in respect of whom
notice has been duly given to the company of the intention to propose him at the
meeting for appointment or reappointment as a director. The notice shall give
the particulars of that person which would, if he were so appointed, be required
to be included in the company's register of directors.
85. ADDITIONAL POWERS OF THE COMPANY
Subject as aforesaid, the Company may appoint a person who is willing to act to
be a director either to fill a vacancy or as an additional director:
(a) by ordinary resolution of the members in general meeting; or
(b) by notice in writing left at the registered office.
86. APPOINTMENT BY BOARD
The board may appoint a person who is willing to act to be a director, either to
fill a vacancy or as an additional director, provided that the appointment does
not cause the number of directors to exceed the number, if any, fixed by or in
accordance with these Articles as the maximum number of directors. A director
so appointed shall hold office only until the next following annual general
meeting. If not reappointed at such annual general meeting, he shall vacate
office at the conclusion thereof.
87. AGE LIMIT
No person shall be disqualified from being appointed or reappointed a director,
and no director shall be required to vacate that office, by reason only of the
fact that he has attained the age of seventy years or any other age nor shall it
be necessary by reason of his age to give special notice under the Companies
Acts of any resolution. Where the board convenes any general meeting of the
Company at which (to the knowledge of the board) a director will be proposed for
appointment or reappointment who at the date for which the meeting is convened
will have attained the age of seventy years or more, the board shall give notice
of his age in years in the notice convening the meeting or in any document
accompanying the notice, but the accidental omission to do so shall not
invalidate any proceedings, or any appointment or reappointment of that
director, at that meeting.
88. NO SHARE QUALIFICATION
A director shall not be required to hold any shares of the Company by way of
qualification.
19
<PAGE>
ALTERNATE DIRECTORS
89. POWER TO APPOINT ALTERNATES
Any director (other than an alternate director) may appoint any other director,
or any other person approved by resolution of the board and willing to act, to
be an alternate director and may remove from office an alternate director so
appointed by him.
90. ALTERNATES ENTITLED TO RECEIVE NOTICE
An alternate director shall be entitled to receive notice of all meetings of the
board and of all meetings of committees of the board of which his appointor is a
member, to attend and vote at any such meeting at which his appointor is not
personally present, and generally to perform all the functions of his appointor
(except as regards power to appoint an alternate) as a director in his absence.
It shall not be necessary to give notice of such a meeting to an alternate
director who is absent from the United Kingdom.
91. ALTERNATES REPRESENTING MORE THAN ONE DIRECTOR
A director or any other person may act as alternate director to represent more
than one director, and an alternate director shall be entitled at meetings of
the board or any committee of the board to one vote for every director whom he
represents (and who is not present) in addition to his own vote (if any) as a
director, but he shall count as only one for the purpose of determining whether
a quorum is present.
92. EXPENSES AND REMUNERATION OF ALTERNATES
An alternate director may be repaid by the Company such expenses as might
properly have been repaid to him if he had been a director but shall not in
respect of his services as an alternate director be entitled to receive any
remuneration from the Company [except such part (if any) of the remuneration
otherwise payable to his appointer as such appointer may by notice in writing to
the Company from time to time direct]. An alternate director shall be entitled
to be indemnified by the Company to the same extent as if he were a director.
93. TERMINATION OF APPOINTMENT
An alternate director shall cease to be an alternate director:
(a) if his appointor ceases to be a director; but, if a director retires by
rotation or otherwise but is reappointed or deemed to have been
reappointed at the meeting at which he retires, any appointment of an
alternate director made by him which was in force immediately prior to
his retirement shall continue after his reappointment;
(b) on the happening of any event which, if he were a director, would cause
him to vacate his office as director; or
(c) if he resigns his office by notice to the Company.
94. METHOD OF APPOINTMENT AND REVOCATION
Any appointment or removal of an alternate director shall be by notice to the
Company signed by the director making or revoking the appointment and shall take
effect in accordance with the terms of the notice (subject to any approval
required by Article 89) upon receipt of such notice at the office.
20
<PAGE>
95. ALTERNATE NOT AN AGENT OF APPOINTOR
Save as otherwise expressly provided in these Articles, an alternate director
shall be deemed for all purposes to be a director and, accordingly, except where
the context otherwise requires, references to a director shall be deemed to
include a reference to an alternate director. An alternate director shall alone
be responsible for his own acts and defaults and he shall not be deemed to be
the agent of the director appointing him.
POWERS OF THE BOARD
96. BUSINESS TO BE MANAGED BY BOARD
Subject to the provisions of the Companies Acts, the Memorandum and these
Articles and to any directions given by special resolution, the business of the
Company shall be managed by the board which may pay all expenses incurred in
forming and registering the Company and may exercise all the powers of the
Company. No alteration of the Memorandum or Articles and no such direction
shall invalidate any prior act of the board which would have been valid if that
alteration had not been made or that direction had not been given. The powers
given by this Article shall not be limited by any special power given to the
board by these Articles and a meeting of the board at which a quorum is present
may exercise all powers exercisable by the board.
DELEGATION OF POWERS OF THE BOARD
97. COMMITTEES OF THE BOARD
The board may delegate any of its powers to any committee consisting of one or
more directors. The board may also delegate to any director holding any
executive office such of its powers as the board considers desirable to be
exercised by him. Any such delegation shall, in the absence of express
provision to the contrary in the terms of delegation, be deemed to include
authority to sub-delegate to one or more directors (whether or not acting as a
committee) or to any employee or agent of the Company all or any of the powers
delegated and may be made subject to such conditions as the board may specify,
and may be revoked or altered. The board may co-opt on to any such committee
persons other than directors, who may enjoy voting rights in the committee. The
co-opted members shall be less than one-half of the total membership of the
committee and a resolution of any committee shall be effective only if a
majority of the members present are directors. Subject to any conditions
imposed by the board, the proceedings of a committee with two or more members
shall be governed by these Articles regulating the proceedings of directors so
far as they are capable of applying.
98. AGENTS
The board may, by power of attorney or otherwise, appoint any person or persons
to be the agent or agents of the Company for such purposes, with such powers,
authorities and discretions (not exceeding those vested in the board) and on
such conditions as the board determines, including authority for the agent or
agents to delegate all or any of his or their powers, authorities and
discretions, and may revoke or vary such delegation.
99. OFFICES INCLUDING THE TITLE "DIRECTOR"
The board may appoint any person to any office or employment having a
designation or title including the word "director" or attach to any existing
office or employment with the Company such a designation or title and may
terminate any such appointment or the use of any such
21
<PAGE>
designation or title. The inclusion of the word "director" in the
designation or title of any such office or employment shall not imply that
the holder is a director of the Company, nor shall the holder thereby be
empowered in any respect to act as, or be deemed to be, a director of the
Company for any of the purposes of these Articles.
DISQUALIFICATION AND REMOVAL OF DIRECTORS
100. DISQUALIFICATION
The office of a director shall be vacated if:
(a) he ceases to be a director by virtue of any provisions of the Companies
Acts or these Articles or he becomes prohibited by law from being a
director; or
(b) he becomes bankrupt or makes any arrangement or composition with his
creditors generally or shall apply to the court for an interim order
under section 253 of the Insolvency Act 1986 in connection with a
voluntary arrangement under that Act; or
(c) he is, or may be, suffering from mental disorder and either:
(i) he is admitted to hospital in pursuance of an application for
admission for treatment under the Mental Health Act 1983 or, in
Scotland, an application for admission under the Mental Health
(Scotland) Act 1960; or
(ii) an order is made by a court having jurisdiction (whether in the
United Kingdom or elsewhere) in matters concerning mental disorder
for his detention or for the appointment of a receiver, curator
bonis or other person to exercise powers with respect to his
property or affairs; or
(d) (not being a director holding office as such for a fixed term) he resigns
his office by notice to the Company; or
(e) he shall for more than six consecutive months have been absent without
permission of the board from meetings of the board held during that
period and his alternate director (if any) shall not during such period
have attended in his stead and the board resolves that his office be
vacated.
101. POWER OF COMPANY TO REMOVE DIRECTOR
Subject to the provisions of the Companies Acts a director may be removed from
office forthwith by:-
(a) (and notwithstanding any provision of these Articles or of any
agreement between the Company and such director but without
prejudice to any claim he may have for damages for breach of any
such agreement) ordinary resolution of the members of the Company
passed at a general meeting of which special notice has been
given;
(b) written resolution of the members of the Company; or
22
<PAGE>
(c) notice in writing left at the registered office of the Company and
signed by the holder(s) of not less than 75% of the voting rights
attaching to the shares for the time being issued.
REMUNERATION OF NON-EXECUTIVE DIRECTORS
102. ORDINARY REMUNERATION
The ordinary remuneration of the directors who do not hold executive office for
their services (excluding amounts payable under any other provision of these
Articles) shall not exceed in aggregate L10,000 per annum or such higher amount
as the Company may from time to time by ordinary resolution determine. Subject
thereto, each such director shall be paid a fee (which shall be deemed to accrue
from day to day) at such rate as may from time to time be determined by the
board.
103. ADDITIONAL REMUNERATION FOR SPECIAL SERVICES
Any director who does not hold executive office and who serves on any committee
of the directors, by the request of the board goes or resides abroad for any
purpose of the Company or otherwise performs special services which in the
opinion of the directors are outside the scope of the ordinary duties of a
director, may (without prejudice to the provisions of Article 102) be paid such
extra remuneration by way of salary, commission or otherwise as the board may
determine.
DIRECTORS' EXPENSES
104. DIRECTORS MAY BE PAID EXPENSES
The directors may be paid all travelling, hotel, and other expenses properly
incurred by them in connection with their attendance at meetings of the board or
committees of the board or general meetings or separate meetings of the holders
of any class of shares or of debentures of the Company or otherwise in
connection with the discharge of their duties.
EXECUTIVE DIRECTORS
105. APPOINTMENT TO EXECUTIVE OFFICE
Subject to the provisions of the Companies Acts, the board may appoint one or
more of its body to be the holder of any executive office (except that of
auditor) under the Company and may enter into an agreement or arrangement with
any director for his employment by the Company or for the provision by him of
any services outside the scope of the ordinary duties of a director. Any such
appointment, agreement or arrangement may be made upon such terms, including
terms as to remuneration, as the board determines, and any remuneration which is
so determined may be in addition to or in lieu of any ordinary remuneration as a
director. The board may revoke or vary any such appointment but without
prejudice to any rights or claims which the person whose appointment is revoked
or varied may have against the Company by reason thereof.
106. TERMINATION OF APPOINTMENT TO EXECUTIVE OFFICE
Any appointment of a director to an executive office shall terminate if he
ceases to be a director but without prejudice to any rights or claims which he
may have against the Company by reason
23
<PAGE>
of such cesser. A director appointed to an executive office shall not ipso
facto cease to be a director if his appointment to such executive office
terminates.
107. EMOLUMENTS TO BE DETERMINED BY THE BOARD
The emoluments of any director holding executive office for his services as such
shall be determined by the board, and may be of any description, and (without
limiting the generality of the foregoing) may include admission to or
continuance of membership of any scheme (including any share acquisition scheme)
or fund instituted or established or financed or contributed to by the Company
for the provision of pensions, life assurance or other benefits for employees or
their dependants, or the payment of a pension or other benefits to him or his
dependants on or after retirement or death, apart from membership of any such
scheme or fund.
DIRECTORS' INTERESTS
108. DIRECTORS MAY CONTRACT WITH THE COMPANY
Subject to the provisions of the Companies Acts, and provided that he has
disclosed to the board the nature and extent of any material interest of his, a
director notwithstanding his office:
(a) may be a party to, or otherwise interested in, any transaction or
arrangement with the Company or in which the Company is otherwise
interested;
(b) may act by himself or his firm in a professional capacity for the Company
(otherwise than as auditor) and he or his firm shall be entitled to
remuneration for professional services as if he were not a director;
(c) may be a director or other officer of, or employed by, or a party to any
transaction or arrangement with, or otherwise interested in, any body
corporate promoted by the Company or in which the Company is otherwise
interested; and
(d) shall not, by reason of his office, be accountable to the Company for any
benefit which he derives from any such office or employment or from any
such transaction or arrangement or from any interest in any such body
corporate and no such transaction or arrangement shall be liable to be
avoided on the ground of any such interest or benefit.
109. NOTIFICATION OF INTERESTS
For the purposes of Article 108:
(a) a general notice given to the board that a director is to be regarded as
having an interest of the nature and extent specified in the notice in
any transaction or arrangement in which a specified person or class of
persons is interested shall be deemed to be a disclosure that the
director has an interest in any such transaction of the nature and extent
so specified; and
(b) an interest of which a director has no knowledge and of which it is
unreasonable to expect him to have knowledge shall not be treated as an
interest of his.
24
<PAGE>
110. EXERCISE BY COMPANY OF VOTING RIGHTS
The board may exercise the voting power conferred by the shares in any body
corporate held or owned by the Company in such manner in all respects as it
thinks fit (including the exercise thereof in favour of any resolution
appointing its members or any of them directors of such body corporate, or
voting or providing for the payment of remuneration to the directors of such
body corporate).
GRATUITIES, PENSIONS AND INSURANCE
111. GRATUITIES AND PENSIONS
The board may (by establishment of or maintenance of schemes or otherwise)
provide benefits, whether by the payment of gratuities or pensions or by
insurance or otherwise, for any past or present director or employee of the
Company or any of its subsidiaries or any body corporate associated with, or any
business acquired by, any of them, and for any member of his family (including a
spouse and a former spouse) or any person who is or was dependent on him, and
may (as well before as after he ceases to hold such office or employment)
contribute to any fund and pay premiums for the purchase or provision of any
such benefit.
112. INSURANCE
Without prejudice to the provisions of Article 154, the board shall have the
power to purchase and maintain insurance for or for the benefit of any persons
who are or were at any time directors, officers, or employees or auditors of the
Company, or of any other company which is its holding company or in which the
Company or such holding company has any interest whether direct or indirect or
which is in any way allied to or associated with the Company, or of any
subsidiary undertaking of the Company or any such other company, or who are or
were at any time trustees of any pension fund or employee share scheme in which
employees of the Company or any such other company or subsidiary undertaking are
interested, including (without prejudice to the generality of the foregoing)
insurance against any liability incurred by such persons in respect of any act
or omission in the actual or purported execution or discharge of their duties or
in the exercise or purported exercise of their powers or otherwise in relation
to their duties, powers or offices in relation to the Company or any such other
company, subsidiary undertaking, pension fund or employee share scheme.
113. DIRECTORS NOT LIABLE TO ACCOUNT
No director or former director shall be accountable to the Company or the
members for any benefit provided pursuant to this Article and the receipt of any
such benefit shall not disqualify any person from being or becoming a director
of the Company.
PROCEEDINGS OF DIRECTORS
114. CONVENING MEETINGS
Subject to the provisions of these Articles, the board may regulate its
proceedings as it thinks fit. A director may, and the secretary at the request
of a director shall, call a meeting of the board. Notice of a board meeting
shall be deemed to be properly given to a director if it is given to him
personally or by word of mouth or sent in writing to him at his last known
address or any other
25
<PAGE>
address given by him to the Company for this purpose. Questions arising at a
meeting shall be decided by a majority of votes. In the case of an equality
of votes, the chairman shall have a second or casting vote. Any director may
waive notice of a meeting and any such waiver may be retrospective.
115. QUORUM
The quorum for the transaction of the business of the board may be fixed by the
board and unless so fixed at any other number shall be two. A person who holds
office only as an alternate director shall, if his appointor is not present, be
counted in the quorum. Any director who ceases to be a director at a board
meeting may continue to be present and to act as a director and be counted in
the quorum until the termination of the board meeting if no director objects.
116. POWERS OF DIRECTORS IF NUMBER FALLS BELOW MINIMUM
The continuing directors or a sole continuing director may act notwithstanding
any vacancies in their number, but, if the number of directors is less than the
number fixed as the minimum, the continuing directors or director may act only
for the purpose of filling vacancies or of calling a general meeting.
117. CHAIRMAN AND DEPUTY CHAIRMAN
The board may appoint one of their number to be the chairman, and one of their
number to be the deputy chairman, of the board and may at any time remove either
of them from such office. Unless he is unwilling to do so, the director
appointed as chairman, or in his stead the director appointed as deputy
chairman, shall preside at every meeting of the board at which he is present.
If there is no director holding either of those offices, or if neither the
chairman nor the deputy chairman is willing to preside or neither of them is
present within five minutes after the time appointed for the meeting, the
directors present may appoint one of their number to be chairman of the meeting.
118. VALIDITY OF ACTS OF THE BOARD
All acts done by a meeting of the board, or of a committee of the board, or by a
person acting as a director or alternate director, shall, notwithstanding that
it be afterwards discovered that there was a defect in the appointment of any
director or any member of the committee or alternate director or that any of
them were disqualified from holding office, or had vacated office, or were not
entitled to vote, be as valid as if every such person had been duly appointed
and was qualified and had continued to be a director or, as the case may be, an
alternate director and had been entitled to vote.
119. RESOLUTIONS IN WRITING
A resolution in writing signed by all the directors entitled to receive notice
of a meeting of the board or of a committee of the board (not being less than
the number of directors required to form a quorum of the board) shall be as
valid and effectual as if it had been passed at a meeting of the board or (as
the case may be) a committee of the board duly convened and held and for this
purpose:
(a) a resolution may consist of several documents to the same effect each
signed by one or more directors;
(b) a resolution signed by an alternate director on behalf of his appointor
need not also be signed by his appointor; and
26
<PAGE>
(c) a resolution signed by a director who has appointed an alternate director
need not also be signed by the alternate director in that capacity.
120. MEETINGS BY TELEPHONE, ETC.
Without prejudice to the first sentence of Article 115, a meeting of the board
or of a committee of the board may consist of a conference between directors who
are not all in one place, but of whom each is able (directly by telephonic
communication, video link or via the internet) to speak to each of the others,
and to be heard by each of the others simultaneously. A director taking part in
such a conference shall be deemed to be present in person at the meeting and
shall be entitled to vote or be counted in a quorum accordingly. Such a meeting
shall be deemed to take place where the largest group of those participating in
the conference is assembled, or, if there is no such group, where the chairman
of the meeting then is. The word MEETING in these Articles shall be construed
accordingly.
121. DIRECTORS' POWER TO VOTE ON CONTRACTS IN WHICH THEY ARE INTERESTED
Save as otherwise provided by these Articles, a director may vote at a meeting
of the board or a committee of the board on any resolution of the board
concerning a matter in which he has, directly or indirectly, any kind of
interest whatsoever, and if he shall vote on any such resolution as aforesaid
his vote shall be counted; and in relation to any such vote as aforesaid he
shall (whether or not he shall vote on the same) be taken into account in the
quorum present at the meeting.
122. EXCLUSION OF DIRECTOR FROM QUORUM
A director shall not be counted in the quorum present at a meeting in relation
to a resolution on which he is not entitled to vote.
123. AMENDMENT OF RESTRICTIONS ON VOTING
The Company may by ordinary resolution suspend or relax to any extent, either
generally or in respect of any particular matter, any provision of these
Articles prohibiting a director from voting at a meeting of the board or of a
committee of the board, or ratify any transaction not duly authorised by reason
of a contravention of any such provision.
124. DIVISION OF PROPOSALS
Where proposals are under consideration concerning the appointment (including
fixing or varying the terms of appointment) of two or more directors to offices
or employments with the Company or any body corporate in which the Company is
interested, the proposals may be divided and considered in relation to each
director separately and in such cases each of the directors concerned shall be
entitled to vote and be counted in the quorum in respect of each resolution
except that concerning his own appointment.
125. DECISION OF CHAIRMAN FINAL AND CONCLUSIVE
If a question arises at a meeting of the board or of a committee of the board as
to the entitlement of a director to vote or be counted in a quorum, the question
may, before the conclusion of the meeting, be referred to the chairman of the
meeting and his ruling in relation to any director other than himself shall be
final and conclusive except in a case where the nature or extent of the
interests of the director concerned have not been fairly disclosed. If any such
question arises in respect of the chairman of the meeting, it shall be decided
by resolution of the board (on which the chairman shall not vote) and such
resolution will be final and conclusive except in a case where the nature and
extent of the interests of the chairman have not been fairly disclosed.
27
<PAGE>
SECRETARY
126. APPOINTMENT AND REMOVAL OF SECRETARY
Subject to the provisions of the Companies Acts, the secretary shall be
appointed by the board for such term, at such remuneration and upon such
conditions as it may think fit; and any secretary so appointed may be removed by
the board, but without prejudice to any claim for damages for breach of any
contract of service between him and the Company.
MINUTES
127. MINUTES REQUIRED TO BE KEPT
The board shall cause minutes to be made in books kept for the purpose:
(a) of all appointments of officers made by the board; and
(b) of all proceedings at meetings of the Company, of the holders of any
class of shares in the Company, of the board, and of committees of the
board, including the names of the directors present at each such meeting.
Any such minutes, if purporting to be signed by the chairman of the meeting to
which they relate or of the meeting at which they are read, shall be sufficient
evidence without any further proof of the facts therein stated.
THE SEAL
128. AUTHORITY REQUIRED FOR USE OF SEAL
The seal shall only be used by the authority of a resolution of the board or of
a committee of the board. The board may determine who shall sign any instrument
to which the seal is affixed and unless otherwise so determined it shall be
signed by at least one director and the secretary or by at least two directors.
129. OFFICIAL SEAL FOR USE ABROAD
The company may exercise the powers conferred by section 39 of the Act with
regard to having an official seal for use abroad.
130. EXECUTION OF INSTRUMENT AS A DEED UNDER HAND
Where the Act so permits, any instrument signed, with the authority of a
resolution of the board or of a committee of the board, by one director and the
secretary or by two directors and expressed to be executed by the Company as a
deed shall have the same effect as if executed under the seal, provided that no
instrument which makes it clear on its face that it is intended by the persons
making it to have effect as a deed shall be signed without the authority of the
board.
131. DELIVERY OF DEEDS
A document which is executed by the Company as a deed shall not be deemed to be
delivered by the Company solely as a result of its having been executed by the
Company.
28
<PAGE>
CERTIFICATION
132. CERTIFIED COPIES
Any director or the secretary or any person appointed by the board for the
purpose shall have power to authenticate any documents affecting the
constitution of the Company and any resolutions passed by the Company or the
holders of any class of shares of the Company or the board or any committee of
the board, and any books, records, documents and accounts relating to the
business of the Company, and to certify copies thereof or extracts therefrom as
true copies or extracts. A document purporting to be a copy of a resolution, or
the minutes of or an extract from the minutes of a meeting of the Company or the
holders of any class of shares of the Company or of the board or any committee
of the board that is certified as aforesaid shall be conclusive evidence in
favour of all persons dealing with the Company upon the faith thereof that such
resolution has been duly passed or, as the case may be, that such minutes or
extract is a true and accurate record of proceedings at a duly constituted
meeting.
DIVIDENDS
133. DECLARATION OF DIVIDENDS
Subject to the provisions of the Companies Acts, the Company may by ordinary
resolution declare dividends in accordance with the respective rights of the
members, but no dividend shall exceed the amount recommended by the board.
134. INTERIM DIVIDENDS
Subject to the provisions of the Companies Acts, the board may declare and
pay interim dividends if it appears to the board that they are justified by
the profits of the Company available for distribution. If the share capital
is divided into different classes, the board may declare and pay interim
dividends on shares which confer deferred or non-preferred rights with regard
to dividend as well as on shares which confer preferential rights with regard
to dividend, but no interim dividend shall be declared or paid on shares
carrying deferred or non-preferred rights if, at the time of declaration or
payment, any preferential dividend is in arrear. The board may also declare
and pay at intervals settled by it any dividend payable at a fixed rate if it
appears to the board that the profits available for distribution justify the
payment. Provided the board acts in good faith it shall not incur any
liability to the holders of shares conferring preferred rights for any loss
they may suffer by the declaration or lawful payment of an interim dividend
on any shares having deferred or non-preferred rights.
135. APPORTIONMENT OF DIVIDENDS
Except as otherwise provided by the rights attached to shares, all dividends
shall be declared and paid according to the amounts paid up on the shares on
which the dividend is paid; but no amount paid on a share in advance of the
date on which a call is payable shall be treated for the purposes of this
Article as paid on the share. All dividends shall be apportioned and paid
proportionately to the amounts paid up on the shares during any portion or
portions of the period in respect of which the dividend is paid; but, if any
share is issued on terms providing that it shall rank for dividend as from a
particular date, that share shall rank for dividend accordingly.
136. DIVIDENDS IN SPECIE
A general meeting declaring a dividend may, upon the recommendation of the
board, by ordinary resolution direct that it shall be satisfied wholly or partly
by the distribution of assets, and in
29
<PAGE>
particular of paid up shares or debentures of any other body corporate, and,
where any difficulty arises in regard to the distribution, the board may
settle the same as it thinks fit and in particular may issue fractional
certificates or authorise any person to sell and transfer any fractions or
disregard fractions altogether, and may fix the value for distribution of any
assets and may determine that cash shall be paid to any member upon the
footing of the value so fixed in order to adjust the rights of members and
may vest any assets in trustees.
137. PERMITTED DEDUCTIONS
The board may deduct from any dividend or other moneys payable to any member in
respect of a share any moneys presently payable by him to the Company in respect
of that share.
138. PROCEDURE FOR PAYMENT
Any dividend or other moneys payable in respect of a share may be paid by cheque
or warrant sent by post to the registered address of the holder or person
entitled or, if two or more persons are the holders of the share or are jointly
entitled to it by reason of the death or bankruptcy of the holder or otherwise
by operation of law, to the registered address of that one of those persons who
is first named in the register or to such person and to such address as the
person or persons entitled may in writing direct. Every such cheque or warrant
shall be made payable to the order of the person or persons entitled or to such
other person as the person or persons entitled may in writing direct and shall
be sent at the risk of the person entitled, and payment of the cheque shall be a
good discharge to the Company. Any joint holder or other person jointly
entitled to a share as aforesaid may give receipts for any dividend or other
moneys payable in respect of the share. Any such dividend or other money may
also be paid by any other method (including direct debit, bank transfer and
dividend warrant) which the board considers appropriate.
139. INTEREST NOT PAYABLE
No dividend or other moneys payable in respect of a share shall bear interest
against the Company unless otherwise provided by the rights attached to the
share.
140. FORFEITURE OF UNCLAIMED DIVIDENDS
Any dividend which has remained unclaimed for twelve years from the date when it
became due for payment shall, if the board so resolves, be forfeited and cease
to remain owing by the Company. The payment by the board of any unclaimed
dividend or other moneys payable in respect of a share into a separate account
shall not constitute the Company a trustee thereof.
CAPITALISATION OF PROFITS AND RESERVES
141. POWER TO CAPITALISE
The board may with the authority of an ordinary resolution of the Company:
(a) subject as hereinafter provided, resolve to capitalise any undistributed
profits of the Company not required for paying any preferential dividend
(whether or not they are available for distribution) or any sum standing
to the credit of any reserve or other fund, including the Company's share
premium account and capital redemption reserve, if any;
(b) appropriate the sum resolved to be capitalised to the members or any
class of members on the record date specified in the relevant resolution
who would have been entitled to it if it were distributed by way of
dividend and in the same proportions and apply such sum
30
<PAGE>
on their behalf either in or towards paying up the amounts, if any,
for the time being unpaid on any shares held by them respectively, or
in paying up in full unissued shares, debentures or other obligations
of the Company of a nominal amount equal to that sum, and allot the
shares, debentures or other obligations credited as fully paid to
those members, or as they may direct, in those proportions, or partly
in one way and partly in the other; but the share premium account, the
capital redemption reserve, and any profits which are not available
for distribution may, for the purposes of this Article, only be
applied in paying up unissued shares to be allotted to members
credited as fully paid;
(c) make such provision by authorising the sale and transfer to any person of
fractions to which any members would become entitled or may issue
fractional certificates or may resolve that the distribution be made as
nearly as practicable in the correct proportion but not exactly so or may
ignore fractions altogether or resolve that cash payments be made to any
members in order to adjust the rights of all parties or otherwise as (in
each case) the board determines where shares or debentures become, or
would otherwise become, distributable under this Article in fractions;
(d) authorise any person to enter on behalf of all the members concerned into
an agreement with the Company providing for either:-
(i) the allotment to such members respectively, credited as fully
paid, of any shares, debentures or other obligations to which they
are entitled upon such capitalisation; or
(ii) the payment up by the Company on behalf of such members (by the
application thereto of their respective proportions of the profits
resolved to be capitalised) of the amounts, or any part of the
amounts, remaining unpaid on their existing shares,
and any agreement made under such authority shall be binding on all such
members; and
(e) generally do all acts and things required to give effect to such
resolution as aforesaid.
RECORD DATES
142. RECORD DATES FOR DIVIDENDS, ETC.
Notwithstanding any other provision of these Articles, the Company or the board
may fix any date as the record date for any dividend, distribution, allotment or
issue, and such record date may be on or at any time before or after any date on
which the dividend, distribution, allotment or issue is declared, paid or made.
ACCOUNTS
143. RIGHTS TO INSPECT RECORDS
No member shall (as such) have any right of inspecting any accounting records or
other book or document of the Company except as conferred by statute or
authorised by the board or by ordinary resolution of the Company or order of a
court of competent jurisdiction.
31
<PAGE>
144. DELIVERY OF BALANCE SHEETS AND PROFIT AND LOSS ACCOUNTS
A copy of every balance sheet and profit and loss account (including any
documents required by law to be annexed thereto) which is to be laid before the
Company in general meeting and of the directors' and auditors' reports shall, at
least twenty-one days previously to the meeting, be delivered or sent by post to
every member and to every debenture holder of the Company of whose address the
Company is aware, and to every other person who is entitled to receive notice of
meetings from the Company under the provisions of the Companies Acts or of these
Articles or, in the case of joint holders of any share or debenture, to one of
the joint holders, provided that the requirements of this Article shall be
deemed satisfied in relation to any member by sending to such member, where
permitted by the Companies Acts and instead of such copies, a summary financial
statement derived from the Company's annual accounts and the report of the
directors and prepared in the form and containing the information prescribed by
the Companies Acts and any regulations made thereunder.
NOTICES
145. WHEN NOTICE REQUIRED TO BE IN WRITING
Any notice to be given to or by any person pursuant to these Articles shall be
in writing except that a notice calling a meeting of the board need not be in
writing.
146. METHOD OF GIVING NOTICE
The Company may serve or deliver any notice or other document on or to a member
either personally, by sending it by post in a prepaid envelope, or by facsimile
or telex addressed to the member at his registered address or by leaving it at
that address. In the case of joint holders of a share, all notices or other
documents shall be served on or delivered to the joint holder whose name stands
first in the register in respect of the joint holding and any notice or other
document so served or delivered shall be deemed for all purposes sufficient
service on or delivery to all the joint holders. A member whose registered
address is not within the United Kingdom and who gives to the Company an address
within the United Kingdom at which notices may be given to him shall be entitled
to have notices given to him at that address, but otherwise:
(a) no such members shall be entitled to receive any notice from the Company;
and
(b) without prejudice to the generality of the foregoing, any notice of a
general meeting of the Company which is in fact given or purports to be
given to such members shall be ignored for the purpose of determining the
validity of the proceedings at such general meeting.
147. DEEMED RECEIPT OF NOTICE
A member present, either in person or by proxy, at any meeting of the Company or
of the holders of any class of shares in the Company shall be deemed to have
received notice of the meeting and, where requisite, of the purposes for which
it was called.
148. NOTICE TO PERSONS ENTITLED BY TRANSMISSION
A notice or other document may be served or delivered by the Company on or to
the persons entitled by transmission to a share, whether in consequence of the
death or bankruptcy of a member or otherwise by sending or delivering it, in any
manner authorised by these Articles for the service or delivery of a notice or
other document on or to a member, addressed to them by name, or by the title of
representatives of the deceased, or trustee of the bankrupt or by any like
32
<PAGE>
description at the address, if any, within the United Kingdom supplied for that
purpose by the persons claiming to be so entitled. Until such an address has
been supplied, a notice or other document may be served or delivered in any
manner in which it might have been served or delivered if the death or
bankruptcy or other event giving rise to the transmission had not occurred.
149. NOTICE TO PERSONS ENTITLED BY DEATH OR BANKRUPTCY
A notice may be given by the Company to the persons entitled to a share in
consequence of the death or bankruptcy of a member by sending or delivering it,
in any manner authorised by these Articles for the giving of notice to a member,
addressed to them by name, or by the title of representatives of the deceased,
or trustee of the bankrupt or by any like description at the address, if any,
within the United Kingdom supplied for that purpose by the persons claiming to
be so entitled. Until such an address has been supplied, a notice may be given
in any manner in which it might have been given if the death or bankruptcy had
not occurred.
150. TRANSFEREES ETC. BOUND BY PRIOR NOTICE
Every person who becomes entitled to a share shall be bound by any notice in
respect of that share which, before his name is entered in the register, has
been duly given to a person from whom he derives his title.
151. WHEN NOTICES DEEMED SERVED
Proof that an envelope containing a notice was properly addressed, prepaid and
posted shall be conclusive evidence that the notice was given. A notice sent by
post shall be deemed to be given:
(a) if sent by first class post from an address in the United Kingdom or
another country to another address in the United Kingdom or, as the case
may be, that other country, on the day following that on which the
envelope containing it was posted;
(b) if sent by airmail from an address in the United Kingdom to an address
outside the United Kingdom, on the day following that on which the
envelope containing it was posted; and
(c) in any other case, on the second day following that on which the envelope
containing it was posted.
A notice sent by facsimile transmission shall be deemed given at the time the
notice is received.
WINDING UP
152. LIQUIDATOR MAY DISTRIBUTE IN SPECIE
If the Company is wound up, the liquidator may, with the sanction of an
extraordinary resolution of the Company and any other sanction required by the
Insolvency Act 1986, divide among the members in specie the whole or any part of
the assets of the Company and may, for that purpose, value any assets and
determine how the division shall be carried out as between the members or
different classes of members. The liquidator may, with the like sanction, vest
the whole or any part of the assets in trustees upon such trusts for the benefit
of the members as he with the like sanction determines, but no member shall be
compelled to accept any assets upon which there is a liability.
33
<PAGE>
153. DISPOSAL OF ASSETS BY LIQUIDATOR
The power of sale of a liquidator shall include a power to sell wholly or
partially for shares or debentures or other obligations of another body
corporate, either then already constituted or about to be constituted for the
purpose of carrying out the sale.
INDEMNITY
154. INDEMNITY TO DIRECTORS, OFFICERS, ETC.
Subject to the provisions of the Companies Acts but without prejudice to any
indemnity to which a director may otherwise be entitled, every director or other
officer or auditor of the Company shall be indemnified out of the assets of the
Company against all costs, charges, losses, expenses and liabilities incurred by
him in the execution or discharge of his duties or the exercise of his powers or
otherwise in relation thereto, including (but without limitation) any liability
incurred by him in defending any proceedings, whether civil or criminal, in
which judgment is given in his favour (or the proceedings are otherwise disposed
of without any finding or admission of any material breach of duty on his part)
or in which he is acquitted or in connection with any application in which
relief is granted to him by the court from liability for negligence, default,
breach of duty or breach of trust in relation to the affairs of the Company.
34
<PAGE>
NAME AND ADDRESS OF THE SUBSCRIBER(S) SIGNATURE(S) OF THE SUBSCRIBER(S)
NAME Michael Richard Counsell Michael Richard Counsell
ADDRESS 15 Pembroke Road
Bristol
BS99 7DX
(Commercial Manager)
NAME Christopher Charles Hadler Christopher Charles Hadler
ADDRESS 15 Pembroke Road
Bristol
BS99 7DX
(Commercial Manager)
DATED this 1st day of June 1982
Witness to the above signature: Dawn Bennett
Witness Signature: Dawn Bennett
Witness Occupation: Clerk
Witness Address: 15 Pembroke Road
Bristol
BS99 7DX
35
<PAGE>
EXHIBIT 3.27
Company No.: 2854848
SPECIAL
RESOLUTION The Companies Act 1985
Private Company Limited by Shares
of SPEED 3818 LIMITED
At an Extraordinary General Meeting of the above-named Company duly convened and
held at Classic House, 174-180 Old Street, London ECIV 9BP on 4th October, 1993.
the subjoined SPECIAL RESOLUTION was duly passed, viz:
RESOLUTION
That the existing Clause 3(A) of the Memorandum of Association of the Company be
deleted, and that the attached Clause 3(A) be substituted in its place.
Signed:
-------------------------------------
For and on behalf of
Waterlow Nominees Limited
<PAGE>
THE COMPANIES ACTS 1985
(AS AMENDED BY THE COMPANIES ACT 1989)
PRIVATE COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
of
TREFN FABRICATIONS LIMITED
(As amended by Special Resolution passed on 4th October 1993)
1. The Company's name is (1) Trefn Fabrications Limited
2. The Company's registered office is to be situated in England and Wales
3. The Company's objects are:
(A) To carry on the trade or business of engineers, founders, smiths,
machinists, manufacturers and patentees; to enter into any contracts in
relation to, and to erect, construct, maintain, alter, repair, pull down
and restore either alone or jointly with any other companies or persons
works of all descriptions, including wharves, docks, piers, railways,
tramways, waterways, roads, bridges, warehouses, factories, mills,
engines, machinery, railway carriages and wagons, ships and vessels of
every description, gas works, electric works, water works, drainage and
sewage works and buildings of every description; to purchase or otherwise
acquire houses, offices, workshops, buildings, and premises and any fixed
and movable machinery, tools, engines, boilers, plant, implements,
patterns, stock in trade, patents and patent rights, convenient to be
used in or about the trade or business of engineers, founders, smiths or
machinists.
- ------------------------
* The name of the Company was changed from Speed 3818 Limited on
15th October 1993
2
<PAGE>
The Companies Act, 1985
(As amended by the Companies Act 1989)
-------------------
PRIVATE COMPANY LIMITED BY SHARES
-------------------
MEMORANDUM OF ASSOCIATION
of
SPEED 3818 LIMITED
-------------------
l. The Company's name is "SPEED 3818 LIMITED".
2. The Company's registered office will be situated in England and Wales.
3. The Company's objects are:
(A) (i) To carry on business as a general commercial company.
(ii) To carry on any trade or business whatsoever and to do all
such things as are incidental or conducive to the carrying
on of any trade or business by it.
(iii) To undertake all or any of the following objects.
(B) To carry on any other trade or business which can, in the opinion
of the Board of Directors, be advantageously carried on by the
Company.
(C) To acquire by purchase, lease, exchange, hire or otherwise, or to
hold for any estate or interest, any land, buildings, easements,
rights, privileges, concessions, patents, patent rights, licences,
secret processes, machinery, plant, stock-in-trade and any real or
personal property of any kind necessary or convenient for the
purposes of or in connection with the Company's business.
(D) To erect, alter or maintain any buildings, plant and machinery
necessary or convenient for the Company's business and to
contribute to or subsidise the erection, construction and
maintenance of any of the above.
1
<PAGE>
(E) To acquire by subscription or otherwise and hold, sell, deal with,
make a market in or dispose of any shares, stocks, debentures,
debenture stock, or other securities of any kind whatsoever,
guaranteed by any company constituted or carrying on business in
any part of the world and debentures, debenture stock and other
securities of any kind guaranteed by any Government or Authority,
Municipal, Local or otherwise, whether at home or abroad, and to
subscribe for the same either conditionally or otherwise and to
guarantee the subscription thereof and to exercise and enforce all
rights and powers conferred by the ownership thereof.
(F) To receive money on deposit or otherwise either without security
or secured by debentures, debenture stock (perpetual or
terminable), mortgage or other security charged on the undertaking
or on all or any of the assets of the Company including uncalled
capital, and generally to act as bankers.
(G) To borrow and raise money in any manner and to secure with or
without consideration the repayment of any money borrowed, raised,
or owing by mortgage, charge, debenture, debenture stock, bond,
standard security, lien, or any other security of whatsoever
nature upon the whole or any part of the Company's property or
assets (whether present or future) including its uncalled capital,
and also by a similar mortgage, charge, debenture, debenture
stock, bond, standard security, indemnity, lien or security of
whatsoever nature to secure and guarantee the performance by the
Company or any other company or person (including, but without
prejudice to the generality of the foregoing) the holding company
of the Company or any company which is a subsidiary of such
holding company within, in each case, the meaning of Section 736
and Section 736(A) of the Companies Act 1985 (the "Act"), as
amended by the Companies Act 1989, of any obligation or liability
it or such person or company may undertake or which may become
binding upon it or such person or company, and to secure any
securities of the Company by a Trust Deed or other assurance and
to enter into partnership or any joint purse arrangement with any
person, persons, firm or company.
(H) To lend money with or without security, and to invest money of the
Company upon such terms as the Company may approve, and to
guarantee the dividends, interest and capital of the shares,
stocks or securities of any company of or in which the Company is
a member or is otherwise interested, and generally as the
Directors think fit.
(I) To apply for, purchase or otherwise acquire and hold or use any
patents, licences, concessions, copyrights and the like,
conferring any right to use or publish any secret or other
information and to use, exercise, develop or grant licences in
respect of the property, rights of possession so acquired.
2
<PAGE>
(J) To take part in the formation, management, supervision or control
of the business or operation of any company or undertaking and for
that purpose to appoint and remunerate any directors, accountants,
consultants, experts or agents.
(K) To employ experts, consultants and valuers to investigate and
examine the condition, prospects, value, character and
circumstances of any business concerns and undertakings and
generally of any assets, property or rights.
(L) To establish or promote or concur in establishing or promoting any
other company whose objects shall include the acquisition or
taking over of all or any of the assets or liabilities of the
Company or the promotion of which shall be in any manner
calculated to advance directly or indirectly the objects or the
interests of the Company and to acquire, hold or dispose of
shares, stocks or securities issued by or any other obligations of
any such other company.
(M) To draw, accept, make, endorse, discount, execute, issue and
negotiate promissory notes, bills of exchange, bills of lading,
warrants, debentures and other negotiable instruments.
(N) To invest and deal with the monies of the Company not immediately
required for the purposes of the business of the Company in or
upon such investments and in such manner as the Company may
approve.
(O) To pay for any property or rights acquired by the Company either
in cash or by the issue of fully or partly paid up shares, with or
without preferred or deferred or special rights or restrictions in
respect of dividend, repayment of capital, voting or otherwise, or
by any securities which the Company has power to issue, or partly
in one mode and partly in another, and generally on such terms as
the Company may determine.
(P) To accept payment for any property or rights sold or otherwise
disposed of or dealt with by the Company, either in cash, by
installments or otherwise, or in fully or partly paid-up shares or
stock of any company or corporation, with or without preferred or
deferred or special rights or restrictions in respect of dividend,
repayment of capital, voting or otherwise, or in debentures or
mortgages or other securities of any company or corporation or
partly in one mode and partly in another, and generally on such
terms as the Company may determine, and to hold, dispose of or
otherwise deal with any shares, stocks or securities so acquired.
(Q) To enter into arrangements for joint working in business or
amalgamate with or enter into any partnership or arrangement for
sharing profits, union of interests, reciprocal concession or
cooperation with any company, firm or person carrying on or
proposing to carry on any business within the objects of the
Company or
3
<PAGE>
which is capable of being carried on so as directly or
indirectly to benefit the Company.
(R) To purchase or otherwise acquire, take over an undertake all or
any part of the business, property, liabilities and transactions
of any person, or company carrying on any business the carrying on
of which is calculated to benefit the Company or to advance its
interests, or possessed of property suitable for the purposes of
the Company.
(S) To sell, improve, manage, develop, turn to account, exchange, let
on rent, royalty, share of profits or otherwise, grant licences,
easements and other rights in or over, and in any other manner
deal with or dispose of the undertaking and all or any of the
property and assets for the time being of the Company for such
consideration as the Company may think fit.
(T) To provide for the welfare of persons employed or formerly
employed by the Company and to grant pensions, allowances,
gratuities and bonuses to officers or ex-officers, employees or
ex-employees of the Company or its predecessors in business or of
any associated company of the Company or its predecessors in
business or the dependents of such persons and to establish and
maintain or concur in establishing and maintaining trusts, funds
or schemes (whether contributory or non-contributory), with a view
to providing pensions or other funds for any such persons as
aforesaid or their dependents.
(U) To subscribe to or otherwise aid the establishment and support of,
any schools and any educational, scientific, literary, religious
or charitable institutions or trade societies, whether such
institutions or societies be solely connected with the business
carried on by the Company or its predecessors in business or not,
and to institute and maintain any club or other establishment.
(V) To distribute in specie assets of the Company properly
distributable amongst the members, but so that no distribution
amounting to a reduction of capital be made except with the
sanction (if any) for the time being required by law.
(W) To purchase and maintain insurance for or for the benefit of any
persons who are or were at any time directors, officers, employees
or auditors of the Company against any liability incurred by such
persons in respect of any act or omission in the actual or
purported execution and or discharge of their duties and or in the
exercise of their powers and or otherwise in relation to their
duties, powers or officers in relation to the Company, and to such
extent as may be permitted by law or otherwise to indemnify or to
exempt any such person against or from any such liability.
4
<PAGE>
(X) To do all or any of the things hereinbefore authorised, either
alone or in conjunction with others, or as factors, trustees or
agents for others, or by or through factors, trustees or agents.
(Y) Subject to, and always in compliance with, the provisions of
Sections 155 to 158 (inclusive) of the Act (if and so far as such
provisions shall be applicable), to give, whether directly or
indirectly, any kind of financial assistance (as defined in
Section 152(1)(a) of the Act) for any such purpose as is specified
in Section 151(1) and/or Section 151(2) of the Act.
(Z) To do all such other things (whether similar to any of the
foregoing or not) as are incidental to or which the Company may
think conducive to the above objects or any of them.
The objects set forth in any sub-clause of this clause shall not be
restrictively construed but the widest interpretation shall be given
thereto, and they shall not, except when the context expressly so
requires, be in any way limited to or restricted by reference to or
inference from any other object or objects set forth in such sub-clause
or from the terms of any other sub-clause or by the name of the Company.
None of such sub-clauses or the object or objects therein specified or
the powers thereby conferred shall be deemed subsidiary or ancillary to
the objects or powers mentioned in any other sub-clause, but the Company
shall have full power to exercise all or any of the powers and to achieve
or to endeavor to achieve all or any of the objects conferred by and
provided in any one or more of the said sub-clauses.
4. The liability of the Members is limited.
5. The Share Capital of the Company is L1,000 divided into 1,000 shares of
L1 each.
5
<PAGE>
WE, the subscribers to this Memorandum of Association, wish to be formed
into a Company pursuant to this Memorandum; and we agree to take the
number of shares shown opposite our respective names.
- --------------------------------------------------------------------------------
NAMES AND ADDRESSES OF SUBSCRIBERS No. of Shares taken by each Subscriber
- --------------------------------------------------------------------------------
For and on behalf of One
WATERLOW NOMINEES LIMITED
Classic House
174-180 Old Street
LONDON
EC1V 9BP
- --------------------------------------------------------------------------------
For and on behalf of One
WATERLOW SECRETARIES LIMITED
Classic House
174-180 Old Street
LONDON
EC1V 9BP
- --------------------------------------------------------------------------------
Dated the 1st day of June, 1993.
WITNESS to the above Signatures:
ZOE DOLPHIN
Classic House
174-180 Old Street
LONDON
EC1V 9BP
6
<PAGE>
EXHIBIT 3.28
THE COMPANIES ACTS 1985 AND 1989
--------------------------------------------
PRIVATE COMPANY LIMITED BY SHARES
--------------------------------------------
ARTICLES OF ASSOCIATION
OF
TREFN FABRICATIONS LIMITED
--------------------------------------------
(Incorporated on 20 September 1993)
--------------------------------------------
Company Number: 2854848
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PRELIMINARY 1
INTERPRETATION 1
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
SHARE CAPITAL 3
2. Shares with special rights . . . . . . . . . . . . . . . . . . . . . .3
3. Allotment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
4. Redeemable shares. . . . . . . . . . . . . . . . . . . . . . . . . . .3
5. Commissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
6. Trusts not recognised. . . . . . . . . . . . . . . . . . . . . . . . .4
VARIATION OF RIGHTS 4
7. Method of varying rights . . . . . . . . . . . . . . . . . . . . . . .4
8. When rights deemed to be varied. . . . . . . . . . . . . . . . . . . .4
SHARE CERTIFICATES 4
9. Members' rights to certificates . . . . . . . . . . . . . . . . . . .4
10. Replacement certificates . . . . . . . . . . . . . . . . . . . . . . .5
LIEN 5
11. Company to have lien on shares . . . . . . . . . . . . . . . . . . . .5
12. Enforcement of lien by sale. . . . . . . . . . . . . . . . . . . . . .5
13. Giving effect to sale. . . . . . . . . . . . . . . . . . . . . . . . .5
14. Application of proceeds . . . . . . . . . . . . . . . . . . . . . . .5
CALLS ON SHARES 5
15. Power to make calls. . . . . . . . . . . . . . . . . . . . . . . . . .5
16. Time when call made . . . . . . . . . . . . . . . . . . . . . . . . .6
17. Liability of joint holders . . . . . . . . . . . . . . . . . . . . . .6
18. Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . .6
19. Deemed calls . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
20. Differentiation on calls . . . . . . . . . . . . . . . . . . . . . . .6
21. Payment of calls in advance. . . . . . . . . . . . . . . . . . . . . .6
FORFEITURE AND SURRENDER 6
22. Notice requiring payment of call . . . . . . . . . . . . . . . . . . .6
23. Forfeiture for non-compliance . . . . . . . . . . . . . . . . . . . .7
24. Sale of forfeited shares . . . . . . . . . . . . . . . . . . . . . . .7
25. Liability following forfeiture . . . . . . . . . . . . . . . . . . . .7
26. Surrender. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
27. Extinction of rights . . . . . . . . . . . . . . . . . . . . . . . . .7
28. Evidence of forfeiture . . . . . . . . . . . . . . . . . . . . . . . .7
<PAGE>
TRANSFER OF SHARES 8
29. Form and execution of transfer . . . . . . . . . . . . . . . . . . . .8
30. Restrictions on transfer . . . . . . . . . . . . . . . . . . . . . . .8
31. Invalid transfers. . . . . . . . . . . . . . . . . . . . . . . . . . .8
32. Notice of refusal to register. . . . . . . . . . . . . . . . . . . . .8
33. Suspension of registration . . . . . . . . . . . . . . . . . . . . .9
34. No fee payable on registration . . . . . . . . . . . . . . . . . . . .9
35. Retention of transfers . . . . . . . . . . . . . . . . . . . . . . . .9
TRANSMISSION OF SHARES 9
36. Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
37. Elections following transmission . . . . . . . . . . . . . . . . . . .9
38. Rights of persons entitled by transmission . . . . . . . . . . . . . .9
ALTERATION OF SHARE CAPITAL 10
39. Alterations permitted by ordinary resolution . . . . . . . . . . . . 10
40. New shares subject to these Articles . . . . . . . . . . . . . . . . 10
41. Fractions arising. . . . . . . . . . . . . . . . . . . . . . . . . . 10
42. Power to reduce capital . . . . . . . . . . . . . . . . . . . . . . 10
PURCHASE OF OWN SHARES 11
43. Power to purchase own shares . . . . . . . . . . . . . . . . . . . . 11
GENERAL MEETINGS 11
44. Types of general meeting . . . . . . . . . . . . . . . . . . . . . . 11
45. Annual general meetings . . . . . . . . . . . . . . . . . . . . . . 11
46. Class meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
47. Convening general meetings . . . . . . . . . . . . . . . . . . . . . 11
NOTICE OF GENERAL MEETINGS 12
48. Period of notice . . . . . . . . . . . . . . . . . . . . . . . . . . 12
49. Provision of notice . . . . . . . . . . . . . . . . . . . . . . . . 12
50. Contents of notice . . . . . . . . . . . . . . . . . . . . . . . . . 12
51. Accidental omission to give notice . . . . . . . . . . . . . . . . . 13
PROCEEDINGS AT GENERAL MEETINGS 13
52. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
53. If quorum not present . . . . . . . . . . . . . . . . . . . . . . . 13
54. Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
55. Directors entitled to speak . . . . . . . . . . . . . . . . . . . . 13
56. Adjournments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
57. Amendments to resolutions . . . . . . . . . . . . . . . . . . . . . 14
58. Methods of voting . . . . . . . . . . . . . . . . . . . . . . . . . 14
59. Declaration of result . . . . . . . . . . . . . . . . . . . . . . . 14
60. Withdrawal of demand for poll . . . . . . . . . . . . . . . . . . . 14
61. Conduct of poll . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
62. Chairman's casting vote . . . . . . . . . . . . . . . . . . . . . . 15
63. When poll to be taken . . . . . . . . . . . . . . . . . . . . . . . 15
64. Notice of poll . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
65. Effectiveness of special and extraordinary resolutions . . . . . . . 15
66. Resolutions in writing . . . . . . . . . . . . . . . . . . . . . . . 15
VOTES OF MEMBERS 15
67. Right to vote . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
68. Votes of joint holders . . . . . . . . . . . . . . . . . . . . . . . 15
69. Member under incapacity . . . . . . . . . . . . . . . . . . . . . . 16
70. Calls in arrears . . . . . . . . . . . . . . . . . . . . . . . . . . 16
71. Objection to voting . . . . . . . . . . . . . . . . . . . . . . . . 16
72. Supplementary provisions on voting . . . . . . . . . . . . . . . . . 16
PROXIES AND CORPORATE REPRESENTATIVES 16
73. Appointment of proxy . . . . . . . . . . . . . . . . . . . . . . . . 16
74. Form of proxy - standard . . . . . . . . . . . . . . . . . . . . . . 16
75. Form of proxy - each way . . . . . . . . . . . . . . . . . . . . . . 17
76. Voting by appointor . . . . . . . . . . . . . . . . . . . . . . . . 17
77. Delivery of form of proxy . . . . . . . . . . . . . . . . . . . . . 17
78. Validity of form of proxy . . . . . . . . . . . . . . . . . . . . . 18
79. Corporate representatives . . . . . . . . . . . . . . . . . . . . . 18
80. Revocation of authority . . . . . . . . . . . . . . . . . . . . . . 18
NUMBER OF DIRECTORS 18
81. Limits on number of directors . . . . . . . . . . . . . . . . . . . 18
APPOINTMENT AND RETIREMENT OF DIRECTORS 18
82. No retirement by rotation . . . . . . . . . . . . . . . . . . . . . 18
83. Eligibility for election . . . . . . . . . . . . . . . . . . . . . . 18
84. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
85. Additional powers of the Company . . . . . . . . . . . . . . . . . . 19
86. Appointment by board . . . . . . . . . . . . . . . . . . . . . . . . 19
87. Age limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
88. No share qualification . . . . . . . . . . . . . . . . . . . . . . . 19
ALTERNATE DIRECTORS 20
89. Power to appoint alternates . . . . . . . . . . . . . . . . . . . . 20
90. Alternates entitled to receive notice . . . . . . . . . . . . . . . 20
91. Alternates representing more than one director . . . . . . . . . . . 20
92. Expenses and remuneration of alternates . . . . . . . . . . . . . . 20
93. Termination of appointment . . . . . . . . . . . . . . . . . . . . . 20
94. Method of appointment and revocation . . . . . . . . . . . . . . . . 20
95. Alternate not an agent of appointor . . . . . . . . . . . . . . . . 21
POWERS OF THE BOARD 21
96. Business to be managed by board . . . . . . . . . . . . . . . . . . 21
<PAGE>
DELEGATION OF POWERS OF THE BOARD 21
97. Committees of the board . . . . . . . . . . . . . . . . . . . . . . 21
98. Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
99. Offices including the title "director" . . . . . . . . . . . . . . . 21
DISQUALIFICATION AND REMOVAL OF DIRECTORS 22
100. Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . 22
101. Power of Company to remove director . . . . . . . . . . . . . . . . 22
REMUNERATION OF NON-EXECUTIVE DIRECTORS 23
102. Ordinary remuneration . . . . . . . . . . . . . . . . . . . . . . . 23
103. Additional remuneration for special services . . . . . . . . . . . . 23
DIRECTORS' EXPENSES 23
104. Directors may be paid expenses . . . . . . . . . . . . . . . . . . . 23
EXECUTIVE DIRECTORS 23
105. Appointment to executive office . . . . . . . . . . . . . . . . . . 23
106. Termination of appointment to executive office . . . . . . . . . . . 23
107. Emoluments to be determined by the board . . . . . . . . . . . . . . 24
DIRECTORS' INTERESTS 24
108. Directors may contract with the Company . . . . . . . . . . . . . . 24
109. Notification of interests . . . . . . . . . . . . . . . . . . . . . 24
110. Exercise by Company of voting rights . . . . . . . . . . . . . . . . 25
GRATUITIES, PENSIONS AND INSURANCE 25
111. Gratuities and pensions . . . . . . . . . . . . . . . . . . . . . . 25
112. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
113. Directors not liable to account . . . . . . . . . . . . . . . . . . 25
PROCEEDINGS OF DIRECTORS 25
114. Convening meetings . . . . . . . . . . . . . . . . . . . . . . . . . 25
115. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
116. Powers of directors if number falls below minimum . . . . . . . . . 26
117. Chairman and deputy chairman . . . . . . . . . . . . . . . . . . . . 26
118. Validity of acts of the board . . . . . . . . . . . . . . . . . . . 26
119. Resolutions in writing . . . . . . . . . . . . . . . . . . . . . . . 26
120. Meetings by telephone, etc. . . . . . . . . . . . . . . . . . . . . 26
121. Directors' power to vote on contracts in which they are interested . 27
122. Exclusion of director from quorum . . . . . . . . . . . . . . . . . 27
123. Amendment of restrictions on voting . . . . . . . . . . . . . . . . 27
124. Division of proposals . . . . . . . . . . . . . . . . . . . . . . . 27
125. Decision of chairman final and conclusive . . . . . . . . . . . . . 27
SECRETARY 28
<PAGE>
126. Appointment and removal of secretary . . . . . . . . . . . . . . . . 28
MINUTES 28
127. Minutes required to be kept . . . . . . . . . . . . . . . . . . . . 28
THE SEAL 28
128. Authority required for use of seal . . . . . . . . . . . . . . . . . 28
129. Official seal for use abroad . . . . . . . . . . . . . . . . . . . . 28
130. Execution of instrument as a deed under hand . . . . . . . . . . . . 28
131. Delivery of deeds . . . . . . . . . . . . . . . . . . . . . . . . . 28
CERTIFICATION 29
132. Certified copies . . . . . . . . . . . . . . . . . . . . . . . . . . 29
DIVIDENDS 29
133. Declaration of dividends . . . . . . . . . . . . . . . . . . . . . . 29
134. Interim dividends . . . . . . . . . . . . . . . . . . . . . . . . . 29
135. Apportionment of dividends . . . . . . . . . . . . . . . . . . . . . 29
136. Dividends in specie . . . . . . . . . . . . . . . . . . . . . . . . 29
137. Permitted deductions . . . . . . . . . . . . . . . . . . . . . . . . 30
138. Procedure for payment . . . . . . . . . . . . . . . . . . . . . . . 30
139. Interest not payable . . . . . . . . . . . . . . . . . . . . . . . . 30
140. Forfeiture of unclaimed dividends . . . . . . . . . . . . . . . . . 30
CAPITALISATION 30
141. Power to capitalise . . . . . . . . . . . . . . . . . . . . . . . . 30
RECORD DATES 31
142. Record dates for dividends, etc. . . . . . . . . . . . . . . . . . . 31
ACCOUNTS 31
143. Rights to inspect records . . . . . . . . . . . . . . . . . . . . . 31
144. Delivery of balance sheets and profit and loss accounts . . . . . . 32
NOTICES 32
145. When notice required to be in writing . . . . . . . . . . . . . . . 32
146. Method of giving notice . . . . . . . . . . . . . . . . . . . . . . 32
147. Deemed receipt of notice . . . . . . . . . . . . . . . . . . . . . . 32
148. Notice to persons entitled by transmission . . . . . . . . . . . . . 32
149. Notice to persons entitled by death or bankruptcy . . . . . . . . . 33
150. Transferees etc. bound by prior notice . . . . . . . . . . . . . . . 33
151. When notices deemed served . . . . . . . . . . . . . . . . . . . . . 33
WINDING UP 33
152. Liquidator may distribute in specie . . . . . . . . . . . . . . . . 33
153. Disposal of assets by liquidator . . . . . . . . . . . . . . . . . . 34
INDEMNITY 34
154. Indemnity to directors, officers, etc. . . . . . . . . . . . . . . . 34
</TABLE>
<PAGE>
COMPANY NO.: 2854848
THE COMPANIES ACTS 1985 AND 1989
PRIVATE COMPANY LIMITED BY SHARES
--------------------------------------------
ARTICLES OF ASSOCIATION
OF
TREFN FABRICATIONS LIMITED
(INCORPORATED ON 20 SEPTEMBER 1993)
--------------------------------------------
PRELIMINARY
THE REGULATIONS IN TABLE A IN THE COMPANIES (TABLES A-F) REGULATIONS IN FORCE AT
THE DATE OF THE INCORPORATION OF THE COMPANY SHALL NOT APPLY TO THE COMPANY.
INTERPRETATION
1. DEFINITIONS
IN THESE ARTICLES, EXCEPT WHERE THE SUBJECT OR CONTEXT OTHERWISE REQUIRES, THE
WORDS DEFINED IN THE FIRST COLUMN OF THE FOLLOWING TABLE SHALL BEAR THE MEANINGS
SET OPPOSITE THEM RESPECTIVELY IN THE SECOND COLUMN.
THE ACT means The Companies Act 1985 including any modification or re-enactment
thereof for the time being in force.
THESE ARTICLES means these articles of association as altered from time to time
by special resolution.
THE AUDITORS means the auditors for the time being of the Company.
THE BOARD means the directors or any of them acting as the board of directors of
the Company.
CLEAR DAYS means the period excluding the day when a notice is given or deemed
to be given and the day for which it is given or on which it is to take effect.
THE COMPANIES ACTS has the meaning ascribed thereto by section 744 of the Act
and any enactment passed after those Acts which may, by virtue of that or any
other such enactment, be
1
<PAGE>
cited together with those Acts as the "Companies Acts" (with or without the
addition of an indication of the date of any such enactment).
A DIRECTOR means a director of the Company.
DIVIDEND means Dividend or bonus.
THE HOLDER means in relation to any shares the member whose name is entered in
the register as the holder of such shares.
A MEMBER means a member of the Company.
THE MEMORANDUM means the memorandum of association of the Company as amended
from time to time.
THE OFFICE means the registered office of the Company.
PAID means paid or credited as paid.
THE REGISTER means the register of members of the Company.
THE SEAL means the common seal of the Company and includes any official seal
kept by the Company by virtue of section 39 or 40 of the Act.
THE SECRETARY means the secretary of the Company and includes a joint,
assistant, deputy or temporary secretary and any other person appointed to
perform the duties of the secretary.
THE UNITED KINGDOM means Great Britain and Northern Ireland.
References to a document being executed include references to its being executed
under hand or under seal or by any other method.
References to writing include references to any visible substitute for writing
and to anything partly in one form and partly in another form.
Words denoting the singular number include the plural number and vice versa;
words denoting the masculine gender include the feminine gender; and words
denoting persons include corporations.
Save as aforesaid any words or expressions defined in the Act (but excluding any
statutory modification thereof not in force at the date of adoption of these
Articles) shall, if not inconsistent with the subject or context, bear the same
meaning in these Articles.
Subject to the preceding paragraph, references to any provision of any enactment
or of any subordinate legislation (as defined by section 21(1) of the
Interpretation Act 1978) include any modification or re-enactment of that
provision for the time being in force.
Headings are inserted for convenience only and do not affect the construction of
these Articles.
2
<PAGE>
In these Articles, (a) powers of delegation shall not be restrictively construed
but the widest interpretation shall be given thereto; (b) the word "board" in
the context of the exercise of any power contained in these Articles includes
any committee consisting of one or more directors, any director holding
executive office and any local or divisional board, manager or agent of the
Company to which or, as the case may be, to whom the power in question has been
delegated; (c) no power of delegation shall be limited by the existence or,
except where expressly provided by the terms of delegation, the exercise of
that or any other power of delegation; and (d) except where expressly provided
by the terms of delegation, the delegation of a power shall not exclude the
concurrent exercise of that power by any other body or person who is for the
time being authorised to exercise it under these Articles or under another
delegation of the power.
SHARE CAPITAL
2. SHARES WITH SPECIAL RIGHTS
Subject to the provisions of the Companies Acts and without prejudice to any
rights attached to any existing shares or class of shares, any share may be
issued with such rights or restrictions as the Company may by ordinary
resolution determine or, subject to and in default of such determination, as the
board shall determine.
3. ALLOTMENT
Any shares proposed to be issued after the date of adoption of these Articles
shall first be offered to the members in proportion as nearly as may be to the
number of the existing shares held by them respectively unless the Company shall
by Special Resolution otherwise direct. The offer shall be made by notice
specifying the number of shares offered, and limiting a period (not being less
than fourteen days) within which the offer, if not accepted, will be deemed to
be declined. After the expiration of that period, those shares so deemed to be
declined shall be offered in the proportion aforesaid to the persons who have,
within the said period, accepted all the shares offered to them; such further
offer shall be made in the same manner and limited by a like period as the
original offer. Any shares not accepted pursuant to such offer or further offer
as aforesaid or not capable of being offered as aforesaid except by way of
fractions and any shares released from the provisions of this Article by such
Special Resolution as aforesaid shall be under the control of the directors, who
may allot, grant options over or otherwise dispose of the same to such persons,
on such terms, and in such manner as they think fit, provided that, in the case
of shares not accepted as aforesaid, such shares shall not be disposed of on
terms which are more favourable to the subscribers thereof than the terms on
which they were offered to the members. Subject to this Clause the directors are
unconditionally authorised for the purposes of Section 80 of the Act, to allot,
grant options over, or otherwise dispose of relevant securities up to the amount
of the share capital as at the date of adoption of these Articles at any time or
times during the period of five years from the date of adoption and at any time
thereafter pursuant to any offer or agreement made by the Company before the
expiry of this authority. Sub-sections 89(1) and 90(1) inclusive of the Act
shall be excluded from applying to the Company.
4. REDEEMABLE SHARES
Subject to the provisions of the Companies Acts, and without prejudice to any
rights attached to any existing shares or class of shares, shares may be issued
which are to be redeemed or are to be liable to be redeemed at the option of the
Company or the holder on such terms and in such manner as may be provided by
these Articles.
3
<PAGE>
5. COMMISSIONS
The Company may exercise all powers of paying commissions or brokerage conferred
or permitted by the Companies Acts. Subject to the provisions of the Companies
Acts, any such commission or brokerage may be satisfied by the payment of cash
or by the allotment of fully or partly paid shares or partly in one way and
partly in the other.
6. TRUSTS NOT RECOGNISED
Except as required by law, no person shall be recognised by the Company as
holding any share upon any trust and (except as otherwise provided by these
Articles or by law) the Company shall not be bound by or recognise any interest
in any share (or in any fractional part of a share) except an absolute right to
the entirety thereof in the holder.
VARIATION OF RIGHTS
7. METHOD OF VARYING RIGHTS
Subject to the provisions of the Companies Acts, if at any time the capital of
the Company is divided into different classes of shares, the rights attached to
any class may (unless otherwise provided by the terms of issue of the shares of
that class) be varied or abrogated, whether or not the Company is being wound
up, either with the consent in writing of the holders of three-quarters in
nominal value of the issued shares of the class or with the sanction of an
extraordinary resolution passed at a separate general meeting of the holders of
the shares of the class (but not otherwise).
8. WHEN RIGHTS DEEMED TO BE VARIED
For the purposes of this Article, unless otherwise expressly provided by the
rights attached to any shares or class of shares, those rights shall be deemed
to be varied by the reduction of the capital paid up on those shares otherwise
than by a purchase or redemption by the Company of its own shares and by the
allotment of other shares ranking in priority for payment of a dividend or in
respect of capital or which confer on the holders voting rights more favourable
than those conferred by such first mentioned shares, but shall not otherwise be
deemed to be varied by the creation or issue of other shares ranking pari passu
with, or subsequent to, such first mentioned shares or by the purchase or
redemption by the Company of any of its own shares.
SHARE CERTIFICATES
9. MEMBERS' RIGHTS TO CERTIFICATES
Every member, upon becoming the holder of any shares, shall be entitled, without
payment, to one certificate for all the shares of each class held by him (and,
upon transferring a part of his holding of shares of any class, to a certificate
for the balance of such holding) or several certificates each for one or more of
his shares upon payment for every certificate after the first of such reasonable
sum as the board may from time to time determine. Every certificate shall
specify the number, class and distinguishing numbers (if any) of the shares to
which it relates and the amount or respective amounts paid up thereon and, where
the Company has adopted a seal, sealed with the seal. The Company shall not be
bound to issue more than one certificate for shares held jointly by several
persons and delivery of a certificate to one joint holder shall be a sufficient
delivery to all of them. Shares of different classes may not be included in the
same certificate.
4
<PAGE>
10. REPLACEMENT CERTIFICATES
If a share certificate is defaced, worn out, lost or destroyed, it may be
renewed on such terms (if any) as to evidence and indemnity (with or without
security) and payment of any exceptional out-of-pocket expenses reasonably
incurred by the Company in investigating evidence and preparing the requisite
form of indemnity as the board may determine but otherwise free of charge, and
(in the case of defacement or wearing out) on delivery up of the old
certificate.
LIEN
11. COMPANY TO HAVE LIEN ON SHARES
The Company shall have a first and paramount lien on every share (not being a
fully paid share) for all moneys payable to the Company (whether presently or
not) in respect of that share. The board may at any time (generally or in
particular cases) waive any lien or declare any share to be wholly or in part
exempt from the provisions of this Article. The Company's lien on a share shall
extend to any amount (including dividends) payable in respect of it.
12. ENFORCEMENT OF LIEN BY SALE
The Company may sell, in such manner as the board determines, any share on which
the Company has a lien if a sum in respect of which the lien exists is presently
payable and is not paid within fourteen clear days after notice has been given
to the holder of the share or to the person entitled to it in consequence of the
death or bankruptcy of the holder or otherwise by operation of law, demanding
payment and stating that if the notice is not complied with the shares may be
sold.
13. GIVING EFFECT TO SALE
To give effect to any such sale the board may authorise some person to execute
an instrument of transfer of the shares sold to, or in accordance with the
directions of, the purchaser. The transferee shall not be bound to see to the
application of the purchase money nor shall his title to the shares be affected
by any irregularity in or invalidity of the proceedings in relation to the sale.
14. APPLICATION OF PROCEEDS
The net proceeds of the sale, after payment of the costs, shall be applied in or
towards payment or satisfaction of so much of the sum in respect of which the
lien exists as is presently payable, and any residue shall (upon surrender to
the Company for cancellation of the certificate for the shares sold and subject
to a like lien for any moneys not presently payable as existed upon the shares
before the sale) be paid to the person entitled to the shares at the date of the
sale.
CALLS ON SHARES
15. POWER TO MAKE CALLS
Subject to the terms of allotment, the board may from time to time make calls
upon the members in respect of any moneys unpaid on their shares (whether in
respect of nominal value or premium) and each member shall (subject to receiving
at least fourteen clear days' notice specifying when and where payment is to be
made) pay to the Company as required by the notice the amount called on his
shares. A call may be required to be paid by instalments. A call may, before
receipt by the Company of any sum due thereunder, be revoked in whole or part
and the
5
<PAGE>
time fixed for payment of a call may be postponed in whole or part as the
board may determine. A person upon whom a call is made shall remain liable
for calls made upon him notwithstanding the subsequent transfer of the shares
in respect whereof the call was made.
16. TIME WHEN CALL MADE
A call shall be deemed to have been made at the time when the resolution of the
board authorising the call was passed.
17. LIABILITY OF JOINT HOLDERS
The joint holders of a share shall be jointly and severally liable to pay all
calls in respect thereof.
18. INTEREST PAYABLE
If a call or any instalment of a call remains unpaid in whole or in part after
it has become due and payable the person from whom it is due and payable shall
pay interest on the amount unpaid from the day it became due and payable until
it is paid at the rate fixed by the terms of allotment of the share or in the
notice of the call or, if no rate is fixed, such rate, not exceeding 15 per
cent. per annum or, if higher, the appropriate rate (as defined by the Act), as
may be determined by the board, but the board may waive payment of such interest
wholly or in part.
19. DEEMED CALLS
An amount payable in respect of a share on allotment or at any fixed date,
whether in respect of nominal value or premium or as an instalment of a call,
shall be deemed to be a call duly made and notified and payable on the date so
fixed or in accordance with the terms of the allotment, and if it is not paid
the provisions of these Articles shall apply as if that amount had become due
and payable by virtue of a call duly made and notified.
20. DIFFERENTIATION ON CALLS
Subject to the terms of allotment, the board may make arrangements on the issue
of shares for a difference between the allottees and/or holders in the amounts
and times of payment of calls on their shares.
21. PAYMENT OF CALLS IN ADVANCE
The board may, if it thinks fit, receive from any member willing to advance the
same all or any part of the moneys uncalled and unpaid upon any shares held by
him and such payment in advance of calls shall extinguish PRO TANTO the
liability upon the shares in respect of which it is made, and may pay upon all
or any of the moneys so advanced (until the same would but for such advance
become presently payable) interest at such rate not exceeding (unless the
Company by ordinary resolution may otherwise direct) 15 per cent. per annum or,
if higher, the appropriate rate (as defined in the Act) as may be agreed upon
between the board and such member.
FORFEITURE AND SURRENDER
22. NOTICE REQUIRING PAYMENT OF CALL
If a call or any instalment of a call remains unpaid in whole or in part
after it has become due and payable, the board may give to the person from
whom it is due not less than fourteen clear days' notice in writing requiring
payment of the amount unpaid together with any interest which may have
accrued and any costs, charges and expenses incurred by the Company by reason
of such non-payment. The notice shall name the place where payment is to be
made and shall state that
6
<PAGE>
if the notice is not complied with the shares in respect of which the call
was made will be liable to be forfeited.
23. FORFEITURE FOR NON-COMPLIANCE
If any such notice is not complied with, any share in respect of which it was
given may, at any time before the payment required by the notice has been made,
be forfeited by a resolution of the board and the forfeiture shall include all
dividends or other moneys payable in respect of the forfeited shares and not
paid before the forfeiture. When any share has been forfeited, notice of the
forfeiture shall be served upon the person who was before the forfeiture the
holder of the share, and an entry of such notice having been given and of the
forfeiture with the date thereof shall forthwith be made in the register
opposite the entry of the share; but no forfeiture shall be invalidated by any
omission or neglect to give such notice or to make such entries.
24. SALE OF FORFEITED SHARES
Subject to the provisions of the Companies Acts, a forfeited share shall be
deemed to belong to the Company and may be sold, re-allotted or otherwise
disposed of on such terms and in such manner as the board determines, either to
the person who was before the forfeiture the holder or to any other person, and
at any time before sale, re-allotment or other disposal, the forfeiture may be
cancelled on such terms as the board thinks fit. Where for the purposes of its
disposal a forfeited share is to be transferred to any person the board may
authorise some person to execute an instrument of transfer of the share to that
person. The Company may receive the consideration given for the share on its
disposal and may register the transferee as holder of the share.
25. LIABILITY FOLLOWING FORFEITURE
A person any of whose shares have been forfeited shall cease to be a member in
respect of them and shall surrender to the Company for cancellation the
certificate for the shares forfeited but shall remain liable to the Company for
all moneys which at the date of forfeiture were presently payable by him to the
Company in respect of those shares with interest thereon at the rate at which
interest was payable on those moneys before the forfeiture or, if no interest
was so payable, at such rate, not exceeding 15 per cent. per annum or, if
higher, the appropriate rate (as defined in the Act) as the board may determine,
from the date of forfeiture until payment, but the board may waive payment
wholly or in part or enforce payment without any allowance for the value of the
shares at the time of forfeiture or for any consideration received on their
disposal.
26. SURRENDER
The board may accept the surrender of any share which it is in a position to
forfeit upon such terms and conditions as may be agreed and, subject to any such
terms and conditions, a surrendered share shall be treated as if it had been
forfeited.
27. EXTINCTION OF RIGHTS
The forfeiture of a share shall involve the extinction at the time of forfeiture
of all interest in and all claims and demands against the Company in respect of
the share and all other rights and liabilities incidental to the share as
between the person whose share is forfeited and the Company, except only such of
those rights and liabilities as are by these Articles expressly saved, or as are
by the Companies Acts given or imposed in the case of past members.
28. EVIDENCE OF FORFEITURE
A statutory declaration by a director or the secretary that a share has been
duly forfeited or surrendered on a specified date shall be conclusive evidence
of the facts stated in it as against all
7
<PAGE>
persons claiming to be entitled to the share and the declaration shall
(subject to the execution of an instrument of transfer if necessary)
constitute a good title to the share and the person to whom the share is
disposed of shall not be bound to see to the application of the purchase
money, if any, nor shall his title to the share be affected by any
irregularity in, or invalidity of, the proceedings in reference to the
forfeiture, surrender, sale, re-allotment or disposal of the share.
TRANSFER OF SHARES
29. FORM AND EXECUTION OF TRANSFER
The instrument of transfer of a share may be in any usual form or in any other
form which the board may approve and shall be signed by or on behalf of the
transferor and, unless the share is fully paid, by or on behalf of the
transferee. An instrument of transfer need not be under seal.
30. RESTRICTIONS ON TRANSFER
Subject to Article 32 The board may, in its absolute discretion and without
giving any reason, refuse to register the transfer of a share which is not fully
paid, or does not otherwise comply with the provisions of Articles 31 or 32.
31. REGISTRATION OF TRANSFER
The directors must register the transfer of a share which is fully paid and
which:
(a) is lodged at the office or such other place as the directors may
reasonably appoint, is duly stamped and is accompanied by the certificate
for the shares to which it relates or such other evidence as the board
may reasonably require to show the right of transferor to make the
transfer;
(b) is in respect of only one class of shares; and
(c) is in favour of not more than four transferees.
32. TRANSFERS TO SECURED INSTITUTIONS
Notwithstanding anything contained in these Articles, the directors shall not
decline to and shall promptly register any transfer of shares, and they may not
suspend registration thereof where such transfer:
(a) is to any bank or institution to which such shares have been charged by
way of security, whether as agent and trustee for a group of banks or
institutions or otherwise or to any nominee or transferee of such a bank
or institution (a "Secured Institution"); or
(b) is delivered to the Company for registration by a Secured Institution or
its nominee in order to perfect its security over the shares; or
(c) is executed by a Secured Institution or its nominee pursuant to the power
of sale or other power under such security,
and furthermore notwithstanding anything to the contrary contained in these
Articles no transferor of any shares in the Company or proposed transferor of
such shares to a
8
<PAGE>
Secured Institution or its nominee and no Secured Institution or its nominee
shall be required to offer the shares which are or are to be the subject of
any transfer aforesaid to the shareholders for the time being of the Company
or any of them, and no such shareholder shall have any right under the
Articles of Association or otherwise howsoever to require such shares to be
transferred to them whether for consideration or not.
33. NOTICE OF REFUSAL TO REGISTER
If the board refuses to register the transfer, it shall within 30 days after the
date on which the instrument of transfer was lodged with the Company send to the
transferee notice of the refusal.
34. NO FEE PAYABLE ON REGISTRATION
No fee shall be charged for the registration of any instrument of transfer or
other document relating to or affecting the title to any share.
35. RETENTION OF TRANSFERS
The Company shall be entitled to retain any instrument of transfer which is
registered, but any instrument of transfer which the board refuses to register
shall be returned to the person lodging it when notice of the refusal is given.
TRANSMISSION OF SHARES
36. TRANSMISSION
If a member dies the survivor or survivors where he was a joint holder, and his
personal representatives where he was a sole holder or the only survivor of
joint holders, shall be the only persons recognised by the Company as having any
title to his interest; but nothing herein contained shall release the estate of
a deceased member (whether a sole or joint holder) from any liability in respect
of any share held by him.
37. ELECTIONS FOLLOWING TRANSMISSION
A person becoming entitled to a share in consequence of the death or bankruptcy
of a member or otherwise by operation of law may, upon such evidence being
produced as the board may properly require as to his entitlement, elect either
to become the holder of the share or to have some person nominated by him
registered as the transferee. If he elects to become the holder he shall give
notice to the Company to that effect. If he elects to have another person
registered, he shall execute an instrument of transfer of the share to that
person. All the provisions of these Articles relating to the transfer of shares
shall apply to any such notice or instrument of transfer as if it were an
instrument of transfer executed by the member and the death or bankruptcy of the
member or other event giving rise to the transmission had not occurred.
The board may at any time give notice requiring any such person to elect either
to be registered himself or to transfer the share and if the notice is not
complied with within sixty days the board may thereafter withhold payment of all
dividends or other moneys payable in respect of the share until the requirements
of the notice have been complied with.
38. RIGHTS OF PERSONS ENTITLED BY TRANSMISSION
A person becoming entitled to a share in consequence of the death or bankruptcy
of a member or otherwise by operation of law shall, upon such evidence being
produced as the board may properly require as to his entitlement and subject to
the requirements of Article 37, have the same
9
<PAGE>
rights in relation to the share as he would have had if he were the holder of
the share, and may give a discharge for all dividends and other moneys
payable in respect of the share, but he shall not, before being registered as
the holder of the share, be entitled in respect of it to receive notice of or
to attend or vote at any meeting of the Company or to receive notice of or to
attend or vote at any separate meeting of the holders of any class of shares
in the Company.
ALTERATION OF SHARE CAPITAL
39. ALTERATIONS PERMITTED BY ORDINARY RESOLUTION
The Company may by ordinary resolution:
(a) increase its share capital by such sum to be divided into shares of such
amount as the resolution prescribes;
(b) consolidate and divide all or any of its share capital into shares of
larger amount than its existing shares;
(c) subject to the provisions of the Companies Acts, sub-divide its shares,
or any of them, into shares of smaller amount than is fixed by the
Memorandum and the resolution may determine that, as between the shares
resulting from the sub-division, any of them may have any preference or
advantage as compared with the others; and
(d) cancel shares which, at the date of the passing of the resolution, have
not been taken or agreed to be taken by any person and diminish the
amount of its share capital by the amount of the shares so cancelled.
40. NEW SHARES SUBJECT TO THESE ARTICLES
All new shares shall be subject to the provisions of these Articles with
reference to payment of calls, lien, forfeiture, transfer, transmission and
otherwise, and, unless otherwise provided by these Articles, by the resolution
creating the new shares or by the conditions of issue, the new shares shall be
unclassified shares.
41. FRACTIONS ARISING
Whenever as a result of a consolidation or sub-division of shares any fractions
arise, the board may settle the matter in any manner it deems fit and in
particular may sell shares representing fractions to which any members would
otherwise become entitled to any person (including, subject to the provisions of
the Companies Acts, the Company) and distribute the net proceeds of sale in due
proportion among those members, and the board may authorise some person to
execute an instrument of transfer of the shares to, or in accordance with the
directions of, the purchaser. The transferee shall not be bound to see to the
application of the purchase moneys nor shall his title to the shares be affected
by any irregularity in or invalidity of the proceedings in relation to the sale.
42. POWER TO REDUCE CAPITAL
Subject to the provisions of the Companies Acts, the Company may by special
resolution reduce its share capital, any capital redemption reserve and any
share premium account in any way.
10
<PAGE>
PURCHASE OF OWN SHARES
43. POWER TO PURCHASE OWN SHARES
Subject to and in accordance with the provisions of the Companies Acts and
without prejudice to any relevant special rights attached to any class of
shares, the Company may purchase any of its own shares of any class (including
redeemable shares) and, if it is a private company, make a payment in respect of
the redemption or purchase of its own shares otherwise than out of distributable
profits of the company or the proceeds of a fresh issue of shares, at any price
(whether at par or above or below par), and so that any shares to be so
purchased may be selected in any manner whatsoever. Every contract for the
purchase of, or under which the Company may become entitled or obliged to
purchase, shares in the Company shall be authorised by such resolution of the
Company as may be required by the Companies Acts and by an extraordinary
resolution passed at a separate general meeting of the holders of each class of
shares (if any) which, at the date on which the contract is authorised by the
Company in general meeting, entitle them, either immediately or at any time
later on, to convert all or any of the shares of that class held by them into
equity share capital of the Company.
GENERAL MEETINGS
44. TYPES OF GENERAL MEETING
All general meetings of the Company other than annual general meetings shall be
called extraordinary general meetings.
45. ANNUAL GENERAL MEETINGS
The board shall convene and the Company shall hold general meetings as annual
general meetings in accordance with the requirements of the Act.
46. CLASS MEETINGS
All provisions of these Articles relating to general meetings of the Company
shall, mutatis mutandis, apply to every separate general meeting of the holders
of any class of shares in the capital of the Company, except that:
(a) the necessary quorum shall be two persons holding or representing by
proxy at least one-third in nominal value of the issued shares of the
class or, at any adjourned meeting of such holders, one holder present in
person or by proxy, whatever the amount of his holding, who shall be
deemed to constitute a meeting; and
(b) any holder of shares of the class present in person or by proxy may
demand a poll; and
(c) each holder of shares of the class shall, on a poll, have one vote in
respect of every share of the class held by him.
47. CONVENING GENERAL MEETINGS
Subject to the provisions of Article 48, the board may call general meetings
whenever and at such times and places as it shall determine and, on the
requisition of members pursuant to the provisions of the Companies Acts, shall
forthwith proceed to convene an extraordinary general
11
<PAGE>
meeting in accordance with the requirements of the Companies Acts. If there
are not within the United Kingdom sufficient directors to call a general
meeting, any director or any member of the Company may call a general meeting.
NOTICE OF GENERAL MEETINGS
48. PERIOD OF NOTICE
An annual general meeting and an extraordinary general meeting called for the
passing of a special resolution, elective resolution or a resolution appointing
a person as a director shall be called by at least twenty-one clear days'
notice. All other extraordinary general meetings shall be called by at least
fourteen clear days' notice but a general meeting may be called by shorter
notice if it is so agreed:
(a) in the case of an annual general meeting, by all the members entitled to
attend and vote thereat; and
(b) in the case of any other meeting by a majority in number of the members
having a right to attend and vote being a majority together holding not
less than ninety-five per cent. in nominal value of the shares giving
that right.
49. PROVISION OF NOTICE
Subject to the provisions of these Articles and to any restrictions imposed on
any shares, the notice shall be given to all the members, to all persons
entitled to a share in consequence of the death or bankruptcy of a member, to
each of the directors, to the auditors for the time being of the Company and if
required under the Companies Acts, the former auditors of the Company.
50. CONTENTS OF NOTICE
The notice shall specify the time and place of the meeting and, in the case of
special business, the general nature of such business. All business shall be
deemed special that is transacted at an extraordinary general meeting and also
all business that is transacted at an annual general meeting with the exception
of:-
(a) the declaration of dividends;
(b) the consideration and adoption of the accounts and balance sheet and the
reports of the directors and auditors and other documents required to be
annexed to the accounts;
(c) the appointment and re-appointment of directors;
(d) the appointment of auditors where special notice of the resolution for
such appointment is not required by the Companies Acts; and
(e) the fixing of, or the determining of the method of fixing, the
remuneration of the directors and/or auditors.
The notice shall, in the case of an annual general meeting, specify the meeting
as such, and, in the case of a meeting to pass a special, extraordinary or
elective resolution, specify the intention to propose the resolution as a
special, extraordinary, or elective resolution, as the case may be.
12
<PAGE>
The notice shall state with reasonable prominence that a member entitled to
attend and vote at the meeting being called is entitled to appoint one or more
proxies to attend and vote instead of him, and that a proxy need not also be a
member.
51. ACCIDENTAL OMISSION TO GIVE NOTICE
The accidental omission to give notice of a meeting to any person entitled to
receive the same, or the non-receipt of a notice of meeting by any such person,
shall not invalidate the proceedings at that meeting.
PROCEEDINGS AT GENERAL MEETINGS
52. QUORUM
No business shall be transacted at any general meeting unless a quorum is
present, but the absence of a quorum shall not preclude the choice or
appointment of a chairman, which shall not be treated as part of the business of
the meeting. Save as otherwise provided by these Articles, one person, if and
for so long as the Company has only one member, and one person being a member
and being a proxy for a member or two persons, if and for so long as the Company
has two or more members, entitled to vote upon the business to be transacted,
each being a member or a proxy for a member or a duly authorised representative
of a corporation, shall be a quorum.
53. IF QUORUM NOT PRESENT
If such a quorum is not present within five minutes (or such longer time not
exceeding thirty minutes as the chairman of the meeting may decide to wait) from
the time appointed for the meeting, or if during a meeting such a quorum ceases
to be present, the meeting, if convened on the requisition of members, shall be
dissolved, and in any other case shall stand adjourned to such time and place as
the chairman of the meeting may determine. If at the adjourned meeting a quorum
is not present within fifteen minutes after the time appointed for holding the
meeting, the meeting shall be dissolved.
54. CHAIRMAN
The chairman, if any, of the board or, in his absence, any deputy chairman of
the Company or, in his absence, some other director nominated by the board,
shall preside as chairman of the meeting, but if neither the chairman, deputy
chairman nor such other director (if any) is present within five minutes after
the time appointed for holding the meeting or is not willing to act as chairman,
the directors present shall elect one of their number to be chairman. If there
is only one director present and willing to act, he shall be chairman. If no
director is willing to act as chairman, or if no director is present within five
minutes after the time appointed for holding the meeting, the members present
and entitled to vote shall choose one of their number to be chairman.
55. DIRECTORS ENTITLED TO SPEAK
A director shall, notwithstanding that he is not a member, be entitled to attend
and speak at any general meeting and at any separate meeting of the holders of
any class of shares in the Company.
56. ADJOURNMENTS
The chairman may, with the consent of a meeting at which a quorum is present
(and shall if so directed by the meeting), adjourn the meeting from time to time
and from place to place, but no business shall be transacted at an adjourned
meeting other than business which might properly
13
<PAGE>
have been transacted at the meeting had the adjournment not taken place.
When a meeting is adjourned for thirty days or more or for an indefinite
period, at least seven Clear days' notice shall be given specifying the time
and place of the adjourned meeting and the general nature of the business to
be transacted. Otherwise it shall not be necessary to give any notice of an
adjournment or of the business to be transacted at an adjourned meeting.
57. AMENDMENTS TO RESOLUTIONS
If an amendment shall be proposed to any resolution under consideration but
shall in good faith be ruled out of order by the chairman of the meeting, the
proceedings on the substantive resolution shall not be invalidated by any error
in such ruling. With the consent of the chairman of the meeting, an amendment
may be withdrawn by its proposer before it is voted upon. In the case of a
resolution duly proposed as a special or extraordinary resolution, no amendment
thereto (other than a mere clerical amendment to correct a patent error) may in
any event be considered or voted upon.
58. METHODS OF VOTING
A resolution put to the vote of a general meeting shall be decided on a show of
hands unless, before or on the declaration of the result of a vote on the show
of hands or on the withdrawal of any other demand for a poll, a poll is duly
demanded. Subject to the provisions of the Companies Acts, a poll may be
demanded by:
(a) the chairman of the meeting; or
(b) at least two members present in person or by proxy having the right to
vote at the meeting; or
(c) any member or members present in person or by proxy representing not less
than one-tenth of the total voting rights of all the members having the
right to vote at the meeting; or
(d) any member or members present in person or by proxy holding shares
conferring a right to vote at the meeting being shares on which an
aggregate sum has been paid up equal to not less than one-tenth of the
total sum paid up on all the shares conferring that right,
and a demand by a person as proxy for a member shall be the same as a demand by
the member.
59. DECLARATION OF RESULT
Unless a poll is duly demanded a declaration by the chairman that a resolution
has been carried or carried unanimously, or by a particular majority, or lost,
or not carried by a particular majority and an entry to that effect in the
minutes of the meeting shall be conclusive evidence of the fact without proof of
the number or proportion of the votes recorded in favour of or against the
resolution.
60. WITHDRAWAL OF DEMAND FOR POLL
The demand for a poll may, before the poll is taken, be withdrawn but only with
the consent of the chairman and a demand so withdrawn shall not be taken to have
invalidated the result of a show of hands declared before the demand was made.
If the demand for a poll is withdrawn, the chairman or any other member entitled
may demand a poll.
14
<PAGE>
61. CONDUCT OF POLL
A poll shall be taken as the chairman directs and he may appoint scrutineers
(who need not be members) and fix a time and place for declaring the result of
the poll. The result of the poll shall be deemed to be the resolution of the
meeting at which the poll was demanded.
62. CHAIRMAN'S CASTING VOTE
In the case of an equality of votes, whether on a show of hands or on a poll,
the chairman shall not be entitled to a casting vote in addition to any other
vote he may have.
63. WHEN POLL TO BE TAKEN
A poll demanded on the election of a chairman or on a question of adjournment
shall be taken forthwith. A poll demanded on any other question shall be taken
either forthwith or at such time and place as the chairman directs not being
more than thirty days after the poll is demanded. The demand for a poll shall
not prevent the continuance of a meeting for the transaction of any business
other than the question on which the poll was demanded. If a poll is demanded
before the declaration of the result of a show of hands and the demand is duly
withdrawn, the meeting shall continue as if the demand had not been made.
64. NOTICE OF POLL
No notice need be given of a poll not taken forthwith if the time and place at
which it is to be taken are announced at the meeting at which it is demanded.
In any other case at least seven clear days' notice shall be given specifying
the time and place at which the poll is to be taken.
65. EFFECTIVENESS OF SPECIAL AND EXTRAORDINARY RESOLUTIONS
Where for any purpose an ordinary resolution of the Company is required, a
special or extraordinary resolution shall also be effective and where for any
purpose an extraordinary resolution is required a special resolution shall also
be effective.
66. RESOLUTIONS IN WRITING
Subject to the provisions of the Companies Acts, a resolution in writing
executed by or on behalf of each member who would have been entitled to vote
upon it if it had been proposed at a general meeting at which he was present
shall be as effectual as if it had been passed at a general meeting properly
convened and held and may consist of several instruments in the like form each
executed by or on behalf of one or more of the members.
VOTES OF MEMBERS
67. RIGHT TO VOTE
Subject to any rights or restrictions attached to any shares, on a show of hands
every member who is present in person or by proxy shall have one vote and on a
poll every member present in person or by proxy shall have one vote for every
share of which he is the holder.
68. VOTES OF JOINT HOLDERS
In the case of joint holders of a share the vote of the senior who tenders a
vote, whether in person or by proxy, shall be accepted to the exclusion of the
votes of the other joint holders and for this purpose seniority shall be
determined by the order in which the names of the holders stand in the register.
15
<PAGE>
69. MEMBER UNDER INCAPACITY
A member in respect of whom an order has been made by any court or official
having jurisdiction (whether in the United Kingdom or elsewhere) in matters
concerning mental disorder may vote, whether on a show of hands or on a poll, by
his receiver, curator bonis or other person authorised in that behalf appointed
by that court or official, and any such receiver, curator bonis or other person
may, on a poll, vote by proxy. Evidence to the satisfaction of the board of the
authority of the person claiming to exercise the right to vote shall be
deposited at the office, or at such other place as is specified in accordance
with these Articles for the deposit of instruments of proxy, not less than 48
hours before the time appointed for holding the meeting or adjourned meeting at
which the right to vote is to be exercised and in default the right to vote
shall not be exercisable.
70. CALLS IN ARREARS
No member shall be entitled to vote at any general meeting or at any separate
meeting of the holders of any class of shares in the Company, either in person
or by proxy, in respect of any share held by him unless all moneys presently
payable by him in respect of that share have been paid.
71. OBJECTION TO VOTING
No objection shall be raised to the qualification of any voter except at the
meeting or adjourned meeting or poll at which the vote objected to is tendered,
and every vote not disallowed at such meeting shall be valid. Any objection
made in due time shall be referred to the chairman whose decision shall be final
and conclusive.
72. SUPPLEMENTARY PROVISIONS ON VOTING
On a poll votes may be given either personally or by proxy. A member entitled to
more than one vote need not, if he votes, use all his votes or cast all the
votes he uses in the same way.
PROXIES AND CORPORATE REPRESENTATIVES
73. APPOINTMENT OF PROXY
An instrument appointing a proxy shall be in writing under the hand of the
appointor or his attorney or, if the appointor is a corporation, either under
its common seal or the hand of a duly authorised officer, attorney or other
person authorised to sign it.
74. FORM OF PROXY - STANDARD
The instrument appointing a proxy shall be executed by or on behalf of the
appointer and shall be in the following form (or in a form as near thereto as
circumstances allow or in any other form which is usual or which the directors
may approve):
"______________________ Limited
I/We, _____ _____ , of _____ _____ _____ being a member/members of the
above-named company, hereby appoint _____ _____ of _____ _____ _____, or
failing him, _____ _____ of _____ _____ _____, as my/our proxy to vote in
my/our names[s] and on my/our behalf at the annual/extraordinary general
meeting of the company to be held on _____ _____ 19__, and at any
adjournment thereof.
16
<PAGE>
Signed on _____ _____ 19__."
75. FORM OF PROXY - EACH WAY
Where it is desired to afford members an opportunity of instructing the proxy
how he shall act the instrument appointing a proxy shall be in the following
form (or in a form as near thereto as circumstances allow or in any other form
which is usual or which the directors may approve):
"_____________________ Limited
I/We, _____ _____ , of _____ _____ _____ being a member/members of the
above-named company, hereby appoint _____ _____ of _____ _____ _____, or
failing him, _____ _____ of _____ _____ _____, as my/our proxy to vote in
my/our names[s] and on my/our behalf at the annual/extraordinary general
meeting of the company to be held on _____ _____ 19__, and at any
adjournment thereof.
Signed on _____ _____ 19__."
This form is to be used in respect of the resolutions mentioned below as
follows:
Resolution No.1 *for*against
Resolution No.2 *for*against.
*Strike out whichever is not desired.
Unless otherwise instructed, the proxy may vote as he thinks fit or
abstain from voting.
Signed on _____ _____ 19__."
76. VOTING BY APPOINTOR
Delivery of an instrument appointing a proxy shall not preclude a member from
attending and voting in person at the meeting or poll concerned. A member may
appoint more than one proxy to attend on the same occasion.
77. DELIVERY OF FORM OF PROXY
The instrument appointing a proxy and any power of attorney or other written
authority under which it is executed or an office or notarially certified copy
or a copy certified in accordance with the Powers of Attorney Act 1971 of such
power or written authority shall be deposited at the office or at such other
place within the United Kingdom as is specified in the notice convening the
meeting or in any instrument of proxy sent out by the Company in relation to the
meeting not less than 48 hours before the time appointed for holding the meeting
or adjourned meeting at which the person named in the instrument proposes to
vote and an instrument of proxy which is not deposited or delivered in a manner
so permitted shall be invalid. No instrument of proxy shall be valid after the
expiration of twelve months from the date stated in it as the date of its
execution. When two or more valid but differing instruments of proxy are
delivered in respect of the same share for use at the same meeting, the one
which was delivered last (regardless of its date or of the date of its
execution) shall be treated as replacing and revoking the others as regards that
share; if the Company is unable to determine which was delivered last, none of
them shall be treated as valid in respect of that share.
17
<PAGE>
78. VALIDITY OF FORM OF PROXY
The instrument of proxy shall, unless the contrary is stated in it, be deemed
to confer authority to vote as the proxy thinks fit on any amendment of a
resolution put to the meeting for which the proxy is given and on any resolution
put to the meeting, whether or not notice of such resolution was given in the
notice of meeting. The instrument of proxy shall, unless the contrary is stated
therein, be valid as well for any adjournment of the meeting as for the meeting
to which it relates.
79. CORPORATE REPRESENTATIVES
Any corporation or corporation sole which is a member of the Company may (in the
case of a corporation, by resolution of its directors or other governing body or
by authority to be given under seal or under the hand of an officer duly
authorised by it) authorise such person as it thinks fit to act as its
representative at any meeting of the Company or at any separate meeting of the
holders of any class of shares. A person so authorised shall be entitled to
exercise the same power on behalf of the grantor of the authority as the grantor
could exercise if it were an individual member of the Company and the grantor
shall for the purposes of these Articles be deemed to be present in person at
any such meeting if a person so authorised is present at it.
80. REVOCATION OF AUTHORITY
A vote given or poll demanded by proxy or by the duly authorised representative
of a corporation shall be valid notwithstanding the previous determination of
the authority of the person voting or demanding a poll unless notice of the
determination was received by the Company at the office or at such other place
at which the instrument of proxy was duly deposited before the commencement of
the meeting or adjourned meeting at which the vote is given or the poll demanded
or (in the case of a poll taken otherwise than on the same day as the meeting or
adjourned meeting) the time appointed for taking the poll.
NUMBER OF DIRECTORS
81. LIMITS ON NUMBER OF DIRECTORS
Unless otherwise determined by ordinary resolution, the number of directors
(other than alternate directors) shall be not less than one but shall not be
subject to any maximum in number. Wheresoever the minimum number of directors
shall be one, a sole director shall have authority to exercise all the powers
and discretions by the Act and/or by these expressed to be vested in the
directors generally.
APPOINTMENT AND RETIREMENT OF DIRECTORS
82. NO RETIREMENT BY ROTATION
The directors shall not be required to retire by rotation.
83. ELIGIBILITY FOR ELECTION
No person shall be appointed a director at any general meeting unless:
(a) he is recommended by the board; or
18
<PAGE>
(b) not less than six nor more than thirty-five Clear days before the date
appointed for the meeting, notice executed by a member qualified to vote
at the meeting (not being the person to be proposed) has been given to
the Company of the intention to propose that person for appointment
stating the particulars which would, if he were so appointed or
reappointed, be required to be included in the Company's register of
directors, together with notice executed by that person of his
willingness to be appointed.
84. NOTICE
Not less than seven nor more than twenty-eight clear days before the date
appointed for holding a general meeting notice shall be given to all who are
entitled to receive notice of the meeting of any person who is recommended by
the directors for appointment as a director at the meeting or in respect of whom
notice has been duly given to the company of the intention to propose him at the
meeting for appointment or reappointment as a director. The notice shall give
the particulars of that person which would, if he were so appointed, be required
to be included in the company's register of directors.
85. ADDITIONAL POWERS OF THE COMPANY
Subject as aforesaid, the Company may appoint a person who is willing to act to
be a director either to fill a vacancy or as an additional director:
(a) by ordinary resolution of the members in general meeting; or
(b) by notice in writing left at the registered office.
86. APPOINTMENT BY BOARD
The board may appoint a person who is willing to act to be a director, either to
fill a vacancy or as an additional director, provided that the appointment does
not cause the number of directors to exceed the number, if any, fixed by or in
accordance with these Articles as the maximum number of directors. A director
so appointed shall hold office only until the next following annual general
meeting. If not reappointed at such annual general meeting, he shall vacate
office at the conclusion thereof.
87. AGE LIMIT
No person shall be disqualified from being appointed or reappointed a director,
and no director shall be required to vacate that office, by reason only of the
fact that he has attained the age of seventy years or any other age nor shall it
be necessary by reason of his age to give special notice under the Companies
Acts of any resolution. Where the board convenes any general meeting of the
Company at which (to the knowledge of the board) a director will be proposed for
appointment or reappointment who at the date for which the meeting is convened
will have attained the age of seventy years or more, the board shall give notice
of his age in years in the notice convening the meeting or in any document
accompanying the notice, but the accidental omission to do so shall not
invalidate any proceedings, or any appointment or reappointment of that
director, at that meeting.
88. NO SHARE QUALIFICATION
A director shall not be required to hold any shares of the Company by way of
qualification.
19
<PAGE>
ALTERNATE DIRECTORS
89. POWER TO APPOINT ALTERNATES
Any director (other than an alternate director) may appoint any other director,
or any other person approved by resolution of the board and willing to act, to
be an alternate director and may remove from office an alternate director so
appointed by him.
90. ALTERNATES ENTITLED TO RECEIVE NOTICE
An alternate director shall be entitled to receive notice of all meetings of the
board and of all meetings of committees of the board of which his appointor is a
member, to attend and vote at any such meeting at which his appointor is not
personally present, and generally to perform all the functions of his appointor
(except as regards power to appoint an alternate) as a director in his absence.
It shall not be necessary to give notice of such a meeting to an alternate
director who is absent from the United Kingdom.
91. ALTERNATES REPRESENTING MORE THAN ONE DIRECTOR
A director or any other person may act as alternate director to represent more
than one director, and an alternate director shall be entitled at meetings of
the board or any committee of the board to one vote for every director whom he
represents (and who is not present) in addition to his own vote (if any) as a
director, but he shall count as only one for the purpose of determining whether
a quorum is present.
92. EXPENSES AND REMUNERATION OF ALTERNATES
An alternate director may be repaid by the Company such expenses as might
properly have been repaid to him if he had been a director but shall not in
respect of his services as an alternate director be entitled to receive any
remuneration from the Company [except such part (if any) of the remuneration
otherwise payable to his appointer as such appointer may by notice in writing to
the Company from time to time direct]. An alternate director shall be entitled
to be indemnified by the Company to the same extent as if he were a director.
93. TERMINATION OF APPOINTMENT
An alternate director shall cease to be an alternate director:
(a) if his appointor ceases to be a director; but, if a director retires by
rotation or otherwise but is reappointed or deemed to have been
reappointed at the meeting at which he retires, any appointment of an
alternate director made by him which was in force immediately prior to
his retirement shall continue after his reappointment;
(b) on the happening of any event which, if he were a director, would cause
him to vacate his office as director; or
(c) if he resigns his office by notice to the Company.
94. METHOD OF APPOINTMENT AND REVOCATION
Any appointment or removal of an alternate director shall be by notice to the
Company signed by the director making or revoking the appointment and shall take
effect in accordance with the terms of the notice (subject to any approval
required by Article 89) upon receipt of such notice at the office.
20
<PAGE>
95. ALTERNATE NOT AN AGENT OF APPOINTOR
Save as otherwise expressly provided in these Articles, an alternate director
shall be deemed for all purposes to be a director and, accordingly, except where
the context otherwise requires, references to a director shall be deemed to
include a reference to an alternate director. An alternate director shall alone
be responsible for his own acts and defaults and he shall not be deemed to be
the agent of the director appointing him.
POWERS OF THE BOARD
96. BUSINESS TO BE MANAGED BY BOARD
Subject to the provisions of the Companies Acts, the Memorandum and these
Articles and to any directions given by special resolution, the business of the
Company shall be managed by the board which may pay all expenses incurred in
forming and registering the Company and may exercise all the powers of the
Company. No alteration of the Memorandum or Articles and no such direction
shall invalidate any prior act of the board which would have been valid if that
alteration had not been made or that direction had not been given. The powers
given by this Article shall not be limited by any special power given to the
board by these Articles and a meeting of the board at which a quorum is present
may exercise all powers exercisable by the board.
DELEGATION OF POWERS OF THE BOARD
97. COMMITTEES OF THE BOARD
The board may delegate any of its powers to any committee consisting of one or
more directors. The board may also delegate to any director holding any
executive office such of its powers as the board considers desirable to be
exercised by him. Any such delegation shall, in the absence of express
provision to the contrary in the terms of delegation, be deemed to include
authority to sub-delegate to one or more directors (whether or not acting as a
committee) or to any employee or agent of the Company all or any of the powers
delegated and may be made subject to such conditions as the board may specify,
and may be revoked or altered. The board may co-opt on to any such committee
persons other than directors, who may enjoy voting rights in the committee. The
co-opted members shall be less than one-half of the total membership of the
committee and a resolution of any committee shall be effective only if a
majority of the members present are directors. Subject to any conditions
imposed by the board, the proceedings of a committee with two or more members
shall be governed by these Articles regulating the proceedings of directors so
far as they are capable of applying.
98. AGENTS
The board may, by power of attorney or otherwise, appoint any person or persons
to be the agent or agents of the Company for such purposes, with such powers,
authorities and discretions (not exceeding those vested in the board) and on
such conditions as the board determines, including authority for the agent or
agents to delegate all or any of his or their powers, authorities and
discretions, and may revoke or vary such delegation.
99. OFFICES INCLUDING THE TITLE "DIRECTOR"
The board may appoint any person to any office or employment having a
designation or title including the word "director" or attach to any existing
office or employment with the Company
21
<PAGE>
such a designation or title and may terminate any such appointment or the use
of any such designation or title. The inclusion of the word "director" in
the designation or title of any such office or employment shall not imply
that the holder is a director of the Company, nor shall the holder thereby be
empowered in any respect to act as, or be deemed to be, a director of the
Company for any of the purposes of these Articles.
DISQUALIFICATION AND REMOVAL OF DIRECTORS
100. DISQUALIFICATION
The office of a director shall be vacated if:
(a) he ceases to be a director by virtue of any provisions of the Companies
Acts or these Articles or he becomes prohibited by law from being a
director; or
(b) he becomes bankrupt or makes any arrangement or composition with his
creditors generally or shall apply to the court for an interim order
under section 253 of the Insolvency Act 1986 in connection with a
voluntary arrangement under that Act; or
(c) he is, or may be, suffering from mental disorder and either:
(i) he is admitted to hospital in pursuance of an application for
admission for treatment under the Mental Health Act 1983 or, in
Scotland, an application for admission under the Mental Health
(Scotland) Act 1960; or
(ii) an order is made by a court having jurisdiction (whether in the
United Kingdom or elsewhere) in matters concerning mental disorder
for his detention or for the appointment of a receiver, curator
bonis or other person to exercise powers with respect to his
property or affairs; or
(d) (not being a director holding office as such for a fixed term) he resigns
his office by notice to the Company; or
(e) he shall for more than six consecutive months have been absent without
permission of the board from meetings of the board held during that
period and his alternate director (if any) shall not during such period
have attended in his stead and the board resolves that his office be
vacated.
101. POWER OF COMPANY TO REMOVE DIRECTOR
Subject to the provisions of the Companies Acts a director may be removed from
office forthwith by:-
(a) (and notwithstanding any provision of these Articles or of any
agreement between the Company and such director but without
prejudice to any claim he may have for damages for breach of any
such agreement) ordinary resolution of the members of the Company
passed at a general meeting of which special notice has been
given;
(b) written resolution of the members of the Company; or
22
<PAGE>
(c) notice in writing left at the registered office of the Company and
signed by the holder(s) of not less than 75% of the voting rights
attaching to the shares for the time being issued.
REMUNERATION OF NON-EXECUTIVE DIRECTORS
102. ORDINARY REMUNERATION
The ordinary remuneration of the directors who do not hold executive office for
their services (excluding amounts payable under any other provision of these
Articles) shall not exceed in aggregate L10,000 per annum or such higher amount
as the Company may from time to time by ordinary resolution determine. Subject
thereto, each such director shall be paid a fee (which shall be deemed to accrue
from day to day) at such rate as may from time to time be determined by the
board.
103. ADDITIONAL REMUNERATION FOR SPECIAL SERVICES
Any director who does not hold executive office and who serves on any committee
of the directors, by the request of the board goes or resides abroad for any
purpose of the Company or otherwise performs special services which in the
opinion of the directors are outside the scope of the ordinary duties of a
director, may (without prejudice to the provisions of Article 102) be paid such
extra remuneration by way of salary, commission or otherwise as the board may
determine.
DIRECTORS' EXPENSES
104. DIRECTORS MAY BE PAID EXPENSES
The directors may be paid all travelling, hotel, and other expenses properly
incurred by them in connection with their attendance at meetings of the board or
committees of the board or general meetings or separate meetings of the holders
of any class of shares or of debentures of the Company or otherwise in
connection with the discharge of their duties.
EXECUTIVE DIRECTORS
105. APPOINTMENT TO EXECUTIVE OFFICE
Subject to the provisions of the Companies Acts, the board may appoint one or
more of its body to be the holder of any executive office (except that of
auditor) under the Company and may enter into an agreement or arrangement with
any director for his employment by the Company or for the provision by him of
any services outside the scope of the ordinary duties of a director. Any such
appointment, agreement or arrangement may be made upon such terms, including
terms as to remuneration, as the board determines, and any remuneration which is
so determined may be in addition to or in lieu of any ordinary remuneration as a
director. The board may revoke or vary any such appointment but without
prejudice to any rights or claims which the person whose appointment is revoked
or varied may have against the Company by reason thereof.
106. TERMINATION OF APPOINTMENT TO EXECUTIVE OFFICE
Any appointment of a director to an executive office shall terminate if he
ceases to be a director but without prejudice to any rights or claims which he
may have against the Company by reason
23
<PAGE>
of such cesser. A director appointed to an executive office shall not ipso
facto cease to be a director if his appointment to such executive office
terminates.
107. EMOLUMENTS TO BE DETERMINED BY THE BOARD
The emoluments of any director holding executive office for his services as such
shall be determined by the board, and may be of any description, and (without
limiting the generality of the foregoing) may include admission to or
continuance of membership of any scheme (including any share acquisition scheme)
or fund instituted or established or financed or contributed to by the Company
for the provision of pensions, life assurance or other benefits for employees or
their dependants, or the payment of a pension or other benefits to him or his
dependants on or after retirement or death, apart from membership of any such
scheme or fund.
DIRECTORS' INTERESTS
108. DIRECTORS MAY CONTRACT WITH THE COMPANY
Subject to the provisions of the Companies Acts, and provided that he has
disclosed to the board the nature and extent of any material interest of his, a
director notwithstanding his office:
(a) may be a party to, or otherwise interested in, any transaction or
arrangement with the Company or in which the Company is otherwise
interested;
(b) may act by himself or his firm in a professional capacity for the Company
(otherwise than as auditor) and he or his firm shall be entitled to
remuneration for professional services as if he were not a director;
(c) may be a director or other officer of, or employed by, or a party to any
transaction or arrangement with, or otherwise interested in, any body
corporate promoted by the Company or in which the Company is otherwise
interested; and
(d) shall not, by reason of his office, be accountable to the Company for any
benefit which he derives from any such office or employment or from any
such transaction or arrangement or from any interest in any such body
corporate and no such transaction or arrangement shall be liable to be
avoided on the ground of any such interest or benefit.
109. NOTIFICATION OF INTERESTS
For the purposes of Article 108:
(a) a general notice given to the board that a director is to be regarded as
having an interest of the nature and extent specified in the notice in
any transaction or arrangement in which a specified person or class of
persons is interested shall be deemed to be a disclosure that the
director has an interest in any such transaction of the nature and extent
so specified; and
(b) an interest of which a director has no knowledge and of which it is
unreasonable to expect him to have knowledge shall not be treated as an
interest of his.
24
<PAGE>
110. EXERCISE BY COMPANY OF VOTING RIGHTS
The board may exercise the voting power conferred by the shares in any body
corporate held or owned by the Company in such manner in all respects as it
thinks fit (including the exercise thereof in favour of any resolution
appointing its members or any of them directors of such body corporate, or
voting or providing for the payment of remuneration to the directors of such
body corporate).
GRATUITIES, PENSIONS AND INSURANCE
111. GRATUITIES AND PENSIONS
The board may (by establishment of or maintenance of schemes or otherwise)
provide benefits, whether by the payment of gratuities or pensions or by
insurance or otherwise, for any past or present director or employee of the
Company or any of its subsidiaries or any body corporate associated with, or any
business acquired by, any of them, and for any member of his family (including a
spouse and a former spouse) or any person who is or was dependent on him, and
may (as well before as after he ceases to hold such office or employment)
contribute to any fund and pay premiums for the purchase or provision of any
such benefit.
112. INSURANCE
Without prejudice to the provisions of Article 154, the board shall have the
power to purchase and maintain insurance for or for the benefit of any persons
who are or were at any time directors, officers, or employees or auditors of the
Company, or of any other company which is its holding company or in which the
Company or such holding company has any interest whether direct or indirect or
which is in any way allied to or associated with the Company, or of any
subsidiary undertaking of the Company or any such other company, or who are or
were at any time trustees of any pension fund or employee share scheme in which
employees of the Company or any such other company or subsidiary undertaking are
interested, including (without prejudice to the generality of the foregoing)
insurance against any liability incurred by such persons in respect of any act
or omission in the actual or purported execution or discharge of their duties or
in the exercise or purported exercise of their powers or otherwise in relation
to their duties, powers or offices in relation to the Company or any such other
company, subsidiary undertaking, pension fund or employee share scheme.
113. DIRECTORS NOT LIABLE TO ACCOUNT
No director or former director shall be accountable to the Company or the
members for any benefit provided pursuant to this Article and the receipt of any
such benefit shall not disqualify any person from being or becoming a director
of the Company.
PROCEEDINGS OF DIRECTORS
114. CONVENING MEETINGS
Subject to the provisions of these Articles, the board may regulate its
proceedings as it thinks fit. A director may, and the secretary at the request
of a director shall, call a meeting of the board. Notice of a board meeting
shall be deemed to be properly given to a director if it is given to him
personally or by word of mouth or sent in writing to him at his last known
address or any other
25
<PAGE>
address given by him to the Company for this purpose. Questions arising at a
meeting shall be decided by a majority of votes. In the case of an equality
of votes, the chairman shall have a second or casting vote. Any director may
waive notice of a meeting and any such waiver may be retrospective.
115. QUORUM
The quorum for the transaction of the business of the board may be fixed by the
board and unless so fixed at any other number shall be two. A person who holds
office only as an alternate director shall, if his appointor is not present, be
counted in the quorum. Any director who ceases to be a director at a board
meeting may continue to be present and to act as a director and be counted in
the quorum until the termination of the board meeting if no director objects.
116. POWERS OF DIRECTORS IF NUMBER FALLS BELOW MINIMUM
The continuing directors or a sole continuing director may act notwithstanding
any vacancies in their number, but, if the number of directors is less than the
number fixed as the minimum, the continuing directors or director may act only
for the purpose of filling vacancies or of calling a general meeting.
117. CHAIRMAN AND DEPUTY CHAIRMAN
The board may appoint one of their number to be the chairman, and one of their
number to be the deputy chairman, of the board and may at any time remove either
of them from such office. Unless he is unwilling to do so, the director
appointed as chairman, or in his stead the director appointed as deputy
chairman, shall preside at every meeting of the board at which he is present.
If there is no director holding either of those offices, or if neither the
chairman nor the deputy chairman is willing to preside or neither of them is
present within five minutes after the time appointed for the meeting, the
directors present may appoint one of their number to be chairman of the meeting.
118. VALIDITY OF ACTS OF THE BOARD
All acts done by a meeting of the board, or of a committee of the board, or by a
person acting as a director or alternate director, shall, notwithstanding that
it be afterwards discovered that there was a defect in the appointment of any
director or any member of the committee or alternate director or that any of
them were disqualified from holding office, or had vacated office, or were not
entitled to vote, be as valid as if every such person had been duly appointed
and was qualified and had continued to be a director or, as the case may be, an
alternate director and had been entitled to vote.
119. RESOLUTIONS IN WRITING
A resolution in writing signed by all the directors entitled to receive notice
of a meeting of the board or of a committee of the board (not being less than
the number of directors required to form a quorum of the board) shall be as
valid and effectual as if it had been passed at a meeting of the board or (as
the case may be) a committee of the board duly convened and held and for this
purpose:
(a) a resolution may consist of several documents to the same effect each
signed by one or more directors;
(b) a resolution signed by an alternate director on behalf of his appointor
need not also be signed by his appointor; and
26
<PAGE>
(c) a resolution signed by a director who has appointed an alternate director
need not also be signed by the alternate director in that capacity.
120. MEETINGS BY TELEPHONE, ETC.
Without prejudice to the first sentence of Article 115, a meeting of the board
or of a committee of the board may consist of a conference between directors who
are not all in one place, but of whom each is able (directly by telephonic
communication, video link or via the internet) to speak to each of the others,
and to be heard by each of the others simultaneously. A director taking part in
such a conference shall be deemed to be present in person at the meeting and
shall be entitled to vote or be counted in a quorum accordingly. Such a meeting
shall be deemed to take place where the largest group of those participating in
the conference is assembled, or, if there is no such group, where the chairman
of the meeting then is. The word MEETING in these Articles shall be construed
accordingly.
121. DIRECTORS' POWER TO VOTE ON CONTRACTS IN WHICH THEY ARE INTERESTED
Save as otherwise provided by these Articles, a director may vote at a meeting
of the board or a committee of the board on any resolution of the board
concerning a matter in which he has, directly or indirectly, any kind of
interest whatsoever, and if he shall vote on any such resolution as aforesaid
his vote shall be counted; and in relation to any such vote as aforesaid he
shall (whether or not he shall vote on the same) be taken into account in the
quorum present at the meeting.
122. EXCLUSION OF DIRECTOR FROM QUORUM
A director shall not be counted in the quorum present at a meeting in relation
to a resolution on which he is not entitled to vote.
123. AMENDMENT OF RESTRICTIONS ON VOTING
The Company may by ordinary resolution suspend or relax to any extent, either
generally or in respect of any particular matter, any provision of these
Articles prohibiting a director from voting at a meeting of the board or of a
committee of the board, or ratify any transaction not duly authorised by reason
of a contravention of any such provision.
124. DIVISION OF PROPOSALS
Where proposals are under consideration concerning the appointment (including
fixing or varying the terms of appointment) of two or more directors to offices
or employments with the Company or any body corporate in which the Company is
interested, the proposals may be divided and considered in relation to each
director separately and in such cases each of the directors concerned shall be
entitled to vote and be counted in the quorum in respect of each resolution
except that concerning his own appointment.
125. DECISION OF CHAIRMAN FINAL AND CONCLUSIVE
If a question arises at a meeting of the board or of a committee of the board as
to the entitlement of a director to vote or be counted in a quorum, the question
may, before the conclusion of the meeting, be referred to the chairman of the
meeting and his ruling in relation to any director other than himself shall be
final and conclusive except in a case where the nature or extent of the
interests of the director concerned have not been fairly disclosed. If any such
question arises in respect of the chairman of the meeting, it shall be decided
by resolution of the board (on which the chairman shall not vote) and such
resolution will be final and conclusive except in a case where the nature and
extent of the interests of the chairman have not been fairly disclosed.
27
<PAGE>
SECRETARY
126. APPOINTMENT AND REMOVAL OF SECRETARY
Subject to the provisions of the Companies Acts, the secretary shall be
appointed by the board for such term, at such remuneration and upon such
conditions as it may think fit; and any secretary so appointed may be removed by
the board, but without prejudice to any claim for damages for breach of any
contract of service between him and the Company.
MINUTES
127. MINUTES REQUIRED TO BE KEPT
The board shall cause minutes to be made in books kept for the purpose:
(a) of all appointments of officers made by the board; and
(b) of all proceedings at meetings of the Company, of the holders of any
class of shares in the Company, of the board, and of committees of the
board, including the names of the directors present at each such meeting.
Any such minutes, if purporting to be signed by the chairman of the meeting to
which they relate or of the meeting at which they are read, shall be sufficient
evidence without any further proof of the facts therein stated.
THE SEAL
128. AUTHORITY REQUIRED FOR USE OF SEAL
The seal shall only be used by the authority of a resolution of the board or of
a committee of the board. The board may determine who shall sign any instrument
to which the seal is affixed and unless otherwise so determined it shall be
signed by at least one director and the secretary or by at least two directors.
129. OFFICIAL SEAL FOR USE ABROAD
The company may exercise the powers conferred by section 39 of the Act with
regard to having an official seal for use abroad.
130. EXECUTION OF INSTRUMENT AS A DEED UNDER HAND
Where the Act so permits, any instrument signed, with the authority of a
resolution of the board or of a committee of the board, by one director and the
secretary or by two directors and expressed to be executed by the Company as a
deed shall have the same effect as if executed under the seal, provided that no
instrument which makes it clear on its face that it is intended by the persons
making it to have effect as a deed shall be signed without the authority of the
board.
131. DELIVERY OF DEEDS
A document which is executed by the Company as a deed shall not be deemed to be
delivered by the Company solely as a result of its having been executed by the
Company.
28
<PAGE>
CERTIFICATION
132. CERTIFIED COPIES
Any director or the secretary or any person appointed by the board for the
purpose shall have power to authenticate any documents affecting the
constitution of the Company and any resolutions passed by the Company or the
holders of any class of shares of the Company or the board or any committee of
the board, and any books, records, documents and accounts relating to the
business of the Company, and to certify copies thereof or extracts therefrom as
true copies or extracts. A document purporting to be a copy of a resolution, or
the minutes of or an extract from the minutes of a meeting of the Company or the
holders of any class of shares of the Company or of the board or any committee
of the board that is certified as aforesaid shall be conclusive evidence in
favour of all persons dealing with the Company upon the faith thereof that such
resolution has been duly passed or, as the case may be, that such minutes or
extract is a true and accurate record of proceedings at a duly constituted
meeting.
DIVIDENDS
133. DECLARATION OF DIVIDENDS
Subject to the provisions of the Companies Acts, the Company may by ordinary
resolution declare dividends in accordance with the respective rights of the
members, but no dividend shall exceed the amount recommended by the board.
134. INTERIM DIVIDENDS
Subject to the provisions of the Companies Acts, the board may declare and
pay interim dividends if it appears to the board that they are justified by
the profits of the Company available for distribution. If the share capital
is divided into different classes, the board may declare and pay interim
dividends on shares which confer deferred or non-preferred rights with regard
to dividend as well as on shares which confer preferential rights with regard
to dividend, but no interim dividend shall be declared or paid on shares
carrying deferred or non-preferred rights if, at the time of declaration or
payment, any preferential dividend is in arrear. The board may also declare
and pay at intervals settled by it any dividend payable at a fixed rate if it
appears to the board that the profits available for distribution justify the
payment. Provided the board acts in good faith it shall not incur any
liability to the holders of shares conferring preferred rights for any loss
they may suffer by the declaration or lawful payment of an interim dividend
on any shares having deferred or non-preferred rights.
135. APPORTIONMENT OF DIVIDENDS
Except as otherwise provided by the rights attached to shares, all dividends
shall be declared and paid according to the amounts paid up on the shares on
which the dividend is paid; but no amount paid on a share in advance of the
date on which a call is payable shall be treated for the purposes of this
Article as paid on the share. All dividends shall be apportioned and paid
proportionately to the amounts paid up on the shares during any portion or
portions of the period in respect of which the dividend is paid; but, if any
share is issued on terms providing that it shall rank for dividend as from a
particular date, that share shall rank for dividend accordingly.
136. DIVIDENDS IN SPECIE
A general meeting declaring a dividend may, upon the recommendation of the
board, by ordinary resolution direct that it shall be satisfied wholly or partly
by the distribution of assets, and in
29
<PAGE>
particular of paid up shares or debentures of any other body corporate, and,
where any difficulty arises in regard to the distribution, the board may
settle the same as it thinks fit and in particular may issue fractional
certificates or authorise any person to sell and transfer any fractions or
disregard fractions altogether, and may fix the value for distribution of any
assets and may determine that cash shall be paid to any member upon the
footing of the value so fixed in order to adjust the rights of members and
may vest any assets in trustees.
137. PERMITTED DEDUCTIONS
The board may deduct from any dividend or other moneys payable to any member in
respect of a share any moneys presently payable by him to the Company in respect
of that share.
138. PROCEDURE FOR PAYMENT
Any dividend or other moneys payable in respect of a share may be paid by cheque
or warrant sent by post to the registered address of the holder or person
entitled or, if two or more persons are the holders of the share or are jointly
entitled to it by reason of the death or bankruptcy of the holder or otherwise
by operation of law, to the registered address of that one of those persons who
is first named in the register or to such person and to such address as the
person or persons entitled may in writing direct. Every such cheque or warrant
shall be made payable to the order of the person or persons entitled or to such
other person as the person or persons entitled may in writing direct and shall
be sent at the risk of the person entitled, and payment of the cheque shall be a
good discharge to the Company. Any joint holder or other person jointly
entitled to a share as aforesaid may give receipts for any dividend or other
moneys payable in respect of the share. Any such dividend or other money may
also be paid by any other method (including direct debit, bank transfer and
dividend warrant) which the board considers appropriate.
139. INTEREST NOT PAYABLE
No dividend or other moneys payable in respect of a share shall bear interest
against the Company unless otherwise provided by the rights attached to the
share.
140. FORFEITURE OF UNCLAIMED DIVIDENDS
Any dividend which has remained unclaimed for twelve years from the date when it
became due for payment shall, if the board so resolves, be forfeited and cease
to remain owing by the Company. The payment by the board of any unclaimed
dividend or other moneys payable in respect of a share into a separate account
shall not constitute the Company a trustee thereof.
CAPITALISATION OF PROFITS AND RESERVES
141. POWER TO CAPITALISE
The board may with the authority of an ordinary resolution of the Company:
(a) subject as hereinafter provided, resolve to capitalise any undistributed
profits of the Company not required for paying any preferential dividend
(whether or not they are available for distribution) or any sum standing
to the credit of any reserve or other fund, including the Company's share
premium account and capital redemption reserve, if any;
(b) appropriate the sum resolved to be capitalised to the members or any
class of members on the record date specified in the relevant resolution
who would have been entitled to it if it were distributed by way of
dividend and in the same proportions and apply such
30
<PAGE>
sum on their behalf either in or towards paying up the amounts,
if any, for the time being unpaid on any shares held by them
respectively, or in paying up in full unissued shares, debentures or
other obligations of the Company of a nominal amount equal to that
sum, and allot the shares, debentures or other obligations credited as
fully paid to those members, or as they may direct, in those
proportions, or partly in one way and partly in the other; but the
share premium account, the capital redemption reserve, and any profits
which are not available for distribution may, for the purposes of this
Article, only be applied in paying up unissued shares to be allotted
to members credited as fully paid;
(c) make such provision by authorising the sale and transfer to any person of
fractions to which any members would become entitled or may issue
fractional certificates or may resolve that the distribution be made as
nearly as practicable in the correct proportion but not exactly so or may
ignore fractions altogether or resolve that cash payments be made to any
members in order to adjust the rights of all parties or otherwise as (in
each case) the board determines where shares or debentures become, or
would otherwise become, distributable under this Article in fractions;
(d) authorise any person to enter on behalf of all the members concerned into
an agreement with the Company providing for either:-
(i) the allotment to such members respectively, credited as fully
paid, of any shares, debentures or other obligations to which they
are entitled upon such capitalisation; or
(ii) the payment up by the Company on behalf of such members (by the
application thereto of their respective proportions of the profits
resolved to be capitalised) of the amounts, or any part of the
amounts, remaining unpaid on their existing shares,
and any agreement made under such authority shall be binding on all such
members; and
(e) generally do all acts and things required to give effect to such
resolution as aforesaid.
RECORD DATES
142. RECORD DATES FOR DIVIDENDS, ETC.
Notwithstanding any other provision of these Articles, the Company or the board
may fix any date as the record date for any dividend, distribution, allotment or
issue, and such record date may be on or at any time before or after any date on
which the dividend, distribution, allotment or issue is declared, paid or made.
ACCOUNTS
143. RIGHTS TO INSPECT RECORDS
No member shall (as such) have any right of inspecting any accounting records or
other book or document of the Company except as conferred by statute or
authorised by the board or by ordinary resolution of the Company or order of a
court of competent jurisdiction.
31
<PAGE>
144. DELIVERY OF BALANCE SHEETS AND PROFIT AND LOSS ACCOUNTS
A copy of every balance sheet and profit and loss account (including any
documents required by law to be annexed thereto) which is to be laid before the
Company in general meeting and of the directors' and auditors' reports shall, at
least twenty-one days previously to the meeting, be delivered or sent by post to
every member and to every debenture holder of the Company of whose address the
Company is aware, and to every other person who is entitled to receive notice of
meetings from the Company under the provisions of the Companies Acts or of these
Articles or, in the case of joint holders of any share or debenture, to one of
the joint holders, provided that the requirements of this Article shall be
deemed satisfied in relation to any member by sending to such member, where
permitted by the Companies Acts and instead of such copies, a summary financial
statement derived from the Company's annual accounts and the report of the
directors and prepared in the form and containing the information prescribed by
the Companies Acts and any regulations made thereunder.
NOTICES
145. WHEN NOTICE REQUIRED TO BE IN WRITING
Any notice to be given to or by any person pursuant to these Articles shall be
in writing except that a notice calling a meeting of the board need not be in
writing.
146. METHOD OF GIVING NOTICE
The Company may serve or deliver any notice or other document on or to a member
either personally, by sending it by post in a prepaid envelope, or by facsimile
or telex addressed to the member at his registered address or by leaving it at
that address. In the case of joint holders of a share, all notices or other
documents shall be served on or delivered to the joint holder whose name stands
first in the register in respect of the joint holding and any notice or other
document so served or delivered shall be deemed for all purposes sufficient
service on or delivery to all the joint holders. A member whose registered
address is not within the United Kingdom and who gives to the Company an address
within the United Kingdom at which notices may be given to him shall be entitled
to have notices given to him at that address, but otherwise:
(a) no such members shall be entitled to receive any notice from the Company;
and
(b) without prejudice to the generality of the foregoing, any notice of a
general meeting of the Company which is in fact given or purports to be
given to such members shall be ignored for the purpose of determining the
validity of the proceedings at such general meeting.
147. DEEMED RECEIPT OF NOTICE
A member present, either in person or by proxy, at any meeting of the Company or
of the holders of any class of shares in the Company shall be deemed to have
received notice of the meeting and, where requisite, of the purposes for which
it was called.
148. NOTICE TO PERSONS ENTITLED BY TRANSMISSION
A notice or other document may be served or delivered by the Company on or to
the persons entitled by transmission to a share, whether in consequence of the
death or bankruptcy of a member or otherwise by sending or delivering it, in any
manner authorised by these Articles for the service or delivery of a notice or
other document on or to a member, addressed to them by
32
<PAGE>
name, or by the title of representatives of the deceased, or trustee of the
bankrupt or by any like description at the address, if any, within the United
Kingdom supplied for that purpose by the persons claiming to be so entitled.
Until such an address has been supplied, a notice or other document may be
served or delivered in any manner in which it might have been served or
delivered if the death or bankruptcy or other event giving rise to the
transmission had not occurred.
149. NOTICE TO PERSONS ENTITLED BY DEATH OR BANKRUPTCY
A notice may be given by the Company to the persons entitled to a share in
consequence of the death or bankruptcy of a member by sending or delivering it,
in any manner authorised by these Articles for the giving of notice to a member,
addressed to them by name, or by the title of representatives of the deceased,
or trustee of the bankrupt or by any like description at the address, if any,
within the United Kingdom supplied for that purpose by the persons claiming to
be so entitled. Until such an address has been supplied, a notice may be given
in any manner in which it might have been given if the death or bankruptcy had
not occurred.
150. TRANSFEREES ETC. BOUND BY PRIOR NOTICE
Every person who becomes entitled to a share shall be bound by any notice in
respect of that share which, before his name is entered in the register, has
been duly given to a person from whom he derives his title.
151. WHEN NOTICES DEEMED SERVED
Proof that an envelope containing a notice was properly addressed, prepaid and
posted shall be conclusive evidence that the notice was given. A notice sent by
post shall be deemed to be given:
(a) if sent by first class post from an address in the United Kingdom or
another country to another address in the United Kingdom or, as the case
may be, that other country, on the day following that on which the
envelope containing it was posted;
(b) if sent by airmail from an address in the United Kingdom to an address
outside the United Kingdom, on the day following that on which the
envelope containing it was posted; and
(c) in any other case, on the second day following that on which the envelope
containing it was posted.
A notice sent by facsimile transmission shall be deemed given at the time the
notice is received.
WINDING UP
152. LIQUIDATOR MAY DISTRIBUTE IN SPECIE
If the Company is wound up, the liquidator may, with the sanction of an
extraordinary resolution of the Company and any other sanction required by the
Insolvency Act 1986, divide among the members in specie the whole or any part of
the assets of the Company and may, for that purpose, value any assets and
determine how the division shall be carried out as between the members or
different classes of members. The liquidator may, with the like sanction, vest
the whole or any part of the assets in trustees upon such trusts for the benefit
of the members as he with the like sanction determines, but no member shall be
compelled to accept any assets upon which there is a liability.
33
<PAGE>
153. DISPOSAL OF ASSETS BY LIQUIDATOR
The power of sale of a liquidator shall include a power to sell wholly or
partially for shares or debentures or other obligations of another body
corporate, either then already constituted or about to be constituted for the
purpose of carrying out the sale.
INDEMNITY
154. INDEMNITY TO DIRECTORS, OFFICERS, ETC.
Subject to the provisions of the Companies Acts but without prejudice to any
indemnity to which a director may otherwise be entitled, every director or other
officer or auditor of the Company shall be indemnified out of the assets of the
Company against all costs, charges, losses, expenses and liabilities incurred by
him in the execution or discharge of his duties or the exercise of his powers or
otherwise in relation thereto, including (but without limitation) any liability
incurred by him in defending any proceedings, whether civil or criminal, in
which judgment is given in his favour (or the proceedings are otherwise disposed
of without any finding or admission of any material breach of duty on his part)
or in which he is acquitted or in connection with any application in which
relief is granted to him by the court from liability for negligence, default,
breach of duty or breach of trust in relation to the affairs of the Company.
34
<PAGE>
Name and Address of the Subscriber(s) Signature(s) of the Subscriber(s)
NAME Waterlow Nominees Limited Waterlow Nominees Limited
ADDRESS Classic House
174-180 Old Street
London EC1V 9BP
NAME Waterlow Secretaries Waterlow Secretaries Limited
ADDRESS Limited
Classic House
174-180 Old Street
London EC1V 9BP
DATED this 1st of June 1993
Witness to the above signature: Zoe Dolphin
Witness Signature: Zoe Dolphin
Witness Address: Classic House
174-180 Old Street
London EC1V 9BP
35
<PAGE>
EXHIBIT 3.29
The Companies Act, 1948
--------------------
COMPANY LIMITED BY SHARES
--------------------
MEMORANDUM OF ASSOCIATION
of
TRIM ENGINEERING LIMITED
--------------------
l. The name of the Company is "TRIM ENGINEERING LIMITED".
2. The Registered Office of the Company will be situate in England.
3. The objects for which the Company is established are:
(l) (a) To carry on business as GENERAL ENGINEERS, precision
engineers, mechanical engineers, motor engineers,
aeronautical engineers, electrical engineers,
constructional engineers, ironmasters, ironfounders,
ironworkers, steel makers, blast furnace proprietors,
brassfounders, metal makers, refiners and workers, sheet
metal workers, metal stampers, metal piercers, die casters,
die sinkers, turners, copper-smiths, tinsmiths, ore
importers and workers, millwrights, wheelwrights,
galvanisers, machinists, oxyacetylene, electric and spot
welders, japanners, annealers, enamellers, cellulose
sprayers, electro and chromium platers, polishers, metal
finishers, panel beaters, joiners, woodworkers, plastic
moulders and workers, ironmongers, hardware dealers,
warehousemen, storage contractors, carriers and haulage
contractors.
(b) To carry on business as manufacturers and repairers of, and
dealers in machines and machinery generally, machine parts,
machine and other tools, jigs, gears, gauges, moulds, dies,
presses, implements, scientific and other instruments,
forgings, castings, plates, nails, screws, boilers,
engines, motor cars, motor lorries, trucks and other
vehicles, motor car bodies, aeroplanes and other aircraft,
and accessories and spare parts therefor; engineering
equipment, requisites and supplies, ironmongery, hardware,
household appliances, fittings, equipment and utensils,
wireless goods, plastic goods, and metal goods of every
description.
1
<PAGE>
(2) To carry on or acquire any businesses similar to the businesses
above-mentioned or which may be conveniently or advantageously
carried on or combined with them, or may be calculated directly or
indirectly to enhance the value of or render more profitable any
of the Company's property.
(3) To purchase or sell, take or let on lease, take or give in
exchange or on hire, or otherwise acquire, grant, hold or dispose
of any estate or interest in any lands, buildings, easements,
concessions, machinery, plant, stock in trade, goodwill, trade
marks, designs, patterns, patents, copyright or licences, or any
other real or personal property or any right, privilege, option,
estate or interest.
(4) To sell, lease, let on hire, improve, manage, develop, mortgage,
dispose of, turn to account or otherwise deal with all or any of
the property and rights and undertakings of the Company for such
consideration as the Company may think fit.
(5) To erect, build, construct, alter, improve, replace, remove,
enlarge, maintain, manage, control work any railways, tramways,
roads, canals, docks, locks, wharves, stores, buildings, shops,
factories, works, mills, plant or machinery necessary for the
Company's business, or to join with others in doing any of the
things aforesaid.
(6) To borrow or raise money for the purposes of the Company and for
that purpose to mortgage or otherwise charge the whole or any part
of the Company's undertaking, property and assets including the
uncalled Capital of the Company.
(7) To remunerate any person, firm or company for services rendered,
or to be rendered, in placing or assisting to place or
guaranteeing the placing of any of the Shares in the Company's
Capital, or any Debentures, Debenture Stock of other Securities of
the Company, or in or about the formation or promotion of the
Company or the conduct of its business.
(8) Upon the issue of any Shares to employ brokers and agents and to
pay underwriting commission to or otherwise remunerate by Shares
or options to take Shares, or by Debentures, Debenture Stock or
other Securities, persons subscribing for Shares or procuring
subscriptions for Shares.
(9) To accept, draw, make, execute, discount and endorse bills of
exchange, promissory notes, or other negotiable instruments.
(10) To apply for and take out, purchase or otherwise acquire any trade
marks, designs, patterns, patents, patent rights, inventions, or
secret processes which may be useful for the Company's objects,
and to grant licences to use the same.
2
<PAGE>
(11) To pay all the costs, charges and expenses preliminary and
incidental to the promotion, formation, establishment and
incorporation of the Company.
(12) To cause the Company to be registered or otherwise incorporated in
any Colony, Dependency or Foreign State where the Company's
Operations are carried on in accordance with the laws of such
Colony, Dependency or Foreign State.
(13) To establish or promote any company for the purpose of acquiring
all or any of the property, rights and liabilities of the Company
or for any other purpose which may seem directly or indirectly
calculated to benefit the Company.
(14) acquire and undertake the whole or any part of the assets and/or
liabilities of any person, firm or company carrying on any
business of a nature similar to that which this Company is
authorised to carry on.
(15) To amalgamate with any company having objects similar to those of
this Company.
(16) To sell or dispose of the whole undertaking of the Company or any
part thereof for such consideration as the Company may think fit,
and in particular for Shares, Debentures or Securities of any
other company having objects altogether or in part similar to
those of this Company.
(17) To subscribe or guarantee money for any charitable, benevolent,
educational or social object, or for any exhibition or for any
public, general, or useful object which the Directors may think
desirable or advantageous to the Company.
(18) To establish and support, or to aid in the establishment and
support of, any club, institution or organisation calculated to
benefit persons employed by the Company or having dealings with
the Company.
(19) To invest the moneys of the Company not immediately required upon
such securities and in such manner as the Directors may from time
to time determine.
(20) Subject to the provisions of Section 54 of the Companies Act,
1948, to lend and advance money to such persons, firms or
companies, and on such terms as may see expedient and in
particular to customers and others having dealings with the
Company, and to guarantee the performance of contracts by such
persons, firms or companies.
(21) To enter into partnership or into any arrangement for sharing
profits, union of interests, cooperation, joint adventure,
reciprocal concession, or otherwise, with any person or company
carrying on or engaged in, or about to carry on or engage
3
<PAGE>
in, any business or transaction which this Company is authorised
to carry on or engage in, or any business or transaction capable
of being conducted so as directly or indirectly to benefit this
Company and to lend money to, guarantee the contract of, or
otherwise assist, any such person or company.
(22) To take, or otherwise acquire, and hold shares, debentures,
debenture stock or other securities in any other company having
objects altogether or in part similar to those of this Company, or
carrying on any business capable of being conducted so as directly
or indirectly to benefit this Company.
(23) To grant bonuses, gratuities, pensions or charitable laid to
persons employed by the Company.
(24) To distribute any of the property of the Company among its Members
in specie.
(25) To do all such things as are incidental or conducive to the
attainment of the above objects or any them.
4. The liability of the Members is limited.
5. The Share Capital of the Company is L100, divided into 100 Shares of Ll
each.
WE, the several persons whose Names and Addresses are subscribed, are
desirous of being formed into a Company in pursuance of this Memorandum
of Association, and respectively agree to take the number of Shares in
the Capital of the Company set opposite our respective names.
NAMES, ADDRESSES AND DESCRIPTIONS OF SUBSCRIBERS No. of Shares
taken by each
Subscriber
- ------------------------------------------------------------------------------
Robert William Henry Pinson One
91 Stewart Road
Bournemouth
Engineer
- ------------------------------------------------------------------------------
Irene Winifred Pinson One
91 Stewart Road
Bournemouth
Secretary
- ------------------------------------------------------------------------------
4
<PAGE>
- ------------------------------------------------------------------------------
TOTAL SHARES TAKEN Two
- ------------------------------------------------------------------------------
Dated this 16th day of April 1962.
Witness to the above Signatures:
5
<PAGE>
EXHIBIT 3.30
THE COMPANIES ACTS 1985 AND 1989
___________________________________________
PRIVATE COMPANY LIMITED BY SHARES
____________________________________________
ARTICLES OF ASSOCIATION
OF
TRIM ENGINEERING LIMITED
________________________________________
(Incorporated on 7 May 1962)
________________________________________
Company Number: 723273
<PAGE>
TABLE OF CONTENTS
PRELIMINARY 1
INTERPRETATION 1
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . .1
SHARE CAPITAL 3
2. Shares with special rights . . . . . . . . . . . . . . . . . .3
3. Allotment. . . . . . . . . . . . . . . . . . . . . . . . . . .3
4. Redeemable shares. . . . . . . . . . . . . . . . . . . . . . .3
5. Commissions. . . . . . . . . . . . . . . . . . . . . . . . . .4
6. Trusts not recognised. . . . . . . . . . . . . . . . . . . . .4
VARIATION OF RIGHTS 4
7. Method of varying rights . . . . . . . . . . . . . . . . . . .4
8. When rights deemed to be varied. . . . . . . . . . . . . . . .4
SHARE CERTIFICATES 4
9. Members' rights to certificates . . . . . . . . . . . . . . .4
10. Replacement certificates . . . . . . . . . . . . . . . . . . .5
LIEN 5
11. Company to have lien on shares . . . . . . . . . . . . . . . .5
12. Enforcement of lien by sale. . . . . . . . . . . . . . . . . .5
13. Giving effect to sale. . . . . . . . . . . . . . . . . . . . .5
14. Application of proceeds . . . . . . . . . . . . . . . . . . .5
CALLS ON SHARES 5
15. Power to make calls. . . . . . . . . . . . . . . . . . . . . .5
16. Time when call made . . . . . . . . . . . . . . . . . . . . .6
17. Liability of joint holders . . . . . . . . . . . . . . . . . .6
18. Interest payable . . . . . . . . . . . . . . . . . . . . . . .6
19. Deemed calls . . . . . . . . . . . . . . . . . . . . . . . . .6
20. Differentiation on calls . . . . . . . . . . . . . . . . . . .6
21. Payment of calls in advance. . . . . . . . . . . . . . . . . .6
FORFEITURE AND SURRENDER 6
22. Notice requiring payment of call . . . . . . . . . . . . . . .6
23. Forfeiture for non-compliance . . . . . . . . . . . . . . . .7
24. Sale of forfeited shares . . . . . . . . . . . . . . . . . . .7
25. Liability following forfeiture . . . . . . . . . . . . . . . .7
26. Surrender. . . . . . . . . . . . . . . . . . . . . . . . . . .7
27. Extinction of rights . . . . . . . . . . . . . . . . . . . . .7
28. Evidence of forfeiture . . . . . . . . . . . . . . . . . . . .7
<PAGE>
TRANSFER OF SHARES 8
29. Form and execution of transfer . . . . . . . . . . . . . . . .8
30. Restrictions on transfer . . . . . . . . . . . . . . . . . . .8
31. Invalid transfers. . . . . . . . . . . . . . . . . . . . . . .8
32. Notice of refusal to register. . . . . . . . . . . . . . . . .8
33. Suspension of registration . . . . . . . . . . . . . . . . .9
34. No fee payable on registration . . . . . . . . . . . . . . . .9
35. Retention of transfers . . . . . . . . . . . . . . . . . . . .9
TRANSMISSION OF SHARES 9
36. Transmission . . . . . . . . . . . . . . . . . . . . . . . . .9
37. Elections following transmission . . . . . . . . . . . . . . .9
38. Rights of persons entitled by transmission . . . . . . . . . .9
ALTERATION OF SHARE CAPITAL 10
39. Alterations permitted by ordinary resolution . . . . . . . . .10
40. New shares subject to these Articles . . . . . . . . . . . . .10
41. Fractions arising. . . . . . . . . . . . . . . . . . . . . . .10
42. Power to reduce capital . . . . . . . . . . . . . . . . . . .10
PURCHASE OF OWN SHARES 11
43. Power to purchase own shares . . . . . . . . . . . . . . . . .11
GENERAL MEETINGS 11
44. Types of general meeting . . . . . . . . . . . . . . . . . . .11
45. Annual general meetings . . . . . . . . . . . . . . . . . . .11
46. Class meetings . . . . . . . . . . . . . . . . . . . . . . . .11
47. Convening general meetings . . . . . . . . . . . . . . . . . .11
NOTICE OF GENERAL MEETINGS 12
48. Period of notice . . . . . . . . . . . . . . . . . . . . . . .12
49. Provision of notice . . . . . . . . . . . . . . . . . . . . .12
50. Contents of notice . . . . . . . . . . . . . . . . . . . . . .12
51. Accidental omission to give notice . . . . . . . . . . . . . .13
PROCEEDINGS AT GENERAL MEETINGS 13
52. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
53. If quorum not present . . . . . . . . . . . . . . . . . . . .13
54. Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . .13
55. Directors entitled to speak . . . . . . . . . . . . . . . . .13
56. Adjournments . . . . . . . . . . . . . . . . . . . . . . . . .13
57. Amendments to resolutions . . . . . . . . . . . . . . . . . .14
58. Methods of voting . . . . . . . . . . . . . . . . . . . . . .14
59. Declaration of result . . . . . . . . . . . . . . . . . . . .14
60. Withdrawal of demand for poll . . . . . . . . . . . . . . . .14
61. Conduct of poll . . . . . . . . . . . . . . . . . . . . . . .15
<PAGE>
62. Chairman's casting vote . . . . . . . . . . . . . . . . . . .15
63. When poll to be taken . . . . . . . . . . . . . . . . . . . .15
64. Notice of poll . . . . . . . . . . . . . . . . . . . . . . . .15
65. Effectiveness of special and extraordinary resolutions . . . .15
66. Resolutions in writing . . . . . . . . . . . . . . . . . . . .15
VOTES OF MEMBERS 15
67. Right to vote . . . . . . . . . . . . . . . . . . . . . . . .15
68. Votes of joint holders . . . . . . . . . . . . . . . . . . . .15
69. Member under incapacity . . . . . . . . . . . . . . . . . . .16
70. Calls in arrears . . . . . . . . . . . . . . . . . . . . . . .16
71. Objection to voting . . . . . . . . . . . . . . . . . . . . .16
72. Supplementary provisions on voting . . . . . . . . . . . . . .16
PROXIES AND CORPORATE REPRESENTATIVES 16
73. Appointment of proxy . . . . . . . . . . . . . . . . . . . . .16
74. Form of proxy - standard . . . . . . . . . . . . . . . . . . .16
75. Form of proxy - each way . . . . . . . . . . . . . . . . . . .17
76. Voting by appointor . . . . . . . . . . . . . . . . . . . . .17
77. Delivery of form of proxy . . . . . . . . . . . . . . . . . .17
78. Validity of form of proxy . . . . . . . . . . . . . . . . . .18
79. Corporate representatives . . . . . . . . . . . . . . . . . .18
80. Revocation of authority . . . . . . . . . . . . . . . . . . .18
NUMBER OF DIRECTORS 18
81. Limits on number of directors . . . . . . . . . . . . . . . .18
APPOINTMENT AND RETIREMENT OF DIRECTORS 18
82. No retirement by rotation . . . . . . . . . . . . . . . . . .18
83. Eligibility for election . . . . . . . . . . . . . . . . . . .18
84. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
85. Additional powers of the Company . . . . . . . . . . . . . . .19
86. Appointment by board . . . . . . . . . . . . . . . . . . . . .19
87. Age limit . . . . . . . . . . . . . . . . . . . . . . . . . .19
88. No share qualification . . . . . . . . . . . . . . . . . . . .19
ALTERNATE DIRECTORS 20
89. Power to appoint alternates . . . . . . . . . . . . . . . . .20
90. Alternates entitled to receive notice . . . . . . . . . . . .20
91. Alternates representing more than one director . . . . . . . .20
92. Expenses and remuneration of alternates . . . . . . . . . . .20
93. Termination of appointment . . . . . . . . . . . . . . . . . .20
94. Method of appointment and revocation . . . . . . . . . . . . .20
95. Alternate not an agent of appointor . . . . . . . . . . . . .21
POWERS OF THE BOARD 21
96. Business to be managed by board . . . . . . . . . . . . . . .21
<PAGE>
DELEGATION OF POWERS OF THE BOARD 21
97. Committees of the board . . . . . . . . . . . . . . . . . . .21
98. Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
99. Offices including the title "director" . . . . . . . . . . . .21
DISQUALIFICATION AND REMOVAL OF DIRECTORS 22
100. Disqualification . . . . . . . . . . . . . . . . . . . . . . .22
101. Power of Company to remove director . . . . . . . . . . . . .22
REMUNERATION OF NON-EXECUTIVE DIRECTORS 23
102. Ordinary remuneration . . . . . . . . . . . . . . . . . . . .23
103. Additional remuneration for special services . . . . . . . . .23
DIRECTORS' EXPENSES 23
104. Directors may be paid expenses . . . . . . . . . . . . . . . .23
EXECUTIVE DIRECTORS 23
105. Appointment to executive office . . . . . . . . . . . . . . .23
106. Termination of appointment to executive office . . . . . . . .23
107. Emoluments to be determined by the board . . . . . . . . . . .24
DIRECTORS' INTERESTS 24
108. Directors may contract with the Company . . . . . . . . . . .24
109. Notification of interests . . . . . . . . . . . . . . . . . .24
110. Exercise by Company of voting rights . . . . . . . . . . . . .25
GRATUITIES, PENSIONS AND INSURANCE 25
111. Gratuities and pensions . . . . . . . . . . . . . . . . . . .25
112. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . .25
113. Directors not liable to account . . . . . . . . . . . . . . .25
PROCEEDINGS OF DIRECTORS 25
114. Convening meetings . . . . . . . . . . . . . . . . . . . . . .25
115. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
116. Powers of directors if number falls below minimum . . . . . .26
117. Chairman and deputy chairman . . . . . . . . . . . . . . . . .26
118. Validity of acts of the board . . . . . . . . . . . . . . . .26
119. Resolutions in writing . . . . . . . . . . . . . . . . . . . .26
120. Meetings by telephone, etc. . . . . . . . . . . . . . . . . .26
121. Directors' power to vote on contracts
in which they are interested . . . . . . . . . . . . . . .27
122. Exclusion of director from quorum . . . . . . . . . . . . . .27
123. Amendment of restrictions on voting . . . . . . . . . . . . .27
124. Division of proposals . . . . . . . . . . . . . . . . . . . .27
125. Decision of chairman final and conclusive . . . . . . . . . .27
<PAGE>
SECRETARY 28
126. Appointment and removal of secretary . . . . . . . . . . . . .28
MINUTES 28
127. Minutes required to be kept . . . . . . . . . . . . . . . . .28
THE SEAL 28
128. Authority required for use of seal . . . . . . . . . . . . . .28
129. Official seal for use abroad . . . . . . . . . . . . . . . . .28
130. Execution of instrument as a deed under hand . . . . . . . . .28
131. Delivery of deeds . . . . . . . . . . . . . . . . . . . . . .28
CERTIFICATION 29
132. Certified copies . . . . . . . . . . . . . . . . . . . . . . .29
DIVIDENDS 29
133. Declaration of dividends . . . . . . . . . . . . . . . . . . .29
134. Interim dividends . . . . . . . . . . . . . . . . . . . . . .29
135. Apportionment of dividends . . . . . . . . . . . . . . . . . .29
136. Dividends in specie . . . . . . . . . . . . . . . . . . . . .29
137. Permitted deductions . . . . . . . . . . . . . . . . . . . . .30
138. Procedure for payment . . . . . . . . . . . . . . . . . . . .30
139. Interest not payable . . . . . . . . . . . . . . . . . . . . .30
140. Forfeiture of unclaimed dividends . . . . . . . . . . . . . .30
CAPITALISATION 30
141. Power to capitalise . . . . . . . . . . . . . . . . . . . . .30
RECORD DATES 31
142. Record dates for dividends, etc. . . . . . . . . . . . . . . .31
ACCOUNTS 31
143. Rights to inspect records . . . . . . . . . . . . . . . . . .31
144. Delivery of balance sheets and profit and loss accounts . . .32
NOTICES 32
145. When notice required to be in writing . . . . . . . . . . . .32
146. Method of giving notice . . . . . . . . . . . . . . . . . . .32
147. Deemed receipt of notice . . . . . . . . . . . . . . . . . . .32
148. Notice to persons entitled by transmission . . . . . . . . . .32
149. Notice to persons entitled by death or bankruptcy . . . . . .33
150. Transferees etc. bound by prior notice . . . . . . . . . . . .33
151. When notices deemed served . . . . . . . . . . . . . . . . . .33
WINDING UP 33
152. Liquidator may distribute in specie . . . . . . . . . . . . .33
153. Disposal of assets by liquidator . . . . . . . . . . . . . . .34
INDEMNITY 34
154. Indemnity to directors, officers, etc. . . . . . . . . . . . .34
<PAGE>
COMPANY NO.: 723273
THE COMPANIES ACTS 1985 AND 1989
PRIVATE COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
TRIM ENGINEERING LIMITED
(INCORPORATED ON 7 MAY 1962)
PRELIMINARY
THE REGULATIONS IN TABLE A IN THE COMPANIES (TABLES A-F) REGULATIONS IN FORCE AT
THE DATE OF THE INCORPORATION OF THE COMPANY SHALL NOT APPLY TO THE COMPANY.
INTERPRETATION
1. DEFINITIONS
IN THESE ARTICLES, EXCEPT WHERE THE SUBJECT OR CONTEXT OTHERWISE REQUIRES, THE
WORDS DEFINED IN THE FIRST COLUMN OF THE FOLLOWING TABLE SHALL BEAR THE MEANINGS
SET OPPOSITE THEM RESPECTIVELY IN THE SECOND COLUMN.
THE ACT means The Companies Act 1985 including any modification or re-enactment
thereof for the time being in force.
THESE ARTICLES means these articles of association as altered from time to time
by special resolution.
THE AUDITORS means the auditors for the time being of the Company.
THE BOARD means the directors or any of them acting as the board of directors of
the Company.
CLEAR DAYS means the period excluding the day when a notice is given or deemed
to be given and the day for which it is given or on which it is to take effect.
THE COMPANIES ACTS has the meaning ascribed thereto by section 744 of the Act
and any enactment passed after those Acts which may, by virtue of that or any
other such enactment, be
1
<PAGE>
cited together with those Acts as the "Companies Acts" (with or without the
addition of an indication of the date of any such enactment).
A DIRECTOR means a director of the Company.
DIVIDEND means Dividend or bonus.
THE HOLDER means in relation to any shares the member whose name is entered in
the register as the holder of such shares.
A MEMBER means a member of the Company.
THE MEMORANDUM means the memorandum of association of the Company as amended
from time to time.
THE OFFICE means the registered office of the Company.
PAID means paid or credited as paid.
THE REGISTER means the register of members of the Company.
THE SEAL means the common seal of the Company and includes any official seal
kept by the Company by virtue of section 39 or 40 of the Act.
THE SECRETARY means the secretary of the Company and includes a joint,
assistant, deputy or temporary secretary and any other person appointed to
perform the duties of the secretary.
THE UNITED KINGDOM means Great Britain and Northern Ireland.
References to a document being executed include references to its being executed
under hand or under seal or by any other method.
References to writing include references to any visible substitute for writing
and to anything partly in one form and partly in another form.
Words denoting the singular number include the plural number and vice versa;
words denoting the masculine gender include the feminine gender; and words
denoting persons include corporations.
Save as aforesaid any words or expressions defined in the Act (but excluding any
statutory modification thereof not in force at the date of adoption of these
Articles) shall, if not inconsistent with the subject or context, bear the same
meaning in these Articles.
Subject to the preceding paragraph, references to any provision of any enactment
or of any subordinate legislation (as defined by section 21(1) of the
Interpretation Act 1978) include any modification or re-enactment of that
provision for the time being in force.
Headings are inserted for convenience only and do not affect the construction of
these Articles.
2
<PAGE>
In these Articles, (a) powers of delegation shall not be restrictively
construed but the widest interpretation shall be given thereto; (b) the word
"board" in the context of the exercise of any power contained in these
Articles includes any committee consisting of one or more directors, any
director holding executive office and any local or divisional board, manager
or agent of the Company to which or, as the case may be, to whom the power in
question has been delegated; (c) no power of delegation shall be limited by
the existence or, except where expressly provided by the terms of delegation,
the exercise of that or any other power of delegation; and (d) except where
expressly provided by the terms of delegation, the delegation of a power
shall not exclude the concurrent exercise of that power by any other body or
person who is for the time being authorised to exercise it under these
Articles or under another delegation of the power.
SHARE CAPITAL
2. SHARES WITH SPECIAL RIGHTS
Subject to the provisions of the Companies Acts and without prejudice to any
rights attached to any existing shares or class of shares, any share may be
issued with such rights or restrictions as the Company may by ordinary
resolution determine or, subject to and in default of such determination, as the
board shall determine.
3. ALLOTMENT
Any shares proposed to be issued after the date of adoption of these Articles
shall first be offered to the members in proportion as nearly as may be to the
number of the existing shares held by them respectively unless the Company shall
by Special Resolution otherwise direct. The offer shall be made by notice
specifying the number of shares offered, and limiting a period (not being less
than fourteen days) within which the offer, if not accepted, will be deemed to
be declined. After the expiration of that period, those shares so deemed to be
declined shall be offered in the proportion aforesaid to the persons who have,
within the said period, accepted all the shares offered to them; such further
offer shall be made in the same manner and limited by a like period as the
original offer. Any shares not accepted pursuant to such offer or further offer
as aforesaid or not capable of being offered as aforesaid except by way of
fractions and any shares released from the provisions of this Article by such
Special Resolution as aforesaid shall be under the control of the directors, who
may allot, grant options over or otherwise dispose of the same to such persons,
on such terms, and in such manner as they think fit, provided that, in the case
of shares not accepted as aforesaid, such shares shall not be disposed of on
terms which are more favourable to the subscribers thereof than the terms on
which they were offered to the members. Subject to this Clause the directors are
unconditionally authorised for the purposes of Section 80 of the Act, to allot,
grant options over, or otherwise dispose of relevant securities up to the amount
of the share capital as at the date of adoption of these Articles at any time or
times during the period of five years from the date of adoption and at any time
thereafter pursuant to any offer or agreement made by the Company before the
expiry of this authority. Sub-sections 89(1) and 90(1) inclusive of the Act
shall be excluded from applying to the Company.
4. REDEEMABLE SHARES
Subject to the provisions of the Companies Acts, and without prejudice to any
rights attached to any existing shares or class of shares, shares may be issued
which are to be redeemed or are to be liable to be redeemed at the option of the
Company or the holder on such terms and in such manner as may be provided by
these Articles.
3
<PAGE>
5. COMMISSIONS
The Company may exercise all powers of paying commissions or brokerage conferred
or permitted by the Companies Acts. Subject to the provisions of the Companies
Acts, any such commission or brokerage may be satisfied by the payment of cash
or by the allotment of fully or partly paid shares or partly in one way and
partly in the other.
6. TRUSTS NOT RECOGNISED
Except as required by law, no person shall be recognised by the Company as
holding any share upon any trust and (except as otherwise provided by these
Articles or by law) the Company shall not be bound by or recognise any interest
in any share (or in any fractional part of a share) except an absolute right to
the entirety thereof in the holder.
VARIATION OF RIGHTS
7. METHOD OF VARYING RIGHTS
Subject to the provisions of the Companies Acts, if at any time the capital of
the Company is divided into different classes of shares, the rights attached to
any class may (unless otherwise provided by the terms of issue of the shares of
that class) be varied or abrogated, whether or not the Company is being wound
up, either with the consent in writing of the holders of three-quarters in
nominal value of the issued shares of the class or with the sanction of an
extraordinary resolution passed at a separate general meeting of the holders of
the shares of the class (but not otherwise).
8. WHEN RIGHTS DEEMED TO BE VARIED
For the purposes of this Article, unless otherwise expressly provided by the
rights attached to any shares or class of shares, those rights shall be deemed
to be varied by the reduction of the capital paid up on those shares otherwise
than by a purchase or redemption by the Company of its own shares and by the
allotment of other shares ranking in priority for payment of a dividend or in
respect of capital or which confer on the holders voting rights more favourable
than those conferred by such first mentioned shares, but shall not otherwise be
deemed to be varied by the creation or issue of other shares ranking pari passu
with, or subsequent to, such first mentioned shares or by the purchase or
redemption by the Company of any of its own shares.
SHARE CERTIFICATES
9. MEMBERS' RIGHTS TO CERTIFICATES
Every member, upon becoming the holder of any shares, shall be entitled, without
payment, to one certificate for all the shares of each class held by him (and,
upon transferring a part of his holding of shares of any class, to a certificate
for the balance of such holding) or several certificates each for one or more of
his shares upon payment for every certificate after the first of such reasonable
sum as the board may from time to time determine. Every certificate shall
specify the number, class and distinguishing numbers (if any) of the shares to
which it relates and the amount or respective amounts paid up thereon and, where
the Company has adopted a seal, sealed with the seal. The Company shall not be
bound to issue more than one certificate for shares held jointly by several
persons and delivery of a certificate to one joint holder shall be a sufficient
delivery to all of them. Shares of different classes may not be included in the
same certificate.
4
<PAGE>
10. REPLACEMENT CERTIFICATES
If a share certificate is defaced, worn out, lost or destroyed, it may be
renewed on such terms (if any) as to evidence and indemnity (with or without
security) and payment of any exceptional out-of-pocket expenses reasonably
incurred by the Company in investigating evidence and preparing the requisite
form of indemnity as the board may determine but otherwise free of charge, and
(in the case of defacement or wearing out) on delivery up of the old
certificate.
LIEN
11. COMPANY TO HAVE LIEN ON SHARES
The Company shall have a first and paramount lien on every share (not being a
fully paid share) for all moneys payable to the Company (whether presently or
not) in respect of that share. The board may at any time (generally or in
particular cases) waive any lien or declare any share to be wholly or in part
exempt from the provisions of this Article. The Company's lien on a share shall
extend to any amount (including dividends) payable in respect of it.
12. ENFORCEMENT OF LIEN BY SALE
The Company may sell, in such manner as the board determines, any share on which
the Company has a lien if a sum in respect of which the lien exists is presently
payable and is not paid within fourteen clear days after notice has been given
to the holder of the share or to the person entitled to it in consequence of the
death or bankruptcy of the holder or otherwise by operation of law, demanding
payment and stating that if the notice is not complied with the shares may be
sold.
13. GIVING EFFECT TO SALE
To give effect to any such sale the board may authorise some person to execute
an instrument of transfer of the shares sold to, or in accordance with the
directions of, the purchaser. The transferee shall not be bound to see to the
application of the purchase money nor shall his title to the shares be affected
by any irregularity in or invalidity of the proceedings in relation to the sale.
14. APPLICATION OF PROCEEDS
The net proceeds of the sale, after payment of the costs, shall be applied in or
towards payment or satisfaction of so much of the sum in respect of which the
lien exists as is presently payable, and any residue shall (upon surrender to
the Company for cancellation of the certificate for the shares sold and subject
to a like lien for any moneys not presently payable as existed upon the shares
before the sale) be paid to the person entitled to the shares at the date of the
sale.
CALLS ON SHARES
15. POWER TO MAKE CALLS
Subject to the terms of allotment, the board may from time to time make calls
upon the members in respect of any moneys unpaid on their shares (whether in
respect of nominal value or premium) and each member shall (subject to receiving
at least fourteen clear days' notice specifying when and where payment is to be
made) pay to the Company as required by the notice the amount called on his
shares. A call may be required to be paid by instalments. A call may, before
receipt by the Company of any sum due thereunder, be revoked in whole or part
and the
5
<PAGE>
time fixed for payment of a call may be postponed in whole or part as the
board may determine. A person upon whom a call is made shall remain liable
for calls made upon him notwithstanding the subsequent transfer of the shares
in respect whereof the call was made.
16. TIME WHEN CALL MADE
A call shall be deemed to have been made at the time when the resolution of the
board authorising the call was passed.
17. LIABILITY OF JOINT HOLDERS
The joint holders of a share shall be jointly and severally liable to pay all
calls in respect thereof.
18. INTEREST PAYABLE
If a call or any instalment of a call remains unpaid in whole or in part after
it has become due and payable the person from whom it is due and payable shall
pay interest on the amount unpaid from the day it became due and payable until
it is paid at the rate fixed by the terms of allotment of the share or in the
notice of the call or, if no rate is fixed, such rate, not exceeding 15 per
cent. per annum or, if higher, the appropriate rate (as defined by the Act), as
may be determined by the board, but the board may waive payment of such interest
wholly or in part.
19. DEEMED CALLS
An amount payable in respect of a share on allotment or at any fixed date,
whether in respect of nominal value or premium or as an instalment of a call,
shall be deemed to be a call duly made and notified and payable on the date so
fixed or in accordance with the terms of the allotment, and if it is not paid
the provisions of these Articles shall apply as if that amount had become due
and payable by virtue of a call duly made and notified.
20. DIFFERENTIATION ON CALLS
Subject to the terms of allotment, the board may make arrangements on the issue
of shares for a difference between the allottees and/or holders in the amounts
and times of payment of calls on their shares.
21. PAYMENT OF CALLS IN ADVANCE
The board may, if it thinks fit, receive from any member willing to advance the
same all or any part of the moneys uncalled and unpaid upon any shares held by
him and such payment in advance of calls shall extinguish PRO TANTO the
liability upon the shares in respect of which it is made, and may pay upon all
or any of the moneys so advanced (until the same would but for such advance
become presently payable) interest at such rate not exceeding (unless the
Company by ordinary resolution may otherwise direct) 15 per cent. per annum or,
if higher, the appropriate rate (as defined in the Act) as may be agreed upon
between the board and such member.
FORFEITURE AND SURRENDER
22. NOTICE REQUIRING PAYMENT OF CALL
If a call or any instalment of a call remains unpaid in whole or in part
after it has become due and payable, the board may give to the person from
whom it is due not less than fourteen clear days' notice in writing requiring
payment of the amount unpaid together with any interest which may have
accrued and any costs, charges and expenses incurred by the Company by reason
of such non-payment. The notice shall name the place where payment is to be
made and shall state that
6
<PAGE>
if the notice is not complied with the shares in respect of which the call
was made will be liable to be forfeited.
23. FORFEITURE FOR NON-COMPLIANCE
If any such notice is not complied with, any share in respect of which it was
given may, at any time before the payment required by the notice has been made,
be forfeited by a resolution of the board and the forfeiture shall include all
dividends or other moneys payable in respect of the forfeited shares and not
paid before the forfeiture. When any share has been forfeited, notice of the
forfeiture shall be served upon the person who was before the forfeiture the
holder of the share, and an entry of such notice having been given and of the
forfeiture with the date thereof shall forthwith be made in the register
opposite the entry of the share; but no forfeiture shall be invalidated by any
omission or neglect to give such notice or to make such entries.
24. SALE OF FORFEITED SHARES
Subject to the provisions of the Companies Acts, a forfeited share shall be
deemed to belong to the Company and may be sold, re-allotted or otherwise
disposed of on such terms and in such manner as the board determines, either to
the person who was before the forfeiture the holder or to any other person, and
at any time before sale, re-allotment or other disposal, the forfeiture may be
cancelled on such terms as the board thinks fit. Where for the purposes of its
disposal a forfeited share is to be transferred to any person the board may
authorise some person to execute an instrument of transfer of the share to that
person. The Company may receive the consideration given for the share on its
disposal and may register the transferee as holder of the share.
25. LIABILITY FOLLOWING FORFEITURE
A person any of whose shares have been forfeited shall cease to be a member in
respect of them and shall surrender to the Company for cancellation the
certificate for the shares forfeited but shall remain liable to the Company for
all moneys which at the date of forfeiture were presently payable by him to the
Company in respect of those shares with interest thereon at the rate at which
interest was payable on those moneys before the forfeiture or, if no interest
was so payable, at such rate, not exceeding 15 per cent. per annum or, if
higher, the appropriate rate (as defined in the Act) as the board may determine,
from the date of forfeiture until payment, but the board may waive payment
wholly or in part or enforce payment without any allowance for the value of the
shares at the time of forfeiture or for any consideration received on their
disposal.
26. SURRENDER
The board may accept the surrender of any share which it is in a position to
forfeit upon such terms and conditions as may be agreed and, subject to any such
terms and conditions, a surrendered share shall be treated as if it had been
forfeited.
27. EXTINCTION OF RIGHTS
The forfeiture of a share shall involve the extinction at the time of forfeiture
of all interest in and all claims and demands against the Company in respect of
the share and all other rights and liabilities incidental to the share as
between the person whose share is forfeited and the Company, except only such of
those rights and liabilities as are by these Articles expressly saved, or as are
by the Companies Acts given or imposed in the case of past members.
28. EVIDENCE OF FORFEITURE
A statutory declaration by a director or the secretary that a share has been
duly forfeited or surrendered on a specified date shall be conclusive evidence
of the facts stated in it as against all
7
<PAGE>
persons claiming to be entitled to the share and the declaration shall
(subject to the execution of an instrument of transfer if necessary)
constitute a good title to the share and the person to whom the share is
disposed of shall not be bound to see to the application of the purchase
money, if any, nor shall his title to the share be affected by any
irregularity in, or invalidity of, the proceedings in reference to the
forfeiture, surrender, sale, re-allotment or disposal of the share.
TRANSFER OF SHARES
29. FORM AND EXECUTION OF TRANSFER
The instrument of transfer of a share may be in any usual form or in any other
form which the board may approve and shall be signed by or on behalf of the
transferor and, unless the share is fully paid, by or on behalf of the
transferee. An instrument of transfer need not be under seal.
30. RESTRICTIONS ON TRANSFER
Subject to Article 32 The board may, in its absolute discretion and without
giving any reason, refuse to register the transfer of a share which is not fully
paid, or does not otherwise comply with the provisions of Articles 31 or 32.
31. REGISTRATION OF TRANSFER
The directors must register the transfer of a share which is fully paid and
which:
(a) is lodged at the office or such other place as the directors may
reasonably appoint, is duly stamped and is accompanied by the certificate
for the shares to which it relates or such other evidence as the board
may reasonably require to show the right of transferor to make the
transfer;
(b) is in respect of only one class of shares; and
(c) is in favour of not more than four transferees.
32. TRANSFERS TO SECURED INSTITUTIONS
Notwithstanding anything contained in these Articles, the directors shall not
decline to and shall promptly register any transfer of shares, and they may not
suspend registration thereof where such transfer:
(a) is to any bank or institution to which such shares have been charged by
way of security, whether as agent and trustee for a group of banks or
institutions or otherwise or to any nominee or transferee of such a bank
or institution (a "Secured Institution"); or
(b) is delivered to the Company for registration by a Secured Institution or
its nominee in order to perfect its security over the shares; or
(c) is executed by a Secured Institution or its nominee pursuant to the power
of sale or other power under such security,
and furthermore notwithstanding anything to the contrary contained in these
Articles no transferor of any shares in the Company or proposed transferor of
such shares to a Secured
8
<PAGE>
Institution or its nominee and no Secured Institution or its nominee shall be
required to offer the shares which are or are to be the subject of any
transfer aforesaid to the shareholders for the time being of the Company or
any of them, and no such shareholder shall have any right under the Articles
of Association or otherwise howsoever to require such shares to be
transferred to them whether for consideration or not.
33. NOTICE OF REFUSAL TO REGISTER
If the board refuses to register the transfer, it shall within 30 days after the
date on which the instrument of transfer was lodged with the Company send to the
transferee notice of the refusal.
34. NO FEE PAYABLE ON REGISTRATION
No fee shall be charged for the registration of any instrument of transfer or
other document relating to or affecting the title to any share.
35. RETENTION OF TRANSFERS
The Company shall be entitled to retain any instrument of transfer which is
registered, but any instrument of transfer which the board refuses to register
shall be returned to the person lodging it when notice of the refusal is given.
TRANSMISSION OF SHARES
36. TRANSMISSION
If a member dies the survivor or survivors where he was a joint holder, and his
personal representatives where he was a sole holder or the only survivor of
joint holders, shall be the only persons recognised by the Company as having any
title to his interest; but nothing herein contained shall release the estate of
a deceased member (whether a sole or joint holder) from any liability in respect
of any share held by him.
37. ELECTIONS FOLLOWING TRANSMISSION
A person becoming entitled to a share in consequence of the death or bankruptcy
of a member or otherwise by operation of law may, upon such evidence being
produced as the board may properly require as to his entitlement, elect either
to become the holder of the share or to have some person nominated by him
registered as the transferee. If he elects to become the holder he shall give
notice to the Company to that effect. If he elects to have another person
registered, he shall execute an instrument of transfer of the share to that
person. All the provisions of these Articles relating to the transfer of shares
shall apply to any such notice or instrument of transfer as if it were an
instrument of transfer executed by the member and the death or bankruptcy of the
member or other event giving rise to the transmission had not occurred.
The board may at any time give notice requiring any such person to elect either
to be registered himself or to transfer the share and if the notice is not
complied with within sixty days the board may thereafter withhold payment of all
dividends or other moneys payable in respect of the share until the requirements
of the notice have been complied with.
38. RIGHTS OF PERSONS ENTITLED BY TRANSMISSION
A person becoming entitled to a share in consequence of the death or bankruptcy
of a member or otherwise by operation of law shall, upon such evidence being
produced as the board may properly require as to his entitlement and subject to
the requirements of Article 37, have the same
9
<PAGE>
rights in relation to the share as he would have had if he were the holder of
the share, and may give a discharge for all dividends and other moneys
payable in respect of the share, but he shall not, before being registered as
the holder of the share, be entitled in respect of it to receive notice of or
to attend or vote at any meeting of the Company or to receive notice of or to
attend or vote at any separate meeting of the holders of any class of shares
in the Company.
ALTERATION OF SHARE CAPITAL
39. ALTERATIONS PERMITTED BY ORDINARY RESOLUTION
The Company may by ordinary resolution:
(a) increase its share capital by such sum to be divided into shares of such
amount as the resolution prescribes;
(b) consolidate and divide all or any of its share capital into shares of
larger amount than its existing shares;
(c) subject to the provisions of the Companies Acts, sub-divide its shares,
or any of them, into shares of smaller amount than is fixed by the
Memorandum and the resolution may determine that, as between the shares
resulting from the sub-division, any of them may have any preference or
advantage as compared with the others; and
(d) cancel shares which, at the date of the passing of the resolution, have
not been taken or agreed to be taken by any person and diminish the
amount of its share capital by the amount of the shares so cancelled.
40. NEW SHARES SUBJECT TO THESE ARTICLES
All new shares shall be subject to the provisions of these Articles with
reference to payment of calls, lien, forfeiture, transfer, transmission and
otherwise, and, unless otherwise provided by these Articles, by the resolution
creating the new shares or by the conditions of issue, the new shares shall be
unclassified shares.
41. FRACTIONS ARISING
Whenever as a result of a consolidation or sub-division of shares any fractions
arise, the board may settle the matter in any manner it deems fit and in
particular may sell shares representing fractions to which any members would
otherwise become entitled to any person (including, subject to the provisions of
the Companies Acts, the Company) and distribute the net proceeds of sale in due
proportion among those members, and the board may authorise some person to
execute an instrument of transfer of the shares to, or in accordance with the
directions of, the purchaser. The transferee shall not be bound to see to the
application of the purchase moneys nor shall his title to the shares be affected
by any irregularity in or invalidity of the proceedings in relation to the sale.
42. POWER TO REDUCE CAPITAL
Subject to the provisions of the Companies Acts, the Company may by special
resolution reduce its share capital, any capital redemption reserve and any
share premium account in any way.
10
<PAGE>
PURCHASE OF OWN SHARES
43. POWER TO PURCHASE OWN SHARES
Subject to and in accordance with the provisions of the Companies Acts and
without prejudice to any relevant special rights attached to any class of
shares, the Company may purchase any of its own shares of any class (including
redeemable shares) and, if it is a private company, make a payment in respect of
the redemption or purchase of its own shares otherwise than out of distributable
profits of the company or the proceeds of a fresh issue of shares, at any price
(whether at par or above or below par), and so that any shares to be so
purchased may be selected in any manner whatsoever. Every contract for the
purchase of, or under which the Company may become entitled or obliged to
purchase, shares in the Company shall be authorised by such resolution of the
Company as may be required by the Companies Acts and by an extraordinary
resolution passed at a separate general meeting of the holders of each class of
shares (if any) which, at the date on which the contract is authorised by the
Company in general meeting, entitle them, either immediately or at any time
later on, to convert all or any of the shares of that class held by them into
equity share capital of the Company.
GENERAL MEETINGS
44. TYPES OF GENERAL MEETING
All general meetings of the Company other than annual general meetings shall be
called extraordinary general meetings.
45. ANNUAL GENERAL MEETINGS
The board shall convene and the Company shall hold general meetings as annual
general meetings in accordance with the requirements of the Act.
46. CLASS MEETINGS
All provisions of these Articles relating to general meetings of the Company
shall, mutatis mutandis, apply to every separate general meeting of the holders
of any class of shares in the capital of the Company, except that:
(a) the necessary quorum shall be two persons holding or representing by
proxy at least one-third in nominal value of the issued shares of the
class or, at any adjourned meeting of such holders, one holder present in
person or by proxy, whatever the amount of his holding, who shall be
deemed to constitute a meeting; and
(b) any holder of shares of the class present in person or by proxy may
demand a poll; and
(c) each holder of shares of the class shall, on a poll, have one vote in
respect of every share of the class held by him.
47. CONVENING GENERAL MEETINGS
Subject to the provisions of Article 48, the board may call general meetings
whenever and at such times and places as it shall determine and, on the
requisition of members pursuant to the provisions of the Companies Acts, shall
forthwith proceed to convene an extraordinary general
11
<PAGE>
meeting in accordance with the requirements of the Companies Acts. If there
are not within the United Kingdom sufficient directors to call a general
meeting, any director or any member of the Company may call a general meeting.
NOTICE OF GENERAL MEETINGS
48. PERIOD OF NOTICE
An annual general meeting and an extraordinary general meeting called for the
passing of a special resolution, elective resolution or a resolution appointing
a person as a director shall be called by at least twenty-one clear days'
notice. All other extraordinary general meetings shall be called by at least
fourteen clear days' notice but a general meeting may be called by shorter
notice if it is so agreed:
(a) in the case of an annual general meeting, by all the members entitled to
attend and vote thereat; and
(b) in the case of any other meeting by a majority in number of the members
having a right to attend and vote being a majority together holding not
less than ninety-five per cent. in nominal value of the shares giving
that right.
49. PROVISION OF NOTICE
Subject to the provisions of these Articles and to any restrictions imposed on
any shares, the notice shall be given to all the members, to all persons
entitled to a share in consequence of the death or bankruptcy of a member, to
each of the directors, to the auditors for the time being of the Company and if
required under the Companies Acts, the former auditors of the Company.
50. CONTENTS OF NOTICE
The notice shall specify the time and place of the meeting and, in the case of
special business, the general nature of such business. All business shall be
deemed special that is transacted at an extraordinary general meeting and also
all business that is transacted at an annual general meeting with the exception
of:-
(a) the declaration of dividends;
(b) the consideration and adoption of the accounts and balance sheet and the
reports of the directors and auditors and other documents required to be
annexed to the accounts;
(c) the appointment and re-appointment of directors;
(d) the appointment of auditors where special notice of the resolution for
such appointment is not required by the Companies Acts; and
(e) the fixing of, or the determining of the method of fixing, the
remuneration of the directors and/or auditors.
The notice shall, in the case of an annual general meeting, specify the meeting
as such, and, in the case of a meeting to pass a special, extraordinary or
elective resolution, specify the intention to propose the resolution as a
special, extraordinary, or elective resolution, as the case may be.
12
<PAGE>
The notice shall state with reasonable prominence that a member entitled to
attend and vote at the meeting being called is entitled to appoint one or more
proxies to attend and vote instead of him, and that a proxy need not also be a
member.
51. ACCIDENTAL OMISSION TO GIVE NOTICE
The accidental omission to give notice of a meeting to any person entitled to
receive the same, or the non-receipt of a notice of meeting by any such person,
shall not invalidate the proceedings at that meeting.
PROCEEDINGS AT GENERAL MEETINGS
52. QUORUM
No business shall be transacted at any general meeting unless a quorum is
present, but the absence of a quorum shall not preclude the choice or
appointment of a chairman, which shall not be treated as part of the business of
the meeting. Save as otherwise provided by these Articles, one person, if and
for so long as the Company has only one member, and one person being a member
and being a proxy for a member or two persons, if and for so long as the Company
has two or more members, entitled to vote upon the business to be transacted,
each being a member or a proxy for a member or a duly authorised representative
of a corporation, shall be a quorum.
53. IF QUORUM NOT PRESENT
If such a quorum is not present within five minutes (or such longer time not
exceeding thirty minutes as the chairman of the meeting may decide to wait) from
the time appointed for the meeting, or if during a meeting such a quorum ceases
to be present, the meeting, if convened on the requisition of members, shall be
dissolved, and in any other case shall stand adjourned to such time and place as
the chairman of the meeting may determine. If at the adjourned meeting a quorum
is not present within fifteen minutes after the time appointed for holding the
meeting, the meeting shall be dissolved.
54. CHAIRMAN
The chairman, if any, of the board or, in his absence, any deputy chairman of
the Company or, in his absence, some other director nominated by the board,
shall preside as chairman of the meeting, but if neither the chairman, deputy
chairman nor such other director (if any) is present within five minutes after
the time appointed for holding the meeting or is not willing to act as chairman,
the directors present shall elect one of their number to be chairman. If there
is only one director present and willing to act, he shall be chairman. If no
director is willing to act as chairman, or if no director is present within five
minutes after the time appointed for holding the meeting, the members present
and entitled to vote shall choose one of their number to be chairman.
55. DIRECTORS ENTITLED TO SPEAK
A director shall, notwithstanding that he is not a member, be entitled to attend
and speak at any general meeting and at any separate meeting of the holders of
any class of shares in the Company.
56. ADJOURNMENTS
The chairman may, with the consent of a meeting at which a quorum is present
(and shall if so directed by the meeting), adjourn the meeting from time to time
and from place to place, but no business shall be transacted at an adjourned
meeting other than business which might properly
13
<PAGE>
have been transacted at the meeting had the adjournment not taken place.
When a meeting is adjourned for thirty days or more or for an indefinite
period, at least seven Clear days' notice shall be given specifying the time
and place of the adjourned meeting and the general nature of the business to
be transacted. Otherwise it shall not be necessary to give any notice of an
adjournment or of the business to be transacted at an adjourned meeting.
57. AMENDMENTS TO RESOLUTIONS
If an amendment shall be proposed to any resolution under consideration but
shall in good faith be ruled out of order by the chairman of the meeting, the
proceedings on the substantive resolution shall not be invalidated by any error
in such ruling. With the consent of the chairman of the meeting, an amendment
may be withdrawn by its proposer before it is voted upon. In the case of a
resolution duly proposed as a special or extraordinary resolution, no amendment
thereto (other than a mere clerical amendment to correct a patent error) may in
any event be considered or voted upon.
58. METHODS OF VOTING
A resolution put to the vote of a general meeting shall be decided on a show of
hands unless, before or on the declaration of the result of a vote on the show
of hands or on the withdrawal of any other demand for a poll, a poll is duly
demanded. Subject to the provisions of the Companies Acts, a poll may be
demanded by:
(a) the chairman of the meeting; or
(b) at least two members present in person or by proxy having the right to
vote at the meeting; or
(c) any member or members present in person or by proxy representing not less
than one-tenth of the total voting rights of all the members having the
right to vote at the meeting; or
(d) any member or members present in person or by proxy holding shares
conferring a right to vote at the meeting being shares on which an
aggregate sum has been paid up equal to not less than one-tenth of the
total sum paid up on all the shares conferring that right,
and a demand by a person as proxy for a member shall be the same as a demand by
the member.
59. DECLARATION OF RESULT
Unless a poll is duly demanded a declaration by the chairman that a resolution
has been carried or carried unanimously, or by a particular majority, or lost,
or not carried by a particular majority and an entry to that effect in the
minutes of the meeting shall be conclusive evidence of the fact without proof of
the number or proportion of the votes recorded in favour of or against the
resolution.
60. WITHDRAWAL OF DEMAND FOR POLL
The demand for a poll may, before the poll is taken, be withdrawn but only with
the consent of the chairman and a demand so withdrawn shall not be taken to have
invalidated the result of a show of hands declared before the demand was made.
If the demand for a poll is withdrawn, the chairman or any other member entitled
may demand a poll.
14
<PAGE>
61. CONDUCT OF POLL
A poll shall be taken as the chairman directs and he may appoint scrutineers
(who need not be members) and fix a time and place for declaring the result of
the poll. The result of the poll shall be deemed to be the resolution of the
meeting at which the poll was demanded.
62. CHAIRMAN'S CASTING VOTE
In the case of an equality of votes, whether on a show of hands or on a poll,
the chairman shall not be entitled to a casting vote in addition to any other
vote he may have.
63. WHEN POLL TO BE TAKEN
A poll demanded on the election of a chairman or on a question of adjournment
shall be taken forthwith. A poll demanded on any other question shall be taken
either forthwith or at such time and place as the chairman directs not being
more than thirty days after the poll is demanded. The demand for a poll shall
not prevent the continuance of a meeting for the transaction of any business
other than the question on which the poll was demanded. If a poll is demanded
before the declaration of the result of a show of hands and the demand is duly
withdrawn, the meeting shall continue as if the demand had not been made.
64. NOTICE OF POLL
No notice need be given of a poll not taken forthwith if the time and place at
which it is to be taken are announced at the meeting at which it is demanded.
In any other case at least seven clear days' notice shall be given specifying
the time and place at which the poll is to be taken.
65. EFFECTIVENESS OF SPECIAL AND EXTRAORDINARY RESOLUTIONS
Where for any purpose an ordinary resolution of the Company is required, a
special or extraordinary resolution shall also be effective and where for any
purpose an extraordinary resolution is required a special resolution shall also
be effective.
66. RESOLUTIONS IN WRITING
Subject to the provisions of the Companies Acts, a resolution in writing
executed by or on behalf of each member who would have been entitled to vote
upon it if it had been proposed at a general meeting at which he was present
shall be as effectual as if it had been passed at a general meeting properly
convened and held and may consist of several instruments in the like form each
executed by or on behalf of one or more of the members.
VOTES OF MEMBERS
67. RIGHT TO VOTE
Subject to any rights or restrictions attached to any shares, on a show of hands
every member who is present in person or by proxy shall have one vote and on a
poll every member present in person or by proxy shall have one vote for every
share of which he is the holder.
68. VOTES OF JOINT HOLDERS
In the case of joint holders of a share the vote of the senior who tenders a
vote, whether in person or by proxy, shall be accepted to the exclusion of the
votes of the other joint holders and for this purpose seniority shall be
determined by the order in which the names of the holders stand in the register.
15
<PAGE>
69. MEMBER UNDER INCAPACITY
A member in respect of whom an order has been made by any court or official
having jurisdiction (whether in the United Kingdom or elsewhere) in matters
concerning mental disorder may vote, whether on a show of hands or on a poll, by
his receiver, curator bonis or other person authorised in that behalf appointed
by that court or official, and any such receiver, curator bonis or other person
may, on a poll, vote by proxy. Evidence to the satisfaction of the board of the
authority of the person claiming to exercise the right to vote shall be
deposited at the office, or at such other place as is specified in accordance
with these Articles for the deposit of instruments of proxy, not less than 48
hours before the time appointed for holding the meeting or adjourned meeting at
which the right to vote is to be exercised and in default the right to vote
shall not be exercisable.
70. CALLS IN ARREARS
No member shall be entitled to vote at any general meeting or at any separate
meeting of the holders of any class of shares in the Company, either in person
or by proxy, in respect of any share held by him unless all moneys presently
payable by him in respect of that share have been paid.
71. OBJECTION TO VOTING
No objection shall be raised to the qualification of any voter except at the
meeting or adjourned meeting or poll at which the vote objected to is tendered,
and every vote not disallowed at such meeting shall be valid. Any objection
made in due time shall be referred to the chairman whose decision shall be final
and conclusive.
72. SUPPLEMENTARY PROVISIONS ON VOTING
On a poll votes may be given either personally or by proxy. A member entitled to
more than one vote need not, if he votes, use all his votes or cast all the
votes he uses in the same way.
PROXIES AND CORPORATE REPRESENTATIVES
73. APPOINTMENT OF PROXY
An instrument appointing a proxy shall be in writing under the hand of the
appointor or his attorney or, if the appointor is a corporation, either under
its common seal or the hand of a duly authorised officer, attorney or other
person authorised to sign it.
74. FORM OF PROXY - STANDARD
The instrument appointing a proxy shall be executed by or on behalf of the
appointer and shall be in the following form (or in a form as near thereto as
circumstances allow or in any other form which is usual or which the directors
may approve):
"______________________ Limited
I/We, _____ _____ , of _____ _____ _____ being a member/members of the
above-named company, hereby appoint _____ _____ of _____ _____ _____, or
failing him, _____ _____ of _____ _____ _____, as my/our proxy to vote in
my/our names[s] and on my/our behalf at the annual/extraordinary general
meeting of the company to be held on _____ _____ 19__, and at any
adjournment thereof.
Signed on _____ _____ 19__."
75. FORM OF PROXY - EACH WAY
Where it is desired to afford members an opportunity of instructing the proxy
how he shall act the instrument appointing a proxy shall be in the following
form (or in a form as near thereto as circumstances allow or in any other form
which is usual or which the directors may approve):
"_____________________ Limited
I/We, _____ _____ , of _____ _____ _____ being a member/members of the
above-named company, hereby appoint _____ _____ of _____ _____ _____, or
failing him, _____ _____ of _____ _____ _____, as my/our proxy to vote in
my/our names[s] and on my/our behalf at the annual/extraordinary general
meeting of the company to be held on _____ _____ 19__, and at any
adjournment thereof.
16
<PAGE>
Signed on _____ _____ 19__."
This form is to be used in respect of the resolutions mentioned below as
follows:
Resolution No.1 *for*against
Resolution No.2 *for*against.
*Strike out whichever is not desired.
Unless otherwise instructed, the proxy may vote as he thinks fit or
abstain from voting.
Signed on _____ _____ 19__."
76. VOTING BY APPOINTOR
Delivery of an instrument appointing a proxy shall not preclude a member from
attending and voting in person at the meeting or poll concerned. A member may
appoint more than one proxy to attend on the same occasion.
77. DELIVERY OF FORM OF PROXY
The instrument appointing a proxy and any power of attorney or other written
authority under which it is executed or an office or notarially certified copy
or a copy certified in accordance with the Powers of Attorney Act 1971 of such
power or written authority shall be deposited at the office or at such other
place within the United Kingdom as is specified in the notice convening the
meeting or in any instrument of proxy sent out by the Company in relation to the
meeting not less than 48 hours before the time appointed for holding the meeting
or adjourned meeting at which the person named in the instrument proposes to
vote and an instrument of proxy which is not deposited or delivered in a manner
so permitted shall be invalid. No instrument of proxy shall be valid after the
expiration of twelve months from the date stated in it as the date of its
execution. When two or more valid but differing instruments of proxy are
delivered in respect of the same share for use at the same meeting, the one
which was delivered last (regardless of its date or of the date of its
execution) shall be treated as replacing and revoking the others as regards that
share; if the Company is unable to determine which was delivered last, none of
them shall be treated as valid in respect of that share.
17
<PAGE>
78. VALIDITY OF FORM OF PROXY
The instrument of proxy shall, unless the contrary is stated in it, be deemed
to confer authority to vote as the proxy thinks fit on any amendment of a
resolution put to the meeting for which the proxy is given and on any resolution
put to the meeting, whether or not notice of such resolution was given in the
notice of meeting. The instrument of proxy shall, unless the contrary is stated
therein, be valid as well for any adjournment of the meeting as for the meeting
to which it relates.
79. CORPORATE REPRESENTATIVES
Any corporation or corporation sole which is a member of the Company may (in the
case of a corporation, by resolution of its directors or other governing body or
by authority to be given under seal or under the hand of an officer duly
authorised by it) authorise such person as it thinks fit to act as its
representative at any meeting of the Company or at any separate meeting of the
holders of any class of shares. A person so authorised shall be entitled to
exercise the same power on behalf of the grantor of the authority as the grantor
could exercise if it were an individual member of the Company and the grantor
shall for the purposes of these Articles be deemed to be present in person at
any such meeting if a person so authorised is present at it.
80. REVOCATION OF AUTHORITY
A vote given or poll demanded by proxy or by the duly authorised representative
of a corporation shall be valid notwithstanding the previous determination of
the authority of the person voting or demanding a poll unless notice of the
determination was received by the Company at the office or at such other place
at which the instrument of proxy was duly deposited before the commencement of
the meeting or adjourned meeting at which the vote is given or the poll demanded
or (in the case of a poll taken otherwise than on the same day as the meeting or
adjourned meeting) the time appointed for taking the poll.
NUMBER OF DIRECTORS
81. LIMITS ON NUMBER OF DIRECTORS
Unless otherwise determined by ordinary resolution, the number of directors
(other than alternate directors) shall be not less than one but shall not be
subject to any maximum in number. Wheresoever the minimum number of directors
shall be one, a sole director shall have authority to exercise all the powers
and discretions by the Act and/or by these expressed to be vested in the
directors generally.
APPOINTMENT AND RETIREMENT OF DIRECTORS
82. NO RETIREMENT BY ROTATION
The directors shall not be required to retire by rotation.
83. ELIGIBILITY FOR ELECTION
No person shall be appointed a director at any general meeting unless:
(a) he is recommended by the board; or
18
<PAGE>
(b) not less than six nor more than thirty-five Clear days before the date
appointed for the meeting, notice executed by a member qualified to vote
at the meeting (not being the person to be proposed) has been given to
the Company of the intention to propose that person for appointment
stating the particulars which would, if he were so appointed or
reappointed, be required to be included in the Company's register of
directors, together with notice executed by that person of his
willingness to be appointed.
84. NOTICE
Not less than seven nor more than twenty-eight clear days before the date
appointed for holding a general meeting notice shall be given to all who are
entitled to receive notice of the meeting of any person who is recommended by
the directors for appointment as a director at the meeting or in respect of whom
notice has been duly given to the company of the intention to propose him at the
meeting for appointment or reappointment as a director. The notice shall give
the particulars of that person which would, if he were so appointed, be required
to be included in the company's register of directors.
85. ADDITIONAL POWERS OF THE COMPANY
Subject as aforesaid, the Company may appoint a person who is willing to act to
be a director either to fill a vacancy or as an additional director:
(a) by ordinary resolution of the members in general meeting; or
(b) by notice in writing left at the registered office.
86. APPOINTMENT BY BOARD
The board may appoint a person who is willing to act to be a director, either to
fill a vacancy or as an additional director, provided that the appointment does
not cause the number of directors to exceed the number, if any, fixed by or in
accordance with these Articles as the maximum number of directors. A director
so appointed shall hold office only until the next following annual general
meeting. If not reappointed at such annual general meeting, he shall vacate
office at the conclusion thereof.
87. AGE LIMIT
No person shall be disqualified from being appointed or reappointed a director,
and no director shall be required to vacate that office, by reason only of the
fact that he has attained the age of seventy years or any other age nor shall it
be necessary by reason of his age to give special notice under the Companies
Acts of any resolution. Where the board convenes any general meeting of the
Company at which (to the knowledge of the board) a director will be proposed for
appointment or reappointment who at the date for which the meeting is convened
will have attained the age of seventy years or more, the board shall give notice
of his age in years in the notice convening the meeting or in any document
accompanying the notice, but the accidental omission to do so shall not
invalidate any proceedings, or any appointment or reappointment of that
director, at that meeting.
88. NO SHARE QUALIFICATION
A director shall not be required to hold any shares of the Company by way of
qualification.
19
<PAGE>
ALTERNATE DIRECTORS
89. POWER TO APPOINT ALTERNATES
Any director (other than an alternate director) may appoint any other director,
or any other person approved by resolution of the board and willing to act, to
be an alternate director and may remove from office an alternate director so
appointed by him.
90. ALTERNATES ENTITLED TO RECEIVE NOTICE
An alternate director shall be entitled to receive notice of all meetings of the
board and of all meetings of committees of the board of which his appointor is a
member, to attend and vote at any such meeting at which his appointor is not
personally present, and generally to perform all the functions of his appointor
(except as regards power to appoint an alternate) as a director in his absence.
It shall not be necessary to give notice of such a meeting to an alternate
director who is absent from the United Kingdom.
91. ALTERNATES REPRESENTING MORE THAN ONE DIRECTOR
A director or any other person may act as alternate director to represent more
than one director, and an alternate director shall be entitled at meetings of
the board or any committee of the board to one vote for every director whom he
represents (and who is not present) in addition to his own vote (if any) as a
director, but he shall count as only one for the purpose of determining whether
a quorum is present.
92. EXPENSES AND REMUNERATION OF ALTERNATES
An alternate director may be repaid by the Company such expenses as might
properly have been repaid to him if he had been a director but shall not in
respect of his services as an alternate director be entitled to receive any
remuneration from the Company [except such part (if any) of the remuneration
otherwise payable to his appointer as such appointer may by notice in writing to
the Company from time to time direct]. An alternate director shall be entitled
to be indemnified by the Company to the same extent as if he were a director.
93. TERMINATION OF APPOINTMENT
An alternate director shall cease to be an alternate director:
(a) if his appointor ceases to be a director; but, if a director retires by
rotation or otherwise but is reappointed or deemed to have been
reappointed at the meeting at which he retires, any appointment of an
alternate director made by him which was in force immediately prior to
his retirement shall continue after his reappointment;
(b) on the happening of any event which, if he were a director, would cause
him to vacate his office as director; or
(c) if he resigns his office by notice to the Company.
94. METHOD OF APPOINTMENT AND REVOCATION
Any appointment or removal of an alternate director shall be by notice to the
Company signed by the director making or revoking the appointment and shall take
effect in accordance with the terms of the notice (subject to any approval
required by Article 89) upon receipt of such notice at the office.
20
<PAGE>
95. ALTERNATE NOT AN AGENT OF APPOINTOR
Save as otherwise expressly provided in these Articles, an alternate director
shall be deemed for all purposes to be a director and, accordingly, except where
the context otherwise requires, references to a director shall be deemed to
include a reference to an alternate director. An alternate director shall alone
be responsible for his own acts and defaults and he shall not be deemed to be
the agent of the director appointing him.
POWERS OF THE BOARD
96. BUSINESS TO BE MANAGED BY BOARD
Subject to the provisions of the Companies Acts, the Memorandum and these
Articles and to any directions given by special resolution, the business of the
Company shall be managed by the board which may pay all expenses incurred in
forming and registering the Company and may exercise all the powers of the
Company. No alteration of the Memorandum or Articles and no such direction
shall invalidate any prior act of the board which would have been valid if that
alteration had not been made or that direction had not been given. The powers
given by this Article shall not be limited by any special power given to the
board by these Articles and a meeting of the board at which a quorum is present
may exercise all powers exercisable by the board.
DELEGATION OF POWERS OF THE BOARD
97. COMMITTEES OF THE BOARD
The board may delegate any of its powers to any committee consisting of one or
more directors. The board may also delegate to any director holding any
executive office such of its powers as the board considers desirable to be
exercised by him. Any such delegation shall, in the absence of express
provision to the contrary in the terms of delegation, be deemed to include
authority to sub-delegate to one or more directors (whether or not acting as a
committee) or to any employee or agent of the Company all or any of the powers
delegated and may be made subject to such conditions as the board may specify,
and may be revoked or altered. The board may co-opt on to any such committee
persons other than directors, who may enjoy voting rights in the committee. The
co-opted members shall be less than one-half of the total membership of the
committee and a resolution of any committee shall be effective only if a
majority of the members present are directors. Subject to any conditions
imposed by the board, the proceedings of a committee with two or more members
shall be governed by these Articles regulating the proceedings of directors so
far as they are capable of applying.
98. AGENTS
The board may, by power of attorney or otherwise, appoint any person or persons
to be the agent or agents of the Company for such purposes, with such powers,
authorities and discretions (not exceeding those vested in the board) and on
such conditions as the board determines, including authority for the agent or
agents to delegate all or any of his or their powers, authorities and
discretions, and may revoke or vary such delegation.
99. OFFICES INCLUDING THE TITLE "DIRECTOR"
The board may appoint any person to any office or employment having a
designation or title including the word "director" or attach to any existing
office or employment with the Company
21
<PAGE>
such a designation or title and may terminate any such appointment or the use
of any such designation or title. The inclusion of the word "director" in
the designation or title of any such office or employment shall not imply
that the holder is a director of the Company, nor shall the holder thereby be
empowered in any respect to act as, or be deemed to be, a director of the
Company for any of the purposes of these Articles.
DISQUALIFICATION AND REMOVAL OF DIRECTORS
100. DISQUALIFICATION
The office of a director shall be vacated if:
(a) he ceases to be a director by virtue of any provisions of the Companies
Acts or these Articles or he becomes prohibited by law from being a
director; or
(b) he becomes bankrupt or makes any arrangement or composition with his
creditors generally or shall apply to the court for an interim order
under section 253 of the Insolvency Act 1986 in connection with a
voluntary arrangement under that Act; or
(c) he is, or may be, suffering from mental disorder and either:
(i) he is admitted to hospital in pursuance of an application for
admission for treatment under the Mental Health Act 1983 or, in
Scotland, an application for admission under the Mental Health
(Scotland) Act 1960; or
(ii) an order is made by a court having jurisdiction (whether in the
United Kingdom or elsewhere) in matters concerning mental disorder
for his detention or for the appointment of a receiver, curator
bonis or other person to exercise powers with respect to his
property or affairs; or
(d) (not being a director holding office as such for a fixed term) he resigns
his office by notice to the Company; or
(e) he shall for more than six consecutive months have been absent without
permission of the board from meetings of the board held during that
period and his alternate director (if any) shall not during such period
have attended in his stead and the board resolves that his office be
vacated.
101. POWER OF COMPANY TO REMOVE DIRECTOR
Subject to the provisions of the Companies Acts a director may be removed from
office forthwith by:-
(a) (and notwithstanding any provision of these Articles or of any
agreement between the Company and such director but without
prejudice to any claim he may have for damages for breach of any
such agreement) ordinary resolution of the members of the Company
passed at a general meeting of which special notice has been
given;
(b) written resolution of the members of the Company; or
22
<PAGE>
(c) notice in writing left at the registered office of the Company and
signed by the holder(s) of not less than 75% of the voting rights
attaching to the shares for the time being issued.
REMUNERATION OF NON-EXECUTIVE DIRECTORS
102. ORDINARY REMUNERATION
The ordinary remuneration of the directors who do not hold executive office for
their services (excluding amounts payable under any other provision of these
Articles) shall not exceed in aggregate L10,000 per annum or such higher amount
as the Company may from time to time by ordinary resolution determine. Subject
thereto, each such director shall be paid a fee (which shall be deemed to accrue
from day to day) at such rate as may from time to time be determined by the
board.
103. ADDITIONAL REMUNERATION FOR SPECIAL SERVICES
Any director who does not hold executive office and who serves on any committee
of the directors, by the request of the board goes or resides abroad for any
purpose of the Company or otherwise performs special services which in the
opinion of the directors are outside the scope of the ordinary duties of a
director, may (without prejudice to the provisions of Article 102) be paid such
extra remuneration by way of salary, commission or otherwise as the board may
determine.
DIRECTORS' EXPENSES
104. DIRECTORS MAY BE PAID EXPENSES
The directors may be paid all travelling, hotel, and other expenses properly
incurred by them in connection with their attendance at meetings of the board or
committees of the board or general meetings or separate meetings of the holders
of any class of shares or of debentures of the Company or otherwise in
connection with the discharge of their duties.
EXECUTIVE DIRECTORS
105. APPOINTMENT TO EXECUTIVE OFFICE
Subject to the provisions of the Companies Acts, the board may appoint one or
more of its body to be the holder of any executive office (except that of
auditor) under the Company and may enter into an agreement or arrangement with
any director for his employment by the Company or for the provision by him of
any services outside the scope of the ordinary duties of a director. Any such
appointment, agreement or arrangement may be made upon such terms, including
terms as to remuneration, as the board determines, and any remuneration which is
so determined may be in addition to or in lieu of any ordinary remuneration as a
director. The board may revoke or vary any such appointment but without
prejudice to any rights or claims which the person whose appointment is revoked
or varied may have against the Company by reason thereof.
106. TERMINATION OF APPOINTMENT TO EXECUTIVE OFFICE
Any appointment of a director to an executive office shall terminate if he
ceases to be a director but without prejudice to any rights or claims which he
may have against the Company by reason
23
<PAGE>
of such cesser. A director appointed to an executive office shall not ipso
facto cease to be a director if his appointment to such executive office
terminates.
107. EMOLUMENTS TO BE DETERMINED BY THE BOARD
The emoluments of any director holding executive office for his services as such
shall be determined by the board, and may be of any description, and (without
limiting the generality of the foregoing) may include admission to or
continuance of membership of any scheme (including any share acquisition scheme)
or fund instituted or established or financed or contributed to by the Company
for the provision of pensions, life assurance or other benefits for employees or
their dependants, or the payment of a pension or other benefits to him or his
dependants on or after retirement or death, apart from membership of any such
scheme or fund.
DIRECTORS' INTERESTS
108. DIRECTORS MAY CONTRACT WITH THE COMPANY
Subject to the provisions of the Companies Acts, and provided that he has
disclosed to the board the nature and extent of any material interest of his, a
director notwithstanding his office:
(a) may be a party to, or otherwise interested in, any transaction or
arrangement with the Company or in which the Company is otherwise
interested;
(b) may act by himself or his firm in a professional capacity for the Company
(otherwise than as auditor) and he or his firm shall be entitled to
remuneration for professional services as if he were not a director;
(c) may be a director or other officer of, or employed by, or a party to any
transaction or arrangement with, or otherwise interested in, any body
corporate promoted by the Company or in which the Company is otherwise
interested; and
(d) shall not, by reason of his office, be accountable to the Company for any
benefit which he derives from any such office or employment or from any
such transaction or arrangement or from any interest in any such body
corporate and no such transaction or arrangement shall be liable to be
avoided on the ground of any such interest or benefit.
109. NOTIFICATION OF INTERESTS
For the purposes of Article 108:
(a) a general notice given to the board that a director is to be regarded as
having an interest of the nature and extent specified in the notice in
any transaction or arrangement in which a specified person or class of
persons is interested shall be deemed to be a disclosure that the
director has an interest in any such transaction of the nature and extent
so specified; and
(b) an interest of which a director has no knowledge and of which it is
unreasonable to expect him to have knowledge shall not be treated as an
interest of his.
24
<PAGE>
110. EXERCISE BY COMPANY OF VOTING RIGHTS
The board may exercise the voting power conferred by the shares in any body
corporate held or owned by the Company in such manner in all respects as it
thinks fit (including the exercise thereof in favour of any resolution
appointing its members or any of them directors of such body corporate, or
voting or providing for the payment of remuneration to the directors of such
body corporate).
GRATUITIES, PENSIONS AND INSURANCE
111. GRATUITIES AND PENSIONS
The board may (by establishment of or maintenance of schemes or otherwise)
provide benefits, whether by the payment of gratuities or pensions or by
insurance or otherwise, for any past or present director or employee of the
Company or any of its subsidiaries or any body corporate associated with, or any
business acquired by, any of them, and for any member of his family (including a
spouse and a former spouse) or any person who is or was dependent on him, and
may (as well before as after he ceases to hold such office or employment)
contribute to any fund and pay premiums for the purchase or provision of any
such benefit.
112. INSURANCE
Without prejudice to the provisions of Article 154, the board shall have the
power to purchase and maintain insurance for or for the benefit of any persons
who are or were at any time directors, officers, or employees or auditors of the
Company, or of any other company which is its holding company or in which the
Company or such holding company has any interest whether direct or indirect or
which is in any way allied to or associated with the Company, or of any
subsidiary undertaking of the Company or any such other company, or who are or
were at any time trustees of any pension fund or employee share scheme in which
employees of the Company or any such other company or subsidiary undertaking are
interested, including (without prejudice to the generality of the foregoing)
insurance against any liability incurred by such persons in respect of any act
or omission in the actual or purported execution or discharge of their duties or
in the exercise or purported exercise of their powers or otherwise in relation
to their duties, powers or offices in relation to the Company or any such other
company, subsidiary undertaking, pension fund or employee share scheme.
113. DIRECTORS NOT LIABLE TO ACCOUNT
No director or former director shall be accountable to the Company or the
members for any benefit provided pursuant to this Article and the receipt of any
such benefit shall not disqualify any person from being or becoming a director
of the Company.
PROCEEDINGS OF DIRECTORS
114. CONVENING MEETINGS
Subject to the provisions of these Articles, the board may regulate its
proceedings as it thinks fit. A director may, and the secretary at the request
of a director shall, call a meeting of the board. Notice of a board meeting
shall be deemed to be properly given to a director if it is given to him
personally or by word of mouth or sent in writing to him at his last known
address or any other
25
<PAGE>
address given by him to the Company for this purpose. Questions arising at a
meeting shall be decided by a majority of votes. In the case of an equality
of votes, the chairman shall have a second or casting vote. Any director may
waive notice of a meeting and any such waiver may be retrospective.
115. QUORUM
The quorum for the transaction of the business of the board may be fixed by the
board and unless so fixed at any other number shall be two. A person who holds
office only as an alternate director shall, if his appointor is not present, be
counted in the quorum. Any director who ceases to be a director at a board
meeting may continue to be present and to act as a director and be counted in
the quorum until the termination of the board meeting if no director objects.
116. POWERS OF DIRECTORS IF NUMBER FALLS BELOW MINIMUM
The continuing directors or a sole continuing director may act notwithstanding
any vacancies in their number, but, if the number of directors is less than the
number fixed as the minimum, the continuing directors or director may act only
for the purpose of filling vacancies or of calling a general meeting.
117. CHAIRMAN AND DEPUTY CHAIRMAN
The board may appoint one of their number to be the chairman, and one of their
number to be the deputy chairman, of the board and may at any time remove either
of them from such office. Unless he is unwilling to do so, the director
appointed as chairman, or in his stead the director appointed as deputy
chairman, shall preside at every meeting of the board at which he is present.
If there is no director holding either of those offices, or if neither the
chairman nor the deputy chairman is willing to preside or neither of them is
present within five minutes after the time appointed for the meeting, the
directors present may appoint one of their number to be chairman of the meeting.
118. VALIDITY OF ACTS OF THE BOARD
All acts done by a meeting of the board, or of a committee of the board, or by a
person acting as a director or alternate director, shall, notwithstanding that
it be afterwards discovered that there was a defect in the appointment of any
director or any member of the committee or alternate director or that any of
them were disqualified from holding office, or had vacated office, or were not
entitled to vote, be as valid as if every such person had been duly appointed
and was qualified and had continued to be a director or, as the case may be, an
alternate director and had been entitled to vote.
119. RESOLUTIONS IN WRITING
A resolution in writing signed by all the directors entitled to receive notice
of a meeting of the board or of a committee of the board (not being less than
the number of directors required to form a quorum of the board) shall be as
valid and effectual as if it had been passed at a meeting of the board or (as
the case may be) a committee of the board duly convened and held and for this
purpose:
(a) a resolution may consist of several documents to the same effect each
signed by one or more directors;
(b) a resolution signed by an alternate director on behalf of his appointor
need not also be signed by his appointor; and
26
<PAGE>
(c) a resolution signed by a director who has appointed an alternate director
need not also be signed by the alternate director in that capacity.
120. MEETINGS BY TELEPHONE, ETC.
Without prejudice to the first sentence of Article 115, a meeting of the board
or of a committee of the board may consist of a conference between directors who
are not all in one place, but of whom each is able (directly by telephonic
communication, video link or via the internet) to speak to each of the others,
and to be heard by each of the others simultaneously. A director taking part in
such a conference shall be deemed to be present in person at the meeting and
shall be entitled to vote or be counted in a quorum accordingly. Such a meeting
shall be deemed to take place where the largest group of those participating in
the conference is assembled, or, if there is no such group, where the chairman
of the meeting then is. The word MEETING in these Articles shall be construed
accordingly.
121. DIRECTORS' POWER TO VOTE ON CONTRACTS IN WHICH THEY ARE INTERESTED
Save as otherwise provided by these Articles, a director may vote at a meeting
of the board or a committee of the board on any resolution of the board
concerning a matter in which he has, directly or indirectly, any kind of
interest whatsoever, and if he shall vote on any such resolution as aforesaid
his vote shall be counted; and in relation to any such vote as aforesaid he
shall (whether or not he shall vote on the same) be taken into account in the
quorum present at the meeting.
122. EXCLUSION OF DIRECTOR FROM QUORUM
A director shall not be counted in the quorum present at a meeting in relation
to a resolution on which he is not entitled to vote.
123. AMENDMENT OF RESTRICTIONS ON VOTING
The Company may by ordinary resolution suspend or relax to any extent, either
generally or in respect of any particular matter, any provision of these
Articles prohibiting a director from voting at a meeting of the board or of a
committee of the board, or ratify any transaction not duly authorised by reason
of a contravention of any such provision.
124. DIVISION OF PROPOSALS
Where proposals are under consideration concerning the appointment (including
fixing or varying the terms of appointment) of two or more directors to offices
or employments with the Company or any body corporate in which the Company is
interested, the proposals may be divided and considered in relation to each
director separately and in such cases each of the directors concerned shall be
entitled to vote and be counted in the quorum in respect of each resolution
except that concerning his own appointment.
125. DECISION OF CHAIRMAN FINAL AND CONCLUSIVE
If a question arises at a meeting of the board or of a committee of the board as
to the entitlement of a director to vote or be counted in a quorum, the question
may, before the conclusion of the meeting, be referred to the chairman of the
meeting and his ruling in relation to any director other than himself shall be
final and conclusive except in a case where the nature or extent of the
interests of the director concerned have not been fairly disclosed. If any such
question arises in respect of the chairman of the meeting, it shall be decided
by resolution of the board (on which the chairman shall not vote) and such
resolution will be final and conclusive except in a case where the nature and
extent of the interests of the chairman have not been fairly disclosed.
27
<PAGE>
SECRETARY
126. APPOINTMENT AND REMOVAL OF SECRETARY
Subject to the provisions of the Companies Acts, the secretary shall be
appointed by the board for such term, at such remuneration and upon such
conditions as it may think fit; and any secretary so appointed may be removed by
the board, but without prejudice to any claim for damages for breach of any
contract of service between him and the Company.
MINUTES
127. MINUTES REQUIRED TO BE KEPT
The board shall cause minutes to be made in books kept for the purpose:
(a) of all appointments of officers made by the board; and
(b) of all proceedings at meetings of the Company, of the holders of any
class of shares in the Company, of the board, and of committees of the
board, including the names of the directors present at each such meeting.
Any such minutes, if purporting to be signed by the chairman of the meeting to
which they relate or of the meeting at which they are read, shall be sufficient
evidence without any further proof of the facts therein stated.
THE SEAL
128. AUTHORITY REQUIRED FOR USE OF SEAL
The seal shall only be used by the authority of a resolution of the board or of
a committee of the board. The board may determine who shall sign any instrument
to which the seal is affixed and unless otherwise so determined it shall be
signed by at least one director and the secretary or by at least two directors.
129. OFFICIAL SEAL FOR USE ABROAD
The company may exercise the powers conferred by section 39 of the Act with
regard to having an official seal for use abroad.
130. EXECUTION OF INSTRUMENT AS A DEED UNDER HAND
Where the Act so permits, any instrument signed, with the authority of a
resolution of the board or of a committee of the board, by one director and the
secretary or by two directors and expressed to be executed by the Company as a
deed shall have the same effect as if executed under the seal, provided that no
instrument which makes it clear on its face that it is intended by the persons
making it to have effect as a deed shall be signed without the authority of the
board.
131. DELIVERY OF DEEDS
A document which is executed by the Company as a deed shall not be deemed to be
delivered by the Company solely as a result of its having been executed by the
Company.
28
<PAGE>
CERTIFICATION
132. CERTIFIED COPIES
Any director or the secretary or any person appointed by the board for the
purpose shall have power to authenticate any documents affecting the
constitution of the Company and any resolutions passed by the Company or the
holders of any class of shares of the Company or the board or any committee of
the board, and any books, records, documents and accounts relating to the
business of the Company, and to certify copies thereof or extracts therefrom as
true copies or extracts. A document purporting to be a copy of a resolution, or
the minutes of or an extract from the minutes of a meeting of the Company or the
holders of any class of shares of the Company or of the board or any committee
of the board that is certified as aforesaid shall be conclusive evidence in
favour of all persons dealing with the Company upon the faith thereof that such
resolution has been duly passed or, as the case may be, that such minutes or
extract is a true and accurate record of proceedings at a duly constituted
meeting.
DIVIDENDS
133. DECLARATION OF DIVIDENDS
Subject to the provisions of the Companies Acts, the Company may by ordinary
resolution declare dividends in accordance with the respective rights of the
members, but no dividend shall exceed the amount recommended by the board.
134. INTERIM DIVIDENDS
Subject to the provisions of the Companies Acts, the board may declare and
pay interim dividends if it appears to the board that they are justified by
the profits of the Company available for distribution. If the share capital
is divided into different classes, the board may declare and pay interim
dividends on shares which confer deferred or non-preferred rights with regard
to dividend as well as on shares which confer preferential rights with regard
to dividend, but no interim dividend shall be declared or paid on shares
carrying deferred or non-preferred rights if, at the time of declaration or
payment, any preferential dividend is in arrear. The board may also declare
and pay at intervals settled by it any dividend payable at a fixed rate if it
appears to the board that the profits available for distribution justify the
payment. Provided the board acts in good faith it shall not incur any
liability to the holders of shares conferring preferred rights for any loss
they may suffer by the declaration or lawful payment of an interim dividend
on any shares having deferred or non-preferred rights.
135. APPORTIONMENT OF DIVIDENDS
Except as otherwise provided by the rights attached to shares, all dividends
shall be declared and paid according to the amounts paid up on the shares on
which the dividend is paid; but no amount paid on a share in advance of the
date on which a call is payable shall be treated for the purposes of this
Article as paid on the share. All dividends shall be apportioned and paid
proportionately to the amounts paid up on the shares during any portion or
portions of the period in respect of which the dividend is paid; but, if any
share is issued on terms providing that it shall rank for dividend as from a
particular date, that share shall rank for dividend accordingly.
136. DIVIDENDS IN SPECIE
A general meeting declaring a dividend may, upon the recommendation of the
board, by ordinary resolution direct that it shall be satisfied wholly or partly
by the distribution of assets, and in
29
<PAGE>
particular of paid up shares or debentures of any other body corporate, and,
where any difficulty arises in regard to the distribution, the board may
settle the same as it thinks fit and in particular may issue fractional
certificates or authorise any person to sell and transfer any fractions or
disregard fractions altogether, and may fix the value for distribution of any
assets and may determine that cash shall be paid to any member upon the
footing of the value so fixed in order to adjust the rights of members and
may vest any assets in trustees.
137. PERMITTED DEDUCTIONS
The board may deduct from any dividend or other moneys payable to any member in
respect of a share any moneys presently payable by him to the Company in respect
of that share.
138. PROCEDURE FOR PAYMENT
Any dividend or other moneys payable in respect of a share may be paid by cheque
or warrant sent by post to the registered address of the holder or person
entitled or, if two or more persons are the holders of the share or are jointly
entitled to it by reason of the death or bankruptcy of the holder or otherwise
by operation of law, to the registered address of that one of those persons who
is first named in the register or to such person and to such address as the
person or persons entitled may in writing direct. Every such cheque or warrant
shall be made payable to the order of the person or persons entitled or to such
other person as the person or persons entitled may in writing direct and shall
be sent at the risk of the person entitled, and payment of the cheque shall be a
good discharge to the Company. Any joint holder or other person jointly
entitled to a share as aforesaid may give receipts for any dividend or other
moneys payable in respect of the share. Any such dividend or other money may
also be paid by any other method (including direct debit, bank transfer and
dividend warrant) which the board considers appropriate.
139. INTEREST NOT PAYABLE
No dividend or other moneys payable in respect of a share shall bear interest
against the Company unless otherwise provided by the rights attached to the
share.
140. FORFEITURE OF UNCLAIMED DIVIDENDS
Any dividend which has remained unclaimed for twelve years from the date when it
became due for payment shall, if the board so resolves, be forfeited and cease
to remain owing by the Company. The payment by the board of any unclaimed
dividend or other moneys payable in respect of a share into a separate account
shall not constitute the Company a trustee thereof.
CAPITALISATION OF PROFITS AND RESERVES
141. POWER TO CAPITALISE
The board may with the authority of an ordinary resolution of the Company:
(a) subject as hereinafter provided, resolve to capitalise any undistributed
profits of the Company not required for paying any preferential dividend
(whether or not they are available for distribution) or any sum standing
to the credit of any reserve or other fund, including the Company's share
premium account and capital redemption reserve, if any;
(b) appropriate the sum resolved to be capitalised to the members or any
class of members on the record date specified in the relevant resolution
who would have been entitled to it if it were distributed by way of
dividend and in the same proportions and apply such
30
<PAGE>
sum on their behalf either in or towards paying up the amounts, if any,
for the time being unpaid on any shares held by them respectively, or in
paying up in full unissued shares, debentures or other obligations of the
Company of a nominal amount equal to that sum, and allot the shares,
debentures or other obligations credited as fully paid to those members,
or as they may direct, in those proportions, or partly in one way and
partly in the other; but the share premium account, the capital
redemption reserve, and any profits which are not available for
distribution may, for the purposes of this Article, only be applied in
paying up unissued shares to be allotted to members credited as fully
paid;
(c) make such provision by authorising the sale and transfer to any person of
fractions to which any members would become entitled or may issue
fractional certificates or may resolve that the distribution be made as
nearly as practicable in the correct proportion but not exactly so or may
ignore fractions altogether or resolve that cash payments be made to any
members in order to adjust the rights of all parties or otherwise as (in
each case) the board determines where shares or debentures become, or
would otherwise become, distributable under this Article in fractions;
(d) authorise any person to enter on behalf of all the members concerned into
an agreement with the Company providing for either:-
(i) the allotment to such members respectively, credited as fully
paid, of any shares, debentures or other obligations to which they
are entitled upon such capitalisation; or
(ii) the payment up by the Company on behalf of such members (by the
application thereto of their respective proportions of the profits
resolved to be capitalised) of the amounts, or any part of the
amounts, remaining unpaid on their existing shares,
and any agreement made under such authority shall be binding on all such
members; and
(e) generally do all acts and things required to give effect to such
resolution as aforesaid.
RECORD DATES
142. RECORD DATES FOR DIVIDENDS, ETC.
Notwithstanding any other provision of these Articles, the Company or the board
may fix any date as the record date for any dividend, distribution, allotment or
issue, and such record date may be on or at any time before or after any date on
which the dividend, distribution, allotment or issue is declared, paid or made.
ACCOUNTS
143. RIGHTS TO INSPECT RECORDS
No member shall (as such) have any right of inspecting any accounting records or
other book or document of the Company except as conferred by statute or
authorised by the board or by ordinary resolution of the Company or order of a
court of competent jurisdiction.
31
<PAGE>
144. DELIVERY OF BALANCE SHEETS AND PROFIT AND LOSS ACCOUNTS
A copy of every balance sheet and profit and loss account (including any
documents required by law to be annexed thereto) which is to be laid before the
Company in general meeting and of the directors' and auditors' reports shall, at
least twenty-one days previously to the meeting, be delivered or sent by post to
every member and to every debenture holder of the Company of whose address the
Company is aware, and to every other person who is entitled to receive notice of
meetings from the Company under the provisions of the Companies Acts or of these
Articles or, in the case of joint holders of any share or debenture, to one of
the joint holders, provided that the requirements of this Article shall be
deemed satisfied in relation to any member by sending to such member, where
permitted by the Companies Acts and instead of such copies, a summary financial
statement derived from the Company's annual accounts and the report of the
directors and prepared in the form and containing the information prescribed by
the Companies Acts and any regulations made thereunder.
NOTICES
145. WHEN NOTICE REQUIRED TO BE IN WRITING
Any notice to be given to or by any person pursuant to these Articles shall be
in writing except that a notice calling a meeting of the board need not be in
writing.
146. METHOD OF GIVING NOTICE
The Company may serve or deliver any notice or other document on or to a member
either personally, by sending it by post in a prepaid envelope, or by facsimile
or telex addressed to the member at his registered address or by leaving it at
that address. In the case of joint holders of a share, all notices or other
documents shall be served on or delivered to the joint holder whose name stands
first in the register in respect of the joint holding and any notice or other
document so served or delivered shall be deemed for all purposes sufficient
service on or delivery to all the joint holders. A member whose registered
address is not within the United Kingdom and who gives to the Company an address
within the United Kingdom at which notices may be given to him shall be entitled
to have notices given to him at that address, but otherwise:
(a) no such members shall be entitled to receive any notice from the Company;
and
(b) without prejudice to the generality of the foregoing, any notice of a
general meeting of the Company which is in fact given or purports to be
given to such members shall be ignored for the purpose of determining the
validity of the proceedings at such general meeting.
147. DEEMED RECEIPT OF NOTICE
A member present, either in person or by proxy, at any meeting of the Company or
of the holders of any class of shares in the Company shall be deemed to have
received notice of the meeting and, where requisite, of the purposes for which
it was called.
148. NOTICE TO PERSONS ENTITLED BY TRANSMISSION
A notice or other document may be served or delivered by the Company on or to
the persons entitled by transmission to a share, whether in consequence of the
death or bankruptcy of a member or otherwise by sending or delivering it, in any
manner authorised by these Articles for the service or delivery of a notice or
other document on or to a member, addressed to them by
32
<PAGE>
name, or by the title of representatives of the deceased, or trustee of the
bankrupt or by any like description at the address, if any, within the United
Kingdom supplied for that purpose by the persons claiming to be so entitled.
Until such an address has been supplied, a notice or other document may be
served or delivered in any manner in which it might have been served or
delivered if the death or bankruptcy or other event giving rise to the
transmission had not occurred.
149. NOTICE TO PERSONS ENTITLED BY DEATH OR BANKRUPTCY
A notice may be given by the Company to the persons entitled to a share in
consequence of the death or bankruptcy of a member by sending or delivering it,
in any manner authorised by these Articles for the giving of notice to a member,
addressed to them by name, or by the title of representatives of the deceased,
or trustee of the bankrupt or by any like description at the address, if any,
within the United Kingdom supplied for that purpose by the persons claiming to
be so entitled. Until such an address has been supplied, a notice may be given
in any manner in which it might have been given if the death or bankruptcy had
not occurred.
150. TRANSFEREES ETC. BOUND BY PRIOR NOTICE
Every person who becomes entitled to a share shall be bound by any notice in
respect of that share which, before his name is entered in the register, has
been duly given to a person from whom he derives his title.
151. WHEN NOTICES DEEMED SERVED
Proof that an envelope containing a notice was properly addressed, prepaid and
posted shall be conclusive evidence that the notice was given. A notice sent by
post shall be deemed to be given:
(a) if sent by first class post from an address in the United Kingdom or
another country to another address in the United Kingdom or, as the case
may be, that other country, on the day following that on which the
envelope containing it was posted;
(b) if sent by airmail from an address in the United Kingdom to an address
outside the United Kingdom, on the day following that on which the
envelope containing it was posted; and
(c) in any other case, on the second day following that on which the envelope
containing it was posted.
A notice sent by facsimile transmission shall be deemed given at the time the
notice is received.
WINDING UP
152. LIQUIDATOR MAY DISTRIBUTE IN SPECIE
If the Company is wound up, the liquidator may, with the sanction of an
extraordinary resolution of the Company and any other sanction required by the
Insolvency Act 1986, divide among the members in specie the whole or any part of
the assets of the Company and may, for that purpose, value any assets and
determine how the division shall be carried out as between the members or
different classes of members. The liquidator may, with the like sanction, vest
the whole or any part of the assets in trustees upon such trusts for the benefit
of the members as he with the like sanction determines, but no member shall be
compelled to accept any assets upon which there is a liability.
33
<PAGE>
153. DISPOSAL OF ASSETS BY LIQUIDATOR
The power of sale of a liquidator shall include a power to sell wholly or
partially for shares or debentures or other obligations of another body
corporate, either then already constituted or about to be constituted for the
purpose of carrying out the sale.
INDEMNITY
154. INDEMNITY TO DIRECTORS, OFFICERS, ETC.
Subject to the provisions of the Companies Acts but without prejudice to any
indemnity to which a director may otherwise be entitled, every director or other
officer or auditor of the Company shall be indemnified out of the assets of the
Company against all costs, charges, losses, expenses and liabilities incurred by
him in the execution or discharge of his duties or the exercise of his powers or
otherwise in relation thereto, including (but without limitation) any liability
incurred by him in defending any proceedings, whether civil or criminal, in
which judgment is given in his favour (or the proceedings are otherwise disposed
of without any finding or admission of any material breach of duty on his part)
or in which he is acquitted or in connection with any application in which
relief is granted to him by the court from liability for negligence, default,
breach of duty or breach of trust in relation to the affairs of the Company.
34
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
NAME AND ADDRESS OF THE SUBSCRIBER(S) SIGNATURE(S) OF THE SUBSCRIBER(S)
- ------------------------------------------------------------------------------
<S> <C>
NAME Robert William Henry Robert William Henry Pinson
ADDRESS Pinson
91 Stewart Road
Bournemouth
(Engineer)
NAME Irene Winifred Pinson Irene Winifred Pinson
ADDRESS 91 Stewart Road
Bournemouth
(Secretary)
</TABLE>
DATED this 16th day of April 1962
Witness to the above signature: Arthur Liftball
Witness Signature: Arthur Liftball
Witness Occupation: Chartered Accountant
Witness Address: 14 Christchurch Road
Bournemouth
35
<PAGE>
EXECUTION COPY
COMPASS AEROSPACE CORPORATION
AND ITS UNDERSIGNED SUBSIDIARIES
2029 Century Park East
Suite 1112
Los Angeles, California 90067
Dated as of July 30, 1999
BankBoston, N.A., as Agent and Issuing
Bank, and the UK Fronting Lender and
the Lenders referred to in the Credit
Agreement (as defined below)
100 Federal Street
Boston, Massachusetts 02110
Re: CONSENT, WAIVER AND AMENDMENT NO. 2 TO CREDIT AGREEMENT
Ladies and Gentlemen:
We refer to the Amended and Restated Credit Agreement, dated as of
November 20, 1998, as amended and restated as of February 11, 1999, and as
further amended as of June 7, 1999 (as so amended, the "CREDIT Agreement"),
among (a) Compass Aerospace Corporation (the "BORROWER"), (b) Aeromil
Engineering Company ("Aeromil"), (c) Western Methods Machinery Corporation
("WESTERN METHODS"), (d) Barnes Machine Incorporated ("BARNES"), (e) Brittain
Machine, Inc. ("BRITTAIN"), (f) Wichita Manufacturing, Inc. ("WICHITA"), (g)
Sea-lect Products, Inc. ("SEA-LECT"), (h) Pacific Hills Manufacturing Co.
(formerly known as Lamsco West, Inc.) ("Lamsco"), (i) Modern Manufacturing,
Inc. ("MODERN MANUFACTURING" and, together with Aeromil, Western Methods,
Barnes, Brittain, Wichita, Sea-Lect and Lamsco, collectively, the
"GUARANTORS"), (j) BankBoston, N.A. ("BankBoston") and the other lending
institutions listed on SCHEDULE 1 thereto as Lenders (the "LENDERS"), (k)
BankBoston, as Issuing Bank and as Agent, (l) Royal Bank of Canada, as
Syndication Agent, (m) General Electric Capital Corporation, as Documentation
Agent, and (n) Bank of America, N.A. (f/k/a NationsBank, N.A), as Co-Agent.
Capitalized terms used but not defined in this Agreement (this "AGREEMENT")
have the same meanings herein as in the Credit Agreement, as amended hereby.
<PAGE>
-2-
The Borrower has requested that the Required Lenders and the Agent
(a) consent to the UK Borrower's Acquisition of all of the Capital Stock of
Trim Engineering Ltd., (b) waive the requirements of Sections 6.3, 9.16 and
9.17 of the Credit Agreement which would otherwise be applicable to the Trim
Subsidiary, Maybrey (as defined below), and (c) join with the undersigned
Transaction Parties in amending the Credit Agreement to, among other things,
permit the proposed financing of such Acquisition and amend and restate the
financial covenants of the Borrower in Sections 11.2 and 11.5 of the Credit
Agreement. The undersigned Required Lenders and the Agent have advised the
Borrower that they are prepared to grant such consent and such wavier and to
so amend the Credit Agreement, on the terms, subject to the conditions and in
reliance on the representations contained herein.
SECTION 1. CONSENT TO TRIM ACQUISITION AND WAIVER. Subject to
satisfaction of each of the conditions set forth in Section 3 below, the
Required Lenders hereby:
(a) waive the requirement that Maybrey comply with the
requirements set forth in Sections 6.3, 9.16 and 9.17 of the Credit
Agreement, as amended hereby; PROVIDED that this waiver shall not
affect the applicability or effectiveness of Section 9.23 of the Credit
Agreement, as amended hereby; and
(b) consent to the Trim Acquisition.
Such consent and such waivers shall be effective as of the Effective Date.
SECTION 2. AMENDMENT OF CREDIT AGREEMENT. Subject to satisfaction of
each of the conditions set forth in Section 3 below, each of the undersigned
Transaction Parties, the Agent and the undersigned Required Lenders agrees to
amend the Credit Agreement as set forth below. Each of the following amendments
shall be effective as of the Effective Date:
(a) DEFINITIONS.
(i) Section 1.1 of the Credit Agreement is amended by amending
and restating in their entirety, each of the following defined terms as
follows:
ACQUISITION DOCUMENTS. Each of the Aeromil
Acquisition Documents, the Western Methods Acquisition
Documents, the Barnes Acquisition Documents, the Brittain
Acquisition Documents, the J&J Acquisition Documents, the
Sea-Lect Acquisition Documents, the Lamsco
<PAGE>
-3-
Acquisition Documents, the Modern Acquisition Documents,
the Trim Acquisition Documents and all other agreements,
documents and instruments executed and/or delivered in
connection with any Acquisition.
LOAN DOCUMENTS. This Agreement, the Notes, the
Security Documents, the Commitment Letter, the Fee Letter, the
Amendment Agreement, Amendment No. 1 to Credit Agreement,
Amendment No. 2 to Credit Agreement, and any Rate Protection
Agreement between the Borrower and any Lender.
MORTGAGES. Collectively, the several mortgages, deeds
of trust and legal charges over land from the time to time
executed and delivered by any Transaction Party to the Agent
with respect to fee or leasehold interests of such Transaction
Party in Real Estate and in each case in form and substance
satisfactory to the Agent.
SECURITY DOCUMENTS. The Security Agreement, the Stock
Pledge Agreement, the First Amendment to Security Documents
Agreement, the UK Security Documents, the Agency Account
Agreements, the Mortgages and each other Instrument executed
and delivered by any Transaction Party to or in favor of the
Agent or any Lender and designated a "SECURITY DOCUMENT" for
purposes of this Agreement.
SUBORDINATED DEBT DOCUMENTS. The Senior Subordinated
Note Documents, the Exchange Note Documents, the Permitted
Subordinated Debt Documents, the 1999 Senior Subordinated Note
Documents, the Trim Seller Note Documents, and the Permitted
Seller Subordinated Debt Documents.
TRANSACTION PARTIES. Collectively, the Borrowers, all
Guarantors and all UK Guarantors.
UK BORROWER. A UK Subsidiary of the Borrower that
shall become party hereto as the "UK Borrower" pursuant to
ss.13.8 of this Agreement by executing and delivering an
Accession Agreement substantially in the form attached hereto
as EXHIBIT K. As of the Amendment No. 2 Effective Date Compass
UK shall be the UK Borrower.
(ii) Section 1.1 of the Credit Agreement is further
amended by inserting the following new defined terms in the
appropriate alphabetical sequence in such Section:
<PAGE>
-4-
AMENDMENT NO. 2 TO CREDIT AGREEMENT. The Consent,
Waiver and Amendment No. 2 to Credit Agreement, dated as of
July 30, 1999, among the US Transaction Parties, the UK
Borrower, the Required Lenders and the Agent.
AMENDMENT NO. 2 EFFECTIVE DATE. The date on which all
of the conditions to the effectiveness of Amendment No. 2 to
Credit Agreement are satisfied and Amendment No. 2 to Credit
Agreement becomes effective.
COMPASS UK. Compass Aerospace Limited (Registered No.
03668754), a private limited liability company organized under
the laws of England and Wales.
DEBENTURES. The Debentures, dated or to be dated on
or prior to the Amendment No. 2 Effective Date, made by the UK
Borrower and the UK Guarantors in favor of the Agent, and each
in form and substance satisfactory to the Agent.
DEEDS OF GUARANTEE. Collectively, the Deeds of
Guarantee and Indemnity from the time to time executed and
delivered by any of the UK Guarantors, in favor of applicable
Lenders, the Agent and the UK Fronting Bank whereby the UK
Guarantors guarantee the UK Obligations, and each in form and
substance satisfactory to the Agent.
DEEDS OF SUPPLEMENTAL GUARANTEE. Collectively, the
Deeds of Supplemental Guarantee and Indemnity from the time to
time executed and delivered by any of the UK Guarantors, in
favor of applicable Lenders, the Agent and the UK Fronting
Bank, whereby the UK Guarantors guarantee all the Obligations,
and each in form and substance satisfactory to the Agent.
DIAC. Diac Limited (Registered No. 00552029), a
private limited liability company organized under the laws of
England and Wales.
FABRICATION. Trefn Fabrications Limited (Registered
No. 02854848), a private limited liability company organized
under the laws of England and Wales.
MAYBREY. Maybrey Precision Castings Limited
(Registered No. 00720270), a private limited liability company
organized under the laws of England and Wales.
<PAGE>
-5-
CHARGES OVER SHARES. Collectively, (a) the Charge
over Shares, to be dated on or prior to the Amendment No. 2
Effective Date, from the US Borrower in favor of the Agent,
for the benefit of the Lenders, with respect to the Capital
Stock of the UK Borrower, (b) the Charge over Shares, to be
dated on or prior to the Amendment No. 2 Effective Date, from
the UK Borrower in favor of the Agent, for the benefit of the
Lenders, with respect to the Capital Stock of Trim, (c) the
several Charges over Shares, each to be dated on or prior to
the Amendment No. 2 Effective Date, from Trim in favor of the
Agent, for the benefit of the Lenders, with respect to the
Capital Stock of the Trim Subsidiaries (other than Treatment),
(d) the Charge over Shares, to be dated on or prior to the
Amendment No. 2 Effective Date, from Trefn in favor of the
Agent, for the benefit of the Lenders, with respect to the
Capital Stock of Treatment, and (e) each other Charge over
Shares from the time to time executed and delivered by the UK
Borrower, any UK Guarantor or any other UK Subsidiary, in
favor of the Agent for the benefit of the Lenders, and each
such Charge over Shares in form and substance satisfactory to
the Agent.
INTERCOMPANY FUNDING AGREEMENTS. Collectively, the
several Intercompany Funding Agreements, to be dated on or
prior to the Amendment No. 2 Effective Date, by and among the
UK Borrower and the other UK Subsidiaries, and each in form
and substance satisfactory to the Agent.
1999 EXCHANGE NOTE DOCUMENTS. The 1999 Senior
Subordinated Exchange Notes, the 1999 Senior Subordinated
Indenture and each of the documents, instruments and other
agreements, evidencing or governing obligations of the
Transaction Parties in respect of the 1999 Senior Subordinated
Exchange Notes, as in effect on the Amendment No. 2 Effective
Date and as the same may be amended, modified or supplemented
from time to time in accordance with the terms thereof and
hereof.
1999 SENIOR SUBORDINATED EXCHANGE NOTES. The Senior
Subordinated Notes due 2005 which may be issued by the
Borrower in exchange for the 1999 Senior Subordinated Notes in
accordance with the terms contained in the 1999 Senior
Subordinated Indenture.
1999 OFFERING MEMORANDUM. The Offering Memorandum, to
be dated on or prior to the Amendment No. 2 Effective Date,
<PAGE>
-6-
disclosing the terms and conditions of the 1999 Senior
Subordinated Notes and the 1999 Senior Subordinated Exchange
Notes.
1999 SENIOR SUBORDINATED INDENTURE. The Senior
Subordinated Indenture, to be dated on or prior to the
Amendment No. 2 Effective Date, by and among the Borrower and
IBJ Whitehall Bank & Trust Company, as Trustee pursuant to
which the 1999 Senior Subordinated Notes shall be issued.
1999 SENIOR SUBORDINATED NOTE DOCUMENTS. The 1999
Senior Subordinated Notes, the 1999 Senior Subordinated
Exchange Notes, the 1999 Senior Subordinated Indenture, any
and all guarantees of any Subsidiary of the Borrower given or
made pursuant to the 1999 Senior Subordinated Indenture, and
each of the Instruments evidencing the 1999 Senior
Subordinated Notes or 1999 senior Subordinated Exchange Notes,
or pursuant to which any 1999 Senior Subordinated Note or 1999
Senior Subordinated Exchange Note is issued, incurred or
guaranteed.
1999 SENIOR SUBORDINATED NOTES. The 10.125% Senior
Subordinated Notes due 2005 issued by the Borrower in
accordance with the terms contained in the 1999 Senior
Subordinated Indenture, in an aggregate principal amount
outstanding not to exceed $19,000,000.
TREATMENT. Trefn Engineering (Metal Treatment
Division) Limited (Registered No. 01665930), a private limited
liability company organized under the laws of England and
Wales.
TREFN. Trefn Engineering Limited (Registered No.
01396688), a private limited liability company organized under
the laws of England and Wales.
TRIM. Trim Engineering Limited (Registered No.
00723273), a private limited liability company organized under
the laws of England and Wales.
TRIM ACQUISITION. The acquisition by the UK Borrower
of all of the Capital Stock of Trim pursuant to the Trim
Acquisition Documents.
TRIM ACQUISITION AGREEMENT. The Share Stock Purchase
Agreement (including the related Disclosure Letter, from the
Trim Sellers to Compass UK, and the attached disclosure
bundle), dated or
<PAGE>
-7-
to be dated on or prior to the Amendment No. 2 Effective
Date, by and among the UK Borrower, the US Borrower and the
Trim Sellers.
TRIM ACQUISITION DOCUMENTS. The Trim Acquisition
Agreement, the Intercompany Funding Agreements, the Trim
Seller Notes and all other agreements and documents relating
to the Trim Acquisition.
TRIM SELLERS. Collectively, Brian David William
Pinson, John Robert Pinson and Robert William Henry Pinson.
TRIM SELLER NOTES. The Variable Rate Guaranteed Loan
Notes 2002, dated or to be dated on or prior to the Amendment
No. 2 Effective Date, made by (a) the UK Borrower in favor of
the Trim Sellers in an aggregate original principal amount not
to exceed L1,600,000, and (b) the Borrower as the
guarantor thereof.
TRIM SELLER NOTE DOCUMENTS. The Trim Seller Notes and
all other agreements and documents relating to the Trim Seller
Notes.
TRIM SUBSIDIARIES. Collectively, Diac, Fabrication,
Maybrey, Trefn and Treatment.
UK GUARANTEES. Collectively, the Deeds of Guarantee
and Deeds of Supplemental Guarantee.
UK GUARANTORS. Collectively, (a) Diac, Fabrication,
Trim, Trefn and Treatment, (b) each other UK Subsidiary of the
Borrower which executes a UK Guarantee, and (c) the UK
Borrower, with respect to any UK Obligation for which it is
not the direct obligor.
UK SECURITY DOCUMENTS. The UK Guarantees, the
Debentures, the Charges Over Shares, the UK Security Trust
Deed, each Mortgage executed by a UK Subsidiary, and each
other document, instrument, certificate or agreement now or
hereafter executed and delivered in connection with the
granting in favor of the Agent, for the benefit of the
applicable Lenders, of any Liens over assets or properties or
Capital Stock of the UK Borrower or any of the other UK
Subsidiaries.
UK SECURITY TRUST DEED. The Trust Deed, dated or to
be dated on or prior to the Amendment No. 2 Effective Date,
among the Agent,
<PAGE>
-8-
the Lenders and the Issuers, appointing the Agent as
security trustee under the UK Security Documents.
(b) MANDATORY REDUCTION OF COMMITMENTS. Section 4.2(e) of the Credit
Agreement is hereby amended and restated in its entirety as follows (with such
amendment to have retroactive effect as of the Amendment No. 1 Effective Date):
"(e) INTENTIONALLY OMITTED."
(c) COLLATERAL SECURITY AND GUARANTEE. Article 6 of the Credit
Agreement is hereby amended as follows:
(i) Section 6.3 of the Credit Agreement is amended by
inserting the following sentence immediately before the first sentence
of such Section:
"All UK Obligations shall also be guaranteed pursuant to the
terms of the Deeds of Guarantees."
(ii) by adding the following new Section 6.4 at the end of
such Article:
6.4. RELEASE OF CERTAIN UK GUARANTOR GUARANTEES AND
SECURITY. At such time as all of the Guarantees (as such term
is defined in each of the Senior Subordinated Indenture and
1999 Senior Subordinated Indenture) executed by each of the UK
Guarantors in favor of the Holders (as such term is defined in
each of the Senior Subordinated Indenture and the 1999 Senior
Subordinated Indenture) of the Senior Subordinated Notes and
1999 Senior Subordinated Notes shall have been released in
compliance with the terms of the Senior Subordinated
Indenture, or the 1999 Senior Subordinated Indenture, as the
case may be, the Borrowers shall provide the Agent with
reasonable evidence of such release and upon receipt of such
evidence the Lenders shall promptly direct the Agent to, and
the Agent shall promptly, release (a) each Deed of
Supplemental Guarantee and (b) the security interests and/or
fixed or floating charges over the assets of such UK Guarantor
granted to secure the Obligations guaranteed by such Deeds of
Supplemental Guarantee, and the Agent shall execute such
documents, prepared by the Borrower, as the Borrower shall
reasonably request to evidence such release. Such release
shall not release or affect any (i) Deeds of Guarantee by
which, pursuant to its terms, a UK Guarantor guaranteed solely
the payment and performance of the UK Obligations or (ii) any
security interests and/or fixed or
<PAGE>
-9-
floating charges over the assets of such UK Guarantor
granted to secure the UK Obligations.
(d) FINANCIAL STATEMENTS AND PROJECTIONS. Section 8.4(b) of the Credit
Agreement is hereby amended by renumbering Section 8.4(b) to new Subsection
8.4(b)(i) and inserting the following new subsection 8.4(b)(ii):
"(ii) PRO FORMA BALANCE SHEET. There has been furnished to
each of the Lenders the Borrower's unaudited pro forma consolidated
balance sheet as of December 31, 1998 (the "PRO FORMA BALANCE SHEET"),
prepared after giving effect to (i) the Lamsco Acquisition and the
making of the Loans on the Original Closing Date and the consummation
of the other transactions to occur on the Original Closing Date, (ii)
the Modern Acquisition, and (iii) the Trim Acquisition, as if each such
transaction had occurred on such date. Such Pro Forma Balance Sheet has
been prepared (i) in good faith by the Borrower, based upon reasonable
estimates and assumptions and (ii) on the basis of the assumptions
stated therein, accurately reflects all adjustments required to be made
to give effect to the transactions contemplated to occur on the
Original Closing Date and present fairly on a pro forma basis the
estimated consolidated financial position of the Borrower and its
consolidated Subsidiaries, as of such date, assuming that such
transactions had actually occurred at such date."
(e) EMPLOYEE BENEFIT PLANS. Section 8.14(e) of the Credit
Agreement is hereby amended and restated in its entirety as follows:
"(e) UK PENSION SCHEMES.
(i) Except as disclosed on SCHEDULE 8.14 hereto, the UK
Borrower and the UK Subsidiaries have no plans, schemes or arrangements
(whether legally enforceable or not) under which it has any obligation
to provide or contribute towards the provision of benefits in relation
to death, disability or retirement for any of their employees.
(ii) Except as disclosed on SCHEDULE 8.14 hereto, in relation
to each plan, scheme or arrangement disclosed in the SCHEDULE 8.14:
(A) all contributions which are payable by the UK
Borrower or any UK Subsidiary in respect of it have been duly
made and such UK Borrower or UK Subsidiary has fulfilled all
its obligations under it in respect of its employees;
<PAGE>
-10-
(B) to the best of the our knowledge, it complies
with and has been administered in respect of its employees and
at all times (x)in accordance in all material respects with
all applicable legal and administrative requirements
(including Article 119 of the Treaty of Rome as it applies to
the eligibility of an Employee to join it and the benefits
provided under it, the preservation requirements within the
meaning of Section 69 of the Pension Schemes Act 1993, the
contracting-out requirements of Part III of the Pensions
Schemes Act 1993 and all relevant requirements of the Pensions
Act 1995) and (y) in accordance in all material respects with
its trusts, powers, and provisions and all other Applicable
Laws;
(C) it provides only money purchase benefits as
defined in Section 18 Pensions Schemes Act 1993; and to the
best of our knowledge, all actuarial, consultancy, legal and
other fees, charges or expenses have been paid and no such
services have been provided for which an account or invoice
has not been rendered."
(f) USE OF PROCEEDS. Section 8.15(a)(ii) of the Credit Agreement is
hereby amended and restated in its entirety as follows:
"(ii) (A) use the proceeds of Revolving Credit Loans solely
(x) to finance permitted Capital Expenditures and for working capital
and general corporate purposes of the US Transaction Parties and (y)
during the period from July 30, 1999 through September 31, 1999, to
make intercompany loans to the UK Borrower to satisfy working capital
needs of the UK Borrower and the other UK Subsidiaries and (B) not use
any proceeds of Revolving Credit Loans to finance any Permitted
Acquisition or any fees or expenses incurred in connection therewith;"
(g) FISCAL YEAR. Section 8.20 of the Credit Agreement is hereby amended
and restated in its entirety as follows:
"8.20. FISCAL YEAR. The Borrower and each of its Subsidiaries
(other than Trim and its Subsidiaries) has a fiscal year which is the
twelve (12) months ending on December 31 of each year. Trim and each of
its Subsidiaries has a fiscal year which (a) as of the Amendment No. 2
Effective date is the twelve months ended April 30 of each year, and
(b) on or before December 31, 1999 will be changed to the twelve (12)
months ended December 31 of each year.
(h) SENIOR DEBT. Section 8.23 of the Credit Agreement is hereby amended
and restated in its entirety as follows:
<PAGE>
-11-
"8.23 SENIOR DEBT. All Obligations, including all Loans,
Reimbursement Obligations and the Maximum Drawing Amount of all Letters
of Credit, constitute (a) "Senior Debt" (or the equivalent term) under
all Subordinated Debt Documents and (b) "Designated Senior Debt" under
each of the Senior Subordinated Indenture and the 1999 Senior
Subordinated Indenture. The Borrower hereby irrevocably expressly
designates all such Obligations to be "Senior Debt" and "Designated
Senior Debt" under and for all purposes of each of the Senior
Subordinated Indenture and the 1999 Senior Subordinated Indenture. The
Borrower and each Guarantor hereby irrevocably agree that all
Obligations are, and are hereby made, senior in right of payment to the
Securities and each Guarantee (as such terms are defined in each of the
Senior Subordinated Indenture and 1999 Senior Subordinated Indenture)
and to all other Obligations of the Borrower or any of its Subsidiaries
under or in respect of (i) the Senior Subordinated Indenture or any of
the other Senior Subordinated Debt Documents or (ii) the 1999 Senior
Subordinated Indenture or any of the other 1999 Senior Subordinated
Debt Documents."
(i) REPRESENTATIONS AND WARRANTIES IN ANCILLARY DOCUMENTS. Section 8.24
of the Credit Agreement is hereby amended and restated in its entirety as
follows:
"8.24. REPRESENTATIONS AND WARRANTIES IN ANCILLARY DOCUMENTS.
All representations and warranties set forth in the Ancillary Documents
are true and correct in all material respects at the time as of which
such representations and warranties were made and on the Original
Closing Date (with respect to Ancillary Documents entered into on or
prior to such date) and as of the date of such Ancillary Documents
(with respect to Ancillary Documents entered into after the Original
Closing Date).
(j) FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. Section 9.3 of
the Credit Agreement is amended as follows:
(i) by (A) replacing the period at the end of paragraph (h)
with a semicolon, and (B) inserting the following new paragraphs (o)
and (p) at the end of Section 9.3:
"(o) simultaneously with the delivery of the
financial statements referred to in subsection (c) above, a
report, certified by the principal financial or accounting
officer of the Borrower, as to whether Maybrey has the
required net assets to comply with the requirements of
Section 9.23, 9.16 and 9.17 and setting forth in reasonable
detail the basis therefor; and
<PAGE>
-12-
(p) as soon as practicable, but in any event not
later than ninety (90) days after the Amendment No. 2
Effective Date, the consolidated and consolidating balance
sheets of Trim and its Subsidiaries for the period from April
30, 1998 through to the end of March 31, 1999, April 30, 1999
or June 30, 1999, and the related consolidated and
consolidating statements of income and consolidated statements
of retained earnings and cash flow for such period, each such
statement setting forth in comparative form the figures for
the previous fiscal year and prepared in reasonable detail and
in accordance with GAAP, and all such consolidated statements
to be certified without qualification by the Independent
Public Accountants, together with a written statement from
such Accountants to the effect that they have read a copy of
this Agreement, and that, in making the examination necessary
to said certification, they have obtained no knowledge of any
Default or Event of Default, or, if such Accountants shall
have obtained knowledge of any Default or Event of Default,
they shall disclose in such statement any such Default or
Event of Default; PROVIDED that such Accountants shall not be
liable to the Lenders for failure to obtain knowledge of any
Default or Event of Default."
(k) OWNERSHIP OF SUBSIDIARIES. Section 9.15 of the Credit Agreement is
amended by adding, immediately following the word "Guarantors", the phrase
"and of each of the UK Guarantors".
(l) COLLATERAL FOR LOANS. Section 9.16(a) of the Credit Agreement is
hereby amended and restated in its entirety as follows:
"(a) Pledge and maintain the pledge of all of the Capital
Stock of each of its direct Subsidiaries in favor of the Agent, for the
benefit of the Secured Parties, in accordance with the provisions of
the Stock Pledge Agreement or any other Instrument evidencing a pledge
of stock or charge or mortgage over shares entered into by the Borrower
or any of its Subsidiaries, except that only sixty-five percent (65%)
of the Capital Stock of any direct UK Subsidiary of the Borrower shall
be pledged to secure the Obligations (other than the UK Obligations) if
the Borrowers establish, to the reasonable satisfaction of the Agent,
that (i) a pledge of a greater amount would result in adverse tax
consequences and (ii) no Guarantee (as such term is defined in the
Senior Subordinated Indenture and/or the 1999 Senior Subordinated
Indenture, as the case may be) is executed by the issuer of such
Capital Stock."
<PAGE>
-13-
(m) AFFIRMATIVE COVENANTS. Article 9 of the Credit Agreement is hereby
amended by adding, at the end of such Article, the following new Section 9.22
and Section 9.23:
9.22. ADDITIONAL UK GUARANTEES; SECURITY. At any time that
a Guarantee (as such term is defined in each of the Senior
Subordinated Indenture or 1999 Senior Subordinated Indenture) is
executed by any UK Subsidiary, cause (A) each such UK Subsidiary to,
prior to such execution or simultaneously therewith: (a) execute and
deliver to the Agent a Deed of Supplemental Guarantee pursuant to
which such UK Subsidiary guarantees the payment and performance of
all the Obligations, and (b) secure or caused to be secured the
Obligations by creating or causing to be created in favor of the
Agent for the benefit of the Lenders and perfected security
interests in and first fixed and floating charges or mortgages over
(subject only to Permitted Liens) all inventory, receivables,
equipment, accounts, copyrights, patents, trademarks, other general
intangibles, real property and other assets (including any Capital
Stock owned by such UK Subsidiary) of such UK Subsidiary, now owned,
or hereafter acquired, and (B) each Transaction Party holding
Capital Stock of such a UK Subsidiary to, prior to such execution or
simultaneously therewith, to satisfy the requirements of Section
9.16(a). All such security interests in and charges or mortgages
over such Property will be created under Security Instruments in
form and substance satisfactory to the Agent, and the Borrower and
its Subsidiaries shall deliver to the Agent all such Security
Instruments (including, without limitation, legal opinions, title
insurance policies and lien searches) as the Agent or the Required
Lenders shall reasonably request to evidence the satisfaction of the
obligations created by this Section 9.22. The Borrower agrees to
provide such evidence as the Agent or the Required Lenders shall
request as to the perfection and priority of such security interests
in and charges or mortgages over such Property (subject only to
Permitted Liens).
9.23. COLLATERAL FOR LOANS BY MAYBREY. Cause Maybrey to, to
the extent not prohibited by Applicable Law, within thirty (30) days
of having net assets for the purposes of Section 155(2) of the
Companies Act 1985 (England), comply with the requirements of
Sections 6.3, 9.16 and 9.17 in order to secure the UK Obligations, as
if for purposes of such sections of the Credit Agreement the
Acquisition of Maybrey had occurred simultaneously with its
satisfaction of the net asset requirement of Section 155(2) of the
Companies Act 1985 (England)."
(n) INDEBTEDNESS. Section 10.1 of the Credit Agreement is amended as
follows:
<PAGE>
-14-
(i) by replacing the reference to "$25,000,000" in Section
10.1(d) with a reference to "$5,000,000";
(ii) by amending and restating Section 10.1(k) in its entirety
as follows:
"(k) Any (i) guarantee by the Borrower of Purchase
Money Indebtedness permitted by paragraph (c) of this
ss.10.1 (to the extent permitted in the definition of
Purchase Money Indebtedness), (ii) guarantee by the
Borrower of Permitted Seller Subordinated Debt permitted by
paragraph (d) of this Section 10.1 (to the extent permitted
in the definition of Permitted Seller Subordinated Debt),
(iii) guarantee by the Borrower of the Trim Seller Notes
permitted by paragraph (m) of this Section 10.1 (to the
extent permitted in the definition of Trim Seller Notes),
and (iv) guarantee by the Borrower of the obligations of
the UK Borrower under the Trim Acquisition Agreement;"
(iii) by (A) replacing the period at the end of paragraph (l)
with a semi-colon, and (B) inserting the following new paragraphs (m),
(n), (o) and (p) at the end of Section 10.1:
"(m) Indebtedness of the UK Borrower under the Trim
Seller Notes in an aggregate principal amount not to exceed
L1,600,000, minus the amount of any payment, prepayment,
redemption, repurchase or other acquisition of, or
cancellation or discharge of, such Trim Seller Notes;
(n) Indebtedness of the Borrower under the 1999
Senior Subordinated Notes in an aggregate principal amount not
to exceed $19,000,000, MINUS the amount of any payment,
prepayment, redemption, repurchase or other acquisition of, or
cancellation or discharge of, any 1999 Senior Subordinated
Notes;
(o) Indebtedness of the Borrower under the 1999
Exchange Notes issued in exchange for the 1999 Senior
Subordinated Notes in the manner described in the 1999 Senior
Subordinated Indenture, PROVIDED, that the aggregate principal
amount of the 1999 Exchange Notes outstanding at any time
shall not exceed the outstanding principal amount of the 1999
Senior Subordinated Notes on the date of the issuance of the
1999 Exchange Notes, MINUS the amount of any payment,
prepayment, redemption, repurchase or other acquisition of, or
cancellation or other discharge of, any 1999 Exchange Notes;
<PAGE>
-15-
(p) any guarantee by any Subsidiary of the Borrower
of Indebtedness permitted by (A) paragraphs (e) or (f), so
long as such guarantees are in the form of the Guarantee (as
such term is defined in the Senior Subordinated Indenture),
and are subordinated as set forth in the Guarantee and in
Article XII of the Senior Subordinated Indenture and (B)
paragraphs (n) or (o), so long as such guarantees are in the
form of the Guarantee (as such term is defined in the 1999
Senior Subordinated Indenture), and are subordinated as set
forth in the Guarantee and in Article XII of the 1999 Senior
Subordinated Indenture."
(o) INVESTMENTS. Section 10.3 of the Credit Agreement is amended as
follows:
(i) by amending and restating Section 10.3(e) of the Credit
Agreement in its entirety as follows:
"(e) Investments consisting of the Guarantee and the UK
Guarantees;"
(ii) by (A) deleting the "and" at the end of paragraph (g),
(B) replacing the period at the end of paragraph (h) with a semi-colon,
and (C) inserting the following new paragraphs (i) and (j) at the end
of Section 10.3:
"(i) Investments by the UK Borrower or any UK
Subsidiary in a UK Guarantor or the UK Borrower in the form of
intercompany loans made in cash, PROVIDED, HOWEVER, that if
any Enforcement Period is continuing, then no such Investments
shall be permitted under this paragraph (g) in violation of
the restrictions set forth in the Enforcement Notice
commencing such Enforcement Period; and
(j) solely during the period from July 30, 1999
through September 30, 1999, Investments by the Borrower in the
UK Borrower in the form of intercompany loans made in cash to
finance working capital needs of the UK Borrower and the other
UK Subsidiaries, PROVIDED, HOWEVER, that (x) if any
Enforcement Period is continuing, then no such Investments
shall be permitted under this paragraph (g) in violation of
the restrictions set forth in the Enforcement Notice
commencing such Enforcement Period, (y) the aggregate
outstanding principal amount of such intercompany loans shall
not exceed $7,500,000 at any time and (z) all such
intercompany loans shall have been repaid in full by the UK
Borrower on or before September 30, 1999."
<PAGE>
-16-
(p) DISTRIBUTIONS AND RESTRICTED PAYMENTS. Section 10.4 of the Credit
Agreement is amended as follows:
(i) Subsections 10.4(b)(i) and (ii) of the Credit Agreement
are hereby amended and restated in their entirety as follows:
"(i) mandatory payments of principal of and accrued
unpaid interest on Subordinated Debt made as required by the
terms of the Subordinated Debt Documents, so long as such
payments are not prohibited by the subordination provisions
set forth in the Subordinated Debt Documents (it being
understood that the redemption of (x) Senior Subordinated
Notes or Exchange Notes pursuant to Article III of the Senior
Subordinated Indenture and/or (y) 1999 Senior Subordinated
Notes or 1999 Senior Subordinated Exchange Notes pursuant to
Article III of the 1999 Senior Subordinated Indenture is
prohibited by this Agreement); and
(ii) the issuance of (x) the Exchange Notes for the
Senior Subordinated Notes originally issued under the Senior
Subordinated Indenture in accordance with the terms of the
Senior Subordinated Note Documents and/or (y) the 1999 Senior
Subordinated Exchange Notes for the 1999 Senior Subordinated
Notes originally issued under the 1999 Senior Subordinated
Indenture in accordance with the terms of the 1999 Senior
Subordinated Note Documents."
(ii) Subsection 10.4(c) is hereby amended and restated in its
entirety as follows:
"(c) Make any payment, prepayment, redemption,
repurchase or other acquisition of, or cancel or discharge in
any manner, any Indebtedness of any Transaction Party to any
other Transaction Party, or make any payment or distribution
in respect of any interest or other sums due in respect of any
such Indebtedness (an "INTERCOMPANY DEBT PAYMENT"), except for
Intercompany Debt Payments made by the Transaction Party which
was permitted to incur such Indebtedness; PROVIDED that no
Intercompany Debt Payment shall be permitted at any time while
any Enforcement Period shall be continuing if the Enforcement
Notice for such Enforcement Period prohibits such Intercompany
Debt Payment,
<PAGE>
-17-
(q) TRANSACTIONS WITH AFFILIATES. Section 10.11 of the Credit
Agreement is hereby amended
(i) by (A) deleting the "and" at the end of paragraph (g), (B)
renumbering paragraph (h) as paragraph (k), and (C) inserting the
following new paragraphs (h), (i) and (j) in the appropriate
alphabetical order:
"(h) the intercompany loans permitted under
Section 10.3(i) and (j) and the repayments of such loans
permitted by Section 10.4(c);
(i) the Intercompany Funding Agreements; and
(j) payments under the Trim Seller Note which are
permitted by Section 10.4(b)."
(ii) replacing the parenthetical "(other than as described
in the following paragraphs of this Section 10.9)" contained in the
renumbered paragraph (k) with the following replacement
parenthetical "(other than as described in the preceding paragraphs
of this Section 10.9)". "
(r) FISCAL YEAR. Section 10.15 of the Credit Agreement is
hereby amended and restated in its entirety as follows:
"10.15. FISCAL YEAR. Permit the fiscal year of the Borrower
and each of its Subsidiaries to end on a day other than December 31,
except that for the period from the Amendment No. 2 Effective Date
through December 31, 1999, Trim and its Subsidiaries shall be permitted
to have a fiscal year ending April 30."
(s) MINIMUM CONSOLIDATED EBITDA. Section 11.2 of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:
11.2. MINIMUM CONSOLIDATED EBITDA. Consolidated EBITDA of the
Borrower and its Subsidiaries for any Reference Period ending on any
date or during any period set forth in the table below to be less than
the amount set forth opposite such date or period:
<TABLE>
<CAPTION>
Minimum
DATE OR PERIOD CONSOLIDATED EBITDA
-------------- -------------------
<S> <C>
September 30, 1999 through December 31, 1999 $40,500,000
March 31, 2000 through June 30, 2000 $42,000,000
</TABLE>
<PAGE>
-18-
<TABLE>
<S> <C>
September 30, 2000 $43,000,000
December 31, 2000 $44,000,000
January 1, 2001 through June 30, 2001 $51,000,000
July 1 through December 31, 2001 $55,000,000
January 1, 2002 through December 31, 2002 $60,000,000
January 1, 2003 through June 30, 2003 $63,000,000
July 1, 2003 through December 31, 2003 $63,500,000
January 1, 2004 through March 31, 2004 $65,000,000
April 1, 2004 through December 31, 2004 $66,000,000
January 1, 2005 through February 1, 2005 $67,500,000
</TABLE>
(t) MAXIMUM CAPITAL EXPENDITURES. Section 11.5 of the Credit Agreement
is hereby amended and restated in its entirety to read as follows:
11.5. MAXIMUM CAPITAL EXPENDITURES. The aggregate amount of
Capital Expenditures of the Borrower and its Subsidiaries (other
than Capital Expenditures made (a) with the proceeds of Indebtedness
permitted by paragraphs (c) of Section 10.1 or (b) as a result of
the acquisition of Capital Assets in any Permitted Acquisition) (i)
to exceed $9,500,000 in the 1999 calendar year and (ii) for any
Reference Period ending on any date or during any period set forth
in the table below to exceed the amount set forth in the table below
opposite such date or period:
<TABLE>
<CAPTION>
DATE OR PERIOD AMOUNT
-------------- ------
<S> <C>
January 1, 2000 through December 31, 2000 $ 8,000,000
January 1, 2001 through December 31, 2001 $12,200,000
January 1, 2002 through December 31, 2002 $12,400,000
January 1, 2003 through December 31, 2003 $14,200,000
January 1, 2004 through December 31, 2004 $15,100,000
January 1, 2005 through February 1, 2005 $12,500,000
</TABLE>
(u) GENERAL PROVISIONS RELATING TO FINANCIAL TERMS AND COVENANTS.
Section 11.6(a) of the Credit Agreement is hereby amended and restated in its
entirety as follows:
"(a) CONSOLIDATED EBITDA. In determining Consolidated EBITDA
of the Borrower and its Subsidiaries for any period, there shall be (i)
included in such Consolidated EBITDA all EBITDA attributable to any
business acquired by the Borrower or any of its Subsidiaries during
such period as if such business were acquired on the first day of such
period and (ii) excluded from such Consolidated EBITDA all EBITDA
attributable to any business disposed of by
<PAGE>
-19-
the Borrower or any of its Subsidiaries during such period as if
such business were disposed of on the first day of such period. For
purposes hereof, the EBITDA attributable to any such acquired or
disposed of business prior to the date of acquisition or disposition
thereof shall be determined in a manner consistent with the method
for determining Consolidated EBITDA, but on a non-consolidated basis
(subject to any adjustments made pursuant to paragraph (c) below).
Notwithstanding the foregoing, this paragraph (a) shall not cause
any increase in Consolidated EBITDA of the Borrower and its
Subsidiaries on account of the Lamsco Acquisition for the fiscal
quarters ended March 31, 1998, June 30, 1998 and September 30, 1998.
The effect of the Lamsco Acquisition and the Modern Acquisition on
Consolidated EBITDA of the Borrower and its Subsidiaries for such
three fiscal quarters is fully reflected and accounted for in
Section 11.7(a). In addition, and notwithstanding the foregoing, this
paragraph (a) shall not cause any increase in Consolidated EBITDA of
the Borrower and its Subsidiaries on account of the Trim Acquisition
for the fiscal quarters ended December 31, 1998, March 31, 1999 and
June 30, 1999. The effect of the Trim Acquisition on Consolidated
EBITDA of the Borrower and its Subsidiaries for such three fiscal
quarters is fully reflected and accounted for in Section 11.8(a)."
(v) FINANCIAL COVENANTS. Article 11 of the Credit Agreement is hereby
amended by inserting the following new Section 11.8 immediately following
Section 11.7:
"11.8 COMPUTATIONS OF CERTAIN FINANCIAL COVENANTS FOLLOWING
TRIM ACQUISITION.
(a) CONSOLIDATED EBITDA CALCULATION. In determining
Consolidated EBITDA of the Borrower and its Subsidiaries for any
Reference Period which includes any fiscal quarter ending December 31,
1998, March 31, 1999 or June 30, 1999, the Consolidated EBITDA of the
Borrower and its Subsidiaries for such fiscal quarter shall be the sum
of (a) the Consolidated EBITDA of the Borrower and its Subsidiaries
(other than Trim and its Subsidiaries) for such fiscal quarter PLUS (b)
the Consolidated EBITDA of Trim and its Subsidiaries for such fiscal
quarter which shall be deemed for all purposes of this Agreement to be
as follows:
FISCAL QUARTER ENDED TRIM CONSOLIDATED EBITDA
-------------------- ------------------------
December 31, 1998 $2,300,000
March 31, 1999 $2,500,000
June 30, 1999 $2,700,000
(b) CONSOLIDATED OPERATING CASH FLOW CALCULATION. In
determining Consolidated Operating Cash Flow of the Borrower and its
Subsidiaries for any
<PAGE>
-20-
Reference Period which includes any fiscal quarter ending December
31, 1998, March 31, 1999 or June 30, 1999, the Consolidated
Operating Cash Flow of the Borrower and its Subsidiaries for such
fiscal quarter shall be the sum of (a) the Consolidated Operating
Cash Flow of the Borrower and its Subsidiaries (other than Trim and
its Subsidiaries) for such fiscal quarter PLUS (b) the Consolidated
Operating Cash Flow of Trim and its Subsidiaries for such fiscal
quarter which shall be deemed for all purposes of this Agreement to
be as follows:
TRIM CONSOLIDATED
FISCAL QUARTER ENDED OPERATING CASH FLOW
-------------------- -------------------
December 31, 1998 $1,800,000
March 31, 1999 $1,700,000
June 30, 1998 $1,900,000
(c) CAPITAL EXPENDITURES AND CONSOLIDATED OPERATING CASH FLOW
IN DETERMINING MINIMUM DEBT SERVICE COVERAGE RATIO. For purposes of
determining compliance with Section 11.4, Capital Expenditures of the
Borrower and its Subsidiaries used in determining Consolidated
Operating Cash Flow of the Borrower and its Subsidiaries for Reference
Periods ending September 30, 1999 and December 31, 1999, shall (i) for
the fiscal quarter ending September 30, 1999, be the sum of (A) the
actual Capital Expenditures of the Borrower and its Subsidiaries
(except for Trim and its Subsidiaries) for such fiscal quarter PLUS (B)
the greater (x) the actual Capital Expenditures of Trim and its
Subsidiaries for such fiscal quarter MINUS $1,750,000 and (y) zero, and
(ii) for the fiscal quarter ending December 31, 1999, be the sum of
(Ai) the actual Capital Expenditures of the Borrower and its
Subsidiaries (except for Trim and its Subsidiaries) for such fiscal
quarter PLUS (B) the greater of (x) the actual Capital Expenditures of
Trim and its Subsidiaries for the fiscal quarter ending September 30,
1999, MINUS the actual Capital Expenditures of Trim and its
Subsidiaries for the fiscal quarter ending September 30, 1999, MINUS
$1,750,000 and (y) zero."
(w) CONDITIONS TO ALL BORROWINGS. Section 13.7 of the Credit Agreement
is hereby amended and restated in its entirety as follows:
"13.7 SENIOR DEBT. The Borrower shall have demonstrated to the
reasonable satisfaction of the Agent that (a) all outstanding
Obligations (after giving effect to the requested Loans or Letters of
Credit) constitute "Senior Debt" (or corresponding alternative terms)
under the Subordinated Debt Documents and "Designated Senior Debt"
under and for all purposes of each of the Senior Subordinated Indenture
and 1999 Senior Subordinated Indenture, and (b) the incurrence of
Indebtedness in respect of the requested
<PAGE>
-21-
Loans or Letters of Credit shall be permitted by all Subordinated
Debt Documents. The foregoing demonstration shall include (if
requested by the Agent) certificates of the chief financial officer
of the Borrower setting forth in reasonable detail the basis
therefor, and the calculations (if any) required to evidence
compliance with the applicable covenants set forth in the
Subordinated Debt Documents."
(x) EVENTS OF DEFAULT. Section 14.1 of the Credit Agreement is hereby
amended by:
(i) replacing each reference to "Guarantors" contained in
Section 14(p) with a reference to "Guarantors and/or UK Guarantors";
(ii) by (A) deleting the "or" at the end of paragraph (q), and
(B) inserting the following new paragraphs (r) and (s) at the end of
Section 14.1:
"(r) any party to the Trim Seller Note shall fail to
comply with any of its covenants, obligations or agreements
contained in the Trim Seller Note; or
(s) any Transaction Party shall make any payment
or prepayment of principal of any Trim Seller Note if the
Borrower shall not have established to the satisfaction of
the Agent (based on, among other things, projections and
pro forma financial statements delivered to the Agent and
certified by the Chief Financial Officer) that, immediately
after giving effect to such payment or prepayment
(including the making of any Loans and the incurrence of
any Indebtedness required to finance the payment or
prepayment) all covenants (including covenants contained in
Section 11 of this Agreement) contained herein (i) would
have been satisfied on a pro forma basis as at the end of
and for the Most Recent Reference Period for which the
Borrower has delivered to the Lenders, in compliance with
Section 9.3(a) or (b) and Section 9.3(d), the financial
statements and compliance certificate required by such
subsections (such pro forma compliance to be determined as
if such payment or prepayment was made as at the end of
such Most Recent Reference Period)."
(y) SCHEDULES TO CREDIT AGREEMENT.
(i) SCHEDULES 8.16, 8.17, 8.18, 8.19 and 8.22 to the Credit
Agreement are hereby amended by supplementing such existing Schedules
with the following supplemental Schedules attached hereto.
<PAGE>
-22-
(ii) The Credit Agreement is hereby amended by adding a new
SCHEDULE 8.14 as attached hereto
SECTION 3. CONDITIONS TO EFFECTIVENESS. This Agreement shall become
effective if, and only if, on or before July 31, 1999, each of the following
conditions precedent shall have been satisfied:
(a) EXECUTION AND DELIVERY OF DOCUMENTS.
(i) AMENDMENT DOCUMENTS. The Agent shall have received duly
executed counterparts of this Agreement, the Accession Agreement, and
the UK Security Documents (including separate (x) Deeds of Supplemental
Guarantee and (y) Deeds of Guarantees, by each UK Guarantor)
(collectively, the "AMENDMENT DOCUMENTS") in each case which, when
taken together bear the authorized signatures of each of the parties
thereto, and which are each in form and substance satisfactory to the
Agent.
(ii) 1999 SENIOR SUBORDINATED NOTE DOCUMENTS. Each of the 1999
Senior Subordinated Note Documents shall have been duly executed and
delivered by each of the parties thereto, shall be in full force and
effect and shall be in form and substance satisfactory to the Agent.
The Agent shall have received an executed copy of each of the 1999
Senior Subordinated Note Documents certified by an authorized officer
of the Borrower as of the Amendment No. 2 Effective Date to be true,
correct and complete copies of such documents.
(iii) ACQUISITION DOCUMENTS. Each of the Trim Acquisition
Documents shall have been duly executed and delivered by each of the
parties thereto, shall be in full force and effect and shall be in form
and substance satisfactory to the Agent. The Agent shall have received
an executed copy of each of the Trim Acquisition Documents certified by
an authorized officer of the Borrower as of the Amendment No. 2
Effective Date, to be true, correct and complete copies of such
documents.
(iv) EQUITY DOCUMENTS. Each of the Equity Documents executed
in connection with the issuance of Capital Stock the proceeds of which
are used to finance the Trim Acquisition (the "TRIM EQUITY DOCUMENTS")
shall have been duly executed by the Borrower and the Borrower's
shareholders party thereto, shall be in full force and effect and shall
be in form and substance satisfactory to the Agent. The Agent shall
have received an executed copy of each of such Trim Equity Documents
certified by an authorized officer of the
<PAGE>
-23-
Borrower as of the Amendment No. 2 Effective Date to be true,
correct and complete copies of such documents.
(v) SENIOR SUBORDINATED NOTE DOCUMENTS. Each Senior
Subordinated Note Document, executed in connection with Trim
Acquisition, shall have been duly executed and delivered by each of the
parties thereto, shall be in full force and effect and shall be in form
and substance satisfactory to the Agent. The Agent shall have received
an executed copy of each of such Senior Subordinated Note Documents
certified by an authorized officer of the Borrower as of the Amendment
No. 2 Effective Date to be true, correct and complete copies of such
documents.
(b) UK BORROWER. Compass UK shall have (i) executed and delivered to
the Agent and the Lenders an Accession Agreement in form and substance
satisfactory to the Agent pursuant to the terms of which Compass UK becomes a
party to the Credit Agreement as the UK Borrower, and becomes a party to any
other Loan Document as the Agent may reasonably request (the "ACCESSION
AGREEMENT"), and (ii) agreed to perform and observe all of the obligations
and covenants of the UK Borrower and of a Transaction Party (other than
obligations and covenants of a Guarantor contained in Section 7 of the Credit
Agreement) under the Credit Agreement, and of the appropriate party under any
Loan Document to which it becomes a party.
(c) PERMITTED ACQUISITION. All conditions precedent for the Trim
Acquisition to be a Permitted Acquisition (except for the requirements of (x)
paragraph (q)(i) and (ii) of such definition and (y) with respect to Maybrey,
paragraphs (g) and (h) of such definition) shall have been satisfied and a
duly authorized officer of the Borrower shall have delivered to the Agent an
officer's certificate certifying that such conditions have been met.
(d) COMPLETION OF TRIM ACQUISITION.
(i) The Trim Acquisition, including all of the terms and
conditions thereof, shall have been duly approved by the board of
directors and (if required by Applicable Law) the shareholders of the
parties thereto. The representations and warranties set forth in the
Trim Acquisition Documents shall be true and correct as if made on and
as of the Amendment No. 2 Effective Date. Each of the conditions
precedent to the UK Borrower's and the Trim Sellers' obligations to
consummate the Trim Acquisition as set forth in the Trim Acquisition
Documents shall have been satisfied or waived with the consent of the
Agent. The Trim Acquisition shall have been consummated in accordance
with the terms of the Trim Acquisition
<PAGE>
-24-
Documents and all Applicable Laws. The purchase price for the Trim
Acquisition shall not exceed L37,000,000, and all the fees and
expenses payable by the Borrower of any of its Subsidiaries in
connection therewith and the financing thereof, shall not exceed
$2,500,000.
(ii) On the Effective Date, after giving effect to the Trim
Acquisition, the ownership and capital structure (including the terms
of any Equity Interests issued or to be issued by the Borrower or any
of its Subsidiaries) and management of the Borrower and its UK
Subsidiaries shall be satisfactory to the Agent.
(e) TRIM SELLER NOTES. The Trim Seller Notes shall (i) have been
subordinated to the Obligations on terms satisfactory to the Agent, (b) not
be secured by any assets of the Borrowers or any of their Subsidiaries, (c)
not be guaranteed by the Borrowers or a Subsidiary of the Borrowers (except
that the Borrower shall be permitted to guarantee the Trim Seller Notes so
long as such guarantee is subject to the same subordination provisions as the
Trim Seller Note), (d) have a maturity date of July 30, 2002, (e) require no
scheduled principal payment prior to such maturity date; (f) have an interest
rate of not more than nine and one-half of one percent (9 1/2%) per annum,
payable twice yearly in arrears, and (g) have the Agent's approval with
respect to all other terms (including mandatory prepayment or redemption
obligations, prepayment or redemption premiums, covenants, events of default,
remedies and subordination provisions) (such approval not to be unreasonably
withheld).
(f) ISSUANCE OF PERMITTED CAPITAL STOCK. All Capital Stock issued
pursuant to the Trim Equity Documents shall constitute Permitted Capital
Stock and a duly authorized officer of the Borrower shall have delivered to
the Agent an officer's certificate certifying that such requirements have
been met.
(g) NET CASH PROCEEDS OF DEBT AND EQUITY ISSUANCES. The Agent shall
have received evidence reasonably satisfactory to it that:
(i) the Borrower shall have issued Permitted
Capital Stock to certain of its existing shareholders for a
cash purchase price of not less than $15,000,000;
(ii) the purchasers thereof shall have paid to the
Borrower not less than $15,000,000 as the cash purchase price
for the 1999 Senior Subordinated Notes; and
(iii) an amount equivalent to the Net Cash Proceeds
received by the Borrower from the issuance of such Permitted
Capital Stock
<PAGE>
-25-
and the 1999 Senior Subordinated Notes shall have been used
to finance the Trim Acquisition in accordance with the
terms of the Trim Acquisition Documents.
(h) FEES AND EXPENSES. The Borrower shall have paid or reimbursed the
Agent for all of the fees and disbursements of Bingham Dana LLP, the Agent's
special counsel, which shall have been incurred by the Agent in connection
with the preparation, negotiation, execution and delivery of this Agreement
and the implementation of the transactions contemplated thereby, or which
otherwise are required to be paid under the Credit Agreement.
(i) LEGAL OPINIONS. The Agent shall have received
(i) a copy of each of the legal opinions required in order for
the Trim Acquisition to be a Permitted Acquisition as set forth in the
definition thereof (other than the opinions required by paragraph
(q)(i) and (ii));
(ii) from Morgan, Lewis & Bockius, counsel to the Transaction
Parties, such other favorable legal opinions as the Agent may require,
addressed to the Agent and the Lenders, dated as of the Effective Date
and in form, scope and substance satisfactory to the Agent. The
Transaction Parties shall have instructed such counsel to deliver such
opinion to the Agent; and
(iii) a copy of the favorable legal opinion(s) addressed to
the initial purchaser of the 1999 Senior Subordinated Notes from
counsel to the Borrower, with such legal opinion(s) either addressed to
the Agent and the Lenders or accompanied by a reliance letter(s)
authorizing the Agent and the Lenders to rely on such opinion(s), with
each such opinion and, if applicable, such reliance letter, in form and
substance satisfactory to the Agent.
(j) CERTIFIED COPIES OF CHARTER DOCUMENTS. The Agent shall have
received from
(i) each of the US Transaction Parties a certificate of a
duly authorized officer of such Person, dated as of the Effective Date,
certifying that no amendments to its Governing Documents have occurred
since the Amendment No. 1 Effective Date; and
(ii) each of the UK Subsidiaries a copy, certified by a duly
authorized officer of such UK Subsidiary to be true and complete, of
each of (A) its Memorandum and Articles of Association, Certificate of
Incorporation and
<PAGE>
-26-
any Certificate of Incorporation on Name Change as in effect on such
date of certification, and (B) its by-laws as in effect on such date.
Each such certificate or such certified copies shall be in form and substance
reasonably satisfactory to the Agent.
(k) PROOF OF CORPORATE ACTION. The Agent shall have received from each
of the Transaction Parties copies, certified by a duly authorized officer of
such Person to be true and complete on and as of the Effective Date, of the
records of all corporate action taken by such Person to authorize (i) such
Person's execution and delivery of each of the Amendment Documents, the 1999
Senior Subordinated Note Documents, the Trim Acquisition Documents and the
Trim Equity Documents (collectively, the "DOCUMENTS") to which it is a party,
and (ii) such Person's performance of all of its agreements and obligations
under the Credit Agreement, as amended hereby, and each of the other
Documents to which it is a party. Each of such certified copies shall be in
form and substance reasonably satisfactory to the Agent.
(l) INCUMBENCY CERTIFICATE. The Agent shall have received incumbency
certificates, dated the Effective Date, signed respectively by a duly
authorized officer of each of the Transaction Parties, and giving the name
and bearing a specimen signature of each individual who shall be authorized
(x) to sign, in the name and on behalf of such Person, each of the Amendment
Documents and other Loan Documents to which such person is or is to become a
party, (y) in the case of the UK Borrower, to make UK Loan Requests and
Conversion Requests and (z) to give notices and to take other action on
behalf of such Person under the Amendment Documents or any other Loan
Document. Such certificates shall be in form and substance reasonably
satisfactory to the Agent.
(m) CLOSING CERTIFICATE. The Agent shall have received a certificate,
dated the Effective Date, signed by the chief financial officer of the
Borrower, to the effect that (i) each of the representations and warranties
of the US Transaction Parties contained in Section 4 hereof are true and
correct as of the Effective Date and (ii) no Default or Event of Default
exists on the Effective Date (after giving effect to this Agreement).
(n) INSURANCE CERTIFICATES. The Agent shall have received a
certificate(s) of insurance from an independent insurance broker dated as of
the Amendment No. 2 Effective Date, identifying insurers, types of insurance,
insurance limits, and policy terms, and otherwise describing the insurance
obtained in accordance with the provisions of the UK Security Documents and
naming the Agent as additional insured and loss payee, and the Agent shall be
satisfied with all such insurance coverage.
<PAGE>
-27-
(o) REPRESENTATIONS AND WARRANTIES. The Agent shall be satisfied that
the representations and warranties set forth in Section 4 hereof are true and
correct on and as of the Effective Date.
(p) SENIOR DEBT. The Borrower shall have demonstrated to the reasonable
satisfaction of the Agent that (a) all outstanding Obligations (after giving
effect to the requested Loans or Letters of Credit) constitute "Senior Debt"
(or corresponding alternative terms) under the Subordinated Debt Documents
and "Designated Senior Debt" under and for all purposes of each of the Senior
Subordinated Indenture and the 1999 Senior Subordinated Indenture, and (b)
the incurrence of Indebtedness in respect of the requested Loans shall be
permitted by all Subordinated Debt Documents. The foregoing demonstration
shall include certificates of the chief financial officer of the Borrower
setting forth in reasonable detail the basis therefor, and the calculations
(if any) required to evidence compliance with the applicable covenants set
forth in the Subordinated Debt Documents.
(q) DISBURSEMENT INSTRUCTIONS. The Agent shall have received
disbursement instructions from the Borrower with respect to the proceeds of
the UK Acquisition Loans, in form and substance satisfactory to the Agent.
(r) SOURCES AND USES STATEMENT. The Agent shall have received a sources
and uses statement from the Borrower which reflects (a) the source of all
funds to be used by the Borrower and any Subsidiary of the Borrower to
consummate all the transactions contemplated by this Amendment, including the
Trim Acquisition, and (b) all uses of such funds, such statement to be in
form and substance satisfactory to the Agent.
(s) VALIDITY OF LIENS. The UK Security Documents shall be effective to
create in favor of the Agent a legal, valid and enforceable first priority
(except for Permitted Liens entitled to priority under applicable law) security
interest in and Lien upon the Collateral under applicable law. All filings,
recordings, deliveries of Instruments and other actions necessary or desirable
in the opinion of the Agent to create and perfect such security interests shall
have been duly effected. The Agent shall have received evidence thereof in form
and substance satisfactory to the Agent.
(t) LIEN SEARCH RESULTS. The Agent shall have received from each UK
Subsidiary the results of lien searches with respect to the Collateral located
in the United Kingdom with such search results indicating no Liens other than
Permitted Liens and otherwise in form and substance satisfactory to the Agent.
<PAGE>
-28-
(u) PROCEEDINGS AND DOCUMENTS. The Agent shall have received all
information and all such documents, instruments or agreements as the Agent
may reasonably request, and all such information, documents, instruments or
agreements shall be satisfactory to the Agent, including, by way of example
(but not limited to):
(i) Certified true and complete copies of the statutory
declarations made by the directors and auditors of each of Trim and its
Subsidiaries (other than Maybrey) in accordance with Section 156 of the
Companies Act 1985 (England) together with the shareholders resolution
and all other documents ancillary thereto, in each case in form and
substance satisfactory to the Agent; and
(ii) A non-statutory auditors letter from auditors of each of
Trim and its Subsidiaries (other than Maybrey) in connection with
Section 15 of the Companies Act 1985 (England) dated as of the
Amendment No. 2 Effective Date, and in form and substance satisfactory
to the Agent.
The first date as of which all of the foregoing conditions precedents shall be
satisfied is referred to herein as the "EFFECTIVE DATE".
SECTION 4. REPRESENTATIONS AND WARRANTIES. Each of the undersigned
Transaction Parties hereby represents and warrants to the Agent and the Lenders
that:
(a) Each of the Documents have been duly executed and
delivered by the Transaction Parties party thereto. The execution and
delivery by each such Transaction Party of each of the Documents to
which they are a party, have been duly authorized by proper proceedings
by such Person, and each such Document to which any such Person is a
party constitutes the legal, valid and binding obligation of such
Person, enforceable against such Person in accordance with the terms of
such Document.
(b) The execution, delivery and performance of each Document
by each of the Transaction Parties party thereto (i) are within the
corporate or other legal authority of such Person, (ii) have been duly
authorized by all necessary corporate or other proceedings and (iii) do
not and will not conflict with or result in any breach or contravention
of any Applicable Law or any Contractual Obligation or Governing
Document of any of the Transaction Parties.
(c) Each of the representations and warranties of each of the
Transaction Parties contained in the Loan Documents or in any
Instrument
<PAGE>
-29-
delivered pursuant to or in connection with the Credit Agreement was
true in all respects as of the date as of which it was made and is
true in all respects on the date hereof (except to the extent that
such representations and warranties relate expressly to an earlier
date).
(d) After giving effect to this Agreement, no Default or Event
of Default has occurred and is continuing.
SECTION 5. COVENANTS OF TRANSACTION PARTIES. The undersigned
Transaction Parties hereby covenant and agree to deliver to the Agent, within
thirty (30) days following the Amendment No. 2 Effective Date, (a) all
endorsements to any insurance certificates delivered to the Agent on the
Amendment No. 2 Effective Date, and (b) certified copies of all policies
evidencing insurance (or certificates therefor signed by the insurer or an agent
authorized to bind the insurer) obtained by each of the UK Subsidiaries in
accordance with the insurance coverage requirements set forth in the Credit
Agreement and the UK Security Documents and the Agent shall be satisfied with
the adequacy of all such endorsements and insurance.
SECTION 6. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. EXPENSES. The Borrower shall pay all reasonable
out-of-pocket expenses incurred by the Agent in connection with the preparation,
negotiation, execution, delivery and enforcement of this Agreement, including,
but not limited to, the reasonable fees and disbursements of Bingham Dana LLP.
SECTION 8. MISCELLANEOUS. From and after the date hereof, this
Agreement shall be deemed a Loan Document for all purposes of the Credit
Agreement and the other Loan Documents and each reference to Loan Documents in
the Credit Agreement and the other Loan Documents shall be deemed to include
this Agreement. Any breach by any Transaction Party of the covenants and
obligations of such Transaction Parties contained herein shall be an immediate
Event of Default. Except as expressly provided herein, this Agreement shall not,
by implication or otherwise, limit, impair, constitute a waiver of or otherwise
affect any rights or remedies of the Agent or the Lenders under the Credit
Agreement or the other Loan Documents, nor alter, modify, amend or in any way
affect any of the obligations or covenants contained in the Credit Agreement or
any of the other Loan Documents, all of which are ratified and confirmed in all
respects and shall continue in full force and effect. This Agreement may be
executed in any number of counterparts, but all of such counterparts shall
together constitute but one and the same agreement. Delivery of an executed
counterpart of a signature page by facsimile transmission
<PAGE>
-30-
shall be effective as delivery of a manually executed counterpart of this
Agreement. In making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.
[Remainder of this page intentionally left blank]
<PAGE>
-31-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all as of the date first above
written.
Very truly yours,
BORROWER: COMPASS AEROSPACE CORPORATION
By:
---------------------------
Name:
Title:
UK BORROWER: COMPASS AEROSPACE LIMITED
By:
---------------------------
Name:
Title:
GUARANTORS: AEROMIL ENGINEERING COMPANY
WESTERN METHODS MACHINERY
CORPORATION
BARNES MACHINE INCORPORATED
BRITTAIN MACHINE, INC.
WICHITA MANUFACTURING, INC.,
SEA-LECT PRODUCTS, INC.,
PACIFIC HILLS MANUFACTURING CO.
MODERN MANUFACTURING, INC.
By:
---------------------------
Name:
Title:
<PAGE>
-32-
Agreed to and Accepted By:
BANKBOSTON, N.A., as Lender, as
Agent and as Issuing Bank
By: ----------------------------------
Name:
Title:
BANKBOSTON, N.A., (London Branch),
as Lender and UK Fronting Lender
By: ----------------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION, as Lender
By: ----------------------------------
Name:
Title:
ROYAL BANK OF CANADA, as Lender
By: ----------------------------------
Name:
Title:
<PAGE>
-33-
BANK OF AMERICA, N.A.
(Formerly known as
Nationsbank, N.A.), as Lender
By: ----------------------------------
Name:
Title:
PARIBAS, as Lender
By: ----------------------------------
Name:
Title:
By: ----------------------------------
Name:
Title:
WESTERN FINANCIAL BANK, as Lender
By: ----------------------------------
Name:
Title:
HELLER FINANCIAL, INC. , as Lender
<PAGE>
-34-
By: ----------------------------------
Name:
Title:
CYPRESSTREE INVESTMENT FUND,
LLC, as Lender
By: CypressTree Investment Management
Company Inc., its Managing Member
By: ----------------------------------
Name:
Title:
CYPRESSTREE INSTITUTIONAL
FUND, LLC, as Lender
By: CypressTree Investment Management
Company Inc., its Managing Member
By: ----------------------------------
Name:
Title:
KZH CYPRESSTREE-1 LLC, as Lender
By: ----------------------------------
Name:
Title:
FIRST SOURCE FINANCIAL LLP, as Lender
By: First Source Financial, Inc.,
its Agent/Manager
<PAGE>
-35-
By: ----------------------------------
Name:
Title:
SRV-HIGHLAND, INC., as Lender
By: ----------------------------------
Name:
Title:
<PAGE>
====================================
COMPASS AEROSPACE CORPORATION
Issuer,
and
IBJ WHITEHALL BANK & TRUST COMPANY
Trustee
-------------------
INDENTURE
Dated as of July 30, 1999
-------------------
$19,000,000
101/8% Senior Subordinated Notes due 2005
===================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions........................................................................................1
SECTION 1.2. Incorporation by Reference of TIA.................................................................20
SECTION 1.3. Rules of Construction.............................................................................20
ARTICLE II
THE SECURITIES
SECTION 2.1. Form and Dating...................................................................................21
SECTION 2.2. Execution and Authentication......................................................................22
SECTION 2.3. Registrar and Paying Agent........................................................................22
SECTION 2.4. Paying Agent to Hold Assets in Trust..............................................................22
SECTION 2.5. Securityholder Lists..............................................................................23
SECTION 2.6. Transfer and Exchange.............................................................................23
SECTION 2.7. Replacement Securities............................................................................28
SECTION 2.8. Outstanding Securities............................................................................28
SECTION 2.9. Treasury Securities...............................................................................29
SECTION 2.10. Temporary Securities..............................................................................29
SECTION 2.11. Cancellation......................................................................................29
SECTION 2.12. Defaulted Interest................................................................................29
SECTION 2.13. CUSIP Numbers.....................................................................................30
ARTICLE III
REDEMPTION
SECTION 3.1. Right of Redemption...............................................................................30
SECTION 3.2. Notices to Trustee................................................................................31
SECTION 3.3. Selection of Securities to Be Redeemed............................................................31
SECTION 3.4. Notice of Redemption..............................................................................32
SECTION 3.5. Effect of Notice of Redemption....................................................................32
SECTION 3.6. Deposit of Redemption Price.......................................................................33
SECTION 3.7. Securities Redeemed in Part.......................................................................33
ARTICLE IV
COVENANTS
SECTION 4.1. Payment of Securities.............................................................................33
SECTION 4.2. Maintenance of Office or Agency...................................................................34
SECTION 4.3. Limitation on Restricted Payments.................................................................34
SECTION 4.4. Corporate and Partnership Existence...............................................................35
SECTION 4.5. Payment of Taxes and Other Claims.................................................................35
SECTION 4.6. Maintenance of Properties and Insurance...........................................................36
SECTION 4.7. Compliance Certificate; Notice of Default.........................................................36
SECTION 4.8. Reports...........................................................................................36
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 4.9. Limitation on Status as Investment Company........................................................37
SECTION 4.10. Limitation on Transactions with Affiliates........................................................37
SECTION 4.11. Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock...............................................................37
SECTION 4.12. Limitations on Dividends and Other Payment Restrictions
Affecting Subsidiaries...................................................................38
SECTION 4.13. Limitations on Layering Indebtedness..............................................................39
SECTION 4.14. Limitation on Sales of Assets and Subsidiary Stock................................................39
SECTION 4.15. Waiver of Stay, Extension or Usury Laws...........................................................43
SECTION 4.16. Limitation on Liens Securing Indebtedness.........................................................43
SECTION 4.17. Rule 144A Information Requirement.................................................................43
SECTION 4.18. Limitations on Lines of Business..................................................................43
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1. Limitation on Merger, Sale or Consolidation.......................................................44
SECTION 5.2. Successor Corporation Substituted.................................................................44
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. Events of Default.................................................................................45
SECTION 6.2. Acceleration of Maturity Date; Rescission and Annulment...........................................46
SECTION 6.3. Collection of Indebtedness and Suits for Enforcement by Trustee...................................47
SECTION 6.4. Trustee May File Proofs of Claim..................................................................47
SECTION 6.5. Trustee May Enforce Claims Without Possession of Securities.......................................48
SECTION 6.6. Priorities........................................................................................48
SECTION 6.7. Limitation on Suits...............................................................................49
SECTION 6.8. Unconditional Right of Holders to Receive Principal, Premium and Interest.........................49
SECTION 6.9. Rights and Remedies Cumulative....................................................................49
SECTION 6.10. Delay or Omission Not Waiver......................................................................50
SECTION 6.11. Control by Holders................................................................................50
SECTION 6.12. Waiver of Existing or Past Default................................................................50
SECTION 6.13. Undertaking for Costs.............................................................................50
SECTION 6.14. Restoration of Rights and Remedies................................................................51
ARTICLE VII
TRUSTEE
SECTION 7.1. Duties of Trustee.................................................................................51
SECTION 7.2. Rights of Trustee.................................................................................52
SECTION 7.3. Individual Rights of Trustee......................................................................53
SECTION 7.4. Trustee's Disclaimer..............................................................................53
SECTION 7.5. Notice of Default.................................................................................53
SECTION 7.6. Reports by Trustee to Holders.....................................................................54
SECTION 7.7. Compensation and Indemnity........................................................................54
SECTION 7.8. Replacement of Trustee............................................................................55
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 7.9. Successor Trustee by Merger, Etc..................................................................55
SECTION 7.10. Eligibility; Disqualification.....................................................................56
SECTION 7.11. Preferential Collection of Claims Against Company.................................................56
ARTICLE VIII
DISCHARGE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1. Discharge; Option to Effect Legal Defeasance or Covenant Defeasance...............................56
SECTION 8.2. Legal Defeasance and Discharge....................................................................56
SECTION 8.3. Covenant Defeasance...............................................................................57
SECTION 8.4. Conditions to Legal or Covenant Defeasance........................................................57
SECTION 8.5. Deposited Cash and U.S. Government Obligations to be Held in Trust; Other
Miscellaneous Provisions..................................................................58
SECTION 8.6. Repayment to the Company..........................................................................59
SECTION 8.7. Reinstatement.....................................................................................59
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. Supplemental Indentures Without Consent of Holders................................................59
SECTION 9.2. Amendments, Supplemental Indentures and Waivers with Consent of Holders...........................60
SECTION 9.3. Compliance with TIA...............................................................................61
SECTION 9.4. Revocation and Effect of Consents.................................................................61
SECTION 9.5. Notation on or Exchange of Securities.............................................................62
SECTION 9.6. Trustee to Sign Amendments, Etc...................................................................62
ARTICLE X
RIGHT TO REQUIRE REPURCHASE
SECTION 10.1. Repurchase of Securities at Option of the Holder Upon a Change of Control.........................62
ARTICLE XI
GUARANTEE
SECTION 11.1. Guarantee........................................................................................65
SECTION 11.2. Execution and Delivery of Guarantee..............................................................66
SECTION 11.3. Certain Bankruptcy Events........................................................................66
SECTION 11.4. Limitation on Merger of Subsidiaries and Release of Guarantors...................................67
ARTICLE XII
SUBORDINATION
SECTION 12.1. Securities Subordinated to Senior Debt...........................................................67
SECTION 12.2. No Payment on Securities in Certain Circumstances................................................67
SECTION 12.3. Securities Subordinated to Prior Payment of All Senior Debt on Dissolution,
Liquidation or Reorganization...........................................................69
SECTION 12.4. Securityholders to Be Subrogated to Rights of Holders of Senior Debt.............................69
SECTION 12.5. Obligations of the Company and the Guarantors Unconditional......................................69
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 12.6. Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice..........................70
SECTION 12.7. Application by Trustee of Assets Deposited with It...............................................70
SECTION 12.8. Subordination Rights Not Impaired by Acts or Omissions of the Company,
the Guarantors or Holders of Senior Debt................................................70
SECTION 12.9. Securityholders Authorize Trustee to Effectuate Subordination of Securities......................71
SECTION 12.10. Right of Trustee to Hold Senior Debt.............................................................71
SECTION 12.11. Article XII Not to Prevent Events of Default.....................................................71
SECTION 12.12. No Fiduciary Duty of Trustee to Holders of Senior Debt...........................................71
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. TIA Controls.....................................................................................72
SECTION 13.2. Notices..........................................................................................72
SECTION 13.3. Communications by Holders with Other Holders.....................................................73
SECTION 13.4. Certificate and Opinion as to Conditions Precedent...............................................73
SECTION 13.5. Statements Required in Certificate or Opinion....................................................73
SECTION 13.6. Rules by Trustee, Paying Agent, Registrar........................................................74
SECTION 13.7. Legal Holidays...................................................................................74
SECTION 13.8. Governing Law....................................................................................74
SECTION 13.9. No Adverse Interpretation of Other Agreements....................................................74
SECTION 13.10. No Recourse Against Others.......................................................................74
SECTION 13.11. Successors.......................................................................................75
SECTION 13.12. Duplicate Originals..............................................................................75
SECTION 13.13. Severability.....................................................................................75
SECTION 13.14. Table of Contents, Headings, Etc.................................................................75
SECTION 13.15. Qualification of Indenture.......................................................................75
SECTION 13.16. Registration Rights..............................................................................75
EXHIBIT A - FORM OF SECURITY ...................................................................................A-1
</TABLE>
iv
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA INDENTURE
SECTION SECTION
<S> <C>
310(a)(1)...................................................................................... 7.10
(a)(2)...................................................................................... 7.10
(a)(3)...................................................................................... N.A.
(a)(4)...................................................................................... N.A.
(a)(5)...................................................................................... 7.10
(b)......................................................................................... 7.10
(c)......................................................................................... N.A.
311(a)......................................................................................... 7.11
(b)......................................................................................... 7.11
(c)......................................................................................... N.A.
312(a)......................................................................................... 2.5
(b)......................................................................................... 13.3
(c)......................................................................................... 13.3
313(a)......................................................................................... 7.6
(b)(1)...................................................................................... 7.6
(b)(2)...................................................................................... 7.6
(c)......................................................................................... 7.6
(d)......................................................................................... N.A.
314(a)......................................................................................... 4.7(a)
315(a)......................................................................................... 7.2
(b)......................................................................................... 7.5
(c)......................................................................................... 7.1
(d)......................................................................................... 7.1
(e)......................................................................................... 6.13
316(a)(last sentence).......................................................................... 2.9
(a)(1)(A)................................................................................... 6.11
(a)(1)(B)................................................................................... 6.12
(a)(2)...................................................................................... N.A.
(b)......................................................................................... 6.8
317(a)(1)...................................................................................... 6.3
(a)(2)...................................................................................... 6.4
(b)......................................................................................... 2.4
318(a)......................................................................................... 13.1
(b)......................................................................................... N.A.
(c)......................................................................................... 13.1
</TABLE>
- ----------
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
v
<PAGE>
INDENTURE, dated as of July 30, 1999, by and between Compass Aerospace
Corporation, a Delaware corporation (the "Company"), and IBJ Whitehall Bank &
Trust Company, a New York banking corporation as trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each other party
and for the equal and ratable benefit of the Holders of the Company's 101/8%
Series C Senior Subordinated Notes due 2005 to be exchanged for the 101/8%
Series D Senior Subordinated Notes due 2005:
ARTICLE II
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. DEFINITIONS.
"ACQUIRED INDEBTEDNESS" means Indebtedness or Disqualified Capital
Stock of any person existing at the time such person becomes a Subsidiary of the
Company, including by designation, or is merged or consolidated into or with the
Company or one of its Subsidiaries.
"ACQUISITION" means the purchase or other acquisition of any person or
all or substantially all the assets of any person by any other person, whether
by purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
"AFFILIATE" means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. For
purposes of this definition, the term "control" means the power to direct the
management and policies of a person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by contract,
or otherwise, PROVIDED, THAT, with respect to ownership interest in the Company
and its Subsidiaries, a Beneficial Owner of 10% or more of the total voting
power normally entitled to vote in the election of directors, managers or
trustees, as applicable, shall for such purposes be deemed to constitute
control.
"AFFILIATE TRANSACTION" shall have the meaning specified in Section
4.10.
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"ASSET SALE" shall have the meaning specified in Section 4.14.
"ASSET SALE OFFER" shall have the meaning specified in Section 4.14.
"ASSET SALE OFFER AMOUNT" shall have the meaning specified in Section
4.14.
"ASSET SALE OFFER PERIOD" shall have the meaning specified in Section
4.14.
"ASSET SALE OFFER PRICE" shall have the meaning specified in Section
4.14.
"AVERAGE LIFE" means, as of the date of determination, with respect to
any security or instrument, the quotient obtained by dividing (i) the sum of the
products (a) of the number of years from the date of determination to the date
or dates of each successive scheduled principal (or redemption) payment of such
security or instrument and (b) the amount of each such respective principal (or
redemption) payment by (ii) the sum of all such principal (or redemption)
payments.
<PAGE>
"BANKRUPTCY LAW" means Title 11, U.S. Code, or any similar Federal,
state or foreign law for the relief of debtors.
"BENEFICIAL OWNER" or "BENEFICIAL OWNER" for purposes of the definition
of Change of Control and Affiliate has the meaning attributed to it in Rules
13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue Date), whether
or not applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"BOARD OF DIRECTORS" means, with respect to any Person, the board of
directors of such Person or any committee of the board of directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the board of directors of such Person.
"BOARD RESOLUTION" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New York
are authorized or obligated by law or executive order to close.
"CAPITAL CONTRIBUTION" means any contribution to the equity of the
Company from a direct or indirect parent of the Company for which no
consideration other than the issuance of common stock with no redemption rights
and no special preferences, privileges or voting rights is given.
"CAPITALIZED LEASE OBLIGATION" means, as to any person, the obligations
of such Person under a lease that are required to be classified and accounted
for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"CAPITAL STOCK" means, with respect to any corporation, any and all
shares, interests, rights to purchase (other than convertible or exchangeable
Indebtedness that is not itself otherwise capital stock), warrants, options,
participations or other equivalents of or interests (however designated) in
stock issued by that corporation.
"CASH" or "CASH" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public or private debts.
"CASH EQUIVALENT" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) or (ii) time deposits and
certificates of deposit and commercial paper issued by the parent corporation of
any domestic commercial bank of recognized standing having capital and surplus
in excess of $500,000,000 or (iii) commercial paper issued by others rated at
least A-2 or the equivalent thereof by Standard & Poor's Corporation or at least
P-2 or the equivalent thereof by Moody's Investors Service, Inc., and in the
case of each of (i), (ii), and (iii) maturing within one year after the date of
acquisition.
"CHANGE OF CONTROL" means:
(i) prior to consummation of an Initial Public Equity Offering
the Excluded Persons shall cease to own beneficially and of record at
least 51% of the total voting power in the aggregate
2
<PAGE>
of all classes of Capital Stock of the Company then outstanding
normally entitled to vote in elections of directors or
(ii) on or following the consummation of an Initial Public
Equity Offering,
(A) any merger or consolidation of the Company with
or into any person or any sale, transfer or other conveyance,
whether direct or indirect, of all or substantially all of the
assets of the Company, on a consolidated basis, in one
transaction or a series of related transactions, if,
immediately after giving effect to such transaction(s), any
"person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable) (other than any of the Excluded Persons) (a) is or
becomes the "beneficial owner," directly or indirectly, of
more than 35% of the total voting power in the aggregate
normally entitled to vote in the election of directors,
managers, or trustees, as applicable, of the transferee(s) or
surviving entity or entities, and (b) any such person or group
becomes, directly or indirectly, the beneficial owner of a
greater percentage of such total voting power, than
beneficially owned by the Excluded Persons,
(B) any "person" or "group" (as such terms are used
for purposes of Sections 13(d) and 14(d) of the Exchange Act,
whether or not applicable) (other than any of the Excluded
Persons) (a) is or becomes the "beneficial owner," directly or
indirectly, of more than 35% of the total voting power in the
aggregate of all classes of Capital Stock of the Company then
outstanding normally entitled to vote in elections of
directors, and (b) any such person or group becomes, directly
or indirectly, the beneficial owner of a greater percentage of
such total voting power, than beneficially owned by the
Excluded Persons, or
(C) during any period of 12 consecutive months after
the Issue Date, individuals who at the beginning of any such
12-month period constituted the Board of Directors of the
Company (together with any new directors whose election by
such Board of Directors or whose nomination for election by
the shareholders of the Company, as applicable, was approved
by a vote of a majority of the directors then still in office
who were either directors at the beginning of such period or
whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the
Board of Directors of the Company, as applicable, then in
office.
"CHANGE OF CONTROL OFFER" shall have the meaning specified in Section
10.1.
"CHANGE OF CONTROL OFFER PERIOD" shall have the meaning specified in
Section 10.1.
"CHANGE OF CONTROL PURCHASE DATE" shall have the meaning specified in
Section 10.1.
"CHANGE OF CONTROL PURCHASE PRICE" shall have the meaning specified in
Section 10.1.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture, and thereafter means such
successor.
"CONSOLIDATION" means, with respect to the Company, the consolidation
of the accounts of the Subsidiaries with those of the Company, all in accordance
with GAAP; PROVIDED that "consolidation" will
3
<PAGE>
not include consolidation of the accounts of any Unrestricted Subsidiary with
the accounts of the Company. The term "consolidated" has a correlative meaning
to the foregoing.
"CONSOLIDATED COVERAGE RATIO" of any person on any date of
determination (the "Transaction Date") means the ratio, on a PRO FORMA basis,
of:
(a) the aggregate amount of Consolidated EBITDA of such person
attributable to continuing operations and businesses (exclusive of
amounts attributable to operations and businesses permanently
discontinued or disposed of) for the Reference Period to
(b) the aggregate Consolidated Fixed Charges of such person
(exclusive of amounts attributable to operations and businesses
permanently discontinued or disposed of, but only to the extent that
the obligations giving rise to such Consolidated Fixed Charges would no
longer be obligations contributing to such person's Consolidated Fixed
Charges subsequent to the Transaction Date) during the Reference
Period;
PROVIDED, that for purposes of such calculation,
(i) Acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction
Date shall be assumed to have occurred on the first day of the
Reference Period,
(ii) transactions giving rise to the need to calculate the
Consolidated Coverage Ratio shall be assumed to have occurred on the
first day of the Reference Period,
(iii) the incurrence of any Indebtedness or issuance of any
Disqualified Capital Stock during the Reference Period or subsequent to
the Reference Period and on or prior to the Transaction Date (and the
application of the proceeds therefrom to the extent used to refinance
or retire other Indebtedness) shall be assumed to have occurred on the
first day of the Reference Period, and
(iv) the Consolidated Fixed Charges of such person
attributable to interest on any Indebtedness or dividends on any
Disqualified Capital Stock bearing a floating interest (or dividend)
rate shall be computed on a PRO FORMA basis as if the average rate in
effect from the beginning of the Reference Period to the Transaction
Date had been the applicable rate for the entire period, unless such
Person or any of its Subsidiaries is a party to an Interest Swap or
Hedging Obligation (which shall remain in effect for the 12-month
period immediately following the Transaction Date) that has the effect
of fixing the interest rate on the date of computation, in which case
such rate (whether higher or lower) shall be used.
"CONSOLIDATED EBITDA" means, with respect to any person, for any
period, the Consolidated Net Income of such person for such period adjusted to
add thereto (to the extent deducted from net revenues in determining
Consolidated Net Income), without duplication, the sum of (i) Consolidated
income tax expense, (ii) Consolidated depreciation and amortization expense, and
(iii) Consolidated Fixed Charges, less the amount of all cash payments made by
such person or any of its Subsidiaries during such period to the extent such
payments relate to non-cash charges that were added back in determining
Consolidated EBITDA for such period or any prior period, PROVIDED that
consolidated income tax expense and depreciation and amortization of a
Subsidiary that is a less than Wholly-Owned Subsidiary shall only be added to
the extent of the equity interest of the Company in such Subsidiary.
4
<PAGE>
"CONSOLIDATED FIXED CHARGES" of any person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of:
(a) interest expensed or capitalized, paid, accrued, or
scheduled to be paid or accrued (including, in accordance with the
following sentence, interest attributable to Capitalized Lease
Obligations) of such person and its Consolidated Subsidiaries during
such period, including
(i) original issue discount and non-cash interest
payments or accruals on any Indebtedness,
(ii) the interest portion of all deferred payment
obligations, and
(iii) all commissions, discounts and other fees and
charges owed with respect to bankers' acceptances and letters
of credit financings and currency and Interest Swap and
Hedging Obligations, in each case to the extent attributable
to such period, and
(b) the amount of dividends accrued or payable (or guaranteed)
by such person or any of its Consolidated Subsidiaries in respect of
Preferred Stock (other than by Subsidiaries of such person to such
person or such person's Wholly-Owned Subsidiaries), except if such
Preferred Stock is a payment-in-kind ("PIK") security, issuance of such
additional PIK securities would not count as dividends for purposes of
this definition.
For purposes of this definition, (x) interest on a Capitalized Lease Obligation
shall be deemed to accrue at an interest rate reasonably determined in good
faith by the Company to be the rate of interest implicit in such Capitalized
Lease Obligation in accordance with GAAP and (y) interest expense attributable
to any Indebtedness represented by the guaranty by such person or a Subsidiary
of such person of an obligation of another person shall be deemed to be the
interest expense attributable to the Indebtedness guaranteed.
"CONSOLIDATED NET INCOME" means, with respect to any person for any
period, the net income (or loss) of such person and its Consolidated
Subsidiaries (determined on a consolidated basis in accordance with GAAP) for
such period, adjusted to exclude (only to the extent included in computing such
net income (or loss) and without duplication):
(a) all gains (but not losses) which are either extraordinary
(as determined in accordance with GAAP) or are either unusual or
nonrecurring (including any gain from the sale or other disposition of
assets outside the ordinary course of business or from the issuance or
sale of any capital stock),
(b) the net income, if positive, of any person, other than a
Consolidated Subsidiary, in which such person or any of its
Consolidated Subsidiaries has an interest, except to the extent of the
amount of any dividends or distributions actually paid in cash to such
person or a Consolidated Subsidiary of such person during such period,
but in any case not in excess of such person's PRO RATA share of such
person's net income for such period,
(c) the net income or loss of any person acquired in a pooling
of interests transaction for any period prior to the date of such
acquisition,
(d) the net income, if positive, of any of such person's
Consolidated Subsidiaries to the extent that the declaration or payment
of dividends or similar distributions is not at the time permitted by
operation of the terms of its charter or bylaws or any other agreement,
instrument,
5
<PAGE>
judgment, decree, order, statute, rule or governmental regulation
applicable to such Consolidated Subsidiary.
"CONSOLIDATED NET WORTH" of any person at any date means the aggregate
consolidated stockholders' equity of such person (plus amounts of equity
attributable to preferred stock) and its Consolidated Subsidiaries, as would be
shown on the consolidated balance sheet of such person prepared in accordance
with GAAP, adjusted to exclude (to the extent included in calculating such
equity),
(a) the amount of any such stockholders' equity attributable
to Disqualified Capital Stock or treasury stock of such person and its
Consolidated Subsidiaries,
(b) all write-ups in the book value of any asset of such
person or a Consolidated Subsidiary of such person subsequent to the
Issue Date (other than writeups resulting from foreign currency
translations or of tangible assets of a going concern business made
within 12 months after the acquisition of such business) and
(c) all investments in Subsidiaries that are not Consolidated
Subsidiaries and in persons that are not Subsidiaries.
"CONSOLIDATED SUBSIDIARY" means, for any person, each Subsidiary of
such person (whether now existing or hereafter created or acquired) the
financial statements of which are consolidated for financial statement reporting
purposes with the financial statements of such person in accordance with GAAP.
"CORPORATE TRUST OFFICE" means the office of the Trustee in the Borough
of Manhattan, The City of New York.
"COVENANT DEFEASANCE" shall have the meaning specified in Section 8.3.
"CREDIT AGREEMENT" means the credit agreement entered into by and among
Compass, its subsidiaries, various financial institutions and, BancBoston
Robertson Stephens Inc. as arranger, BankBoston, N.A. as a lender and agent,
Royal Bank of Canada as syndication agent, NationsBank, N.A., as co-agent and
General Electric Capital Corporation as documentation agent, providing a
revolving credit facility, term loans and an acquisition line, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, as such credit agreement and/or related
documents may be amended, restated, supplemented, renewed, replaced or otherwise
modified from time to time whether or not with the same agent, trustee,
representative lenders or holders, and irrespective of any changes in the terms
and conditions thereof. Without limiting the generality of the foregoing, the
term "Credit Agreement" shall include agreements in respect of Interest Swap and
Hedging Obligations with lenders party to the Credit Agreement and shall also
include any amendment, amendment and restatement, renewal, extension,
restructuring, supplement or modification to any Credit Agreement and all
refundings, refinancings and replacements of any Credit Agreement, including any
agreement (i) extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (ii) adding or deleting borrowers or guarantors
thereunder, so long as borrowers and issuers include one or more of the Company
and its Subsidiaries and their respective successors and assigns, (iii)
increasing the amount of Indebtedness incurred thereunder or available to be
borrowed thereunder, PROVIDED that on the date such Indebtedness is incurred in
accordance with the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock" or (iv) otherwise altering the
terms and conditions thereof in a manner not prohibited by the terms of this
Indenture.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
6
<PAGE>
"DEFAULT" means any event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"DEFAULTED INTEREST" shall have the meaning specified in Section 2.12.
"DEFINITIVE SECURITIES" means Securities that are in the form of
Security attached hereto as Exhibit A that do not include the information called
for by footnotes 3 and 8 thereof.
"DEPOSITORY" means, with respect to the Securities issuable or issued
in whole or in part in global form, the person specified in Section 2.3 as the
Depository with respect to the Securities, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
"DESIGNATED SENIOR DEBT" means, (a) so long as it is in effect and
there is at least $1,000,000 of outstanding indebtedness thereunder, the Credit
Agreement and (b) any other Senior Debt designated by the Company to be
"Designated Senior Debt" that has an outstanding principal amount of at least
$25,000,000 at the time of such designation.
"DISQUALIFIED CAPITAL STOCK" means:
(a) except as set forth in (b), with respect to any person,
Equity Interests of such person that, by its terms or by the terms of
any security into which it is convertible, exercisable or exchangeable,
is, or upon the happening of an event or the passage of time or both
would be, required to be redeemed or repurchased (including at the
option of the holder thereof) by such person or any of its
Subsidiaries, in whole or in part, on or prior to the Stated Maturity
of the Securities and
(b) with respect to any Subsidiary of such person (including
with respect to any Subsidiary of the Company), any Equity Interests
other than any common equity with no preference, privileges, or
redemption or repayment provisions.
"EQUITY INTEREST" of any Person means any shares, interests,
participation or other equivalents (however designated) in such Person's equity,
and shall in any event include any Capital Stock issued by, or partnership or
membership interests in, such Person.
"EVENT OF DEFAULT" shall have the meaning specified in Section 6.1.
"EVENT OF LOSS" means, with respect to any property or asset, any (i)
loss, destruction or damage of such property or asset or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"EXCESS PROCEEDS" shall have the meaning specified in Section 4.14.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"EXCHANGE SECURITIES" means the 101/8% Series D Senior Subordinated
Notes due 2005, as supplemented from time to time in accordance with the terms
hereof, to be issued pursuant to this Indenture in connection with the offer to
exchange Securities for the Initial Securities that may be made by the
7
<PAGE>
Company pursuant to the Registration Rights Agreement that contains the
information referred to in footnotes 1, 2 and 8 to the form of Security attached
hereto as Exhibit A.
"EXCLUDED PERSON" means officers and directors of the Company and those
persons who beneficially own membership interests in Compass Holdings LLC, in
each case, as of the Issue Date.
"EXEMPTED AFFILIATE TRANSACTION" means:
(a) customary employee compensation arrangements approved by a
majority of independent (as to such transactions) members of the Board
of Directors of the Company,
(b) dividends permitted under the terms of the covenant
discussed in Section 4.3 and payable, in form and amount, on a pro rata
basis to all holders of common stock of the Company,
(c) Management Fee Payments up to $500,000 in any fiscal year
and the reimbursement by the Company of reasonable out-of-pocket costs
and expenses incurred in connection with the rendering of management
services to or on behalf of the Company,
(d) Permitted Payments to Parent and
(e) transactions solely between the Company and any of its
Wholly-Owned Consolidated Subsidiaries or solely among Wholly-Owned
Consolidated Subsidiaries of the Company.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries in existence on the date of this Indenture.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States as in effect on the Issue Date.
"GLOBAL SECURITY" means a Security that contains the information
referred to in footnotes 3 and 6 to the form of Security attached hereto as
Exhibit A.
"GUARANTEE" shall have the meaning provided in Section 11.1.
"GUARANTOR" means, subject to the provisions in Section 11.4 of this
Indenture, Western Methods Machinery Corporation, Aeromil Engineering Company,
Brittain Machine, Inc., Wichita Manufacturing, Inc., Barnes Machine, Inc.,
Sea-Lect Products, Inc., Pacific Hills Manufacturing Co., Modern Manufacturing,
Inc., Compass Aerospace Limited, Trim Engineering Limited, Trefn Engineering
Limited, Trefn Engineering (Metal Treatments) Division Limited, Diac Limited and
Trefn Fabrications Limited and each other Subsidiary of the Company that
executes a Guarantee guaranteeing the Securities in accordance with the
provisions of this Indenture.
"HOLDER" or "SECURITYHOLDER" means the Person in whose name a Security
is registered on the Registrar's books.
"INCUR" or "INCUR" shall have the meaning specified in Section 4.11.
8
<PAGE>
"INCURRENCE DATE" shall have the meaning specified in Section 4.11.
"INDEBTEDNESS" of any person means, without duplication,
(a) all liabilities and obligations, contingent or otherwise,
of such any person, to the extent such liabilities and obligations
would appear as a liability upon the consolidated balance sheet of such
person in accordance with GAAP,
(i) in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such
person or only to a portion thereof),
(ii) evidenced by bonds, notes, debentures or similar
instruments,
(iii) representing the balance deferred and unpaid of
the purchase price of any property or services, except (other
than accounts payable or other obligations to trade creditors
which have remained unpaid for greater than 60 days past their
original due date) those incurred in the ordinary course of
its business that would constitute ordinarily a trade payable
to trade creditors;
(b) all liabilities and obligations, contingent or
otherwise, of such person,
(i) evidenced by bankers' acceptances or similar
instruments issued or accepted by banks,
(ii) relating to any Capitalized Lease Obligation, or
(iii) evidenced by a letter of credit or a
reimbursement obligation of such person with respect to any
letter of credit;
(c) all net obligations of such person under Interest Swap and
Hedging Obligations;
(d) all liabilities and obligations of others of the kind
described in the preceding clause (a), (b) or (c) that such person has
guaranteed or that is otherwise its legal liability or which are
secured by any assets or property of such person and all obligations to
purchase, redeem or acquire any Equity Interests;
(e) any and all deferrals, renewals, extensions, refinancing
and refundings (whether direct or indirect) of, or amendments,
modifications or supplements to, any liability of the kind described in
any of the preceding clauses (a), (b), (c) or (d), or this clause (e),
whether or not between or among the same parties; and
(f) all Disqualified Capital Stock of such Person (measured at
the greater of its voluntary or involuntary maximum fixed repurchase
price plus accrued and unpaid dividends). For purposes hereof, the
"maximum fixed repurchase price" of any Disqualified Capital Stock
which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this
Indenture, and if such price is based upon, or measured by, the Fair
Market Value of such Disqualified Capital Stock, such Fair Market Value
to be determined in good faith by the board of directors of the issuer
(or managing general partner of the issuer) of such Disqualified
Capital Stock.
9
<PAGE>
"INDENTURE" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"INITIAL PUBLIC EQUITY OFFERING" means an initial underwritten offering
of common stock of the Company or Parent for cash pursuant to an effective
registration statement under the Securities Act as a consequence of which the
common stock of the Company or Parent is listed on a national securities
exchange or quoted on the national market system of Nasdaq stock market.
"INITIAL PURCHASER" means BancBoston Robertson Stephens Inc.
"INITIAL SECURITIES" means the 101/8% Series C Senior Subordinated
Notes due 2005, as supplemented from time to time in accordance with the terms
hereof, issued under this Indenture that contains the information referred to in
footnotes 4, 5 and 7 to the form of Security attached hereto as Exhibit A.
"INTEREST PAYMENT DATE" means the stated due date of an installment of
interest on the Securities.
"INTEREST SWAP AND HEDGING OBLIGATION" means any obligation of any
person pursuant to any interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate exchange agreement,
currency exchange agreement or any other agreement or arrangement designed to
protect against fluctuations in interest rates or currency values, including,
without limitation, any arrangement whereby, directly or indirectly, such person
is entitled to receive from time to time periodic payments calculated by
applying either a fixed or floating rate of interest on a stated notional amount
in exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"INVESTMENT" by any person in any other person means (without
duplication)
(a) the acquisition (whether by purchase, merger,
consolidation or otherwise) by such person (whether for cash, property,
services, securities or otherwise) of capital stock, bonds, notes,
debentures, partnership or other ownership interests or other
securities, including any options or warrants, of such other person or
any agreement to make any such acquisition;
(b) the making by such person of any deposit with, or advance,
loan or other extension of credit to, such other person (including the
purchase of property from another person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such
other person) or any commitment to make any such advance, loan or
extension (but excluding accounts receivable, endorsements for
collection or deposits arising in the ordinary course of business);
(c) other than guarantees of Indebtedness of the Company or
any Guarantor to the extent permitted by the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock,"
the entering into by such person of any guarantee of, or other credit
support or contingent obligation with respect to, Indebtedness or other
liability of such other person;
(d) the making of any capital contribution by such person to
such other person; and
(e) the designation by the Board of Directors of the Company
of any person to be an Unrestricted Subsidiary.
The Company shall be deemed to make an Investment in an amount equal to the fair
market value of the net assets of any subsidiary (or, if neither the Company nor
any of its Subsidiaries has theretofore made
10
<PAGE>
an Investment in such subsidiary, in an amount equal to the Investments being
made), at the time that such subsidiary is designated an Unrestricted
Subsidiary, and any property transferred to an Unrestricted Subsidiary from the
Company or a Subsidiary of the Company shall be deemed an Investment valued at
its fair market value at the time of such transfer.
"ISSUE DATE" means the date of first issuance of the Securities under
this Indenture.
"JUNIOR SECURITY" means any Qualified Capital Stock and any
Indebtedness of the Company or a Guarantor, as applicable, that is subordinated
in right of payment to Senior Debt at least to the same extent as the Securities
or the Guarantee, as applicable, and has no scheduled installment of principal
due, by redemption, sinking fund payment or otherwise, on or prior to the Stated
Maturity of the Securities; PROVIDED, that in the case of subordination in
respect of Senior Debt under the Credit Agreement, "Junior Security" shall mean
any Qualified Capital Stock and any Indebtedness of the Company or the
Guarantor, as applicable, that (i) has a final maturity date occurring after the
final maturity date of, all Senior Debt outstanding under the Credit Agreement
on the date of issuance of such Qualified Capital Stock or Indebtedness, (ii) is
unsecured, (iii) has an Average Life longer than the security for which such
Qualified Capital Stock or Indebtedness is being exchanged, and (iv) by their
terms or by law are subordinated to Senior Debt outstanding under the Credit
Agreement on the date of issuance of such Qualified Capital Stock or
Indebtedness at least to the same extent as the Securities.
"LEGAL DEFEASANCE" shall have the meaning specified in Section 8.2.
"LEGAL HOLIDAY" shall have the meaning specified in Section 13.7.
"LIEN" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation or other encumbrance
upon or with respect to any property of any kind, real or personal, movable or
immovable, now owned or hereafter acquired.
"LIQUIDATED DAMAGES" shall have the meaning specified in the
Registration Rights Agreement.
"MANAGEMENT FEE PAYMENTS" means payments from the Company to Dunhill
and Hayes Capital under that certain Management Consulting Agreement, dated
March 9, 1998, as amended, by and between the Company, Dunhill Bank Caribbean
Ltd. and Hayes Capital, in accordance with the terms and provisions of such
Management Consulting Agreement on the Issue Date, PROVIDED, HOWEVER, that the
obligation of the Company to make such payments will be subordinated to the
payment of all Obligations with respect to the Securities (and any Guarantee
thereof).
"MATERIAL FACILITY" means a facility that has a customer certification
including without limitation D1-9000.
"MATURITY DATE" means, when used with respect to any Security, the date
specified on such Security as the fixed date on which the final installment of
principal of such Security is due and payable (in the absence of any
acceleration thereof pursuant to the provisions of this Indenture regarding
acceleration of Indebtedness or any Change of Control Offer or Asset Sale
Offer).
"MOODY'S" means Moody's Investors Services, Inc. and its successors.
"MORTGAGE INDEBTEDNESS" of any person means any Indebtedness of such
person secured by real property of such person which in the reasonable good
faith judgment of the Board of Directors is directly related to a Related
Business of the Company.
11
<PAGE>
"NET CASH PROCEEDS" means the aggregate amount of cash or Cash
Equivalents received by the Company in the case of a sale of Qualified Capital
Stock and by the Company and its Subsidiaries in respect of an Asset Sale plus,
in the case of an issuance of Qualified Capital Stock upon any exercise,
exchange or conversion of securities (including options, warrants, rights and
convertible or exchangeable debt) of the Company that were issued for cash on or
after the Issue Date, the amount of cash originally received by the Company upon
the issuance of such securities (including options, warrants, rights and
convertible or exchangeable debt) less, in each case, the sum of all payments,
fees, commissions and (in the case of Asset Sales, reasonable and customary),
expenses (including, without limitation, the fees and expenses of legal counsel
and investment banking fees and expenses) incurred in connection with such Asset
Sale or sale of Qualified Capital Stock, and, in the case of an Asset Sale only,
less the amount (estimated reasonably and in good faith by the Company) of
income, franchise, sales and other applicable taxes (the computation of which
shall take into account any available net operating losses and other tax
attributes of Parent, and the Company and their Subsidiaries) required to be
paid by the Company or any of its respective Subsidiaries in the taxable year of
such sale in connection with such Asset Sale.
"NON-RECOURSE INDEBTEDNESS" means Indebtedness of the Company or its
Subsidiaries to the extent that,
(i) under the terms thereof or pursuant to law, no personal
recourse may be had against the Company or its Subsidiaries for the
payment of the principal of or interest or premium on such
Indebtedness, and enforcement of obligations on such Indebtedness
(except with respect to fraud, willful misconduct, misrepresentation,
misapplication of funds, reckless damage to assets and undertakings
with respect to environmental matters or construction defects) is
limited only to recourse against interests in specified assets and
property (the "Special Assets"), accounts and proceeds arising
therefrom, and rights under purchase agreements or other agreements
with respect to such Subject Assets;
(ii) such Indebtedness (x) is incurred concurrently with the
acquisition by the Company or its Subsidiaries of such Subject Assets
or a Person (or interests in a Person) holding such Subject Assets, or
(y) constitutes Refinancing Indebtedness with respect to Indebtedness
so incurred; and
(iii) the Subject Assets are not existing assets and no
existing assets or proceeds from the sale, transfer of other
disposition of existing assets were used to acquire such Subject
Assets.
"OBLIGATION" means any principal, premium or interest payment, or
monetary penalty, or damages, due by the Company or any Guarantor under the
terms of the Securities or this Indenture, including any liquidated damages due
pursuant to the terms of the Registration Rights Agreement.
"OFFICER" means, with respect to the Company or any Guarantor, the
Chief Executive Officer, the President, any Vice President, the Chief Financial
Officer, the Treasurer, the Controller, or the Secretary of the Company or such
Guarantor.
"OFFICERS' CERTIFICATE" means, with respect to the Company or any
Guarantor, a certificate signed by two Officers or by an Officer and an
Assistant Secretary of the Company or such Guarantor and otherwise complying
with the requirements of Sections 13.4 and 13.5.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of Sections
13.4 and 13.5.
"PARENT" means Compass Holdings LLC or its successor, so long as such
entity owns at least 51% of the Capital Stock of the Company.
12
<PAGE>
"PAYING AGENT" shall have the meaning specified in Section 2.3.
"PAYMENT DEFAULT" shall have the meaning specified in Section 12.2.
"PAYMENT NOTICE" shall have the meaning specified in Section 12.2.
"PERMITTED INDEBTEDNESS" means that:
(a) the Company and the Guarantors may incur Indebtedness
evidenced by the Securities and represented by this Indenture up to the
amounts specified therein as of the date thereof;
(b) the Company and the Guarantors, as applicable, may incur
Refinancing Indebtedness with respect to any Indebtedness or
Disqualified Capital Stock, as applicable, described in clause (a) of
this definition or incurred under the Debt Incurrence Ratio test of
Section 4.11 or which is outstanding on the Issue Date, PROVIDED that
in each case such Refinancing Indebtedness is secured only by the
assets that secured the Indebtedness so refinanced;
(c) the Company and its Subsidiaries may incur Indebtedness
solely in respect of bankers acceptances, and performance bonds (to the
extent that such incurrence does not result in the incurrence of any
obligation to repay any obligation relating to borrowed money of
others), all in the ordinary course of business in accordance with
customary industry practices, in amounts and for the purposes customary
in the Company's industry; PROVIDED, that the aggregate principal
amount outstanding of such Indebtedness (including any Refinancing
Indebtedness and any other Indebtedness issued to refinance, refund,
defease or replace such Indebtedness) shall at no time exceed $250,000;
(d) the Company may incur Indebtedness to any Guarantor, and
any Guarantor may incur Indebtedness to any other Guarantor or to the
Company; PROVIDED, that, in the case of Indebtedness of the Company,
such obligations shall be unsecured and subordinated in all respects to
the Company's obligations pursuant to the Securities and the date of
any event that causes such Guarantor no longer to be a Guarantor shall
be an Incurrence Date; and
(e) any Guarantor may guaranty any Indebtedness of the Company
or another Guarantor that was permitted to be incurred pursuant to this
Indenture, substantially concurrently with such incurrence or at the
time such person becomes a Guarantor.
"PERMITTED INVESTMENT" means:
(a) Investments in any of the Securities;
(b) Investments in Cash Equivalents;
(c) intercompany notes to the extent permitted under clause
(d) of the definition of "Permitted Indebtedness" and
(d) any Investment by the Company or any Guarantor in a Person
if as a result of such Investment such Person immediately becomes a
Wholly-Owned Subsidiary Guarantor or such Person is immediately merged
with or into the Company or a Wholly-Owned Subsidiary Guarantor.
13
<PAGE>
"PERMITTED LIEN" means:
(a) Liens existing on the Issue Date;
(b) Liens imposed by governmental authorities for taxes,
assessments or other charges not yet subject to penalty or which are
being contested in good faith and by appropriate proceedings, if
adequate reserves with respect thereto are maintained on the books of
the Company in accordance with GAAP;
(c) statutory liens of carriers, warehousemen, mechanics,
material men, landlords, repairmen or other like Liens arising by
operation of law in the ordinary course of business provided that (i)
the underlying obligations are not overdue for a period of more than 30
days, or (ii) such Liens are being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP;
(d) Liens securing the performance of bids, trade contracts
(other than borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(e) easements, rights-of-way, zoning, similar restrictions and
other similar encumbrances or title defects which, singly or in the
aggregate, do not in any case materially detract from the value of the
property, subject thereto (as such property is used by the Company or
any of its Subsidiaries) or interfere with the ordinary conduct of the
business of the Company or any of its Subsidiaries;
(f) Liens arising by operation of law in connection with
judgments, only to the extent, for an amount and for a period not
resulting in an Event of Default with respect thereto;
(g) pledges or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security legislation;
(h) Liens securing the Securities;
(i) Liens securing Indebtedness of a Person existing at the
time such Person becomes a Subsidiary or is merged with or into the
Company or a Subsidiary or Liens securing Indebtedness incurred in
connection with an Acquisition, PROVIDED that such Liens were in
existence prior to the date of such acquisition, merger or
consolidation, were not incurred in anticipation thereof, and do not
extend to any other assets;
(j) Liens arising from Purchase Money Indebtedness or Mortgage
Indebtedness permitted to be incurred pursuant to Section 4.11 PROVIDED
such Liens relate solely to the property which is subject to such
Purchase Money Indebtedness or Mortgage Indebtedness, as applicable;
(k) leases or subleases granted to other persons in the
ordinary course of business not materially interfering with the conduct
of the business of the Company or any of its Subsidiaries or materially
detracting from the value of the relative assets of the Company or any
Subsidiary;
(l) Liens arising from precautionary Uniform Commercial Code
financing statement filings regarding operating leases entered into by
the Company or any of its Subsidiaries in the ordinary course of
business;
14
<PAGE>
(m) Liens securing Refinancing Indebtedness incurred to
refinance any Indebtedness that was previously so secured in a manner
no more adverse to the Holders of the Securities than the terms of the
Liens securing such refinanced Indebtedness, and provided that the
Indebtedness secured is not increased and the lien is not extended to
any additional assets or property that would not have been security for
the Indebtedness refinanced; and
(n) Liens securing Indebtedness incurred under the Credit
Agreement in accordance with the terms of Section 4.11.
"PERMITTED PAYMENTS TO PARENT" means without duplication, (a) payments
to Parent in an amount sufficient to permit Parent to pay reasonable and
necessary operating expenses and other general corporate expenses to the extent
such expenses relate or are fairly allocable to the Company and its
Subsidiaries, provided such expenses do not exceed $250,000 in any fiscal year;
and (b) payments to Parent to enable Parent to pay foreign, federal, state or
local tax liabilities ("Tax Payment"), not to exceed the amount of any tax
liabilities that would be otherwise payable by the Company and its Subsidiaries
and Unrestricted Subsidiaries to the appropriate taxing authorities if they
filed separate tax returns to the extent that Parent has an obligation to pay
such tax liabilities relating to the operations, assets or capital of the
Company or its Subsidiaries and Unrestricted Subsidiaries PROVIDED, HOWEVER,
that (i), notwithstanding the foregoing, in the case of determining the amount
of a Tax Payment that is permitted to be paid by Company and any of its United
States subsidiaries in respect of their Federal income tax liability, such
payment shall be determined on the basis of assuming that all payments made to
Parent pursuant to the immediately preceding clause (a) shall be treated as a
deductible expense of the Company in the taxable year during which the
obligation to make such payment accrues and (ii) any Tax Payments shall either
be used by Parent to pay such tax liabilities within 90 days of Parent's receipt
of such payment or refunded to the payee.
"PERSON" or "PERSON" means any corporation, individual, limited
liability company, joint stock company, joint venture, partnership, limited
liability company, unincorporated association, governmental regulatory entity,
country, state or political subdivision thereof, trust, municipality or other
entity.
"PREFERRED STOCK" means an Equity Interest of any class or classes of a
Person (however designated) which is preferred as to payments of dividends, or
as to distributions upon any liquidation or dissolution, over Equity Interests
of any other class of such Person.
"PRINCIPAL" of any Indebtedness means the principal of such
Indebtedness.
"PROPERTY" means any right or interest in or to property or assets of
any kind whatsoever, whether real, personal or mixed and whether tangible,
intangible, contingent, direct or indirect.
"PURCHASE MONEY INDEBTEDNESS" of any person means any Non-Recourse
Indebtedness of such person to any seller or other person incurred solely to
finance the acquisition (including in the case of a Capitalized Lease
Obligation, the lease) of any after acquired tangible property which, in the
reasonable good faith judgment of the Board of Directors of the Company, is
directly related to a Related Business of the Company and which is incurred
substantially concurrently with such acquisition and is secured only by the
assets so financed.
"QUALIFIED CAPITAL STOCK" means any Capital Stock of the Company that
is not Disqualified Capital Stock.
"QUALIFIED EXCHANGE" means any legal defeasance, redemption,
retirement, repurchase or other acquisition of Capital Stock or of Indebtedness
of the Company issued on or after the Issue Date with the
15
<PAGE>
Net Cash Proceeds received by the Company from the substantially concurrent sale
of Qualified Capital Stock or any exchange of Qualified Capital Stock for any
Capital Stock or for Indebtedness of the Company issued on or after the Issue
Date.
"RECORD DATE" means a Record Date specified in the Securities whether
or not such Record Date is a Business Day, or, if applicable, as specified in
Section 2.12.
"REDEMPTION DATE," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to Article III of
this Indenture and Paragraph 5 in the form of Security attached hereto as
Exhibit A.
"REDEMPTION PRICE," when used with respect to any Security to be
redeemed, means the redemption price for such redemption pursuant to Paragraph 5
in the form of Security attached hereto as Exhibit A, which shall include,
without duplication, in each case, accrued and unpaid interest and Liquidated
Damages, if any, to the Redemption Date.
"REFERENCE PERIOD" with regard to any Person means the four full fiscal
quarters (or such lesser period during which such Person has been in existence)
ended immediately preceding any date upon which any determination is to be made
pursuant to the terms of the Securities or this Indenture.
"REFINANCING INDEBTEDNESS" means Indebtedness or Disqualified Capital
Stock (a) issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disqualified Capital Stock, liquidation preference, not to exceed (after
deduction of reasonable and customary fees and expenses incurred in connection
with the Refinancing plus the amount of any premium paid in connection with such
Refinancing in accordance with the terms of the documents governing the
Indebtedness refinanced without giving effect to any modification thereof made
in connection with or in contemplation of such refinancing) the lesser of (i)
the principal amount or, in the case of Disqualified Capital Stock, liquidation
preference, of the Indebtedness or Disqualified Capital Stock so Refinanced and
(ii) if such Indebtedness being Refinanced was issued with an original issue
discount, the accreted value thereof (as determined in accordance with GAAP) at
the time of such Refinancing; PROVIDED, that (A) such Refinancing Indebtedness
of any Subsidiary of the Company shall only be used to Refinance outstanding
Indebtedness or Disqualified Capital Stock of such Subsidiary, (B) such
Refinancing Indebtedness shall (x) not have an Average Life shorter than the
Indebtedness or Disqualified Capital Stock to be so refinanced at the time of
such Refinancing and (y) in all respects, be no less subordinated or junior, if
applicable, to the rights of Holders of the Securities than was the Indebtedness
or Disqualified Capital Stock to be refinanced, (C) such Refinancing
Indebtedness shall have a final stated maturity or redemption date, as
applicable, no earlier than the final stated maturity or redemption date, as
applicable, of the Indebtedness or Disqualified Capital Stock to be so
refinanced, and (D) such Refinancing Indebtedness shall be secured (if secured)
in a manner no more adverse to the Holders of the Securities than the terms of
the Liens (if any) securing such refinanced Indebtedness, including, without
limitation, the amount of Indebtedness secured shall not be increased.
"REGISTRAR" shall have the meaning specified in Section 2.3.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of the date hereof by and between the Initial Purchaser, the Company
and the Guarantors, as such agreement may be amended, modified or supplemented
from time to time in accordance with the terms thereof.
16
<PAGE>
"RELATED BUSINESS" means the business conducted (or proposed to be
conducted) by the Company and its Subsidiaries as of the Issue Date and any and
all businesses that in the good faith judgment of the Board of Directors of the
Company are materially related businesses.
"RESTRICTED INVESTMENT" means, in one or a series of related
transactions, any Investment, other than other Permitted Investments.
"RESTRICTED PAYMENT" means, with respect to any person,
(a) the declaration or payment of any dividend or other
distribution in respect of Equity Interests of such person or any
parent or Subsidiary of such person,
(b) any payment on account of the purchase, redemption or
other acquisition or retirement for value of Equity Interests of such
person or any Subsidiary or parent of such person,
(c) other than with the proceeds from the substantially
concurrent sale of, or in exchange for, Refinancing Indebtedness any
purchase, redemption, or other acquisition or retirement for value of,
any payment in respect of any amendment of the terms of or any
defeasance of, any Subordinated Indebtedness, directly or indirectly,
by such person or a parent or Subsidiary of such person prior to the
scheduled maturity, any scheduled repayment of principal, or scheduled
sinking fund payment, as the case may be, of such Indebtedness,
(d) any Restricted Investment by such person and
(e) any Management Fee Payments or similar payments to any
Affiliates (other than Subsidiaries) in excess of an aggregate of
$500,000 in any fiscal year, PROVIDED, HOWEVER, that the obligation of
the Company to pay such Management Fee Payments will be subordinated to
the payment of all Obligations with respect to the Securities (and any
Guarantee thereof);
PROVIDED, HOWEVER, that the term "Restricted Payment" does not include (i) any
dividend, distribution or other payment on or with respect to Equity Interests
of an issuer to the extent payable solely in shares of Qualified Capital Stock
of such issuer; or (ii) any dividend, distribution or other payment to the
Company, or to any of its Guarantors, by the Company or any of its Subsidiaries.
"RESTRICTED SECURITY" means a Security, unless or until it has been (i)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering it or (ii) distributed to the public
pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act; PROVIDED, that in no case shall an Exchange Security issued in
accordance with this Indenture and the terms and provisions of the Registration
Rights Agreement be a Restricted Security.
"S&P" means Standard & Poor's, a division of The McGraw Hill Companies,
and its successors.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means, collectively, the Initial Securities and, when and
if issued as provided in the Registration Rights Agreement, the Exchange
Securities.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
17
<PAGE>
"SECURITIES CUSTODIAN" means the Trustee, as custodian with respect to
the Securities in global form, or any successor entity thereto.
"SECURITYHOLDER" or "HOLDER" means the Person in whose name a Security
is registered on the Registrar's books.
"SENIOR DEBT" of the Company or any Guarantor means Indebtedness
(including any monetary obligation in respect of the Credit Agreement, and
interest, whether or not allowable, accruing on Indebtedness incurred pursuant
to the Credit Agreement after the filing of a petition initiating any proceeding
under any bankruptcy, insolvency or similar law) of the Company or such
Guarantor arising under the Credit Agreement or that, by the terms of the
instrument creating or evidencing such Indebtedness, is expressly designated
Senior Debt and made senior in right of payment to the Securities or the
applicable Guarantee; PROVIDED, that in no event shall Senior Debt include (a)
Indebtedness to any Subsidiary of the Company or any officer, director or
employee of the Company or any Subsidiary of the Company, (b) Indebtedness
incurred in violation of the terms of this Indenture, (c) Indebtedness to trade
creditors, (d) Disqualified Capital Stock, (e) Capitalized Lease Obligations,
and (f) any liability for taxes owed or owing by the Company or such Guarantor.
"SIGNIFICANT SUBSIDIARY" shall have the meaning provided under
Regulation S-X of the Securities Act, as in effect on the Issue Date.
"SPECIAL RECORD DATE" for payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 2.12.
"STATED MATURITY" when used with respect to any Security, means April
15, 2005.
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or a
Guarantor that is subordinated in right of payment by its terms or the terms of
any document or instrument relating thereto to the Securities or such Guarantee,
as applicable, in any respect or has a stated maturity after the Stated
Maturity.
"SUBSIDIARY," with respect to any person, means:
(i) a corporation a majority of whose Equity Interests with
voting power, under ordinary circumstances, to elect directors is at
the time, directly or indirectly, owned by such person, by such person
and one or more Subsidiaries of such person or by one or more
Subsidiaries of such person,
(ii) any other person (other than a corporation) in which such
person, one or more Subsidiaries of such person, or such person and one
or more Subsidiaries of such person, directly or indirectly, at the
date of determination thereof has at least majority ownership interest,
or
(iii) a partnership in which such person or a Subsidiary of
such person is, at the time, a general partner.
Notwithstanding the foregoing, an Unrestricted Subsidiary shall not be a
Subsidiary of the Company or of any Subsidiary of the Company. Unless the
context requires otherwise, Subsidiary means each direct and indirect Subsidiary
of the Company.
"TIA" means the Trust Indenture Act of 1939, as amended, (15 U.S.
Code Sections 77aaa-77bbbb) as in effect on the date of the execution of this
Indenture, except as provided in Section 9.3.
18
<PAGE>
"TRANSFER RESTRICTED SECURITIES" means Securities that bear or are
required to bear the legend set forth in Section 2.6.
"TREASURY RATE" means the yield to maturity at the time of computation
of U.S. Treasury securities with a constant maturity (as compiled and published
in the most recent Federal Reserve Release H.15 (519) which has become publicly
available at least two Business Days prior to the applicable Redemption Date
(or, if such statistical release is no longer published, any publicly available
source or similar market data)) closest to the period from the applicable
Redemption Date to April 15, 2002, PROVIDED, HOWEVER, that if the period from
such Redemption Date to April 15, 2002, is not equal to the constant maturity of
a U.S. Treasury security for which a weekly average yield is given, the Treasury
Rate shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of one year) from the weekly average yields of U.S. Treasury
securities for which such yields are given, except that if the period from the
applicable Redemption Date to April 15, 2002, is less than one year, the weekly
average yield on actually traded U.S. Treasury securities adjusted to a constant
maturity of one year shall be used.
"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"TRUST OFFICER" means any officer within the corporate trust division
(or any successor group) of the Trustee or any other officer of the Trustee
customarily performing functions similar to those performed by the persons who
at that time shall be such officers, and also means, with respect to a
particular corporate trust matter, any other officer of the Trustee to whom such
trust matter is referred because of his knowledge of and familiarity with the
particular subject.
"UNRESTRICTED SUBSIDIARY" means any subsidiary of the Company that does
not own any Capital Stock of, or own or hold any Lien on any property of, the
Company or any other Subsidiary of the Company and that, at the time of
determination, shall be an Unrestricted Subsidiary (as designated by the Board
of Directors of the Company); PROVIDED, that (i) such subsidiary shall not
engage, to any substantial extent, in any line or lines of business activity
other than a Related Business, (ii) neither immediately prior thereto nor after
giving PRO FORMA effect to such designation would there exist a Default or Event
of Default and (iii) immediately after giving pro forma effect thereto, the
Company could incur at least $1.00 of Indebtedness pursuant to the Debt
Incurrence Ratio in Section 4.11. The Board of Directors of the Company may
designate any Unrestricted Subsidiary to be a Subsidiary, PROVIDED, that (i) no
Default or Event of Default is existing or will occur as a consequence thereof
and (ii) immediately after giving effect to such designation, on a PRO FORMA
basis, the Company could incur at least $1.00 of Indebtedness pursuant to the
Debt Incurrence Ratio of Section 4.11. Each such designation shall be evidenced
by filing with the Trustee a certified copy of the resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"U.S. GOVERNMENT OBLIGATIONS" means direct non-callable obligations of,
or noncallable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
"WHOLLY-OWNED," with respect to a Consolidated Subsidiary, means a
Consolidated Subsidiary that is a Wholly-Owned Subsidiary.
"WHOLLY-OWNED SUBSIDIARY" means a Subsidiary all the Equity Interests
of which are owned by the Company or one or more Wholly-Owned Subsidiaries of
the Company.
"WHOLLY-OWNED SUBSIDIARY GUARANTOR" means a Guarantor that is a
Wholly-Owned Subsidiary.
19
<PAGE>
SECTION 1.2. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"COMMISSION" means the SEC.
"INDENTURE SECURITIES" means the Securities.
"INDENTURE SECURITYHOLDER" means a Holder or a Securityholder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee.
"OBLIGOR" on the indenture securities means the Company, each Guarantor
and any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them thereby.
SECTION 1.3. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions;
(6) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision; and
(7) references to Sections or Articles means reference to
such Section or Article in this Indenture, unless stated otherwise.
20
<PAGE>
ARTICLE II
THE SECURITIES
SECTION 2.1. FORM AND DATING.
The Securities and the Trustee's certificate of authentication, in
respect thereof, shall be substantially in the form of Exhibit A hereto, which
Exhibit is part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company shall
approve the form of the Securities and any notation, legend or endorsement on
them. Any such notations, legends or endorsements not contained in the form of
Security attached as Exhibit A hereto shall be delivered in writing to the
Trustee. Each Security shall be dated the date of its authentication.
The terms and provisions contained in the forms of Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
SECTION 2.2. EXECUTION AND AUTHENTICATION.
Two Officers shall sign, or one Officer shall sign and one Officer
shall attest to, the Security for the Company by manual or facsimile signature.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless and the
Company shall nevertheless be bound by the terms of the Securities and this
Indenture.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security but
such signature shall be conclusive evidence that the Security has been
authenticated pursuant to the terms of this Indenture.
The Trustee shall authenticate Initial Securities for original issue in
the aggregate principal amount of up to $19,000,000 and shall authenticate
Exchange Securities for original issue in the aggregate principal amount of up
to $19,000,000, in each case upon a written order of the Company in the form of
an Officers' Certificate; PROVIDED that such Exchange Securities shall be
issuable only upon the valid surrender for cancellation of Initial Securities of
a like aggregate principal amount in accordance with the Registration Rights
Agreement. The Officers' Certificate shall specify the amount of Securities to
be authenticated and the date on which the Securities are to be authenticated.
The aggregate principal amount of Securities outstanding at any time may not
exceed $19,000,000, except as provided in Section 2.7. Upon the written order of
the Company in the form of an Officers' Certificate, the Trustee shall
authenticate Securities in substitution of Securities originally issued to
reflect any name change of the Company.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company, any Affiliate of the Company,
or any of their respective Subsidiaries.
Securities shall be issuable only in registered form without coupons in
denominations of $1,000 and any integral multiples thereof.
21
<PAGE>
SECTION 2.3. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where Securities may be presented for
registration of transfer or for exchange ("Registrar"), and an office or agency
where Securities may be presented for payment ("Paying Agent"), and where
notices and demands to or upon the Company in respect of the Securities may be
served. The Company may act as Registrar or Paying Agent, except that, for the
purposes of Articles III, VIII, X, and Section 4.14 hereof and as otherwise
specified in this Indenture, neither the Company nor any Affiliate of the
Company shall act as Paying Agent. The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company may have one or more
co-Registrars and one or more additional Paying Agents. The term "Registrar"
includes any co-registrar and the term "Paying Agent" includes any additional
Paying Agent. The Company hereby initially appoints the Trustee as Registrar and
Paying Agent, and by its acknowledgement and acceptance on the signature page
hereto, the Trustee hereby initially agrees so to act.
The Company shall enter into an appropriate written agency agreement
with any Agent (including the Paying Agent) not a party to this Indenture, which
agreement shall implement the provisions of this Indenture that relate to such
Agent, and shall furnish a copy of each such agreement to the Trustee. The
Company shall promptly notify the Trustee in writing of the name and address of
any such Agent. If the Company fails to maintain a Registrar or Paying Agent,
the Trustee shall act as such.
The Company initially appoints The Depository Trust Company ("DTC"), to
act as Depositary with respect to the Global Securities.
The Company initially appoints the Trustee to act as Securities
Custodian with respect to the Global Securities.
Upon the occurrence of an Event of Default described in Section 6.1(iv)
or (v) hereof, the Trustee shall, or upon the occurrence of any other Event of
Default by notice to the Company, the Registrar and the Paying Agent, the
Trustee may assume the duties and obligations of the Registrar and the Paying
Agent hereunder.
SECTION 2.4. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, premium, if any, or interest (or Liquidated Damages, if any) on,
the Securities (whether such assets have been distributed to it by the Company
or any other obligor on the Securities), and shall notify the Trustee in writing
of any Default in making any such payment. If either of the Company or a
Subsidiary of the Company acts as Paying Agent, it shall segregate such assets
and hold them as a separate trust fund for the benefit of the Holders or the
Trustee. The Company at any time may require a Paying Agent to distribute all
assets held by it to the Trustee and account for any assets disbursed and the
Trustee may at any time during the continuance of any payment Default or any
Event of Default, upon written request to a Paying Agent, require such Paying
Agent to distribute all assets held by it to the Trustee and to account for any
assets distributed. Upon distribution to the Trustee of all assets that shall
have been delivered by the Company to the Paying Agent, the Paying Agent (if
other than the Company) shall have no further liability for such assets.
22
<PAGE>
SECTION 2.5. SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses
of Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
or any Paying Agent is not the Registrar, the Company shall furnish to the
Trustee on or before the third Business Day preceding each Interest Payment
Date and at such other times as the Trustee or any such Paying Agent may
request in writing a list in such form and as of such date as the Trustee or
any such Paying Agent reasonably may require of the names and addresses of
Holders and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.6. TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF DEFINITIVE SECURITIES. When
Definitive Securities are presented to the Registrar with a request:
(x) to register the transfer of such Definitive
Securities; or
(y) to exchange such Definitive Securities for an
equal principal amount of Definitive Securities of other
authorized denominations, the Registrar shall register the
transfer or make the exchange as requested if its reasonable
requirements for such transaction are met; PROVIDED, HOWEVER,
that the Definitive Securities surrendered for registration of
transfer or exchange:
(i) shall be duly endorsed or accompanied
by a written instrument of transfer in form
reasonably satisfactory to the Company and the
Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing; and
(ii) in the case of Transfer Restricted
Securities that are Definitive Securities, shall be
accompanied by the following additional information
and documents, as applicable:
(A) if such Transfer Restricted
Security is being delivered to the Registrar
by a Holder for registration in the name of
such Holder, without transfer, a
certification from such Holder to that
effect (in substantially the form set forth
on the reverse of the Security); or
(B) if such Transfer Restricted
Security is being transferred to a
"qualified institutional buyer" (within the
meaning of Rule 144A promulgated under the
Securities Act) that is aware that any sale
of Securities to it will be made in reliance
on Rule 144A under the Securities Act and
that is acquiring such Transfer Restricted
Security for its own account or for the
account of another such "qualified
institutional buyer," a certification from
such Holder to that effect (in substantially
the form set forth on the reverse of the
Security); or
(C) if such Transfer Restricted
Security is being transferred pursuant to an
exemption from registration in accordance
with Rule 144, or outside the United States
in an offshore transaction in compliance
with Rule 904 under the Securities Act, or
pursuant to an effective registration
statement under the Securities Act, a
certification from such Holder to that
23
<PAGE>
effect (in substantially the form set forth
on the reverse of the Security); or
(D) if such Transfer Restricted
Security is being transferred in reliance on
another exemption from the registration
requirements of the Securities Act and with
all applicable securities laws of the States
of the United States, a certification from
such Holder to that effect (in substantially
the form set forth on the reverse of the
Security) and an Opinion of Counsel
reasonably acceptable to the Company and to
the Registrar, if the Company so requests,
to the effect that such transfer is in
compliance with the Securities Act.
(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL SECURITY. A Definitive Security may not
be exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the
Trustee of a Definitive Security, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the
Trustee, together with:
(i) if such Definitive Security is a Transfer
Restricted Security, certification, substantially in the form
set forth on the reverse of the Security, that such Definitive
Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act; and
(ii) whether or not such Definitive Security is a
Transfer Restricted Security, written instructions directing
the Trustee to make, or to direct the Securities Custodian to
make, an endorsement on the Global Security to reflect an
increase in the aggregate principal amount of the Securities
represented by the Global Security,
then the Trustee shall cancel such Definitive Security and cause, or
direct the Securities Custodian to cause, in accordance with the
standing instructions and procedures existing between the Depositary
and the Securities Custodian, the aggregate principal amount of
Securities represented by the Global Security to be increased
accordingly. If no Global Securities are then outstanding, the Company
shall issue and the Trustee shall authenticate a new Global Security in
the appropriate principal amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. The transfer
and exchange of Global Securities or beneficial interests therein shall
be effected through the Depositary, in accordance with this Indenture
(including applicable restrictions on transfer set forth herein, if
any) and the procedures of the Depositary therefor.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL SECURITY FOR
A DEFINITIVE SECURITY.
(i) Any Person having a beneficial interest in a
Global Security may upon request exchange such beneficial
interest for a Definitive Security. Upon receipt by the
Trustee of written instructions or such other form of
instructions as is customary for the Depositary, from the
Depositary or its nominee on behalf of any Person having a
beneficial interest in a Global Security, and upon receipt by
the Trustee of a written instruction or such other form of
instructions as is customary for the Depositary or the Person
designated by the Depositary as having such a beneficial
interest in a Transfer Restricted Security only, the following
additional information and documents (all of which may be
submitted by facsimile):
24
<PAGE>
(A) if such beneficial interest is being
transferred to the Person designated by the
Depositary as being the beneficial owner, a
certification from the transferor to that effect (in
substantially the form set forth on the reverse of
the Security); or
(B) if such beneficial interest is being
transferred to a "qualified institutional buyer"
(within the meaning of Rule 144A promulgated under
the Securities Act), that is aware that any sale of
Securities to it will be made in reliance on Rule
144A under the Securities Act and that is acquiring
such beneficial interest in the Transfer Restricted
Security for its own account or the account of
another such "qualified institutional buyer," a
certification to that effect from the transferor (in
substantially the form set forth on the reverse of
the Security); or
(C) if such beneficial interest is being
transferred pursuant to an exemption from
registration in accordance with Rule 144, or outside
the United States in an offshore transaction in
compliance with Rule 904 under the Securities Act, or
pursuant to an effective registration statement under
the Securities Act, a certification from the
transferor to that effect (in substantially the form
set forth on the reverse of the Security); or
(D) if such beneficial interest is being
transferred in reliance on another exemption from the
registration requirements of the Securities Act and
in accordance with all applicable securities laws of
the States of the United States, a certification to
that effect from the transferor (in substantially the
form set forth on the reverse of the Security) and an
Opinion of Counsel from the transferee or transferor
reasonably acceptable to the Company and to the
Registrar, if the Company so requests, to the effect
that such transfer is in compliance with the
Securities Act,
then the Trustee or the Securities Custodian, at the direction of the
Trustee, will cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities
Custodian, the aggregate principal amount of the Global Security to be
reduced and, following such reduction, the Company will execute and,
upon receipt of an authentication order in the form of an Officers'
Certificate, the Trustee's authenticating agent will authenticate and
deliver to the transferee a Definitive Security.
(ii) Definitive Securities issued in exchange for a
beneficial interest in a Global Security pursuant to this
Section 2.6(d) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee. The Trustee shall
deliver such Definitive Securities to the persons in whose
names such Securities are so registered.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL
SECURITIES. Notwithstanding any other provisions of this Indenture
(other than the provisions set forth in subsection (f) of this Section
2.6), a Global Security may not be transferred as a whole except by the
Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by
the Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary.
25
<PAGE>
(f) AUTHENTICATION OF DEFINITIVE SECURITIES IN ABSENCE OF
DEPOSITARY. If at any time:
(i) the Depositary for the Securities notifies the
Company that the Depositary is unwilling or unable to continue
as Depositary for the Global Securities and a successor
Depositary for the Global Securities is not appointed by the
Company within ninety days after delivery of such notice; or
(ii) the Company, in its sole discretion, notifies
the Trustee in writing that it elects to cause the issuance of
Definitive Securities under this Indenture,
then the Company will execute, and the Trustee, upon receipt of an
Officers' Certificate requesting the authentication and delivery of
Definitive Securities, will, or its authenticating agent will,
authenticate and deliver Definitive Securities, in an aggregate
principal amount equal to the principal amount of the Global
Securities, in exchange for such Global Securities.
(g) LEGENDS.
(i) Except as permitted by the following paragraph
(ii), each Security certificate evidencing the Global
Securities and the Definitive Securities (and all Securities
issued in exchange therefor or substitution thereof) shall
bear a legend in substantially the following form:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT
WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k)
UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF TRANSFER
OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT
(A) TO COMPASS AEROSPACE CORPORATION OR ANY SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE), AND, IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF
LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO
COMPASS AEROSPACE CORPORATION THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME
26
<PAGE>
PERIOD REFERRED TO IN RULE 144(k) UNDER THE SECURITIES ACT
AFTER THE ORIGINAL ISSUANCE OF THE NOTES THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING
TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND COMPASS AEROSPACE CORPORATION SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER
OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE
TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION
OF THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer
Restricted Security (including any Transfer Restricted
Security represented by a Global Security) pursuant to Rule
144 under the Act or an effective registration statement under
the Securities Act:
(A) in the case of any Transfer Restricted
Security that is a Definitive Security, the Registrar
shall permit the Holder thereof to exchange such
Transfer Restricted Security for a Definitive
Security that does not bear the legend set forth
above and rescind any restriction on the transfer of
such Transfer Restricted Security; and
(B) any such Transfer Restricted Security
represented by a Global Security shall not be subject
to the provisions set forth in (i) above (such sales
or transfers being subject only to the provisions of
Section 2.6(c) hereof); PROVIDED, HOWEVER, that with
respect to any request for an exchange of a Transfer
Restricted Security that is represented by a Global
Security for a Definitive Security that does not bear
a legend, which request is made in reliance upon Rule
144, the Holder thereof shall certify in writing to
the Registrar that such request is being made
pursuant to Rule 144 (such certification to be
substantially in the form set forth on the reverse of
the Security).
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL SECURITY. At such
time as all beneficial interests in a Global Security have either been
exchanged for Definitive Securities, redeemed, repurchased or
cancelled, such Global Security shall be returned to or retained and
cancelled by the Trustee. At any time prior to such cancellation, if
any beneficial interest in a Global Security is exchanged for
Definitive Securities, redeemed, repurchased or cancelled, the
principal amount of Securities represented by such Global Security
shall be reduced and an endorsement shall be made on such Global
Security, by the Trustee or the Securities Custodian, at the direction
of the Trustee, to reflect such reduction.
(i) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF
DEFINITIVE SECURITIES.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee or any
authenticating agent of the Trustee shall authenticate
Definitive Securities and Global Securities at the Registrar's
request.
(iv) No service charge shall be made to a Holder for
any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover
27
<PAGE>
any transfer tax, assessments, or similar governmental charge
payable in connection therewith (other than any such transfer
taxes, assessments, or similar governmental charge payable
upon exchanges or transfers pursuant to Section 2.2 (fourth
paragraph), 2.10, 3.7, 4.14 (clause 8 of the sixth paragraph),
9.5, or 10.1 hereof).
(iii) The Registrar shall not be required to register
the transfer of or exchange of (a) any Definitive Security
selected for redemption in whole or in part pursuant to
Article III, except the unredeemed portion of any Definitive
Security being redeemed in part, or (b) any Security for a
period beginning 15 Business Days before the mailing of a
notice of an offer to repurchase pursuant to Article X or
Section 4.14 hereof or redemption of Securities pursuant to
Article III hereof and ending at the close of business on the
day of such mailing.
(iv) The Trustee shall have no obligation or duty
to monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Indenture or under
applicable law with respect to any transfer of any interest in
any Security (including any transfers between or among
Depositary participants or beneficial owners of interests in
any Global Security) other than to require delivery of such
certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly
required by the terms of, this Indenture, and to examine the
same to determine substantial compliance as to form with the
express requirements thereof.
SECTION 2.7. REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims and submits an affidavit or other evidence, satisfactory to
the Trustee, to the Trustee to the effect that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Security if the Trustee's requirements are met. If
required by the Trustee or the Company, such Holder must provide an indemnity
bond or other indemnity, sufficient in the judgment of both the Company and the
Trustee, to protect the Company, the Trustee or any Agent from any loss which
any of them may suffer if a Security is replaced. The Company may charge such
Holder for its reasonable, out-of-pocket expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.8. OUTSTANDING SECURITIES.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee (including any Security represented by a
Global Security) except those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Security effected by
the Trustee hereunder and those described in this Section 2.8 as not
outstanding. A Security does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Security, except as provided in Section
2.9 hereof.
If a Security is replaced pursuant to Section 2.7 hereof (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a BONA FIDE purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section 2.7
hereof.
If on a Redemption Date or the Maturity Date the Paying Agent (other
than the Company or an Affiliate of the Company) holds cash sufficient to pay
all of the principal and interest and premium, if any,
28
<PAGE>
due on the Securities payable on that date and payment of the Securities
called for redemption is not otherwise prohibited, then on and after that
date such Securities cease to be outstanding and interest on them ceases to
accrue.
SECTION 2.9. TREASURY SECURITIES.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, amendment, supplement, waiver or
consent, Securities owned by the Company or Affiliates of the Company shall be
disregarded, except that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, amendment, supplement,
waiver or consent, only Securities that a Trust Officer of the Trustee knows are
so owned shall be disregarded.
SECTION 2.10. TEMPORARY SECURITIES.
Until Definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of Definitive Securities but may
have variations that the Company reasonably and in good faith consider
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall, upon receipt of a written order of the
Company in the form of an Officers' Certificate, authenticate Definitive
Securities in exchange for temporary Securities. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as permanent Securities authenticated and delivered
hereunder.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for registration, transfer, exchange or
payment. The Trustee, or at the direction of the Trustee, the Registrar or the
Paying Agent (other than the Company or an Affiliate of the Company), and no one
else, shall cancel and, without the written direction of the Company to the
contrary, shall dispose of all Securities surrendered for transfer, exchange,
payment or cancellation. Subject to Section 2.7 hereof, the Company may not
issue new Securities to replace Securities that have been paid or delivered to
the Trustee for cancellation. No Securities shall be authenticated in lieu of or
in exchange for any Securities cancelled as provided in this Section 2.11
hereof, except as expressly permitted in the form of Securities and as permitted
by this Indenture.
SECTION 2.12. DEFAULTED INTEREST.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the person in
whose name that Security (or one or more predecessor Securities) is registered
at the close of business on the Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date plus any interest
payable on the defaulted interest at the rate and in the manner provided in
Section 4.1 hereof and the Security (herein called "Defaulted Interest"), shall
forthwith cease to be payable to the registered holder on the relevant Record
Date, or, as applicable, the Special Record Date (as defined below), and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in clause (1) or (2) below:
29
<PAGE>
(1) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Securities (or their
respective predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee and the Paying Agent in writing of the amount
of Defaulted Interest proposed to be paid on each Security and the date
of the proposed payment, and at the same time the Company shall deposit
with the Paying Agent an amount of cash equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Paying Agent for such deposit prior to
the date of the proposed payment, such cash when deposited to be held
in trust for the benefit of the persons entitled to such Defaulted
Interest as provided in this clause (1). Thereupon the Paying Agent
shall fix a special record date for the payment of such Defaulted
Interest (a "Special Record Date"), which shall be not more than 15
days, and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Paying Agent
of the notice of the proposed payment. The Paying Agent shall promptly
notify the Company and the Trustee of such Special Record Date and, in
the name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder at
his address as it appears in the Security register not less than 10
days prior to such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having
been mailed as aforesaid, such Defaulted Interest shall be paid to the
persons in whose names the Securities (or their respective predecessor
Securities) are registered on such Special Record Date and shall no
longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon
such notice as may be required by such exchange, if, after notice given
by the Company to the Trustee and the Paying Agent of the proposed
payment pursuant to this clause, such manner shall be deemed
practicable by the Trustee and the Paying Agent.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon the registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
SECTION 2.13. CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; PROVIDED that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers. The Company will promptly notify
the Trustee of any change in the "CUSIP" numbers.
ARTICLE III
REDEMPTION
SECTION 3.1. RIGHT OF REDEMPTION.
Redemption of Securities, as permitted by the provisions of this
Indenture, shall be made in accordance with such provisions and this Article
III. The Company shall not have the right to redeem any Securities prior to
April 15, 2002, other than as provided in the next paragraph and Paragraph 5 of
the
30
<PAGE>
Securities. On or after April 15, 2002, the Company shall have the right to
redeem all or any part of the Securities for cash at the Redemption Prices
specified in the form of Security attached as Exhibit A set forth therein in
Paragraph 5 thereof, in each case (subject to the right of Holders of record on
a Record Date to receive interest due on an Interest Payment Date that is on or
prior to such Redemption Date, and subject to the provisions set forth in
Section 3.5), including accrued and unpaid interest and Liquidated Damages, if
any, thereon to the Redemption Date.
Notwithstanding the foregoing, prior to April 15, 2001, upon an Initial
Public Equity Offering of common stock for cash of the Company, up to 35% of the
aggregate principal amount of the Securities originally outstanding may be
redeemed at the option of the Company within 90 days of such Initial Public
Equity Offering, on not less than 30 days, but not more than 60 days, notice to
each holder of the Securities to be redeemed, with cash from the Net Cash
Proceeds to the Company of such Initial Public Equity Offering, at a redemption
price equal to 110.125% of principal, (subject to the right of Holders of record
on a Record Date to receive interest due on an Interest Payment Date that is on
or prior to such Redemption Date) together with accrued and unpaid interest and
Liquidated Damages, if any, to the date of redemption; PROVIDED, HOWEVER, that
at least 65% of the aggregate principal amount of the Securities originally
outstanding remain outstanding immediately following such redemption.
Except as provided in this paragraph and Paragraph 5 of the Securities,
the Securities may not otherwise be redeemed at the option of the Company.
SECTION 3.2. NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to Paragraph 5 of
the Securities, it shall notify the Trustee and the Paying Agent in writing of
the Redemption Date and the principal amount of Securities to be redeemed and
whether it wants the Paying Agent to give notice of redemption to the Holders.
If the Company elects to reduce the principal amount of Securities to
be redeemed pursuant to Paragraph 5 of the Securities by crediting against any
such redemption Securities it has not previously delivered to the Trustee and
the Paying Agent for cancellation, it shall so notify the Trustee, in the form
of an Officers' Certificate, and the Paying Agent of the amount of the reduction
and deliver such Securities with such notice.
The Company shall give each notice to the Trustee and the Paying Agent
provided for in this Section 3.2 at least 40 days before the Redemption Date
(unless a shorter notice shall be satisfactory to the Trustee and the Paying
Agent). Any such notice may be cancelled at any time prior to notice of such
redemption being mailed to any Holder and shall thereby be void and of no
effect.
SECTION 3.3. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all of the Securities are to be redeemed pursuant to
Paragraph 5 thereof, the Trustee shall select the Securities to be redeemed on a
PRO RATA basis, by lot or by such other method as the Trustee shall determine to
be appropriate and fair and in such manner as complies with any applicable
Depositary, legal and stock exchange requirements.
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Company
and the Paying Agent in writing of the Securities selected for redemption and,
in the case of any Security selected for partial redemption, the principal
amount thereof to be redeemed. Securities in denominations of $1,000 may be
redeemed only in whole. The Trustee may select for redemption portions (equal to
$1,000 or any integral multiple thereof) of the
31
<PAGE>
principal of Securities that have denominations larger than $1,000. Provisions
of this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption.
SECTION 3.4. NOTICE OF REDEMPTION.
At least 30 days, but not more than 60 days prior to the Redemption
Date, the Company shall mail a notice of redemption by first class mail, postage
prepaid, to the Trustee, the Paying Agent and each Holder whose Securities are
to be redeemed. At the Company's request, the Paying Agent shall give the notice
of redemption in the Company's name and at the Company's expense. Each notice
for redemption shall identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price, including accrued and unpaid
interest and Liquidated Damages, if any, to be paid upon such
redemption;
(3) the name and address of the Paying Agent and the
Registrar;
(4) that Securities called for redemption must be surrendered
to the Paying Agent at the address specified in such notice to collect
the Redemption Price;
(5) that, unless (a) the Company defaults in its obligation
to deposit with the Paying Agent cash which through the scheduled
payment of principal and interest in respect thereof in accordance with
their terms shall provide the amount to fund the Redemption Price in
accordance with Section 3.6 hereof or (b) such redemption payment is
prohibited, interest on Securities called for redemption ceases to
accrue on and after the Redemption Date and the only remaining right of
the Holders of such Securities is to receive payment of the Redemption
Price, including accrued and unpaid interest (and Liquidated Damages,
if any) to the Redemption Date, upon surrender to the Paying Agent of
the Securities called for redemption and to be redeemed;
(6) if any Security is being redeemed in part, the portion of
the principal amount, equal to $1,000 or any integral multiple thereof,
of such Security to be redeemed and that, after the Redemption Date,
and upon surrender of such Security, a new Security or Securities in
aggregate principal amount equal to the unredeemed portion thereof
shall be issued;
(7) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of such Securities
to be redeemed and the aggregate principal amount of Securities to be
outstanding after such partial redemption;
(8) the CUSIP number of the Securities to be redeemed; and
(9) that the notice is being sent pursuant to this Section
3.4 and pursuant to the optional redemption provisions of Paragraph 5
of the Securities.
SECTION 3.5. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.4
hereof, Securities called for redemption become due and payable on the
Redemption Date and at the Redemption Price, including accrued and unpaid
interest (and Liquidated Damages, if any) to the Redemption Date. Upon surrender
to the Trustee or Paying Agent, such Securities called for redemption shall be
paid at the Redemption
32
<PAGE>
Price, including interest and Liquidated Damages, if any, accrued and unpaid to
the Redemption Date; PROVIDED that if the Redemption Date is after a regular
Record Date and on or prior to the Interest Payment Date, to which such Record
Date relates, the accrued interest (and Liquidated Damages, if any) shall be
payable to the Holder of the redeemed Securities registered on the relevant
Record Date; and PROVIDED, FURTHER, that if a Redemption Date is a Legal
Holiday, payment shall be made on the next succeeding Business Day and no
interest shall accrue for the period from such Redemption Date to such
succeeding Business Day.
SECTION 3.6. DEPOSIT OF REDEMPTION PRICE.
No later than 11:00 a.m. (New York time) on the Redemption Date, the
Company shall deposit in same day funds with the Paying Agent (other than the
Company or an Affiliate of the Company) cash sufficient to pay the Redemption
Price of all Securities to be redeemed on such Redemption Date (other than
Securities or portions thereof called for redemption on that date that have been
delivered by the Company to the Trustee for cancellation). The Paying Agent
shall promptly return to the Company any cash so deposited which is not required
for that purpose upon the written request of the Company.
If the Company complies with the preceding paragraph and payment of the
Securities called for redemption is not prohibited for any reason, interest on
the Securities to be redeemed shall cease to accrue on the applicable Redemption
Date, whether or not such Securities are presented for payment. Notwithstanding
anything herein to the contrary, if any Security surrendered for redemption in
the manner provided in the Securities shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall continue to accrue and be paid from the Redemption
Date until such payment is made on the unpaid principal, and, to the extent
lawful, on any interest not paid on such unpaid principal, in each case at the
rate and in the manner provided in Section 4.1 hereof and the Security.
SECTION 3.7. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is to be redeemed in part, the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder, without service charge to the Holder, a new Security or Securities equal
in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE IV
COVENANTS
SECTION 4.1. PAYMENT OF SECURITIES.
The Company shall pay the principal of and interest (and Liquidated
Damages, if any) on the Securities on the dates and in the manner provided
herein and in the Securities. An installment of principal of or interest (or
Liquidated Damages, if any) on the Securities shall be considered paid on the
date it is due if the Trustee or Paying Agent (other than the Company or an
Affiliate of the Company) holds for the benefit of the Holders (on or before
10:00 a.m. New York City time to the extent necessary to provide the funds to
the Depository in accordance with the Depository's procedures) on that date cash
deposited and designated for and sufficient to pay the installment.
The Company shall pay interest on overdue principal and on overdue
installments of interest (and Liquidated Damages, if any) at the rate specified
in the Securities compounded semi-annually, to the extent lawful.
33
<PAGE>
SECTION 4.2. MAINTENANCE OF OFFICE OR AGENCY.
The Company and the Guarantors shall maintain in the Borough of
Manhattan, The City of New York, an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company and the Guarantors in respect of the Securities and this Indenture
may be served. The Company and the Guarantors shall give prompt written notice
to the Trustee and the Paying Agent of the location, and any change in the
location, of such office or agency. If at any time the Company and the
Guarantors shall fail to maintain any such required office or agency or shall
fail to furnish the Trustee and the Paying Agent with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 13.2 hereof.
The Company and the Guarantors may also from time to time designate one
or more other offices or agencies where the Securities may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; PROVIDED, HOWEVER, that no such designation or rescission shall in
any manner relieve the Company and the Guarantors of their obligation to
maintain an office or agency in the Borough of Manhattan, The City of New York,
for such purposes. The Company and the Guarantors shall give prompt written
notice to the Trustee and the Paying Agent of any such designation or rescission
and of any change in the location of any such other office or agency. The
Company hereby initially designates the Corporate Trust Office of the Trustee as
such office.
SECTION 4.3. LIMITATION ON RESTRICTED PAYMENTS.
The Company and the Guarantors shall not, and shall not permit any of
their Subsidiaries to, directly or indirectly, make any Restricted Payment if,
after giving effect to such Restricted Payment on a PRO FORMA basis, (1) a
Default or an Event of Default shall have occurred and be continuing, (2) the
Company is not permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Debt Incurrence Ratio in Section 4.11 or (3) the aggregate
amount of all Restricted Payments made by the Company and its Subsidiaries,
including after giving effect to such proposed Restricted Payment, from and
after the Issue Date, would exceed, without duplication, the sum of (a) 50% of
the aggregate Consolidated Net Income of the Company for the period (taken as
one accounting period), commencing on the first day of the first full fiscal
quarter commencing after the Issue Date, to and including the last day of the
fiscal quarter ended immediately prior to the date of each such calculation (or,
in the event Consolidated Net Income for such period is a deficit, then minus
100% of such deficit), plus (b) the aggregate Net Cash Proceeds received by the
Company from a Capital Contribution or the sale of its Qualified Capital Stock
(other than (i) to a Subsidiary of the Company, (ii) to the extent applied in
connection with a Qualified Exchange and (iii) to the extent credited in (v) and
(w) in the following paragraph), after the Issue Date, plus (c) other than
amounts credited pursuant to clause (v) of the next following paragraph, the net
amount of any Restricted Investments (not to exceed the original amount of such
Investment) made after the Issue Date that are returned to the Company or the
Guarantor that made such prior Investment, without restriction in cash on or
prior to the date of any such calculation.
The foregoing clauses (2) and (3) of the immediately preceding
paragraph, however, will not prohibit (v) Restricted Investments in a Related
Business, PROVIDED, that, after giving PRO FORMA effect to such Investment, the
aggregate amount of all such Investments made on or after the Issue Date that
are outstanding (after giving effect to any such Investments that are returned
to the Company or the Guarantor that made such prior Investment, without
restriction, in cash on or prior to the date of any such calculation) at any
time does not exceed $4,000,000, (w) repurchases of Capital Stock from employees
of the Company or its Subsidiaries upon the death, disability or termination of
employment in an aggregate amount to all employees not to exceed $300,000 in any
fiscal year or $1,500,000 in the aggregate on and after the Issue Date net of
the Net Cash Proceeds received by the Company from subsequent reissuances of
such Qualified
34
<PAGE>
Capital Stock to new employees that are not Excluded Persons, and the provisions
of the immediately preceding paragraph will not prohibit, (x) a Qualified
Exchange, (y) the payment of any dividend on Qualified Capital Stock within 60
days after the date of its declaration if such dividend could have been made on
the date of such declaration in compliance with the foregoing provisions or (z)
Permitted Payments to Parent. The full amount of any Restricted Payment made
pursuant to the foregoing clauses (v), (w), (y) and (z) (but not pursuant to
clause (x)) of the immediately preceding sentence, however, will be deducted in
the calculation of the aggregate amount of Restricted Payments available to be
made referred to in clause (3) of the immediately preceding paragraph.
In addition, the Company and the Guarantors will not, and will not
permit any of their Subsidiaries to, directly or indirectly, make any Management
Fee Payment or similar payment to Affiliates (other than Subsidiaries) other
than Permitted Payments to Parent if, after giving effect to such Management Fee
Payments or similar payments, on a PRO FORMA basis after giving effect to such
payment, a Default or an Event of Default shall have occurred and be continuing.
For purposes of this covenant, the amount of any Restricted Payment, if
other than in cash, shall be the fair market value thereof, as determined in the
good faith reasonable judgment of the Board of Directors of the Company.
Additionally, on the date of each Restricted Payment, the Company shall deliver
an Officers' Certificate to the Trustee describing in reasonable detail the
nature of such Restricted Payment, stating the amount of such Restricted
Payment, stating in reasonable detail the provisions of this Indenture pursuant
to which such Restricted Payment was made and certifying that such Restricted
Payment was made in compliance with the terms of this Indenture.
SECTION 4.4. CORPORATE AND PARTNERSHIP EXISTENCE.
Except as otherwise permitted by Article V, Section 4.14 or Section
11.4, the Company and the Guarantors shall do or cause to be done all things
necessary to preserve and keep in full force and effect their respective
corporate, partnership or other organizational existence, as the case may be,
and the corporate, partnership or other organizational existence, as the case
may be, of each of their Subsidiaries in accordance with the respective
organizational documents of each of them and the material rights (charter and
statutory) and material corporate franchises of the Company, the Guarantors and
each of their respective Subsidiaries; PROVIDED, HOWEVER, that neither the
Company nor any Guarantor shall be required to preserve, with respect to
themselves, any right or franchise, and with respect to any of their respective
Subsidiaries, any such existence, right or franchise, if (a) the Company shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and (b) the loss thereof is not adverse in any
material respect to the Holders.
SECTION 4.5. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company and the Guarantors shall, and shall cause each of their
Subsidiaries to, pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (i) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon the Company, any Guarantor or any
of their Subsidiaries or any of their respective properties and assets and (ii)
all lawful claims, whether for labor, materials, supplies or services, which
have become due and payable and which by law have or may become a Lien upon the
property and assets of the Company, any Guarantor or any of their Subsidiaries;
PROVIDED, HOWEVER, that neither the Company nor any Guarantor shall be required
to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which disputed amounts adequate
reserves have been established in accordance with GAAP.
35
<PAGE>
SECTION 4.6. MAINTENANCE OF PROPERTIES AND INSURANCE.
The Company and the Guarantors shall cause all material properties used
or useful to the conduct of their business and the business of each of their
Subsidiaries to be maintained and kept in good condition, repair and working
order (reasonable wear and tear excepted) and supplied with all necessary
equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in their reasonable
judgment may be necessary, so that the business carried on in connection
therewith may be properly conducted at all times; PROVIDED, HOWEVER, that
nothing in this Section 4.6 shall prevent the Company or any Guarantor from
discontinuing any operation or maintenance of any of such properties, or
disposing of any of them, if such discontinuance or disposal is (a)(i) in the
judgment of the Company, desirable in the conduct of the business of the Company
and (ii) not adverse in any material respect to the Holders or (b) otherwise
permitted under Section 4.14.
The Company and the Guarantors shall provide, or cause to be provided,
for themselves and each of their Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the reasonable,
good faith opinion of the Board of Directors of the Company is adequate and
appropriate for the conduct of the business of the Company, the Guarantors and
such Subsidiaries in a prudent manner, with (except for self-insurance)
reputable insurers or with the government of the United States of America or an
agency or instrumentality thereof, in such amounts, with such deductibles, and
by such methods as shall be customary, in the reasonable, good faith opinion of
the Company and adequate and appropriate for the conduct of the business of the
Company, the Guarantors and such Subsidiaries in a prudent manner for entities
similarly situated in the industry.
SECTION 4.7. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee within 120 days
after the end of its fiscal year an Officers' Certificate, one of the
signers of which shall be the principal executive, principal financial
or principal accounting officer of the Company, complying with Section
314(a)(4) of the TIA and stating that a review of its activities and
the activities of its Subsidiaries, if any, during the preceding fiscal
year has been made under the supervision of the signing Officers with a
view to determining whether the Company has kept, observed, performed
and fulfilled its obligations under this Indenture (without regard to
notice requirements or grace periods) and further stating, as to each
such Officer signing such certificate, whether or not the signer knows
of any failure by the Company, any Guarantor or any Subsidiary of the
Company to comply with any conditions or covenants in this Indenture
and, if such signer does know of such a failure to comply, the
certificate shall describe such failure with particularity. The
Officers' Certificate shall also notify the Trustee should the relevant
fiscal year end on any date other than the current fiscal year end
date.
(b) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, promptly upon becoming aware of
any Default or Event of Default, an Officers' Certificate specifying
such Default or Event of Default and what action the Company is taking
or proposes to take with respect thereto. The Trustee shall not be
deemed to have knowledge of any Default, any Event of Default or any
such fact unless one of its Trust Officers receives written notice
thereof from the Company or any of the Holders.
SECTION 4.8. REPORTS.
Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee and, to each Holder and to prospective purchasers of Securities
identified to the Company by the Initial Purchaser, within 15 days after it is
or would have
36
<PAGE>
been (if it were subject to such reporting obligations) required to file such
with the Commission, (i) all annual and quarterly financial statements
substantially equivalent to financial statements that would have been included
in reports filed with the Commission on Forms 10-K and 10-Q, if the Company were
subject to the requirements of Section 13 or 15(d) of the Exchange Act,
including, with respect to annual information only, a report thereon by the
Company's certified independent public accountants as such would be required in
such reports to the Commission and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports; and, in each case, together with a management's
discussion and analysis of financial condition and results of operations which
would be so required and, unless the Commission shall not accept such reports,
file with the Commission the annual, quarterly and other reports which it is or
would have been required to file with the Commission.
SECTION 4.9. LIMITATION ON STATUS AS INVESTMENT COMPANY.
The Company and the Guarantors shall not and shall not permit any of
their Subsidiaries to become required to register as an "investment company" (as
that term is defined in the Investment Company Act of 1940, as amended), or
otherwise become subject to regulation under the Investment Company Act.
SECTION 4.10. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
Neither the Company nor any of its Subsidiaries shall be permitted on
or after the Issue Date to enter into or suffer to exist any contract,
agreement, arrangement or transaction with any Affiliate (an "Affiliate
Transaction"), or any series of related Affiliate Transactions, (other than
Exempted Affiliate Transactions), (i) unless it is determined that the terms of
such Affiliate Transaction are fair and reasonable to the Company, and no less
favorable to the Company, than could have been obtained in an arm's length
transaction with a non-Affiliate, and (ii) if involving consideration to either
party in excess of $1,000,000, unless such Affiliate Transaction(s) is evidenced
by an Officers' Certificate addressed and delivered to the Trustee certifying
that such Affiliate Transaction (or Affiliate Transactions) have been approved
by a majority of the members of the Board of Directors that are disinterested in
such transaction and (iii) if involving consideration to either party in excess
of $5,000,000, unless in addition the Company, prior to the consummation
thereof, obtains a written favorable opinion as to the fairness of such
transaction to the Company from a financial point of view from an independent
investment banking firm of national reputation or, if pertaining to a matter for
which such investment banking firms do not customarily render such opinions, an
appraisal or valuation firm of national reputation.
SECTION 4.11. LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND
DISQUALIFIED CAPITAL STOCK.
Except as set forth in this covenant, the Company and the Guarantors
shall not, and shall not permit any of their Subsidiaries to, directly or
indirectly, issue, assume, guaranty, incur, become directly or indirectly liable
with respect to (including as a result of an Acquisition), or otherwise become
responsible for, contingently or otherwise (individually and collectively, to
"incur" or, as appropriate, an "incurrence"), any Indebtedness or any
Disqualified Capital Stock (including Acquired Indebtedness), other than
Permitted Indebtedness. Notwithstanding the foregoing if (i) no Default or Event
of Default shall have occurred and be continuing at the time of, or would occur
after giving effect on a PRO FORMA basis to, such incurrence of Indebtedness or
Disqualified Capital Stock and (ii) on the date of such incurrence (the
"Incurrence Date"), the Consolidated Coverage Ratio of the Company for the
Reference Period immediately preceding the Incurrence Date, after giving effect
on a PRO FORMA basis to such incurrence of such Indebtedness or Disqualified
Capital Stock and, to the extent set forth in the definition of Consolidated
Coverage Ratio, the use of proceeds thereof, would be at least 2 to 1 (as
applicable, each the "Debt
37
<PAGE>
Incurrence Ratio"), then the Company may incur such Indebtedness or Disqualified
Capital Stock and the Guarantors may incur such Indebtedness (other than
Disqualified Capital Stock).
In addition, the foregoing limitations will not apply to:
(a) the incurrence by the Company or any Guarantor of Purchase
Money Indebtedness, PROVIDED, that (i) the aggregate principal amount
of such Indebtedness incurred on or after the Issue Date and
outstanding at any time pursuant to this paragraph (a) (including any
Refinancing Indebtedness and other Indebtedness issued to refinance,
replace, defease or refund such Indebtedness) shall not exceed
$2,000,000, and (ii) in each case, such Indebtedness shall not
constitute more than 100% of the cost (determined in accordance with
GAAP) to the Company or such Guarantor, as applicable, of the property
so purchased or leased;
(b) if no Event of Default shall have occurred and be
continuing, the incurrence by the Company or any Guarantor of
Indebtedness in an aggregate principal amount outstanding at any time
(including Refinancing Indebtedness and other Indebtedness incurred to
refinance, replace, defease or refund such Indebtedness) of up to
$5,000,000;
(c) the incurrence by the Company or any Guarantor of Mortgage
Indebtedness or Indebtedness pursuant to the Credit Agreement up to an
aggregate principal amount outstanding under the Credit Agreement or of
Mortgage Indebtedness collectively (in each case including any
Refinancing Indebtedness and other Indebtedness incurred to refinance,
replace, defease or refund such Indebtedness) not to exceed in the
aggregate $12,000,000, PROVIDED, THAT (A) in the case of Indebtedness
pursuant to the Credit Agreement minus the amount of any such
Indebtedness (i) retired with the Net Cash Proceeds from any Asset Sale
applied to permanently reduce the outstanding amounts or the
commitments with respect to such Indebtedness pursuant to clause
(1)(b)(ii) of the first paragraph of Section 4.14 or (ii) assumed by a
transferee in an Asset Sale, and (B) in the case of Mortgage
Indebtedness such Indebtedness shall not constitute more than 100% of
the cost (determined in accordance with GAAP) to the Company or such
Guarantor, as applicable, of such mortgaged real estate asset.
Indebtedness or Disqualified Capital Stock of any Person which is
outstanding at the time such Person becomes a Subsidiary of the Company
(including upon designation of any subsidiary or other person as a Subsidiary)
or is merged with or into or consolidated with the Company or a Subsidiary of
the Company shall be deemed to have been incurred at the time such Person
becomes such a Subsidiary of the Company or is merged with or into or
consolidated with the Company or a Subsidiary of the Company, as applicable.
Upon each incurrence of Indebtedness, the Company may designate under
which provision of this covenant such Indebtedness is being incurred and such
Indebtedness should be deemed to have been so incurred under such provision and
no other provision of this covenant except as specifically provided otherwise.
SECTION 4.12. LIMITATIONS ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.
The Company and the Guarantors shall not, and shall not permit any of
their Subsidiaries to, directly or indirectly, create, assume or suffer to exist
any consensual restriction on the ability of any Subsidiary of the Company to
pay dividends or make other distributions to or on behalf of, or to pay any
obligation to or on behalf of, or otherwise to transfer assets or property to or
on behalf of, or make or pay loans or advances to or on behalf of, the Company
or any Subsidiary of the Company, except (a) restrictions imposed by the
Securities or this Indenture or by other indebtedness of the Company (which
38
<PAGE>
may also be guaranteed by the Guarantors) ranking senior or PARI PASSU with the
Securities or the guarantees, as applicable, provided such restrictions are no
more restrictive than those imposed by this Indenture and the Securities, (b)
restrictions imposed by applicable law, (c) existing restrictions under
Indebtedness outstanding on the Issue Date, including pursuant to the Credit
Agreement, (d) restrictions under any Acquired Indebtedness not incurred in
violation of this Indenture or any agreement relating to any property, asset, or
business acquired by the Company or any of its Subsidiaries, which restrictions
in each case existed at the time of acquisition, were not put in place in
connection with or in anticipation of such acquisition and are not applicable to
any person, other than the person acquired, or to any property, asset or
business, other than the property, assets and business so acquired, (e) any such
restriction or requirement imposed by Indebtedness incurred under the Credit
Agreement pursuant to Section 4.11 provided such restriction or requirement is
no more restrictive than that imposed by the Credit Agreement as of the Issue
Date, (f) restrictions with respect solely to a Subsidiary of the Company
imposed pursuant to a binding agreement which has been entered into for the sale
or disposition of all or substantially all of the Equity Interests or assets of
such Subsidiary, provided such restrictions apply solely to the Equity Interests
or assets of such Subsidiary which are being sold (g) restrictions on transfer
contained in Purchase Money Indebtedness or Mortgage Indebtedness incurred
pursuant to Section 4.11 provided such restrictions relate only to the transfer
of the property acquired with the proceeds of such Purchase Money Indebtedness
or Mortgage Indebtedness, as applicable and (h) in connection with and pursuant
to permitted Refinancings, replacements of restrictions imposed pursuant to
clauses (a), (c) or (d) of this paragraph that are not more restrictive than
those being replaced and do not apply to any other person or assets than those
that would have been covered by the restrictions in the Indebtedness so
refinanced. Notwithstanding the foregoing, neither (a) customary provisions
restricting subletting or assignment of any lease entered into in the ordinary
course of business, consistent with industry practice, nor (b) Liens permitted
under the terms of this Indenture on assets securing Senior Debt, Purchase Money
Indebtedness, or Mortgage Indebtedness incurred in accordance with Section 4.11
shall in and of themselves be considered a restriction on the ability of the
applicable Subsidiary to transfer such agreement or assets, as the case may be.
SECTION 4.13. LIMITATIONS ON LAYERING INDEBTEDNESS.
The Company and the Guarantors shall not, and shall not permit any of
their Subsidiaries to, directly or indirectly, incur, or suffer to exist any
Indebtedness (other than the Securities) that is subordinate in right of payment
to any other Indebtedness of the Company or a Guarantor unless, by its terms,
such Indebtedness is subordinate in right of payment to, or ranks PARI PASSU
with, the Securities or the Guarantees, as applicable.
SECTION 4.14. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK.
The Company and the Guarantors shall not, and shall not permit any of
their Subsidiaries to, in one or a series of related transactions, convey, sell,
transfer, assign or otherwise dispose of, directly or indirectly, any of its
property, business or assets, including by merger or consolidation (in the case
of a Subsidiary of the Company), and including any sale or other transfer or
issuance of any Equity Interests of any Subsidiary of the Company, whether by
the Company or a Subsidiary of either or through the issuance, sale or transfer
of Equity Interests by a Subsidiary of the Company, and including any sale and
leaseback transaction (any of the foregoing, an "Asset Sale"), unless (l)(a) the
Net Cash Proceeds therefrom (the "Asset Sale Offer Amount") are applied (i)
within 270 days after the date of such Asset Sale to the optional redemption of
the Securities in accordance with the terms of this Indenture and other
Indebtedness of the Company ranking on a parity with the Securities and with
similar provisions requiring the Company to redeem such Indebtedness with the
proceeds for asset sales, pro rata in proportion to the respective principal
amounts (or accreted values in the case of Indebtedness issued with an original
issue discount) of the Securities and such other Indebtedness then outstanding
or (ii) within 300 days after the date of such Asset Sale to the repurchase of
the Securities and such other Indebtedness on a parity with the Securities
39
<PAGE>
and with similar provisions requiring the Company to make an offer to purchase
such Indebtedness with the proceeds for asset sales pursuant to a cash offer
(subject only to conditions required by applicable law, if any) (pro rata in
proportion to the respective principal amounts (or accreted values in the case
of Indebtedness issued with an original issue discount) of the Securities and
such other Indebtedness then outstanding) (the "Asset Sale Offer") at a purchase
price of 100% of principal amount (or accreted value in the case of Indebtedness
issued with an original issue discount) (the "Asset Sale Offer Price") together
with accrued and unpaid interest and Liquidated Damages, if any, to the date of
payment, made within 270 days of such Asset Sale or (b) within 270 days
following such Asset Sale, the Asset Sale Offer Amount is (i) invested (or
committed, pursuant to a binding commitment subject only to reasonable,
customary closing conditions, to be invested, and in fact is so invested, within
an additional 90 days) in tangible assets and property other than notes, bonds,
obligations and securities) which in the good faith reasonable judgment of the
Board will immediately constitute or be a part of a Related Business of the
Company or such Subsidiary (if it continues to be a Subsidiary) immediately
following such transaction or (ii) used to retire Purchase Money Indebtedness,
Mortgage Indebtedness or Senior Debt and, to permanently reduce (in the case of
Senior Debt that is not Purchase Money Indebtedness or Mortgage Indebtedness)
the amount of such Indebtedness, incurred under Section 4.11 hereof (including
that in the case of a revolver or similar arrangement that makes credit
available, such commitment is so permanently reduced by such amount), (2) at
least 90% of the consideration for such Asset Sale or series of related Asset
Sales consists of cash or Cash Equivalents, (3) no Default or Event of Default
shall have occurred and be continuing at the time of, or would occur after
giving effect, on a PRO FORMA basis, to, such Asset Sale, and (4) the Board of
Directors of the Company determines in good faith that the Company or such
Subsidiary, as applicable, receives fair market value for such Asset Sale.
Notwithstanding, and without complying with, the provisions of this
covenant:
(i) the Company and its Subsidiaries may, in the
ordinary course of business, (1) convey, sell, transfer,
assign or otherwise dispose of inventory and other assets
acquired and held for resale in the ordinary course of
business and (2) liquidate Cash Equivalents;
(ii) the Company and its Subsidiaries may convey,
sell, transfer, assign or otherwise dispose of assets pursuant
to and in accordance with Section 5.1;
(iii) the Company and its Subsidiaries may sell or
dispose of damaged, worn out, scrap or other obsolete property
in the ordinary course of business so long as such property is
no longer necessary for the proper conduct of the business of
the Company or such Subsidiary, as applicable; and
(iv) the Company and the Guarantors may convey,
sell, transfer, assign or otherwise dispose of assets to the
Company or any of its Wholly-Owned Subsidiary Guarantors;
(v) the Company and its Subsidiaries, in the ordinary
course of business, may convey, sell, transfer, assign, or
otherwise dispose of assets (or related assets in related
transactions) with a fair market value of less than $250,000;
and
(vi) the Company and each of its Subsidiaries may
surrender or waive contract rights or settle, release or
surrender contract, tort or other claims of any kind or grant
Liens not prohibited by this Indenture;
40
<PAGE>
An acquisition of Securities pursuant to an Asset Sale Offer may be
deferred until the accumulated Net Cash Proceeds from Asset Sales not applied to
the uses set forth in 1(a)(i) or 1(b) above (the "Excess Proceeds") exceeds
$5,000,000 and that each Asset Sale Offer shall remain open for 20 Business Days
following its commencement (the "Asset Sale Offer Period"). Upon expiration of
the Asset Sale Offer Period, the Company shall apply the Asset Sale Offer Amount
plus an amount equal to accrued and unpaid interest and Liquidated Damages, if
any, to the purchase of all Indebtedness properly tendered (on a PRO RATA basis
if the Asset Sale Offer Amount is insufficient to purchase all Indebtedness so
tendered) at the Asset Sale Offer Price (together with accrued interest and
Liquidated Damages, if any). To the extent that the aggregate amount of
Securities and such other PARI PASSU Indebtedness tendered pursuant to an Asset
Sale Offer is less than the Asset Sale Offer Amount, the Company may use any
remaining Net Cash Proceeds for general corporate purposes as otherwise
permitted by this Indenture and following each Asset Sale Offer the Excess
Proceeds amount shall be reset to zero. For purposes of (2) above, total
consideration received means the total consideration received for such Asset
Sales minus the amount of, (a) Purchase Money Indebtedness or Mortgage
Indebtedness secured solely by the assets sold and assumed by a transferee and
(b) property that within 30 days of such Asset Sale is converted into cash or
Cash Equivalents, PROVIDED that such cash and Cash Equivalents shall be treated
as Net Cash Proceeds attributable to the original Asset Sale for which such
property was received.
All Net Cash Proceeds from an Event of Loss relating to a Material
Facility shall be invested, used for prepayment of Senior Indebtedness or used
to repurchase Securities, all within the period and as otherwise provided above
in clauses 1(a) or 1(b)(i) of the first paragraph of this Section 4.14 plus 90
days.
In addition to the foregoing and notwithstanding anything herein to the
contrary, the Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly make any Asset Sale of any of the Equity Interests of
any Subsidiary of the Company (other than the Company or a Wholly-Owned
Subsidiary Guarantor) except pursuant to an Asset Sale of all the Equity
Interests of such Subsidiary.
Notice of an Asset Sale Offer shall be sent, on or prior to the
commencement of the Asset Sale Offer, by first-class mail, by the Company to
each Holder at its registered address, with a copy to the Trustee. The notice to
the Holders shall contain all information, instructions and materials required
by applicable law or otherwise material to such Holders' decision to tender
Securities pursuant to the Asset Sale Offer. The notice, which (to the extent
consistent with this Indenture) shall govern the terms of an Asset Sale Offer,
shall state:
(1) that the Asset Sale Offer is being made pursuant to such
notice and this Section 4.14;
(2) the Asset Sale Offer Amount, the Asset Sale Offer Price
(including the amount of accrued but unpaid interest (and Liquidated
Damages, if any)), and the date of purchase;
(3) that any Security or portion thereof not tendered or
accepted for payment will continue to accrue interest if interest is
then accruing;
(4) that, unless the Company defaults in depositing cash with
the Paying Agent (which may not for purposes of this Section 4.14,
notwithstanding anything in this Indenture to the contrary, be the
Company or any Affiliate of the Company), in accordance with the last
paragraph of this Section 4.14 any Security, or portion thereof,
accepted for payment pursuant to the Asset Sale Offer shall cease to
accrue interest after the Asset Sale Purchase Date;
(5) that Holders electing to have a Security, or portion
thereof, purchased pursuant to an Asset Sale Offer will be required to
surrender their Security, with the form entitled "Option
41
<PAGE>
of Holder to Elect Purchase" on the reverse of the Security completed,
to the Paying Agent (which may not for purposes of this Section 4.14,
notwithstanding any other provision of this Indenture, be the Company
or any Affiliate of the Company) at the address specified in the
notice;
(6) that Holders will be entitled to withdraw their
elections, in whole or in part, if the Paying Agent receives, prior to
the expiration of the Asset Sale Offer, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
the Securities the Holder is withdrawing and a statement containing a
facsimile signature and stating that such Holder is withdrawing his
election to have such principal amount of the Securities purchased;
(7) that if Indebtedness in a principal amount in excess of
the principal amount of Securities to be acquired pursuant to the Asset
Sale Offer are tendered and not withdrawn, the Company shall purchase
Indebtedness on a PRO RATA basis in proportion to the respective
principal amounts (or accreted values in the case of Indebtedness
issued with an original issue discount) thereof (with such adjustments
as may be deemed appropriate by the Company so that only Securities in
denominations of $1,000 or integral multiples of $1,000 shall be
acquired);
(8) that Holders whose Securities were purchased only in part
will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered; and
(9) the circumstances and relevant facts regarding such Asset
Sales.
Any Asset Sale Offer shall be made in compliance with all applicable
laws, rules, and regulations, including, if applicable, Regulation 14E of the
Exchange Act and the rules and regulations thereunder and all other applicable
Federal and state securities laws. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this paragraph,
compliance by the Company or any of its subsidiaries with such laws and
regulations shall not in and of itself cause a breach of its obligations under
such covenant.
On or before the date of purchase, the Company shall (i) accept for
payment Securities or portions thereof properly tendered pursuant to the Asset
Sale Offer (on a PRO RATA basis if required pursuant to paragraph (7) above),
(ii) deposit with the Paying Agent cash sufficient to pay the Asset Sale Offer
Price for all Securities or portions thereof so accepted and (iii) deliver to
the Trustee Securities so accepted together with an Officers' Certificate
setting forth the Securities or portions thereof being purchased by the Company.
The Paying Agent shall promptly mail or deliver to Holders of Securities so
accepted payment in an amount equal to the Asset Sale Offer Price for such
Securities, and the Company shall promptly issue a new Security and the Trustee,
upon written request of the Company, shall promptly authenticate and mail or
deliver to such Holders such new Security equal in principal amount to any
unpurchased portion of the Security surrendered. Any Securities not so accepted
shall be promptly mailed or delivered by the Company to the Holder thereof.
If the payment date in connection with an Asset Sale Offer hereunder is
on or after an interest payment Record Date and on or before the associated
Interest Payment Date, any accrued and unpaid interest (and Liquidated Damages,
if any, due on such Interest Payment Date) will be paid to the person in whose
name a Security is registered at the close of business on such Record Date, and
such interest (or Liquidated Damages, if applicable) will not be payable to
Holders who tender Securities pursuant to such Asset Sale Offer.
42
<PAGE>
SECTION 4.15. WAIVER OF STAY, EXTENSION OR USURY LAWS.
Each of the Company and the Guarantors covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law which would prohibit or forgive the
Company or any Guarantor from paying all or any portion of the principal of,
premium of, or interest (or Liquidated Damages, if any) on the Securities as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture; and (to the
extent that it may lawfully do so) each of the Company and the Guarantors hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law had been enacted.
SECTION 4.16. LIMITATION ON LIENS SECURING INDEBTEDNESS.
The Company and the Guarantors shall not, and shall not permit any of
their Subsidiaries to, create, incur, assume or suffer to exist any Lien of any
kind, other than Permitted Liens, upon any of their respective assets now owned
or acquired on or after the date of this Indenture or upon any income or profits
therefrom securing any Indebtedness of the Company or any Guarantor other than
Senior Indebtedness, unless the Company provides, and causes its Subsidiaries to
provide, concurrently therewith, that the Securities are equally and ratably so
secured, PROVIDED that, if such Indebtedness is Subordinated Indebtedness, the
Lien securing such Subordinated Indebtedness shall be subordinate and junior to
the Lien securing the Securities with the same relative priority as such
Subordinated Indebtedness shall have with respect to the Securities, and
PROVIDED, FURTHER, that this clause shall not be applicable to any Liens
securing any such Indebtedness which became Indebtedness of the Company pursuant
to a transaction subject to the provisions of this Indenture described below
under Section 5.1 or which constitutes Acquired Indebtedness and which in either
case were in existence at the time of such transaction (unless such Indebtedness
was incurred or such Lien created in connection with or in contemplation of,
such transaction), so long as such Liens do not extend to or cover any property
or assets of the Company or any Subsidiary of the Company other than property or
assets acquired in such transaction.
SECTION 4.17. RULE 144A INFORMATION REQUIREMENT.
The Company shall furnish to the Holders of the Securities, securities
analysts, and prospective purchasers of Securities designated by the Holders of
Transfer Restricted Securities, upon their request, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act until such
time as either the Company has concluded an offer to exchange the Exchange
Securities for the Initial Securities or a registration statement relating to
resales of the Securities has become effective under the Securities Act. The
Company shall also furnish such information during the pendency of any
suspension of effectiveness of such resale registration statement.
SECTION 4.18. LIMITATIONS ON LINES OF BUSINESS.
Neither the Company nor any of its Subsidiaries shall directly or
indirectly engage to any substantial extent in any line or lines of business
activity other than that which, in the reasonable good faith judgment of the
Board of Directors of the Company, is a Related Business.
43
<PAGE>
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1. LIMITATION ON MERGER, SALE OR CONSOLIDATION.
The Company shall not consolidate with or merge with or into another
person or, directly or indirectly, sell, lease, convey or transfer all or
substantially all of its assets (computed on a consolidated basis), whether in a
single transaction or a series of related transactions, to another Person or
group of affiliated Persons unless (i) either (a) the Company is the continuing
entity or (b) the resulting, surviving or transferee entity is a corporation
organized under the laws of the United States, any state thereof or the District
of Columbia and expressly assumes by supplemental indenture all of the
obligations of the Company in connection with the Securities and this Indenture;
(ii) no Default or Event of Default shall exist or shall occur immediately after
giving effect on a PRO FORMA basis to such transaction; and (iii) unless such
transaction is solely the merger of the Company and one of its previously
existing Wholly-owned Subsidiaries which is also a Guarantor and which
transaction is not in connection with any other transaction immediately after
giving effect to such transaction on a PRO FORMA basis, the consolidated
resulting, surviving or transferee entity would immediately thereafter be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Debt Incurrence Ratio set forth in Section 4.11 .
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with the foregoing,
the successor corporation formed by such consolidation or into which the Company
is merged or to which such transfer is made shall succeed to and (except in the
case of a lease) be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
corporation had been named therein as the Company, and (except in the case of a
lease) the Company shall be released from the obligations under the Securities
and this Indenture except with respect to any obligations that arise from, or
are related to, such transaction.
For purposes of the foregoing, the transfer (by lease, assignment, sale
or otherwise) of all or substantially all of the properties and assets of one or
more Subsidiaries, the Company's interest in which constitutes all or
substantially all of the properties and assets of the Company shall be deemed to
be the transfer of all or substantially all of the properties and assets of the
Company.
SECTION 5.2. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with Section 5.1
hereof, the successor corporation formed by such consolidation or into which the
Company is merged or to which such transfer is made, or, in the case of a plan
of liquidation, the entity which receives the greatest value from such plan of
liquidation shall succeed to, and (except in the case of a lease) be substituted
for, and may exercise every right and power of, the Company under this Indenture
with the same effect as if such successor corporation had been named herein as
the Company, and (except in the case of a lease) when a successor corporation
duly assumes all of the obligations of the Company pursuant hereto and pursuant
to the Securities, the Company shall be released from such obligations (except
with respect to any obligations that arise from, or are related to, such
transaction).
44
<PAGE>
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be caused voluntarily or involuntarily or effected, without limitation, by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) failure by the Company to pay any installment of
interest (or Liquidated Damages, if any) upon the Securities
as and when the same becomes due and payable, and the
continuance of any such failure for a period of 30 days;
(ii) failure by the Company to pay all or any part of
the principal or premium, if any, on the Securities when and
as the same becomes due and payable at maturity, upon
redemption, by acceleration, or otherwise, including, without
limitation, payment of the Change of Control Purchase Price or
the Asset Sale Offer Price, or otherwise;
(iii) failure by the Company or any Subsidiary to
observe or perform any other covenant or agreement contained
in the Securities or this Indenture and, subject to certain
exceptions and the continuance of such failure for a period of
30 days after written notice is given to the Company by the
Trustee or to the Company and the Trustee by the Holders of at
least 25% in aggregate principal amount of the Securities
outstanding;
(iv) a decree, judgment, or order by a court of
competent jurisdiction shall have been entered adjudicating
the Company or any of its Significant Subsidiaries as bankrupt
or insolvent, or approving as properly filed a petition
seeking reorganization of the Company or any of its
Significant Subsidiaries under any bankruptcy or similar law,
and such decree or order shall have continued undischarged and
unstayed for a period of 60 days; or a decree, judgment or
order of a court of competent jurisdiction appointing a
receiver, liquidator, trustee, or assignee in bankruptcy or
insolvency for the Company, any of its Significant
Subsidiaries, or any substantial part of the property of any
such Person, or for the winding up or liquidation of the
affairs of any such Person, shall have been entered, and such
decree, judgment, or order shall have remained in force
undischarged and unstayed for a period of 60 days;
(v) the Company or any of its Significant
Subsidiaries shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of a
bankruptcy proceeding against it, or shall file a petition or
answer or consent seeking reorganization under any bankruptcy
or similar law or similar statute, or shall consent to the
filing of any such petition, or shall consent to the
appointment of a Custodian, receiver, liquidator, trustee, or
assignee in bankruptcy or insolvency of it or any substantial
part of its assets or property, or shall make a general
assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts generally as they
become due, fail generally to pay its debts as they become
due, or take any corporate action in furtherance of any of the
foregoing;
(vi) the failure to pay at final stated maturity
(giving effect to any applicable grace periods) the principal
amount of any Indebtedness of the Company or any Subsidiary of
the Company or the acceleration of the final stated maturity
of any Indebtedness if the
45
<PAGE>
aggregate principal amount of such Indebtedness, together with
the principal amount of any such Indebtedness in default for
failure to pay principal at final maturity or which has been
accelerated, aggregates $5,000,000 or more at any time; and
(vii) final unsatisfied judgments not covered by
insurance for the payment of money, or the issuance of any
warrant of attachment against any portion of the property or
assets of the Company or any of its Subsidiaries, aggregating
in excess of $5,000,000, at any one time shall be rendered
against the Company or any of its Subsidiaries and not be
stayed, bonded or discharged for a period (during which
execution shall not be effectively stayed) of 60 days.
SECTION 6.2. ACCELERATION OF MATURITY DATE; RESCISSION AND ANNULMENT.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in Section 6.1(iv) or Section 6.1(v) above relating to the
Company or any Significant Subsidiary), then, and in every such case, unless the
principal of all of the Securities shall have already become due and payable,
either the Trustee or the Holders of 25% in aggregate principal amount of then
outstanding Securities, by notice in writing to the Company (and to the Trustee
if given by Holders) (an "Acceleration Notice"), may declare all principal,
determined as set forth below, and accrued interest (and Liquidated Damages, if
any) thereon to be due and payable immediately; PROVIDED, however, that if any
Senior Debt is outstanding pursuant to the Credit Agreement, upon a declaration
of such acceleration, such principal and interest shall be due and payable upon
the earlier of (x) the third Business Day after the sending to the Company and
the representative of such written notice, unless such Event of Default is cured
or waived prior to such date and (y) the date of acceleration of any Senior Debt
under the Credit Agreement. If an Event of Default specified in clause (iv) or
(v), above, relating to the Company or any of its Significant Subsidiaries
occurs, all principal and accrued interest (and Liquidated Damages, if any)
thereon will be immediately due and payable on all outstanding Securities
without any declaration or other act on the part of Trustee or the Holders.
At any time after such a declaration of acceleration being made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article VI, the Holders of not less
than a majority in aggregate principal amount of then outstanding Securities, by
written notice to the Company and the Trustee, may rescind, on behalf of all
Holders, any such declaration of acceleration if:
(1) the Company has paid or deposited with the Trustee cash
sufficient to pay:
(A) all overdue interest and Liquidated
Damages, if any, on all Securities,
(B) the principal of (and premium, if any,
applicable to) any Securities which would become due
other than by reason of such declaration of
acceleration, and interest thereon at the rate borne
by the Securities,
(C) to the extent that payment of such
interest is lawful, interest upon overdue interest at
the rate borne by the Securities,
(D) all sums paid or advanced by the Trustee
hereunder and the compensation, expenses,
disbursements and advances of the Trustee and its
agents and counsel, and all other amounts due the
Trustee under Section 7.7 and
46
<PAGE>
(2) all Events of Default, other than the non-payment of the
principal of, premium, if any, and interest on Securities which have
become due solely by such declaration of acceleration, have been cured
or waived as provided in Section 6.12.
Notwithstanding the previous sentence of this Section 6.2, no waiver shall be
effective against any Holder for any Event of Default or event which with notice
or lapse of time or both would be an Event of Default with respect to (i) any
covenant or provision which cannot be modified or amended without the consent of
the Holder of each outstanding Security affected thereby, unless all such
affected Holders agree, in writing, to waive such Event of Default or other
event and (ii) any provision requiring supermajority approval to amend, unless
such default has been waived by such a supermajority. No such waiver shall cure
or waive any subsequent default or impair any right consequent thereon.
SECTION 6.3. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
The Company covenants that if an Event of Default in payment of
principal, premium or interest (or Liquidated Damages, if any) specified in
clause (i) or (ii) of Section 6.1 hereof occurs and is continuing, the Company
shall, upon demand of the Trustee, pay to it, for the benefit of the Holders of
such Securities, the whole amount then due and payable on such Securities for
principal, premium (if any), and interest (and Liquidated Damages, if any), and,
to the extent that payment of such interest shall be legally enforceable,
interest on any overdue principal (and premium, if any), and on any overdue
interest (and Liquidated Damages, if any), at the rate borne by the Securities,
and, in addition thereto, such further amount as shall be sufficient to cover
the costs and expenses of collection, including compensation to, and expenses,
disbursements and advances of the Trustee and its agents and counsel and all
other amounts due the Trustee under Section 7.7.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust in favor of the
Holders, may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company or any other obligor upon the
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 6.4. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal, premium, if any (and
Liquidated Damages, if any), or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise to take any and all actions under
the TIA, including
(1) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest (and Liquidated Damages,
if any) owing and unpaid in respect of the Securities and
47
<PAGE>
to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee and its agent and counsel and all other amounts due the Trustee
under Section 7.7) and of the Holders allowed in such judicial
proceeding, and
(2) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel, and any
other amounts due the Trustee under Section 7.7 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; PROVIDED, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and may be a member of a creditors'
committee.
SECTION 6.5. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust in favor of the Holders, and any recovery of
judgment shall, after provision for the payment of compensation to, and
expenses, disbursements and advances of the Trustee and its agents and counsel
and all other amounts due the Trustee under Section 7.7, be for the ratable
benefit of the Holders of the Securities in respect of which such judgment has
been recovered.
SECTION 6.6. PRIORITIES.
Any money collected by the Trustee pursuant to this Article VI shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal, premium (if
any), or interest (or Liquidated Damages, if any), upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the Trustee in payment of all amounts due pursuant to Section
7.7 hereof;
SECOND: To the Holders in payment of the amounts then due and unpaid
for principal of, premium (if any), and interest (and Liquidated Damages, if
any) on, the Securities in respect of which or for the benefit of which such
money has been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for principal,
premium (if any), and interest (and Liquidated Damages, if any), respectively;
and
THIRD: To the Company, the Guarantors or such other Person as may be
lawfully entitled thereto, the remainder, if any, each as their respective
interests may appear.
48
<PAGE>
The Trustee may, but shall not be obligated to, fix a record date and
payment date for any payment to the Holders under this Section 6.6.
SECTION 6.7. LIMITATION ON SUITS.
No Holder of any Security shall have any right to order or direct the
Trustee to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(A) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(B) the Holders of not less than 25% in aggregate principal
amount of then outstanding Securities shall have made written request
to the Trustee to institute proceedings in respect of such Event of
Default in its own name as Trustee hereunder;
(C) such Holder or Holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities to be incurred or reasonably probable to be incurred in
compliance with such request;
(D) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(E) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatsoever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 6.8. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.
Notwithstanding any other provision of this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of, and premium (if any), and interest (and
Liquidated Damages, if any) on, such Security on the Maturity Dates of such
payments as expressed in such Security (in the case of redemption, the
Redemption Price on the applicable Redemption Date, in the case of a Change of
Control, the Change of Control Purchase Price on the Change of Control Purchase
Date, and in the case of an Asset Sale, the Asset Sale Offer Price on the
relevant purchase date) and to institute suit for the enforcement of any such
payment after such respective dates, and such rights shall not be impaired
without the consent of such Holder.
SECTION 6.9. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in Section 2.7 hereof, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or
49
<PAGE>
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 6.10. DELAY OR OMISSION NOT WAIVER.
No delay or omission by the Trustee or by any Holder of any Security to
exercise any right or remedy arising upon any Event of Default shall impair the
exercise of any such right or remedy or constitute a waiver of any such Event of
Default. Every right and remedy given by this Article VI or by law to the
Trustee or to the Holders may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION 6.11. CONTROL BY HOLDERS.
The Holder or Holders of a majority in aggregate principal amount of
then outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred upon the Trustee, PROVIDED, that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) the Trustee shall not determine and shall have no duty to
ascertain that the action so directed would involve it in personal
liability or would be unjustly prejudicial to the Holders not taking
part in such direction, and
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 6.12. WAIVER OF EXISTING OR PAST DEFAULT.
Subject to Section 6.8, the Holder or Holders of not less than a
majority in aggregate principal amount of the outstanding Securities may, on
behalf of all Holders, waive any existing or past Default or Event of Default
hereunder and its consequences under this Indenture, except a default
(A) in the payment of the principal of, premium, if any, or
interest (or Liquidated Damages, if any) on, any Security as specified
in clauses (i) and (ii) of Section 6.1 hereof and not yet cured, or
(B) in respect of a covenant or provision hereof which, under
Article IX, cannot be modified or amended without the consent of the
Holder of each outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair the exercise of any right arising therefrom.
SECTION 6.13. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken, suffered or omitted to be taken by it as
Trustee, any court may in its discretion require the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in such suit, having
due regard to the merits and
50
<PAGE>
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 6.13 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in aggregate principal amount of the outstanding
Securities, or to any suit instituted by any Holder for enforcement of the
payment of principal of, or premium (if any), or interest (or Liquidated
Damages, if any) on, any Security on or after the respective Maturity Date
expressed in such Security (including, in the case of redemption, on or after
the Redemption Date).
SECTION 6.14. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Guarantors, the Trustee and
the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed, subject to
the terms hereof.
SECTION 7.1. DUTIES OF TRUSTEE.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers
vested in it by this Indenture and use the same degree of care and
skill in their exercise as a prudent Person would exercise or use under
the circumstances in the conduct of his or her own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and no
covenants or obligations shall be implied in or read into this
Indenture which are adverse to the Trustee, and
(2) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture.
However, in the case of any such certificates or opinions
which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine the
certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of
paragraph (b) of this Section 7.1,
51
<PAGE>
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts, and
(3) The Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section
6.11 hereof.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or to take
or omit to take any action under this Indenture or at the request,
order or direction of the Holders or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b), (c), (d) and (f) of
this Section 7.1.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree in writing with the
Company (including without limitation to the extent the Trustee
receives funds prior to the interest payment date in order to comply
with the provisions of Section 4.1). Assets held in trust by the
Trustee need not be segregated from other assets except to the extent
required by law.
SECTION 7.2. RIGHTS OF TRUSTEE.
Subject to Section 7.1 hereof:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting on any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee need
not investigate any fact or matter stated in such document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate or an
Opinion of Counsel, which shall conform to Sections 13.4 and 13.5
hereof. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such certificate or advice
of counsel.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it or its
agent takes or omits to take in good faith which it believes to be
authorized or within its rights or powers conferred upon it by this
Indenture.
(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, notice, request, direction, consent,
order, bond, debenture or other paper or document, but the Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company
personally or by its agent or attorney.
52
<PAGE>
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Holders, pursuant to the provisions of
this Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby.
(g) Unless otherwise specifically provided for in this
Indenture, any demand, request, direction or notice from the Company or
any Guarantor shall be sufficient if signed by an Officer of the
Company or such Guarantor, as applicable.
(h) The Trustee shall have no duty to inquire as to the
performance of the Company's or any Guarantor's covenants in Article IV
hereof or as to the performance by any Agent of its duties hereunder.
In addition, the Trustee shall not be deemed to have knowledge of any
Default or Event of Default except (i) any Event of Default occurring
pursuant to Sections 6.1(i), 6.1(ii) and 4.1 hereof, or (ii) any
Default or Event of Default of which the Trustee shall have received
written notification or obtained actual knowledge.
(i) Whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate.
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, any
Guarantor, any of their Subsidiaries, or their respective Affiliates with the
same rights it would have if it were not Trustee. Any Agent may do the same with
like rights. However, the Trustee must comply with Sections 7.10 and 7.11
hereof.
SECTION 7.4. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities and it shall not be accountable for the
Company's use of the proceeds from the Securities or any money paid to the
Company or upon the Company's discretion under any provision of this Indenture,
and it shall not be responsible for any statement or recital herein or any
statement in the Securities, other than the Trustee's certificate of
authentication, or the use or application of any funds received by a Paying
Agent other than the Trustee.
SECTION 7.5. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Securityholder notice of
the uncured Default or Event of Default within 90 days after such Default or
Event of Default occurs. Except in the case of a Default or an Event of Default
in payment of principal (or premium, if any), of, or interest (or Liquidated
Damages, if any) on, any Security (including the payment of the Change of
Control Purchase Price on the Change of Control Payment Date, the payment of the
Redemption Price on the Redemption Date and the payment of the Asset Sale Offer
Price on the relevant purchase date), the Trustee may withhold the notice if and
so long as a Trust Officer in good faith determines that withholding the notice
is in the interest of the Securityholders.
53
<PAGE>
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each April 15 beginning with the April 15
following the date of this Indenture, the Trustee shall, if required by law,
mail to each Securityholder a brief report dated as of such April 15 that
complies with TIA Section 313(a). The Trustee also shall comply with TIA
Sections 313(b) and 313(c).
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or automatic quotation system.
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the SEC and each stock exchange,
if any, on which the Securities are listed.
SECTION 7.7. COMPENSATION AND INDEMNITY.
The Company and the Guarantors jointly and severally agree to pay to
the Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company and the Guarantors shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it in accordance with this Indenture. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents, accountants, experts and counsel.
The Company and the Guarantors jointly and severally agree to indemnify
the Trustee (in its capacity as Trustee) and each of its officers, directors,
attorneys-in-fact and agents for, and hold it harmless against, any claim,
demand, expense (including but not limited to reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel), loss or
liability incurred by it without negligence or bad faith on the part of the
Trustee, arising out of or in connection with the administration of this trust
and its rights or duties hereunder, including the reasonable costs and expenses
of defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The Trustee
shall notify the Company promptly of any claim asserted against the Trustee for
which it may seek indemnity. The Company and the Guarantors shall defend the
claim and the Trustee shall provide reasonable cooperation at the Company's and
the Guarantors' expense in the defense. The Trustee may have separate counsel
and the Company and the Guarantors shall pay the reasonable fees and expenses of
such counsel; PROVIDED, that the Company and the Guarantors will not be required
to pay such fees and expenses if they assume the Trustee's defense and there is
no conflict of interest between the Company and the Guarantors and the Trustee
in connection with such defense. The Company and the Guarantors need not pay for
any settlement made without their written consent; PROVIDED, that such consent
shall not be unreasonably withheld. The Company and the Guarantors need not
reimburse any expense or indemnify against any loss or liability to the extent
incurred by the Trustee through its negligence, bad faith or willful misconduct.
To secure the Company's and the Guarantors' payment obligations in this
Section 7.7, the Trustee shall have a lien prior to the Securities on all assets
held or collected by the Trustee, in its capacity as Trustee, except assets held
in trust to pay principal and premium, if any, of or interest on particular
Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(iv) or (v) of this Indenture occurs, the
expenses and the compensation for the services are intended to constitute
expenses of administration under any Bankruptcy Law.
The Company's and the Guarantors' obligations under this Section 7.7
and any lien arising hereunder shall survive the resignation or removal of the
Trustee, the discharge of the Company's and the
54
<PAGE>
Guarantors' obligations pursuant to Article VIII of this Indenture and any
rejection or termination of this Indenture under any Bankruptcy Law.
SECTION 7.8. REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company in writing. The
Holder or Holders of a majority in aggregate principal amount of the outstanding
Securities may remove the Trustee by so notifying the Company and the Trustee in
writing and may appoint a successor trustee with the Company's consent. The
Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver, Custodian or other public officer takes
charge of the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holder or
Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that
and provided that all sums owing to the retiring Trustee provided for in Section
7.7 hereof have been paid, the retiring Trustee shall transfer all property held
by it as trustee to the successor Trustee, subject to the lien provided in
Section 7.7 hereof, the resignation or removal of the retiring Trustee shall
become effective, and the successor Trustee shall have all the rights, powers
and duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holder or Holders of at least 10% in principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's and the Guarantors' obligations under Section 7.7 hereof
shall continue for the benefit of the retiring Trustee.
SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
55
<PAGE>
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
The Trustee shall at all times satisfy the requirements of TIA
Section 310(a)(1), (2) and (5). The Trustee shall have a combined capital
and surplus of at least $25,000,000 as set forth in its most recent published
annual report of condition. The Trustee shall comply with TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE VIII
DISCHARGE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1. DISCHARGE; OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT
DEFEASANCE.
This Indenture shall cease to be of further effect (except that the
Company's and the Guarantors' obligations under Section 7.7 and the Trustee's
and the Paying Agent's obligations under Sections 8.6 and 8.7 shall survive)
when all outstanding Securities theretofore authenticated and issued have been
delivered (other than destroyed, lost or stolen Securities that have been
replaced or paid) to the Trustee for cancellation and the Company or the
Guarantors have paid all sums payable hereunder. In addition, the Company may
elect to have Section 8.2, at the Company's option and at any time within one
year of the Maturity Date of the Securities, or Section 8.3, at the Company's
option at any time, of this Indenture applied to all outstanding Securities upon
compliance with the conditions set forth below in this Article VIII.
SECTION 8.2. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, the Company and the Guarantors shall be deemed
to have been discharged from their respective obligations with respect to all
outstanding Securities on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented and this Indenture shall cease to be of further effect
as to all outstanding Securities and Guarantees, except as to be deemed to be
"outstanding" only for the purposes of Section 8.5 hereof and the other Sections
of this Indenture referred to in (a) and (b) below, and the Company and the
Guarantors shall be deemed to have satisfied all other of their respective
obligations under such Securities and this Indenture (and the Trustee, on demand
of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Securities to receive payments in respect of the principal of,
premium, if any, and interest (and Liquidated Damages, if any) on such
Securities when such payments are due from the trust described in Section 8.5,
(b) the Company's obligations with respect to such Securities under Sections
2.4, 2.6, 2.7, 2.10, 4.2, 8.5, 8.6 and 8.7 hereof and (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Company's and the
Guarantors' obligations in connection therewith. Subject to compliance with this
Article VIII, the Company may exercise its option under this Section 8.2
notwithstanding the prior exercise of its option under Section 8.3 hereof with
respect to the Securities.
56
<PAGE>
SECTION 8.3. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, the Company and the Guarantors shall be released
from their respective obligations under the covenants contained in Sections 4.3,
4.6, 4.7, 4.8, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16, 4.17 and 4.18, Article V and
Article X hereof with respect to the outstanding Securities on and after the
date the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Securities shall thereafter be deemed not "outstanding"
for the purposes of any direction, waiver, consent or declaration or act of
Holders (and the consequences of any thereof) in connection with such covenants,
but shall continue to be deemed "outstanding" for all other purposes hereunder.
For this purpose, such Covenant Defeasance means that, with respect to the
outstanding Securities, neither the Company nor any Guarantor need comply with
and shall have any liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document, but,
except as specified above, the remainder of this Indenture and such Securities
shall be unaffected thereby. In addition, upon the Company's exercise under
Section 8.1 hereof of the option applicable to this Section 8.3, Sections
6.1(iii) through 6.1(vii) hereof shall not constitute Events of Default with
respect to the Securities.
SECTION 8.4. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
(a) The following shall be the conditions to the application
of either Section 8.2 or 8.3 hereof to the outstanding Securities:
(i) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee
satisfying the requirements of Section 7.10 hereof who shall
agree to comply with the provisions of this Article VIII
applicable to it), in trust, for the benefit of the Holders of
the Securities, cash, U.S. Government Obligations, or a
combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any,
and interest (and Liquidated Damages, if any) on such
outstanding Securities on the stated date for payment thereof
or on the redemption date of such principal or installment of
principal of, premium, if any, or interest on such Securities,
and the holders of Securities must have a valid, perfected,
exclusive security interest in such trust,
(ii) in the case of Legal Defeasance, the Company
shall have delivered to the Trustee an opinion of counsel in
the United States reasonably acceptable to the trustee
confirming that (1) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling
or (2) since the date of this Indenture, there has been a
change in the applicable Federal income tax law, in either
case to the effect that, and based thereon such opinion of
counsel shall confirm that, the Holders of such outstanding
Securities will not recognize income, gain or loss for Federal
income tax purposes as a result of such Legal Defeasance and
will be subject to Federal income tax on the same amounts, in
the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Company
shall have delivered to the Trustee an opinion of counsel in
the United States reasonably acceptable to such Trustee
confirming that the Holders of such outstanding Securities
will not recognize income, gain or loss for Federal income tax
purposes as a result of such Covenant Defeasance and will be
subject to Federal income tax on the same amounts, in the same
57
<PAGE>
manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit or in
the case of Legal Defeasance insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in
the period ending on the 91st day after the date of deposit;
(v) such Legal Defeasance or Covenant Defeasance will
not result in a breach or violation of, or constitute a
default under any material agreement or instrument to which
the Company or any of its Subsidiaries is a party or by which
the Company or any of its Subsidiaries is bound;
(vi) the Company shall have delivered to the Trustee
an Officers' Certificate stating that the deposit was not made
by the Company with the intent of preferring the Holders of
such Securities over the other creditors of the Company with
the intent of defeating, hindering, delaying or defrauding
other creditors of the Company; and
(vii) the Company shall have delivered to the Trustee
an Officers' Certificate and an opinion of counsel, each
stating that the conditions precedent provided for in, in the
case of the Officers' Certificate, (i) through (vi) and, in
the case of the opinion of counsel, clauses (i), (with respect
to the validity and perfection of the security interest) (ii),
(iii) and (v) of this paragraph, have been complied with and
in the case of a Covenant Defeasance the Company shall have
delivered to the Trustee an Officers' Certificate, subject to
such qualifications and exceptions as the Trustee deems
appropriate, to the effect that, assuming no intervening
bankruptcy of the Company between the date of deposit and the
91st day following the deposit and that no Holder of the
Securities is an insider of the Company, after the 91st day of
deposit the trust funds will not be subject to the effect of
any applicable Federal bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally.
(b) If the funds deposited with the Trustee to effect Covenant
Defeasance are insufficient to pay the principal of, premium, if any,
and interest (and Liquidated Damages, if any) on the Securities when
due, then the obligations of the Company and the Guarantors under this
Indenture, the Securities and the Guarantees will be revived and no
such defeasance will be deemed to have occurred.
SECTION 8.5. DEPOSITED CASH AND U.S. GOVERNMENT OBLIGATIONS TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.6 hereof, all cash and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 8.5, the "Paying Agent")
pursuant to Section 8.4 hereof in respect of the outstanding Securities shall be
held in trust and applied by the Paying Agent, in accordance with the provisions
of such Securities and this Indenture, to the payment, either directly or
through any other Paying Agent as the Trustee may determine, to the Holders of
such Securities of all sums due and to become due thereon in respect of
principal, premium, if any, and interest (and Liquidated Damages, if any), but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 8.4 or the principal
58
<PAGE>
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of outstanding Securities.
SECTION 8.6. REPAYMENT TO THE COMPANY.
(a) Anything in this Article VIII to the contrary
notwithstanding, the Trustee or the Paying Agent shall deliver or pay
to the Company from time to time upon the request of the Company any
cash or U.S. Government Obligations held by it as provided in Section
8.4 hereof which in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered
under Section 8.4(a) hereof), are in excess of the amount thereof that
would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
(b) Any cash and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of,
premium, if any, or interest (and Liquidated Damages, if any) on any
Security and remaining unclaimed for two years after such principal,
and premium, if any, or interest has become due and payable shall be
paid to the Company on its request; and the Holder of such Security
shall thereafter look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such
trust money shall thereupon cease; PROVIDED, HOWEVER, that the Trustee
or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in the
NEW YORK TIMES and THE WALL STREET JOURNAL (national edition), notice
that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
SECTION 8.7. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any cash or U.S.
Government Obligations in accordance with Section 8.2 or 8.3 hereof, as the case
may be, of this Indenture by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's and the Guarantors' obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.2 or 8.3 hereof until such time as
the Trustee or Paying Agent is permitted to apply such money in accordance with
Sections 8.2 and 8.3 hereof, as the case may be; PROVIDED, HOWEVER, that, if the
Company makes any payment of principal of, premium, if any, or interest (and
Liquidated Damages, if any) on any Security following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the cash or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holder, the Company or any Guarantor, when
authorized by Board Resolutions, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
59
<PAGE>
(1) to cure any ambiguity, defect, or inconsistency, or make
any other provisions with respect to matters or questions arising under
this Indenture which shall not be inconsistent with the provisions of
this Indenture, PROVIDED such action pursuant to this clause (1) shall
not adversely affect the interests of any Holder in any respect;
(2) to add to the covenants of the Company or the Guarantors
for the benefit of the Holders, or to surrender any right or power
herein conferred upon the Company or the Guarantors or make any other
change that does not adversely affect the rights of any Holder;
(3) to provide for collateral for or additional Guarantors of
the Securities;
(4) to evidence the succession of another Person to the
Company, and the assumption by any such successor of the obligations of
the Company, herein and in the Securities in accordance with Article V;
(5) to comply with the TIA;
(6) to evidence the succession of another corporation to any
Guarantor and assumption by any such successor of the Guarantee of such
Guarantor (as set forth in Section 11.4) in accordance with Article XI;
(7) to evidence the release of any Guarantor in accordance
with Article V;
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities;
(9) in any other case where a supplemental indenture is
required or permitted to be entered into pursuant to the provisions of
this Indenture without the consent of any Holder; or
(10) to provide for the issuance and authorization of the
Exchange Securities.
(11) to effect any changes to Section 2.6 in a manner
necessary to comply with procedures of the Securities Custodian or the
Depository, PROVIDED such action pursuant to this clause (11) shall not
adversely affect the interests of any Holder in any respect.
SECTION 9.2. AMENDMENTS, SUPPLEMENTAL INDENTURES AND WAIVERS WITH
CONSENT OF HOLDERS.
Subject to Section 6.8 hereof, with the consent of the Holders of a
majority in principal amount of the Securities then outstanding (including
consents obtained in connection with a tender offer or exchange offer for
such Securities), by written act of said Holders delivered to the Company and
the Trustee, the Company, and as applicable, any Guarantor, when authorized
by Board Resolutions, and the Trustee may amend or supplement this Indenture
or the Securities or enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Indenture or the Securities or
of modifying in any manner the rights of the Holders under this Indenture or
the Securities; PROVIDED that no such modification may, without the consent
of holders of at least 66 2/3% in aggregate principal amount of Securities at
the time outstanding, modify the provisions (including the defined terms
therein) of Article X in a manner adverse to the holders. Subject to Section
6.8, the Holder or Holders of not less than a majority in aggregate principal
amount of then outstanding Securities may waive compliance by the Company or
any Guarantor with any provision of this Indenture or the Securities.
Notwithstanding any of the above, however, no such amendment,
60
<PAGE>
supplemental indenture or waiver shall, without the consent of the Holder of
each outstanding Security affected thereby:
(1) change the Maturity Date on any Security, or reduce the
principal amount thereof or the rate (or extend the time for payment)
of interest thereon or any premium payable upon the redemption thereof,
or change the place of payment where, or the coin or currency in which,
any Security or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such
payment on or after the Maturity Date thereof (or in the case of
redemption, on or after the Redemption Date), or reduce the Change of
Control Purchase Price or the Asset Sale Offer Price (although the
provisions relating to the Change of Control or Asset Sale may
otherwise be amended or deleted in accordance with the provisions of
this Indenture) or alter the provisions (including the defined terms
used herein) of Article III of this Indenture or Paragraph 5 of the
Securities, regarding the right of the Company to redeem the
Securities, in a manner adverse to the Holders; or
(2) reduce the percentage in principal amount of the
outstanding Securities, the consent of whose Holders is required for
any such amendment, supplemental indenture or wavier provided for in
this Indenture; or
(3) modify any of the waiver provisions, except to increase
any required percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent of the
Holder of each outstanding Security affected thereby.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment, supplement
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture or waiver.
After an amendment, supplement or waiver under this Section 9.2 or
under Section 9.4 hereof becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under this
Article IX, the Company may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
SECTION 9.3. COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by written notice to the
Company or the Person designated by the
61
<PAGE>
Company as the Person to whom consents should be sent if such revocation is
received by the Company or such Person before the date on which the Trustee
receives an Officers' Certificate certifying that the Holders of the requisite
principal amount of Securities have consented (and not theretofore revoked such
consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date, and only those Persons (or
their duly designated proxies), shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (3) of Section 9.2 hereof, in which case, the amendment, supplement
or waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same debt as the consenting Holder's Security; PROVIDED, that any such
waiver shall not impair or affect the right of any Holder to receive payment of
principal and premium of and interest (and Liquidated Damages, if any) on a
Security, on or after the respective dates set for such amounts to become due
and payable expressed in such Security, or to bring suit for the enforcement of
any such payment on or after such respective dates.
SECTION 9.5. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee
or require the Holder to put an appropriate notation on the Security. The
Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms. Any
failure to make the appropriate notation or to issue a new Security shall not
affect the validity of such amendment, supplement or waiver.
SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article IX; PROVIDED, that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver authorized pursuant to this Article IX is
authorized or permitted by this Indenture.
ARTICLE X
RIGHT TO REQUIRE REPURCHASE
SECTION 10.1. REPURCHASE OF SECURITIES AT OPTION OF THE HOLDER UPON A
CHANGE OF CONTROL.
(a) In the event that a Change of Control has occurred, each
holder of Securities will have the right, at such holder's option,
pursuant to an offer (subject only to conditions required by applicable
law, if any) by the Company (the "Change of Control Offer"), to require
the Company to repurchase all or any part of such holder's Securities
(PROVIDED, that the principal amount of such Securities must be $1,000
or an integral multiple thereof) on a date (the "Change of Control
Purchase Date") that is no later than 35 Business Days after the
occurrence of such Change of
62
<PAGE>
Control, at a cash price equal to 101% of the principal amount thereof
(the "Change of Control Purchase Price"), together with accrued and
unpaid interest and Liquidated Damages, if any, to the Change of
Control Purchase Date.
Notwithstanding anything in this Article X to the contrary,
prior to the commencement of a Change of Control Offer, but in any
event within 30 days following any Change of Control, the Company shall
(i)(a) repay in full and terminate all commitments under Indebtedness
under the Credit Agreement and all other Senior Debt the terms of which
require repayment upon a Change of Control or (b) offer to repay in
full and terminate all commitments under all Indebtedness under the
Credit Agreement and all such other Senior Debt and repay the
Indebtedness owed to each lender which has accepted such offer in full
or (ii) obtain the requisite consents under the Credit Agreement and
all such other Senior Debt to permit the repurchase of the Securities
as provided herein. The Company's failure to comply with the preceding
sentence shall constitute an Event of Default described in Section
6.1(iv) and not in Section 6.1(ii).
(b) In the event that, pursuant to this Section 10.1, the
Company shall be required to commence a Change of Control Offer, the
Company shall follow the procedures set forth in this Section 10.1 as
follows:
(i) the Change of Control Offer shall commence
within 10 Business Days following the occurrence of a Change
of Control;
(ii) the Change of Control Offer shall remain open
for 20 Business Days following its commencement (the "Change
of Control Offer Period");
(iii) upon the expiration of the Change of Control
Offer Period, the Company promptly shall purchase all of the
tendered Securities at the Change of Control Purchase Price;
(iv) if the Change of Control is on or after an
interest payment record date and on or before the associated
Interest Payment Date, any accrued and unpaid interest (and
Liquidated Damages, if any) due on such Interest Payment Date
will be paid to the Person in whose name a Security is
registered at the close of business on such Record Date, and
such interest (and Liquidated Damages, if applicable) will not
be payable to Securityholders who tender Securities pursuant
to the Change of Control Offer;
(v) the Company shall provide the Trustee and the
Paying Agent with written notice of the Change of Control
Offer at least three Business Days before the commencement of
any Change of Control Offer; and
(vi) on or before the commencement of any Change of
Control Offer, the Company or the Trustee (upon the request
and at the expense of the Company) shall send, by first-class
mail, a notice to each of the Securityholders, which (to the
extent consistent with this Indenture) shall govern the terms
of the Change of Control Offer and shall state:
(A) that the Change of Control Offer is
being made pursuant to this Section 10.1 and that all
Securities, or portions thereof, tendered will be
accepted for payment;
63
<PAGE>
(B) the Change of Control Purchase Price
(including the amount of accrued but unpaid interest
(and Liquidated Damages, if any)) and the Change of
Control Purchase Date;
(C) that any Security, or portion thereof,
not tendered or accepted for payment will continue to
accrue interest;
(D) that, unless the Company defaults in
depositing cash with the Paying Agent in accordance
with the last paragraph of this Section 10.1, or such
payment is prevented for any reason, any Security, or
portion thereof, accepted for payment pursuant to the
Change of Control Offer shall cease to accrue
interest after the Change of Control Purchase Date;
(E) that Holders electing to have a
Security, or portion thereof, purchased pursuant to a
Change of Control Offer will be required to surrender
the Security, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent (which may
not for purposes of this Section 10.1,
notwithstanding anything in this Indenture to the
contrary, be the Company or any Affiliate of the
Company) at the address specified in the notice prior
to the expiration of the Change of Control Offer;
(F) that Holders will be entitled to
withdraw their election, in whole or in part, if the
Paying Agent receives, prior to the expiration of the
Change of Control Offer, a facsimile transmission or
letter setting forth the name of the Holder, the
principal amount of the Securities the Holder is
withdrawing and a statement containing a facsimile
signature and stating that such Holder is withdrawing
his election to have such principal amount of
Securities purchased;
(G) that Holders whose Securities are
purchased only in part will be issued new Securities
equal in principal amount to the unpurchased portion
of the Securities surrendered; and
(H) a brief description of the events
resulting in such Change of Control.
Any Change of Control Offer shall be made in compliance with
all applicable laws, rules and regulations, including, if applicable,
Regulation 14E under the Exchange Act and the rules thereunder and all
other applicable Federal and state securities laws. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Indenture relating to a Change of Control,
compliance by the Company or any of the Guarantors with such laws and
regulations shall not in and of itself cause a breach of its
obligations under this Indenture.
On or before the Change of Control Purchase Date, the Company
shall (i) accept for payment Securities or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent cash sufficient to pay the Change of Control Purchase
Price (together with accrued and unpaid interest and Liquidated
Damages, if any) of all Securities so tendered and (iii) deliver to the
Trustee Securities so accepted together with an Officers' Certificate
listing the Securities or portions thereof being purchased by the
Company. The Paying Agent promptly will pay the Holders of Securities
so accepted an amount equal to the Change of Control Purchase Price
(together with accrued and unpaid interest and Liquidated Damages, if
any), and the Trustee promptly will authenticate and deliver to such
Holders a new Security equal in
64
<PAGE>
principal amount to any unpurchased portion of the Security
surrendered. Any Securities not so accepted will be delivered promptly
by the Company to the Holder thereof. The Company publicly will
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Purchase Date.
ARTICLE XI
GUARANTEE
SECTION 11.1. GUARANTEE.
(a) If any Person becomes a Subsidiary of the Company, whether
pursuant to the acquisition by the Company or any Guarantor of Equity
Interests of such Person, or otherwise, such Subsidiary (in each case,
a "Guarantor") shall, to the fullest extent permitted by applicable
law, irrevocably and unconditionally guarantee (the "Guarantee") to
each Holder of a Security authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, irrespective of the
validity and enforceability against the Company and any other
Guarantors of this Indenture, the Securities or the obligations of the
Company under this Indenture or the Securities, that: (x) the principal
of and premium (if any), and interest (and Liquidated Damages, if any)
on the Securities will be paid in full when due, whether at the
Maturity Date or Interest Payment Date, by acceleration, call for
redemption, upon a Change of Control, an Asset Sale Offer or otherwise;
(y) all other obligations of the Company to the Holders or the Trustee
under this Indenture or the Securities will be promptly paid in full or
performed, all in accordance with the terms of this Indenture and the
Securities; and (z) in case of any extension of time of payment or
renewal of any Securities or any of such other obligations, they will
be paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at maturity, by acceleration, call
for redemption, upon a Change of Control, an Asset Sale Offer or
otherwise. Failing payment when due of any amount so guaranteed for
whatever reason, each Guarantor shall be obligated to pay the same
before failure so to pay becomes an Event of Default.
If the Company or a Guarantor defaults in the payment of the
principal of, premium, if any, or interest (or Liquidated Damages, if
any) on, the Securities when and as the same shall become due, whether
upon maturity, acceleration, call for redemption, upon a Change of
Control Offer, upon an Asset Sale Offer or otherwise, without the
necessity of action by the Trustee or any Holder, each Guarantor shall
be required, jointly and severally, to promptly make such payment in
full.
Each Guarantor shall, within five Business Days after becoming
a Subsidiary of the Company, execute and deliver to the Trustee a
supplemental indenture, which shall be in a form satisfactory to the
Trustee, making such Guarantor a party to this Indenture.
(b) Each Guarantor hereby agrees to the fullest extent
permitted by applicable law, that its obligations with regard to this
Guarantee shall be unconditional, irrespective of the validity,
regularity or enforceability of the Securities or this Indenture, the
absence of any action to enforce the same, any delays in obtaining or
realizing upon or failures to obtain or realize upon collateral, the
recovery of any judgment against the Company, any action to enforce the
same or any other circumstances that might otherwise constitute a legal
or equitable discharge or defense of a Guarantor. Each Guarantor hereby
waives to the fullest extent permitted by applicable law diligence,
presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require
a proceeding first against the Company or right to require the prior
disposition of the assets of the Company to meet its obligations,
protest,
65
<PAGE>
notice and all demands whatsoever and covenants that this Guarantee
will not be discharged except by complete performance of the
obligations contained in the Securities and this Indenture.
(c) If any Holder or the Trustee is required by any court or
otherwise to return to either the Company or any Guarantor, or any
Custodian or similar official acting in relation to either the Company
or such Guarantor, any amount paid by either the Company or such
Guarantor to the Trustee or such Holder, this Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor agrees that it will not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed
hereby. Each Guarantor further agrees that, as between such Guarantor,
on the one hand, and the Holders and the Trustee, on the other hand,
(i) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Section 6.2 hereof for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration as to the Company of the obligations
guaranteed hereby, and (ii) in the event of any declaration of
acceleration of those obligations as provided in Section 6.2 hereof,
those obligations (whether or not due and payable) will forthwith
become due and payable by each of the Guarantors for the purpose of
this Guarantee.
(d) It is the intention of each Guarantor and the Company that
the obligations of each Guarantor hereunder shall be in, but not in
excess of, the maximum amount permitted by applicable law. Accordingly,
if the obligations in respect of the Guarantee would be annulled,
avoided or subordinated to the creditors of any Guarantor by a court of
competent jurisdiction in a proceeding actually pending before such
court as a result of a determination both that such Guarantee was made
by such Guarantor without fair consideration and, immediately after
giving effect thereto, such Guarantor was insolvent or unable to pay
its debts as they mature or left with an unreasonably small capital,
then the obligations of such Guarantor under such Guarantee shall be
reduced by such court if and to the extent such reduction would result
in the avoidance of such annulment, avoidance or subordination;
PROVIDED, HOWEVER, that any reduction pursuant to this paragraph shall
be made in the smallest amount as is strictly necessary to reach such
result. For purposes of this paragraph, "fair consideration,"
"insolvency," "unable to pay its debts as they mature," "unreasonably
small capital" and the effective times of reductions, if any, required
by this paragraph shall be determined in accordance with applicable
law.
SECTION 11.2. EXECUTION AND DELIVERY OF GUARANTEE.
Each Guarantor shall, by virtue of such Guarantor's execution and
delivery of an indenture supplement pursuant to Section 11.1 hereof, be deemed
to have signed on each Security issued hereunder the notation of guarantee set
forth on the form of the Securities attached hereto as Exhibit A to the same
extent as if the signature of such Guarantor appeared on such Security.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the guarantee set forth in
Section 11.1 on behalf of each Guarantor. The notation of a guarantee set forth
on any Security shall be null and void and of no further effect with respect to
the guarantee of any Guarantor which, pursuant to Section 11.4, is released from
such Guarantee.
SECTION 11.3. CERTAIN BANKRUPTCY EVENTS.
Each Guarantor hereby covenants and agrees, to the fullest extent that
it may do so under applicable law, that in the event of the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Company, such
Guarantor shall not file (or join in any filing of), or otherwise seek to
participate in the filing of, any motion or request seeking to stay or to
prohibit (even temporarily) execution on the
66
<PAGE>
Guarantee and hereby waives and agrees not to take the benefit of any such stay
of execution, whether under Section 362 or 105 of the United States Bankruptcy
Code or otherwise.
SECTION 11.4. LIMITATION ON MERGER OF SUBSIDIARIES AND RELEASE OF
GUARANTORS.
No Guarantor shall consolidate or merge with or into (whether or not
such Guarantor is the surviving person) another person unless (i) subject to the
provisions of the following paragraph and certain other provisions of this
Indenture, the person formed by or surviving any such consolidation or merger
(if other than such Guarantor) assumes all the obligations of such Guarantor
pursuant to a supplemental indenture in form reasonably satisfactory to the
Trustee, pursuant to which such person shall unconditionally guarantee, on a
senior subordinated basis, all of such Guarantor's obligations under such
Guarantor's guarantee and this Indenture on the terms set forth in this
Indenture; and (ii) immediately before and immediately after giving effect to
such transaction on a PRO FORMA basis, no Default or Event of Default shall have
occurred or be continuing.
Upon the sale or disposition (whether by merger, stock purchase, asset
sale or otherwise) of a Guarantor (or all of its assets) to an entity which is
not a Guarantor (including the designation of a Subsidiary to become an
Unrestricted Subsidiary), which transaction is otherwise in compliance with this
Indenture (including, without limitation, the provisions of Section 4.14), such
Guarantor will be deemed released from its obligations under its Guarantee of
the Securities; PROVIDED, HOWEVER, that any such termination shall occur only to
the extent that all obligations of such Guarantor under all of its guarantees
of, and under all of its pledges of assets or other security interests which
secure, any Indebtedness of the Company or any other Subsidiary shall also
terminate upon such release, sale or transfer.
ARTICLE XII
SUBORDINATION
SECTION 12.1. SECURITIES SUBORDINATED TO SENIOR DEBT.
The Company and the Guarantors and each Holder, by its acceptance of
Securities, agree that (a) the payment of the principal of and interest on the
Securities and (b) any other payment in respect of the Securities, including on
account of the acquisition or redemption of the Securities by the Company and
the Guarantors (including, without limitation, pursuant to Section 4.14, Article
X or Article XI) is subordinated, to the extent and in the manner provided in
this Article XII, to the prior payment in full in cash or Cash Equivalents of
all Senior Debt of the Company and the Guarantors and that these subordination
provisions are for the benefit of the holders of Senior Debt.
This Article XII shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of, or continue to hold,
Senior Debt, and such provisions are made for the benefit of the holders of
Senior Debt and such holders are made obligees hereunder and any one or more of
them may enforce such provisions.
SECTION 12.2. NO PAYMENT ON SECURITIES IN CERTAIN CIRCUMSTANCES.
(a) No payment (by set-off or otherwise) shall be made by or
on behalf of the Company or a Guarantor, as applicable, on account of
any Obligation in respect of the Securities, including the principal
of, premium, if any, or interest or Liquidated Damages on the
Securities (including any repurchases of Securities), or on account of
the redemption provisions of the Securities, for cash or property
(other than Junior Securities), (i) upon the maturity of any Senior
67
<PAGE>
Debt of the Company or such Guarantor by lapse of time, acceleration
(unless waived) or otherwise, unless and until all principal of,
premium, if any, and the interest on such Senior Debt are first paid in
full in cash or Cash Equivalents (or such payment is duly provided for)
or otherwise to the extent holders accept satisfaction of amounts due
by settlement in other than cash or Cash Equivalents, or (ii) in the
event of default in the payment of any principal of, premium, if any,
or interest on Senior Debt of the Company or such Guarantor when it
becomes due and payable, whether at maturity, or at a date fixed for
prepayment or by declaration or otherwise (a "Payment Default"), unless
and until such Payment Default has been cured or waived or otherwise
has ceased to exist.
(b) Upon (i) the happening of an event of default other than a
Payment Default that permits the holders of Senior Debt to declare such
Senior Debt to be due and payable and (ii) written notice of such event
of default given to the Company and the Trustee by the Representative
under the Credit Agreement or the holders of an aggregate of at least
$10,000,000 principal amount outstanding of any other Senior Debt or
their representative (a "Payment Notice"), then, unless and until such
event of default has been cured or waived or otherwise has ceased to
exist, no payment (by set-off or otherwise) may be made by or on behalf
of the Company or any Guarantor which is an obligor under such Senior
Debt on account of any Obligation in respect of the Securities,
including the principal of, premium, if any, or interest on the
Securities, (including any repurchases of any of the Securities), or on
account of the redemption provisions of the Securities, in any such
case, other than payments made with Junior Securities. Notwithstanding
the foregoing, unless the Senior Debt in respect of which such event of
default exists has been declared due and payable in its entirety within
179 days after the Payment Notice is delivered as set forth above (the
"Payment Blockage Period") (and such declaration has not been rescinded
or waived), at the end of the Payment Blockage Period, the Company and
the Guarantors shall be required to pay all sums not paid to the
Holders of the Securities during the Payment Blockage Period due to the
foregoing prohibitions and to resume all other payments as and when due
on the Securities. Any number of Payment Notices may be given;
PROVIDED, HOWEVER, that (i) not more than one Payment Notice shall be
given within a period of any 360 consecutive days, and (ii) no default
that existed upon the date of such Payment Notice or the commencement
of such Payment Blockage Period (whether or not such event of default
is on the same issue of Senior Debt) shall be made the basis for the
commencement of any other Payment Blockage Period (it being
acknowledged that any subsequent action, or any subsequent breach of
any financial covenant for a period commencing after the expiration of
such Payment Blockage Period that, in either case, would give rise to a
new event of default, even though it is an event that would also have
been a separate breach pursuant to any provision under which a prior
event of default previously existed, shall constitute a new event of
default for this purpose).
(c) In furtherance of the provisions of Section 12.1, in the
event that, notwithstanding the foregoing provisions of this Section
12.2, any payment or distribution of assets of the Company or any
Guarantor (other than Junior Securities) shall be received by the
Trustee or the Holders at a time when such payment or distribution is
prohibited by the foregoing provisions of this Section 12.2, such
payment or distribution shall be held in trust for the benefit of the
holders of such Senior Debt, and shall be paid or delivered by the
Trustee or such Holders, as the case may be, to the holders of such
Senior Debt remaining unpaid or unprovided for or to their
representative or representatives, or to the trustee or trustees under
any indenture pursuant to which any instruments evidencing any of such
Senior Debt may have been issued, ratably according to the aggregate
principal amounts remaining unpaid on account of such Senior Debt held
or represented by each, for application to the payment of all such
Senior Debt remaining unpaid, to the extent necessary to pay or to
provide for the payment of all such Senior Debt in full in cash or Cash
68
<PAGE>
Equivalents or otherwise to the extent holders accept satisfaction of
amounts due after giving effect to any concurrent payment or
distribution to the holders of such Senior Debt.
SECTION 12.3. SECURITIES SUBORDINATED TO PRIOR PAYMENT OF ALL SENIOR
DEBT ON DISSOLUTION, LIQUIDATION OR REORGANIZATION.
Upon any distribution of assets of the Company or any Guarantor upon
any dissolution, winding up, total or partial liquidation or reorganization of
the Company or a Guarantor, whether voluntary or involuntary, in bankruptcy,
insolvency, receivership or a similar proceeding or upon assignment for the
benefit of creditors or any marshalling of assets or liabilities:
(a) the holders of all Senior Debt of the Company or such
Guarantor, as applicable, will first be entitled to receive payment in
full in cash or Cash Equivalents (or have such payment duly provided
for) or otherwise to the extent holders expressly accept satisfaction
of amounts due by settlement in other than cash or Cash Equivalents
before the Holders are entitled to receive any payment on account of
any Obligation in respect of the Securities, including the principal
of, premium, if any, and interest on the Securities (other than Junior
Securities); and
(b) any payment or distribution of assets of the Company or
such Guarantor of any kind or character from any source, whether in
cash, property or securities (other than Junior Securities) to which
the Holders or the Trustee on behalf of the Holders would be entitled
(by set-off or otherwise), except for the subordination provisions
contained in this Indenture, will be paid by the liquidating trustee or
agent or other person making such a payment or distribution directly to
the holders of such Senior Debt or their representative to the extent
necessary to make payment in full (or have such payment duly provided
for) on all such Senior Debt remaining unpaid, after giving effect to
any concurrent payment or distribution to the holders of such Senior
Debt.
SECTION 12.4. SECURITYHOLDERS TO BE SUBROGATED TO RIGHTS OF HOLDERS OF
SENIOR DEBT.
Subject to the payment in full in cash or Cash Equivalents of all
Senior Debt of the Company or any Guarantor as provided herein, the Holders of
Securities shall be subrogated to the rights of the holders of such Senior Debt
to receive payments or distributions of assets of the Company applicable to the
Senior Debt until all amounts owing on the Securities shall be paid in full, and
for the purpose of such subrogation no such payments or distributions to the
holders of such Senior Debt by or on behalf of the Company or any Guarantor, or
by or on behalf of the Holders by virtue of this Article XII, which otherwise
would have been made to the Holders shall, as between the Company or any
Guarantor and the Holders, be deemed to be payment by the Company or any
Guarantor or on account of such Senior Debt, it being understood that the
provisions of this Article XII are and are intended solely for the purpose of
defining the relative rights of the Holders, on the one hand, and the holders of
such Senior Debt, on the other hand.
SECTION 12.5. OBLIGATIONS OF THE COMPANY AND THE GUARANTORS
UNCONDITIONAL.
Nothing contained in this Article XII or elsewhere in this Indenture or
in the Securities is intended to or shall impair, as between the Company and any
Guarantors and the Holders, the obligation of each such Person, which is
absolute and unconditional, to pay to the Holders the principal of, premium, if
any, and interest and Liquidated Damages on the Securities as and when the same
shall become due and payable in accordance with their terms, or is intended to
or shall affect the relative rights of the Holders and creditors of the Company
and the Guarantors other than the holders of the Senior Debt, nor shall anything
herein or therein prevent the Trustee or any Holder from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, under this Article XII, of the holders of Senior Debt in
respect of cash, property or securities of the Company and the Guarantors
69
<PAGE>
received upon the exercise of any such remedy. Notwithstanding anything to the
contrary in this Article XII or elsewhere in this Indenture or in the
Securities, upon any distribution of assets of the Company and the Guarantors
referred to in this Article XII, the Trustee, subject to the provisions of
Sections 7.1 and 7.2, and the Holders shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, or a
certificate of the liquidating Trustee or agent or other Person making any
distribution to the Trustee or to the Holders for the purpose of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Senior Debt and other Indebtedness of the Company or any Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article XII so long as such
court has been apprised of the provisions of, or the order, decree or
certificate makes reference to, the provisions of this Article XII. Nothing in
this Section 12.5 shall apply to the claims of, or payments to, the Trustee
under or pursuant to Section 7.7.
SECTION 12.6. TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT PROHIBITED IN
ABSENCE OF NOTICE.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee unless and until a Trust Officer of the Trustee or any Paying Agent
shall have received, no later than one Business Day prior to such payment
written notice thereof from the Company or from one or more holders of Senior
Debt or from any representative therefor and, prior to the receipt of any such
written notice, the Trustee, subject to the provisions of Sections 7.1 and 7.2,
shall be entitled in all respects conclusively to assume that no such fact
exists.
SECTION 12.7. APPLICATION BY TRUSTEE OF ASSETS DEPOSITED WITH IT.
Amounts deposited in trust with the Trustee pursuant to and in
accordance with Article VIII shall be for the sole benefit of Securityholders
and, to the extent (i) the making of such deposit by the Company shall not be in
contravention of any term or provision of the Credit Agreement or other
Designated Senior Debt and (ii) allocated for the payment of Securities, shall
not be subject to the subordination provisions of this Article XII. Otherwise,
any deposit of assets with the Trustee or the Agent (whether or not in trust)
for the payment of principal of or interest on any Securities shall be subject
to the provisions of Sections 12.1, 12.2, 12.3 and 12.4; PROVIDED that, if prior
to one Business Day preceding the date on which by the terms of this Indenture
any such assets may become distributable for any purpose (including without
limitation, the payment of either principal of or interest on any Security) the
Trustee or such Paying Agent shall not have received with respect to such assets
the written notice provided for in Section 12.6, then the Trustee or such Paying
Agent shall have full power and authority to receive such assets and to apply
the same to the purpose for which they were received, and shall not be affected
by any notice to the contrary which may be received by it on or after such date.
SECTION 12.8. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS
OF THE COMPANY, THE GUARANTORS OR HOLDERS OF SENIOR DEBT.
No right of any present or future holders of any Senior Debt to enforce
subordination provisions contained in this Article XII shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company or any Guarantor or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by the Company or any Guarantor with the
terms of this Indenture, regardless of any knowledge thereof which any such
holder may have or be otherwise charged with. The holders of Senior Debt may
extend, renew, modify or amend the terms of the Senior Debt or any security
therefor and release, sell or exchange such security and otherwise deal freely
with the Company and the Guarantors, all without affecting the liabilities and
obligations of the parties to this Indenture or the Holders. The subordination
provisions contained in this Indenture are for the benefit of the holders from
70
<PAGE>
time to time of Senior Debt and may not be rescinded, cancelled, amended or
modified in any way other than any amendment or modification that would not
adversely affect the rights of any holder of Senior Debt or any amendment or
modification that is consented to by each holder of Senior Debt that would be
adversely affected thereby. The subordination provisions hereof shall continue
to be effective or be reinstated, as the case may be, if at any time any payment
of any of the Senior Debt is rescinded or must otherwise be returned by any
holder of the Senior Debt upon the insolvency, bankruptcy, or reorganization of
the Company, any Guarantor, or otherwise, all as though such payment has not
been made.
SECTION 12.9. SECURITYHOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF SECURITIES.
Each Holder of the Securities by his acceptance thereof authorizes
and expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provisions contained
in this Article XII and to protect the rights of the Holders pursuant to this
Indenture, and appoints the Trustee his attorney-in-fact for such purpose,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company or any Guarantor (whether in bankruptcy,
insolvency or receivership proceedings or upon an assignment for the benefit
of creditors or any other marshalling of assets and liabilities of the
Company or any Guarantor), the immediate filing of a claim for the unpaid
balance of his Securities in the form required in said proceedings and cause
said claim to be approved. In the event of any liquidation or reorganization
of the Company or any Guarantor in bankruptcy, insolvency, receivership or
similar proceeding, if the Holders of the Securities (or the Trustee on their
behalf) have not filed any claim, proof of claim, or other instrument of
similar character necessary to enforce the obligations of the Company or any
Guarantor in respect of the Securities at least thirty (30) days before the
expiration of the time to file the same, then in such event, but only in such
event, the holders of the Designated Senior Debt or a representative on their
behalf may, as an attorney-in-fact for such Holders, file any claim, proof of
claim, or other instrument of similar character on behalf of such Holders.
Nothing herein contained shall be deemed to authorize the Trustee or the
holders of Senior Debt or their representative to authorize or consent to or
accept or adopt on behalf of any Securityholder any plan of reorganization,
arrangement, adjustment or composition affecting the Securities or the rights
of any Holder thereof, or to authorize the Trustee or the holders of Senior
Debt or their representative to vote in respect of the claim of any
Securityholder in any such proceeding.
SECTION 12.10. RIGHT OF TRUSTEE TO HOLD SENIOR DEBT.
The Trustee shall be entitled to all of the rights set forth in this
Article XII in respect of any Senior Debt at any time held by it to the same
extent as any other holder of Senior Debt, and nothing in this Indenture shall
be construed to deprive the Trustee of any of its rights as such holder.
SECTION 12.11. ARTICLE XII NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal of, premium, if
any, or interest (or Liquidated Damages, if any) on the Securities by reason of
any provision of this Article XII shall not be construed as preventing the
occurrence of a Default or an Event of Default under Section 6.1 or in any way
limit the rights of the Trustee or any Holder to pursue any other rights or
remedies with respect to the Securities.
SECTION 12.12. NO FIDUCIARY DUTY OF TRUSTEE TO HOLDERS OF SENIOR DEBT.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders (other than
for its willful misconduct or negligence) if it shall in good faith mistakenly
pay over or distribute to the Holders of Securities or the Company, any
Guarantor or any other Person, cash, property or securities to which any holders
of Senior Debt shall be entitled by virtue of this
71
<PAGE>
Article XII or otherwise. Nothing in this Section 12.12 shall affect the
obligation of any other such Person to hold such payment for the benefit of, and
to pay such payment over to, the holders of Senior Debt or their representative.
In the event of any conflict between the fiduciary duty of the Trustee to the
Holders of Securities and to the holders of Senior Debt, the Trustee is
expressly authorized to resolve such conflict in favor of the Holders.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of the TIA, the imposed duties, upon
qualification of this Indenture under the TIA, shall control.
SECTION 13.2. NOTICES.
Any notices or other communications to the Company or any Guarantor or
the Trustee required or permitted hereunder shall be in writing, and shall be
sufficiently given if made by hand delivery, by telex, by telecopier or
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Company or any Guarantor:
Compass Aerospace Corporation
1501 Hughes Way, Suite 400
Long Beach, California 90810
Attention: Chief Financial Officer
Telecopy: (310) 522-0601
with a copy to:
Morgan, Lewis & Bockius LLP
300 South Grand Avenue
22nd Floor
Los Angeles, California 90071-3132
Attention: Peter Wallace, Esq.
Telecopy: (213) 612-2554
if to the Trustee:
IBJ Whitehall Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Trust Department
Telecopy: (212) 858-2952
Any party by notice to each other party may designate additional or
different addresses as shall be furnished in writing by such party. Any notice
or communication to any party shall be deemed to have been given or made as of
the date so delivered, if personally delivered; when answered back, if telexed;
when receipt is acknowledged, if telecopied; and five Business Days after
mailing if sent by registered or
72
<PAGE>
certified mail, postage prepaid (except that a notice of change of address shall
not be deemed to have been given until actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be mailed
to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.3. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or
the Securities. The Company, the Trustee, the Registrar and any other Person
shall have the protection of TIA Section 312(c).
SECTION 13.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company or any Guarantor to the
Trustee to take any action under this Indenture, such Person shall furnish to
the Trustee:
(1) an Officers' Certificate (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been met; and
(2) an Opinion of Counsel (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of such
counsel, all such conditions precedent have been met.
SECTION 13.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been met; and
(4) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been met; PROVIDED,
HOWEVER, that with respect to matters of fact an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
73
<PAGE>
SECTION 13.6. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 13.7. LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in New York, New York are authorized or obligated by law or
executive order to close. If a payment date is a Legal Holiday at such place,
payment may be made at such place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
SECTION 13.8. GOVERNING LAW.
THIS INDENTURE, THE GUARANTEES AND THE SECURITIES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK. EACH OF THE
COMPANY AND THE GUARANTORS HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK
OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK
IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
INDENTURE AND THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID
COURTS. EACH OF THE COMPANY AND THE GUARANTORS IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY
SECURITYHOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY AND THE
GUARANTORS IN ANY OTHER JURISDICTION.
SECTION 13.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any Guarantor or any of their respective
Subsidiaries. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 13.10. NO RECOURSE AGAINST OTHERS.
No partner, incorporator, direct or indirect stockholder, director,
officer or employee, as such, past, present or future, of the Company or any
Guarantor, or any successor entity, shall have any personal liability in respect
of the obligations of the Company and the Guarantors under the Securities, this
Indenture or for any claim based on, in respect of, or by reason of such
obligations or their creation by reason of his, her or its status as such
partner, incorporator, stockholder, director, officer or employee. Each
Securityholder by accepting a Security waives and releases all such liability.
The waiver and release are part of the consideration for the issuance of the
Securities.
74
<PAGE>
SECTION 13.11. SUCCESSORS.
All agreements of the Company and the Guarantors in this Indenture and
the Securities shall bind its successor. All agreements of the Trustee in this
Indenture shall bind its successor.
SECTION 13.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies or counterparts of this
Indenture. Each signed copy or counterpart shall be an original, but all of them
together shall represent the same agreement.
SECTION 13.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture or in
the Securities or in the Guarantees shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions shall not in any way be affected or impaired thereby, it
being intended that all of the provisions hereof shall be enforceable to the
full extent permitted by law.
SECTION 13.14. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and headings of the
Articles and the Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 13.15. QUALIFICATION OF INDENTURE.
The Company shall qualify this Indenture under the TIA in accordance
with the terms and conditions of the Registration Rights Agreement and shall pay
all costs and expenses (including attorneys' fees for the Company and the
Trustee) incurred in connection therewith, including, but not limited to, costs
and expenses of qualification of this Indenture and the Securities and printing
this Indenture and the Securities. The Trustee shall be entitled to receive from
the Company any such Officers' Certificates, Opinions of Counsel or other
documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
SECTION 13.16. REGISTRATION RIGHTS.
Certain Holders of the Securities may be entitled to certain
registration rights with respect to such Securities pursuant to, and subject to
the terms of, the Registration Rights Agreement.
75
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the date first written above.
COMPASS AEROSPACE CORPORATION
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
Attest:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
WESTERN METHODS MACHINERY CORPORATION
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
Attest:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
AEROMIL ENGINEERING COMPANY
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
Attest:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
76
<PAGE>
BRITTAIN MACHINE, INC.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
Attest:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
BARNES MACHINE, INC.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
Attest:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
WICHITA MANUFACTURING, INC.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
Attest:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
SEA-LECT PRODUCTS, INC.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
Attest:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
77
<PAGE>
PACIFIC HILLS MANUFACTURING CO.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
Attest:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
MODERN MANUFACTURING, INC.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
Attest:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
COMPASS AEROSPACE LIMITED
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
TRIM ENGINEERING LIMITED
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
78
<PAGE>
TREFN ENGINEERING LIMITED
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
TREFN ENGINEERING (METAL TREATMENTS)
DIVISION LIMITED
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
TREFN FABRICATIONS LIMITED
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
DIAC LIMITED
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
79
<PAGE>
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
Attest:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
80
<PAGE>
EXHIBIT A
[FORM OF SECURITY]
COMPASS AEROSPACE CORPORATION
101/8% SERIES C1 SENIOR SUBORDINATED NOTE DUE 2005
CUSIP No. ______________
No. $
Compass Aerospace Corporation, a Delaware corporation (hereinafter
called the "Company," which term includes any successors under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
________________, or registered assigns, the principal sum of _____________
Dollars, on April 15, 2005.
Interest Payment Dates: April 15 and October 15
Record Dates: April 1 and October 1
Reference is made to the further provisions of this Security on the
reverse side, which will, for all purposes, have the same effect as if set forth
at this place.
IN WITNESS WHEREOF, the Company has caused this Instrument to be duly
executed as of July 30, 1999.
COMPASS AEROSPACE CORPORATION
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
Attest:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned
Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
By:
----------------------------------
Authorized Signatory
Dated:
- ------------------
1 Series C should be replaced with Series D in the Exchange Securities.
A-1
<PAGE>
COMPASS AEROSPACE CORPORATION
101/8% Series C(2) Senior Subordinated Note due 2005
Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Security may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. Unless this certificate is presented by an authorized
representative of The Depositary Trust Company (55 Water Street, New York,
New York) ("DTC"), to the Company or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as requested by an authorized representative of
DTC (and any payment is made to Cede & Co. or such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.(3)
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED
TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF
TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO
COMPASS AEROSPACE CORPORATION OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE), AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO COMPASS
AEROSPACE CORPORATION THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO
IN RULE 144(k) UNDER THE SECURITIES ACT AFTER THE ORIGINAL ISSUANCE OF THE
NOTES THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE
HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND
COMPASS AEROSPACE CORPORATION SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
- --------
(2) Series C should be replaced with Series D in the Exchange Securities.
(3) This paragraph should only be added if the Security is issued in global
form.
A-2
<PAGE>
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
1. INTEREST. Compass Aerospace Corporation, a Delaware corporation
(hereinafter called the "Company," which term includes any successors under
the Indenture hereinafter referred to), promises to pay interest on the
principal amount of this Security at the rate of 10 1/8 % per annum. To the
extent it is lawful, the Company promises to pay interest on any interest
payment due but unpaid on such principal amount at a rate of 10 1/8 % per
annum compounded semi-annually.
The Company will pay interest semi-annually on April 15 and October
15 of each year (each, an "Interest Payment Date"), commencing October 15,
1999. Interest on the Securities will accrue from the most recent date to
which interest has been paid or, if no interest has been paid on the
Securities, from the date of the original issuance. Interest will be computed
on the basis of a 360-day year consisting of twelve 30-day months.
2. METHOD OF PAYMENT. The Company shall pay interest (and Liquidated
Damages, if any) on the Securities (except defaulted interest) to the Persons
who are the registered Holders at the close of business on the Record Date
immediately preceding the Interest Payment Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. Except as
provided below, the Company shall pay principal, premium, and interest (and
Liquidated Damages, if any) in such coin or currency of the United States of
America as at the time of payment shall be legal tender for payment of public
and private debts ("Cash"). The Securities will be payable as to principal,
premium and interest (and Liquidated Damages, if any) at the office or agency
of the Company maintained for such purpose within the Borough of Manhattan,
the City and State of New York or, at the option of the Company, payment of
principal, premium and interest (and Liquidated Damages, if any) may be made
by check mailed to the Holders at their addresses set forth in the register
of Holders, and PROVIDED that payment by wire transfer of immediately
available funds will be required with respect to principal of and interest
(and Liquidated Damages, if any) and premium on all Global Securities and all
other Securities the Holders of which shall have provided wire transfer
instructions to the Company or the Paying Agent at least 5 Business Days
prior to the relevant record date.
3. PAYING AGENT AND REGISTRAR. Initially, IBJ Whitehall Bank & Trust
Company (the "Trustee"), will act as Paying Agent and Registrar. The Company
may change any Paying Agent, Registrar or co-Registrar without notice to the
Holders. The Company or any of its Subsidiaries may, subject to certain
exceptions, act as Paying Agent, Registrar or co-Registrar.
4. INDENTURE. The Company issued the Securities under an Indenture,
dated as of July 30, 1999 (the "Indenture"), among the Company, the
Guarantors and the Trustee. Capitalized terms herein are used as defined in
the Indenture unless otherwise defined herein. The terms of the Securities
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act, as in effect on the date of the
Indenture. The Securities are subject to all such terms, and Holders of
Securities are referred to the Indenture and said Act for a statement of
them. The Securities are senior subordinated obligations of the Company
limited in aggregate principal amount to $19,000,000. The Securities are, to
the extent and in the manner provided in the Indenture, subordinate and
subject in right of payment to the prior payment in full of all Senior Debt
of the Company, whether outstanding on the date of the Indenture or
thereafter created, incurred, assumed or guaranteed. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be provided in the Indenture and (c) appoints the Trustee his
attorney-in-fact for such purpose.
5. REDEMPTION. Except as provided in this Paragraph 5 or in Article
III of the Indenture, the Company shall not have the right to redeem any
Securities. The Securities may be redeemed in whole or from time to time in
part at any time on and after April 15, 2002, at the option of the Company,
at the Redemption Price (expressed as a percentage of principal amount) set
forth below with respect to the indicated Redemption Date, in each case
(subject to the right of Holders of record on a Record Date that is on or
prior to such Redemption Date to receive interest due on the Interest Payment
Date to which such Record Date relates), plus any accrued but unpaid interest
(and Liquidated Damages, if any) to the Redemption Date.
A-3
<PAGE>
If redeemed during
the 12-month period
Commencing April 15, Redemption Price
- -------------------- ----------------
2002..................................... 105.063%
2003..................................... 102.531%
2004..................................... 100.000%
Notwithstanding the foregoing, prior to April 15, 2001, upon an
Initial Public Equity Offering of common stock for cash of the Company, up to
35% of the aggregate principal amount of the Securities originally
outstanding may be redeemed at the option of the Company within 90 days of
such Initial Public Equity Offering, on not less than 30 days, but not more
than 60 days, notice to each holder of the Securities to be redeemed, with
cash from the Net Cash Proceeds of such Initial Public Equity Offering, at a
redemption price equal to 110.125% of principal, (subject to the right of
Holders of record on a Record Date to receive interest due on an Interest
Payment Date that is on or prior to such Redemption Date) together with
accrued and unpaid interest and Liquidated Damages, if any, to the date of
redemption; PROVIDED, HOWEVER, that at least 65% of the aggregate principal
amount of the original aggregate principal amount of the Securities remain
outstanding.
Any such redemption will comply with Article III of the Indenture.
6. NOTICE OF REDEMPTION. Notice of redemption will be sent by first
class mail, at least 30 days and not more than 60 days prior to the
Redemption Date to the Holder of each Security to be redeemed at such
Holder's last address as then shown upon the registry books of the Registrar.
Securities may be redeemed in part in multiples of $1,000 only.
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Securities called for redemption
shall have been deposited with the Paying Agent on such Redemption Date, the
Securities called for redemption will cease to bear interest and the only
right of the Holders of such Securities will be to receive payment of the
Redemption Price, plus any accrued and unpaid interest (and Liquidated
Damages, if any) to the Redemption Date.
7. DENOMINATIONS; TRANSFER; EXCHANGE. The Securities are in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder may register the transfer of, or exchange
Securities in accordance with, the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities (a) selected for redemption except the unredeemed portion of any
Security being redeemed in part or (b) for a period beginning 15 Business
Days before the mailing of a notice of an offer to repurchase or redemption
and ending at the close of business on the day of such mailing.
8. PERSONS DEEMED OWNERS. The registered Holder of a Security may be
treated as the owner of it for all purposes.
9. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent(s)
will pay the money back to the Company at its written request. After that,
all liability of the Trustee and such Paying Agent(s) with respect to such
money shall cease.
10. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. Except as set forth
in the Indenture, if the Company irrevocably deposits with the Trustee, in
trust, for the benefit of the Holders, cash, U.S. Government Obligations or a
combination thereof, in such amounts as will be sufficient in the opinion of
a nationally recognized firm of independent public accountants selected by
the Trustee, to pay the principal of, premium, if any, and interest (and
Liquidated Damages, if any) on the Securities to redemption or maturity and
complies with the other provisions of the Indenture relating thereto, the
Company will be discharged from certain provisions of the Indenture and the
Securities (including the financial covenants, but excluding its obligation
to pay the principal of, premium, if any, and interest
A-4
<PAGE>
(and Liquidated Damages, if any) on the Securities). Upon satisfaction of
certain additional conditions set forth in the Indenture, the Company may
elect to have its obligations discharged with respect to outstanding
Securities.
11. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain exceptions,
the Indenture or the Securities may be amended or supplemented with the
written consent of the Holders of at least a majority in aggregate principal
amount of the Securities then outstanding, and any existing Default or Event
of Default or compliance with any provision may be waived with the consent of
the Holders of a majority in aggregate principal amount of the Securities
then outstanding. Without notice to or consent of any Holder, the parties
thereto may under certain circumstances amend or supplement the Indenture or
the Securities to, among other things, cure any ambiguity, defect or
inconsistency, or make any other change that does not adversely affect the
rights of any Holder of a Security.
12. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations
on the ability of the Company and any Guarantors to, among other things,
incur additional Indebtedness and issue Preferred Stock, pay dividends or
make certain other Restricted Payments, enter into certain transactions with
Affiliates, incur Liens, sell assets and subsidiary stock, merge or
consolidate with any other Person or transfer (by lease, assignment or
otherwise) substantially all of the properties and assets of the Company. The
limitations are subject to a number of important qualifications and
exceptions. The Company must periodically report to the Trustee on compliance
with such limitations.
13. RANKING. Payment of principal, premium, if any, and interest
(and Liquidated Damages, if any) on the Securities is subordinated, in the
manner and to the extent set forth in the Indenture, to the prior payment in
full of all Senior Debt.
14. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be
required to offer to purchase on the Change of Control Purchase Date
all outstanding Securities at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest (and
Liquidated Damages, if any), if any, to the Change of Control Purchase
Date. Holders of Securities will receive a Change of Control Offer from
the Company prior to any related Change of Control Purchase Date and
may elect to have such Securities purchased by completing the form
entitled "Option of Holder to Elect Purchase" appearing below.
(b) The Indenture imposes certain limitations on the ability
of the Company, the Guarantors or any of their respective Subsidiaries
to sell assets and subsidiary stock. In the event the proceeds from a
permitted Asset Sale exceed certain amounts, as specified in the
Indenture, the Company will be required either to reinvest the proceeds
of such Asset Sale in a Related Business, repay certain Indebtedness or
to make an offer to purchase each Holder's Securities at 100% of the
principal amount thereof, plus accrued interest (and Liquidated
Damages, if any), if any, to the purchase date.
15. NOTATION OF GUARANTEE. As set forth more fully in the Indenture,
the Persons constituting Guarantors from time to time, in accordance with the
provisions of the Indenture, unconditionally and jointly and severally
guarantee, in accordance with Section 11.1 of the Indenture, to the Holder and
to the Trustee and its successors and assigns, that (i) the principal of and
interest on the Security will be paid, whether at the Maturity Date or Interest
Payment Dates, by acceleration, call for redemption upon a Change of Control
Offer, upon an Asset Sale Offer or otherwise, and all other obligations of the
Company to the Holder or the Trustee under the Indenture or this Security will
be promptly paid in full or performed, all in accordance with the terms of the
Indenture and this Security, and (ii) in the case of any extension of payment or
renewal of this Security or any of such other obligations, they will be paid in
full when due or performed in accordance with the terms of such extension or
renewal, whether at the Maturity Date, as so extended, by acceleration, call for
redemption, upon a Change of Control Offer, upon an Asset Sale Offer or
otherwise. Such guarantees shall cease to apply, and shall be null and void,
with respect to any Guarantor who, pursuant to Article XI of the Indenture, is
released from its guarantees, or whose guarantees otherwise cease to be
applicable pursuant to the terms of the Indenture.
A-5
<PAGE>
When a successor assumes all the obligations of its predecessor
under the Securities and the Indenture, the predecessor will be released from
those obligations.
16. DEFAULTS AND REMEDIES. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the then outstanding Securities may declare all the Securities to
be due and payable immediately, or if there are any amounts outstanding under
the Credit Agreement shall become immediately due and payable upon the first
to occur of an acceleration under the Credit Agreement or three Business Days
after receipt by the Company and the representative of the holders of the
Indebtedness under the Credit Agreement of the notice of such an acceleration
but only if such Event of Default is then continuing. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company or any of its
Significant Subsidiaries, all outstanding Securities will become due and
payable without further action or notice. Securityholders may not enforce the
Indenture, the Securities or the Guarantees except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in aggregate
principal amount of the then outstanding Securities may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from
Securityholders notice of any continuing Default or Event of Default (except
a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
17. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture,
in its individual or any other capacity, may make loans to, accept deposits
from, and perform services for the Company, any Guarantor, any of their
Subsidiaries or any of their respective Affiliates, and may otherwise deal
with such Persons as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS. No partner, incorporator, direct or
indirect stockholder, partner, director, officer or employee, as such, past,
present or future, of the Company or any Guarantor, or any successor entity,
shall have any personal liability in respect of the obligations of the
Company and the Guarantors under the Securities or the Indenture by reason of
his, her or its status as such partner, incorporator, stockholder, director,
officer or employee. Each Holder of a Security by accepting a Security waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities.
19. AUTHENTICATION. This Security shall not be valid until the
Trustee or authenticating agent signs the certificate of authentication on
the other side of this Security.
20. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations may be
used in the name of a Holder of a Security or an assignee, such as: TEN COM
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
21. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company will
cause CUSIP numbers to be printed on the Securities as a convenience to the
Holders of the Securities. No representation is made as to the accuracy of
such numbers as printed on the Securities and reliance may be placed only on
the other identification numbers printed hereon.
22. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES.(4)
In addition to the rights provided to Holders of Securities under the
Indenture, Holders of Securities shall have all the rights set forth in the
Registration Rights Agreement.
23. GOVERNING LAW. The Indenture and the Securities shall be
governed by and construed in accordance with the internal laws of the State
of New York.
- --------
(4) This paragraph should be included only for the Initial Securities.
A-6
<PAGE>
[FORM OF ASSIGNMENT]
I or we assign this Security to:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Print or type name, address and zip code of assignee)
______________________________________________________________________________
(Please insert Social Security or other identifying number of assignee)
and irrevocably appoint _______________________________________ agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Dated: _______________ Signed:________________________________________________
______________________________________________________________________________
(Sign exactly as name appears on the other side of this Security)
Signature Guarantee*
- --------
* NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized signature Guarantee Programs:
(i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The
New York Stock Exchange Medallion Program (MNSP); (iii) The Stock
Exchange Medallion Program (SEMP); or (iv) in such other guarantee
program acceptable to the Trustee.
A-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.14 or Article X of the Indenture, check the appropriate
box: / / Section 4.14 / / Article X.
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.14 or Article X of the Indenture, as the case
may be, state the amount you want to be purchased: $________.
Date: ________________ Signature:_________________________________
(Sign exactly as your name appears
on the other side of this Security)
Signature Guarantee**
- --------------------
** NOTICE: The Signature must be guaranteed by an Institution which is
a member of one of the following recognized signature Guarantee
Programs: (i) The Securities Transfer Agent Medallion Program
(STAMP); (ii) The New York Stock Exchange Medallion Program (MNSP);
(iii) The Stock Exchange Medallion Program (SEMP); or (iv) in such
other guarantee program acceptable to the Trustee.
A-8
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES*
The following exchanges of a part of this Global Security for
Definitive Securities have been made:
<TABLE>
<CAPTION>
Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global authorized officer
Principal Amount Principal Amount of Security following of Trustee or
Date of of this Global this Global such decrease (or Securities
Exchange Security Security increase) Custodian
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------
* This schedule should only be added if the Security is issued in
global form.
A-9
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
TRANSFER RESTRICTED SECURITIES*
Re: 10 1/8% Series C Senior Subordinated Notes Due 2005 of Compass
Aerospace Corporation
This Certificate relates to $_____________ principal amount of
Securities held in (check applicable space) _____ book-entry or ______
definitive form by _____________________________________ (the "Transferor").
The Transferor (check applicable box):
/ / has requested the Trustee by written order to deliver in
exchange for its beneficial interest in the Global Security
held by the Depository a Security or Securities in definitive,
registered form of authorized denominations and an aggregate
principal amount equal to its beneficial interest in such
Global Security (or the portion thereof indicated above); or
/ / has requested the Trustee by written order to exchange or
register the transfer of a Security or Securities.
In connection with such request and in respect of each such Security,
the Transferor does hereby certify that Transferor is familiar with the
Indenture relating to the above-captioned Securities and as provided in Section
2.6 of such Indenture, the transfer of this Security does not require
registration under the Securities Act (as defined below) because:
/ / Such Security is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section
2.6(a)(ii)(A) or Section 2.6(d)(i)(A) of the Indenture).
/ / Such Security is being transferred to a "qualified
institutional buyer" (within the meaning of Rule 144A
promulgated under the Securities Act), that is aware that any
sale of Securities to it will be made in reliance on Rule 144A
under the Securities Act and that is acquiring such Transfer
Restricted Security for its own account, or for the account of
another such "qualified institutional buyer" (in satisfaction
of Section 2.06(a)(ii)(B) or Section 2.06(d)(i)(B) of the
Indenture).
/ / Such Security is being transferred pursuant to an exemption
from registration in accordance with Rule 144, or outside the
United States in an Offshore Transaction in compliance with
Rule 904 under the Securities Act, or pursuant to an effective
registration statement under the Securities Act (in
satisfaction of Section 2.6(a)(ii)(C) or Section 2.6(d)(i)(C)
of the Indenture).
/ / Such Security is being transferred in reliance on and in
compliance with an exemption from the registration
requirements of the Securities Act and in accordance with
applicable securities laws of the States of the United States,
other than as provided in the immediately preceding paragraph.
An Opinion of Counsel to the effect that such transfer does
not require registration under the Securities Act accompanies
this Certificate (in satisfaction of Section 2.6(a)(ii)(D) or
Section 2.6(d)(i)(D) of the Indenture).
______________________________________________________________________________
(Insert Name of Transferor)
By:___________________________________________________________________________
Date:_______________________
____________________________
- --------------
* This Certificate shall be included only for Initial Securities.
A-10
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
SECURITIES*
Re: 10 1/8% Series D Senior Subordinated Notes Due 2005 of Compass
Aerospace Corporation
This Certificate relates to $_______________ principal amount of
Securities held in (check applicable box) _____ book-entry or ______ definitive
form by _______________________________________ (the "Transferor").
The Transferor (check applicable box):
/ / has requested the Trustee by written order to deliver in
exchange for its beneficial interest in the Global Security
held by the Depositary a Security or Securities in definitive,
registered form of authorized denominations and an aggregate
principal amount equal to its beneficial interest in such
Global Security (or the portion thereof indicated above); or
/ / has requested the Registrar by written order to exchange or
register the transfer of a Security or Securities.
- --------
* This certificate shall be included only for the Exchange Securities.
A-11
<PAGE>
EXHIBIT 12.1
Compass Aerospace Corporation
Statements re Computation of Ratio of Earnings to Fixed Charges
The ratio of earnings to fixed charges has been calculated by dividing
income before income taxes and fixed charges by fixed charges. Fixed charges
consist of interest expense and one third of operating rental expense, which
management believes is representative of the interest component of rental
expenses.
<TABLE>
<CAPTION>
Compass Aerospace
Corporation Brittain Machine, Inc.(1)
for the for the for the years ended June 30
Year Ended 36 Days Ended for the period from
December 31, December 31, June 30, 1997 to
1998 1997 April 21, 1998 1997 1996 1995 1994
-------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges
Interest (income) expense, net 8,493 166 385 398 403 359 293
Interest portion of Net Rental 416 53 17 52 40 42 42
Expense
-------------------------- --------------------------------------------------------
Total Fixed Charges 8,909 219 402 450 443 401 335
========================== ========================================================
Earnings
Income (loss) before taxes 2,347 117 7,879 6,114 4,383 (414) 3,154
Fixed Charges 8,909 219 402 450 443 401 335
-------------------------- --------------------------------------------------------
Total Adjusted Earnings 11,256 336 8,281 6,564 4,826 (13) 3,489
========================== ========================================================
Ratio of earnings to fixed charges 1.3 1.5 20.6 14.6 10.9 (0.0) 10.4
========================== ========================================================
<CAPTION>
for the Six for the Six
Months Ended Months Ended
June 30, 1999 June 30, 1999
-------------------------------
<S> <C> <C>
Fixed Charges
Interest (income) expense, net 9,932 2,370
Interest portion of Net Rental 412 173
Expense
--------------------------------
Total Fixed Charges 10,344 2,453
================================
Earnings
Income (loss) before taxes (3,399) 1,505
Fixed Charges 10,344 2,543
--------------------------------
Total Adjusted Earnings 6,945 4,048
================================
Ratio of earnings to fixed charges 0.7 1.6
================================
</TABLE>
(1) Brittain Machine, Inc. is included as the predecessor of Compass Aerospace
Corporation.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF COMPASS AEROSPACE CORPORATION
Aeromil Engineering Company, a Delaware corporation
Barnes Machine, Inc., a Delaware corporation
Brittain Machine, Inc., a Delaware corporation
Compass Aerospace Limited, a private limited liability company organized under
the laws of England and Wales
Diac Limited, a private limited liability company organized under
the laws of England and Wales
Maybrey Precision Castings Limited, a private limited liability company
organized under the laws of England and Wales
Modern Manufacturing, Inc., a Delaware corporation
Pacific Hills Manufacturing Co., a California corporation, doing business as
"Lamsco West, Inc.," "Lamsco NW" and "Lamsco Northwest"
Sea-Lect Products, Inc., a Delaware corporation
Trefn Engineering Limited, a private limited liability company organized under
the laws of England and Wales
Trefn Engineering (Metal Treatments Division) Limited, a private limited
liability company organized under the laws of England and Wales
Trim Engineering Limited, a private limited liability company organized under
the laws of England and Wales
Western Methods Machinery Corporation, a California corporation
Wichita Manufacturing, Inc., a California corporation
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts," "Summary
Financial Data," and "Selected Historical Consolidated Financial Data" and to
the use of our report dated March 15, 1999 in connection with the
consolidated financial statements of Compass Aerospace Corporation; our
report dated March 19, 1998 in connection with the financial statements of
Aeromil Engineering Company; our report dated September 3, 1996 in connection
with the consolidated financial statements of Brittain Machine, Inc. and
Subsidiary; our report dated August 12, 1998 in connection with the financial
statements of Barnes Machine, Inc.; our report dated September 25, 1998 in
connection with the combined financial statements of Sea-Lect Products Inc.
and Affiliate; our report dated April 27, 1999 in connection with the
consolidated financial statements of Modern Manufacturing, Inc. (formerly
Y.F. Americas, Inc. and Subsidiary) included in Amendment No. 3 to the
Registration Statement (Form S-4 No.333-75643-01) and related Prospectus of
Compass Aerospace Corporation for the registration of $110,000,000 of
10 1/8% Series B Senior Subordinated Notes due 2005, $19,000,000 of 10 1/8%
Series D Senior Subordinated Notes due 2005 and $129,000,000 of related
guarantees.
/s/ Ernst & Young LLP
Long Beach, California
October 25, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated October 17, 1997 accompanying the
consolidated financial statements of Brittain Machine, Inc. as of June 30,
1997 and for the year then ended and our report dated July 9, 1998
accompanying the consolidated financial statements of Brittain Machine, Inc.
as of April 21, 1998 and for the period July 1, 1997 through April 21, 1998
contained in the Amendment No. 3 to the Compass Aerospace Corporation
Registration Statement (Form S-4 No. 333-75643-01) and Prospectus. We consent
to the use of the aforementioned reports in the Registration Statement and
Prospectus and to the use of our name as it appears under the caption
"Experts."
/s/ Grant Thornton LLP
Wichita, Kansas
October 25, 1999
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in this Amendment No. 3 to Registration
Statement on Form S-4 of our report, dated March 5, 1999, relating to the
financial statements of Pacific Hills Manufacturing Co. (formerly known as
Lamsco West, Inc). We also consent to the reference to
our Firm under the caption "Experts" in the Prospectus.
/s/ McGladrey & Pullen, LLP
New Haven, Connecticut
October 21, 1999
<PAGE>
Exhibit 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-4 of our
reports dated 30th January, 1998, and 19th February, 1999, relating to the
financial statements of the Trim Engineering Group for the years ending 30th
April, 1997 and 1998. We also consent to the reference to our Firm under the
caption "Experts" in the Prospectus.
/s/ PRINCECROFT REDMAN
Princecroft Redman, formerly Prince, Croft & Ball
22nd October 1999
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 3 to the Registration Statement (Form S-4 No. 333-75643-01) and
related Prospectus of Compass Aerospace Corporation for the registration of
$110,000,000 of its 10 1/8% Series B Senior Subordinated Notes due 2005,
$19,000,000 of its 10 1/8% Series D Senior Subordinated Notes due 2005 and
$129,000,000 of its Guarantees of the 10 1/8% Series B Senior Subordinated
Notes due 2005 and the 10 1/8% Series D Senior Subordinated Notes due 2005
issued by registrants other than Compass Aerospace Corporation and to the
inclusion therein of our report dated October 12, 1999 with respect to the
consolidated financial statements of Trim Engineering Limited.
/s/ ERNST & YOUNG
------------------
Ernst & Young
Southampton, England
October 25, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES THERETO OF COMPASS AEROSPACE
CORPORATION FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001081008
<NAME> COMPASS AEROSPACE CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 7,096
<SECURITIES> 0
<RECEIVABLES> 17,739
<ALLOWANCES> 694
<INVENTORY> 32,671
<CURRENT-ASSETS> 60,262
<PP&E> 67,804
<DEPRECIATION> 10,893
<TOTAL-ASSETS> 248,129
<CURRENT-LIABILITIES> 23,520
<BONDS> 197,087
0
0
<COMMON> 248
<OTHER-SE> 28,718
<TOTAL-LIABILITY-AND-EQUITY> 248,129
<SALES> 32,724
<TOTAL-REVENUES> 32,724
<CGS> 23,234
<TOTAL-COSTS> 23,234
<OTHER-EXPENSES> (475)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,858
<INCOME-PRETAX> (1,368)
<INCOME-TAX> 504
<INCOME-CONTINUING> (861)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (861)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
COMPASS AEROSPACE CORPORATION
OFFER FOR ALL OUTSTANDING
10 1/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2005
IN EXCHANGE FOR
10 1/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2005
AND
ALL OUTSTANDING 10 1/8% SERIES C SENIOR SUBORDINATED NOTES DUE 2005
IN EXCHANGE FOR
10 1/8% SERIES D SENIOR SUBORDINATED NOTES DUE 2005
PURSUANT TO THE PROSPECTUS, DATED [ ], 1999.
-------------
- ------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON , 1999,
UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ONE BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
- ------------------------------------------------------------------------------
Delivery To: Bank of New York, EXCHANGE AGENT
BY HAND/OVERNIGHT BY REGISTERED OR CERTIFIED FACSIMILE TRANSMISSION
DELIVERY: MAIL: NUMBER:
Bank of New York Bank of New York (212) 815-6339
101 Barclay Street Debt Processing Group-7E
Reorg Department-7E P.O. Box 11265
New York, NY 10286 New York, NY 10286 CONFIRM BY TELEPHONE:
(212) 815-6331
For Information Call:
(212) 815-2568
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges that he or she has received and reviewed
the prospectus, dated , 1999 of Compass Aerospace Corporation, a
Delaware corporation ("Compass"), and this letter of transmittal, which
together constitute Compass' offer to exchange an aggregate principal amount
of up to $110,000,000 of Compass' 10 1/8% Series B Senior Subordinated Notes
Due 2005 for a like principal amount of the
<PAGE>
issued and outstanding $110,000,000 of 10 1/8% Series A Senior Subordinated
Notes due 2005 and Compass' offer to exchange an aggregate principal amount
of up to $19,000,000 of Compass 10 1/8% Series D Senior Subordinated Notes
due 2005 for a like principal amount of the issued and outstanding $19,000,000
of Compass' 10 1/8% Series C Senior Subordinated Notes due 2005.
For each outstanding Series A note accepted for exchange, the holder of
such outstanding Series A note will receive a Series B note having a
principal amount equal to that of the surrendered outstanding Series A note.
For each outstanding Series C note accepted for exchange, the holder of such
outstanding Series C note will receive a Series D note having a principal
amount equal to that of the surrendered outstanding Series C note. The
Series B and Series D notes will bear interest from and including the date of
consummation of the exchange offer. Holders whose outstanding Series A or
Series C notes are accepted for exchange will have the right to receive, in
cash, accrued interest thereon to, but not including, the date of
consummation of the exchange offer. Such interest will be payable to the
registered holders of the Series B or Series D notes, respectively, with the
first interest payment on the Series B and Series D notes. Holders whose
outstanding Series A or Series C notes are accepted for exchange will be
deemed to have waived the right to receive any payment in respect of interest
on the outstanding Series A or Series C notes accrued after the date of
consummation of the exchange offer. Compass reserves the right, at any time
or from time to time, to extend the exchange offer at its discretion, in
which event the term "Expiration Date" shall mean the latest time and date to
which the exchange offer is extended. Compass shall notify the holders of
the outstanding Series A and Series C notes of any extension by means of a
public announcement prior to 9:00 A.M., New York City time, on the next
business day after the previously scheduled Expiration Date.
This letter is to be completed by a holder of outstanding Series A or
Series C notes if (i) certificates are to be forwarded herewith, or (ii) if a
tender of certificates for outstanding Series A or Series C notes, if
available, is to be made by book-entry transfer to the account maintained by
the exchange agent at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in "The Exchange
Offer--Book-Entry Transfer" section of the prospectus. Holders of
outstanding Series A or Series C notes whose certificates are not immediately
available, or who are unable to deliver their certificates or confirmation of
the book-entry tender of their outstanding Series A or Series C notes into
the exchange agent's account at the Book-Entry Transfer Facility (a
"Book-Entry Confirmation") and all other documents required by this letter to
the exchange agent on or prior to the expiration date, must tender their
outstanding Series A or Series C notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures"
section of the prospectus. See Instruction 1. Delivery of documents to the
Book-Entry Transfer Facility does not constitute delivery to the exchange
agent.
The undersigned has completed the appropriate boxes below and signed
this letter to indicate the action the undersigned desires to take with
respect to the exchange offer.
<PAGE>
List below the outstanding notes to which this letter relates. List any
Series A notes you hold separately from any Series C notes that you hold in
the spaces provided below. If a space provided below is inadequate, the
certificate numbers and principal amount of outstanding notes should be
listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING 1 2 3
SERIES A NOTES
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate
Principal Principal
Amount of Amount
Name(s) and Address(es) of Certificate Outstanding Tendered**
Registered Holder(s) (Please fill Number(s)* Note(s)
in, if blank)
- -------------------------------------------------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
Total
- -------------------------------------------------------------------------------
* Need not be completed if outstanding Series A notes are being tendered
by book-entry transfer.
** Unless otherwise indicated in this column, a holder will be deemed to
have tendered ALL of the outstanding Series A notes represented by the
outstanding notes indicated in column 2.
See instruction 2. Outstanding Series A notes tendered hereby must be in
denominations of principal amount at maturity of $1,000 and any integral
multiple thereof. See Instruction 1.
- -------------------------------------------------------------------------------
</TABLE>
/ / CHECK HERE IF TENDERED OUTSTANDING SERIES A NOTES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE
AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered
Holder(s)
----------------------------------------------------------------
Window Ticket Number (if any)
--------------------------------------------
Date of Execution of Notice of Guaranteed
Delivery
----------------------------------------------------------------
Name of Institution which guaranteed
delivery
---------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING 1 2 3
SERIES C NOTES
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate
Principal Principal
Amount of Amount
Name(s) and Address(es) of Certificate Outstanding Tendered**
Registered Holder(s) (Please fill Number(s)* Note(s)
in, if blank)
- -------------------------------------------------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
Total
- -------------------------------------------------------------------------------
* Need to be completed if outstanding Series C notes are being tendered
by book-entry transfer.
** Unless otherwise indicated in this column, a holder will be deemed to
have tendered ALL of the outstanding Series C notes represented by the
outstanding notes indicated in column 2.
See instruction 2. Outstanding Series C notes tendered hereby must be
in denominations of principal amount at maturity of $1,000 and any
integral multiple thereof. See Instruction 1.
- -------------------------------------------------------------------------------
</TABLE>
/ / CHECK HERE IF TENDERED OUTSTANDING SERIES C NOTES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE
EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
------------------------------------------
Window Ticket Number (if any)
--------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
----------------------
Name of Institution which guaranteed delivery
---------------------------
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
-----------------------------------------------------------------------
Address:
--------------------------------------------------------------------
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the exchange offer, the
undersigned hereby tenders to Compass the aggregate principal amount of
outstanding Series A and Series C notes indicated above. Subject to, and
effective upon, the acceptance for exchange of the outstanding Series A and
Series C notes tendered hereby, the undersigned hereby sells, assigns and
transfers to, or upon the order of, Compass all right, title and interest in
and to such outstanding Series A and Series C notes as are being tendered
hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the outstanding
Series A and/or Series C notes tendered hereby and that Compass will acquire
good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim
when the same are accepted by Compass. The undersigned hereby further
represents that any new notes acquired in exchange for outstanding Series A
and Series C notes tendered hereby will have been acquired in the ordinary
course of business of the person receiving such new notes, whether or not
such person is the undersigned, that neither the Holder of such outstanding
Series A or Series C notes nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such new
notes and that neither the holder of such outstanding Series A or Series C
notes nor any such other person is an "affiliate," as defined in Rule 405
under the Securities Act of 1933, as amended (the "Securities Act"), of
Compass.
The undersigned also acknowledges that this Exchange Offer is being made
in reliance on an interpretation by the staff of the Securities and Exchange
Commission (the "SEC") that the Series B notes issued in exchange for the
outstanding Series A notes, and the Series D notes issued in exchange for the
outstanding Series C notes pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by holders thereof (other than any
such holder that is (i) an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act, or (ii) a broker-dealer, except as
provided below), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Series B or
Series D notes are acquired in the ordinary course of such holders' business
and such holders have no arrangements with any person to participate in the
distribution of such Series B or Series D notes. If the undersigned is not a
broker-dealer, the undersigned represents that it is not engaged in, and does
not intend to engage in, a distribution of Series B or Series D notes. If the
undersigned is a broker-dealer that will receive Series B notes for its own
account in exchange for outstanding Series A notes, or Series D notes for its
own account in exchange for outstanding Series C notes that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver the prospectus in connection with any
resale of such Series B or Series D notes; however, by so acknowledging and
by delivering the prospectus, the undersigned will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by Compass to be necessary or desirable to complete the
sale, assignment and transfer of the outstanding Series A and Series C notes
tendered hereby. All authority conferred or agreed to be conferred in this
letter and every obligation of the undersigned hereunder shall be binding
upon the successors, assigns, heirs, executors, administrators, trustees in
bankruptcy and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
This tender may be withdrawn only in accordance with the procedures set forth
in "The Exchange Offer--Withdrawal Rights" section of the prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions For Series B Notes" or in the box entitled "Special Issuance
Instructions For Series D Notes" below, please deliver the Series B and
Series D notes, as applicable, (and, if applicable, substitute certificates
representing Series A notes for any outstanding Series A notes not exchanged,
or substitute certificates representing Series C notes for any outstanding
Series C notes not exchanged) in the name of the undersigned
<PAGE>
or, in the case of a book-entry delivery of outstanding Series A or Series C
notes, please credit the account indicated above maintained at the Book-Entry
Transfer Facility. Similarly, unless otherwise indicated under the box
entitled "Special Delivery Instructions For Series B Notes" or under the box
entitled "Special Delivery Instructions For Series D Notes" below, please
send the Series B and Series D notes, as applicable, (and, if applicable,
substitute certificates representing Series A notes for any outstanding
Series A notes not exchanged, or substitute certificates representing Series
C notes for any outstanding Series C notes not exchanged) to the undersigned
at the address shown above in the boxes entitled "Description of Outstanding
Series A Notes" or "Description of Outstanding Series C Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF
OUTSTANDING SERIES A NOTES" OR DESCRIPTION OF OUTSTANDING SERIES C NOTES"
ABOVE, AS APPLICABLE, AND SIGNING THIS LETTER, OR BY CAUSING THE OUTSTANDING
SERIES A OR SERIES C NOTES, AS APPLICABLE, TO BE TRANSFERRED TO THE EXCHANGE
AGENT'S ACCOUNT VIA ATOP IN THE CASE OF A BOOK-ENTRY TRANSFER, WILL BE DEEMED
TO HAVE TENDERED THE OUTSTANDING SERIES A OR SERIES C NOTES AS SET FORTH ABOVE.
<PAGE>
- ----------------------------------- --------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
FOR SERIES B NOTES FOR SERIES B NOTES
(See Instructions 3 and 4) (See Instructions 3 and 4)
To be completed ONLY if To be completed ONLY if
certificates for outstanding Series A certificates for outstanding Series A
notes not exchanged and/or Series B notes not exchanged and/or Series B
Notes are to be issued in the name Notes are to be sent to someone other
of and sent to someone other than than the person or persons whose
the person or persons whose signature(s) appear(s) on this letter
signature(s) appear(s) on this above or to such person or persons at
letter above. an address other than shown in the
box entitled "Description of
Outstanding Series A Notes" on this
letter above.
Issue: Series B Notes and/or
outstanding notes to:
Mail: Series B Notes and/or
outstanding notes to:
Name(s)
---------------------------
(PLEASE TYPE OR PRINT)
Name(s)
- ----------------------------------- ------------------------------
(PLEASE TYPE OR PRINT) (PLEASE TYPE OR PRINT)
Address
--------------------------- --------------------------------------
(PLEASE TYPE OR PRINT)
- -----------------------------------
(ZIP CODE)
Address
(Complete Substitute Form W-9) -----------------------------
--------------------------------------
(ZIP CODE)
- ----------------------------------- --------------------------------------
- ----------------------------------- --------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
FOR SERIES D NOTES FOR SERIES D NOTES
(See Instructions 3 and 4) (See Instructions 3 and 4)
To be completed ONLY if To be completed ONLY if
certificates for outstanding Series C certificates for outstanding Series C
notes not exchanged and/or Series D notes not exchanged and/or Series D
Notes are to be issued in the name Notes are to be sent to someone other
of and sent to someone other than than the person or persons whose
the person or persons whose signature(s) appear(s) on this letter
signature(s) appear(s) on this above or to such person or persons at
letter above. an address other than shown in the
box entitled "Description of
Outstanding Series C Notes" on this
letter above.
Issue: Series B Notes and/or
outstanding notes to:
Mail: Series B Notes and/or
outstanding notes to:
Name(s)
---------------------------
(PLEASE TYPE OR PRINT)
Name(s)
- ----------------------------------- ------------------------------
(PLEASE TYPE OR PRINT) (PLEASE TYPE OR PRINT)
Address
--------------------------- --------------------------------------
(PLEASE TYPE OR PRINT)
- -----------------------------------
(ZIP CODE)
Address
(Complete Substitute Form W-9) -----------------------------
--------------------------------------
(ZIP CODE)
- ----------------------------------- --------------------------------------
<PAGE>
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES
FOR THE OUTSTANDING SERIES A OR SERIES C NOTES TO BE EXCHANGED AND ALL OTHER
REQUIRED DOCUMENTS), OR A BOOK-ENTRY CONFIRMATION, OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00
P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
<PAGE>
- -------------------------------------------------------------------------------
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
Dated: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ,1998
X. . . . . . . . . . . . . . . . . . . . . . . . . . . . . ,1998
X. . . . . . . . . . . . . . . . . . . . . . . . . . . . . ,1998
SIGNATURE(s) OF OWNER DATE
Area Code and Telephone Number . . . . . . . . . . . . . . . . . . . . .
If a holder is tendering any outstanding Series A or Series C notes,
this letter must be signed by the registered holder(s) as the name(s)
appear(s) on the certificate(s) for the outstanding Series A or Series C
notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a
trustee, executor, administrator, guardian, officer or other person acting
in a fiduciary or representative capacity, please set forth full title. See
Instruction 3.
Name(s):
-----------------------------------------------------------------
------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Capacity:
-----------------------------------------------------------------
Address:
-----------------------------------------------------------------
------------------------------------------------------------------------
(INCLUDING ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUESTED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution:
------------------------------------------------------
(AUTHORIZED SIGNATURE)
- -------------------------------------------------------------------------------
(TITLE)
- -------------------------------------------------------------------------------
(NAME AND FIRM)
Dated:
-------------------------------------------------------------------,1998
- -------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
FOR ALL OUTSTANDING 10 1/8% SERIES A SENIOR SUBORDINATED NOTES due 2005
IN EXCHANGE FOR THE 10 1/8% SERIES B SENIOR SUBORDINATED NOTES due 2005
AND
FOR ALL OUTSTANDING 10 1/8% SERIES C SENIOR SUBORDINATED NOTES due 2005
IN EXCHANGE FOR THE 10 1/8% SERIES D SENIOR SUBORDINATED NOTES due 2005
OF COMPASS AEROSPACE CORPORATION
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
This letter is to be completed by noteholders either if certificates are
to be forwarded herewith or if tenders are to be made pursuant to the
procedures for delivery by book-entry transfer set forth in "The Exchange
Offer--Book-Entry Transfer" section of the prospectus. Certificates for all
physically tendered outstanding Series A or Series C notes, or Book-Entry
Confirmation, as the case may be, as well as a properly completed and duly
executed letter (or manually signed facsimile thereof) and any other
documents required by this letter, must be received by the exchange agent at
the address set forth herein on or prior to the expiration date, or the
tendering holder must comply with the guaranteed delivery procedures set
forth below. Outstanding Series A or Series C notes tendered hereby must be
in denominations of principal amount of maturity of $1,000 and any integral
multiple thereof.
Noteholders whose certificates for outstanding Series A or Series C
notes are not immediately available or who cannot deliver their certificates
and all other required documents to the exchange agent on or prior to the
expiration date, or who cannot complete the procedure for book-entry transfer
on a timely basis, may tender their outstanding Series A or Series C notes
pursuant to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the prospectus. Pursuant
to such procedures,
- - such tender must be made through an Eligible Institution,
- - prior to the expiration date, the exchange agent must receive from such
Eligible Institution a properly completed and duly executed letter (or a
facsimile thereof) and notice of guaranteed delivery, substantially in the
form provided by Compass (by facsimile transmission, mail or hand
delivery), setting forth the name and address of the holder of outstanding
Series A or Series C notes, as applicable, the certificate number or
numbers of any outstanding Series A or Series C notes which will not be
tendered by book-entry transfer, and the amount of outstanding notes
tendered, stating that the tender is being made thereby and guaranteeing
that within three business days after the date of execution of the notice
of guaranteed delivery, the certificates for all physically tendered
outstanding Series A or Series C notes, in proper form for transfer,
or a Book-Entry Confirmation, as the case may be, and any
other documents required by the letter will be deposited by the Eligible
Institution with the exchange agent, and
- - the certificates for all physically tendered outstanding Series A or
Series C notes, in proper form for transfer, or Book-Entry Confirmation,
as the case may be, and all other documents required by this letter,
are received by the exchange agent within three business days after the
date of execution of the notice of guaranteed delivery.
THE METHOD OF DELIVERY OF THIS LETTER, THE OUTSTANDING SERIES A AND
SERIES C NOTES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK
OF THE TENDERING HOLDERS, BUT THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF OUTSTANDING SERIES
A OR SERIES C NOTES ARE SENT BY MAIL, IT IS SUGGESTED THAT THE MAILING BE
MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT THE DELIVERY TO
THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE.
<PAGE>
See "The Exchange Offer" section in the prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO NOTEHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If less than all of the outstanding Series A or Series C notes, as
applicable, evidenced by a submitted certificate is to be tendered, the
tendering holder(s) should fill in the aggregate principal amount of
outstanding notes to be tendered in the boxes above entitled "Description of
Outstanding Series A Notes--Principal Amount Tendered" and "Description of
Outstanding Series C Notes--Principal Amount Tendered." A reissued
certificate representing the balance of untendered outstanding Series A or
Series C notes, as applicable, will be sent to such tendering holder, unless
otherwise provided in the appropriate box on this letter, promptly after the
expiration date. All of the outstanding Series A and Series C notes
delivered to the exchange agent will be deemed to have been tendered unless
otherwise indicated.
3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this letter is signed by the registered holder of the outstanding
Series A and Series C notes tendered hereby, the signature must correspond
exactly with the name as written on the face of the certificates for such
notes without any change whatsoever.
If any tendered outstanding Series A or Series C notes are owned of
record by two or more joint owners, all such owners must sign this letter.
If any tendered outstanding notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate copies of this letter as there are different registrations of
certificates.
When this letter is signed by the registered holder or holders of the
outstanding Series A or Series C notes specified herein and tendered hereby,
no endorsements of certificates or separate bond powers are required. If,
however, the new notes are to be issued, or any untendered outstanding Series
A or Series C notes are to be reissued, to a person other than the registered
holder, then endorsements of any certificates transmitted hereby or separate
bond powers are required. Signatures on such certificate(s) must be
guaranteed by an Eligible Institution.
If this letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed
by an Eligible Institution.
If this letter or any certificates or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and, unless waived by Compass,
proper evidence satisfactory to Compass of their authority to so act must be
submitted.
ENDORSEMENTS ON CERTIFICATES FOR OUTSTANDING SERIES A AND SERIES C NOTES
OR SIGNATURES ON BOND POWERS REQUIRED BY THIS INSTRUCTION 3 MUST BE
GUARANTEED BY A FIRM WHICH IS A MEMBER OF A REGISTERED NATIONAL SECURITIES
EXCHANGE OR A MEMBER OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.
OR BY A COMMERCIAL BANK OR TRUST COMPANY HAVING AN OFFICE OR CORRESPONDENT IN
THE UNITED STATES OR BY SUCH OTHER ELIGIBLE INSTITUTION WITHIN THE MEANING OF
RULE 17(A)(d)-15 UNDER THE SECURITIES EXCHANGE ACT OF 1934,(COLLECTIVELY
"ELIGIBLE INSTITUTIONS").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE
INSTITUTION, PROVIDED THE OUTSTANDING SERIES A OR SERIES C NOTES ARE
TENDERED:
<PAGE>
- - BY A REGISTERED HOLDER OF OUTSTANDING SERIES A OR SERIES C NOTES
(WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER, INCLUDES ANY PARTICIPANT
IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME APPEARS ON A SECURITY
POSITION LISTING AS THE HOLDER OF SUCH OUTSTANDING SERIES A OR SERIES C
NOTES) TENDERED WHO, IN THE CASE OF A HOLDER OF SERIES A NOTES HAS NOT
COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS FOR SERIES B
NOTES" OR "SPECIAL DELIVERY INSTRUCTIONS FOR SERIES B NOTES," AND, IN THE
CASE OF A HOLDER OF SERIES C NOTES HAS NOT COMPLETED THE BOX ENTITLED
"SPECIAL ISSUANCE INSTRUCTIONS FOR SERIES D NOTES" OR "SPECIAL DELIVERY
INSTRUCTIONS FOR SERIES D NOTES" ON THIS LETTER, OR
- - FOR THE ACCOUNT OF AN ELIGIBLE INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of outstanding Series A and Series C notes should
indicate in the applicable box the name and address to which Series B or
Series D notes issued pursuant to the exchange offer and/or substitute
certificates evidencing outstanding Series A or Series C notes not exchanged,
as applicable, are to be issued or sent, if different from the name or
address of the person signing this letter. In the case of issuance in a
different name, the employer identification or social security number of the
person named must also be indicated. Noteholders tendering outstanding
Series A or Series C notes by book-entry transfer may request that
outstanding Series A or Series C notes not exchanged be credited to such
account maintained at the Book-Entry Transfer Facility as such noteholder may
designate hereon. If no such instructions are given, such outstanding Series
A or Series C notes not exchanged will be returned to the name and address of
the person signing this letter.
5. TAX IDENTIFICATION NUMBER.
Federal income tax law may require that a tendering holder whose
outstanding Series A or Series C notes are accepted for exchange must provide
Compass (as payor) with such holder's correct Taxpayer Identification
Number ("TIN") on Substitute Form W-9 below, which in the case of a tendering
holder who is an individual, is his or her social security number. If
Compass is not provided with the current TIN or an adequate basis for an
exemption, such tendering holder may be subject to a $50 penalty imposed by
the Internal Revenue Service. In addition, such tendering holder may be
subject to backup withholding in an amount equal to 31% of all reportable
payments made after the exchange. If withholding results in an overpayment
of taxes, a refund may be obtained.
Exempt holders of outstanding Series A or Series C notes (including,
among others, all corporations) are not subject to these backup withholding
requirements. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering holder of outstanding
Series A or Series C notes should provide its correct TIN by completing the
"Substitute Form W-9" set forth below, certifying that the TIN provided is
correct and as to certain other matters. If the tendering holder of
outstanding Series A or Series C notes is a nonresident alien or foreign
entity not subject to backup withholding, such holder should provide a
completed Form W-8, Certificate of Foreign Status. These forms may be
obtained from the exchange agent. If the outstanding Series A or Series C
notes are in more than one name or are not in the name of the actual owner,
such holder should consult the W-9 Guidelines for information on which TIN to
report. If such holder does not have a TIN, such holder should consult the
W-9 Guidelines for instructions on applying for a TIN, check the box in Part
2 of the Substitute Form W-9 and write "applied for" in lieu of its TIN.
6. TRANSFER TAXES.
Compass will pay all transfer taxes, if any, applicable to the transfer
of outstanding Series A notes in exchange for Series B notes and to the
transfer of outstanding Series C notes in exchange for Series D
<PAGE>
notes pursuant to the exchange offer. If however, Series B and Series D
notes and/or substitute outstanding Series A and Series C notes not exchanged
are to be delivered to, or are to be registered or issued in the name of, any
person other than the registered holder of the outstanding Series A and
Series C notes tendered hereby, or if tendered outstanding Series A and
Series C notes are registered in the name of any person other than the person
signing this letter, or if a transfer tax is imposed for any reason other
than the transfer of outstanding Series A or Series C notes to Compass or its
order pursuant to the exchange offer, the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OUTSTANDING SERIES A AND SERIES C
NOTES SPECIFIED IN THIS LETTER.
7. WAIVER OF CONDITIONS.
Compass reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of outstanding Series A and Series C notes,
by execution of this letter, shall waive any right to receive notice of the
acceptance of their outstanding Series A or Series C notes, as applicable,
for exchange.
Neither Compass, the exchange agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of
outstanding Series A or Series C notes nor shall any of them incur any
liability for failure to give any such notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OUTSTANDING SERIES A OR SERIES C
NOTES.
Any holder whose outstanding Series A or Series C notes have been
mutilated, lost, stolen or destroyed should contact the exchange agent at the
address indicated above for further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests
for additional copies of the prospectus and this letter, may be directed to
the exchange agent, at the address and telephone number indicated above.
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: __________________________
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR TIN:___________________
TIN IN THE BOX AT RIGHT AND Social Security Number or
CERTIFY BY SIGNING AND Employer Identification
DATING BELOW Number
- ------------------------------------------------------------------------------
Part 2--TIN Applied For / /
-----------------------------------------------------------
SUBSTITUTE CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY
THAT:
Form W-9 (1) the number shown on this form is my correct Taxpayer
Department of Identification Number (or I am waiting for a number to
the Treasury be issued to me);
Internal Revenue
Service (2) I am not subject to backup withholding either because:
(a) I am exempt from backup withholding, or (b) I have
Payor's Request not been notified by the Internal Revenue Service (the
For Taxpayer "IRS") that I am subject to backup withholding as a
Identification result of a failure to report all interest or
Number ("TIN") dividends, or (c) the IRS has notified me that I am no
and longer subject to backup withholding; and
Certification
(3) any other information provided on this form is true and
correct.
SIGNATURE DATE
----------------------- -----------
- ------------------------------------------------------------------------------
You must cross out item (2) of the above certification if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting of interest or dividends on your tax return and you have not
been notified by the IRS that you are no longer subject to backup
withholding.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
- ------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administrative Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of the exchange, 31 percent
of all reportable payments to me thereafter will be withheld until I provide the
number.
- ----------------------------- -------------------------------
Signature Date
- ------------------------------------------------------------------------------
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
<TABLE>
<CAPTION>
What Name and Number to Provide:
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
For this type of account: Give the Name and Give the Name and
SOCIAL SECURITY For this type of account: EMPLOYER
number of ____ IDENTIFICATION number
of ___
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Individual The individual 6. Sole proprietorship The owner(3)
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the
first individual on 7. A valid trust, estate, Legal entity (Do not
the account(1) or pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is so designated in
the account title.)(4)
3. Custodian account of The minor(2)
a minor (Uniform Gift
to Minors Act)
4. (a) The usual revocable 8. Corporate The corporation
savings trust (grantor The grantor-
is also trustee) trustee(1) 9. Association, club, The organization
religious, charitable,
educational or other
tax-exempt organization
(b) So-called trust
account that is not a The actual owner(1)
legal or valid trust 10. Partnership The partnership
under State law
5. Sole proprietorship The owner(3) 11. A broker or registered The broker or nominee
nominee
12. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State or
local government, school
district, or prison) that
receives agricultural
program payments
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
1 List first and circle the name of the person whose number you furnish.
2 Circle the minor's name and furnish the minor's social security number.
3 Show the individual's name. If you are a sole proprietor, you must
furnish your individual name and either your Social Security number or your
employer identification number. You may also enter your business name or
"doing business as" name on the business name line. Enter your name(s) as
shown on your social security card and/or as if was used to apply for your
employer identification number on Form SS-4.
4 List first and circle the name of the legal trust, estate, or pension
trust.
Note:
(i) If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
(ii) If you are an individual, you must generally provide the name as
shown on your social security card. However, if you have changed
your last name, for instance, due to marriage, without informing the
Social Security Administration of the name change, please enter your
first name, the last name shown on your social security card, and
your new last name.
(iii) For a joint account, only the person whose Taxpayer Identification
Number is shown on Substitute Form w-9 should sign the form.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Obtaining a Number:
If you do not have a taxpayer identification number, apply for one
immediately. To apply, obtain Form SS-5, Application for a Social Security
Number Card (for individuals), from your local office of the Social Security
Administration, or Form SS-4, Application for Employer Identification Number
(for businesses and all other entities), from your local office of the
Internal Revenue Service.
Payees Exempt from Backup Withholding:
Payees that are exempt from backup withholding with respect to amounts
received in the offer include the following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a), or an individual
retirement account or a custodial account under section 403(b)(7).
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- - An international organization or any agency or instrumentality thereof.
- - A dealer in securities or commodities required to register in the United
States or a possession of the United States.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a).
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
Exempt payees described above, should file Substitute Form W-9 to avoid
possible erroneous backup withholding. Such payees should furnish their
taxpayer identification number, write "exempt" on the face of the form (Part
II), and sign and date the form.
Exempt Foreign Payees:
A payee that is a nonresident alien individual or foreign entity not subject
to backup withholding should complete and execute Form W-8, Certificate of
Foreign Status, and return the executed form with the Letter of Instructions.
Penalties:
(1) Failure To Furnish Taxpayer Identification Number. --If you fail to
furnish your correct taxpayer's identification number to a payor, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) Civil Penalty for False Information with Respect to Withholding.--If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information. --Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
(4) Misuse of TINs. --If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
Privacy Act Notice. --Section 6109 requires you to furnish your correct TIN
to persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid,
the acquisition or abandonment of secured property, or contributions you made
to an IRA. The IRS uses the numbers for identification purposes and to help
verify the accuracy of your tax return. You must provide your TIN whether or
not you are required to file a tax return. Payors must generally withhold
31% of taxable interest, dividend, and certain other payments to a payee who
does not furnish a TIN to a payor. Certain penalties may also apply.
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY FOR
COMPASS AEROSPACE CORPORATION
This form or one substantially equivalent hereto must be used to accept the
exchange offer of Compass Aerospace Corporation ("Compass") made pursuant to
the prospectus, dated [_________], 1999, if:
- - certificates for outstanding Series A or Series C notes of Compass are not
immediately available, or
- - the procedure for book-entry transfer cannot be completed on a timely
basis, or
- - time will not permit all required documents to reach the Exchange Agent
prior to 5:00 P.M., New York City time, on the expiration date of the
exchange offer. Such form may be delivered or transmitted by facsimile
transmission, mail or hand delivery to The Bank of New York (the "Exchange
Agent") as set forth below. In addition, in order to utilize the guaranteed
delivery procedure to tender outstanding Series A or Series C notes pursuant
to the exchange offer, a completed, signed and dated letter of transmittal
relating to the notes (or facsimile thereof) must also be received by the
exchange agent prior to 5:00 P.M., New York City time, on the expiration
date. Capitalized terms not defined herein are defined in the prospectus.
THE BANK OF NEW YORK, EXCHANGE AGENT
IF BY OVERNIGHT CARRIER IF BY REGISTERED OR IF BY FACSIMILE:
OR BY HAND: CERTIFIED MAIL:
The Bank of New York The Bank of New York (212) 815-6339
101 Barclay Street Debt Processing Group - 7E
New York, New York 10286 P.O. Box 11265 CONFIRM BY TELEPHONE:
Attention: Reorg. New York, New York 10286
Department 7E (212) 815-6331
For Information Call:
(212) 815-2568
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
Upon the terms and conditions set forth in the prospectus and the
accompanying letter of transmittal, the undersigned hereby tenders to the
Company the principal amount of outstanding Series A or Series C notes set
forth below, pursuant to the guaranteed delivery procedure described in "The
Exchange Offer--Guaranteed Delivery Procedures" section of the prospectus.
By so tendering, the undersigned does make, at and as of the date hereof, the
representations and warranties of a tendering holder of outstanding Series A
or Series C notes, as applicable, set forth in the letter of transmittal.
Principal Amount at Maturity of Outstanding Series A Notes
Tendered:(*)
$--------------------------------------
--------------------------------------
Certificate Nos. (if available):
--------------------------------------
--------------------------------------
Total Principal Amount at Maturity Represented
by Outstanding Series A Notes Certificate(s)
$--------------------------------------
--------------------------------------
If outstanding Series A notes will be delivered by book-entry transfer
to The Depository Trust Company, provide account number.
Account Number
-------------------------
- ------------------------
(*) Must be in denominations of principal amount at maturity of $1,000 and any
integral multiple thereof.
<PAGE>
Principal Amount at Maturity of Outstanding Series C Notes
Tendered:(**)
$--------------------------------------
--------------------------------------
CERTIFICATE NOS. (IF AVAILABLE):
Total Principal Amount at Maturity Represented
by Outstanding Series C Notes Certificate(s)
$--------------------------------------
--------------------------------------
If outstanding Series C notes will be delivered by book-entry transfer
to The Depository Trust Company, provide account number.
Account Number
-------------------------
- ------------------------
(**) Must be in denominations of principal amount at maturity of $1,000 and any
integral multiple thereof.
<PAGE>
- --------------------------------------------------------------------------------
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
X _____________________________________ ______________
X _____________________________________ ______________
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number:_____________________________________________
Must be signed by the holder(s) of the outstanding Series A or Series C
notes, as applicable, as their name(s) appear(s) on certificates for
outstanding Series A or Series C notes, respectively, or on a security
position listing, or by person(s) authorized to become registered holder(s)
by endorsement and documents transmitted with this notice of guaranteed
delivery. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title
below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
---------------------------------------------------------------------
---------------------------------------------------------------------
______________________________________________________________________________
______________________________________________________________________________
Capacity:
---------------------------------------------------------------------
---------------------------------------------------------------------
Address(es):__________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
GUARANTEE
The undersigned, a member of a registered national securities exchange, or a
member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in the
United States, or an Eligible Institution within the meaning of Rule
17(A)(d)-15 under the Securities Exchange Act of 1934, as amended, hereby
guarantees that the certificates representing the principal amount of
outstanding Series A and Series C notes tendered hereby in proper form for
transfer, or timely confirmation of the book-entry transfer of such
outstanding notes into the Exchange Agent's account at The Depository Trust
Company pursuant to the procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the prospectus, together
with a properly completed and duly executed letter of transmittal (or a
manually signed facsimile thereof) with any required signature guarantee and
any other documents required by the letter of transmittal, will be received
by the Exchange Agent at the address set forth above, no later than three
business days after the date of execution hereof.
___________________________________ __________________________________________
Name of Firm Authorized Signature
___________________________________ ________________________________________
Address Title
___________________________________ Name:_________________________________
Zip Code (Please Type or Print)
Area Code and Telephone No.________ Dated:_________________________________
NOTE: DO NOT SEND CERTIFICATES FOR OUTSTANDING SERIES A OR SERIES C NOTES
WITH THIS FORM. CERTIFICATES FOR OUTSTANDING SERIES A OR SERIES C NOTES
SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
