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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
COMMISSION FILE NUMBER: 0-1298
ADVANCED TECHNICAL PRODUCTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 11-1581582
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3353 PEACHTREE ROAD, SUITE 920
ATLANTA, GEORGIA 30326
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (404) 231-7272
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ------------------------------------- -----------------------------------------
Common Stock, $0.01 par value Nasdaq / SmallCap Market
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant on March 26, 1998 was $20,564,637 (1,482,136 shares at $13 7/8
per share, the closing price of the registrant's common stock on the Nasdaq
SmallCap Market on March 26, 1998). As of that date, 5,220,495 shares of the
Company's Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
THE INFORMATION REQUIRED BY PART III IS INCORPORATED BY REFERENCE FROM THE
REGISTRANT'S DEFINITIVE PROXY STATEMENT TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO REGULATION 14A NOT LATER THAN 120 DAYS AFTER THE
END OF THE FISCAL YEAR COVERED BY THIS REPORT.
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PART I
ITEM 1. BUSINESS
GENERAL
Advanced Technical Products, Inc. ("ATP" or "Company") is a Delaware
corporation that manufactures a variety of products in two principal business
segments, an aerospace and defense segment and a commercial segment. Such
products are manufactured through five business units, Marion Composites,
Intellitec, Lincoln Composites, Alcore and Lunn Industries. The aerospace and
defense segment designs, develops and manufactures advanced composite material
products used in the aerospace and defense industries, including radomes,
aircraft components, missile and satellite composite structures, engine
components, rocket motor cases, pressure vessels, relocatable shelters, missile
launch tubes, torque shafts and fuel tanks, as well as a wide range of
integrated defense systems including electro-optical systems, chemical detection
systems, ordnance delivery systems and light-weight camouflage systems. The
commercial segment produces natural gas vehicle ("NGV") fuel tanks, specialty
vehicle electronic products, products used in the exploration and production of
oil and gas and aluminum honeycomb products used by industrial, transportation
and construction customers. See Note 5 to the consolidated financial statements
of the Company for a summary of the net revenues, operating income and
identifiable assets of each segment.
On October 31, 1997, TPG Holdings, Inc., a Delaware corporation ("TPG"),
merged (the "Merger") with Lunn Industries, Inc., a Delaware corporation
("Lunn"), under the name "Advanced Technical Products, Inc." Lunn was
originally incorporated in New York in 1948 and was reincorporated in Delaware
in 1987. TPG was formed in 1995 to acquire the business and assets of three
operating units of the Brunswick Technical Group (the "Brunswick Business"),
which was completed on April 28, 1995.
AEROSPACE AND DEFENSE SEGMENT
COMPOSITE BASED PRODUCTS
RADOMES. ATP develops and manufactures high-temperature composite
materials and products for aerospace and defense applications and is a leading
manufacturer of composite aircraft structures and composite missile structures.
One of ATP's principal products is high-performance radomes. A radome is the
housing, usually made of composite materials, that shelters the antenna assembly
of a radar set on an airplane, rocket or missile. Management believes that ATP
has approximately a 75% share of the domestic high-performance radome market and
is the sole supplier of radomes for aircraft such as the A-6, AV-8B, B-1, B-1B,
C-5B, C-17, E-2C, F-4, F-5, F-14, F-15, F-16 and the F/A-18. Additionally, ATP
owns a ceramic radome manufacturing technology which enables it to manufacture
high temperature, high performance radomes for interceptor missile applications.
Management believes that ATP has been the sole supplier of Patriot Missile
radomes for the past 12 years. Sales of radomes for each of 1997, 1996 and 1995
constituted 16.8%, 14.3% and 14.7%, respectively, of the total consolidated
revenues of ATP.
AIRCRAFT COMPONENTS. ATP manufactures a variety of other components used
in the aerospace and defense industry. ATP currently fabricates flap assemblies
for the C-17 aircraft and expects to begin delivery of winglets and landing gear
doors for the C-17 by the end of the first quarter of 1998. Because the C-17 is
a high-priority program for the United States Air Force, management of ATP
believes that the production of these C-17 components is expected to provide a
stable stream of revenue for the foreseeable future. ATP also manufactures
composite-based canopies, fuel tanks wing and floor panels, fairings and other
aircrafts components and participates in several leading edge projects. ATP has
also participated in developmental projects that include the successful
application of radar absorbing materials and structures, frequency selective
surfaces and low observable applications. ATP recently won a program to supply
flap track fairings to The Aerostructures Corporation, which parts are installed
on the Airbus A330 and A340 aircraft. This "life of the program" contract is
anticipated to cover approximately 500 aircraft. In February, 1998, ATP also
announced that it had entered into a long-term production alliance with GE
Aircraft Engines pursuant to which ATP will manufacture two composite inlet
devices for the GE F414-400 turbofan engine to be used in the United States
Navy's newest fighter, the F/A-18E/F "Super Hornet." Sales of aircraft
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components for each of 1997, 1996 and 1995 constituted 8.8%, 12.1% and 19.8%,
respectively, of the total consolidated revenues of ATP.
ROCKET MOTOR CASES. ATP manufactures a variety of rocket motor cases used
in solid propellant propulsion systems that are incorporated into strategic
(long-range) and tactical missile systems as well as orbiting commercial
satellites and deep-space penetration spacecraft. ATP manufactures rocket motor
cases for use in strategic missiles such as the D-5 Trident II, as well as for
tactical missile systems such as the VT-1 and the PAC-3 Anti-Missile missile.
ATP also manufactures the ORBUS-21D rocket motor case, which is used in
conjunction with the space shuttle and other unmanned launch vehicles to place
satellites into earth's orbit, and is used on deep space missions.
PRESSURE VESSELS. ATP produces various high-performance pressure vessels
that are used predominantly in aircraft, launch vehicles and space applications
where weight minimization is critical. These high-performance pressure vessels
are used in critical system applications, including emergency power, crew
capsule impact and flotation, maneuvering, environmental, fuel feed and purge
systems. ATP has been a leader in the integration of filament winding technology
in combination with metal liners that results in vessels that meet or exceed
structural requirements. A number of existing pressure vessel configurations are
currently qualified by prime contractors and the military. This qualification
minimizes competition for follow-on orders and provides a variety of products
that can be offered for new applications with minimal capital investment and
production lead time.
FUEL TANKS. External fuel tanks are used by the military to provide an
aircraft with additional operating range. The military requires all-composite
external fuel tanks because they offer a significant weight advantage and
improved crash survivability, greater safety in a fire, and improved gun fire
protection. Management believes that ATP is currently the only qualified
producer of the tank liner for the 230-Gallon AH-64/UH-60 Fuel Tank, which is
used by the United States Army. ATP has completed the full-scale development of
a 480-Gallon Fuel Tank for the F-18 E/F and is under contract for low-rate
initial production.
VEHICLE/MISSILE STRUCTURES. ATP's vehicle/missile structure product line
historically has included composite products used for various structured
applications in the aerospace and defense area, including marine, launch
vehicles, space and aircraft applications. Products more recently included in
this product line are missile warheads, radar housings, missile structures,
aircraft and missile control surfaces and aircraft engine ducts. These
structures must be light-weight and have excellent structural properties in
order to replace conventional metal products. These projects are usually
obtained from various aerospace and defense companies and government
laboratories which need to develop prototype hardware to demonstrate
capabilities of advanced composites.
TUBULAR PRODUCTS. ATP's tubular product line includes missile launch tubes
and torque shafts. The primary products in the launch tube line include the
Multiple Launch Rocket System ("MLRS") and the Javelin launch tubes and the
launch canister for the submarine launched Tomahawk Missile. While the MLRS
program is extremely important to the United States Army as an effective,
low-cost weapon system, the Army has a combined inventory of over 500,000 of
these missiles and the funding level for this program has been, and likely will
remain, low. Composites offer desirable properties for torque shafts for various
aerospace and defense applications and are presently being used in the V-22
Osprey and Boeing Vertol's 234 helicopter. ATP has also manufactured two
prototype drive shafts for the GD-Electric Boat for evaluation for submarines.
RESIN TRANSFER MOLDING. Resin transfer molding is the fabrication of a
composite component by pumping resin into a mold containing reinforcement
material. The rough product is then removed from the mold and finished. While
use of this manufacturing process is primarily driven by its lower cost, recent
advances in materials and equipment have helped to make the process a viable
choice for fabricating composite aircraft and military structures. Currently,
ATP has over 100 components on the advanced military fighter aircraft currently
in development, including the F-18-E/F and the F-22. In addition to serving as a
supplier to the manufacturers of military aircraft, ATP is also providing
components for the MD-80 commercial aircraft, engine components and containers
for military hardware. ATP is continuing to
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look for ways to expand the use of this manufacturing process to a wide variety
of applications in support of the aerospace and defense customer base.
METAL BONDING. ATP supplies metal bonded products through the Lunn
Industries Division. ATP possesses the technology and qualifications as required
by The Boeing Company for Phosphoric Acid Anodizing ("PAA") and structural
bonding to BAC 5555. This PAA capability allows ATP to service the commercial
aircraft market. Numerous other qualifications allow ATP to provide products and
services to the spaceflight, defense and industrial markets. ATP-metal bonded
products can be found in the Boeing 777, 747, 757, 767 and 727 commercial
aircraft as well as numerous defense and satellite applications.
HONEYCOMB. ATP manufactures aluminum honeycomb products through its Alcore
division for use in the aerospace and aircraft industries. Aluminum honeycomb is
a lightweight cellular material composed of hexagonal cells. The most prominent
characteristics of aluminum honeycomb products are high strength-to-weight
ratios, fatigue resistance, energy absorption, sound dampening, heat exchange,
radio frequency shielding, machinability, airflow directionalization and
corrosion resistance. Management believes that one of Alcore's most promising
products is PAA-CORET, a phosphoric acid anodized honeycomb product. PAA-CORET,
qualified to Boeing specifications as BMS 4-4 and 4-6, has recently been
designated as the material of choice for all new metal bonded structures at
Boeing and management believes it is now becoming the material of choice of
other commercial and military aircraft industries.
OTHER DEFENSE SYSTEMS
SHELTERS/SHELTER INTEGRATION. ATP designs, develops and produces mobile
military shelters and has developed leading design and automated production
capabilities for honeycomb, and foam and beam sandwich panel construction,
relocatable shelters. Management believes that most of the shelters in the
inventory of the Department of Defense (the "DOD") were designed and produced
by ATP or its predecessors. Sales of shelters and shelter integration products
for each of 1997, 1996 and 1995 constituted 12.1%, 16.2% and 14.9%,
respectively, of the total consolidated revenues of the business of ATP.
CHEMICAL DEFENSE. ATP is involved in production of the Improved Chemical
Agent Monitor ("ICAM"), a monitoring system designed to detect surface
contamination on a wide variety of objects. Upon the completion of first article
testing, ATP anticipates full-scale production of the ICAM to continue through
2002. ATP is also actively involved in the development and production of
collective protection systems. Collective protection systems provide a clean and
over-pressured environment for soldiers to conduct their mission. Management
believes that ATP's collective protection systems, such as the internally
developed Bio-Chem Filter Blower Unit, are the collective protection system of
choice for several of the next generation vehicle systems. Also, ATP is
producing the M28 Deployable Medical Collective Protection Equipment ("CPE").
This product assures a clean environment for field hospital units for both the
United States Army and Air Force. Production of the M28 CPE is expected to
continue through 1999. ATP recently won a $30 million cost-plus contract to
develop the Generation II Remote Chemical Agent Detector for the U.S. Army.
Development work under this contract will be performed over the next four years.
In addition, the contract includes options for production units which could
potentially continue through 2007. ATP has submitted competitive bids for the
United States Marine Corps chemical defense reckon vehicles and the United
States Army Water Purification Units, both of which contracts are expected to be
awarded in 1998. Sales of chemical defense systems and related products for each
of 1997, 1996 and 1995 constituted 4.4%, 17.8% and 6.5%, respectively, of the
total consolidated revenues of ATP.
ORDNANCE. ATP has been the sole manufacturer of the Volcano launcher
system. This system, which is mounted on wheeled and tracked vehicles as well as
UH60A helicopters, provides for rapid deployment of mine fields. Customers
include the United States Army and other defense prime contractors. Sales of
ordnance delivery system components for each of 1997, 1996 and 1995 constituted
18.8%, 5.1% and 6.4%, respectively, of the total consolidated revenues of ATP.
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COMMERCIAL SEGMENT
NATURAL GAS VEHICLE FUEL TANKS
Legislation mandating stricter air pollution regulations combined with the
abundance of natural gas has created a demand for clean running NGVs. The demand
for NGVs is expected to grow dramatically over the next several years as
installation and refueling infrastructure is added. The most rapidly growing
segment of this market is for transit buses and other types of fleet vehicles
which return to a central depot at the end of each shift. There is also a great
deal of interest in many economically developed countries for NGVs. ATP is
actively working with regulatory agencies in other countries to develop
standards to allow use of all composite NGV cylinders. ATP has signed a
distribution agreement with Mitsui Plastics, Inc. for certain Asian countries.
ATP has spent over six years and $10 million to design, develop and market
an extremely durable, all-composite, plastic-lined Type IV Tank for the NGV
market. The ATP trademarked "TuffshellT" tank competes with steel tanks (Type
I), metal-lined tanks with a hoop over-wrap (Type II) and metal-lined tanks with
a full over-wrap (Type III). Weight reduction and resistance to external damage
are the primary technical criteria during fuel tank selection. The Type IV tank
offers substantial weight reductions (a minimum of 30% versus glass wrapped
aluminum lined Type III tanks) and the flexibility to reduce the impact of the
weight increase. Type IV tanks may be placed on the roof or underbody of transit
busses without violating Federal restrictions on curb weight. Metal lined tanks
that offer reliable impact resistance are generally too heavy to place on the
roof of busses. The Type IV tank has captured over 75% of the transit bus market
in the past four years and is preferred by major builders of transit compressed
natural gas powered coaches. Light duty sedan/truck designers must also keep
their gross vehicle weights below defined Federal levels to meet Environmental
Protection Agency classifications and to meet customer preferences concerning
vehicle handling and low repair costs for suspension and brake components. This
is especially important for the highly successful import vehicle sedan segment
where engine displacement is below the North American average.
SPECIALTY VEHICLE ELECTRONIC PRODUCTS
The specialty vehicle electronics group is engaged in the design and
manufacture of electronic products for the specialty vehicle market that are
primarily used to distribute and control electrical power throughout the
vehicle. This market includes recreational vehicles ("RVs"), conversion vans,
trucks, buses and boats. Currently, ATP sells approximately 250 different
products, most of which have been introduced to meet a customer's request to
solve a particular problem. ATP's products fall into three main categories:
battery run-down protection and charging, power switching and control, and 120
volt AC power management. Many of the battery run-down protection and charging
products are centered around ATP's patented disconnect relay. The power
switching and distribution products center on ATP's unique patented multiplex
system. ATP's patented 120 volt AC power management products are used in RVs to
minimize the overloading of circuit breakers. ATP's electrical products are
currently utilized by all major motor home original equipment manufacturers and
all but one of the major van converters. ATP is currently directing efforts at
increasing its market penetration into the truck, bus and marine industries.
OIL AND GAS EXPLORATION PRODUCTS
ATP manufactures several products used in the oil and gas industry. ATP has
developed a flexible drill pipe that facilitates horizontal drilling, allowing
an operator to re-enter an old small diameter well that is no longer an
effective producer and drill a horizontal lateral into a producing zone. The
technology exists to increase the size of the drill pipe for use in larger
extended reach applications. ATP has also developed drillable casing for the
horizontal drilling market, which is placed in the well at the location where a
horizontal lateral will be drilled. The drill motor will easily drill through
the wall of the drillable casing as opposed to the more lengthy milling
operation required by the use of conventional steel casing.
ATP is also participating with several companies on a National Institute
for Science and Technology project for the development of a production riser to
be used in water depths of 3,000 feet and beyond. This product will be much
lighter than steel casing and both lighter and much less expensive than
titanium. All
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key test requirements have been demonstrated and management believes that the
product will be ready for commercialization in 1999-2000. The number of deep
water platforms is expected to increase as oil reserves in shallower waters
decrease and, because there are numerous wells per platform, this represents a
significant future opportunity. ATP is under contract to Norske, Conoco and
Kvaerner to develop a composite drill riser for deepwater applications.
ATP applied the NGV all-composite tank technology to develop an accumulator
tank for the Production Riser Tensioning system on off-shore platforms. There
are as many as four accumulators per well and the new platforms have in excess
of 25 wells per platform. The all-composite accumulator is lighter weight,
non-corrosive and competitively priced with all steel accumulators. The ATP
accumulator meets ASME Code X and currently there is not a qualified competitor
for this product. These accumulators offer some significant advantages for the
platform and as a result the revenue is expected to increase significantly over
the next several years.
SHAFTS AND ROLLERS
In the industrial machine industry, there is a growing recognition and
acceptance of the advantages of composite shafts and rollers over heavier steel
units. Composite shafts are much lighter and, with the use of carbon fiber, the
stiffness is maintained and the fatigue life is increased. ATP manufactures
several sizes and configurations of shafts.
HONEYCOMB
Beginning in 1994, Alcore expanded beyond the aerospace market into a
number of non-aerospace markets. Applications for high performance, low cost
commercial products were developed for manufacturers of "clean rooms" for
computer chip manufacturing and bio-medical research centers, laminated panels
for luxury cruise ship cabins and numerous architectural uses. Alcore's
honeycomb products are utilized by manufacturers of rail car doors for municipal
transit systems, and, due to unique crush characteristics and energy absorbing
qualities, by the nuclear and energy absorption industries.
COMPETITION AND MARKETS
ATP competes with many manufacturers which, depending on the product
involved, range from large diversified enterprises to smaller companies
specializing in particular products. Factors that affect ATP's competitive
posture are the quality of products and services, the ability to employ certain
technologies and pricing strategies. ATP competes by defining and understanding
customer and market needs, using its technology base to develop new product
applications that meet those needs, communicating and demonstrating the
technical advantage of its products and building long-term relationships with
its customers.
There are many companies that compete with ATP in the aerospace and defense
industry. While ATP's management believes that it has an approximate 75% share
of the domestic high-performance radome market and is a leading supplier of
radomes in the domestic and international markets, ATP competes with a number of
other companies in the production of composite based products used in the
aerospace and defense industries. ATP is a leader in the design and production
of chemical detection equipment. Similarly, while ATP's market share varies with
respect to its other aerospace and defense products such as rocket motor cases,
fuel tanks and pressure vessels, ATP overall has only a minor share of the total
aerospace and defense markets.
Certain of ATP's other commercial products are highly specialized and face
less competition in their respective markets. ATP's management believes that ATP
has approximately 30% of the NGV fuel tank market and is a leading supplier of
battery run-down protection and the power switching and control devices for the
motor home and van conversion original equipment manufacturer markets.
Additionally, while there are numerous producers of standard drill pipe and
casing and fiberglass tubulars, ATP has a leading position in the application of
advanced composites in the oil and gas industry.
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MARKETING AND CUSTOMERS
ATP markets its aerospace and defense products through direct personal
contacts with its customers, active membership in various industry groups, and
by participation in industry trade shows. ATP's aerospace and defense products
are sold primarily to agencies of the United States government and to commercial
customers in the aerospace industry. In 1997, sales to the United States
government either directly or by subcontract constituted 71% of ATP's total
revenue. Other major customers include The Boeing Company and Lockheed Martin
Corporation. Combined aerospace component sales to these customers, most of
which are included above as United States government sales by subcontract,
represented 27% of ATP's total revenues during 1997. ATP's aerospace and defense
products are generally designed and developed to customer specifications.
ATP markets and sells NGV fuel tanks and specialty vehicle electronics
primarily to vehicle manufacturers. ATP sells a predominant number of its
specialty vehicle products to only a few major customers, the loss of any of
which would have an adverse impact on its specialty vehicle products group.
In the commercial composites business, it is necessary to carry a
reasonable raw material and finished goods inventory to allow for a rapid
customer response. The average days sales outstanding of accounts receivable for
the commercial products run somewhat longer than for comparable aerospace and
defense products. Also, there is a greater risk of bad debt associated with
commercial products.
Warranties on these products are for material and workmanship and are based
on standard industry practice. Though ATP has endeavored to design an extremely
safe and durable product, the NGV tank and production riser have a potential for
greater product liability than standard aerospace and defense products. ATP
believes it has adequate product liability insurance to offset these risks.
PATENTS
ATP owns numerous patents and patent applications, some of which, together
with licenses under patents owned by others, are utilized in its operations.
While such patents and licenses are, in the aggregate, important to the
operation of ATP's business, no existing patent, license or other similar
intellectual property right is of such importance that its loss or termination
would, in the opinion of management, materially affect ATP's business.
BACKLOG
ATP's total backlog of contracts as of December 31, 1997, was approximately
$552 million as compared to a backlog of approximately $283 million as of
December 31, 1996. These backlogs include options or unreleased orders of
approximately $360 million in 1997 and $163 million in 1996. The increase in the
backlog reflects (i) a change in management's strategy, since acquiring the
Brunswick Business in 1995, to obtain longer-term contracts than its
predecessor; (ii) improved economic conditions in the aerospace industry; and
(iii) the military's commitment to develop systems to combat chemical warfare.
Predominantly all of the backlog relates to the aerospace and defense segment.
GOVERNMENT CONTRACTS
Because the United States government is a primary customer, ATP's revenues
are directly affected by the government's budget process and inadequate funding
of the operation and maintenance portion of the DOD budget or a reduction in the
budgeted amount for certain programs could have an adverse impact on the revenue
of ATP. All government contracts, and, in general, subcontracts thereunder are
subject to termination in whole or in part at the convenience of the United
States government as well as for default. Long-term government contracts and
related orders are subject to cancellation if appropriations for subsequent
performance periods become unavailable. However, with respect to most contracts
involving the military, ATP would be entitled to receive cancellation payments
upon cancellation of such contracts.
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RAW MATERIALS AND SUPPLIES
Raw materials essential to the conduct of all of ATP's business segments
generally are available at competitive prices. ATP has not experienced
significant difficulties in its ability to obtain raw materials and other
supplies needed in its manufacturing processes, nor does ATP expect such
difficulties to arise in the future. The supply of carbon fiber has been tight
in 1997, but management expects additional capacity in 1998 to alleviate this
situation. ATP ordinarily acquires components and materials through purchase
orders typically covering ATP's requirements for periods averaging 90 to 120
days.
RESEARCH AND DEVELOPMENT
ATP and Brunswick Technical Group have spent $1,063,000, $1,213,000 and
$799,000 for each of 1997, 1996 and 1995, respectively, on research and
development. Predominantly all of the research and development expenses relate
to the aerospace and defense segment.
SEASONALITY
The United States government's fiscal year begins on October 1 and
contracts and options on contracts are generally awarded just prior to its year
end. The lead time to perform the necessary design work, procure materials and
begin production is generally several months, which can create a period of low
production, revenue and profits in the first half of each fiscal year of ATP.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations."
FOREIGN OPERATIONS
Foreign sales to manufacturers worldwide totaled approximately 7.1%, 5.8%
and 7.7% of ATP's total revenues for each of 1997, 1996 and 1995, respectively.
The amounts of revenues, operating income and identifiable assets attributable
to foreign operations were not material when compared to those of ATP's domestic
operations during 1997, 1996 and 1995.
ENVIRONMENTAL REGULATION
ATP's operations are subject to numerous local, state and federal laws and
regulations concerning the containment and disposal of hazardous materials,
pursuant to which ATP has incurred compliance costs. Such costs to date have not
been material. ATP does not presently anticipate the need for significant
expenditures to ensure continued compliance with current environmental
protection laws. Regulations in this area are subject to change and there can be
no assurance that future laws or regulations will not have a material adverse
effect on ATP.
EMPLOYEES
At December 31, 1997, ATP had 1,293 employees. Approximately 450 of ATP's
employees are covered by three separate collective bargaining agreements with
various international and local unions. ATP's management considers employee
relations generally to be good and believes that the probability is remote that
renegotiating these contracts will have a material adverse effect on its
business.
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ITEM 2. PROPERTIES
ATP's principal executive offices are located at 3353 Peachtree Road, Suite
920, Atlanta, Georgia. ATP maintains various facilities nationwide and considers
all of its facilities to be in relatively good operating condition and adequate
for their present uses. ATP believes that it has sufficient capacity to meet its
current and anticipated manufacturing requirements. The following table sets
forth ATP's principal manufacturing plants:
APPROXIMATE LEASED
SQUARE OR
FOOTAGE OWNED
----------- -------
Marion Composites Division:
Marion, Virginia................ 1,019,000 Owned
Intellitec Division:
Deland, Florida................. 353,000 Owned
Lincoln Composites Division:
Lincoln, Nebraska............... 224,000 Owned
Lincoln, Nebraska............... 99,000 Leased
Lunn Industries Division:
Glen Cove, New York............. 93,000 Leased
Alcore Division:
Belcamp, Maryland............... 65,000 Owned
Jessup, Maryland................ 43,000 Leased
The manufacturing facilities of the Marion Composites Division and the Lunn
Industries Division are used exclusively in connection with the ATP's aerospace
and defense segment. While predominantly used in connection with ATP's aerospace
and defense segment, the facilities of the Intellitec Division, the Lincoln
Division and the Alcore Division are used to some extent in connection with
ATP's commercial segment.
ATP pays approximately $995,000 in annual rental expense with respect to
its leased facilities, of which approximately $184,000 relates to facilities in
Lincoln, Nebraska, $275,000 relates to facilities in Glen Cove, New York and
$260,000 relates to facilities in Jessup, Maryland. ATP earns approximately
$250,000 in rental income on certain of its Deland, Florida facilities.
Leases covering ATP's leased facilities expire at varying dates generally
within the next 10 years. ATP anticipates no difficulty in either retaining
occupancy through lease renewals, month-to-month occupancy or purchases of
leased facilities, or replacing the leased facilities with equivalent
facilities.
During the first quarter of 1998, ATP's Alcore Division entered into a new
ten year lease agreement for a facility located in Edgewood, Maryland, into
which the existing Jessup, Maryland operation will be moved. ATP anticipates
that the Edgewood facility will provide increased production capability to
facilitate future business expansion. The annual rental expense of this lease
will be approximately $470,000. ATP plans to sublease the Jessup facility and
anticipates that sublease rental income will substantially offset the lease
cost.
ITEM 3. LEGAL PROCEEDINGS
ATP is not a party to any legal proceedings, other than routine claims and
lawsuits arising in the ordinary course of its business. ATP does not believe
that such claims and lawsuits, individually or in the aggregate, will have a
material adverse effect on ATP's business. Compliance with federal, state, local
and foreign laws and regulations pertaining to the discharge of materials into
the environment, or otherwise relating to the protection of the environment, has
not had, and is not anticipated to have, a material effect upon the capital
expenditures, earnings or competitive position of ATP.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a Special Meeting of stockholders of the Company held on October 31,
1997 (the "Special Meeting"), the stockholders of ATP approved a proposal to
approve and adopt the Acquisition Agreement and Plan of Merger dated June 6,
1997, as amended by the Amendment to Acquisition Agreement and Plan of Merger
dated August 22, 1997 between Lunn and TPG (the "Plan of Merger"). The vote on
the Merger was as follows:
ABSTENTIONS/
FOR AGAINST/WITHHELD BROKER NON-VOTES
- ----------- ---------------- ------------------
7,672,560 91,466 3,978,500
At the Special Meeting, the stockholders of the Company also approved a
proposal to adopt at the 1997 Advanced Technical Products, Inc. Stock Option
Plan (the "Plan"). The vote on the Plan was as follows:
ABSTENTIONS/
FOR AGAINST/WITHHELD BROKER NON-VOTES
- ----------- ---------------- ------------------
7,651,004 184,982 3,906,540
9
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ATP's common stock is traded on the Nasdaq SmallCap Market of the Nasdaq
Stock Market under the symbol "ATPX." The following table sets forth the high
and low sales prices of ATP common stock for the calendar quarters indicated, as
reported by the Nasdaq Stock Market, Inc.:
ATP COMMON STOCK
MARKET PRICE
----------------------
FISCAL YEAR ENDED DECEMBER 31, HIGH LOW
- ------------------------------------- ---------- ----------
1997
First Quarter........................ $ 0.9375 $ 0.6563
Second Quarter....................... $ 1.2500 $ 0.7500
Third Quarter........................ $ 1.7813 $ 1.0938
Fourth Quarter(1)
October 1 - November 3.......... $ 1.6250 $ 1.1875
November 4 - December 31........ $ 18.0000 $ 11.5000
1996
First Quarter........................ $ 1.9375 $ 0.6250
Second Quarter....................... $ 2.0000 $ 1.0938
Third Quarter........................ $ 1.4375 $ 0.9375
Fourth Quarter....................... $ 1.3750 $ 0.6875
- ------------
(1) On October 31, 1997, the Company effected a ten-to-one reverse stock split
and issued an additional 3,943,830 shares in connection with the Merger. The
common stock of the Company began trading on November 2, 1997 on this basis.
On March 26, 1998, ATP had approximately 1,003 stockholders of record. The
last reported sales price of ATP's common stock on such date was $13 7/8.
ATP has not paid dividends on its common stock and does not currently
intend to pay any cash dividends in the foreseeable future. The determination of
the amount of future cash dividends to be declared and paid on the common stock
of ATP, if any, will depend upon ATP's financial condition, earnings and cash
flow from operations, the level of its capital expenditures, its future business
prospects and other factors that the Board of Directors of ATP deems relevant.
In addition, ATP's debt agreements contain covenants restricting the payment of
cash dividends to ATP's common stockholders.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial data presented below as of and for the periods
ending December 31, 1994 through December 31, 1997, have been derived from the
audited financial statements of ATP, TPG and Brunswick Technical Group, the
assets of which were acquired by TPG on April 28, 1995 pursuant to the
acquisition of the Brunswick Business. The financial information as of and for
the year ended December 31, 1993, is derived from the unaudited financial
statements of Brunswick Technical Group. The unaudited financial statements
include all adjustments considered necessary for a fair presentation of the
financial condition and results of operation for this period.
10
<PAGE>
The information presented below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the consolidated financial statements of ATP and related notes and
other financial information included elsewhere in this Annual Report on Form
10-K.
<TABLE>
<CAPTION>
BRUNSWICK TECHNICAL GROUP TPG
------------------------------------------- -----------------------------
AS OF AND AS OF AND
AS OF AND FOR THE YEAR FOR FOR
ENDED THE FOUR THE EIGHT AS OF AND FOR
--------------------------- MONTHS ENDED MONTHS ENDED THE YEAR
DEC. 31, DEC. 31, APRIL 28, DEC. 31, ENDED
1993 1994 1995 1995 DEC. 31, 1996
--------------- -------- ------------ ------------ -------------
(UNAUDITED)
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................ $ 122,244 $118,660 $ 28,416 $ 79,172 $ 126,534
Cost of sales........................ 116,155 112,950 27,354 61,738 94,365
--------------- -------- ------------ ------------ -------------
Gross profit......................... 6,089 5,710 1,062 17,434 32,169
General and administrative and other
expenses........................... 13,675 3,923 1,350 12,123 21,758
--------------- -------- ------------ ------------ -------------
Operating income (loss)(3)........... (7,586) 1,787 (288) 5,311 10,411
Interest expense(1).................. -- -- -- 1,892 2,377
--------------- -------- ------------ ------------ -------------
Income (loss) before income taxes and
extraordinary items................ (7,586) 1,787 (288) 3,419 8,034
Income tax provision* (benefit)...... (2,959) 683 (112) 1,312 3,093
Income (loss) before extraordinary
items.............................. (4,627) 1,104 (176) 2,107 4,941
Extraordinary Item(2)................ -- -- -- -- 667
--------------- -------- ------------ ------------ -------------
Net Income (loss).................... $ (4,627) $ 1,104 $ (176) $ 2,107 $ 4,274
=============== ======== ============ ============ =============
EPS DATA:
Earnings per share -- basic.......... N/A N/A N/A $ 0.52 $ 1.06
Earnings per share -- diluted........ N/A N/A N/A $ 0.52 $ 1.03
BALANCE SHEET DATA:
Working capital...................... 20,426 29,882 26,868 17,558 18,462
Total assets......................... 53,413 54,995 53,358 38,911 44,723
Long-term debt, including current
portion(1)......................... -- -- -- 17,926 17,222
Redeemable 8% cumulative preferred
stock.............................. -- -- -- 1,000 1,000
Common stockholders' equity.......... -- -- -- 2,919 7,018
</TABLE>
ATP
---------------
AS OF AND FOR
THE YEAR
ENDED
DEC. 31, 1997
---------------
(IN THOUSANDS)
INCOME STATEMENT DATA:
Net sales............................ $ 119,433
Cost of sales........................ 91,312
---------------
Gross profit......................... 28,121
General and administrative and other
expenses........................... 19,006
---------------
Operating income (loss)(3)........... 9,115
Interest expense(1).................. 2,273
---------------
Income (loss) before income taxes and
extraordinary items................ 6,842
Income tax provision* (benefit)...... 2,634
Income (loss) before extraordinary
items.............................. 4,208
Extraordinary Item(2)................ --
---------------
Net Income (loss).................... $ 4,208
===============
EPS DATA:
Earnings per share -- basic.......... $ 0.99
Earnings per share -- diluted........ $ 0.95
BALANCE SHEET DATA:
Working capital...................... 21,208
Total assets......................... 85,684
Long-term debt, including current
portion(1)......................... 19,216
Redeemable 8% cumulative preferred
stock.............................. 1,000
Common stockholders' equity.......... 26,494
- ------------
(1) Prior to April 29, 1995, the Brunswick Technical Group was included as part
of Brunswick's consolidated financial statements. Brunswick did not allocate
any debt or interest expense to the Brunswick Technical Group.
(2) Reflects an extraordinary loss from debt refinancing, net of an income tax
benefit of $418,000.
(3) The loss from operations for 1993 was partially the result of (i) a write
down of certain impaired fixed assets included as part of general and
administrative and other expenses, (ii) severance expenses recorded in
connection with a reduction in work force program implemented by Brunswick
and (iii) start up costs incurred in connection with the NGV fuel tank
business.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements of ATP and related notes contained elsewhere in this Annual Report on
Form 10-K.
GENERAL
On October 31, 1997, TPG merged with Lunn under the name "Advanced
Technical Products, Inc." Immediately after the merger, the former stockholders
of Lunn owned approximately 26% of ATP and the former stockholders of TPG owned
approximately 74% of ATP. For accounting purposes, the merger was treated as a
purchase of Lunn by TPG and the results of operations of Lunn since November 1,
1997 have been included in the consolidated financial statements of ATP.
TPG was formed in 1995 to acquire the Brunswick Business, which acquisition
was completed on April 28, 1995. The selected consolidated financial data for
1995 presents the four month period prior to the acquisition of the Brunswick
Business and the eight month period subsequent to such acquisition.
Historically, approximately 80% of ATP's products and services have been
sold to the United States government through prime contracts directly with
governmental agencies, primarily the DOD, or through subcontracts with other
governmental contractors. During the mid-1980s, the defense industry began to be
negatively impacted by a perceived reduction of threats from the former Soviet
Union and affiliated countries in eastern Europe. In addition, increased
competition for the United States federal budget dollars resulted in a reduction
in real dollars in the United States defense budget over the last decade.
Defense spending has recently begun to stabilize and management of ATP believes
that budgeted procurement spending will increase slightly over the next few
years.
The contraction of the defense budget over the last decade and the
resulting excess capacity and intensified competition among defense contractors
has resulted in significant industry consolidation. ATP's strategy includes the
pursuit of acquisitions which will increase its revenue base and improve its
cost competitiveness through reduced overhead costs, facility consolidations and
the elimination of other duplicative costs. Management of ATP believes continued
defense industry consolidations will create opportunities for selected
acquisitions that will allow ATP to further increase its revenue base and
enhance its cost-competitive position. However, because of the uncertainty of
the nature and size of these opportunities, as well as ATP's leverage, there can
be no assurances that the financing necessary to pay for acquisitions can be
obtained.
Although the long-term impact of industry consolidation and the defense
spending budget cannot be predicted with certainty, management of ATP believes
that it is positioned to further its presence in the United States defense
industry and increase its ongoing diversification efforts into foreign defense
markets and selected commercial markets.
The United States government's fiscal year begins on October 1 and
contracts and options on contracts are generally awarded just prior to its year
end. The lead time to perform the necessary design work, procure material and
begin production is generally several months, which can create a period of low
production, revenue and profits in the first half of each fiscal year of ATP.
Over the last 5 years, the percentage of sales and operating earnings (excluding
corporate general and administrative expenses) generated in the second half of
the year have been as follows:
EARNINGS BEFORE
YEAR SALES INTEREST & TAXES
----- ----- ----------------
1997................................. 57% 73%
1996................................. 54% 62%
1995................................. 56% 134%
1994................................. 57% 80%
1993................................. 57% 97%
12
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the components
of the income statement expressed as a percentage of revenues.
<TABLE>
<CAPTION>
EIGHT MONTHS YEAR ENDED
FOUR MONTHS ENDED ------------------------
ENDED APRIL 28, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
--------------- ------------- ------------ ---------
<S> <C> <C> <C> <C>
Revenues............................. 100.0% 100.0% 100.0% 100.0%
Cost of sales........................ 96.3 78.0 74.6 76.5
--------------- ------------- ------------ ---------
Gross profit......................... 3.7 22.0 25.4 23.5
General and administrative and other
expenses........................... 4.7 15.3 17.2 15.9
--------------- ------------- ------------ ---------
Operating income..................... (1.0) 6.7 8.2 7.6
Interest expense..................... -- 2.4 1.9 1.9
--------------- ------------- ------------ ---------
Income (loss) before income taxes and
extraordinary items................ (1.0) 4.3 6.3 5.7
Income tax provisions (benefit)...... (0.4) 1.6 2.4 2.2
--------------- ------------- ------------ ---------
Income (loss) before extraordinary
items.............................. (0.6) 2.7 3.9 3.5
Extraordinary item -- loss on debt
refinancing........................ -- -- 0.5 --
--------------- ------------- ------------ ---------
Net income (loss).................... (0.6)% 2.7% 3.4% 3.5%
=============== ============= ============ =========
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1996
Revenues decreased $7.1 million, or 5.6% from $126.5 in 1996 to $119.4
million in 1997. The decrease in 1997 was primarily due to (i) the completion of
a major chemical detection contract in late 1996; and (ii) the delay in the
production of a major shelter contract caused by design changes mandated by the
customer. These decreases were partially offset by the production related to an
ordnance contract in 1997.
Gross profit as a percent of revenues decreased from 25.4% in 1996 to 23.5%
in 1997. This was primarily attributable to the substantial completion of two
major contracts in 1996 which had gross margins substantially higher than those
of the contracts that replaced them in 1997. This was partially offset by
improved performance in the NGV business.
General and administrative expenses decreased $2.8 million, or 12.6% from
$21.8 million in 1996 to $19.0 in 1997. This decrease results primarily from a
decrease in incentive compensation expense from $1.5 million in 1996 to $0.0 in
1997. Additionally, in response to lower revenues, certain other general and
administrative expenses were eliminated. Excluding incentive compensation
expense, general and administrative expenses as a percent of revenues were
approximately 16% for both years.
Interest expense decreased approximately $0.1 million or 4.4%, as result of
lower interest rates obtained in a refinancing in late 1996, offset by higher
average loan balances.
The decrease of $0.5 million in income taxes from $3.1 million in 1996 to
$2.6 million in 1997 results from lower earnings as the effective rate remained
at 38.5%.
The extraordinary charge of $0.7 million in 1996 was the result of costs
incurred in connection with a refinancing in late 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1995
Revenues on a combined basis increased $18.9 million, or 17.6%, from $107.6
million in 1995 to $126.5 million in 1996. The increase was primarily the result
of increased shipments during 1996 of chemical agent detectors under a contract
with the United States Army. Approximately 4.5% of the increase was a result of
increased commercial sales, consisting primarily of NGV tanks.
13
<PAGE>
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH THE EIGHT MONTHS ENDED DECEMBER 31,
1995
Gross profit as a percent of sales increased from 22% in 1995 to 25.4% in
1996 as a result of (i) a more favorable sales mix of higher profit contracts in
1996, and (ii) an increase in production efficiency attributable to the
commercial segment.
Operating income increased as a percentage of sales from 6.7% in 1995 to
8.2% in 1996, as a result of higher annualized sales absorbing more fixed
general and administrative costs.
Interest expense decreased from an average of approximately $240,000 a
month in 1995 to approximately $200,000 a month in 1996 based primarily on lower
average loan balance outstanding.
An extraordinary loss of $0.7 million (after tax) was recorded in 1996 for
costs incurred in connection with a debt refinancing.
FINANCIAL CONDITION AND LIQUIDITY
Working capital increased by $2.7 million from $18.5 million in 1996 to
$21.2 million in 1997 as a result of (i) an increase in inventory and accounts
receivable of $11.5 million, offset by an increase in accounts payable of $5.7
million and an increase in short-term debt of $4.8 million (excluding debt
assumed in the Merger); (ii) an increase in depreciation of $1.5 million as a
result of capital additions over the last couple of years; and (iii) the
increase in working capital components acquired in the Merger. The increase of
$2.2 million in accounts receivable results from higher than normal sales in the
month of December. The increase in inventory of $9.4 million resulted from a
build-up of inventory on a major shelter contract that was delayed in 1997 and
the start-up and tooling costs related to several major contracts that will come
on stream in late 1998. As a result of these working capital increases, cash
flow from operations were basically at break-even. Cash flow of $3.0 million
used in investing activities was a result of (i) $1.8 million of normal
sustaining capital expenditures and (ii) $1.2 million of capital expenditures
made in connection with the Merger.
In March 1998, ATP received a commitment from a bank to refinance ATP's
existing $39 million of credit facilities. These facilities are comprised of (i)
a term loan of $12 million; (ii) a deferred obligation of $3 million; (iii) a
combined revolving lines of credit of $23 million; and (iv) a capital
expenditure line of credit of $1 million. The term loan and the deferred
obligation will be replaced with a term loan of $18 million payable quarterly
based on a seven-year amortization period. The combined lines of credit, which
will be based on ATP's accounts receivable and inventory balances, will be
replaced with a new $27 million revolving line of credit. The capital
expenditure line of credit will be replaced with a $3 million line of credit.
The total credit facility of $48 million will initially be in place for a period
extending to December 31, 2000 . Interest rates will vary, based on performance
of ATP, but should be favorable to the existing rates by at least one percentage
point going forward.
At December 31, 1997, ATP's backlog of orders and long-term contracts was
approximately $552 million compared to $283 million at December 31, 1996. The
backlog includes scheduled or released orders of approximately $192 million
compared to $120 million at December 31, 1996. The backlog includes both firm
orders supported by customer purchase orders with fixed delivery dates and
blanket orders against which customers issue production releases. The increase
in the backlog reflects (i) a change in management's strategy, since acquiring
the Brunswick Business in 1995, to obtain longer-term contracts than its
predecessor; (ii) improved economic conditions in the aerospace industry; and
(iii) the military's commitment to develop systems to combat chemical warfare.
The backlog is subject to customer rights of cancellation or rescheduling.
However, in most contracts involving the military, ATP would be entitled to
receive cancellation payments. Generally the backlog does not include future
sales of commercial products since they are normally shipped on order and are
not subject to long-term contracts.
ATP has a significant amount of unused manufacturing capacity and therefore
generally does not anticipate large annual sustaining capital requirements
although, there will be years when improvements or
14
<PAGE>
expansions will be necessary. Also, ATP will be looking for opportunistic
acquisition candidates that will enhance the current operations.
Management of ATP believes that cash flow generated from operations and the
new $48 million credit facility are adequate to sustain ATP's current operating
level and future short-term growth.
FACTORS AFFECTING FUTURE OPERATING RESULTS
This Annual Report on Form 10-K contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The
forward-looking statements are those that do not state historical facts and are
inherently subject to risk and uncertainties. The forward-looking statements
contained herein are based on current expectations and entail various risks and
uncertainties that could cause actual results to differ materially from those
projected in such forward-looking statements. Some of such risks and
uncertainties are described below.
DEPENDENCE ON PRINCIPAL INDUSTRIES. The revenues of ATP are concentrated
in the aerospace and defense industries. Sales to non-aerospace and non-defense
industries, although growing, are anticipated to approximate 20% of total
revenues of ATP for the foreseeable future. ATP's success will be heavily
dependent on its ability to successfully obtain major new defense orders
currently planned to be released by the United States government and government
prime contractors, as well as the continued strength of the aerospace industry,
particularly the commercial aircraft industry. No assurances can be given that
ATP will be able to successfully obtain all or even a major portion of the
targeted defense industry orders anticipated to be placed. The commercial
aerospace industry is a cyclical business and the demand by commercial airlines
for new aircraft is highly dependent upon a variety of factors, which
historically have been related to the stability and health of the United States
and world economies. Although the aerospace and commercial aircraft industries
are currently enjoying a significant upturn in business coupled with receipt of
numerous major long-term orders, there can be no assurances that the situation
will continue in the future.
RISKS OF REDUCTIONS OR CHANGES IN MILITARY EXPENDITURES. The primary
customers of ATP are agencies of the DOD. Sales under contracts with the DOD or
under subcontracts that identify the DOD as the ultimate purchaser represented
approximately 71% of ATP's 1997 revenues. The United States defense budget has
declined in real terms since the mid-1980s, resulting in some delays in new
program starts, program stretch-outs and program cancellations. The United
States defense budget has begun to stabilize and even increase in real dollars
over the last several years. A major portion of ATP's DOD business is expected
to be funded by the procurement and research, development, test and evaluation
segments of the defense budget. Procurement and research, development, test and
evaluation funding has been significantly reduced over the last decade but is
expected to remain relatively stable or grow slightly over the next decade. A
significant portion of ATP's DOD business is also expected to be funded by the
operations and maintenance portion of the DOD budget, which has declined less
than the other segments. A further significant decline or reallocation of the
procurement, research, development, test and evaluation or operations and
maintenance segments of the DOD budget could materially and adversely affect
ATP's sales and earnings. The loss or significant curtailment of ATP's material
United States defense contracts would also materially and adversely affect ATP's
future sales and earnings.
COMPETITION. The market for ATP's products is highly competitive. ATP
competes with numerous competitors, a number of which possess substantially
greater financial, marketing, personnel and other resources. Continued
consolidation of major aerospace companies could result in program cancellations
as well as increased demand for price concessions. This, together with increased
competition for available business, could translate into downward pressure on
gross margins with resulting lower overall profit margins. Vendor prices for
production materials such as resins, liquid and film adhesives, reinforcing
fiber materials and other materials and supplies could increase as demand for
aircraft parts and assemblies increase to match higher build rates for
commercial aircraft. Higher material prices and demand for lower aircraft part
and assembly prices could place increasing pressure on ATP's operating margins
and net
15
<PAGE>
income. Although management of ATP believes that the Merger has enhanced ATP's
competitiveness, there can be no assurance that ATP will be able to compete
successfully in the future.
FINANCIAL LEVERAGE. ATP has a significant amount of indebtedness, which
could make it difficult to obtain additional financing for working capital,
capital expenditures, acquisitions or other purposes. Moreover, the terms of
ATP's indebtedness impose various restrictions and covenants on ATP which could
potentially limit ATP's ability to respond to market conditions or to take
advantage of business opportunities. ATP's ability to meet its debt service
obligations and to reduce total debt will be dependent upon its future
performance, which, in turn, will be subject to general conditions in the
aerospace and defense industries and to financial, business and other factors
affecting the operations of ATP, many of which will be beyond its control.
YEAR 2000 ISSUES
ATP is conducting a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue and is
implementing its plan to resolve the issue. The Year 2000 problem is a result of
computer programs being written using two digits (rather than four) to define
the applicable year. Any of ATP's 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 major system failure or miscalculations. ATP presently
believes that, with modifications to existing software and conversions to new
software, the Year 2000 problem will not pose significant operational problems
for ATP's computer systems as so modified and converted and that such
modifications and conversions will not have a material adverse effect on ATP's
financial condition or results from operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
16
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
Advanced Technical Products, Inc.
We have audited the accompanying consolidated balance sheet of Advanced
Technical Products, Inc. and subsidiaries (the "'Company") as of December 31,
1997 and the related consolidated statements of income and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Advanced
Technical Products, Inc. and subsidiaries at December 31, 1997 and the results
of their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
March 20, 1998, except as to
Note 8, which is as of
March 31, 1998.
17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
TPG Holdings, Inc.
We have audited the accompanying consolidated balance sheets of TPG
HOLDINGS, INC. (a Delaware Corporation) AND SUBSIDIARIES as of December 31, 1996
and 1995, and the related consolidated statements of income and cash flows for
the year ended December 31, 1996, and the eight months ended December 31, 1995.
These consolidated financial, statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 TPG Holdings, Inc. and
Subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for the year ended December 31, 1996, and the
eight months ended December 31, 1995, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 14, 1997
18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
TPG Holdings, Inc.
We have audited the. accompanying statements of operations and cash flows
of the BRUNSWICK TECHNICAL GROUP, a division of Brunswick Corporation (a
Delaware corporation), for the four months ended April 28, 1995. The 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 results of operations and cash flows of the
Brunswick Technical Group for four months ended April 28, 1995, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 10, 1997
19
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
FOR THE EIGHT MONTHS ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
EIGHT
1997 1996 MONTHS 1995
------------ ------------ -----------
Revenues............................. $ 119,433 $ 126,534 $ 79,172
Cost of sales........................ 91,312 94,365 61,738
General and administrative and other
expenses........................... 19,006 21,758 12,123
------------ ------------ -----------
Operating income................ 9,115 10,411 5,311
Interest expense..................... 2,273 2,377 1,892
------------ ------------ -----------
Income before taxes and
extraordinary item............ 6,842 8,034 3,419
Income taxes......................... 2,634 3,093 1,312
------------ ------------ -----------
Income before extraordinary
item.......................... 4,208 4,941 2,107
Extraordinary loss from debt
refinancing, net of income taxes of
$418............................... -- 667 --
------------ ------------ -----------
Net income...................... $ 4,208 $ 4,274 $ 2,107
============ ============ ===========
Basic earnings per share
Income before extraordinary
item.......................... $ 0.99 $ 1.23 $ 0.52
Extraordinary item, net......... -- (0.17) --
------------ ------------ -----------
Net income................. $ 0.99 $ 1.06 $ 0.52
============ ============ ===========
Diluted earnings per share
Income before extraordinary
item.......................... $ 0.95 $ 1.20 $ 0.52
Extraordinary item net.......... -- (0.17) --
------------ ------------ -----------
Net income.............. $ 0.95 $ 1.03 $ 0.52
============ ============ ===========
Weighted average number of
common and common equivalent
shares outstanding:
Basic...................... 4,157,111 3,943,830 3,943,830
============ ============ ===========
Diluted.................... 4,362,035 4,058,830 3,943,830
============ ============ ===========
The accompanying notes are an integral part of these statements.
20
<PAGE>
BRUNSWICK TECHNICAL GROUP
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FOUR MONTHS ENDED APRIL 28, 1995
(DOLLARS IN THOUSANDS)
FOUR
MONTHS 1995
-----------
Revenues............................. $28,416
Cost of sales........................ 27,354
General and administrative and other
expenses........................... 1,350
-----------
Operating loss.................. 288
Income tax benefit................... 112
-----------
Net loss............................. $ 176
===========
- ------------
Note: The earnings per share calculation is not presented for the period
because the Brunswick Technical Group was a division of Brunswick
Corporation and there were no shares of stock outstanding relating to
this division.
The accompanying notes are an integral part of these statements.
21
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1997 1996
------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 494 $ 1,059
Accounts receivable (net of
allowance for doubtful
accounts of $449 and $179 as
of December 31, 1997 and
1996)......................... 23,417 17,148
Inventories and costs relating
to long-term contracts and
programs in process, net of
progress payments............. 34,633 20,350
Prepaid expenses................ 923 1,079
Deferred income taxes........... 961 309
------------- -------------
Total current
assets............. 60,428 39,945
------------- -------------
PROPERTY, PLANT AND EQUIPMENT:
Land............................ 655 --
Buildings and improvements...... 2,596 256
Machinery and equipment......... 20,333 3,400
Construction in progress........ 2,125 1,460
Less -- Accumulated
depreciation.................. (8,150) (707)
------------- -------------
Net property, plant and
equipment..................... 17,559 4,409
------------- -------------
DEFERRED INCOME TAXES................ 62 191
OTHER ASSETS......................... 7,635 178
------------- -------------
Total assets.......... $85,684 $44,723
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................ $12,003 $ 5,219
Accrued expenses................ 7,637 6,640
Current portion of capital lease
obligation.................... 150 --
Short-term debt................. 19,430 9,624
------------- -------------
Total current
liabilities........ 39,220 21,483
LONG-TERM LIABILITIES:
Long-term debt, net of current
portion....................... 16,678 15,222
Capital lease obligation, net of
current portion............... 325 --
Other liabilities............... 1,967 --
------------- -------------
Total liabilities..... 58,190 36,705
Mandatorily redeemable preferred
stock, 8% cumulative, redeemable,
$1.00 par value, 1,000,000
authorized, issued and
outstanding........................ 1,000 1,000
SHAREHOLDERS' EQUITY:
Preferred stock, undesignated,
1,000,000 shares authorized,
no shares issued and
outstanding................... -- --
Common stock, $.01 par value,
30,000,000 shares authorized,
5,220,052 shares issued and
outstanding as of December 31,
1997; common stock, $.01 par
value, 1,000,000 shares
authorized, 475,000 shares
issued and outstanding as of
December 31, 1996............. 52 5
Additional paid-in-capital...... 16,506 995
Retained earnings............... 10,376 6,248
Less --
Notes receivable from
officers................ (135) (135)
Additional minimum pension
liability............... (305) (95)
------------- -------------
Total shareholders'
equity............. 26,494 7,018
------------- -------------
Total liabilities and
shareholders'
equity............. $85,684 $44,723
============= =============
The accompanying notes are an integral part of these statements.
22
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
FOR THE EIGHT MONTHS ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
EIGHT
1997 1996 MONTHS 1995
--------- --------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................... $ 4,208 $ 4,274 $ 2,107
Adjustments to reconcile net
income to net cash provided by
(used in) operating
activities --
Depreciation and
amortization............ 1,512 646 138
Loss on fixed asset
disposal................ 33 -- --
Deferred income taxes,
net..................... (523) (836) 374
Increase in accounts
receivable.............. (2,193) (2,273) (3,014)
(Increase) decrease in
inventories............. (9,350) (986) 4,294
(Increase) decrease in
prepaid expenses........ 508 (92) (801)
(Increase) decrease in
other noncurrent
assets.................. (119) (55) 57
Increase (decrease) in
accounts payable........ 5,736 (1,492) 1,308
Increase (decrease) in
accrued expenses........ (305) 999 803
--------- --------- -----------
Net cash provided by
(used in) operating
activities......... (493) 185 5,266
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............ (1,785) (1,755) (1,231)
Cash payments for businesses
acquired...................... (1,187) (1,000) --
--------- --------- -----------
Net cash used in
investing
activities......... (2,972) (2,755) (1,231)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of borrowings.......... 5,139 21,624 --
Repayments of borrowings........ (2,102) (19,078) (2,959)
Cash dividends paid............. (120) (93) --
Proceeds from repayment of notes
receivable.................... -- -- 100
Payments under capital lease
obligation.................... (17) -- --
--------- --------- -----------
Net cash provided by
(used in) financing
activities......... 2,900 2,453 (2,859)
--------- --------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... (565) (117) 1,176
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD.......................... 1,059 1,176 --
--------- --------- -----------
CASH AND CASH EQUIVALENTS, END OF
PERIOD............................. $ 494 $ 1,059 $ 1,176
========= ========= ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest..... $ 2,109 $ 2,567 $ 1,512
Cash paid for income
taxes................... $ 1,259 $ 3,043 $ 1,500
The accompanying notes are an integral part of these statements.
23
<PAGE>
BRUNSWICK TECHNICAL GROUP
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FOUR MONTHS ENDED APRIL 28, 1995
(DOLLARS IN THOUSANDS)
FOUR
MONTHS 1995
-----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................ $ (176)
Adjustments to reconcile net
loss to net cash provided by
operating activities --
Depreciation and
amortization.............. 949
Deferred income taxes,
net....................... 795
Decrease in accounts
receivable................ 6,420
Increase in inventories.... (6,028)
Decrease in prepaid
expenses.................. 930
Decrease in other
noncurrent assets......... 19
Decrease in deferred
pension................... (177)
Increase in accounts
payable................... 415
Increase in accrued
expenses.................. 1,469
-----------
Net cash provided by
operating
activities........... 4,616
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............ (462)
-----------
Net cash used in
investing
activities........... (462)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in due to
affiliate...................... (3,962)
-----------
Net cash used in
financing
activities........... (3,962)
-----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................ 192
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD.......................... 65
-----------
CASH AND CASH EQUIVALENTS, END OF
PERIOD............................. $ 257
===========
The accompanying notes are an integral part of these statements.
24
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996, AND 1995 AND APRIL 28, 1995
1. ORGANIZATION
On April 28, 1995, TPG Holdings, Inc. ("TPG") acquired substantially all
of the assets and liabilities of the Brunswick Technical Group ("BTG"). On
October 31, 1997, TPG merged with Lunn Industries, Inc. ("Lunn"), forming
Advanced Technical Products, Inc. (the "Company"). See Note 3 for further
disclosures relating to these business transactions. Accordingly, the financial
statements presented for the four months ended April 28, 1995 reflect BTG's
results of operations, and for periods subsequent to April 28, 1995 reflect the
Company's results of operations.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are 100% owned. The Company is incorporated
in the state of Delaware, with corporate headquarters located in Atlanta,
Georgia. Principal manufacturing operations are located in Marion, Virginia;
Lincoln, Nebraska; Deland, Florida; Belcamp and Jessup, Maryland and Glen Cove,
New York. The Company's subsidiaries include: Technical Products Group, Inc.,
Alcore, Inc., Marion Properties, Inc., Lincoln Properties, Inc. and Deland
Properties, Inc. All significant intercompany transactions and balances have
been eliminated.
The consolidated financial statements of BTG include the revenues and
expenses of the manufacturing operations purchased by TPG, as well as an
allocation of expenses incurred by the BTG headquarters' office and by Brunswick
Corporation in support of BTG. The BTG consolidated statement of operations
reflects substantially all of the costs associated with the normal cost of
business. Expenses allocated to BTG and allocation methods are further discussed
in Note 18.
REVENUE RECOGNITION
Revenues and anticipated profits under long-term fixed price production
contracts are recorded on a percentage of completion method, principally using
units-of-delivery as the measurement basis for effort accomplished. Deliveries
of units are generally made upon acceptance by the customer in accordance with
contract terms.
Revenues under certain long-term fixed price contracts which require a
significant amount of development effort in relation to total contract value are
recorded based on the accomplishment of milestones as specified by contract
terms. Revenues under cost reimbursable type contracts are recorded as costs are
incurred.
Amounts representing contract change orders or claims are included in
estimates of future contract revenues used for preparing estimates of contract
profitability at completion only when realization is probable and amounts can be
reasonably estimated. Outstanding claims which had not been negotiated were not
material as of the balance sheet dates presented in the accompanying financial
statements.
Estimated losses on contracts are recorded in full when identified.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly liquid instruments purchased with an
original maturity of three months or less.
25
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
GENERAL AND ADMINISTRATIVE COSTS
BTG headquarters and Brunswick Corporation expenses which support BTG were
reported as general and administrative expenses during the four months ended
April 28, 1995. BTG absorbed the general and administrative expenses incurred at
its manufacturing operations in inventory and recognized such costs in cost of
sales as such inventory was shipped.
General and administrative expenses reported for periods after April 28,
1995 include all the Company's corporate headquarters level expenses, as well as
the general and administrative expenses incurred at the manufacturing
operations.
RESEARCH AND DEVELOPMENT COSTS
Company-sponsored research and development costs are reported as part of
general and administrative and other expenses. Revenues and costs incurred in
connection with customer-sponsored research and development contracts are
accounted for as contract revenues and costs.
INVENTORIES
Inventories are valued at the lower of first-in, first-out (FIFO) cost or
market (net realizable value). Inventory cost includes material, labor and
manufacturing overhead for periods beginning after April 28, 1995. Prior to
April 29, 1995, inventory cost also includes general and administrative expenses
incurred at the manufacturing operations. Customer progress payments received on
long-term contracts are recorded as an offset to related inventory balances.
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 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. In particular, accounting for long-term contracts requires
management estimates of future contract revenues and costs used for preparing
estimates at contract completion and determining contract profitability
reflected in the financial statements. Actual results could differ from those
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's debt is estimated based upon cash flows
discounted using the interest rates available to the Company for debt with
similar terms and remaining maturities. The carrying value of the Company's debt
approximates fair value due to the variable rate nature of the borrowings and/or
the short maturity of the borrowings. The carrying value of all other financial
instruments approximates fair value due to the short-term nature of such
instruments.
PROPERTY AND EQUIPMENT
Property additions are recorded at cost. The costs of maintenance and
repairs are charged to operating results as incurred. Depreciation is charged
against operations over three to ten years for machinery and equipment and seven
to forty years for buildings and improvements. Improvements to leased property
are amortized over the life of the lease or the estimated life of the
improvement, whichever is shorter. Straight-line and accelerated methods of
depreciation are used for financial reporting and accelerated methods are used
for tax purposes where permitted. Depreciation expense for the years ended
December 31, 1997 and 1996, eight months ended December 31, 1995 and four months
ended April 28, 1995 is $1,415,000, $569,000, $108,000 and $949,000,
respectively.
26
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EARNINGS PER SHARE
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, EARNINGS PER SHARE. This pronouncement required
the restatement of all prior-period earnings per share data presented to conform
to its provisions. Basic earnings per share is computed by dividing net earnings
available for common shares by the weighted-average number of shares of common
stock outstanding during the year. Diluted earnings per share is computed by
dividing net earnings available for common shares by the sum of (1) the
weighted-average number of shares of common stock outstanding during the period,
(2) the dilutive effect of the assumed exercise of stock options using the
treasury stock method, and (3) dilutive effect of other potentially dilutive
securities.
STOCK OPTIONS
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, which permits
entities to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, Statement 123 also
allows entities to continue to apply the provisions of APB Opinion No. 25 and
provide pro forma net income and pro forma earnings per share disclosures for
employee stock option grants made in 1995 and future years as if the
fair-value-based method defined in Statement 123 had been applied. The Company
has elected to continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosures of Statement 123.
INCOME TAXES
Income taxes are accounted for using the asset and liability method whereby
deferred tax assets and liabilities are recognized for the expected future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
realized or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
GOODWILL
Goodwill, which represents the excess of purchase price over the fair value
of assets acquired, is amortized on the straight-line basis over the estimated
useful life, but not in excess of 40 years. The Company evaluates the possible
impairment of goodwill at each reporting period based on the undiscounted
projected cash flows of the applicable business units.
LONG-LIVED ASSETS
In accordance with Statement of Financial Accounting Standards No. 121,
"ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF," the Company reviews for the impairment of long-lived assets
whenever events or changes in circumstances indicate the carrying amount of an
asset may not be recoverable. During 1997 and 1996, no such impairment losses
have been identified by the Company.
3. FORMATION OF THE COMPANY
The Company was formed on October 31, 1997 when TPG Holdings, Inc. merged
with Lunn Industries, Inc. under the name Advanced Technical Products, Inc.
("ATP"). Former TPG and Lunn common shareholders received 8.3028 and 0.1
shares of ATP stock, respectively, in exchange for each share of the former
companies' stock. The merger agreement specified that 50% of the common stock to
be
27
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
delivered to each former TPG common shareholder would be held in escrow subject
to cancellation pending the results of TPG's 1997 operations versus net income
targets designated in the agreement. TPG's 1997 net income exceeded the maximum
target, and all of the escrowed shares are expected to be released to the former
TPG shareholders in April, 1998.
The merger was accounted for as a purchase of Lunn assets by TPG. The
recorded purchase price of $17,582,000 consisted of (1) $14,358,000, the market
value of Lunn's outstanding stock at the time the intent to merge was announced,
(2) $1,200,000, the estimated value of Lunn's stock options and warrants
outstanding as of the merger valuation date and (3) $2,024,000, the total direct
merger costs incurred. The purchase price was allocated to purchased assets and
liabilities based on approximate fair values as follows (in thousands):
Cash................................. $ --
Accounts receivable.................. 4,076
Inventories.......................... 4,879
Prepaid and other assets............. 681
Fixed assets......................... 12,683
Other assets......................... 644
Current liabilities.................. (7,007)
Long-term debt....................... (3,498)
---------
Total........................... $ 12,458
=========
The purchase price exceeded the fair value of the net assets acquired,
resulting in goodwill valued at $5,124,000. Goodwill is amortized on a
straight-line basis over 40 years.
The operating results of Lunn have been included in the Company's
consolidated financial statements since the date of the acquisition. The
following table presents unaudited pro forma consolidated operating results for
the Company for the years ended December 31, 1997 and 1996 as if the Lunn
acquisition had occurred as of the beginning of 1996 (in thousands, except per
share amounts):
1997 1996
---------- ----------
Net sales............................ $ 138,958 $ 144,632
Net income before extraordinary
items.............................. 5,252 5,404
Extraordinary items.................. -- 785
Net income........................... 5,252 4,619
Earnings per share -- basic.......... 0.99 0.91
Earnings per share -- diluted........ 0.94 0.87
The unaudited pro forma consolidated operating results of the Company are
not necessarily indicative of the operating results that would have been
achieved had the merger been consummated at the beginning of the periods
presented, and should not be construed as representative of future operating
results.
TPG was formed in connection with the acquisition of substantially all of
the assets of BTG on April 28, 1995. The purchase price included cash of $22.0
million and debt payable to Brunswick of $3.259 million of which $259,000 was
retired as of December 31, 1997. In addition, the purchase agreement specified
that the Company would make payments contingent on future earnings. On December
30, 1996 the Company paid $1.0 million to Brunswick in full settlement of this
obligation and recorded this amount as additional purchase price.
28
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The acquisition was accounted for as a purchase of assets. The purchase
price of $28.409 million (including $2.409 million of direct transaction costs)
was allocated to purchased assets and liabilities based on approximate fair
values as follows (in thousands):
Accounts receivable.................. $ 11,824
Inventories.......................... 23,436
Prepaid and other assets............. 1,040
Fixed assets......................... 1,571
Current liabilities.................. (9,462)
---------
Total........................... $ 28,409
=========
Brunswick indemnified the Company for certain legal, tax and environmental
contingencies relating to the period prior to the acquisition.
4. NATURE OF BUSINESS AND CUSTOMER CONCENTRATION
The Company is engaged principally in the design and manufacture of a wide
range of advanced composite, aerospace and defense products including radomes
for high-performance military and commercial aviation, lightweight relocatable
shelters, rocket motor cases, pressure vessels, fuel tanks for military aircraft
and commercial natural gas vehicles, advanced electronic and electro-optical
components, chemical warfare detection systems, metal bonded panels and
composite assemblies using honeycomb cores, fibers and reinforced plastics.
Approximately 71% of the Company's 1997 sales were to the U.S. Government
on prime or sub-contract bases. U.S. government sales for all other periods
reported ranged from 81% to 84%. More than 95% of sales were on a fixed-price
basis for all periods reported.
Firm sales backlog at December 31, 1997 and 1996 was $192.0 million and
$119.6 million, respectively.
As a government contractor, the Company is exposed to certain inherent
industry risks and uncertainties including technological obsolescence, changes
in government policies, dependence on the federal defense budget and annual
congressional appropriation and allotment of funds. Although the Company's major
programs have been well supported during recent years, future spending
reductions and funding limitations could negatively impact future operations.
Approximately 37% of the Company's labor force is covered by collective
bargaining agreements as of December 31, 1997.
5. SEGMENT REPORTING
The Company's operations are divided into two business segments:
Aerospace/Defense and Commercial. A description and financial data for each
segment are summarized below:
AEROSPACE/DEFENSE
The Aerospace/Defense markets served by the Company primarily consist of
the United States government, which the Company sells to on a prime and
subcontract basis, and the commercial aerospace market. The Company designs,
develops and manufactures a wide range of advanced composite products, advanced
electronic and electro-optical components and other integrated defense systems
for this market segment.
29
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMMERCIAL
The Company designs and manufactures composite parts and components for the
automotive, oil and gas and other commercial industries, including fuel tanks
for natural gas vehicles, accumulator bottles, flexible drill pipe and other
composite products. The Company also manufactures electrical power switching
products for specialty vehicles including recreational vehicles, motor homes,
conversion vans, over-the-road trucks and leisure boats.
SELECTED FINANCIAL DATA BY BUSINESS SEGMENT
<TABLE>
<CAPTION>
BRUNSWICK
TECHNICAL
ADVANCED TECHNICAL PRODUCTS, INC. GROUP
--------------------------------------------- ------------
AS OF AND AS OF AND AS OF AND AS OF AND
FOR THE YEAR FOR THE YEAR FOR THE EIGHT FOR THE FOUR
ENDED ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, APRIL 28,
1997 1996 1995 1995
------------ ------------ ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenues
Aerospace/Defense............... $ 99,637 $110,847 $71,409 $ 25,361
Commercial...................... 19,796 15,687 7,763 3,055
Corporate & Other............... -- -- -- --
------------ ------------ ------------- ------------
Total $119,433 $126,534 $79,172 $ 28,416
============ ============ ============= ============
Operating income (loss)
Aerospace/Defense............... $ 10,644 $ 14,484 $ 7,841 $ 1,623
Commercial...................... 334 (404) (1,004) (561)
Corporate & Other............... (1,863) (3,669) (1,526) (1,350)
------------ ------------ ------------- ------------
Total $ 9,115 $ 10,411 $ 5,311 $ (288)
============ ============ ============= ============
Identifiable assets
Aerospace/Defense............... $ 59,979 $ 34,320 $29,051 $ 46,418
Commercial...................... 16,356 7,934 6,777 6,750
Corporate & Other............... 9,349 2,469 3,083 191
------------ ------------ ------------- ------------
Total...................... $ 85,684 $ 44,723 $38,911 $ 53,359
============ ============ ============= ============
Capital Expenditures
Aerospace/Defense............... $ 1,569 $ 955 $ 718 $ 410
Commercial...................... 210 752 488 52
Corporate & Other............... 6 48 25 --
------------ ------------ ------------- ------------
Total...................... $ 1,785 $ 1,755 $ 1,231 $ 462
============ ============ ============= ============
Depreciation and amortization
Aerospace/Defense............... $ 847 $ 466 $ 92 $ 795
Commercial...................... 311 158 46 139
Corporate & Other............... 354 22 -- 15
------------ ------------ ------------- ------------
Total...................... $ 1,512 $ 646 $ 138 $ 949
============ ============ ============= ============
</TABLE>
30
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INVENTORIES
Inventories at December 31, 1997 and 1996 consisted of the following (in
thousands):
1997 1996
--------- ---------
Finished goods....................... $ 1,236 $ 727
Work in process...................... 18,035 8,905
Raw materials........................ 24,297 18,045
Progress payments.................... (8,935) (7,327)
--------- ---------
$ 34,633 $ 20,350
========= =========
7. LEASES
The Company has various lease agreements for offices, factories and certain
equipment. The longest lease obligation extends to 2008. Most leases contain
renewal options and some contain purchase options. No leases contain
restrictions on the Company's activities concerning dividends, further leasing
or additional debt.
The Company is obligated under various capital leases for certain machinery
and equipment that expire at various dates through 2002. The gross amount of
machinery and equipment and related accumulated amortization recorded under
capital leases as of December 31, 1997 were as follows (in thousands):
Machinery and equipment.............. $ 729
Less accumulated amortization........ (140)
---------
Net capital lease asset......... $ 589
=========
Rent expense for the years ended December 31, 1997 and 1996, the eight
months ended December 31, 1995 and the four months ended April 28, 1995
consisted of the following (in thousands):
EIGHT FOUR
YEAR YEAR MONTHS MONTHS
ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, APRIL 28,
1997 1996 1995 1995
-------- -------- -------- ---------
Basic expense......... $ 1,194 $ 1,085 $ 533 $ 315
Sublease income....... (250) (250) (167) (132)
-------- -------- -------- ---------
Rent expense, net..... $ 944 $ 835 $ 366 $ 183
======== ======== ======== =========
31
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum rental payments under agreements classified as operating
leases with noncancelable terms in excess of one year, and the present value of
future minimum capital lease payments are as follows as of December 31, 1997 (in
thousands):
CAPITAL OPERATING
LEASES LEASES
------- ---------
Year ending December 31:
1998................................. $ 194 $ 1,174
1999................................. 161 1,089
2000................................. 115 655
2001................................. 78 522
2002................................. 35 483
Beyond 2002.......................... -- 2,530
------- ---------
Total minimum lease payments......... 583 $ 6,453
=========
Less amounts representing interest
(at rates ranging from 6.6% to
18.2%)............................. (108)
-------
Net principal portion................ 475
Less portion due within one year..... (150)
-------
Long-term portion.................... $ 325
=======
During the first quarter of 1998, the Company entered into a new, ten year
lease agreement for a facility located at Edgewood, Maryland ("Edgewood"),
into which the existing Jessup, Maryland operation will be moved. It is also
anticipated that the Edgewood facility will provide increased production
capability to facilitate future business expansion. The preceding schedule of
operating lease obligations includes the new lease commitment. Such schedule
does not include the remaining eight years and three months on the lease
agreement for the Company's Jessup facility. This lease obligation totals
approximately $1,725,000 over the eight year, three month period. The Company
plans to sublease the Jessup facility and anticipates that the sublease rental
income will offset the lease obligation resulting in no significant net expense
to be recognized in future reporting periods.
8. DEBT
Short-term debt of the Company at December 31 consisted of the following
(in thousands):
1997 1996
--------- ---------
Revolving loans...................... $ 17,367 $ 7,624
Current maturities of long-term
debt............................... 2,063 2,000
--------- ---------
Total................. $ 19,430 $ 9,624
========= =========
Long-term debt of the Company at December 31, 1997 and 1996 consisted of
the following (in thousands):
1997 1996
--------- ---------
Term loans (net of current
maturities)........................ $ 10,714 $ 12,000
Deferred obligation.................. 3,000 3,000
Bond payable......................... 2,273 --
Other long-term debt................. 691 222
--------- ---------
Total................. $ 16,678 $ 15,222
========= =========
32
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Scheduled maturities of long-term debt are as follows (in thousands):
1999................................. $ 2,851
2000................................. 8,426
2001................................. 3,297
2002................................. 296
Thereafter........................... 1,808
---------
Total................. $ 16,678
=========
Debt balances at December 31, 1997 include prior indebtedness of Lunn which
was assumed by the Company as of the date of merger. This debt includes a
revolving loan ($5,016,000), bond payable ($2,473,000) and other long-term debt
($768,000).
REVOLVING AND TERM LOANS
In March, 1998, the Company refinanced its revolving and term loans,
consolidating them with one lending institution. The Company's new credit
facility totals $48.0 million consisting of: (1) $27.0 million of revolving
credit against eligible receivable and inventory balances, (2) $18.0 million
term loan and (3) $3.0 million of capital expenditure facility. The loans are
secured by collateral consisting of substantially all of the Company's property
including inventory, equipment, receivables, general intangibles, investment
property and real property. The interest rates on the revolving and term loans
are set quarterly based on the Company's performance against debt-to-earnings
ratios specified in the agreement. Interest rates can range from LIBOR (the
London Interbank Offered Rates) plus 2.25% to LIBOR plus 1.0% on the revolving
loan and from LIBOR plus 2.75% to LIBOR plus 1.5% on the term loan. Interest is
paid monthly in arrears on all loans. The term loan is payable quarterly based
on a seven-year amortization period. The initial term of the new credit facility
extends to December 31, 2000.
The classifications of debt as short-term and long-term obligations on the
balance sheet as of December 31, 1997 reflect this refinancing commitment.
Under terms of two separate revolving loan agreements outstanding at
December 31, 1997, the Company could borrow up to $23.0 million on a combined
basis against the Company's eligible receivables, inventories and equipment.
Amounts borrowed on one line of credit (up to $17.0 million) are charged
interest at an annual rate of 0.5% above the domestic prime rate or, at the
Company's option, 2.75% above LIBOR. The other line of credit ($6.0 million) was
available at an annual interest rate of LIBOR plus 2.5%, with the first $3.0
million covered by an interest rate swap agreement which fixes the interest rate
at 8.65% to protect against the risk of an increase in the LIBOR rate. At
December 31, 1997, the Company's various revolving loan balances (and annual
interest rates in effect) were as follows: $6,351,000 (9.0%), $6,000,000
(8.6563%), $3,000,000 (8.65%) and $2,016,000 (8.2187%). The interest rate in
effect on the Company's entire revolving loan balance at December 31, 1996 was
8.75%. Interest expense on the revolving loans for the years ended December 31,
1997 and 1996 and the eight months ended December 31, 1995 totaled $873,000,
$710,000 and $567,000, respectively.
On December 27, 1996, the Company refinanced its revolving and term loans
with a different bank. As a result, the Company recorded an after-tax
extraordinary loss of $667,000 ($1.085 million pre-tax) during 1996 related to
prepayment fees, closing costs, origination fees and legal costs. Under the term
loan provisions of such agreement, the Company borrowed $14.0 million on
December 27, 1996, at an annual interest rate of .75% above prime. The interest
rate on all or a portion of the term loan was convertible, at the Company's
option, to 3.0% above LIBOR. Principal payments totaled $500,000 per quarter
beginning April 1, 1997. At December 31, 1997, the term loan principal balance
totaled $12.5 million, $12.0 million
33
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of which carried LIBOR-based interest at an annual rate of 8.9063% and $500,000
of which carried prime-based interest at 9.25%. The annual interest rate in
effect on the entire term loan balance at December 31, 1996 was 9.00%. Interest
expense on the term loans for the years ended December 31, 1997 and 1996 and the
eight months ended December 31, 1995 totaled $1,179,000, $1,402,000 and
$1,143,000, respectively.
The Company also could also obtain equipment loans to finance certain
equipment purchases up to a total of $1.0 million in principal. No equipment
loans existed as of December 31, 1997 and 1996.
The Company is subject to several financial and nonfinancial covenants
under the revolving and term loans. At December 31, 1997, the Company was in
violation of certain financial covenants. Such violations were cured as a result
of the March, 1998 refinancing described above.
DEFERRED OBLIGATION
The deferred obligation of $3.0 million was payable to Brunswick on April
28, 2001, with interest of 8.0% per annum payable annually, according to the
original terms of the acquisition of BTG by TPG (See Note 3). This obligation
was paid in full in March, 1998 in conjunction with the refinancing of the
Company's revolving and term loans. The Company recorded interest expense of
$240,000 in both 1997 and in 1996, and $160,000 for the eight months ended
December 31, 1995, related to the deferred obligation.
BONDS PAYABLE AND OTHER LONG-TERM DEBT
Bonds payable and other long-term debt at December 31, 1997 were assumed by
the Company from Lunn in connection with the merger and result from a financing
agreement with the State of Maryland dated May 14, 1997 to provide $2.6 million
in 15 year tax-exempt industrial development bonds bearing interest at a
variable rate adjusted weekly to finance the purchase of the Lunn's Belcamp,
Maryland honeycomb manufacturing facility and an adjacent 3.2 acre parcel of
land. The Company has entered into an interest rate hedge agreement with a
financial institution to fix the interest rate on the tax exempt bonds at 5.07%
through the year 2012. The unpaid principal bond balance at December 31, 1997
was $2,473,000. On July 7, 1997, in conjunction with the tax exempt bond
financing, Lunn entered into a ten-year $810,000 Maryland Industrial and
Commercial Redevelopment Fund loan agreement with interest set at a fixed rate
of 5.1% annually, plus a five-year $60,000 loan from Harford County, Maryland
with interest set at a fixed rate of 5.5%. The unpaid balance of this other debt
totaled $768,000 at December 31, 1997.
9. RETIREMENT AND EMPLOYEE BENEFIT COSTS OF THE COMPANY
DEFINED CONTRIBUTION PLANS
The Company has retirement and savings plans for substantially all of the
Company's employees which allows participants to make contributions up to 15% of
their base pay via payroll deductions pursuant to Section 401(k) of the Internal
Revenue Code. Under the plan, the Company may make discretionary matching
contributions. The Company's match for the 1997 plan year varied by facility and
ranged from 10% of each participant's pretax contributions, limited to 6% of
their salary, to 50% of each participant's pretax contributions, limited to 4%
of their salary. The cost of the employer match for 1997 and 1996 was $159,000
and $195,000, respectively. The cost of the employer match for the eight months
ended December 31, 1995 was $80,000.
Union employees at the Glen Cove, New York facility are covered by a
defined contribution retirement plan, the cost of which was $5,000 for 1997
(post-merger period, only).
34
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DEFINED BENEFIT PLANS
Hourly union employees of the Company, other than those at the Glen Cove,
New York facility, are covered by defined benefit pension plans with benefits
generally based on negotiated rates and years of service. The Company's funding
policy is to contribute annually the minimum required amount determined by its
actuaries.
The net pension cost of the defined benefit plans for the years ended
December 31, 1997 and 1996, and the eight months ended December 31, 1995 was as
follows (in thousands):
EIGHT MONTHS
ENDED
DEC. 31,
1997 1996 1995
----- ----- ------------
Service cost-benefits earned during
the period......................... $ 276 $ 293 $ 168
Interest cost........................ 74 37 8
Actual return on plan assets......... (25) 13 --
Net amortization and deferral........ 19 (11) --
----- ----- ------------
Net pension cost................ $ 344 $ 332 $ 176
===== ===== ============
The funded status of the plans and amounts recognized in the Company's
balance sheets at December 31 were as follows (in thousands):
1997 1996
--------- ---------
Actuarial present value of benefit
obligations --
Vested.......................... $ 1,379 $ 470
Nonvested....................... 622 80
--------- ---------
Accumulated benefit
obligation.............. 2,001 550
Market value of plan assets.......... (587) (104)
--------- ---------
Unfunded projected benefit
obligation.............. 1,414 446
Unrecognized prior service costs..... (987) --
Unrecognized net loss................ (305) (95)
Adjustment to recognize minimum
liability.......................... 1,292 95
--------- ---------
Net pension liability...... $ 1,414 $ 446
========= =========
Intangible asset..................... $ 987 $ --
========= =========
Assumptions used to measure the projected benefit obligation and the
expected long-term rate of return on plan assets as of December 31, 1997 and
1996 were as follows:
Discount rate for obligations........ 7.25%
Long-term rate of investment 8.00%
return.............................
Mortality............................ 1983 Group
Annuity
The Company does not have any significant postemployment or postretirement
medical or life insurance plans.
35
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. SHAREHOLDERS' EQUITY OF THE COMPANY
The activity in the equity accounts for the period from April 29, 1995
through December 31, 1997, is summarized as follows (in thousands):
<TABLE>
<CAPTION>
NOTES ADDITIONAL
COMMON STOCK ADDITIONAL RECEIVABLE MINIMUM
---------------- PAID-IN RETAINED FROM PENSION
SHARES AMOUNT CAPITAL EARNINGS OFFICERS LIABILITY TOTAL
------ ------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 29, 1995.............. 1 $ 1 $ 999 $ -- $-- $-- $ 1,000
Issuance of notes receivable from
officers for purchase of stock..... -- -- -- -- (235) -- (235)
Repayment of notes receivable........ -- -- -- -- 100 -- 100
Net income........................... -- -- -- 2,107 -- -- 2,107
Preferred dividends declared......... -- -- -- (53) -- -- (53)
------ ------- ----------- --------- ----------- ----------- ---------
Balance, December 31, 1995........... 1 $ 1 $ 999 $ 2,054 $(135) $-- $ 2,919
Common stock split (475-to-1)........ 474 474 (474) -- -- -- --
Par value adjustment (common)........ -- (470) 470 -- -- -- --
Net income........................... -- -- -- 4,274 -- -- 4,274
Preferred dividends declared......... -- -- -- (80) -- -- (80)
Additional minimum pension
liability.......................... -- -- -- -- -- (95) (95)
------ ------- ----------- --------- ----------- ----------- ---------
Balance, December 31, 1996........... 475 $ 5 $ 995 $ 6,248 $(135) $ (95) $ 7,018
Merger transactions:
Retirement of TPG stock.......... (475) (5) -- -- -- -- (5)
Conversion of TPG stock to ATP
stock.......................... 3,944 39 -- -- -- -- 39
Conversion of Lunn stock to ATP
stock.......................... 1,276 13 -- -- -- -- 13
Purchase accounting adjustment
for acquisition of Lunn........ -- -- 15,511 -- -- -- 15,511
Net income........................... -- -- -- 4,208 -- -- 4,208
Preferred dividends declared......... -- -- -- (80) -- -- (80)
Additional minimum pension
liability.......................... -- -- -- -- -- (210) (210)
------ ------- ----------- --------- ----------- ----------- ---------
Balance, December 31, 1997........... 5,220 $ 52 $16,506 $10,376 $(135) $(305) $ 26,494
====== ======= =========== ========= =========== =========== =========
</TABLE>
STOCK OPTION PLANS
In conjunction with the merger on October 31, 1997, the Company assumed the
outstanding obligations of the Lunn and TPG stock option plans. The Company also
adopted the 1997 Advanced Technical Products, Inc. Stock Option Plan (the "1997
Plan") on the merger date. Under the 1997 Plan, the Company may grant
nonstatutory and incentive stock options to employees of the Company for the
purchase of the Company's common stock at an exercise price equal to at least
100% of the fair market value as of the date of grant (110% of such fair market
value if the optionee owns more that 10% of the combined voting power of all
classes of stock of the Company). The Company has authorized 300,000 shares of
common stock for the 1997 Plan. On November 6, 1997, 173,000 incentive stock
options to acquire shares of the Company's common stock were granted to key
employees under the 1997 Plan. The options vest at the rate of 20% on each of
the five anniversary dates following the year of the grant. The exercise price
of the options is $15.00 per share.
36
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On November 6, 1997, the Company adopted the 1997 Advanced Technical
Products, Inc. 1997 Non-Employee Director Stock Option Plan, the terms of which
are the same as the employee plan, except that options are to be granted to only
non-employee members of the Company's board of directors. 100,000 shares of
common stock are authorized under this plan. On November 6, 1997, 43,000
nonqualified stock options were granted to non-employee directors under the
plan. The options vest at a rate of 33 1/3% on each day preceding the annual
meeting of the stockholders of the Company for the years 1998 through 2000. The
exercise price of the options is $15.00 per share.
A summary of stock option transactions for 1997 and 1996 follows
(pre-merger amounts have been restated to reflect amounts on a post-merger
basis; shares are in thousands):
1997 1996
------------------ ------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------ -------- ------ --------
Beginning of year.................... 208 $ 0.41 -- $--
Options granted...................... 216 15.00 208 0.41
Options assumed in merger............ 115 7.39 -- --
Options canceled..................... (12) 0.41 -- --
------ -------- ------ --------
End of year.......................... 527 $ 7.91 208 $ 0.41
====== ======== ====== ========
As of December 31, 1997, exercisable options totaled approximately 154,000.
The range of exercise prices and the weighted average remaining years in
contractual life for options assumed in the Merger were $5.00 to $15.00 and 5.5
years, respectively. The range of exercise prices, weighted average remaining
years in contractual life and weighted average exercise price per share for
options exercisable at December 31, 1997, were $0.41 to $15.00, 6.3 years and
$5.61, respectively.
The weighted average fair value of options granted in 1997 and 1996 was
$8.40 and $1.67 per share, respectively, as determined using the Black Scholes
option-pricing model with the following assumptions:
1997 1996
------- ---------
Risk free interest rate.............. 5.95% 6.82%
Expected dividend yield.............. 0% 0%
Expected stock volatility............ 45% 100%
Expected option life................. 7 years 10 years
37
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company accounts for this plan under Accounting Principles Board
Opinion No. 25, under which no compensation cost has been recognized. Had
compensation cost for this plan been determined based on the fair value at grant
date under the optional method in Statement of Financial Accounting Standards
No. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION," the Company's net income
would have been reduced to the pro forma amounts indicated below:
1997 1996
--------- ---------
Net income:
As reported..................... $ 4,208 $ 4,274
Pro forma....................... 4,166 4,248
Net income per share:
As reported:
Basic........................... $ 0.99 $ 1.06
Diluted......................... 0.95 1.03
Pro forma:
Basic........................... $ 0.98 $ 1.06
Diluted......................... 0.94 1.03
STOCK WARRANTS
The Company assumed obligations of outstanding Lunn stock warrants as of
the merger on October 31, 1997. There were 66,000 stock warrants outstanding as
of December 31, 1997, with a weighted average exercise price of $6.85. There
were no stock warrant transactions during 1997 and 1996, other than the
assumption of existing Lunn obligations by the Company.
Certain warrant agreements contain anti-dilutive provisions providing for
certain adjustments in the exercise price and the number of shares to be
received upon exercise in the event of subsequent sales of stock by the Company
below the initial warrant exercise price.
11. MANDATORILY REDEEMABLE PREFERRED STOCK
The preferred stock is 8% cumulative and redeemable with a $1.00 par value
and 1,000,000 shares are authorized, issued and outstanding. In case of
liquidation, the holders of preferred stock will be paid out of the assets of
the Company in cash equal to $1.00 per share, plus any accumulated and unpaid
dividends before the common stockholders.
The Company may, at its option, redeem any or all of the outstanding shares
of the preferred stock for cash equal to $1.00 per share, plus any accumulated
and unpaid dividends. The preferred shares are subject to mandatory redemption
at the above-stated value on the earlier of April 28, 2001, or the date on which
occurs a change in the ownership of 50% or more of the assets or the common
stock of the Company.
On October 31, 1997, all shares of TPG preferred stock were cancelled and
reissued as preferred stock of the Company.
12. RELATED-PARTY TRANSACTIONS
At December 31, 1997 and 1996, certain officers of the Company have
outstanding promissory notes in the aggregate amount of $134,865, which were
issued to the Company as consideration for the paid-in capital in excess of par
value for the shares of stock they own.
Common shares of the Company owned by each such officer have been pledged
as collateral to secure the payment of the promissory notes. The notes carry an
interest rate of the lesser of 8% and the highest rate permitted by applicable
law. Principal and accrued interest payments are due in full upon maker's sale
of
38
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
any pledged stock or on April 28, 2001, if earlier. The notes may be repaid at
any time at the option of the maker without penalty.
13. TECHNOLOGICAL EXPENDITURES
Technological expenditures, excluding reimbursed projects, for the years
ended December 31, 1997 and 1996, the eight months ended December 31, 1995 and
the four months ended April 28, 1995 consisted of the following (in thousands):
<TABLE>
<CAPTION>
EIGHT FOUR
YEAR YEAR MONTHS MONTHS
ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, APRIL 28,
1997 1996 1995 1995
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Research and development..... $ 1,063 $ 1,213 $ 605 $ 194
Engineering and other........ 654 1,256 834 298
-------- -------- -------- ---------
Total................... $ 1,717 $ 2,469 $ 1,439 $ 492
======== ======== ======== =========
</TABLE>
The Company was also reimbursed $3.878 million, $4.311 million, $1.077
million and $0.258 million under federally funded research and development
contracts during the years ended December 31, 1997 and 1996, the eight months
ended December 31, 1995, and the four months ended April 28, 1995, respectively.
14. INCOME TAXES
The combined provision for U.S. federal and state income taxes for the
years ended December 31, 1997 and 1996, the eight months ended December 31, 1995
and the four months ended April 28, 1995 consisted of the following (in
thousands):
EIGHT FOUR
YEAR MONTHS MONTHS
ENDED YEAR ENDED ENDED
DEC. ENDED DEC. APRIL
31, DEC. 31, 31, 28,
1997 1996 1995 1995
------- -------- ------- -------
Current......................... $ 3,157 $3,511 $ 938 $ (907)
Deferred........................ (523) (836) 374 795
------- -------- ------- -------
Total income tax provision...... $ 2,634 $2,675 $1,312 $ (112)
======= ======== ======= =======
The federal statutory tax rate for periods reported is reconciled to the
effective tax rate as follows:
EIGHT FOUR
YEAR MONTHS MONTHS
ENDED YEAR ENDED ENDED
DEC. ENDED DEC. APRIL
31, DEC. 31, 31, 28,
1997 1996 1995 1995
------- -------- ------- -------
Federal statutory rate........ 34.0% 34.0% 34.0% 34.0%
State and local taxes, net
of federal benefit.......... 4.5 4.5 4.4 5.0
------- -------- ------- -------
Effective tax rate............ 38.5% 38.5% 38.4% 39.0%
======= ======== ======= =======
39
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1997 and
1996 are as follows (in thousands):
1997 1996
--------- ---------
DEFERRED TAX ASSETS --
Excess of tax over book
capitalized inventory costs... $ 327 $ 193
Reserves not deductible until
paid.......................... 757 307
Federal tax credits............. 97 --
Allowance for doubtful
accounts...................... 95 --
Net operating loss
carryforwards................. 2,183 --
--------- ---------
Total deferred tax
assets.................. 3,459 500
DEFERRED TAX LIABILITIES --
Depreciation.................... (978) --
--------- ---------
NET DEFERRED TAX ASSET BEFORE
VALUATION ALLOWANCE................ 2,481 500
VALUATION ALLOWANCE.................. (1,458) --
--------- ---------
NET DEFERRED TAX ASSET............... $ 1,023 $ 500
========= =========
The Company has net operating loss carryforwards of $5,669,000, which were
generated from Lunn operations prior to the merger, and may be applied against
future taxable income and expire at varying dates between 2002 and 2011. As a
result of the merger and the subsequent ownership change of Lunn, the timing of
the realization of the Company's net operating loss carryforwards is subject to
Section 382 of the Internal Revenue Code ("Section 382"). Section 382
generally provides that, if a corporation undergoes an ownership change, the
amount of taxable income that the corporation may offset with net operating loss
carryforwards is subject to an annual limitation. The Company's estimated annual
limitation under Section 382 is $1,020,000.
The valuation allowance of $1,458,000 at December 31, 1997, represents a
reserve for the net deferred tax assets assumed from Lunn in the merger. In
assessing the realizability of deferred tax assets, management considers whether
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax assets and liabilities, projected future
taxable income and tax planning strategies in making this assessment. Based on
these factors and the Section 382 limitation on the annual utilization of net
operating loss carryforwards, management does not believe that it is more likely
than not that the Company will realize the benefits of all these deductible
differences. Subsequently recognized tax benefits for items relating to the
valuation allowance recorded at December 31, 1997 will be recorded as a
reduction of goodwill recognized as a result of the merger with Lunn.
40
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. EARNINGS PER SHARE
A reconciliation of the numerators and denominators used in calculating
basic and diluted EPS follows:
EIGHT
YEAR YEAR MONTHS
ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31,
1997 1996 1995
--------- --------- ---------
Numerators used for basic and diluted
EPS
EPS BEFORE EXTRAORDINARY ITEMS:
Income before extraordinary
items......................... $ 4,208 $ 4,941 $ 2,107
Less: preferred stock dividends
declared...................... (80) (80) (53)
--------- --------- ---------
Income available for common
shares........................ $ 4,128 $ 4,861 $ 2,054
========= ========= =========
EPS:
Net income...................... $ 4,208 $ 4,274 $ 2,107
Less: preferred stock dividends
declared...................... (80) (80) (53)
--------- --------- ---------
Net income available for common
shares........................ $ 4,128 $ 4,194 $ 2,054
========= ========= =========
Denominators used for basic and
diluted EPS
BASIC EPS:
Weighted average number of
common shares outstanding used
for basic EPS................. 4,157,111 3,943,830 3,943,830
DILUTED EPS:
Add: assumed stock conversions,
net of assumed treasury stock
purchases:
-- stock options........... 198,379 115,000 --
-- stock warrants.......... 6,545 -- --
Total shares used for diluted
EPS........................... 4,362,035 4,058,830 3,943,830
========= ========= =========
16. ACCRUED EXPENSES
Accrued expenses at December 31, 1997 and 1996 consisted of the following
(in thousands):
1997 1996
--------- ---------
Payroll and other compensation....... $ 4,025 $ 5,019
Medical expenses..................... 449 518
Interest expense..................... 353 190
Income taxes......................... 1,324 --
Other................................ 1,486 913
--------- ---------
Total........................... $ 7,637 $ 6,640
========= =========
41
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. OTHER NONCURRENT ASSETS
Other noncurrent assets as of December 31, 1997 and 1996 are summarized as
follows (in thousands):
1997 1996
--------- ---------
Assets:
Goodwill, net of accumulated
amortization of $60........... $ 5,385 $ --
Intangible asset -- defined
benefit pension plans......... 987 --
Assets of non-qualified deferred
compensation plan............. 675 --
Other........................... 588 178
--------- ---------
Total other
assets -- noncurrent.... $ 7,635 $ 178
========= =========
18. TRANSACTIONS AMONG BTG AND BRUNSWICK CORPORATION
Related party transactions between BTG and Brunswick for the four months
ended April 28, 1995 and not disclosed elsewhere are as follows:
EMPLOYEE BENEFIT PROGRAMS
The employees of BTG were eligible to participate in certain employee
benefit plans (medical, dental, worker's compensation and other benefits plans)
sponsored by Brunswick which charged BTG its proportionate share of these
programs based on actual charges, historical experience and headcount. BTG
recorded cost of approximately $1.8 million in connection with these plans for
the four months ended April 28, 1995.
On April 28, 1995, TPG terminated its participation in the Brunswick
employee benefit plans. Brunswick retained all assets and liabilities related to
such plans. Effective April 29, 1995, all employees of TPG were offered
participation in its employee benefit plans, including medical, dental, worker's
compensation and other plans. See Note 9 for further discussion of these plans.
RETIREMENT PLANS
Costs charged to BTG for the four months ended April 28, 1995 for its
retirement plans are summarized as follows (in thousands):
Defined benefit plans:
Hourly.......................... $ 135
Salary.......................... 305
---------
Total...................... $ 440
=========
Retirement and savings plan.......... $ 50
=========
The assumptions used in determining the expense recognized for the defined
benefit plans were as follows:
Discount rate........................ 7.25%
Rate of increase in compensation
levels............................. 5.5%
Expected long term rate of return on
assets............................. 9.0%
POSTRETIREMENT MEDICAL BENEFITS
Certain employees of BTG were eligible to participate in a postretirement
medical program sponsored by Brunswick. Costs recorded by BTG represented the
estimated proportionate cost attributable to its employees. Postretirement costs
charged to BTG's operations for the four months ended April 28, 1995 were
approximately $329,000. Brunswick is liable for payments under these programs.
On April 28, 1995, TPG terminated its participation in the Brunswick
postretirement medical program and Brunswick retained all liabilities related to
vested benefits.
CORPORATE SERVICES
Brunswick provided certain support services to the BTG including: cash
management, benefits administration, risk management and tax and audit services.
The charges for these services were allocated to
42
<PAGE>
ADVANCED TECHNICAL PRODUCTS, INC. AND SUBSIDIARIES/
BRUNSWICK TECHNICAL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
BTG based on various formulas which reasonably approximate the actual costs
incurred. The costs recorded by BTG and included in general and administrative
expenses for these allocations were approximately $190,000 for the four months
ended April 28, 1995. The amounts allocated to BTG by Brunswick are not
necessarily indicative of the actual costs which may have been incurred had BTG
operated as an entity unaffiliated with Brunswick. However, BTG believes that
the allocation is reasonable and in accordance with the Securities and Exchange
Commission's Staff Accounting Bulletin No. 55.
19. SUMMARY OF QUARTERLY INFORMATION (UNAUDITED)
1997 QUARTERS
------------------------------------------------
FIRST SECOND THIRD FOURTH(A)
------- ------- ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales................... $23,822 $28,110 $28,608 $ 38,893
Gross profit................ 5,086 6,906 6,742 9,387
Operating income............ 159 2,213 2,253 4,490
Net income (loss)........... (196) 1,049 1,017 2,338
Basic earnings per share.... (b) $0.26 $0.25 $0.48
======= ======= ======= =========
Diluted earnings per share.. (b) $0.25 $0.24 $0.46
======= ======= ======= =========
<TABLE>
<CAPTION>
1996 QUARTERS
------------------------------------------------
FIRST SECOND THIRD FOURTH(C)
------- ------- ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales............................ $27,048 $30,704 $34,409 $ 34,373
Gross profit......................... 6,447 7,860 8,670 9,192
Operating income..................... 1,223 2,528 3,334 3,326
Income (loss) before extraordinary
item............................... 495 1,241 1,752 1,453
Extraordinary loss................... -- -- -- 667
Net income........................... 495 1,241 1,752 786
Basic earnings per share:
Income before extraordinary
item.......................... $ 0.12 $ 0.31 $ 0.44 $ 0.36
Extraordinary item, net......... -- -- -- (0.17)
------- ------- ------- ---------
Net income...................... $ 0.12 $ 0.31 $ 0.44 $ 0.19
======= ======= ======= =========
Diluted earnings per share:
Income before extraordinary
item.......................... $ 0.12 $ 0.31 $ 0.42 $ 0.36
Extraordinary item, net......... -- -- -- (0.18)
------- ------- ------- ---------
Net income...................... $ 0.12 $ 0.31 $ 0.42 $ 0.18
======= ======= ======= =========
</TABLE>
- ------------
(a) The fourth quarter of 1997 includes the results of Lunn operations for the
two months following the merger creating Advanced Technical Products, Inc.
on October 31, 1996.
(b) Loss per common share, assuming dilution, of $0.06 has not been presented
above as such amount was anti-dilutive when compared to the loss per common
share, assuming no dilution, of $0.05.
(c) Fourth quarter 1996 earnings exclude an extraordinary loss of $667 thousand
(net of tax) resulting from debt refinancing.
43
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information concerning directors and executive officers of the Company,
see the information set forth following the caption "ELECTION OF DIRECTORS" in
the Company's definitive proxy statement to be filed no later than 120 days
after the end of the fiscal year covered by this Form 10-K (the "Proxy
Statement"), which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth following the caption "EXECUTIVE COMPENSATION"
in the Company's Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth following the caption "ELECTION OF DIRECTORS"
in the Company's Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth following the caption "TRANSACTION WITH
DIRECTORS, OFFICERS AND AFFILIATES" in the Company's Proxy Statement is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
1. Financial Statements:
Reports of independent public accountants
Consolidated balance sheets at December 31, 1997 and 1996
Consolidated statements of income for the years ended December 31, 1997
and 1996 and the eight months ended December 31, 1995 and the four
months ended April 28, 1995
Consolidated statements of cash flows for the years ended December 31,
1997 and 1996 and the eight months ended December 31, 1995 and the four
months ended April 28, 1995
Notes to consolidated financial statements
43
<PAGE>
3. Exhibits:
EXHIBIT
NO. DESCRIPTION
- ------------------------ ------------------------------------------------------
2.1 -- Agreement and Plan of Merger dated June 6, 1997 by and between
Lunn Industries, Inc. and TPG Holdings, Inc., as amended by
Amendment to Agreement and Plan of Merger dated August 22, 1997 by
and between Lunn Industries, Inc. and TPG Holdings, Inc. (exhibits
and schedules omitted) (incorporated by reference to Exhibit 2.1 to
the Company's Current Report on Form 8-K dated November 14, 1997).
3.1 -- Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3 to the Company's Quarterly
Report on Form 10-QSB for the period ended September 30, 1997).
3.2 -- Bylaws of the Company (incorporated by reference to Exhibit 3.2
of the Company's Quarterly Report on Form 10-QSB for the period
ended September 30, 1996).
10.1 -- Lease covering the Jessup, Maryland Plant (incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ending December 31, 1992).
10.2 -- Lease for the Company's facilities located in Glen Cove, New York
dated January 1, 1995 between Grill Leasing Corp. and Lunn
Industries, Inc. (incorporated by reference to Exhibit 10.12 to the
Company's Quarterly Report on Form 10-QSB for the period ended March
31, 1995).
10.3 -- Amendment to the Company's 1994 Stock Incentive Plan adopted at
the 1996 Annual Shareholders Meeting on September 26, 1996
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-QSB for the period ended September 30,
1996).
10.4 -- Engagement letter dated February 21, 1996 between the Company and
J.E. Sheehan & Co., Inc. for the placement of 3.5 million shares of
the Company's common stock in a private placement (incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on Form
10-QSB for period ended March 31, 1996).
10.5 -- Credit Agreement dated November 22, 1996 between Lunn Industries,
Inc. and Alcore, Inc. and First Union National Bank of Maryland
(incorporated by reference to Exhibit 10.26 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1996).
10.6 -- Promissory Note dated November 15, 1996 payable to the order of
First Union National Bank of Maryland (incorporated by reference to
Exhibit 10.27 to the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1996).
10.7 -- Security Agreement dated November 22, 1996 between Lunn
Industries, Inc. and Alcore, Inc. and First Union National Bank of
Maryland (incorporated by reference to Exhibit 10.28 to the
Company's Annual Report on Form 10-KSB for the year ended December
31, 1996).
10.8 -- Loan Agreement dated as of May 1, 1997 between Maryland
Industrial Development Authority and Alcore, Inc. (incorporated by
reference to Exhibit 10.2 to the Company's Current Report on Form
8-K dated June 2, 1997).
10.9 -- Trust Indenture dated as of May 1, 1997 by and among Maryland
Industrial Development Financing Authority, First Union National
Bank of Virginia and Branch Banking and Trust Company (incorporated
by reference to Exhibit 10.3 to the Company's Current Report on Form
8-K dated June 2, 1997).
10.10 -- Promissory Note dated May 15, 1997 payable to Maryland Industrial
Development Financing Authority for the sum of $2.6 million
(incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K dated June 2, 1997).
10.11 -- Guaranty Agreement dated May 1, 1997 made by Lunn Industries,
Inc. in favor of First Union National Bank of North Carolina
(incorporated by reference to Exhibit 10.4 to the Company's Current
Report on Form 8-K dated June 2, 1997).
10.12 -- Letter of Credit and Reimbursement Agreement by and between
Alcore, Inc. and First Union National Bank of North Carolina dated
May 1, 1997 (incorporated by reference to Exhibit 10.5 to the
Company's Current Report on Form 8-K dated June 2, 1997).
44
<PAGE>
EXHIBIT
NO. DESCRIPTION
- ------------------------ ------------------------------------------------------
10.13 -- Security Agreement dated as of May 1, 1997 by and among Alcore,
Inc., Lunn Industries, Inc., First Union Bank of North Carolina, The
Maryland Industrial Development Financing Authority and First Union
National Bank of Maryland (incorporated by reference to Exhibit 10.2
to the Company's Current Report on Form 8-K dated June 2, 1997).
10.14 -- Loan and Security Agreement dated December 27, 1996, by and among
Fleet Capital Corporation and Technical Products Group, Inc., Marion
Properties, Inc., Deland Properties, Inc. and Lincoln Properties,
Inc.
10.15 -- First Amendment to Loan and Security Agreement dated June 10,
1997, by and among Fleet Capital Corporation and Technical Products
Group, Inc., Marion Properties, Inc., Deland Properties, Inc. and
Lincoln Properties, Inc.
10.16 -- Second Amendment to Loan and Security Agreement dated October 31,
1997, by and among Fleet Capital Corporation and Technical Products
Group, Inc., Marion Properties, Inc., Deland Properties, Inc. and
Lincoln Properties, Inc.
10.17 -- Secured Promissory Note payable to Fleet Capital Corporation
executed by Technical Products Group, Inc., Marion Properties, Inc.,
Deland Properties, Inc. and Lincoln Properties, Inc.
10.18 -- Equipment Promissory Note payable to Fleet Capital Corporation
executed by Technical Products Group, Inc., Marion Properties, Inc.,
Deland Properties, Inc. and Lincoln Properties, Inc.
10.19 -- Form of Commercial Net Building and Ground Lease of Lincoln Air
Park West by and between Brunswick Corporation and Airport Authority
of the City of Lincoln, Nebraska, together with form of Lease
Extension Agreement executed in connection with various facilities
of the Lincoln Composites Division located in Lincoln, Nebraska.
10.20 -- Lease dated October 15, 1997 by and between LPR Partnership and
Technical Products Group, Inc., through the Lincoln Composites
Division, regarding premises located in Lincoln, Nebraska.
10.21* -- Amended and Restated Employment Agreement dated November 1, 1997
by and between the Company and James S. Carter.
10.22* -- Amended and Restated Employment Agreement dated November 1, 1997
by and between the Company and Garrett L. Dominy.
10.23* -- 1997 Advanced Technical Products, Inc. Stock Option Plan.
10.24* -- Form of Incentive Stock Option Agreement for options granted
under Advanced Technical Products, Inc. Stock Option Plan.
10.25* -- Advanced Technical Products, Inc. Non-Employee Directors Stock
Option Plan.
10.26* -- Form of Nonqualified Stock Option Agreement for options granted
under Advanced Technical Products, Inc. Non-Employee Directors Stock
Option Plan.
10.27* -- Technical Products Group, Inc. Deferred Compensation Plan.
10.28* -- Rabbi Trust Agreement executed in connection with Technical
Products Group, Inc. Deferred Compensation Plan.
21.1 -- List of subsidiaries of Advanced Technical Products, Inc.
23.1 -- Consent of KPMG Peat Marwick, LLP.
23.2 -- Consent of Arthur Andersen LLP.
23.3 -- Consent of Arthur Andersen LLP.
27.1 -- Financial Data Schedule.
- ------------
* Indicates management contract or compensatory plan or arrangement.
(B) REPORTS ON FORM 8-K:
Current Report on Form 8-K filed November 14, 1997 reporting under Item 1
and Item 2 the consummation of the Merger on October 31, 1997.
45
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON MARCH 30, 1998.
ADVANCED TECHNICAL PRODUCTS, INC.
/s/ JAMES S. CARTER
JAMES S. CARTER
CHAIRMAN OF THE BOARD, CHIEF
EXECUTIVE OFFICER AND PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- --------------------------------------- ------------------
<S> <C> <C>
/s/JAMES S. CARTER Chairman of the Board, Chief Executive March 30, 1998
JAMES S. CARTER Officer and President (Principal
Executive Officer) and Director
/s/GARRETT L. DOMINY Executive Vice President, Financial March 30, 1998
GARRETT L. DOMINY Officer, Assistant Secretary and
Treasurer (Principal Financial
Officer and Principal Accounting
Officer) and Director
/s/ALAN W. BALDWIN Director March 30, 1998
ALAN W. BALDWIN
/s/ROBERT C. SIGRIST Director March 30, 1998
ROBERT C. SIGRIST
/s/LAWRENCE E. WESNESKI Director March 30, 1998
LAWRENCE E. WESNESKI
/s/SAM P. DOUGLASS Director March 30, 1998
SAM P. DOUGLASS
/s/GARY L. FORBES Director March 30, 1998
GARY L. FORBES
/s/JOHN M. SIMON Director March 30, 1998
JOHN M. SIMON
</TABLE>
46
EXHIBIT 10.14
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this 27th day of December, 1996,
by and among FLEET CAPITAL CORPORATION ("LENDER"), a Rhode Island
corporation having an office at 2711 North Haskell, Suite 2100, LB 21, Dallas,
Texas 75204; and TECHNICAL PRODUCTS GROUP, INC. ("TECHNICAL PRODUCTS"), a
Delaware corporation, MARION PROPERTIES, INC. ("MARION"), a Delaware
corporation, DELAND PROPERTIES, INC. ("DELAND"), a Delaware corporation, and
LINCOLN PROPERTIES, INC. ("LINCOLN"), a Delaware corporation (Technical
Products, Marion, DeLand and Lincoln being referred to individually,
collectively, and joint and severally, as "BORROWER"), each Borrower having its
chief executive office at 3353 Peachtree Road, Suite 920, Atlanta, Georgia
30326. Capitalized terms used in this Agreement have the meanings assigned to
them in APPENDIX A, GENERAL DEFINITIONS. Accounting terms not otherwise
specifically defined herein shall be construed in accordance with GAAP
consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a total credit facility of up to $32,000,000
available upon Borrower's request therefor, as follows:
1.1 REVOLVING CREDIT LOANS.
1.1.1. LOANS AND RESERVES. Lender agrees, during the term of this
Agreement and for so long as no Default or Event of Default exists, to make
Revolving Credit Loans to Technical Products from time to time, as requested by
Borrower in the manner set forth in SECTION 3.1.1 hereof, up to a maximum
principal amount at any time outstanding equal to the Borrowing Base at such
time MINUS the LC Amount and reserves, if any. Lender shall have the right to
establish reserves in such amounts, and with respect to such matters, as Lender
shall deem necessary or appropriate, against the amount of Revolving Credit
Loans which Technical Products may otherwise request under this SECTION 1.1,
including, without limitation, with respect to (i) price adjustments, damages,
unearned discounts, returned products or other matters for which credit
memoranda are issued in the ordinary course of Technical Products' business;
(ii) obsolescence of Inventory; (iii) slow moving Inventory; (iv) other sums
chargeable against Borrower's Loan Account as Revolving Credit Loans under any
section of this Agreement; (v) amounts owing by Borrower to any Person to the
extent secured by a Lien on, or trust over, any Property of Borrower; (vi) all
amounts of past due rent or other charges owing at such time by Borrower to any
Landlord of any premises where any of the Collateral is located; and (vii) such
other matters, events, conditions or contingencies as to which Lender, in its
reasonable judgment, determines reserves should be established from time to time
hereunder.
1.1.2. USE OF PROCEEDS. The Revolving Credit Loans shall be used
solely for the satisfaction of existing Indebtedness of Borrower to FINOVA
Capital Corporation, for the
1
<PAGE>
repayment of the Obligations, for the payment required to be made to Brunswick
in order for Brunswick to cancel the remaining amount of the earn-out payment
provided for in that certain Asset Purchase Agreement, dated as of November 23,
1994, executed by TPG and Brunswick, as thereafter amended (the "ASSET PURCHASE
AGREEMENT"), and for Borrower's general operating capital needs in a manner
consistent with the provisions of this Agreement and Applicable Law. In no event
shall any proceeds of any Revolving Credit Loans be used to purchase or to
carry, reduce, retire or refinance any Indebtedness incurred to purchase or
carry any margin stock (within the meaning of Regulations G or U of the Federal
Reserve Board).
1.2. TERM AND EQUIPMENT LOANS.
1.2.1. TERM LOAN. Lender agrees to make a term loan to Borrower on
the Closing Date in the principal amount of $14,000,000, which shall be
repayable in accordance with the terms of the Term Note and shall be secured by
all of the Collateral. The proceeds of the Term Loan shall be used solely for
purposes for which the proceeds of the Revolving Credit Loans are authorized to
be used. Borrower may not reborrow any amount repaid with respect to the Term
Loan.
1.2.2. EQUIPMENT LOANS. Lender agrees, during the term of this
Agreement, for so long as no Default or Event of Default exists, to make Loans
("EQUIPMENT LOANS") to Borrower from time to time, to finance Borrower's
purchases of Equipment for use in its business. Each Equipment Loan shall be in
the aggregate principal amount of not less than $250,000, and shall not exceed
80% of the invoiced purchase price (excluding taxes, title, freight, and
installation costs) of the Equipment being acquired with the proceeds of such
Equipment Loan. Each Equipment Loan shall be secured by all of the Collateral
and shall be evidenced by the Equipment Note, which Equipment Note shall specify
the rate of interest and the repayment terms applicable to such Equipment Loan.
The principal amount of Equipment Loans hereunder shall not exceed, in the
aggregate, $1,000,000. Borrower may not reborrow any amount repaid with respect
to any Equipment Loan.
1.3. LETTERS OF CREDIT; LC GUARANTIES. Lender agrees, for so long as no
Default or Event of Default exists and if requested by Borrower, to (i) issue
its, or cause to be issued its Affiliate's, standby Letters of Credit for the
account of Technical Products or (ii) execute LC Guaranties by which Lender or
its Affiliate shall guaranty the payment or performance by Technical Products of
its reimbursement obligations with respect to standby Letters of Credit,
provided that the LC Amount at any time shall not exceed $2,000,000. No Letter
of Credit or LC Guarantee shall have an expiration date that is after the last
day of the Original Term or the then applicable Renewal Term. Any amounts paid
by Lender under any LC Guaranty or in connection with any Letter of Credit shall
be treated as Revolving Credit Loans, shall be secured by all of the Collateral
and shall bear interest and be payable at the same rate and in the same manner
as Revolving Credit Loans.
1.4. ALL LOANS TO CONSTITUTE ONE OBLIGATION. All Loans shall constitute
one general joint and several obligation of Borrowers, and shall be secured by
Lender's security interest in and Lien upon all of the Collateral, and by all
other security interests and Liens heretofore, now or at any time or times
hereafter granted by Borrower to Lender.
2
<PAGE>
1.5. JOINT AND SEVERAL LIABILITY; RIGHTS OF CONTRIBUTION.
(A) Each Borrower states and acknowledges that: (i) pursuant to this
Agreement, Borrowers desire to utilize their borrowing potential on a
consolidated basis to the same extent possible if they were merged into a single
corporate entity and that this Agreement reflects the establishment of credit
facilities which would not otherwise be available to such Borrower if each
Borrower were not jointly and severally liable for payment of all of the
Obligations; (ii) it has determined that it will benefit specifically and
materially from the advances of credit contemplated by this Agreement; (iii) it
is both a condition precedent to the obligations of Lender hereunder and a
desire of the Borrowers that each Borrower execute and deliver to Lender this
Agreement; and (iv) Borrowers have requested and bargained for the structure and
terms of and security for the advances contemplated by this Agreement.
(B) Each Borrower hereby irrevocably and unconditionally: (i) agrees
that it is jointly and severally liable to Lender for the full and prompt
payment of the Obligations and the performance by each Borrower of its
obligations hereunder in accordance with the terms hereof; (ii) agrees to fully
and promptly perform all of its obligations hereunder with respect to each
advance of credit hereunder as if such advance had been made directly to it; and
(iii) agrees as a primary obligation to indemnify Lender on demand for and
against any loss incurred by Lender as a result of any of the obligations of any
one or more of the Borrowers being or becoming void, voidable, unenforceable or
ineffective for any reason whatsoever, whether or not known to Lender or any
Person, the amount of such loss being the amount which Lender would otherwise
have been entitled to recover from any one or more of the Borrowers.
(C) It is the intent of each Borrower that the indebtedness,
obligations and liability hereunder of no one of them be subject to challenge on
any basis, including, without limitation, pursuant to any applicable fraudulent
conveyance or fraudulent transfer laws. Accordingly, as of the date hereof, the
liability of each Borrower under this SECTION 1.5, together with all of its
other liabilities to all Persons as of the date hereof and as of any other date
on which a transfer or conveyance is deemed to occur by virtue of this
Agreement, calculated in amount sufficient to pay its probable net liabilities
on its existing Indebtedness as the same become absolute and matured ("DATED
LIABILITIES") is, and is to be, less than the amount of the aggregate of a fair
valuation of its property as of such corresponding date ("DATED ASSETS"). To
this end, each Borrower under this SECTION 1.5, (i) grants to and recognizes in
each other Borrower, ratably, rights of subrogation and contribution in the
amount, if any, by which the Dated Assets of such Borrower, but for the
aggregate of subrogation and contribution in its favor recognized herein, would
exceed the Dated Liabilities of such Borrower or, as the case may be, (ii)
acknowledges receipt of and recognizes its right to subrogation and contribution
ratably from each of the other Borrowers in the amount, if any, by which the
Dated Liabilities of such Borrower, but for the aggregate of subrogation and
contribution in its favor recognized herein, would exceed the Dated Assets of
such Borrower under this SECTION 1.5. In recognizing the value of the Dated
Assets and the Dated Liabilities, it is understood that Borrowers will
recognize, to at least the same extent of their aggregate recognition of
liabilities hereunder, their rights to subrogation and contribution hereunder.
It is a material objective of this SECTION 1.5 that each Borrower recognizes
rights to subrogation and contribution rather than be deemed to be insolvent (or
in contemplation thereof) by
3
<PAGE>
reason of an arbitrary interpretation of its joint and several obligations
hereunder. In addition to and not in limitation of the foregoing provisions of
this SECTION 1.5, the Borrowers and Lender hereby agree and acknowledge that it
is the intent of each Borrower and of Lender that the obligations of each
Borrower hereunder be in all respects in compliance with, and not be voidable
pursuant to, applicable fraudulent conveyance and fraudulent transfer laws.
1.6. STRUCTURE OF CREDIT FACILITY. Each Borrower agrees and acknowledges
that the present structure of the credit facilities detailed in this Agreement
is based in part upon the financial and other information presently known to
Lender regarding each Borrower, the corporate structure of Borrowers, and the
present financial condition of each Borrower. Each Borrower hereby agrees that
Lender shall have the right, in its sole credit judgment, to require that any or
all of the following changes be made to these credit facilities: (i) restrict
loans and advances between Borrowers, (ii) establish separate lockbox and
dominion accounts for Technical Products and, upon and after the occurrence of a
Default or Event of Default, for each other Borrower, (iii) separate the Term
Loan into separate term loans to such of the Borrowers as shall be determined by
Lender, and (iv) establish such other procedures as shall be reasonably deemed
by Lender to be useful in tracking where Loans are made under this Agreement and
the source of payments received by Lender on such Loans.
SECTION 2. INTEREST, FEES AND CHARGES
2.1. INTEREST.
2.1.1. RATES OF INTEREST. The outstanding principal amount of the
Loans shall bear interest at the following rates per annum (individually called,
as applicable, an "APPLICABLE ANNUAL RATE"): (i) FOR REVOLVING CREDIT LOANS, (a)
each Eurodollar Loan shall bear interest at a rate per annum equal to two and
three-fourths percent (2.75%) above LIBOR for the LIBOR Interest Period
applicable thereto, and (b) each Base Rate Loan shall bear interest at a rate
per annum equal to one-half of one percent (0.50%) above the Base Rate, and (ii)
FOR THE TERM LOAN AND EACH EQUIPMENT LOAN, (a) each Eurodollar Loan shall bear
interest at a rate per annum equal to three percent (3.00%) above LIBOR for the
LIBOR Interest Period applicable thereto, and (b) each Base Rate Loan shall bear
interest at a rate per annum equal to three-fourths of one percent (0.75%) above
the Base Rate. Unless Borrower delivers a Borrowing Notice to Lender in
accordance with SECTION 3.1.1(A) hereof irrevocably electing that all or any
portion of the Loans are to bear interest at a rate based upon LIBOR, all of the
Loans shall bear interest at a rate based upon the Base Rate as provided in
CLAUSES (i)(b) and (ii)(b) of this SECTION 2.1.1. The rate of interest
applicable to Base Rate Loans shall increase or decrease by an amount equal to
any increase or decrease in the Base Rate, effective as of the opening of
business on the day that any such change in the Base Rate occurs.
2.1.2. DEFAULT RATE OF INTEREST. Upon and after the occurrence of an
Event of Default, and during the continuation thereof, the principal amount of
all Loans shall, in Lender's sole discretion, bear interest at a rate per annum
equal to 2.00% above the Applicable Annual Rate or other interest rate otherwise
applicable thereto (the "DEFAULT RATE").
4
<PAGE>
2.1.3. MAXIMUM INTEREST. (A) Notwithstanding anything to the
contrary in this Agreement or otherwise, (i) if at any time the amount of
interest computed on the basis of an Applicable Annual Rate or a Default Rate
would exceed the amount of such interest computed upon the basis of the maximum
rate of interest permitted by applicable state or federal law in effect from
time to time hereafter (the "MAXIMUM LEGAL RATE"), the interest payable under
this Agreement shall be computed upon the basis of the Maximum Legal Rate, but
any subsequent reduction in such Applicable Annual Rate or Default Rate, as
applicable, shall not reduce such interest thereafter payable hereunder below
the amount computed on the basis of the Maximum Legal Rate until the aggregate
amount of such interest accrued and payable under this Agreement equals the
total amount of interest which would have accrued if such interest had been at
all times computed solely on the basis of an Applicable Annual Rate or Default
Rate, as applicable; and (ii) unless preempted by federal law, an Applicable
Annual Rate or Default Rate, as applicable, from time to time in effect
hereunder may not exceed the "indicated ceiling rate" from time to time in
effect under Tex. Rev. Civ. Stat. Ann. art 5069-1.04(c) (Vernon 1987). If the
applicable state or federal law is amended in the future to allow a greater rate
of interest to be charged under this Agreement than is presently allowed by
applicable state or federal law, then the limitation of interest hereunder shall
be increased to the maximum rate of interest allowed by applicable state or
federal law as amended, which increase shall be effective hereunder on the
effective date of such amendment, and all interest charges owing to Lender by
reason thereof shall be payable in accordance with SECTION 3.2.2 hereof.
(B) EXCESS INTEREST. No agreements, conditions, provisions or
stipulations contained in this Agreement or any other instrument, document or
agreement between Borrower and Lender or default of Borrower, or the exercise by
Lender of the right to accelerate the payment of the maturity of principal and
interest, or to exercise any option whatsoever contained in this Agreement or
any other Loan Document, or the arising of any contingency whatsoever, shall
entitle Lender to contract for, charge, or receive, in any event, interest
exceeding the Maximum Legal Rate. In no event shall Borrower be obligated to pay
interest exceeding such Maximum Legal Rate and all agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever operate
to bind, obligate or compel Borrower to pay a rate of interest exceeding the
Maximum Legal Rate, shall be without binding force or effect, at law or in
equity, to the extent only of the excess of interest over such Maximum Legal
Rate. In the event any interest is contracted for, charged or received in excess
of the Maximum Legal Rate ("EXCESS INTEREST"), Borrower acknowledges and
stipulates that any such contract, charge, or receipt shall be the result of an
accident and bona fide error, and that any Excess received by Lender shall be
applied, first, to reduce the principal then unpaid hereunder; second, to reduce
the other Obligations; and third, returned to Borrower, it being the intention
of the parties hereto not to enter at any time into a usurious or otherwise
illegal relationship. Borrower recognizes that, with fluctuations in the Base
Rate and the Maximum Legal Rate, such a result could inadvertently occur. By the
execution of this Agreement, Borrower covenants that (i) the credit or return of
any Excess Interest shall constitute the acceptance by Borrower of such Excess
Interest, and (ii) Borrower shall not seek or pursue any other remedy, legal or
equitable, against Lender, based in whole or in part upon contracting for,
charging or receiving of any interest in excess of the maximum authorized by
applicable law. For the purpose of determining whether or not any Excess has
been contracted for, charged or received by Lender, all interest at any time
contracted for, charged or received by Lender
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in connection with this Agreement shall be amortized, prorated, allocated and
spread in equal parts during the entire term of this Agreement.
(C) INCORPORATION BY THIS REFERENCE. The provisions of SECTION
2.1.3(B) shall be deemed to be incorporated into every document or communication
relating to the Obligations which sets forth or prescribes any account, right or
claim or alleged account, right or claim of Lender with respect to Borrower (or
any other obligor in respect of Obligations), whether or not any provision of
SECTION 2.1.3(B) is referred to therein. All such documents and communications
and all figures set forth therein shall, for the sole purpose of computing the
extent of the Obligations and obligations of the Borrowers (or other obligor)
asserted by Lender thereunder, be automatically re-computed by any Borrower or
obligor, and by any court considering the same, to give effect to the
adjustments or credits required by SECTION 2.1.3(B).
2.2. COMPUTATION OF INTEREST AND FEES. Interest, Letter of Credit and LC
Guaranty Fees and unused line fees hereunder shall be calculated daily and shall
be computed on the actual number of days elapsed over a year of 360 days. For
the purpose of computing interest hereunder, all items of payment received by
Lender shall be deemed applied by Lender on account of the Obligations (subject
to final payment of such items) one (1) Business Day after receipt by Lender of
such items in Lender's account located in Chicago, Illinois, and Lender shall be
deemed to have received such item of payment on the date specified in SECTION
3.4 hereof.
2.3. CLOSING FEE. Borrower shall pay to Lender a closing fee of $160,000,
which shall be fully earned and (except to the extent otherwise required by
Applicable Law) nonrefundable on the Closing Date, and shall be paid
concurrently with the initial Loan hereunder.
2.4. LETTER OF CREDIT AND LC GUARANTY FEES. Borrower shall pay to Lender
for standby Letters of Credit and LC Guaranties of standby Letters of Credit,
one and one-half percent (1.50%) per annum of the aggregate face amount of such
Letters of Credit and LC Guaranties outstanding from time to time during the
term of this Agreement, plus all normal and customary charges associated with
issuance thereof, which fees and charges shall be deemed fully earned upon
issuance of each such Letter of Credit or LC Guaranty, shall be due and payable
on the first Business Day of each month and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason.
2.5. UNUSED LINE FEE. Borrower shall pay to Lender a fee equal to one-half
of one percent (0.50%) per annum of the amount by which the Average Monthly
Revolving Credit Loan Balance is less than the Total Revolving Credit Facility.
The unused line fee shall be payable monthly, in arrears, on the first day of
each calendar month hereafter.
2.6. AUDIT AND APPRAISAL FEES. Borrower shall reimburse Lender for all
reasonable out-of-pocket costs and expenses incurred by Lender in connection
with audits and appraisals of Borrower's books and records and such other
matters as Lender shall deem appropriate. All such out-of-pocket expenses shall
be payable on demand.
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2.7. REIMBURSEMENT OF EXPENSES. If, at any time or times regardless of
whether or not an Event of Default then exists, Lender incurs legal or
accounting expenses or any other costs or out-of-pocket expenses in connection
with (i) the negotiation and preparation of this Agreement or any of the other
Loan Documents, any amendment of or modification of this Agreement or any of the
other Loan Documents, or any sale or attempted sale of any interest herein to
any other Person; (ii) the administration of this Agreement or any of the other
Loan Documents and the transactions contemplated hereby and thereby (other than
Lender's overhead costs and expenses associated with the day to day
administration of the Loans); (iii) any litigation, contest, dispute, suit,
proceeding or action (whether instituted by Lender, Borrower or any other
Person) in any way relating to the Collateral, this Agreement or any of the
other Loan Documents or Borrower's affairs; (iv) any attempt to enforce any
rights of Lender against Borrower or any other Person which may be obligated to
Lender by virtue of this Agreement or any of the other Loan Documents, including
the Account Debtors; or (v) any attempt to inspect, verify, protect, preserve,
restore, collect, sell, liquidate or otherwise dispose of or realize upon the
Collateral; then all such legal and accounting expenses, other costs and out of
pocket expenses of Lender shall be charged to Borrower. All amounts chargeable
to Borrower under this SECTION 2.7 shall be Obligations secured by all of the
Collateral, shall be payable on demand to Lender, and shall bear interest from
the date such demand is made until paid in full at the rate applicable to
Revolving Credit Loans from time to time. Borrower shall also reimburse Lender
for expenses incurred by Lender in its administration of the Collateral to the
extent and in the manner provided in SECTION 6 hereof.
2.8. BANK CHARGES. Borrower shall pay to Lender, on demand, any and all
normal and customary fees, costs or expenses which Lender pays to a bank or
other similar institution arising out of or in connection with (i) the
forwarding to Borrower or any other Person on behalf of Borrower, or by Lender,
of proceeds of loans made by Lender to Borrower pursuant to this Agreement and
(ii) the depositing for collection, by Lender, of any check or item of payment
received or delivered to Lender on account of the Obligations.
SECTION 3. LOAN ADMINISTRATION
3.1. MANNER OF BORROWING REVOLVING CREDIT LOANS. Borrowings under the
credit facility established pursuant to SECTION 1 hereof shall be as follows:
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3.1.1.LOAN REQUESTS.
(A) A request for a Eurodollar Loan shall be made, or shall be
deemed to be made, if Borrower gives Lender notice of its intention to borrow in
the form of EXHIBIT P hereto (a "BORROWING NOTICE"), in which notice Borrower
shall specify (i) the aggregate amount of such Eurodollar Loan, (ii) the
requested date of such Eurodollar Loan, (iii) the Applicable Annual Rate
selected in accordance with SECTION 2.1.1, and (iv) the LIBOR Interest Period
applicable thereto. If Borrower selects a Eurodollar Loan, Borrower shall give
Lender the Borrowing Notice no later than 11:00 a.m. Dallas, Texas time at least
two (2) Business Days prior to the requested date of the Eurodollar Loan.
Notwithstanding anything herein to the contrary, Lender shall have the right to
refuse to accept a request for a Eurodollar Loan and to refuse to make a
Eurodollar Loan if at the date such request is made or such Eurodollar Loan is
to be made there exists a Default or an Event of Default.
(B) A request for a Base Rate Loan shall be made, or shall be
deemed to be made, in the following manner: (i) Borrower shall give Lender
notice of its intention to borrow, in which notice Borrower shall specify the
amount of the proposed borrowing and the proposed borrowing date, no later than
11:00 a.m. Dallas, Texas time on the proposed borrowing date; PROVIDED, HOWEVER,
Lender shall have the right to refuse to accept such a request or make such a
Loan if at such time there exists a Default or an Event of Default; and (ii) the
becoming due of any amount required to be paid under this Agreement, under the
Term Note, the Equipment Note or any of the other Loan Documents, as principal,
accrued interest, fees or other charges, shall be deemed irrevocably to be a
request by Borrower from Lender for a Revolving Credit Loan on the due date of,
and in an aggregate amount required to pay, such principal, accrued interest,
fees or other charges and the proceeds of each such Revolving Credit Loan may be
disbursed by Lender by way of direct payment of the relevant Obligation and
shall bear interest at the rate of interest applicable to Revolving Credit Loans
(whether or not any Default, Event of Default or Out-of-Formula Condition exists
at the time of or would result from such Revolving Credit Loan). As an
accommodation to Borrower, Lender may permit telephonic requests for loans and
electronic transmittal of instructions, authorizations, agreements or reports to
Lender by Borrower. Unless Borrower specifically directs Lender in writing not
to accept or act upon telephonic or electronic communications from Borrower,
Lender shall have no liability to Borrower for any loss or damage suffered by
Borrower as a result of Lender's honoring of any requests, execution of any
instructions, authorizations or agreements or reliance on any reports
communicated to Lender telephonically or electronically and purporting to have
been sent to Lender by any individual from time to time designated by Borrower
as an authorized officer and Lender shall have no duty to verify the origin or
authenticity of any such communication.
3.1.2.DISBURSEMENT. Borrower hereby irrevocably authorizes Lender to
disburse the proceeds of each Loan requested, or deemed to be requested,
pursuant to this SECTION 3.1.2 as follows: (i) the proceeds of each Loan
requested under SECTION 3.1.1(A) or SECTION 3.1.1(B)(i) shall be disbursed by
Lender in lawful money of the United States of America in immediately available
funds, in the case of the initial borrowing, in accordance with the terms of the
written disbursement letter from Borrower, and in the case of each subsequent
borrowing, by wire transfer to such bank account as may be agreed upon by
Borrower and Lender from time to time or elsewhere if pursuant
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to a written direction from Borrower; and (ii) the proceeds of each Revolving
Credit Loan requested under SECTION 3.1.1(B)(II) shall be disbursed by Lender by
way of direct payment of the relevant interest or other Obligation.
3.1.3.AUTHORIZATION. Borrower hereby irrevocably authorizes Lender,
in Lender's sole discretion, to advance to Borrower, and to charge Borrower's
Loan Account hereunder as a Revolving Credit Loan, a sum sufficient to pay all
interest accrued on the Obligation during the immediately preceding month and to
pay all costs, fees and expenses at any time owed by Borrower to Lender
hereunder.
3.2. PAYMENTS. All payments with respect to any of the Obligations shall
be made to Lender on the date when due, in Dollars and in immediately available
funds, without any offset or counterclaim. Except where evidenced by notes or
other instruments issued or made by Borrower to Lender specifically containing
payment provisions which are in conflict with this SECTION 3.2 (in which event
the conflicting provisions of said notes or other instruments shall govern and
control), the Obligations shall be payable as follows:
3.2.1.PRINCIPAL. Principal payable on account of Revolving Credit
Loans shall be payable by Borrower to Lender immediately upon the earliest of
(i) the receipt by Lender or Borrower of any proceeds of any of the Collateral,
other than Equipment or real Property, to the extent of said proceeds, (ii) the
occurrence of an Event of Default in consequence of which Lender elects to
accelerate the maturity and payment of the Obligations, or (iii) termination of
this Agreement pursuant to SECTION 4 hereof; PROVIDED, HOWEVER, that if an
Out-of-Formula Condition shall exist at any time, Borrower shall, on demand,
repay the Obligations to the extent necessary to eliminate the Out-of-Formula
Condition.
3.2.2.INTEREST. Interest accrued on the Revolving Credit Loans shall
be due on the earliest of (i) the first calendar day of each month (for the
immediately preceding month), computed through the last calendar day of the
preceding month, (ii) the occurrence of an Event of Default in consequence of
which Lender elects to accelerate the maturity and payment of the Obligations,
(iii) with respect to any Eurodollar Loan, the last day of the applicable LIBOR
Interest Period, or (iv) termination of this Agreement pursuant to SECTION 4
hereof.
3.2.3.COSTS, FEES AND CHARGES. Costs, fees and charges payable
pursuant to this Agreement shall be payable by Borrower as and when provided in
SECTION 2 hereof, to Lender or to any other Person designated by Lender in
writing.
3.2.4.OTHER OBLIGATIONS. The balance of the Obligations requiring
the payment of money, if any, shall be payable by Borrower to Lender as and when
provided in this Agreement, the Other Agreements or the Security Documents, or,
if no date of payment is otherwise specified in the Loan Documents, on demand.
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3.3. MANDATORY PREPAYMENTS.
3.3.1.PROCEEDS OF SALE, LOSS, DESTRUCTION OR CONDEMNATION OF
COLLATERAL. If Borrower sells any of the Equipment or real Property, or if any
of the Collateral is lost or destroyed or taken by condemnation, Borrower shall
pay to Lender, unless otherwise agreed by Lender, as and when received by
Borrower and as a mandatory prepayment of either or both the Term Loan or the
Equipment Loans, as determined by Lender (or, at Lender's option, such of the
other Obligations as Lender may elect), a sum equal to the net proceeds
(including insurance payments) in excess of $500,000 received by Borrower from
such sale, loss, destruction or condemnation. Nothing in this SECTION 3.3.1
shall authorize Borrower to sell any of the Collateral without Lender's prior
written consent except as otherwise expressly provided elsewhere in this
Agreement.
3.4. APPLICATION OF PAYMENTS AND COLLECTIONS. All items of payment
received by Lender by 12:00 noon, Dallas, Texas time, on any Business Day shall
be deemed received on that Business Day. All items of payment received after
12:00 noon, Dallas, Texas time, on any Business Day shall be deemed received on
the following Business Day. Borrower irrevocably waives the right to direct the
application of any and all payments and collections at any time or times
hereafter received by Lender from or on behalf of Borrower, and Borrower does
hereby irrevocably agree that Lender shall have the continuing exclusive right
to apply and reapply any and all such payments and collections received at any
time or times hereafter by Lender or its agent against the Obligations, in such
manner as Lender may deem advisable, notwithstanding any entry by Lender upon
any of its books and records. If as the result of collections of Accounts as
authorized by SECTION 6.2.6 hereof a credit balance exists in the Loan Account,
such credit balance shall not accrue interest in favor of Borrower, but shall be
available to Borrower at any time or times for so long as no Default or Event of
Default exists. Such credit balance shall not be applied or be deemed to have
been applied as a prepayment of the Term Loan or any Equipment Loan, except that
Lender may, at its option, offset such credit balance against any of the
Obligations upon and after the occurrence of an Event of Default.
3.5. LOAN ACCOUNT. Lender shall establish an account on its books (the
"LOAN ACCOUNT") and shall enter all Loans as debits to the Loan Account and
shall also record in the Loan Account all payments made by Borrower on any
Obligations and all proceeds of Collateral which are finally paid to Lender, and
may record therein, in accordance with customary accounting practice, other
debits and credits, including interest and all charges and expenses properly
chargeable to Borrower.
3.6. STATEMENTS OF ACCOUNT. Lender will account to Borrower monthly with a
statement of Loans, charges and payments made pursuant to this Agreement, and
such account rendered by Lender shall be deemed final, binding and conclusive
upon Borrower unless Lender is notified by Borrower in writing to the contrary
within 30 days after the date each accounting is deemed to have been sent
pursuant to SECTION 11.9. Such notice shall only be deemed an objection to those
items specifically objected to therein.
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3.7. ADDITIONAL PROVISIONS REGARDING EURODOLLAR LOANS.
(A) Borrower may select LIBOR with respect to all or any portion of
the Loans in accordance with the provisions of SECTION 3.1.1(A) hereof and of
this SECTION 3.7; PROVIDED, HOWEVER, that (i) each Eurodollar Loan shall be in a
principal amount of not less than Two Million Dollars ($2,000,000) and, if
greater than Two Million Dollars ($2,000,000), in integral multiples of One
Million Dollars ($1,000,000), and (ii) no more than three (3) LIBOR Interest
Periods in the aggregate may be in existence at any one time. Borrower shall
select LIBOR Interest Periods with respect to Eurodollar Loans so that no LIBOR
Interest Period expires after the end of the Original Term. An outstanding Base
Rate Loan may be converted to a Eurodollar Loan at any time subject to the
provisions of this SECTION 3.7.
(B) Each Eurodollar Loan shall bear interest from and including the
first day of the LIBOR Interest Period applicable thereto (but not including the
last day of such LIBOR Interest Period) at the interest rate determined as
applicable to such Eurodollar Loan, but interest on such Eurodollar Loan shall
be payable as provided in the Term Note, the Equipment Note and in SECTION 3.2.2
hereof. If at the end of a LIBOR Interest Period for an outstanding Eurodollar
Loan, Borrower has failed to deliver to Lender a new Borrowing Notice with
respect to such Eurodollar Loan or to pay such Eurodollar Loan, then such
Eurodollar Loan shall be converted to a Base Rate Loan on and after the last day
of such LIBOR Interest Period and shall remain a Base Rate Loan until paid or
until the effective date of a new Borrowing Notice with respect thereto.
(C) If Lender determines that maintenance of any of its Eurodollar
Loans would violate any applicable law, rule, regulation or directive, whether
or not having the force of law, Lender shall suspend the availability of
Eurodollar Loans and require any Eurodollar Loans outstanding to be repaid; or
if Lender determines that (i) deposits of a type or maturity appropriate to
match fund Eurodollar Loans are not available, or (ii) LIBOR does not accurately
reflect the cost of making a Eurodollar Loan, then Lender shall promptly provide
notice to Borrower of its decision to suspend Borrower's ability to make
Eurodollar Loans and/or require Borrower to repay all Eurodollar Loans and shall
suspend the availability of Eurodollar Loans after the date of any such
determination.
(D) If any payment of a Eurodollar Loan occurs on a date which is
not the last day of the applicable LIBOR Interest Period, whether because of
acceleration, prepayment or otherwise, or a Eurodollar Loan is not made on the
date specified by Borrower because Borrower has not satisfied the conditions
precedent to such Eurodollar Loan contained in this Agreement or a Default or
Event of Default has occurred and is continuing, Borrower will indemnify Lender
for any loss or cost incurred by Lender resulting therefrom, including, without
limitation, any loss or cost in liquidating or employing deposits required to
fund or maintain the Eurodollar Loan.
(E) Lender shall deliver a written statement as to the amount due,
if any, under SECTIONS 3.7(C) or (D) hereof. Such written statement shall set
forth in reasonable detail the calculations upon which Lender determined such
amount and shall be final, conclusive and binding on Borrower in the absence of
manifest error. Determination of amounts payable under such Sections in
connection with a Eurodollar Loan shall be calculated as though Lender funded
its
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Eurodollar Loan through the purchase of a deposit of the type and maturity
corresponding to the deposit used as a reference in determining LIBOR applicable
to such Loan whether in fact that is the case or not. Unless otherwise provided
herein, the amount specified in the written statement shall be payable on demand
after receipt by Borrower of the written statement.
SECTION 4. TERM AND TERMINATION
4.1. TERM OF AGREEMENT. Subject to Lender's right to cease making Loans to
Borrower upon or after the occurrence of any Default or Event of Default, this
Agreement shall be in effect for a period of three (3) years from the date
hereof, through December 26, 1999 (the "ORIGINAL TERM").
4.2. TERMINATION.
4.2.1.TERMINATION BY LENDER. Upon at least sixty (60) days prior
written notice to Borrower, Lender may terminate this Agreement as of the last
day of the Original Term and Lender may terminate this Agreement without notice
upon or after the occurrence of an Event of Default.
4.2.2.TERMINATION BY BORROWER. Upon at least sixty (60) days prior
written notice to Lender, Borrower may, at its option, terminate this Agreement;
PROVIDED, HOWEVER, no such termination shall be effective until Borrower has
paid all of the Obligations in immediately available funds and all Letters of
Credit and LC Guaranties have expired or have been cash collateralized to
Lender's satisfaction. Any notice of termination given by Borrower shall be
irrevocable unless Lender otherwise agrees in writing, and Lender shall have no
obligation to make any Loans or issue or procure any Letters of Credit or LC
Guaranties on or after the termination date stated in such notice. Borrower may
elect to terminate this Agreement in its entirety only. No section of this
Agreement or type of Loan available hereunder may be terminated singly.
4.2.3.TERMINATION CHARGES. On the effective date of termination of
this Agreement for any reason, Borrower shall pay to Lender (in addition to the
then outstanding principal, accrued interest and other charges owing under the
terms of this Agreement and any of the other Loan Documents), as liquidated
damages for the loss of the bargain and not as a penalty, an amount equal to
2.0% of the Total Credit Facility if termination occurs during the first
12-month period of the Original Term (December 27, 1996 through December 26,
1997); 1.0% of the Total Credit Facility if termination occurs during the second
12-month period of the Original Term (December 27, 1997 through December 26,
1998); and 0.5% of the Total Credit Facility if termination occurs during the
third 12-month period of the Original Term (December 27, 1998 through December
26, 1999). If termination occurs on or thirty (30) days prior to the last day of
the Original Term, no termination charge shall be payable.
4.2.4.EFFECT OF TERMINATION. All of the Obligations shall be
immediately due and payable upon the termination date stated in any notice of
termination of this Agreement. All undertakings, agreements, covenants,
warranties and representations of Borrower contained in the Loan Documents shall
survive any such termination and Lender shall retain its Liens in the Collateral
and all of its rights and remedies under the Loan Documents notwithstanding such
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termination until Borrower has paid the Obligations to Lender, in full, in
immediately available funds, together with the applicable termination charge, if
any. Notwithstanding the payment in full of the Obligations, Lender shall not be
required to terminate its security interests in the Collateral unless, with
respect to any loss or damage Lender may incur as a result of dishonored checks
or other items of payment received by Lender from Borrower or any Account Debtor
and applied to the Obligations, Lender shall, at its option, (i) have received a
written agreement, executed by Borrower and by any Person whose loans or other
advances to Borrower are used in whole or in part to satisfy the Obligations,
indemnifying Lender from any such loss or damage; or (ii) have retained such
monetary reserves and Liens on the Collateral for such period of time as Lender,
in its reasonable discretion, may deem necessary to protect Lender from any such
loss or damage.
SECTION 5. SECURITY INTERESTS
5.1 SECURITY INTEREST IN COLLATERAL. To secure the prompt payment and
performance to Lender of all of the Obligations, each Borrower hereby grants to
Lender a continuing security interest in and Lien upon all of each Borrower's
assets, including all of the following Property and interests in Property of
Borrower, whether now owned or existing or hereafter created, acquired or
arising and wheresoever located:
(i) All Accounts;
(ii) All Inventory;
(iii) All Equipment;
(iv) All General Intangibles;
(v) All investment property (as defined in SECTION 9.115 of
the Code);
(vi) All real Property;
(vii) All monies and other Property of any kind now or at any
time or times hereafter in the possession or under the control of Lender
or a bailee or Affiliate of Lender;
(viii)All accessions to, substitutions for and all
replacements, products and cash and non-cash proceeds of (i) through (vii)
above, including proceeds of and unearned premiums with respect to
insurance policies insuring any of the Collateral; and
(ix) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs, and other
computer materials and records) of Borrower pertaining to any of (i)
through (viii) above.
5.2 CROSS-COLLATERALIZATION. Each Borrower agrees that the Collateral
pledged by such Borrower hereunder shall secure all of the Obligations of the
Borrower. Upon and after a Default or an Event of Default by any Borrower,
Lender may pursue all rights and remedies that Lender
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may have against all or any part of the Collateral regardless of which Borrower
has legal title to such Collateral. Each Borrower hereby acknowledges that this
cross-collateralization of the Collateral owned by such Borrower is in
consideration of Lender extending the credit hereunder and is mutually
beneficial to each Borrower.
5.3. LIEN PERFECTION; FURTHER ASSURANCES. Borrower shall execute such
UCC-1 financing statements as are required by the Code and such other
instruments, assignments or documents as are necessary to perfect Lender's Lien
upon any of the Collateral and shall take such other action as may be required
to perfect or to continue the perfection of Lender's Lien upon the Collateral.
Unless prohibited by Applicable Law, Borrower hereby authorizes Lender to
execute and file any such financing statement on Borrower's behalf. The parties
agree that a carbon, photographic or other reproduction of this Agreement shall
be sufficient as a financing statement and may be filed in any appropriate
office in lieu thereof. At Lender's request, Borrower shall also promptly
execute or cause to be executed and shall deliver to Lender any and all
documents, instruments and agreements deemed necessary by Lender to give effect
to or carry out the terms or intent of the Loan Documents.
5.4. LIEN ON REALTY; COLLATERAL ASSIGNMENTS OF LEASES. The due and
punctual payment and performance of the Obligations shall also be secured by the
Lien created by each Mortgage upon all real Property of Borrower described
therein. The Mortgage shall be executed by Borrower in favor of Lender and shall
be duly recorded, at Borrower's expense, in each office where such recording is
required to constitute a fully perfected Lien on the real Property covered
thereby. Borrower shall deliver to Lender, at Borrower's expense, mortgagee
title insurance policies issued by a title insurance company satisfactory to
Lender, which policies shall be in form and substance satisfactory to Lender and
shall insure a valid first Lien in favor of Lender on the Property covered
thereby, subject only to those exceptions acceptable to Lender and its counsel.
Borrower shall deliver to Lender such other documents, including all currently
existing as-built survey prints of the real Property, as Lender and its counsel
may request relating to the real Property subject to each Mortgage. The due and
punctual payment and performance of the Obligations shall also be secured by
each Collateral Assignment of Lease of the leasehold interest of Technical
Products in all real Property described therein. Each Collateral Assignment of
Lease shall be executed by Technical Products in favor of Lender and shall be
duly recorded, at Borrower's expense, in each office where such recording is
required to constitute a fully perfected Lien on the leasehold interest of
Technical Products in the real Property covered thereby.
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SECTION 6. COLLATERAL ADMINISTRATION
6.1. General
6.1.1.LOCATION OF COLLATERAL. All tangible items of Collateral,
other than Inventory in transit, motor vehicles, and investment property held in
an account with a securities intermediary shall at all times be kept by Borrower
and its Subsidiaries at one or more of the business locations set forth in
EXHIBIT B hereto and shall not, without the prior written approval of Lender, be
moved therefrom, except prior to an Event of Default and Lender's acceleration
of the maturity of the Obligations in consequence thereof, for (i) sales of
Inventory in the ordinary course of business and (ii) removals in connection
with dispositions of Equipment that are authorized by SECTION 6.4.2 hereof.
6.1.2.INSURANCE OF COLLATERAL. Borrower shall maintain and pay for
insurance upon all Collateral wherever located and with respect to Borrower's
business, covering casualty, hazard, public liability and such other risks in
such amounts and with such insurance companies as are reasonably satisfactory to
Lender. Borrower shall deliver the originals or certified copies of such
policies to Lender with satisfactory lender's loss payable endorsements, which
policies shall name Lender as sole loss payee, assignee or additional insured,
as appropriate. Each policy of insurance or endorsement shall contain a clause
requiring the insurer to give not less than 30 days prior written notice to
Lender in the event of cancellation of the policy for any reason whatsoever and
a clause specifying that the interest of Lender shall not be impaired or
invalidated by any act or neglect of Borrower or the owner of the Property or by
the occupation of the premises for purposes more hazardous than are permitted by
said policy. If Borrower fails to provide and pay for such insurance, Lender
may, at its option, but shall not be required to, procure the same and charge
Borrower therefor. Borrower agrees to deliver to Lender, promptly as rendered,
true copies of all reports made in any reporting forms to insurance companies.
6.1.3.PROTECTION OF COLLATERAL. All expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping the Collateral, any
and all excise, property, sales and use taxes imposed by any Applicable Law on
any of the Collateral or in respect of the sale thereof, and all other payments
required to be made by Lender to any Person to realize upon any Collateral shall
be borne and paid by Borrower. If Borrower fails to promptly pay any portion
thereof when due, Lender may, at its option, but shall not be required to, pay
the same and charge Borrower therefor. Lender shall not be liable or responsible
in any way for the safekeeping of any of the Collateral or for any loss or
damage thereto (except for reasonable care in the custody thereof while any
Collateral is in Lender's actual possession) or for any diminution in the value
thereof, or for any act or default of any warehouseman, carrier, forwarding
agency, or other Person whomsoever, but the same shall be at Borrower's sole
risk.
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6.2. ADMINISTRATION OF ACCOUNTS.
6.2.1. RECORDS, SCHEDULES AND ASSIGNMENTS OF ACCOUNTS. Borrower
shall keep accurate and complete records of its Accounts and all payments and
collections thereon and shall submit to Lender on such periodic basis as Lender
shall request a sales and collections report for the preceding period, in form
satisfactory to Lender. On or before the twentieth day of each month from and
after the date hereof, Borrower shall deliver to Lender, in form acceptable to
Lender, a detailed aged trial balance of all Accounts existing as of the last
day of the preceding month, specifying the names, addresses, face value, dates
of invoices and due dates for each Account Debtor obligated on an Account so
listed ("SCHEDULE OF ACCOUNTS"), and, upon Lender's request therefor, copies of
proof of delivery and the original copy of all documents, including, without
limitation, repayment histories and present status reports relating to the
Accounts so scheduled and such other matters and information relating to the
status of then existing Accounts as Lender shall reasonably request. In
addition, if Accounts in an aggregate face amount in excess of $100,000 become
ineligible because they fall within one of the specified categories of
ineligibility set forth in the definition of Eligible Accounts or otherwise
established by Lender, Borrower shall notify Lender of such occurrence on the
first Business Day following the day such occurrence becomes known to Borrower
and the Borrowing Base shall thereupon be adjusted to reflect such occurrence.
If requested by Lender, Borrower shall execute and deliver to Lender agings and
formal written assignments of all of its Accounts weekly or daily, which shall
include all Accounts that have been created since the date of the last
assignment, together with copies of invoices or invoice registers related
thereto.
6.2.2. DISCOUNTS, ALLOWANCES, DISPUTES. If Borrower grants any
discounts, allowances or credits that are not shown on the face of the invoice
for the Account involved, Borrower shall report such discounts, allowances or
credits, as the case may be, to Lender as part of the next required Schedule of
Accounts. If any amounts due and owing in excess of $100,000 are in dispute
between Borrower and any Account Debtor, Borrower shall provide Lender with
written notice thereof at the time of submission of the next Schedule of
Accounts, explaining in detail the reason for the dispute, all claims related
thereto and the amount in controversy. Upon and after the occurrence of an Event
of Default, Lender shall have the right to settle or adjust all disputes and
claims directly with the Account Debtor and to compromise the amount or extend
the time for payment of the Accounts upon such terms and conditions as Lender
may deem advisable, and to charge the deficiencies, costs and expenses thereof,
including attorney's fees, to Borrower.
6.2.3. TAXES. If an Account includes a charge for any tax payable to
any governmental taxing authority, Lender is authorized, in its sole discretion,
to pay the amount thereof to the proper taxing authority for the account of
Borrower and to charge Borrower therefor; PROVIDED, HOWEVER, that Lender shall
not be liable for any such taxes to any governmental taxing authority that may
be due by Borrower.
6.2.4. ACCOUNT VERIFICATION. Whether or not a Default or an Event
of Default has occurred, any of Lender's officers, employees or agents shall
have the right, at any time or times hereafter, in the name of Lender, any
designee of Lender or Borrower, to verify the validity, amount or any other
matter relating to any Accounts by mail, telephone, telegraph or otherwise.
Borrower
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shall cooperate fully with Lender in an effort to facilitate and promptly
conclude any such verification process.
6.2.5. MAINTENANCE OF DOMINION ACCOUNT. Borrower shall maintain a
Dominion Account pursuant to a lockbox arrangement acceptable to Lender with
such banks as may be selected by Borrower and be acceptable to Lender; provided,
however, Borrower may at its option elect to terminate the Dominion Account upon
providing Lender five (5) days prior written notice of its election to terminate
the Dominion Account. Borrower shall issue to any such banks an irrevocable
letter of instruction directing such banks to deposit all payments or other
remittances received in the lockbox to the Dominion Account for application on
account of the Obligations. All funds deposited in the Dominion Account shall
immediately become the property of Lender and Borrower shall obtain the
agreement by such banks in favor of Lender to waive any offset rights against
the funds so deposited.
6.2.6. COLLECTION OF ACCOUNTS; PROCEEDS OF COLLATERAL. To expedite
collection, Borrower shall endeavor in the first instance to make collection of
its Accounts for Lender. All remittances received by Borrower in respect of
Accounts, together with the proceeds of any other Collateral, shall be held as
Lender's property by Borrower as trustee of an express trust for Lender's
benefit and Borrower shall immediately deposit same in kind in the Dominion
Account. Lender retains the right at all times after the occurrence of a Default
or an Event of Default to notify Account Debtors that Accounts have been
assigned to Lender and to collect Accounts directly in its own name and to
charge the collection costs and expenses, including reasonable attorneys' fees
to Borrower.
6.3. ADMINISTRATION OF INVENTORY.
6.3.1.RECORDS AND REPORTS OF INVENTORY. Borrower shall keep accurate
and complete records of its Inventory. Borrower shall furnish Lender Inventory
reports in form and detail satisfactory to Lender at such times as Lender may
request, but at least once each month, not later than the twentieth day of such
month. In the event Borrower conducts a physical inventory of its Inventory,
Borrower shall provide to Lender a report based on each such physical inventory
promptly thereafter, together with such supporting information as Lender shall
request.
6.3.2.RETURNS OF INVENTORY. Borrower shall not return any of its
Inventory to a supplier or vendor thereof, or any other Person, whether for
cash, credit against future purchases or then existing payables, or otherwise,
unless (i) such return is in the ordinary course of business of Borrower and
such Person, (ii) no Default or Event of Default exists or would result
therefrom, (iii) the return of such Inventory will not result in an
Out-of-Formula Condition, (iv) if the value of all Inventory returned in any
month exceeds $250,000, Borrower promptly notifies Lender thereof, and (v) any
payments received by Borrower in connection with any such return is promptly
turned over to Lender for application to the Obligations.
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6.4. ADMINISTRATION OF EQUIPMENT.
6.4.1.RECORDS AND SCHEDULES OF EQUIPMENT. Borrower shall keep
accurate records itemizing and describing the kind, type, quality, quantity and
value of its Equipment and all dispositions made in accordance with SECTION
6.4.2 hereof, and shall furnish Lender with a current schedule containing the
foregoing information on at least an annual basis and more often if requested by
Lender. Immediately on request therefor by Lender, Borrower shall deliver to
Lender any and all evidence of ownership, if any, of any of the Equipment.
6.4.2.DISPOSITIONS OF EQUIPMENT. Borrower will not sell, lease or
otherwise dispose of or transfer any of the Equipment or any part thereof
without the prior written consent of Lender; PROVIDED, HOWEVER, that the
foregoing restriction shall not apply, for so long as no Default or Event of
Default exists, to (i) dispositions of Equipment which, in the aggregate during
any consecutive twelve-month period, has a fair market value or book value,
whichever is less, of $500,000 or less, provided that all proceeds thereof are
remitted to Lender for application to the Loans, or (ii) replacements of
Equipment that is substantially worn, damaged or obsolete with Equipment of like
kind, function and value, provided that the replacement Equipment shall be
acquired prior to or concurrently with any disposition of the Equipment that is
to be replaced, the replacement Equipment shall be free and clear of Liens other
than Permitted Liens that are not Purchase Money Liens, and Borrower shall have
given Lender at least five (5) days' prior written notice of such disposition.
6.4.3.CONDITION OF EQUIPMENT. The Equipment is in good operating
condition and repair, and all necessary replacements of and repairs thereto
shall be made so that the value and operating efficiency of the Equipment shall
be maintained and preserved, reasonable wear and tear excepted. Borrower will
not permit any of the Equipment to become affixed to any real Property leased to
Borrower so that an interest arises therein under the real estate laws of the
applicable jurisdiction unless the landlord of such real Property has executed a
landlord waiver or leasehold mortgage in favor of and in form acceptable to
Lender, and Borrower will not permit any of the Equipment to become an accession
to any personal Property that is subject to a Lien unless the Lien is a
Permitted Lien (other than a Purchase Money Lien).
6.5. PAYMENT OF CHARGES. All amounts chargeable to Borrower under SECTION
6 hereof shall be Obligations secured by all of the Collateral, shall be payable
on demand and shall bear interest from the date such advance was made until paid
in full at the rate applicable to Revolving Credit Loans from time to time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1. GENERAL REPRESENTATIONS AND WARRANTIES. To induce Lender to enter
into this Agreement and to make advances hereunder, Borrower warrants and
represents to Lender and covenants with Lender that:
7.1.1.ORGANIZATION AND QUALIFICATION. Each Borrower and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction
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of its incorporation. Each Borrower and its Subsidiaries is duly qualified and
is authorized to do business and is in good standing as a foreign corporation in
each state or jurisdiction listed on EXHIBIT C hereto and in all other states
and jurisdictions where the character of its Properties or the nature of its
activities make such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect.
7.1.2.CORPORATE POWER AND AUTHORITY. Each Borrower is duly
authorized and empowered to enter into, execute, deliver and perform this
Agreement and each of the other Loan Documents to which it is a party. The
execution, delivery and performance of this Agreement and each of the other Loan
Documents have been duly authorized by all necessary corporate action and do not
and will not (i) require any consent or approval of the shareholders of any
Borrower; (ii) contravene any Borrower's charter, articles or certificate of
incorporation or by-laws; (iii) violate, or cause any Borrower to be in default
under, any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award in effect having applicability to any
Borrower; (iv) result in a breach of or constitute a default under any indenture
or loan or credit agreement or any other agreement, lease or instrument to which
any Borrower is a party or by which it or its Properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any Lien
(other than Permitted Liens) upon or with respect to any of the Properties now
owned or hereafter acquired by any Borrower.
7.1.3.LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will be, a legal,
valid and binding obligation of each Borrower, enforceable against it in
accordance with its respective terms, except to the extent that such enforcement
may be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or by principles of equity pertaining to the
availability of equitable remedies.
7.1.4.CAPITAL STRUCTURE. EXHIBIT D hereto states (i) the correct
name of each of the Subsidiaries of each Borrower, its jurisdiction of
incorporation and the percentage of its Voting Stock owned by such Borrower,
(ii) the name of each of each Borrower's corporate or joint venture Affiliates
and the nature of the affiliation, (iii) the number, nature and holder of all
outstanding Securities of each Borrower and each Subsidiary of such Borrower and
(iv) the number of authorized, issued and treasury shares of each Borrower and
each Subsidiary of such Borrower. Each Borrower has good title to all of the
shares it purports to own of the stock of each of its Subsidiaries, free and
clear in each case of any Lien, other than Permitted Liens. All such shares have
been duly issued and are fully paid and non-assessable. There are no outstanding
options to purchase, or any rights or warrants to subscribe for, or any
commitments or agreements to issue or sell, or any Securities or obligations
convertible into, or any powers of attorney relating to, shares of the capital
stock of any Borrower or any of its Subsidiaries. There are no outstanding
agreements or instruments binding upon any of Borrower's shareholders relating
to the ownership of its shares of capital stock. TPG is the beneficial and legal
holder of all outstanding capital stock of each Borrower.
7.1.5.CORPORATE NAMES. Neither any Borrower nor any of its
Subsidiaries has been known as or used any corporate, fictitious or trade names
except those listed on EXHIBIT E hereto.
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Except as set forth on EXHIBIT E, neither any Borrower nor any of its
Subsidiaries has been the surviving corporation of a merger or consolidation or
acquired all or substantially all of the assets of any Person.
7.1.6.BUSINESS LOCATIONS; AGENT FOR PROCESS. Each Borrower's and its
Subsidiaries' chief executive office and other places of business are as listed
on EXHIBIT B hereto. During the preceding five-year period, neither any Borrower
nor any of its Subsidiaries has had an office, place of business or agent for
service of process other than as listed on EXHIBIT B. Except as shown on EXHIBIT
B, no Inventory of Borrower is stored with a bailee, warehouseman or similar
Person, nor is any Inventory consigned to any Person.
7.1.7.TITLE TO PROPERTIES; PRIORITY OF LIENS. Each Borrower and its
Subsidiaries have good and indefeasible title to and fee simple ownership of, or
valid and subsisting leasehold interests in, all of their real Property, and
good title to all of the Collateral and all of their other Property, in each
case, free and clear of all Liens except Permitted Liens. Each Borrower has paid
or discharged all lawful claims which, if unpaid, might become a Lien against
any of such Borrower's Properties that is not a Permitted Lien. The Liens
granted to Lender under SECTION 5 hereof are first priority Liens, subject only
to Permitted Liens.
7.1.8.ACCOUNTS. Lender may rely, in determining which Accounts of
Technical Products are Eligible Accounts, on all statements and representations
made by Technical Products with respect to any Account or Accounts. Unless
otherwise indicated in writing to Lender, with respect to each Account:
(i) It is genuine and in all respects what it purports
to be, and it is not evidenced by a judgment;
(ii) It arises out of a completed, BONA FIDE sale and
delivery of goods or rendition of services by Technical Products in the
ordinary course of its business and in accordance with the terms and
conditions of all purchase orders, contracts or other documents relating
thereto and forming a part of the contract between Technical Products and
the Account Debtor;
(iii) It is for a liquidated amount maturing as stated
in the duplicate invoice covering such sale or rendition of services, a
copy of which has been furnished or is available to Lender;
(iv) Such Account, and Lender's security interest
therein, is not subject to any offset, Lien, deduction, defense, dispute,
counterclaim or any other adverse condition except for disputes resulting
in returned goods where the amount in controversy is deemed by Lender to
be immaterial, and each such Account is absolutely owing to Technical
Products and is not contingent in any respect or for any reason;
(v) Technical Products has made no agreement with any
Account Debtor thereunder for any extension, compromise, settlement or
modification of any such Account
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or any deduction therefrom, except discounts or allowances which are
granted by Technical Products in the ordinary course of its business for
prompt payment and which are reflected in the calculation of the net
amount of each respective invoice related thereto and are reflected in the
Schedules of Accounts submitted to Lender pursuant to SECTION 6.2.1
hereof;
(vi) There are no facts, events or occurrences which in
any way impair the validity or enforceability of any Accounts or tend to
reduce the amount payable thereunder from the face amount of the invoice
and statements delivered to Lender with respect thereto;
(vii) To the best of Technical Products' knowledge, the
Account Debtor thereunder (a) had the capacity to contract at the time any
contract or other document giving rise to the Account was executed and (b)
such Account Debtor is Solvent; and
(viii)To the best of Technical Products' knowledge,
there are no proceedings or actions which are threatened or pending
against any Account Debtor thereunder which might result in any material
adverse change in such Account Debtor's financial condition or the
collectibility of such Account.
7.1.9.FINANCIAL STATEMENTS; FISCAL YEAR. The Consolidated and
consolidating balance sheets of TPG and its Subsidiaries (including, without
limitation, the Borrowers) as of October 26, 1996, and the related statements of
income, changes in stockholder's equity, and changes in financial position for
the periods ended on such dates, have been prepared in accordance with GAAP
(excluding incentive compensation accrual), and present fairly the financial
position of TPG and its Subsidiaries (including, without limitation, the
Borrowers) at such dates and the results of the operations of TPG and its
Subsidiaries for such periods. Since October 26, 1996, there has been no
material change in the condition, financial or otherwise, of any Borrower and no
change in the aggregate value of Equipment and real Property owned by each
Borrower, except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse. The fiscal year of
TPG and each of its Subsidiaries ends on December 31 of each year.
7.1.10. FULL DISCLOSURE. The financial statements referred to in
SECTION 7.1.9 hereof do not, nor does this Agreement or any other written
statement of Borrower to Lender, contain any untrue statement of a material fact
or omit a material fact necessary to make the statements con tained therein or
herein not misleading. There is no fact or circumstances which Borrower has
failed to disclose to Lender in writing and which may reasonably be expected to
have a Material Adverse Effect.
7.1.11. SOLVENT FINANCIAL CONDITION. Each Borrower and its
respective Subsidiaries are now and, after giving effect to the Loans to be made
to be issued hereunder, at all times will be, Solvent.
7.1.12. SURETY OBLIGATIONS. Neither any Borrower nor any of its
Subsidiaries is obligated as surety or indemnitor under any surety or similar
bond or other contract issued or entered into any agreement to assure payment,
performance or completion of performance of any undertaking or obligation of any
Person.
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7.1.13. TAXES. Technical Products' federal tax identification number
is 76-0467373. DeLand's federal tax identification number is 76-0467374
Lincoln's federal tax identification number is 76-0467376. Marion's federal tax
identification number is 76-0467375 The federal tax identification number of
each of each Borrower's Subsidiaries is shown on EXHIBIT F hereto. Each Borrower
and each of its Subsidiaries has filed all federal, state and local tax returns
and other reports it is required by law to file and has paid, or made provision
for the payment of, all Taxes upon it, its income and Properties as and when
such Taxes are due and payable, except to the extent being Properly Contested.
The provision for Taxes on the books of TPG and its Subsidiaries are adequate
for all years not closed by applicable statutes, and for its current fiscal
year.
7.1.14. BROKERS. There are no claims for brokerage commissions,
finder's fees or investment banking fees in connection with the transactions
contemplated by this Agreement.
7.1.15. PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. Each Borrower
and its Subsidiaries own or possess all the patents, trademarks, service marks,
trade names, copyrights and licenses necessary for the present and planned
future conduct of their business without any conflict with the rights of others.
All such patents, trademarks, service marks, trade names, copyrights, licenses
and other similar rights are listed on EXHIBIT G hereto.
7.1.16. GOVERNMENTAL CONSENTS. Each Borrower and its Subsidiaries
have, and are in good standing with respect to, all governmental consents,
approvals, licenses, authorizations, permits, certificates, inspections and
franchises necessary to continue to conduct their business as heretofore or
proposed to be conducted by them and to own or lease and operate their
Properties as now owned or leased by them.
7.1.17. COMPLIANCE WITH LAWS. Each Borrower and its Subsidiaries
have duly complied with, and their Properties, business operations and
leaseholds are in compliance in all material respects with, the provisions of
all Applicable Law and there have been no citations, notices or orders of
noncompliance issued to any Borrower or any of its Subsidiaries under any such
law, rule or regulation. Each of each Borrower and its Subsidiaries has
established and maintains an adequate monitoring system to insure that it
remains in compliance with all federal, state and local laws, rules and
regulations applicable to it. No Inventory has been produced in violation of the
Fair Labor Standards Act (29 U.S.C. ss. 201 ET SEQ.), as amended.
7.1.18. RESTRICTIONS. Neither any Borrower nor any of its
Subsidiaries is a party or subject to any contract, agreement, or charter or
other corporate restriction, which has or could be reasonably expected to have a
Material Adverse Effect. Neither any Borrower nor any of its Subsidiaries is a
party or subject to any contract or agreement which restricts its right or
ability to incur Indebtedness, other than as set forth on EXHIBIT H hereto, none
of which prohibit the execution of or compliance with this Agreement or the
other Loan Documents by any Borrower or any of its Subsidiaries, as applicable.
7.1.19. LITIGATION. Except as set forth on EXHIBIT I hereto, there
are no actions, suits, proceedings or investigations pending, or to the
knowledge of any Borrower, threatened, against or affecting any Borrower or any
of its Subsidiaries, or the business, operations, Properties, prospects,
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profits or condition of any Borrower or any of its Subsidiaries. Neither any
Borrower nor any of its Subsidiaries is in default with respect to any order,
writ, injunction, judgment, decree or rule of any court, governmental authority
or arbitration board or tribunal.
7.1.20. NO DEFAULTS. No event has occurred and no condition exists
which would, upon or after the execution and delivery of this Agreement or any
Borrower's performance hereunder, constitute a Default or an Event of Default.
Neither any Borrower nor any of its Subsidiaries is in default, and no event has
occurred and no condition exists which constitutes, or which with the passage of
time or the giving of notice or both would constitute, a default in the payment
of any Indebtedness to any Person for Money Borrowed.
7.1.21. LEASES. EXHIBIT J hereto is a complete listing of all
capitalized leases of each Borrower and its Subsidiaries on the date hereof and
EXHIBIT K hereto is a complete listing of all operating leases of each Borrower
and its Subsidiaries on the date hereof. Each of each Borrower and its
Subsidiaries is in full compliance with all of the terms of each of its
respective capitalized and operating leases.
7.1.22. PENSION PLANS. Except as disclosed on EXHIBIT L hereto,
neither any Borrower nor any of its Subsidiaries has any Plan on the date
hereof. Each Borrower and each of its Subsidiaries is in full compliance with
the requirements of ERISA and the regulations promulgated thereunder with
respect to each Plan. No fact or situation that could result in a material
adverse change in the financial condition of any Borrower or any of its
Subsidiaries exists in connection with any Plan. Neither any Borrower nor any of
its Subsidiaries has any withdrawal liability in connection with a Multiemployer
Plan.
7.1.23. TRADE RELATIONS. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between any Borrower or any of its Subsidiaries and
any customer or any group of customers whose purchases individually or in the
aggregate are material to the business of such Borrower or any of its
Subsidiaries, or with any material supplier, and there exists no condition or
state of facts or circumstances which would materially affect adversely any
Borrower or any of its Subsidiaries or prevent any Borrower or any of its
Subsidiaries from conducting such business after the consummation of the
transaction contemplated by this Agreement in substantially the same manner in
which it has heretofore been conducted.
7.1.24. LABOR RELATIONS. Except as described on EXHIBIT M hereto,
neither any Borrower nor any of its Subsidiaries is a party to any collective
bargaining agreement on the date hereof. On the date hereof, there are no
material grievances, disputes or controversies with any union or any other
organization of any Borrower's or any of its Subsidiaries' employees, or threats
of strikes, work stoppages or any asserted pending demands for collective
bargaining by any union or organization.
7.2. CONTINUOUS NATURE OF REPRESENTATIONS AND WARRANTIES. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall remain accurate, complete and
not misleading at all times during the term of this
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Agreement, except for changes in the nature of a Borrower's or its Subsidiaries'
business or operations that would render the information in any exhibit attached
hereto either inaccurate, incomplete or misleading, so long as Lender has
consented to such changes or such changes are expressly permitted by this
Agreement, and except for such representations and warranties that by their
nature are limited only to a specific date in time.
7.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Borrower contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by Lender
and the parties thereto and the closing of the transactions described therein or
related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1. AFFIRMATIVE COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
8.1.1.VISITS AND INSPECTIONS. Permit representatives of Lender, from
time to time, as often as may be reasonably requested, but only during normal
business hours, to (i) visit and inspect its Properties and the Properties of
each of their respective Subsidiaries, and (ii) inspect, audit and make extracts
from its books and records, and discuss with its officers, employees and
independent accountants, its business, assets, liabilities, financial condition,
business prospects and results of operations.
8.1.2.NOTICES. Notify Lender in writing (i) of the occurrence of any
event or the existence of any fact which renders any representation or warranty
in this Agreement or any of the other Loan Documents inaccurate, incomplete or
misleading; (ii) promptly after Borrower's learning thereof, of the commencement
of any litigation affecting Borrower or any of its Properties, whether or not
the claim is considered by Borrower to be covered by insurance, and of the
institution of any administrative proceeding which if determined adversely to
Borrower, would have a Material Adverse Effect; (iii) at least sixty (60) days
prior thereto, of Borrower's opening of any new office or place of business or
Borrower's closing of any existing office or place of business; (iv) promptly
after Borrower's learning thereof, of any labor dispute to which Borrower may
become a party, any strikes or walkouts relating to any of its plants or other
facilities, and the expiration of any labor contract to which it is a party or
by which it is bound; (v) promptly after Borrower's learning thereof, of any
material default by any Loan Party under any note, indenture, loan agreement,
mortgage, lease, deed, guaranty or other similar agreement relating to any
Indebtedness of Borrower exceeding $500,000; (vi) promptly after the occurrence
thereof, of any Default or Event of Default; (vii) promptly after the occurrence
thereof, of any default by any obligor under any note or other evidence of
Indebtedness payable to Borrower (other than trade receivables) in an amount
exceeding $100,000; and (viii) promptly after the rendition thereof, of any
judgment rendered against any Loan Party in an amount exceeding $50,000.
8.1.3.FINANCIAL STATEMENTS. Keep, and cause each Subsidiary to keep,
adequate records and books of account with respect to its business activities in
which proper entries are made
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in accordance with GAAP reflecting all its financial transactions; and cause to
be prepared and furnished to Lender the following (all to be prepared in
accordance with GAAP applied on a consistent basis, unless Borrower's certified
public accountants concur in any change therein and such change is disclosed to
Lender and is consistent with GAAP):
(i) not later than 90 days after the close of each
fiscal year of Borrower, unqualified audited financial statements of TPG
and its Subsidiaries, including, without limitation, Borrowers, as of the
end of such year, on a Consolidated basis (with a footnote exhibiting the
consolidating information used in preparing such audited financial
statements), certified by a firm of independent certified public
accountants of recognized standing selected by Borrower, but acceptable to
Lender (except for a qualification for a change in accounting principles
with which the accountant concurs);
(ii) not later than 30 days after the end of each month
hereafter, including the last month of Borrower's fiscal year, unaudited
interim financial statements of TPG and its Subsidiaries, including,
without limitation, Borrowers, as of the end of such month and of the
portion of Borrower's financial year then elapsed, on a Consolidated and
consolidating basis, certified by the principal financial officer of TPG
or Borrower as prepared in accordance with GAAP (excluding incentive
compensation accrual) and fairly presenting the Consolidated financial
position and results of operations of TPG and its Subsidiaries, including,
without limitation, Borrowers, for such month and period subject only to
changes from audit and year-end adjustments and except that such
statements need not contain notes;
(iii) promptly after the sending or filing thereof, as
the case may be, copies of any proxy statements, financial statements or
reports which TPG or Borrower has made available to its shareholders and
copies of any regular, periodic and special reports or registration
statements which TPG or Borrower files with the Securities and Exchange
Commission or any governmental authority which may be substituted
therefor, or any national securities exchange;
(iv) promptly after the filing thereof, copies of any
annual report to be filed in accordance with ERISA in connection with each
Plan; and
(v) such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably request, bearing
upon or related to the Collateral or TPG's or any Borrower's and each of
its Subsidiaries' financial condition or results of operations.
Concurrently with the delivery of the financial statements described in
CLAUSE (i) of this SECTION 8.1.3, Borrower shall forward to Lender a copy of the
accountants' letter to TPG's management that is prepared in connection with such
financial statements and also shall cause to be prepared and shall furnish to
Lender a certificate of the aforesaid certified public accountants certifying to
Lender that, based upon their examination of the financial statements of TPG and
its Subsidiaries performed in connection with their examination of said
financial statements, they are
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not aware of any Default or Event of Default, or, if they are aware of such
Default or Event of Default, specifying the nature thereof, and acknowledging,
in a manner satisfactory to Lender, that they are aware that Lender is relying
on such financial statements in making its decisions with respect to the Loans.
Concurrently with the delivery of the financial statements described in CLAUSES
(I) and (II) of this SECTION 8.1.3, or more frequently if requested by Lender,
Borrower shall cause to be prepared and furnished to Lender a Compliance
Certificate in the form of EXHIBIT N hereto executed by the chief financial
officer of TPG or Borrower.
8.1.4.LANDLORD AND STORAGE AGREEMENTS. Provide Lender with copies of
all agreements between any Borrower or any of its Subsidiaries and any landlord
or warehouseman which owns any premises at which any Inventory may, from time to
time, be kept.
8.1.5.GUARANTOR FINANCIAL STATEMENTS. In addition to the financial
statements of TPG to be supplied pursuant to SECTION 8.1.3 hereof, deliver or
cause to be delivered to Lender financial statements for each Guarantor other
than TPG (if any), in form and substance satisfactory to Lender, at such
intervals and covering such time periods as Lender may request.
8.1.6.PROJECTIONS. No later than 30 days prior to the end of each
fiscal year of Borrower, deliver to Lender the budgeted Consolidated and
consolidating balance sheets, profit and loss statements, statement of changes
and capitalization statements (all prepared on a consistent basis with the
historical financial statements of TPG and its Subsidiaries, including, without
limitation, Borrower, together with appropriate supporting details and a
statement of underlying assumptions) for the forthcoming fiscal year, month by
month, of TPG and its Subsidiaries including, without limitation, Borrower.
8.1.7.TAXES.Pay and discharge, and cause each Subsidiary to pay and
discharge, all Taxes prior to the date on which such Taxes become delinquent or
penalties attach thereto, except and to the extent only that such Taxes are
being Properly Contested.
8.1.8.COMPLIANCE WITH LAWS. Comply and cause each Subsidiary to
comply, with all Applicable Law, including all laws, statutes, regulations and
ordinances regarding the collection, payment and deposit of Taxes, and all ERISA
and Environmental Laws, and obtain and keep in force any and all licenses,
permits, franchises, or other governmental authorizations necessary to the
ownership of its Properties or to the conduct of its business, which violation
or failure to obtain might have a Material Adverse Effect.
8.1.9.INSURANCE. In addition to the insurance required herein with
respect to the Collateral, Borrower shall maintain, with financially sound and
reputable insurers, insurance with respect to its Properties and business
against such casualties and contingencies of such type (including product
liability, business interruption, larceny, embezzlement, or other criminal
misappropriation insurance) as is customary in the business of Borrower and in
such amounts as are acceptable to Lender.
8.1.10. BACKLOG REPORTS. In addition to all other reports and
information to be supplied hereunder to Lender, Borrower shall supply on a
monthly basis to Lender a report to
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Lender detailing the backlog of Technical Products in satisfying its orders,
such report to be in form acceptable to Lender.
8.2. NEGATIVE COVENANTS. During the term of this Agreement, and thereafter
for so long as there are any Obligations to Lender, Borrower covenants that,
unless Lender has first consented thereto in writing, it will not:
8.2.1. MERGERS; CONSOLIDATIONS; ACQUISITIONS. Merge or consolidate,
or permit any Subsidiary of Borrower to merge or consolidate, with any Person;
nor acquire, nor permit any of its Subsidiaries to acquire, all or any
substantial part of the Properties of any Person.
8.2.2. LOANS. Make, or permit any of the Subsidiaries to make, any
loans or other advances of money (other than for salary, travel advances,
advances against commissions and other similar advances in the ordinary course
of business) to any Person.
8.2.3. TOTAL INDEBTEDNESS. Create, incur, assume, or suffer to
exist, or permit any of its Subsidiaries to create, incur or suffer to exist,
any Indebtedness, except:
(i) Obligations owing to Lender;
(ii) Subordinated Debt existing on the date of this
Agreement;
(iii) Indebtedness of any Subsidiary of Borrower to
Borrower;
(iv) accounts payable to trade creditors and current
operating expenses (other than for Money Borrowed) which are not aged more
than 45 days from the due date, in each case incurred in the ordinary
course of business and paid within such time period, unless the same are
being Properly Contested;
(v) obligations to pay Rentals permitted by SECTION
8.2.13;
(vi) Permitted Purchase Money Indebtedness;
(vii) contingent liabilities arising out of endorsements
of checks and other negotiable instruments for deposit or collection in
the ordinary course of business;
(viii) Indebtedness existing on the date hereof and
described on EXHIBIT Q hereto; and
(ix) Indebtedness not included in PARAGRAPHS (i) through
(viii) above which, as to Borrower, does not exceed at any time, in the
aggregate, the sum of $500,000.
8.2.4. AFFILIATE TRANSACTIONS. Enter into, or be a party to, or
permit any of its Subsidiaries to enter into or be a party to, any transaction
with any Affiliate or stockholder, except in the ordinary course of and pursuant
to the reasonable requirements of Borrower's or such
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Subsidiary's business and upon fair and reasonable terms which are fully
disclosed to Lender and are no less favorable than would be obtained in a
comparable arm's length transaction with a Person not an Affiliate or
stockholder of Borrower or such Subsidiary.
8.2.5. LIMITATION ON LIENS. Create or suffer to exist, or permit any
of its Subsidiaries to create or suffer to exist, any Lien upon any of its
Property, income or profits, whether now owned or hereafter acquired, except:
(i) Liens at any time granted in favor of Lender;
(ii) Liens for taxes (excluding any Lien imposed
pursuant to any of the provisions of ERISA) not yet due or being Properly
Contested;
(iii) Liens arising in the ordinary course of its
business by operation of law or regulation, but only if payment in respect
of any such Lien is not at the time required or the Indebtedness secured
by such Lien is being Properly Contested and such Lien does not materially
detract from the value of its Property or materially impair the use
thereof in the operation of its business;
(iv) Purchase Money Liens securing Permitted Purchase
Money Indebtedness;
(v) Liens securing Indebtedness of one of Borrower's
Subsidiaries to Borrower or another such Subsidiary;
(vi) Rights of the United States of America or any
department, agency or instrumentality thereof pursuant to the "Government
Property Clause" and "Progress Payment Clause", if any, in any contract
with Technical Products;
(vii) such other Liens as appear on EXHIBIT O hereto;
and
(viii)such other Liens as Lender may hereafter approve
in writing.
8.2.6. SUBORDINATED DEBT. Make, or permit any of its Subsidiaries to
make, any payment of any part or all of any Subordinated Debt or take any other
action or omit to take any other action in respect of any Subordinated Debt,
except in accordance with the subordination agreement relative thereto.
8.2.7. DISTRIBUTIONS. Declare or make, or permit any of its
Subsidiaries to declare or make, any Distributions; PROVIDED, HOWEVER, that so
long as no Default or Event of Default then exists or would arise therefrom,
Technical Products may (i) pay dividends on its common stock in an amount not to
exceed $80,000 during any calendar year for the purpose of permitting TPG to pay
dividends on its preferred stock, (ii) pay Cash Taxes imposed or levied upon
TPG, as and when due, and (iii) pay dividends on its common stock in an amount
not to exceed $240,000 during any calendar year for the purpose of permitting
TPG to make scheduled accommodation payments to
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Brunswick to the extent (a) required under the Asset Purchase Agreement and (b)
permitted under the subordination and intercreditor agreement dated as of the
date hereof by and between Lender and Brunswick.
8.2.8. CAPITAL EXPENDITURES. Make Capital Expenditures (including,
by way of capitalized leases) which, in the aggregate, as to Borrowers and their
Subsidiaries, exceed (i) $2,250,000 during the fiscal year of the Borrowers
ending December 31, 1997, (ii) $2,600,000 during the fiscal year of the
Borrowers ending December 31, 1998, and (iii) $3,100,000 during the fiscal year
of the Borrowers ending December 31, 1999.
8.2.9. DISPOSITION OF ASSETS. Sell, lease or otherwise dispose of
any of, or permit any its Subsidiaries to sell, lease or otherwise dispose of
any of, its Properties, including any disposition of Property as part of a sale
and leaseback transaction, to or in favor of any Person, except (i) sales of
Inventory in the ordinary course of business for so long as no Event of Default
exists hereunder, (ii) a transfer of Property to Borrower by a Subsidiary of
Borrower or (iii) dispositions expressly authorized by this Agreement.
8.2.10. STOCK OF SUBSIDIARIES. Permit any of its Subsidiaries to
issue any additional shares of its capital stock, except director's qualifying
shares.
8.2.11. BILL-AND-HOLD SALES, ETC. Make a sale to any customer on a
bill-and-hold, guaranteed sale, sale and return, sale on approval or consignment
basis, or any sale on a repurchase or return basis; PROVIDED, HOWEVER, that
Technical Products may make sales to the United States of America or any
department, agency or instrumentality thereof, and may retain the sold goods on
its premises if such goods have been approved by a government inspector having
authority to approve such goods (hereinafter referred to as "GOVERNMENT
BILL-AND-HOLD GOODS").
8.2.12. RESTRICTED INVESTMENT. Make or have, or permit any of its
Subsidiaries to make or have, any Restricted Investment.
8.2.13. OPERATING LEASES. Become, or permit any of its Subsidiaries
to become, a lessee under any operating lease (other than a lease under which
Borrower or any of its Subsidiaries is lessor) of Property if the aggregate
Rentals payable during any current or future period of 12 consecutive months
under the lease in question and all other leases under which Borrower or any of
its Subsidiaries is then lessee would exceed $1,000,000. The term "Rentals"
means, as of the date of determination, all payments which the lessee is
required to make by the terms of any lease.
8.2.14. TAX CONSOLIDATION. File or consent to the filing of any
consolidated income tax return with any Person other than its Subsidiaries or
TPG.
8.2.15. COMPLIANCE WITH ASSIGNMENT OF CLAIMS ACT. Fail to
expeditiously assign to Lender upon request of Lender after the occurrence of a
Default or an Event of Default, in a manner satisfactory to Lender, the right of
Technical Products to payment of all then existing and thereafter arising
Accounts where the Account Debtor is the United States of America or any
department,
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agency or instrumentality thereof, so as to comply with the Assignment of Claims
Act of 1940 (31 U.S.C. ss. 203 et seq.).
8.3. SPECIFIC FINANCIAL COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing:
8.3.1. FIXED CHARGE RATIO. TPG shall maintain, on a Consolidated
basis, as of the end of each fiscal quarter set forth below for the twelve
calendar month period ending on such date, a Fixed Charge Ratio of not less than
the ratio set forth below for each fiscal period indicated below:
PERIOD RATIO
------ -----
(i) Twelve calendar month (i) 1.20 to 1.0
period ending
respectively on each of
March 31, 1997 and
June 30, 1997
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(ii) Twelve calendar month (ii) 1.25 to 1.0
period ending
respectively on each of
September 30, 1997,
December 31, 1997,
March 31, 1998,
June 30, 1998 and
September 30, 1998
(iii) Twelve calendar month (iii) 1.40 to 1.0
period ending
respectively on each of
December 31, 1998,
March 31, 1999, June 30,
1999 and September 30,
1999
(iv) Twelve calendar month (iv) 1.50 to 1.0
period ending
December 31, 1999
8.3.2. INTEREST COVERAGE RATIO. TPG shall achieve on a Consolidated
basis, at the end of each fiscal quarter set forth below, for the twelve
calendar month period ending on such date, an Interest Coverage Ratio equal to
or greater than the ratio set forth below for the fiscal period corresponding
thereto:
PERIOD RATIO
------ -----
(i) Twelve calendar month period (i) 2.25 to 1.0
ending respectively on each of
March 31, 1997, June 30, 1997
and September 30, 1997
(ii) Twelve calendar month period (ii) 3.00 to 1.0
ending respectively on
each of December 31, 1997,
March 31, 1998, June 30, 1998
and September 30, 1998
(iii) Twelve calendar month period (iii) 4.00 to 1.0
ending respectively on each of
December 31, 1998, March 31,
1999, June 30, 1999 and September
30, 1999
(iv) Twelve calendar month period (iv) 4.50 to 1.0
ending December 31, 1999
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8.3.3. ADJUSTED TANGIBLE NET WORTH. TPG shall maintain, as of the
last day of each fiscal quarter indicated below, Consolidated Adjusted Tangible
Net Worth of not less than the amount shown below as of the date shown below:
PERIOD RATIO
------ -----
(i) March 31, 1997 (i) $8,500,000
(ii) June 30, 1997 and September (ii) $9,000,000
30, 1997
(iii) December 31, 1997, March 31, (iii) $11,400,000
1998, June 30, 1998 and
September 30, 1998
(iv) December 31, 1998, March 31, (iv) $14,000,000
1999, June 30, 1999 and
September 30, 1999
(v) December 31, 1999 (v) $18,000,000
8.3.4. TOTAL LIABILITIES TO EBITDA. TPG shall maintain on a
Consolidated basis, as of the last day of each fiscal quarter set forth below
(the "CALCULATION DATE"), a ratio of (i) the Total Liabilities of Borrower on
such Calculation Date, to (ii) Borrower's EBITDA for the twelve calendar month
period ending on such Calculation Date, of not more than the ratio set forth
below on the Calculation Date corresponding thereto:
CALCULATION DATE RATIO
---------------- -----
(i) December 31, 1997, March (i) 3.25 to 1.0
31, 1998, June 30, 1998 and
September 30, 1998
(ii) December 31, 1998, March (ii) 3.00 to 1.0
31, 1999, June 30, 1999, and
September 30, 1999
(iii) December 31, 1999 (iii) 2.75 to 1.0
SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Lender under
the other sections of this Agreement, Lender shall not be required to make any
Loan under this Agreement unless and until each of the following conditions has
been and continues to be satisfied:
9.1. DOCUMENTATION. Lender shall have received, in form and substance
satisfactory to Lender and its counsel, a duly executed copy of this Agreement
and the other Loan Documents, together with such additional documents,
instruments and certificates as Lender and its counsel shall require in
connection therewith from time to time, all in form and substance satisfactory
to Lender and its counsel.
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9.2. NO DEFAULT. No Default or Event of Default shall exist.
9.3. OTHER LOAN DOCUMENTS. Each of the conditions precedent set forth in
the other Loan Documents shall have been satisfied.
9.4. AVAILABILITY. Lender shall have determined that immediately after
Lender has made the initial Loans contemplated hereby, and paid (or made
provision for payment of) all closing costs incurred in connection with the
transactions contemplated hereby, Availability shall not be less than
$9,000,000.
9.5. EVIDENCE OF PERFECTION AND PRIORITY OF LIENS IN COLLATERAL. Lender
shall have received copies of all filing receipts or acknowledgments issued by
any governmental authority to evidence any filing or recordation necessary to
perfect the Liens of Lender in the Collateral and evidence in form satisfactory
to Lender that such Liens constitute valid and perfected security interests and
Liens, and that there are no other Liens upon any Collateral except for
Permitted Liens.
9.6. ARTICLES OF INCORPORATION. Lender shall have received a copy of the
Articles or Certificate of Incorporation of each Borrower, and all amendments
thereto, certified by the Secretary of State or other appropriate official of
the jurisdiction of such Borrower's incorporation.
9.7. GOOD STANDING CERTIFICATES. Lender shall have received good standing
certificates for each Borrower, issued by the Secretary of State or other
appropriate official of Borrower's jurisdiction of incorporation and each
jurisdiction where the conduct of Borrower's business activities or ownership of
its Property necessitates qualification.
9.8. OPINION LETTERS. Lender shall have received a favorable, written
opinion of counsel to Borrower, as to the transactions contemplated by this
Agreement, to be in form and substance satisfactory to Lender and Lender's
counsel, in their sole discretion.
9.9. INSURANCE. Lender shall have received copies of the casualty
insurance policies of Borrower, together with loss payable endorsements on
Lender's standard form of loss payee endorsement naming Lender as loss payee and
copies of Borrower's liability insurance policies, together with endorsements
naming Lender as a co-insured.
9.10. DISBURSEMENT LETTER. Lender shall have received written instructions
from Borrower directing application of proceeds of the initial Loans made
pursuant to this Agreement, and an initial Borrowing Base Certificate from
Borrower, in form satisfactory to Lender.
9.11. TITLE INSURANCE POLICIES. Lender shall have received fully paid
mortgagee title insurance policies (or binding commitments to issue title
insurance policies, marked to Lender's satisfaction to evidence the form of such
policies to be delivered after the Closing Date), in standard ALTA form issued
by a title insurance company satisfactory to Lender, each in an amount equal to
not less than the fair market value of the real Property or leasehold interest,
as the case may be, subject to the relevant Mortgage, insuring such Mortgage to
create a valid Lien on all real Property
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and valid Liens on the leasehold interest described therein with no exceptions
which Lender shall not have approved in writing.
9.12. SURVEY. Lender shall have received all currently existing surveys in
the possession of Borrower with respect to each parcel of real Property owned in
fee by Borrower.
9.13. DOMINION ACCOUNT. Lender shall have received the duly executed
agreement establishing the Dominion Account with a financial institution
acceptable to Lender for the collection or servicing of the Accounts.
9.14. LANDLORD AGREEMENTS. Lender shall have received all landlord or
warehouseman agreements with respect to all premises leased by Borrower and
which are disclosed on EXHIBIT K hereto.
9.15. CUSTOMER REFERENCE CHECKS. Lender shall have received a satisfactory
reference check from such customers of Borrower as shall be required by Lender.
9.16. NO LITIGATION. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated hereby.
9.17. SUBORDINATION OF INDEBTEDNESS OF TPG AND/OR BORROWER TO BRUNSWICK;
RESTRUCTURING OF BRUNSWICK EARN-OUT. Each of the following shall have occurred
in a manner and pursuant to executed documentation acceptable to each of Lender
and Lender's counsel:
(i) All Indebtedness of TPG and/or Borrower to Brunswick shall have been
subordinated to the prior payment of the Obligations in a manner and pursuant to
executed documentation satisfactory to Lender and its counsel; and
(ii) TPG and, if appropriate, Borrower, shall have restructured the
earn-out payment provided for in the Asset Purchase Agreement, whereby the
remaining amount of such earn-out payment is canceled.
9.18. STOCK PLEDGE AGREEMENT. Lender shall have received the Stock Pledge
Agreement, in form and substance satisfactory to Lender, duly executed by TPG,
together with all the original stock certificates issued to TPG by each
Borrower, and together with a stock power for each such stock certificate, duly
executed in blank by TPG.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
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<PAGE>
10.1.1. PAYMENT OF NOTES. Borrower shall fail to pay any installment
of principal, interest or premium, if any, owing on the Term Note or the
Equipment Note on the due date of such installment.
10.1.2. PAYMENT OF OTHER OBLIGATIONS. Borrower shall fail to pay any
of the Obligations that are not evidenced by the Term Note or the Equipment Note
on the due date thereof (whether due at stated maturity, on demand, upon
acceleration or otherwise).
10.1.3. MISREPRESENTATIONS. Any representation, warranty or other
statement made or furnished to Lender by or on behalf of any Borrower, any
Subsidiary of any Borrower or Guarantor in this Agreement, any of the other Loan
Documents or any instrument, certificate or financial statement furnished in
compliance with or in reference thereto proves to have been false or misleading
in any material respect when made or furnished or when reaffirmed pursuant to
SECTION 7.2 hereof.
10.1.4. BREACH OF SPECIFIC COVENANTS. Borrower shall fail or neglect
to perform, keep or observe any covenant contained in SECTIONS 6.1.1, 6.2,
8.1.1, 8.1.3(I), (II), (III) OR (IV), 8.2 or 8.3 hereof on the date that
Borrower is required to perform, keep or observe such covenant.
10.1.5. BREACH OF OTHER COVENANTS. Borrower shall fail or neglect to
perform, keep or observe any covenant contained in this Agreement (other than a
covenant which is dealt with specifically elsewhere in SECTION 10.1 hereof) and
the breach of such other covenant is not cured to Lender's satisfaction within 5
days after the sooner to occur of Borrower's receipt of notice of such breach
from Lender or the date on which such failure or neglect first becomes known to
any officer of Borrower.
10.1.6. DEFAULT UNDER SECURITY DOCUMENTS/OTHER AGREEMENTS. Any event
of default shall occur under, or Borrower shall default in the performance or
observance of any term, covenant, condition or agreement contained in, any of
the Security Documents or the Other Agreements and such default shall continue
beyond any applicable grace period.
10.1.7. OTHER DEFAULTS. There shall occur any default or event of
default on the part of Borrower under any agreement, document or instrument to
which Borrower is a party or by which Borrower or any of its Property is bound,
creating or relating to any Indebtedness (other than the Obligations) if the
payment or maturity of such Indebtedness is accelerated in consequence of such
event of default or demand for payment of such Indebtedness is made.
10.1.8. UNINSURED LOSSES. Any material loss, theft, damage or
destruction of any of the Collateral not fully covered (subject to such
deductibles as Lender shall have permitted) by insurance.
10.1.9. ADVERSE CHANGES. There shall occur any material adverse
change in the financial condition or business prospects of the Loan Parties,
taken as a whole.
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10.1.10. INSOLVENCY AND RELATED PROCEEDINGS. Any Loan Party shall
cease to be Solvent or shall suffer the appointment of a receiver, trustee,
custodian or similar fiduciary, or shall make an assignment for the benefit of
creditors, or any petition for an order for relief shall be filed by or against
any Loan Party under the Bankruptcy Code (if against a Loan Party, the
continuation of such proceeding for more than 30 days), or any Loan Party shall
make any offer of settlement, extension or composition to such Loan Party's
unsecured creditors generally.
10.1.11. BUSINESS DISRUPTION; CONDEMNATION. There shall occur a
cessation of a substantial part of the business of any Borrower, any Subsidiary
of any Borrower or any Guarantor for a period which significantly affects such
Borrower's or such Guarantor's capacity to continue its business, on a
profitable basis; or any Borrower, any Subsidiary of any Borrower or any
Guarantor shall suffer the loss or revocation of any license or permit now held
or hereafter acquired by such Borrower or such Guarantor which could reasonably
be expected to have a Material Adverse Effect; or any Borrower or any Guarantor
shall be enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its business
affairs; or any material lease or agreement pursuant to which any Borrower or
any Guarantor leases, uses or occupies any Property shall be canceled or
terminated prior to the expiration of its stated term; or any material part of
the Collateral shall be taken through condemnation or the value of such Property
shall be materially impaired through condemnation.
10.1.12. CHANGE OF OWNERSHIP. Either (i) TPG shall cease to own and
control, beneficially and of record, 100% of the issued and outstanding capital
stock of each of Technical Products, Marion, DeLand and Lincoln or (ii) EQUUS
Capital Appreciation Fund L.P. shall cease to own and control, beneficially and
of record, at least 50% of the issued and outstanding capital stock of TPG.
10.1.13. ERISA. A Reportable Event shall occur which Lender, in its
sole discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for any
Plan, or if any Plan shall be terminated or any such trustee shall be requested
or appointed, or if any Borrower, any Subsidiary of any Borrower or any
Guarantor is in "default" (as defined in Section 4219(c)(5) of ERISA) with
respect to payments to a Multiemployer Plan resulting from such Borrower's, such
Subsidiary's or such Guarantor's complete or partial withdrawal from such Plan.
10.1.14. CHALLENGE TO AGREEMENT. Any Borrower, any Subsidiary of any
Borrower or any Guarantor, or any Affiliate of any of them, shall challenge or
contest in any action, suit or proceeding the validity or enforceability of this
Agreement, or any of the other Loan Documents, the legality or enforceability of
any of the Obligations or the perfection or priority of any Lien granted to
Lender.
10.1.15. REPUDIATION OF OR DEFAULT UNDER GUARANTY AGREEMENT. Any
Guarantor shall revoke or attempt to revoke the Guaranty Agreement signed by
such Guarantor, or shall repudiate such Guarantor's liability thereunder or
shall be in default under the terms thereof.
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10.1.16. CRIMINAL FORFEITURE. Any Borrower, any Subsidiary of any
Borrower or any Guarantor shall be criminally indicted or convicted under any
law that could lead to a forfeiture of any Property of any Borrower, any
Subsidiary of Borrower or any Guarantor.
10.1.17. JUDGMENTS. Any (i) money judgment is filed against any
Borrower, any Subsidiary of any Borrower or any Guarantor or any of their
respective Property, and such judgment shall remain unpaid, unsatisfied by
insurance, and unstayed for more than 30 days, whether or not consecutive, or
(ii) writ of attachment or similar process is filed against any Borrower, any
Subsidiary of any Borrower or any Guarantor, or any of their respective
Property, and such writ of attachment or similar process is not bonded or
secured in an amount and manner reasonably satisfactory to lender.
10.1.18. DOMINION ACCOUNT. Borrower shall fail to maintain a Dominion
Account or shall notifiy Lender that it intends to terminate its existing
Dominion Account.
10.2. ACCELERATION OF THE OBLIGATIONS. Without in any way limiting the
right of Lender to demand payment of any portion of the Obligations payable on
demand in accordance with SECTION 3.2 hereof, upon or at any time after the
occurrence of an Event of Default, all or any portion of the Obligations shall,
at the option of Lender and without presentment, demand protest or further
notice by Lender, become at once due and payable and Borrower shall forthwith
pay to Lender, the full amount of such Obligations; PROVIDED, HOWEVER, that upon
the occurrence of an Event of Default specified in SECTION 10.1.10 hereof, all
of the Obligations shall become automatically due and payable without
declaration, notice or demand by Lender.
10.3. OTHER REMEDIES. Upon and after the occurrence of an Event of
Default, Lender shall have and may exercise from time to time the following
rights and remedies:
10.3.1. All of the rights and remedies of a secured party under the
Code or under other Applicable Law, and all other legal and equitable rights to
which Lender may be entitled, all of which rights and remedies shall be
cumulative and shall be in addition to any other rights or remedies contained in
this Agreement or any of the other Loan Documents, and none of which shall be
exclusive.
10.3.2. The right to take immediate possession of the Collateral,
and to (i) require Borrower to assemble the Collateral, at Borrower's expense,
and make it available to Lender at a place designated by Lender which is
reasonably convenient to both parties, and (ii) enter any premises where any of
the Collateral shall be located and to keep and store the Collateral on said
premises until sold (and if said premises be the Property of Borrower, then
Borrower agrees not to charge Lender for storage thereof).
10.3.3. The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as may
be required by law, in lots or in bulk, for cash or on credit, all as Lender, in
its sole discretion, may deem advisable. Borrower agrees that any requirement of
notice to Borrower of any proposed public or private sale or other disposition
of Collateral by Lender shall
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be deemed reasonable notice thereof if given at least 10 days prior thereto, and
such sale may be at such locations as Lender may designate in said notice.
Lender shall have the right to conduct such sales on Borrower's premises,
without charge therefor, and such sales may be adjourned from time to time in
accordance with Applicable Law. Lender shall have the right to sell, lease or
otherwise dispose of the Collateral, or any part thereof, for cash, credit or
any combination thereof, and Lender may purchase all or any part of the
Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Obligations. The proceeds realized from the sale of any Collateral
may be applied, after allowing 2 Business Days for collection, first to the
costs, expenses and attorneys' fees incurred by Lender in collecting the
Obligations, in enforcing the rights of Lender under the Loan Documents and in
collecting, retaking, completing, protecting, removing, storing, advertising for
sale, selling and delivering any Collateral, second to the interest due upon any
of the Obligations; and third, to the principal of the Obligations. If any
deficiency shall arise, each Borrower shall remain jointly and severally liable
to Lender therefor.
10.3.4. The right to exercise all of Lender's rights and remedies
under the Mortgage with respect to any real Property forming a part of the
Collateral.
Lender is hereby granted a license or other right to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks and advertising matter, or any Property of a
similar nature, as it pertains to the Collateral, in advertising for sale and
selling any Collateral and Borrower's rights under all licenses and all
franchise agreements shall inure to Lender's benefit.
10.3.5. Lender may, at its option, require Borrower to deposit with
Lender funds equal to the LC Amount and, if Borrower fails to promptly make such
deposit, Lender may advance such amount as a Revolving Credit Loan (whether or
not an Out-of-Formula Condition is created thereby). Any such deposit or advance
shall be held by Lender as a reserve to fund future payments on such LC
Guaranties and future drawings against such Letters of Credit. At such time as
all LC Guaranties have been paid or terminated and all Letters of Credit have
been drawn upon or expired, any amounts remaining in such reserve shall be
applied against any outstanding Obligations, or, if all Obligations have been
indefeasibly paid in full, returned to Borrower.
10.4. REMEDIES CUMULATIVE; NO WAIVER. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule or in any Guaranty Agreement given to Lender or contained in
any other agreement between Lender and Borrower, heretofore, concurrently, or
hereafter entered into, shall be deemed cumulative to and not in derogation or
substitution of any of the terms, covenants, conditions, or agreements of
Borrower herein contained. The failure or delay of Lender to require strict
performance by Borrower of any provision of this Agreement or to exercise or
enforce any rights, Liens, powers, or remedies hereunder or under any of the
aforesaid agreements or other documents or security or Collateral shall not
operate as a waiver of such performance, Liens, rights, powers and remedies, but
all such requirements, Liens, rights, powers, and remedies shall continue in
full force and effect until all Loans and all other
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Obligations owing or to become owing from Borrower to Lender shall have been
fully satisfied. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of the other Loan
Documents and no Event of Default by Borrower under this Agreement or any other
Loan Documents shall be deemed to have been suspended or waived by Lender,
unless such suspension or waiver is by an instrument in writing specifying such
suspension or waiver and is signed by a duly authorized representative of Lender
and directed to Borrower.
SECTION 11. MISCELLANEOUS
11.1 THE TERM "BORROWER" OR BORROWERS". All references to "Borrower" or
"Borrowers" herein shall refer to and include each of Technical Products,
Marion, DeLand and Lincoln separately and all representations contained herein
shall be deemed to be separately made by each of them, and each of the
covenants, agreements and obligations set forth herein shall be deemed to be the
joint and several covenants, agreements and obligations of them. Any notice,
request, consent, report or other information or agreement delivered to Lender
by any Borrower shall be deemed to be ratified by, consented to and also
delivered by the other Borrower. Each Borrower recognizes and agrees that each
covenant and agreement of "Borrower" or "Borrowers" under this Agreement and the
other Loan Documents shall create a joint and several obligation of the
Borrowers, which may be enforced against Borrowers, jointly, or against each
Borrower separately. Without limiting the terms of this Agreement and the other
Loan Documents, security interests granted under this Agreement and other Loan
Documents in properties, interests, assets and collateral shall extend to the
properties, interests, assets and collateral of each Borrower. Similarly, the
term "Obligations" shall include, without limitation, all obligations,
liabilities and indebtedness of such corporations, or any one of them, to
Lender, whether such obligations, liabilities and indebtedness shall be joint,
several, joint and several or individual.
11.2. POWER OF ATTORNEY. Borrower hereby irrevocably designates, makes,
constitutes and appoints Lender (and all Persons designated by Lender) as
Borrower's true and lawful attorney (and agent-in-fact) and Lender, or Lender's
agent, may, without notice to Borrower and in either Borrower's or Lender's
name, but at the cost and expense of Borrower:
11.2.1. At such time or times as Lender or said agent, in its sole
discretion, may determine, endorse Borrower's name on any checks, notes,
acceptances, drafts, money orders or any other evidence of payment or proceeds
of the Collateral which come into the possession of Lender or under Lender's
control.
11.2.2. At such time or times upon or after the occurrence of an
Event of Default as Lender or its agent in its sole discretion may determine:
(i) demand payment of the Accounts from the Account Debtors, enforce payment of
the Accounts by legal proceedings or otherwise, and generally exercise all of
Borrower's rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge or release any of the Accounts or
other Collateral or any legal proceedings brought to collect any of the Accounts
or other Collateral; (iii) sell or assign any of the Accounts and other
Collateral upon such terms, for such amounts and at such time or times as Lender
deems advisable; (iv) take control, in any manner, of any item of
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payment or proceeds relating to any Collateral; (v) prepare, file and sign
Borrower's name to a proof of claim in bankruptcy or similar document against
any Account Debtor or to any notice of lien, assignment or satisfaction of lien
or similar document in connection with any of the Collateral; (vi) receive, open
and dispose of all mail addressed to Borrower and to notify postal authorities
to change the address for delivery thereof to such address as Lender may
designate; (vii) endorse the name of Borrower upon any of the items of payment
or proceeds relating to any Collateral and deposit the same to the account of
Lender on account of the Obligations; (viii) endorse the name of Borrower upon
any chattel paper, document, instrument, invoice, freight bill, bill of lading
or similar document or agreement relating to the Accounts, Inventory and any
other Collateral; (ix) use Borrower's stationery and sign the name of Borrower
to verifications of the Accounts and notices thereof to Account Debtors; (x) use
the information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts, Inventory, Equipment
and any other Collateral; (xi) make and adjust claims under policies of
insurance; and (xii) do all other acts and things necessary, in Lender's
determination, to fulfill Borrower's obligations under this Agreement.
11.3. INDEMNITY. BORROWER HEREBY INDEMNIFIES, HOLDS HARMLESS, AND SHALL
DEFEND LENDER AND ITS DIRECTORS, OFFICERS, AGENTS, COUNSEL AND EMPLOYEES
("INDEMNIFIED PERSONS") FROM AND AGAINST ANY AND ALL LOSSES, LIABILITIES,
DAMAGES, COSTS, EXPENSES, SUITS, ACTIONS AND PROCEEDINGS ("LOSSES") EVER
SUFFERED OR INCURRED BY ANY INDEMNIFIED PERSON ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OTHER TRANSACTION CONTEMPLATED HEREBY, INCLUDING, WITHOUT
LIMITATION, ANY LOSSES CAUSED BY THE NEGLIGENCE OF SUCH INDEMNIFIED PERSON, BUT
NOT INCLUDING ANY (I) LOSSES CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH INDEMNIFIED PERSON OR (II) LOSSES SUFFERED BY ANY INDEMNIFIED
PERSON AS THE RESULT OF ANY ACTION, SUIT OR PROCEEDING INSTITUTED AGAINST SUCH
INDEMNIFIED PERSON BY ANOTHER INDEMNIFIED PERSON, AND BORROWER SHALL REIMBURSE
LENDER AND EACH OTHER INDEMNIFIED PERSON FOR ANY EXPENSES (INCLUDING IN
CONNECTION WITH THE INVESTIGATION OF, PREPARATION FOR OR DEFENSE OF ANY ACTUAL
OR THREATENED CLAIM, ACTION OR PROCEEDING ARISING THEREFROM, INCLUDING ANY SUCH
COSTS OF RESPONDING TO DISCOVERY REQUESTS OR SUBPOENAS, REGARDLESS OF WHETHER
LENDER OR SUCH OTHER INDEMNIFIED PERSON IS A PARTY THERETO). WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, THIS INDEMNITY SHALL EXTEND TO ANY CLAIMS
ASSERTED AGAINST LENDER OR ANY OTHER INDEMNIFIED PERSON BY ANY PERSON UNDER ANY
ENVIRONMENTAL LAWS OR SIMILAR LAWS BY REASON OF BORROWER'S OR ANY OTHER PERSON'S
FAILURE TO COMPLY WITH LAWS APPLICABLE TO SOLID OR HAZARDOUS WASTE MATERIALS OR
OTHER TOXIC SUBSTANCES. BORROWER MAY SELECT COUNSEL WITH RESPECT TO ANY LOSSES;
PROVIDED, HOWEVER, EACH INDEMNIFIED PERSON SHALL HAVE THE RIGHT TO MONITOR THE
PROGRESS OF ANY CLAIMS, SUITS AND ADMINISTRATIVE PROCEEDINGS DEFENDED BY
BORROWER HEREUNDER WITH COUNSEL OF SUCH INDEMNIFIED PERSON'S CHOICE, OR CONDUCT
ITS DEFENSE THROUGH COUNSEL OF SUCH INDEMNIFIED PERSON'S
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CHOICE, IN THE EVENT THAT (I) SUCH INDEMNIFIED PERSON DETERMINES IN GOOD FAITH
THAT THE CONDUCT OF ITS DEFENSE BY BORROWER COULD BE MATERIALLY PREJUDICIAL TO
SUCH INDEMNIFIED PERSON'S INTERESTS OR THAT OTHER REASONABLE GROUNDS EXIST WHICH
DEMONSTRATE A LACK OF EFFECTIVENESS OR HIGH LEVEL OF QUALITY IN THE CONDUCT OF
SUCH DEFENSE BY BORROWER, AND (II) PRIOR TO RETAINING SUCH COUNSEL FOR SUCH
PURPOSE, SUCH INDEMNIFIED PERSON SHALL CONSULT WITH BORROWER AND SHALL ATTEMPT
IN GOOD FAITH TO AGREE UPON COUNSEL TO CONDUCT THE DEFENSE ON BEHALF OF BORROWER
AND SUCH INDEMNIFIED PERSON, AND IN EACH CASE THE FEES AND DISBURSEMENTS OF SUCH
COUNSEL SHALL BE PAID BY BORROWER; PROVIDED, HOWEVER, THAT IF SUCH MUTUAL
AGREEMENT IS NOT REACHED WITHIN A REASONABLE TIME ON SELECTING COUNSEL, THEN
SUCH INDEMNIFIED PERSON MAY RETAIN ITS OWN COUNSEL AT BORROWER'S EXPENSE.
NOTWITHSTANDING ANY CONTRARY PROVISION OF THIS AGREEMENT, THE OBLIGATION OF
BORROWER UNDER THIS SECTION 11.3 SHALL SURVIVE THE PAYMENT IN FULL OF THE
OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
11.4. MODIFICATION OF AGREEMENT; SALE OF INTEREST. This Agreement may not
be modified, altered or amended, except by an agreement in writing signed by
Borrower and Lender. Borrower may not sell, assign or transfer any interest in
this Agreement, any of the other Loan Documents, or any of the Obligations, or
any portion thereof, including Borrower's rights, title, interests, remedies,
powers, and duties hereunder or thereunder. Borrower hereby consents to Lender's
participation, sale, assignment, transfer or other disposition, at any time or
times hereafter, of this Agreement and any of the other Loan Documents, or of
any portion hereof or thereof, including Lender's rights, title, interests,
remedies, powers, and duties hereunder or thereunder. In the case of an
assignment, the assignee shall have, to the extent of such assignment, the same
rights, benefits and obligations as it would if it were "Lender" hereunder and
Lender shall be relieved of all obligations hereunder upon any such assignment.
Borrower agrees that it will use its best efforts to assist and cooperate with
Lender in any manner reasonably requested by Lender to effect the sale of
participations in or assignments of any of the Loan Documents or any portion
thereof or interest therein, including assisting in the preparation of
appropriate disclosure documents. Borrower further agrees that Lender may
disclose credit information regarding Borrower and its Subsidiaries to any
potential participant or assignee.
11.5. SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
11.6. SUCCESSORS AND ASSIGNS. This Agreement, the Other Agreements and the
Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrower and Lender permitted under SECTION 11.4
hereof.
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11.7. CUMULATIVE EFFECT; CONFLICT OF TERMS. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in SECTION 3.2 hereof
and except as otherwise provided in any of the other Loan Documents by specific
reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
any provision in any of the other Loan Documents, the provision contained in
this Agreement shall govern and control.
11.8. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
11.9. NOTICES. All notices, requests and demands to or upon a party hereto
shall be in writing and shall be sent by certified or registered mail, return
receipt requested, by personal delivery against receipt, by overnight courier or
by facsimile transmission and shall be deemed to have been validly served, given
or delivered when delivered against receipt or one (1) Business Day after
deposit in the U.S. mail, postage prepaid, or with an overnight courier or in
the case of facsimile transmission, when sent, answerback received, addressed as
follows:
If to Lender: Fleet Capital Corporation
2711 North Haskell Avenue
Suite 2100, LB21
Dallas, Texas 75204
Attention: Loan Administration Manager
Facsimile No.: (214) 828-6530
With a copy to: Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Attention: Larry A. Makel, Esq.
Facsimile No.: (214) 939-6100
If to Borrower: Technical Products Group, Inc.
3353 Peachtree Road, Suite 920
Atlanta, Georgia 30326
Attention: Garrett L. Dominy
Facsimile No.: (404) 231-7277
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With a copy to: Gardere & Wynne, L.L.P.
Thanksgiving Tower, Suite 3000
1601 Elm Street
Dallas, Texas 75201
Attention: Barry D. Drees, Esq.
Facsimile No.: (214) 999-4667
or to such other address as each party may designate for itself by notice given
in accordance with this SECTION 11.9; PROVIDED, HOWEVER, that any notice,
request or demand to or upon Lender pursuant to SECTION 3.1.1 or 4.2.2 hereof
shall not be effective until received by Lender. Any written notice or demand
that is not sent in conformity with the provisions hereof shall nevertheless be
effective on the date that such notice is actually received by the noticed
party.
11.10. LENDER'S CONSENT. Whenever Lender's consent is required to be
obtained under this Agreement, any of the Other Agreements or any of the
Security Documents as a condition to any action, inaction, condition or event,
Lender shall be authorized to give or withhold such consent in its sole and
absolute discretion.
11.11. CREDIT INQUIRIES. Each Borrower hereby authorizes and permits
Lender (but Lender shall have no obligation) to respond to usual and customary
credit inquiries from third parties concerning such Borrower or any of its
Subsidiaries.
11.12. TIME OF ESSENCE. Time is of the essence of this Agreement, the
Other Agreements and the Security Documents.
11.13. ENTIRE AGREEMENT; APPENDIX A AND EXHIBITS AND SCHEDULES. This
Agreement and the other Loan Documents, together with all other instruments,
agreements and certificates executed by the parties in connection therewith or
with reference thereto, embody the entire understanding and agreement between
the parties hereto and thereto with respect to the subject matter hereof and
thereof and supersede all prior agreements, understandings and inducements,
whether express or implied, oral or written. Appendix A and each of the Exhibits
and Schedules attached hereto are incorporated into this Agreement and by this
reference made a part hereof.
11.14. INTERPRETATION. No provision of this Agreement or any of the other
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or dictated such
provision.
11.15. GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
DALLAS, DALLAS COUNTY, TEXAS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS: PROVIDED, HOWEVER, THAT IF
ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN TEXAS, THE
LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER
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AND PROCEDURE FOR FORECLOSURE OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE
ENFORCEMENT OF LENDER'S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE
EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT
WITH THE LAWS OF TEXAS. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND
REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF
BORROWER OR LENDER, BORROWER HEREBY CONSENTS AND AGREES THAT THE DISTRICT COURT
OF DALLAS COUNTY, TEXAS, OR, AT LENDER'S OPTION, THE UNITED STATES DISTRICT
COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION, SHALL HAVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND
LENDER PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED
TO THIS AGREEMENT. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER
HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL
RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE
RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR
TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY
OTHER APPROPRIATE FORUM OR JURISDICTION.
11.16. WAIVERS BY BORROWER. BORROWER WAIVES (I) THE RIGHT TO TRIAL BY JURY
(WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS,
THE OBLIGATIONS OR THE COLLATERAL; (II) PRESENTMENT, DEMAND AND PROTEST AND
NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE,
COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER,
ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES
AT ANY TIME HELD BY LENDER ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY
RATIFIES AND CONFIRMS WHATEVER LENDER MAY DO IN THIS REGARD; (III) NOTICE PRIOR
TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH
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MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF
LENDER'S REMEDIES; (IV) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION
LAWS; AND (V) NOTICE OF ACCEPTANCE HEREOF. BORROWER ACKNOWLEDGES THAT THE
FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS
AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE
DEALINGS WITH BORROWER. BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED
THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY
WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.
11.17. WAIVER OF CONSUMER RIGHTS. BORROWER HEREBY WAIVES ITS RIGHTS UNDER
THE DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT SECTION 17.41 ET. SEQ.
BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF BORROWER'S OWN SELECTION,
BORROWER VOLUNTARILY CONSENTS TO THIS WAIVER. BORROWER EXPRESSLY WARRANTS AND
REPRESENTS THAT BORROWER (I) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING
POSITION RELATIVE TO LENDER, AND (II) HAS BEEN REPRESENTED BY LEGAL COUNSEL IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
BORROWER HAS READ AND UNDERSTANDS
SECTION 11:17: __________ (INITIALS OF TECHNICAL PRODUCTS)
__________ (INITIALS OF MARION)
__________ (INITIALS OF DELAND)
__________ (INITIALS OF LINCOLN)
11.18. ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES, AND THE
SAME MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
11.19. NONAPPLICABILITY OF ARTICLE 5069-15.01 ET SEQ. Borrower and Lender
hereby agree that, except for Section 15.10(b) thereof, the provisions of Tex.
Rev. Civ. Stat. Ann. art. 5069-15.01 ET SEQ. (Vernon 1987) (regulating certain
revolving credit loans and revolving tri-party accounts) shall not apply to this
Agreement or any of the other Loan Documents.
11.20. CERTAIN MATTERS OF CONSTRUCTION. All references to statutes and
related regulations in this Agreement, the Other Agreements and the Security
Agreements shall include any amendments of same and any successor statutes and
regulations. All references in this Agreement, the Other
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Agreements and the Security Agreements to any of the Loan Documents shall
include any and all modifications thereto and any and all extensions or renewals
thereof.
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IN WITNESS WHEREOF, this Agreement has been duly executed in Dallas,
Texas, on the day and year specified at the beginning of this Agreement.
BORROWER:
TECHNICAL PRODUCTS GROUP, INC.
By: GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
MARION PROPERTIES, INC.
By: GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
DELAND PROPERTIES, INC.
By: GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
LINCOLN PROPERTIES, INC.
By: GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
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ACCEPTED IN DALLAS, DALLAS COUNTY, TEXAS:
LENDER:
FLEET CAPITAL CORPORATION
By: BRIAN L. TORNOW
Brian L. Tornow
Senior Vice President
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APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated December 27, 1996, by
and among Fleet Capital Corporation, Technical Products Group, Inc., Marion
Properties, Inc., DeLand Properties, Inc. and Lincoln Properties, Inc., the
following terms shall have the following meanings (terms defined in the singular
to have the same meaning when used in the plural and vice versa):
ACCOUNT DEBTOR - any Person who is or may become obligated
under or on account of an Account.
ACCOUNTS - all accounts, contract rights, chattel paper,
instruments and documents, whether now owned or hereafter created or
acquired by Borrower or in which Borrower now has or hereafter acquires
any interest.
ADJUSTED NET EARNINGS FROM OPERATIONS - with respect to any fiscal
period, means the net earnings (or loss) after provision for income taxes
for such fiscal period of Borrower, as reflected on the financial
statement of Borrower supplied to Lender pursuant to SECTION 8.1.3 of the
Agreement, but excluding:
(i) any gain or loss arising from the sale of capital assets;
(ii) any gain arising from any write-up of assets;
(iii) earnings of any Subsidiary of a Borrower accrued prior
to the date it becomes a Subsidiary;
(iv) earnings of any corporation, substantially all the assets
of which have been acquired in any manner by a Borrower, realized by
such corporation prior to the date of such acquisition;
(v) net earnings of any business entity (other than a
Subsidiary of a Borrower) in which such Borrower has an ownership
interest, unless such net earnings shall have actually been received
by Borrower in the form of cash contributions;
(vi) any portion of the net earnings of any Subsidiary of a
Borrower which for any reason is unavailable for payment of
dividends to such Borrower;
(vii) the earnings of any Person to which any assets of a
Borrower shall have been sold, transferred or disposed of, or into
which such Borrower shall have merged, or been a party to any
consolidation or other form of reorganization, prior to the date of
such transactions;
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(viii) any gain arising from the acquisition of any Securities
of a Borrower;
(ix) any gain arising from extraordinary or non-recurring
items;
(x) any deferred debt issue costs relating specifically to the
refinancing of Borrower's existing Indebtedness to FINOVA Capital
Corporation; and
(xi) any debt issue costs expensed as an extraordinary item
related to the refinancing with Lender.
ADJUSTED TANGIBLE ASSETS - all assets except: (i) any surplus
resulting from any write-up of assets subsequent to April 28, 1995; (ii)
deferred assets, other than prepaid insurance and prepaid taxes; (iii)
patents, copyrights, trademarks, trade names, non-compete agreements,
franchises and other similar intangibles; (iv) goodwill, including any
amounts, however designated on a Consolidated balance sheet of a Person or
its Subsidiaries, representing the excess of the purchase price paid for
assets or stock over the value assigned thereto on the books of such
Person; (v) Restricted Investments; (vi) unamortized debt discount and
expense; (vii) assets located and notes and receivables due from obligors
outside of the United States of America; and (viii) Accounts, notes and
other receivables due from Affiliates or employees.
ADJUSTED TANGIBLE NET WORTH - at any date means a sum equal
to:
(i) the net book value (after deducting related depreciation,
obsolescence, amortization, valuation, and other proper reserves) at
which the Adjusted Tangible Assets of a Person would be shown on a
balance sheet at such date in accordance with GAAP, MINUS
(ii) the amount at which such Person's liabilities (other than
capital stock and surplus) would be shown on such balance sheet in
accordance with GAAP, and including as liabilities all reserves for
contingencies and other potential liabilities.
AFFILIATE - a Person (other than a Subsidiary): (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, a Person; (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of
a Person; or (iii) 5% or more of the Voting Stock (or in the case of a
Person which is not a corporation, 5% or more of the equity interest) of
which is beneficially owned or held by a Person or a Subsidiary of a
Person.
AGREEMENT - the Loan and Security Agreement referred to in the
first sentence of this APPENDIX A, all Exhibits and Schedules thereto and
this APPENDIX A, as amended, renewed, extended and restated from time to
time.
APPLICABLE ANNUAL RATE - as defined in SECTION 2.1.1 of the
Agreement.
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APPLICABLE LAW - all laws, rules and regulations applicable to
the Person, conduct, transaction, covenant or Loan Documents in question,
including all applicable common law and equitable principles; all
provisions of all applicable state and federal constitutions, statutes,
rules, regulations and orders of governmental bodies; and orders,
judgments and decrees of all courts and arbitrators.
ASSET PURCHASE AGREEMENT - as defined in SECTION 1.1.2 of the
Agreement.
AVAILABILITY - the amount of money which Borrower is entitled
to borrow from time to time as Revolving Credit Loans, such amount being
the difference derived when the sum of the principal amount of Revolving
Credit Loans then outstanding (including any amounts which Lender may have
paid for the account of Borrower pursuant to any of the Loan Documents and
which have not been reimbursed by Borrower) and the LC Amount is
subtracted from the Borrowing Base. If the amount outstanding is equal to
or greater than the Borrowing Base, Availability is 0.
AVERAGE MONTHLY REVOLVING CREDIT BALANCE - the amount obtained
by adding the aggregate unpaid balance of Revolving Credit Loans and the
LC Amount at the end of each day during the month in question and by
dividing such sum by the number of days in such month.
BANK - Fleet National Bank, and its successors or assigns.
BASE RATE - the rate of interest announced or quoted by Bank
from time to time as its prime rate for commercial loans, whether or not
such rate is the lowest rate charged by Bank to its most preferred
borrowers; and, if such prime rate for commercial loans is discontinued by
Bank as a standard, a comparable reference rate designated by Bank as a
substitute therefor shall be the Base Rate.
BASE RATE LOAN - a Loan which bears interest based upon the
Base Rate.
BORROWING BASE - as at any date of determination thereof, an
amount equal to the lesser of:
(a) Total Revolving Credit Facility; or
(b) an amount equal to:
(i) up to 85% of the net amount of Eligible
Accounts outstanding at such date;
PLUS
(ii) the lesser of (A) $7,000,000 or (B) up to 50%
of the value of Eligible Inventory at such date;
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MINUS (subtract from the sum of
CLAUSES (a) and (b) above)
(c) the sum of (i) the LC Amount, PLUS (ii) the amount
of any reserves established by Lender pursuant to SECTION 1.1.1 at
such date.
For purposes of CLAUSE (B)(i) hereof, the net amount of
Eligible Accounts at any time shall be the face amount of such Eligible
Accounts less any and all returns, rebates, discounts (which may, at
Lender's option, be calculated on shortest terms), credits, allowances or
sales, excise or withholding taxes of any nature at any time issued,
owing, claimed by Account Debtors, granted, outstanding or payable in
connection with such Accounts at such time.
For purposes of CLAUSE (B)(ii) above, the value of Eligible Inventory on a
date shall be calculated on the basis of the lower of cost or market. Cost shall
be calculated on a first-in, first-out basis.
BRUNSWICK - Brunswick Corporation, a Delaware corporation.
BUSINESS DAY - any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the state of Texas or is a day
on which banking institutions located in such state are closed.
CAPITAL EXPENDITURES - expenditures made or liabilities
incurred for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto which have a useful life
of more than one year, including the total principal portion of
Capitalized Lease Obligations.
CAPITALIZED LEASE OBLIGATION - any Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
CLOSING DATE - the date on which all of the conditions
precedent in SECTION 9 of the Agreement are satisfied and the initial Loan
is made or the initial Letter of Credit or LC Guaranty is issued under the
Agreement.
CODE - the Uniform Commercial Code as adopted and in force in
the state of Texas, as from time to time in effect.
COLLATERAL - all of the Property and interests in Property
described in SECTION 5 of the Agreement, and all other Property and
interests in Property that now or hereafter secure the payment and
performance of any of the Obligations.
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COLLATERAL ASSIGNMENT OF LEASES - each respective collateral
assignment of lease to be executed by Technical Products, in favor of
Lender and by which Technical Products shall grant and convey to Lender,
as security for the Obligations, an assignment of Technical Products'
leasehold interest in all the real Property covered by the Mortgages,
which collateral assignment shall be consented to by the fee owner of such
real Property.
CONSOLIDATED - the consolidation in accordance with GAAP of
the accounts or other items as to which such term applies.
CURRENT ASSETS - at any date means the amount at which all of
the current assets of a Person would be properly classified as current
assets shown on a balance sheet at such date in accordance with GAAP
except that amounts due from Affiliates and investments in Affiliates
shall be excluded therefrom.
DATED ASSETS - as defined in SECTION 1.5 of the Agreement.
DATED LIABILITIES - as defined in SECTION 1.5 of the Agreement.
DEFAULT - an event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, become an Event
of Default.
DEFAULT RATE - as defined in SECTION 2.1.2 of the Agreement.
DISTRIBUTION - in respect of any corporation means and
includes: (i) the payment of any dividends or other distributions on
capital stock of the corporation (except distributions in such stock) and
(ii) the redemption or acquisition of Securities unless made
contemporaneously from the net proceeds of the sale of Securities.
DOLLARS AND THE SIGN "$" - lawful money of the United States
of America.
DOMINION ACCOUNT - a special account of Lender established by
Borrower pursuant to the Agreement at a bank selected by Borrower, but
acceptable to Lender in its reasonable discretion, and over which Lender
shall have sole and exclusive access and control for withdrawal purposes.
EBITDA - for any fiscal period of Borrower, means the sum of
(i) Adjusted Net Earnings from Operations for such period, PLUS (ii)
accrued taxes for such period, PLUS (iii) Interest Expense for such
period, PLUS (iv) depreciation and amortization for such period.
ELIGIBLE ACCOUNT - an Account arising in the ordinary course
of Technical Products' business from the sale of goods or rendition of
services which is payable in Dollars and which Lender, in its reasonable
credit judgment, deems to be an Eligible Account. Without limiting the
generality of the foregoing, no Account shall be an Eligible Account if:
(i) it arises out of a sale made by Technical Products to a Subsidiary or
an Affiliate of Technical Products or to a Person controlled by an
Affiliate of Technical Products; (ii) it is due or
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unpaid more than 90 days after the original invoice date; (iii) with
respect to any contract between Technical Products and any Account Debtor,
20% or more of the Accounts owing under such Contract are not deemed
Eligible Accounts hereunder; (iv) (a) with respect to any Account Debtor
other than McDonnell Douglas Corp., Lockheed Martin Corp., Boeing Co. or
the United States of America (or any department, agency or instrumentality
thereof), the total unpaid Accounts of the Account Debtor exceed 20% of
the net amount of all Eligible Accounts, to the extent of such excess or
(b) with respect to any contract between Technical Products and McDonnell
Douglas Corp., Lockheed Martin Corp., Boeing Co. or the United States of
America (or any department, agency or instrumentality thereof), the total
unpaid Accounts owing under any such contract exceeds 20% of the net
amount of all Eligible Accounts, to the extent of such excess; (v) any
covenant, representation or warranty contained in the Agreement with
respect to such Account has been breached; (vi) the Account Debtor is also
Technical Products' creditor or supplier, or the Account Debtor has
disputed liability with respect to such Account, or the Account Debtor has
made any claim with respect to any other Account due from such Account
Debtor to Technical Products, or the Account otherwise is or may become
subject to any right of setoff, counterclaim, reserve or chargeback,
PROVIDED THAT, in any event, the Accounts of such Account Debtor shall be
ineligible only to the extent of the amount owing by Borrower to such
creditor or supplier or to the extent of such offset, counterclaim,
disputed amount, reserve or chargeback; (vii) the Account Debtor has
commenced a voluntary case under the federal bankruptcy laws or made an
assignment for the benefit of creditors, or a decree or order for relief
has been entered by a court having jurisdiction in the proceedings in
respect of the Account Debtor in an involuntary case under the federal
bankruptcy laws or any other petition or other application for relief
under the federal bankruptcy laws has been filed against the Account
Debtor, or if the Account Debtor has failed, suspended business, ceased to
be Solvent, or consented to or suffered a receiver, trustee, liquidator or
custodian to be appointed for it or for all or a significant portion of
its assets or affairs; (viii) it arises from a sale to an Account Debtor
with its principal office, assets or place of business outside the United
States or Canada, unless the sale is backed by an irrevocable letter of
credit issued or confirmed by Bank and is in form and substance acceptable
to Lender, payable in the full amount of the Account in freely convertible
Dollars at a place of payment within the United States; (ix) it arises
from a sale to the Account Debtor on a bill-and-hold, guaranteed sale,
sale-or-return, sale-on-approval, consignment or any other repurchase or
return basis (unless such sale is a Government Bill-and-Hold Sale); (x)
(a) a Default has occurred hereunder and the Account Debtor is the United
States of America or any department, agency or instrumentality thereof,
unless Technical Products assigns its right to payment of such Account to
Lender, in a manner satisfactory to Lender, so as to comply with the
Assignment of Claims Act of 1940 (31 U.S.C. ss.203 ET SEQ.) or (b) the
Account Debtor is a state, county or municipality, or a political
subdivision or agency thereof, which is subject to any Applicable Law that
would disallow an assignment of Accounts on which it is the Account
Debtor; (xi) the Account Debtor is located in New Jersey, Minnesota,
Indiana, West Virginia or any other state imposing similar conditions on
the right of a creditor to collect accounts receivable unless Technical
Products has either qualified to transact business in such state as a
foreign corporation or filed a Notice of Business Activities Report or
other required report with the appropriate officials in those states for
the then current year; (xii)
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the Account is subject to a Lien other than a Permitted Lien; (xiii) the
goods giving rise to such Account have not been delivered to and accepted
by the Account Debtor or the services giving rise to such Account have not
been performed by Technical Products and accepted by the Account Debtor or
the Account otherwise does not represent a final sale (unless such sale is
a Government Bill-and-Hold Sale); (xiv) the Account is evidenced by
chattel paper or an instrument of any kind, or has been reduced to
judgment; (xv) Technical Products has made any agreement with the Account
Debtor for any deduction therefrom, except for discounts or allowances
which are made in the ordinary course of business for prompt payment and
which discounts or allowances are reflected in the calculation of the face
value of each invoice related to such Account; (xvi) Technical Products
has made an agreement with the Account Debtor to extend the time of
payment thereof; (xvii) the Account is billed on a progress basis or on
the basis of the stage of completion (unless such Account is a "Milestone
Billing"); or (xviii) that portion of an Account which is an incurred
costs billing account governed by the Federal Acquisition Regulations.
ELIGIBLE INVENTORY - such Inventory of Technical Products
(other than packaging materials and supplies) which Lender, in its
reasonable credit judgment, deems to be Eligible Inventory. Without
limiting the generality of the foregoing, no Inventory shall be Eligible
Inventory UNLESS: (i) it is raw materials or finished goods; (ii) it is in
good, new and salable condition; (iii) it is not slow-moving, obsolete or
unmerchantable; (iv) it meets all standards imposed by any governmental
agency or authority; (v) it conforms in all respects to the warranties and
representations set forth in this Agreement; (vi) it is at all times
subject to Lender's duly perfected, first priority Lien and no other Lien
except a Permitted Lien; (vii) it is situated at a location in compliance
with this Agreement and is not in transit or outside the continental
United States; and (viii) it is not subject to progress payment offsets.
For purposes hereof, in no event shall Eligible Inventory include raw
materials that have been entered into work in process or to which any
manufacturing, improvement or value adding process has occurred or raw
materials associated with incurred costs billing programs.
ENVIRONMENTAL LAWS - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety or environmental matters.
EQUIPMENT - all machinery, apparatus, equipment, fittings,
furniture, fixtures, motor vehicles and other tangible personal Property
(other than Inventory) of every kind and description used in Borrower's
operations or owned by Borrower or in which Borrower has an interest,
whether now owned or hereafter acquired by Borrower and wherever located,
and all parts, accessories and special tools and all increases and
accessions thereto and substitutions and replacements therefor.
EQUIPMENT LOAN - the Loans to be made by Lender to Borrower
pursuant to SECTION 1.2.2 of the Agreement.
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EQUIPMENT NOTE - the Equipment Promissory Note to be executed
by Borrower, in favor of Lender, as provided in SECTION 1.2.2 of the
Agreement, which shall be in the form of EXHIBIT A-2 to the Agreement.
ERISA - the Employee Retirement Income Security Act of 1974,
as amended, and all rules and regulations from time to time promulgated
thereunder.
EURODOLLAR LOAN - a Loan which bears interest based upon
LIBOR.
EVENT OF DEFAULT - as defined in SECTION 10.1 of the
Agreement.
EXCESS INTEREST - as defined in SECTION 2.1.3(B) of the
Agreement.
FIXED CHARGE RATIO - for any fiscal period means, the ratio of
(i) an amount equal to (a) the sum of (1) Adjusted Net Earnings from
Operations for such period, (2) Interest Expense for such period, (3)
depreciation and amortization for such period, and (4) the incentive
compensation expense accrual for such period (net of income taxes), MINUS
(b) the sum of (1) Capital Expenditures incurred during such period and
not financed by Equipment Loans hereunder or by borrowings under any other
financing arrangement otherwise permitted hereunder, and (2) the incentive
compensation actually paid in cash during such period (net of income
taxes), to (ii) Fixed Charges of Borrower for such period.
FIXED CHARGES - for any fiscal period means the sum of (i)
scheduled principal payments required to be made during such period in
respect to Indebtedness and (ii) Interest Expense for such period.
GAAP - generally accepted account principles in the United
States of America in effect from time to time.
GENERAL INTANGIBLES - all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including
all choses in action, causes of action, corporate or other business
records, deposit accounts, inventions, blueprints, designs, patents,
patent applications, trademarks, trademark applications, trade names,
trade secrets, service marks, goodwill, brand names, copyrights,
registrations, licenses, franchises, customer lists, tax refund claims,
computer programs, operational manuals, all claims under guaranties,
security interests or other security held by or granted to Borrower to
secure payment of any of the Accounts by an Account Debtor, all rights to
indemnification and all other intangible property of every kind and nature
(other than Accounts).
GOVERNMENT BILL-AND-HOLD SALE - As defined in SECTION 8.2.11
of the Agreement.
GUARANTOR - Any Person who may hereafter guarantee payment or
performance of the whole or any part of the Obligations, including,
without limitation, TPG.
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GUARANTY AGREEMENT - collectively, any and all the Continuing
Guaranty Agreements which are to be executed by a Guarantor in form and
substance satisfactory to Lender.
INDEBTEDNESS - as applied to a Person means, without
duplication: (i) all items which in accordance with GAAP would be included
in determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which Indebtedness is to
be determined, including Capitalized Lease Obligations; (ii) all
obligations of other Persons which such Person has guaranteed; (iii) all
reimbursement obligations in connection with letters of credit or letter
of credit guaranties issued for the account of such Person; and (iv) in
the case of Borrower (without duplication), the Obligations.
INDEMNIFIED PERSONS - as defined in SECTION 11.3 of the
Agreement.
INTEREST COVERAGE RATIO - with respect to any period of
determination, the ratio of (i) an amount equal to the sum of (a) Adjusted
Net Earnings From Operations for such period, (b) accrued taxes for such
period, and (3) Interest Expense for such period, to (ii) Interest Expense
for such period, all as determined in accordance with GAAP.
INTEREST EXPENSE - with respect to any fiscal period, the
interest expense incurred for such period as determined in accordance with
GAAP PLUS Letter of Credit and LC Guaranty fees owing for such period.
INVENTORY - all of Borrower's inventory, whether now owned or
hereafter acquired, including, but not limited to, all goods intended for
sale or lease by Borrower, or for display or demonstration; all work in
process; all raw materials and other materials and supplies of every
nature and description used or which might be used in connection with the
manufacture, printing, packing, shipping, advertising, selling, leasing or
furnishing of such goods or otherwise used or consumed in Borrower's
business; and all documents evidencing and General Intangibles relating to
any of the foregoing, whether now owned or hereafter acquired by Borrower.
LC AMOUNT - at any time, the aggregate undrawn face amount of
all Letters of Credit and LC Guaranties then outstanding.
LC GUARANTY - any guaranty pursuant to which Lender or any
Affiliate of Lender shall guaranty the payment or performance by Borrower
of its reimbursement obligation under any letter of credit.
LETTER OF CREDIT - any letter of credit issued by Lender or
any of Lender's Affiliates for the account of Borrower.
LIBOR - with respect to a Eurodollar Loan for the relevant
LIBOR Interest Period, a rate per annum equal to the quotient of the
following: (i) the rate at which deposits in U.S. dollars in immediately
available funds are offered by Lender or Bank to first-class banks in
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the London interbank market at approximately 11:00 a.m. (London time) two
(2) Business Days prior to the first day of such LIBOR Interest Period, in
the approximate amount of the Eurodollar Loan and having a maturity
approximately equal to the LIBOR Interest Period, DIVIDED BY (ii) the
difference of one (1) MINUS the Reserve Requirement.
LIBOR INTEREST PERIOD - with respect to a Eurodollar Loan, a
period of one (1), two (2), or three (3) months commencing on a Business
Day selected by Borrower pursuant to this Agreement; PROVIDED, THAT (i)
any LIBOR Interest Period which would otherwise end on a day which is not
a Business Day shall be extended to the next succeeding Business Day
unless such Business Day falls in another calendar month, in which case
such LIBOR Interest Period shall end on the next preceding Business Day;
and (ii) any LIBOR Interest Period which begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such LIBOR Interest
Period) shall, subject to CLAUSES (III) below and (I) above, end on the
last Business Day of a calendar month; and (iii) any LIBOR Interest Period
which would otherwise end after the termination of the Agreement, shall
end on the termination of the Agreement. No LIBOR Interest Period for the
Term Loan or an Equipment Loan shall extend beyond a date on which
Borrower is required to make a scheduled payment of principal on the Term
Note or the Equipment Note, as the case may be, unless the sum of the
aggregate Revolving Credit Loans consisting of Base Rate Loans equals or
exceeds the principal amount required to be paid on the Term Note or the
Equipment Note, as the case may be, on such date.
LIEN - any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on common law, statute or contract. The term "Lien"
shall also include reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property. For the purpose of the
Agreement, Borrower shall be deemed to be the owner of any Property which
it has acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the Property has been retained by
or vested in some other Person for security purposes.
LOAN ACCOUNT - the loan account established on the books of
Lender pursuant to SECTION 3.5 of the Agreement.
LOAN DOCUMENTS - the Agreement, the Other Agreements and the
Security Documents.
LOAN PARTY - Borrower, each Guarantor and each other Person
(other than Lender) who is at any time a party to any Loan Document.
LOANS - all loans and advances of any kind made by Lender
pursuant to the Agreement.
LOSSES - as defined in SECTION 11.3 of the Agreement.
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MATERIAL ADVERSE EFFECT - the effect of any event or condition
which, alone or when taken together with other events or conditions
occurring or existing concurrently therewith, (a) has a material adverse
effect upon the business, operations, Properties, condition (financial or
otherwise) or business prospects of Borrower, or any Subsidiary; (b) has
any material adverse effect whatsoever upon the validity or enforceability
of the Agreement or any of the other Loan Documents; (c) has or may be
reasonably expected to have any material adverse effect upon the value of
the whole or any material part of the Collateral, the Liens of Lender with
respect to the Collateral or any material part thereof or the priority of
such Liens; (d) materially impairs the ability of Borrower to perform its
obligations under this Agreement or any of the other Loan Documents,
including repayment of the Obligations when due; or (e) materially impairs
the ability of Lender to enforce or collect the Obligations or realize
upon any of the Collateral in accordance with the Loan Documents and
Applicable Law.
MAXIMUM LEGAL RATE - as defined in SECTION 2.1.3(A) of the
Agreement.
MONEY BORROWED - means (i) Indebtedness arising from the
lending of money by any Person to Borrower; (ii) Indebtedness, whether or
not in any such case arising from the lending by any Person of money to
Borrower, (A) which is represented by notes payable or drafts accepted
that evidence extensions of credit, (B) which constitutes obligations
evidenced by bonds, debentures, notes or similar instruments, or (C) upon
which interest charges are customarily paid (other than accounts payable)
or that was issued or assumed as full or partial payment for Property;
(iii) Indebtedness that constitutes a Capitalized Lease Obligation; (iv)
reimbursement obligations with respect to letters of credit or guaranties
of letters of credit and (v) Indebtedness of Borrower under any guaranty
of obligations that would constitute Indebtedness for Money Borrowed under
CLAUSES (I) through (III) hereof, if owed directly by Borrower.
MORTGAGES - each respective mortgage or deed of trust to be
executed by Borrower, in favor of Lender, and by which Borrower shall
grant and convey to Lender, as security for the Obligations, a Lien upon
all the real Property owned in fee by Borrower, including, without
limitation, the real Property owned in fee (i) by Marion and located at
(a) 325 Brunswick Lane, Marion, Virginia, (b) 1400 Industrial Road,
Marion, Virginia and (c) 101 and 150 Johnston Road, Marion, Virginia (ii)
by DeLand and located at 2000 Brunswick Lane, DeLand, Florida and (iii) by
Lincoln and located at (a) 4300 Industrial Avenue, Lincoln, Nebraska and
(b) 4131 N. 48th Street, Lincoln, Nebraska.
MULTIEMPLOYER PLAN - has the meaning set forth in Section
4001(a)(3) of ERISA.
OBLIGATIONS - all Loans, and all other advances, debts,
liabilities, obligations, covenants and duties, together with all
interest, fees and other charges thereon, owing, arising, due or payable
from Borrower to Lender of any kind or nature, present or future, whether
or not evidenced by any note, guaranty or other instrument, whether
arising under the Agreement or any of the other Loan Documents or
otherwise, and whether direct or
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indirect (including those acquired by assignment), absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter
arising and however acquired.
ORIGINAL TERM - as defined in SECTION 4.1 of the Agreement.
OTHER AGREEMENTS - any and all agreements, instruments and
documents (other than the Agreement and the Security Documents),
heretofore, now or hereafter executed by Borrower, any Subsidiary of
Borrower or any other third party and delivered to Lender in respect of
the transactions contemplated by the Agreement.
OUT-OF-FORMULA CONDITION - at any date of determination
thereof, a condition such that the outstanding principal amount of
Revolving Credit Loans PLUS the LC Amount on such date exceeds the
Borrowing Base on such date.
PARTICIPANT - each Person who shall be granted the right by
Lender to participate in any of the Loans described in the Agreement and
who shall have entered into a participation agreement in form and
substance satisfactory to Lender.
PERMITTED LIEN - a Lien of a kind specified in SECTION 8.2.5
of the Agreement.
PERMITTED PURCHASE MONEY INDEBTEDNESS - Purchase Money
Indebtedness of Borrower incurred after the date hereof which is secured
by a Purchase Money Lien and which, when aggregated with the principal
amount of all other such Indebtedness and Capitalized Lease Obligations of
Borrower at the time outstanding, does not exceed $500,000. For the
purposes of this definition, the principal amount of any Purchase Money
Indebtedness consisting of capitalized leases shall be computed as a
Capitalized Lease Obligation.
PERSON - an individual, partnership, corporation, limited
liability company, joint stock company, land trust, business trust, or
unincorporated organization, or a government or agency or political
subdivision thereof.
PLAN - an employee benefit plan now or hereafter maintained
for employees of Borrower that is covered by Title IV of ERISA.
PROPERLY CONTESTED - in the case of any Indebtedness of a Loan
Party (including any Taxes) that is not paid as and when due or payable by
reason of such Loan Party's bona fide dispute concerning its liability to
pay same or concerning the amount thereof, that (i) such Indebtedness and
any Liens securing same are being properly contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, (ii)
such Loan Party has established appropriate reserves as shall be required
in conformity with GAAP, (iii) the non-payment of such Indebtedness will
not have a Material Adverse Effect and will not result in a forfeiture of
any assets of such Loan Party; (iv) no Lien is imposed upon any of such
Loan Party's assets with respect to such Indebtedness unless such Lien is
at all times junior and subordinate in priority to the Liens in favor of
Lender (except only with respect
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<PAGE>
to property taxes that have priority as a matter of applicable state law);
(v) if the Indebtedness results from the entry, rendition or issuance
against a Loan Party or any of its assets of a judgment, writ, order or
decree, such judgment, writ, order or decree is stayed or bonded pending a
timely appeal or other judicial review; and (vi) if such contest is
abandoned, settled or determined adversely to such Loan Party, such Loan
Party forthwith pays such Indebtedness and all penalties and interest in
connection therewith.
PROPERTY - any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
PURCHASE MONEY INDEBTEDNESS - means and includes (i)
Indebtedness (other than the Obligations) for the payment of all or any
part of the purchase price of any fixed assets, (ii) any Indebtedness
(other than the Obligations) incurred at the time of or within 10 days
prior to or after the acquisition of any fixed assets for the purpose of
financing all or any part of the purchase price thereof, and (iii) any
renewals, extensions or refinancings thereof, but not any increases in the
principal amounts thereof outstanding at the time.
PURCHASE MONEY LIEN - a Lien upon fixed assets which secures
Purchase Money Indebtedness, but only if such Lien shall at all times be
confined solely to the fixed assets the purchase price of which was
financed through the incurrence of the Purchase Money Indebtedness secured
by such Lien.
RENTALS - as defined in SECTION 8.2.13 of the Agreement.
REPORTABLE EVENT - any of the events set forth in Section
4043(b) of ERISA.
RESERVE REQUIREMENT - at any date of determination, that
percentage (expressed as a decimal fraction) which is in effect on such
day, as provided by the Board of Governors of the Federal Reserve System
(or any successor governmental body) applied for determining the maximum
reserve requirements (including without limitation, basic, supplemental,
marginal and emergency reserves) under Regulation D with respect to
"eurocurrency liabilities" as currently defined in Regulation D, or under
any similar or successor regulation with respect to eurocurrency
liabilities or eurocurrency funding. Each determination by Lender of the
Reserve Requirement shall be provided to Borrower and, in the absence of
manifest error, be conclusive and binding. Any Reserve Requirement shall
be determined in accordance with Lender's customary practice and applied
on a consistent basis.
RESTRICTED INVESTMENT - any investment made in cash or by
delivery of Property to any Person, whether by acquisition of stock,
Indebtedness or other obligation or Security, or by loan, advance or
capital contribution, or otherwise, or in any Property except the
following:
(i) investments in one or more Subsidiaries of Borrower
to the extent existing on the Closing Date;
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<PAGE>
(ii) Property to be used in the ordinary course of
business;
(iii) Current Assets arising from the sale of goods and
services in the ordinary course of business of Borrower and its
Subsidiaries;
(iv) investments in direct obligations of the United
States of America, or any agency thereof or obligations guaranteed
by the United States of America, provided that such obligations
mature within one year from the date of acquisition thereof;
(v) investments in certificates of deposit maturing
within one year from the date of acquisition issued by a bank or
trust company organized under the laws of the United States or any
state thereof having capital surplus and undivided profits
aggregating at least $100,000,000; and
(vi) investments in commercial paper given the highest
rating by a national credit rating agency and maturing not more than
270 days from the date of creation thereof.
REVOLVING CREDIT LOAN - a Loan made by Lender as provided in
SECTION 1.1 of the Agreement.
SCHEDULE OF ACCOUNTS - as defined in SECTION 6.2.1 of the
Agreement.
SECURITY - shall have the same meaning as in Section 2(1) of
the Securities Act of 1933, as amended.
SECURITY DOCUMENTS - the Guaranty Agreement, the Mortgages,
the Collateral Assignments of Leases, the Stock Pledge Agreement, and all
other instruments and agreements now or at any time hereafter securing the
whole or any part of the Obligations.
SOLVENT - as to any Person, such Person (i) owns Property
whose fair salable value is greater than the amount required to pay all of
such Person's Indebtedness (including contingent debts), (ii) is able to
pay all of its Indebtedness as such Indebtedness matures and (iii) has
capital sufficient to carry on its business and transactions and all
business and transactions in which it is about to engage.
STOCK PLEDGE AGREEMENT - that certain Stock Pledge Agreement,
executed by TPG on or before the Closing Date, whereby TPG grants to
Lender a first priority Lien in all the issued and outstanding capital
stock of each Borrower owned by TPG, to be in form and substance
satisfactory to Lender.
SUBORDINATED DEBT - Indebtedness of Borrower that is
subordinated to the Obligations in a manner satisfactory to Lender.
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<PAGE>
SUBSIDIARY - any corporation of which a Person owns, directly
or indirectly through one or more intermediaries, more than 50% of the
Voting Stock at the time of determination.
TAXES - any present or future taxes, levies, imposts, duties,
fees, assessments, deductions, withholdings or other charges of whatever
nature, including, without limitation, income, receipts, excise, property,
sales, transfer, license, payroll, withholding, social security and
franchise taxes now or hereafter imposed or levied by the United States,
or any state, local or foreign government or by any department, agency or
other political subdivision or taxing authority thereof or therein and all
interest, penalties, additions to tax and similar liabilities with respect
thereto.
TERM LOAN - the Loan described in SECTION 1.2.1 of the
Agreement.
TERM NOTE - the Secured Promissory Note to be executed by
Borrower on or about the Closing Date in favor of Lender to evidence the
Term Loan, which shall be in the form of EXHIBIT A-1 to the Agreement.
TOTAL CREDIT FACILITY - $32,000,000.
TOTAL LIABILITIES - at any date means all amounts properly
classified as liabilities on a balance sheet at such date in accordance
with GAAP, plus all reserves for contingencies and all other potential
liabilities for which no reserves have previously been established on such
balance sheet, to the extent such amounts are not already classified as
liabilities in accordance with GAAP.
TOTAL REVOLVING CREDIT FACILITY - $17,000,000.
TPG - TPG Holdings, Inc., a Delaware corporation, and the
holder of all of the issued and outstanding capital stock of each
Borrower.
VOTING STOCK - Securities of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
OTHER TERMS. All other terms contained in the Agreement shall have, when
the context so indicates, the meanings provided for by the Code to the extent
the same are used or defined therein.
CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. In the computation of periods of time from
a specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding." The
section titles, table of contents and list of exhibits appear as a matter of
convenience only and shall not affect the interpretation of the Agreement. All
references to statutes and related regulations
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<PAGE>
shall include any amendments of same and any successor statutes and regulations.
All references to any of the Loan Documents shall include any and all
modifications thereto and any and all extensions or renewals thereof. Wherever
the phrase "including" shall appear in the Agreement, such word shall be
understood to mean "including, without limitation."
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<PAGE>
IN WITNESS WHEREOF, this Appendix has been duly executed in Dallas, Dallas
County, Texas, on December 27, 1996.
BORROWER:
TECHNICAL PRODUCTS GROUP, INC.
By: /s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
MARION PROPERTIES, INC.
By: /s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
DELAND PROPERTIES, INC.
By: /s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
LINCOLN PROPERTIES, INC.
By: /s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
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<PAGE>
ACCEPTED IN DALLAS, DALLAS COUNTY, TEXAS:
LENDER:
FLEET CAPITAL CORPORATION
By: /s/BRIAN L. TORNOW
Brian L. Tornow
Senior Vice President
A-18
EXHIBIT 10.15
FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "AMENDMENT"),
dated as of June 10, 1997, is by and among FLEET CAPITAL CORPORATION ("LENDER"),
a Rhode Island corporation and TECHNICAL PRODUCTS GROUP, INC. ("TECHNICAL
PRODUCTS"), a Delaware corporation, MARION PROPERTIES, INC. ("MARION"), a
Delaware corporation, DELAND PROPERTIES, INC. ("DELAND"), a Delaware
corporation, and LINCOLN PROPERTIES, INC. ("LINCOLN"), a Delaware corporation
(Technical Products, Marion, DeLand and Lincoln being referred to individually,
collectively, and joint and severally, as "BORROWER").
RECITALS
A. Lender and Borrower have entered into that certain Loan and Security
Agreement dated December 27, 1996 (the "AGREEMENT").
B. Lender and Borrower desire to amend the Agreement as herein set
forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. Capitalized terms used in this Amendment, to
the extent not otherwise defined herein, shall have the same meaning as in the
Agreement, as amended hereby.
ARTICLE II
AMENDMENTS
SECTION 2.01. AMENDMENT TO SECTION 8.3.3. Effective as of the effective
date hereof, SECTION 8.3.3 of the Agreement is hereby amended and restated in
its entirety to read as follows:
"8.3.3. ADJUSTED TANGIBLE NET WORTH. TPG shall maintain, as of
the last day of each fiscal quarter indicated below, Consolidated
Adjusted Tangible Net Worth of not less than the amount shown below as
of the date shown below:
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<PAGE>
DATE AMOUNT
---- ------
(i) March 31, 1997 (i) $8,500,000
(ii) June 30, 1997 (ii) $6,300,000
(iii)September 30, 1997 (iii)$6,800,000
(iv) December 31, 1997, March 31, (iv) $9,200,000
1998, June 30, 1998 and
September 30, 1998
(v) December 31, 1998, March 31, (v) $11,800,000
1999, June 30, 1999 and
September 30, 1999
(vi) December 31, 1999 (vi) $15,800,000"
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01. CONDITIONS. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent, unless
specifically waived in writing by Lender:
(a) Lender shall have received all of the following,
each dated (unless otherwise indicated) as of the date of this
Amendment, in form and substance satisfactory to Lender.
(1) Officer's Certificate. An officer's
certificate (hereinafter referred to as the "OFFICER'S
CERTIFICATE") certified by the Executive Vice President of
each Borrower certifying that such Borrower has complied with,
and presently is in compliance with, all covenants, agreements
and conditions set forth in the Agreement, as amended by this
Amendment. The Officer's Certificate shall conform to the
Officer's Certificate which is attached hereto as EXHIBIT A
and incorporated herein by reference for all purposes;
(2) Company General Certificate. A company
general certificate (hereinafter referred to as the "COMPANY
GENERAL CERTIFICATE") certified by the Secretary of each
Borrower, certifying (i) that such Borrower's Board of
Directors has met and adopted, approved, consented to and
ratified the resolutions attached thereto which authorize the
execution, delivery and performance by such Borrower of this
Amendment and all other loan documents to which such Borrower
is or is to be a party hereunder (hereinafter referred to as
the "LOAN DOCUMENTS"), (ii) the names of the officers of such
Borrower authorized to sign this Amendment and each of the
Loan Documents to which such Borrower is to be a party
hereunder (including the certificates contemplated herein),
(iii) the specimen signatures of such officers, and (iv) that
such Borrower has not amended such Borrower's Bylaws since the
date of the Agreement. Each Company General Certificate shall
conform to the form of
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<PAGE>
Company General Certificate which is attached hereto as
EXHIBIT B and incorporated herein by reference for all
purposes.
(3) Additional Information. Such additional
documents, instruments and information as Lender or its legal
counsel may request;
(b) The representations and warranties contained
herein and in all Loan Documents, as amended hereby, shall be true and
correct in all material respects as of the date hereof as if made on
the date hereof.
(c) No Event of Default shall have occurred and be
continuing and no event or conditions shall have occurred that with the
giving of notice or lapse of time or both would be an Event of Default
unless such Event of Default has been or is herein specifically waived
in writing by Lender; and
(d) All corporate proceedings taken in connection
with the transaction contemplated by this Amendment and all documents,
instruments and other legal matters incident thereto shall be
satisfactory to Lender and its legal counsel.
ARTICLE IV
LIMITED WAIVER
SECTION 4.01. LIMITED WAIVER OF CERTAIN FINANCIAL COVENANT DEFAULTS.
Upon satisfaction of the conditions specified in ARTICLE III hereof, Lender
shall, subject to the terms and conditions set forth below, waives the following
Event of Default:
(a) The breach by Borrower of its covenant under SECTION 8.3.3
of the Agreement to maintain Adjusted Tangible Net Worth as of March
31, 1997 of not less than $8,500,000.00.
Except as otherwise specifically provided for in this ARTICLE IV, nothing
contained in this Amendment shall be construed as a waiver by Lender of any
covenant or provision of the Loan Agreement, the other Loan Documents, this
Amendment, or of any other contract or instrument between Borrower and Lender,
and Lender's failure at any time or times hereafter to require strict
performance by Borrower of any provision thereof shall not waive, affect or
diminish any right of Lender to thereafter demand strict compliance therewith.
Lender hereby reserves all rights granted under the Loan Agreement, the other
Loan Documents, this Amendment and any other contract or instrument between
Borrower and Lender.
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<PAGE>
ARTICLE V
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
SECTION 5.01. RATIFICATIONS. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement are ratified and confirmed
and shall continue in full force and effect. Borrower and Lender agree that the
Agreement as amended hereby shall continue to be legal, valid, binding and
enforceable in accordance with its terms, subject to bankruptcy, insolvency and
other similar laws affecting the rights of creditors generally and equitable
principles of general applicability.
SECTION 5.02. REPRESENTATIONS AND WARRANTIES. Borrower hereby
represents and warrants to Lender (i) the execution, delivery and performance of
this Amendment and any and all other Loan Documents executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the Certificate of Incorporation or
Bylaws of Borrower; (ii) the representations and warranties contained in the
Agreement, as amended hereby, and any other Loan Document are true and correct
in all material respects on and as of the date hereof as though made on and as
of the date hereof; (iii) no Event or Default under the Agreement has occurred
and is continuing and no event or condition has occurred and is continuing that
with the giving of notice or lapse of time or both would be an Event of Default
unless such Event of Default has been or is herein specifically waived in
writing by Lender; (iv) Borrower is in full compliance in all material respects
with all covenants and agreements contained in the Agreement, as amended hereby,
except to the extent such compliance has been or is herein specifically waived
in writing by Lender; and (v) Borrower has not amended its Bylaws since the date
of the Agreement.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in the Agreement or any other document or
documents relating thereto, including, without limitation, any Loan Document
furnished in connection with this Amendment, shall survive the execution and
delivery of this Amendment and the other Loan Documents, and no investigation by
Lender or any closing shall affect the representations and warranties or the
right of Lender to rely upon them.
SECTION 6.02. REFERENCE TO AGREEMENT. Each of the Loan Documents,
including the Agreement and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Agreement as amended hereby, are hereby amended
so that any reference in such Loan Documents to the Agreement shall mean a
reference to the Agreement as amended hereby.
SECTION 6.03. EXPENSES OF LENDER. As provided in the Agreement,
Borrower agrees to pay on demand all costs and expenses incurred by Lender in
connection with the preparation, negotiation and execution of this Amendment and
the other Loan Documents executed pursuant hereto and any
4
<PAGE>
and all amendments, modifications, and supplements thereto, including, without
limitation, the costs and fees of Lender's legal counsel, and all costs and
expenses incurred by Lender in connection with the enforcement or preservation
of any rights under the Agreement, as amended hereby, or any other Loan
Document, including, without limitation, the costs and fees of Lender's legal
counsel.
SECTION 6.04. SEVERABILITY. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
SECTION 6.05. APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN
DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE
PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.
SECTION 6.06. RELEASE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO
DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR
NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF
ITS LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR
DAMAGES OF ANY KIND OR NATURE FROM LENDER. BORROWER HEREBY VOLUNTARILY AND
KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS,
DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES
WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR
UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING
IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE
BORROWER MAY NOW OR HEREAFTER HAVE AGAINST LENDER, ITS PREDECESSORS, OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE
OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR
REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING, WITHOUT
LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR
RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE
OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR OTHER AGREEMENTS, AND
NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.
SECTION 6.07. SUCCESSORS AND ASSIGNS. This Amendment is binding upon
and shall inure to the benefit of Lender and Borrower and their respective
successors and assigns, except Borrower may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of Lender.
5
<PAGE>
SECTION 6.08 COUNTERPARTS. This Amendment may be executed in one or
more counterparts, each of which when so executed shall be deemed to be an
original, but all of which when taken together shall constitute one and the same
instrument.
SECTION 6.09. EFFECT OF WAIVER. No consent or waiver, express or
implied, by Lender to or for any breach of or deviation from any covenant or
condition by Borrower shall be deemed a consent to or waiver of any other breach
of the same or any other covenant, condition or duty.
SECTION 6.10. HEADINGS. The headings, captions, and arrangements used
in this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed in Dallas,
Texas, on the day and year specified at the beginning of this Amendment.
BORROWER:
TECHNICAL PRODUCTS GROUP, INC.
By:/s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
MARION PROPERTIES, INC.
By:/s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
DELAND PROPERTIES, INC.
By:/s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
LINCOLN PROPERTIES, INC.
By:/s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
ACCEPTED IN DALLAS, DALLAS COUNTY, TEXAS:
LENDER:
FLEET CAPITAL CORPORATION
By:/s/HANCE VANBEBER
Hance VanBeber
Vice President
7
EXHIBIT 10.16
SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT ("THIS
AMENDMENT") is made and entered into as of the 31st day of October, 1997, by
and among FLEET CAPITAL CORPORATION ("LENDER"), a Rhode Island corporation, and
TECHNICAL PRODUCTS GROUP, INC. ("TECHNICAL PRODUCTS"), a Delaware corporation,
MARION PROPERTIES, INC. ("MARION"), a Delaware corporation, DELAND PROPERTIES,
INC. ("DELAND"), a Delaware corporation, and LINCOLN PROPERTIES, INC.
("LINCOLN"), a Delaware corporation (Technical Products, Marion, DeLand and
Lincoln being referred to individually, collectively, and joint and severally,
as "BORROWER").
RECITALS
A. Borrower and Lender have entered into that certain Loan and Security
Agreement, dated December 27, 1996, as amended by that certain First Amendment
to Loan and Security Agreement, dated June 10, 1997, by and between Borrower and
Lender (as amended, the "LOAN AGREEMENT").
B. Pursuant to the terms of an Acquisition Agreement and Plan of Merger
(the "MERGER AGREEMENT"), dated as of June 6, 1997, by and between Borrower's
parent company, TPG Holdings, Inc. ("TPG"), and Lunn Industries, Inc. ("LUNN"),
TPG intends to merge with and into Lunn (the "MERGER"), with Lunn being the
surviving corporation. Simultaneous with the consummation of the Merger, Lunn
intends to change its name to Advanced Technical Products, Inc. ("ATP").
C. In accordance with the terms of the Merger Agreement, Lunn will succeed
to and assume all now existing or hereafter arising obligations of TPG to Lender
under the Loan Agreement and the other Loan Documents, including, but not
limited to, TPG's obligations under (i) that certain Continuing Guaranty
Agreement, dated December 27, 1996 (the "GUARANTY"), pursuant to which TPG has
guaranteed all of Borrower's Obligations to Lender and (ii) that certain Stock
Pledge Agreement, dated December 27, 1996 (the "STOCK PLEDGE AGREEMENT"),
pursuant to which TPG has granted to Lender a lien upon all capital stock of
Borrower, whether now or hereafter issued.
D. TPG and Borrower have requested that, simultaneously with the
consummation of the Merger, TPG and/or Lunn be released from its/their
obligations under the Guaranty and any deficiency liability under the Stock
Pledge Agreement; and Lender has agreed to do so subject to the terms of this
Amendment.
E. Borrower and Lender desire to amend the Loan Agreement and the other
Loan Documents (i) to clarify certain provisions of the Loan Agreement affected
by the Merger and (ii) to allow and provide for certain other matters as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and
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<PAGE>
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1.01 Capitalized terms used in this Amendment are defined in the Loan
Agreement, as amended hereby, unless otherwise stated.
ARTICLE II
AMENDMENTS
2.01 AMENDMENT TO APPENDIX A OF THE LOAN AGREEMENT; ADDITION OF NEW
DEFINITION. Effective as of the date hereof, APPENDIX A of the Loan Agreement is
hereby amended to add the following definition hereto in alphabetical order:
"ATP - Advanced Technical Products, Inc., a Delaware corporation."
2.02 AMENDMENT TO APPENDIX A OF THE LOAN AGREEMENT; DELETION OF DEFINITION
OF "TPG". Effective as of the date hereof, APPENDIX A of the Loan Agreement is
hereby amended by deleting the definition of "TPG" therefrom.
2.03 AMENDMENT TO APPENDIX A OF THE LOAN AGREEMENT; AMENDMENT AND
RESTATEMENT OF DEFINITION OF "GUARANTOR". Effective as of the date hereof,
APPENDIX A of the Loan Agreement is hereby amended by deleting the definition of
"Guarantor" therefrom and inserting the following in lieu thereof:
"GUARANTOR - Any Person who may hereafter guarantee payment or performance
of the whole or any part of the Obligations."
2.04 AMENDMENT OF SECTION 7.1.4 TO THE LOAN AGREEMENT. Effective as of the
date hereof, SECTION 7.1.4 of the Loan Agreement is hereby amended by deleting
the last sentence therefrom and inserting the following in lieu thereof:
"ATP is the beneficial and legal holder of all outstanding capital stock
of each Borrower."
2.05 AMENDMENT TO SECTION 7.1.13 OF THE LOAN AGREEMENT. Effective as of
the date hereof, SECTION 7.1.13 of the Loan Agreement is hereby amended by
deleting therefrom the reference to "TPG" and inserting "ATP" in lieu thereof.
2.06 AMENDMENT TO SECTION 8.1.3 OF THE LOAN AGREEMENT. Effective as of the
date hereof, SECTION 8.1.3 of the Loan Agreement is hereby amended and restated
in its entirety to read as follows:
"8.1.3 FINANCIAL STATEMENTS. Keep, and cause each Subsidiary to
keep, adequate
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records and books of account with respect to its business activities in
which proper entries are made in accordance with GAAP reflecting all its
financial transactions; and cause to be prepared and furnished to Lender
the following (all to be prepared in accordance with GAAP applied on a
consistent basis, unless Borrower's certified public accountants concur in
any change therein and such change is disclosed to Lender and is
consistent with GAAP):
(i) not later than 90 days after the close of each fiscal year
of Borrower, unqualified audited financial statements of ATP, as of
the end of such year, on a Consolidated basis (with a footnote
exhibiting the consolidating information of Borrower on a combined
basis used in preparing such audited financial statements),
certified by a firm of independent certified public accountants of
recognized standing selected by Borrower, but acceptable to Lender
(except for a qualification for a change in accounting principles
with which the accountant concurs);
(ii) not later than 30 days after the end of each month
hereafter, including the last month of Borrower's fiscal year,
unaudited interim financial statements of Borrower, as of the end of
such month and of the portion of Borrower's financial year then
elapsed, on a combined basis, certified by the principal financial
officer of Borrower or ATP as prepared in accordance with GAAP
(excluding incentive compensation accrual) and fairly presenting the
financial position and results of Borrower on a combined basis, for
such month and period subject only to changes from audit and
year-end adjustments and except that such statements need not
contain notes;
(iii) promptly after the sending or filing thereof, as the
case may be, copies of any proxy statements, financial statements or
reports which ATP or Borrower has made available to its shareholders
and copies of any regular, periodic and special reports or
registration statements which ATP or Borrower files with the
Securities and Exchange Commission or any governmental authority
which may be substituted therefor, or any national securities
exchange;
(iv) promptly after the filing thereof, copies of any annual
report to be filed in accordance with ERISA in connection with each
Plan; and
(v) such other data and information (financial and otherwise)
as Lender, from time to time, may reasonably request, bearing upon
or related to the Collateral or ATP's or any Borrower's and each of
its Subsidiaries' financial condition or results of operations.
Concurrently with the delivery of the financial statements described in
CLAUSE (I) of this SECTION 8.1.3, Borrower shall forward to Lender a copy of the
accountants' letter to ATP's management that is prepared in connection with such
financial statements and also shall cause to be prepared and shall furnish to
Lender a certificate of the aforesaid certified public accountants certifying to
Lender that, based upon their examination of the financial statements of
Borrower performed in connection with their examination of said financial
statements, they are not aware of
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any Default or Event of Default, or, if they are aware of such Default or Event
of Default, specifying the nature thereof, and acknowledging, in a manner
satisfactory to Lender, that they are aware that Lender is relying on such
financial statements in making its decisions with respect to the Loans.
Concurrently with the delivery of the financial statements described in CLAUSES
(I) and (II) of this SECTION 8.1.3, or more frequently if requested by Lender,
Borrower shall cause to be prepared and furnished to Lender a Compliance
Certificate in the form of EXHIBIT N hereto executed by the chief financial
officer of Borrower."
2.07 AMENDMENT TO SECTION 8.1.6 OF THE LOAN AGREEMENT. Effective as of the
date hereof, SECTION 8.1.6 of this Loan Agreement is hereby amended and restated
in its entirety to read as follows:
"8.1.6.PROJECTIONS. No later than 30 days prior to the end of each
fiscal year of Borrower, deliver to Lender the budgeted combined balance
sheets, profit and loss statements, statement of changes and
capitalization statements (all prepared on a consistent basis with the
historical financial statements of Borrower, together with appropriate
supporting details and a statement of underlying assumptions) for the
forthcoming fiscal year, month by month, of Borrower."
2.08 AMENDMENT TO SECTION 8.2.7 OF THE LOAN AGREEMENT. Effective as of the
date hereof, SECTION 8.2.7 of the Loan Agreement is hereby amended by deleting
the reference to "TPG" and inserting "ATP" in lieu thereof.
2.09 AMENDMENT TO SECTION 8.2.14 OF THE LOAN AGREEMENT. Effective as of
the date hereof, SECTION 8.2.14 of the Loan Agreement is hereby amended by
deleting the reference to "TPG" and inserting "ATP" in lieu thereof.
2.10 AMENDMENT TO SECTION 8.3.1 OF THE LOAN AGREEMENT. Effective as of the
date hereof, SECTION 8.3.1 of the Loan Agreement is hereby amended by deleting
the reference to "TPG" and inserting "Borrower" in lieu thereof and by deleting
"on a Consolidated basis" and inserting "on a combined basis" in lieu thereof.
2.11 AMENDMENT TO SECTION 8.3.2 OF THE LOAN AGREEMENT. Effective as of the
date hereof, SECTION 8.3.2 of the Loan Agreement is hereby amended by deleting
the reference to "TPG" and inserting "Borrower" in lieu thereof and by deleting
"on a Consolidated basis" and inserting "on a combined basis" in lieu thereof.
2.12 AMENDMENT TO SECTION 8.3.3 OF THE LOAN AGREEMENT. Effective as of the
date hereof, SECTION 8.3.3 of the Loan Agreement is hereby amended by deleting
the reference to "TPG" and inserting "Borrower" in lieu thereof and by deleting
"Consolidated" and inserting "on a combined basis" in lieu thereof.
2.13 AMENDMENT TO SECTION 8.3.4 OF THE LOAN AGREEMENT. Effective as of the
date hereof, SECTION 8.3.4 of the Loan Agreement is hereby amended by deleting
the reference to "TPG" and inserting "Borrower" in lieu thereof and by deleting
"on a Consolidated basis" and inserting "on a
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combined basis" in lieu thereof.
2.14 AMENDMENT TO SECTION 11.9 OF THE LOAN AGREEMENT. Effective as of the
date hereof, SECTION 11.9 of the Loan Agreement is hereby amended and restated
in its entirety to read as follows:
"11.8 NOTICE. All notices, requests and demands to or upon a party
hereto shall be in writing and shall be sent by certified or registered
mail, return receipt requested, by personal delivery against receipt, by
overnight courier or by facsimile transmissions and shall be deemed to
have been validly served, given or delivered immediately when delivered
against receipt or one (1) Business Day after deposit in the U.S. mail,
postage prepaid, or with an overnight courier or in the case of facsimile
transmission, when sent, answerback received, in each case addressed as
follows:
If to Lender: Fleet Capital Corporation
2711 North Haskell Avenue
Suite 2100, LB 21
Dallas, Texas 75204
Attention: Loan Administration Manager
Facsimile No.: (214) 828-6530
With a copy to: Patton Boggs, L.L.P.
2626 Cole Avenue, Suite 300
Dallas, Texas 75204
Attention: Larry A. Makel, Esq.
Facsimile No.: (214) 871-2688
If to Borrower: Technical Products Group, Inc.
3353 Peachtree Road, Suite 920
Atlanta, Georgia 30326
Attention: Garrett L. Dominy
Facsimile No.: (404) 231-7277
With a copy to: Gardere & Wynne, L.L.P.
Thanksgiving Tower
1601 Elm Street, Suite 3000
Dallas, Texas 75201
Attention: Barry D. Drees, Esq.
Facsimile No.: (214) 999-4667
or to such other address as each party may designate for itself by notice
given in accordance with this SECTION 11.9; PROVIDED, HOWEVER, that any
notice, request or demand to or upon Lender pursuant to SECTION 3.1.1 or
4.2.2 hereof shall not be effective until received by Lender. Any written
notice or demand that is not sent in conformity with the provisions hereof
shall nevertheless be effective on the date that such notice is actually
received by the
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noticed party."
2.15 EXHIBIT D - CAPITAL STRUCTURE OF BORROWER. Effective as of the date
hereof, all references in the Loan Agreement to EXHIBIT D, which is entitled
"Capital Structure", shall be deemed references to EXHIBIT D which is attached
hereto as ANNEX A.
2.16 AMENDMENTS TO THE OTHER AGREEMENTS AND THE SECURITY DOCUMENTS.
Effective as of the date hereof, all references in the Other Agreements and the
Security Documents to "TPG Holdings, Inc." and "TPG" shall be deemed references
"Advanced Technical Products, Inc." and "ATP", respectively.
ARTICLE III
CONDITIONS PRECEDENT
3.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent, unless
specifically waived in writing by Lender:
(a) Lender shall have received (i) this Amendment, duly
executed by Borrower, (ii) a company general certificate (hereinafter
referred to as the "COMPANY GENERAL CERTIFICATE") certified by the
Secretary or Assistant Secretary of each Borrower acknowledging (A) that
each Borrower's Board of Directors has met and has adopted, approved,
consented to and ratified resolutions which authorize the execution,
delivery and performance by such Borrower of this Amendment and all other
Loan Documents to which such Borrower is or is to be a party, and (B) the
names of the officers of each Borrower authorized to sign this Amendment
and each of the other Loan Documents to which such Borrower is or is to be
a party hereunder (including the certificates contemplated herein)
together with specimen signatures of such officers, (ii) an assumption,
consent and ratification agreement duly executed by ATP pursuant to which
ATP (A) acknowledges that ATP has assumed the obligations of TPG under the
Stock Pledge Agreement, (B) consents to this Amendment, and (C) ratifies
the terms and conditions of the Stock Pledge Agreement and (iii) such
additional documents, instruments and information as Lender or its legal
counsel may request;
(b) The representations and warranties contained herein and in
the Loan Agreement and the Loan Documents, as each is amended hereby,
shall be true and correct as of the date hereof, as if made on the date
hereof;
(c) No Default or Event of Default shall have occurred and be
continuing;
(d) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents, instruments
and other legal matters incident thereto shall be satisfactory to Lender
and its legal counsel; and
(e) The Merger shall have been consummated in accordance with
the terms of the Merger Agreement.
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ARTICLE IV
NO WAIVER
By execution of this Amendment and subject to the satisfaction conditions
precedent specified in SECTION 3.01 hereof, Lender hereby waives any Default or
Event of Default which would otherwise occur under SECTION 10.1.12 or 10.1.15 of
the Loan Agreement solely as a result of the Merger. Except as specifically
provided in the preceding sentence, nothing contained in this Amendment shall be
construed as a waiver by Lender of any covenant or provision of the Loan
Agreement, the other Loan Documents, this Amendment, or of any other contract or
instrument between Borrower and Lender, and the failure of Lender at any time or
times hereafter to require strict performance by Borrower of any provision
thereof shall not waive, affect or diminish any right of Lender to thereafter
demand strict compliance therewith. Lender hereby reserves all rights granted
under the Loan Agreement, the other Loan Documents, this Amendment and any other
contract or instrument between Borrower and Lender.
ARTICLE V
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
5.01 RATIFICATIONS. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions set forth in
the Loan Agreement and the other Loan Documents, and, except as expressly
modified and superseded by this Amendment, the terms and provisions of the Loan
Agreement and the other Loan Documents are ratified and confirmed and shall
continue in full force and effect. Borrower and Lender agree that the Loan
Agreement and the other Loan Documents, as amended hereby, shall continue to be
legal, valid, binding and enforceable in accordance with their respective terms.
5.02 REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Lender that (a) the execution, delivery and performance of this
Amendment and any and all other Loan Documents executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the Articles of Incorporation or
Bylaws of Borrower; (b) the representations and warranties contained in the Loan
Agreement, as amended hereby, and any other Loan Documents are true and correct
on and as of the date hereof and on and as of the date of execution hereof as
though made on and as of each such date; (c) no Default or Event of Default
under the Loan Agreement, as amended hereby, has occurred and is continuing; and
(d) Borrower is in full compliance with all covenants and agreements contained
in the Loan Agreement and the other Loan Documents, as amended hereby.
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<PAGE>
ARTICLE VI
RELEASE OF GUARANTY
6.01 Subject to the satisfaction of the conditions precedent specified in
SECTION 3.01 hereof, Lender agrees to release TPG and/or Lunn from its/their
obligations under the Guaranty pursuant to the provisions of and subject to the
conditions specified in that certain Release of Guarantor in the form of ANNEX B
attached hereto.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made in the Loan Agreement or any other Loan Documents, including,
without limitation, any document furnished in connection with this Amendment,
shall survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by Lender or any closing shall affect the
representations and warranties or the right of Lender to rely upon them.
7.02 REFERENCE TO LOAN AGREEMENT. Each of the Loan Agreement and the other
Loan Documents, and any and all other Loan Documents, documents or instruments
now or hereafter executed and delivered pursuant to the terms hereof or pursuant
to the terms of the Loan Agreement, as amended hereby, are hereby amended so
that any reference in the Loan Agreement and such other Loan Documents to the
Loan Agreement shall mean a reference to the Loan Agreement as amended hereby.
7.03 EXPENSES OF LENDER. As provided in the Loan Agreement, Borrower
agrees to pay on demand all costs and expenses incurred by Lender in connection
with the preparation, negotiation, and execution of this Amendment and the other
Loan Documents executed pursuant hereto and any and all amendments,
modifications, and supplements thereto, including, without limitation, the costs
and fees of Lender's legal counsel, and all costs and expenses incurred by
Lender in connection with the enforcement or preservation of any rights under
the Loan Agreement, as amended hereby, or any other Loan Documents, including,
without, limitation, the costs and fees of Lender's legal counsel.
7.04 SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
7.05 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and shall
inure to the benefit of Lender and Borrower and their respective successors and
assigns, except that Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of Lender.
7.06 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together
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<PAGE>
shall constitute one and the same instrument.
7.07 EFFECT OF WAIVER. No consent or waiver, express or implied, by Lender
to or for any breach of or deviation from any covenant or condition by Borrower
shall be deemed a consent to or waiver of any other breach of the same or any
other covenant, condition or duty.
7.08 HEADINGS. The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
7.09 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED
PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS.
7.10 FINAL AGREEMENT. THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS,
EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH
RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED. THE
LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY, MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NO
MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS
AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY BORROWER AND
LENDER.
7.11 RELEASE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF
ANY KIND OR NATURE FROM LENDER. BORROWER HEREBY VOLUNTARILY AND KNOWINGLY
RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, AGENTS, OFFICERS,
DIRECTORS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS,
ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER,
KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED,
CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART
ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE BORROWER MAY NOW OR
HEREAFTER HAVE AGAINST LENDER, ITS PREDECESSORS, AGENTS, OFFICERS, DIRECTORS,
EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH
CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR
OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY
CONTRACTING
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<PAGE>
FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF
THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES
UNDER THE LOAN AGREEMENT OR OTHER LOAN DOCUMENTS, AND THE NEGOTIATION AND
EXECUTION OF THIS AMENDMENT.
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IN WITNESS WHEREOF, this Amendment has been executed and is effective as
of the date first above-written.
BORROWER:
TECHNICAL PRODUCTS GROUP
By:/s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
MARION PROPERTIES, INC.
By:/s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
DELAND PROPERTIES, INC.
By:/s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
LINCOLN PROPERTIES, INC.
By:/s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
LENDER:
FLEET CAPITAL CORPORATION
By:________________________________
Name:______________________________
Title:_____________________________
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EXHIBIT 10.17
SECURED PROMISSORY NOTE
$14,000,000.00 December 27, 1996
FOR VALUE RECEIVED, the undersigned (herein collectively referred to as
"BORROWERS"), hereby jointly and severally promise to pay to the order of FLEET
CAPITAL CORPORATION, a Rhode Island corporation (hereinafter "LENDER"), at its
office located at 2711 North Haskell, Suite 2100, LB 21, Dallas, Texas 75204, or
at such other location as Lender may request, in such coin or currency of the
United States which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment, the principal sum of FOURTEEN
MILLION AND NO/100 DOLLARS ($14,000,000.00), together with interest from and
after the date hereof at the per annum rate set forth below.
Subject to SECTION 2.1.3 of the Loan Agreement (as defined below), the
unpaid principal balance outstanding hereunder shall accrue interest at the per
annum rate (hereinafter referred to as the "APPLICABLE ANNUAL RATE") specified
in SECTION 2.1.1 of that certain Loan and Security Agreement by and among
Borrowers and Lender of even date herewith (hereinafter, as renewed, amended,
and restated from time to time, the "LOAN AGREEMENT"), except that upon and
after the occurrence and during the continuance of an Event of Default, the
unpaid principal balance outstanding hereunder, and, to the extent permitted by
applicable law, past due interest hereunder, shall accrue interest at the
Default Rate specified in SECTION 2.1.2 of the Loan Agreement.
This Secured Promissory Note (the "NOTE") is the Term Note referred to in,
and is issued pursuant to, the Loan Agreement, and is entitled to all of the
benefits and security of the Loan Agreement. All of the terms, covenants and
conditions of the Loan Agreement and all other instruments evidencing or
securing the indebtedness hereunder (including, without limitation, the
"Security Documents" as defined in the Loan Agreement) (hereinafter collectively
referred to as the "LOAN DOCUMENTS") are hereby made a part of this Note and are
deemed incorporated herein in full. All capitalized terms used herein, unless
otherwise specifically defined in this Note, shall have the meanings ascribed to
them in the Loan Agreement.
The principal amount and accrued interest of this Note shall be due and
payable on the dates and in the manner hereinafter set forth:
(a) Interest shall be due and payable monthly, in arrears, on
the first day of each month, commencing on January 1, 1997, and continuing
until such time as the full principal balance, together with all other
amounts owing hereunder, shall have been paid in full;
(b) Principal shall be due and payable quarterly, commencing
on April 1, 1997, and continuing on the first day of each July, October
and January thereafter to and including the first day of October, 1999, in
installments of $500,000.00 each; and
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(c) The entire remaining principal amount then outstanding,
together with any and all other amounts due hereunder, shall be due and
payable on the last day of the Original Term or on any earlier termination
of the Loan Agreement pursuant to SECTION 4 thereof.
This Note shall be subject to mandatory prepayment in accordance with the
provisions of SECTION 3.3 of the Loan Agreement.
All partial prepayments, whether mandatory or voluntary, shall be applied
to installments of principal in the inverse order of their maturities.
Upon or after the occurrence of an Event of Default, Lender shall have all
of the rights and remedies set forth in SECTION 10 of the Loan Agreement,
including the right to declare the then outstanding principal balance and
accrued interest hereof to be and the same shall thereupon become, immediately
due and payable without notice to or demand upon Borrower, all of which Borrower
hereby expressly waives.
Notwithstanding anything to the contrary in this Note or otherwise, (i) if
at any time the amount of interest computed on the basis of the Applicable
Annual Rate or a Default Rate would exceed the amount of such interest computed
upon the basis of the maximum rate of interest permitted by applicable state or
federal law in effect from time to time hereafter (the "MAXIMUM LEGAL RATE"),
the interest payable under this Note shall be computed upon the basis of the
Maximum Legal Rate, but any subsequent reduction in such Applicable Annual Rate
or Default Rate, as applicable, shall not reduce such interest thereafter
payable hereunder below the amount computed on the basis of the Maximum Legal
Rate until the aggregate amount of such interest accrued and payable under this
Note equals the total amount of interest which would have accrued if such
interest had been at all times computed solely on the basis of the Applicable
Annual Rate or Default Rate, as applicable; and (ii) unless preempted by federal
law, the Applicable Annual Rate or Default Rate, as applicable, from time to
time in effect hereunder may not exceed the "indicated ceiling rate" from time
to time in effect under Tex. Rev. Civ. Stat. Ann. art. 5069-1.04(c) (Vernon
1987). If the applicable state or federal law is amended in the future to allow
a greater rate of interest to be charged under this Note than is presently
allowed by applicable state or federal law, then the limitation of interest
hereunder shall be increased to the maximum rate of interest allowed by
applicable state or federal law as amended, which increase shall be effective
hereunder on the effective date of such amendment, and all interest charges
owing to Lender by reason thereof shall be payable at the same date and in the
same manner as accrued interest on this Note is generally payable pursuant to
the provisions of this Note.
No agreements, conditions, provisions or stipulation contained in this
Note, the Loan Agreement or any other instrument, document or agreement between
Borrower and Lender or default of Borrower, or the exercise by Lender of the
right to accelerate the payment of the maturity of principal and interest, or to
exercise any option whatsoever contained in this Note or any other Loan
Document, or the arising of any contingency whatsoever, shall entitle Lender to
contract for, charge, or receive, in any event, interest exceeding the Maximum
Legal Rate. In no event shall Borrower be obligated to pay interest exceeding
such Maximum Legal Rate and all agreements, conditions or stipulations, if any,
which may in any event or contingency whatsoever operate to bind, obligate or
compel Borrower to pay a rate of interest exceeding the Maximum Legal Rate,
shall be without
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<PAGE>
binding force or effect, at law or in equity, to the extent only of the excess
of interest over such Maximum Legal Rate. In the event any interest is
contracted for, charged or received in excess of the Maximum Legal Rate ("EXCESS
INTEREST"), Borrower acknowledges and stipulate that any such contract, charge,
or receipt shall be the result of an accident and bona fide error, and that any
Excess Interest received by Lender shall be applied, first, to reduce the
principal then unpaid hereunder; second, to reduce the other Obligations; and
third, returned to Borrower, it being the intention of the parties hereto not to
enter at any time into a usurious or otherwise illegal relationship. Borrower
recognizes that, with fluctuations in the Applicable Annual Rate and the Maximum
Legal Rate, such a result could inadvertently occur. By the execution of this
Note, Borrower covenants that (i) the credit or return of any Excess Interest
shall constitute the acceptance by Borrower of such Excess Interest, and (ii)
Borrower shall not seek or pursue any other remedy, legal or equitable, against
Lender, based in whole or in part upon contracting for, charging or receiving of
any interest in excess of the maximum authorized by applicable law. For the
purpose of determining whether or not any Excess Interest has been contracted
for, charged or received by Lender, all interest at any time contracted for,
charged or received by Lender in connection with this Note shall be amortized,
prorated, allocated and spread in equal parts during the entire term of this
Note.
Time is of the essence of this Note. Unless otherwise provided in the Loan
Agreement, Borrower, for itself and its legal representatives, successors and
assigns, expressly waives, to the fullest extent permitted by Applicable Law,
presentment, demand, protest, notice of dishonor, notice of non-payment, notice
of maturity, notice of protest, presentment for the purpose of accelerating
maturity, diligence in collection, and the benefit of any exemption or
insolvency laws.
If this Note is collected by or through an attorney at law, then Borrower
shall be obligated to pay, in addition the principal balance and accrued
interest hereof, reasonable attorney's fees and court costs, in addition to any
other charges for which Borrower is responsible under the Loan Agreement and
other Loan Documents.
Wherever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under Applicable Law, but if any
provision of this Note shall be prohibited or invalid under Applicable Law, such
provision shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or remaining provisions of
this Note. No delay or failure on the part of Lender in the exercise of any
right or remedy hereunder shall operate as a waiver thereof, nor as an
acquiescence in any default, nor shall any single or partial exercise by Lender
of any right or remedy preclude any other right or remedy. Lender, at its
option, may enforce its rights against any collateral securing this Note without
enforcing its rights against Borrower, any guarantor of the indebtedness
evidenced hereby or any other property or indebtedness due or to become due to
Borrower. Borrower agrees that, without releasing or impairing Borrower's
liability hereunder, Lender may at any time release, surrender, substitute or
exchange any collateral securing this Note and may at any time release any party
primarily or secondarily liable for the indebtedness evidenced by this Note.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of Texas.
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IN WITNESS WHEREOF, Borrowers have caused this Note to be duly executed
and delivered in Dallas, Texas, on the date first above written.
BORROWERS:
TECHNICAL PRODUCTS GROUP, INC.,
a Delaware corporation
By:/s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
MARION PROPERTIES, INC.,
a Delaware corporation
By:/s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
DELAND PROPERTIES, INC.,
a Delaware corporation
By:/s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
LINCOLN PROPERTIES, INC.,
a Delaware corporation
By:/s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
5
EXHIBIT 10.18
EQUIPMENT PROMISSORY NOTE
$1,000,000.00 December 27, 1996
FOR VALUE RECEIVED, the undersigned (herein collectively referred to as
"BORROWERS"), hereby jointly and severally promise to pay to the order of FLEET
CAPITAL CORPORATION, a Rhode Island corporation ("LENDER"), at its office
located at 2711 North Haskell, Suite 2100, LB 21, Dallas, Texas 75204, or at
such other location as Lender may request, in such coin or currency of the
United States which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment, the principal sum of ONE MILLION AND
NO/100 DOLLARS ($1,000,000.00), or as much as may be advanced hereunder as
Equipment Loans pursuant to the provisions of the Loan Agreement (as hereinafter
defined), together with interest from and after the date of funding of the
initial Equipment Loan hereunder at the annual rate set forth below
(hereinafter, the "APPLICABLE ANNUAL RATE").
Subject to SECTION 2.1.3 of the Loan Agreement, the unpaid principal
balance of this Equipment Promissory Note shall accrue interest at the rate per
annum for Equipment Loans stated in SECTION 2.1.1 of that certain Loan and
Security Agreement among Borrowers and Lender, dated as of the date hereof (as
amended, renewed and restated from time to time, the "LOAN AGREEMENT"), except
that upon and after the occurrence and during the continuance of an Event of
Default, the unpaid principal balance of this Note and, to the extent permitted
by applicable law, past-due interest, shall accrue interest at the Default Rate
specified in SECTION 2.1.2 of the Loan Agreement. Interest on this Note shall be
calculated in the manner provided in the Loan Agreement.
This Equipment Promissory Note (this "NOTE") is the Equipment Note
referred to in, and is issued pursuant to, the Loan Agreement and is entitled to
all of the benefits and security of the Loan Agreement. All of the terms,
covenants and conditions of the Loan Agreement and all other instruments
evidencing or securing the indebtedness hereunder (including, without
limitation, the "Security Documents" as defined in the Loan Agreement)
(hereinafter collectively referred to as the "LOAN DOCUMENTS") are hereby made a
part of this Note and are deemed incorporated herein in full. All capitalized
terms used herein, unless otherwise specifically defined in this Note, shall
have the meanings ascribed to them in the Loan Agreement.
The principal amount and accrued interest of this Note shall be due and
payable on the dates and in the manner hereinafter set forth:
(a) interest shall be due and payable monthly, in arrears, on
the first day of the month, commencing on the first day of the first month
after the funding of the initial Equipment Loan advanced hereunder, and
continuing until such time as the full principal balance, together with
all other amounts owing hereunder, shall have been paid in full;
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(b) principal shall be due and payable as follows:
(i) with respect to each Equipment Loan advanced hereunder,
principal installments equal to 1/60 of the original principal
amount of such Equipment Loan shall be due and payable monthly,
commencing on the first day of the first month after the funding of
such Equipment Loan and continuing regularly thereafter on the first
day of each succeeding month thereafter during the term of this
Note; and
(ii) with all remaining principal, together with any and all
other amounts due hereunder, being due and payable in full on the
last day of the Original Term, or on any earlier termination of the
Loan Agreement pursuant to SECTION 4 thereof.
This Note shall be subject to mandatory prepayment in accordance with the
provisions of SECTION 3.3 of the Loan Agreement.
All partial prepayments, whether mandatory or voluntary, shall be applied
to installments of principal in the inverse order of their maturities.
Upon or after the occurrence of an Event of Default under the Loan
Agreement, Lender shall have all of the rights and remedies set forth in SECTION
10 of the Loan Agreement, including the right to declare the then outstanding
principal balance and accrued interest hereof to be and the same shall thereupon
be immediately due and payable without notice to or demand upon Borrowers, all
of which Borrowers hereby expressly waive.
Notwithstanding anything to the contrary in this Note or otherwise, (i) if
at any time the amount of interest computed on the basis of the Applicable
Annual Rate or a Default Rate would exceed the amount of such interest computed
upon the basis of the maximum rate of interest permitted by applicable state or
federal law in effect from time to time hereafter (the "MAXIMUM LEGAL RATE"),
the interest payable under this Note shall be computed upon the basis of the
Maximum Legal Rate, but any subsequent reduction in such Applicable Annual Rate
or Default Rate, as applicable, shall not reduce such interest thereafter
payable hereunder below the amount computed on the basis of the Maximum Legal
Rate until the aggregate amount of such interest accrued and payable under this
Note equals the total amount of interest which would have accrued if such
interest had been at all times computed solely on the basis of the Applicable
Annual Rate or Default Rate, as applicable; and (ii) unless preempted by federal
law, the Applicable Annual Rate or Default Rate, as applicable, from time to
time in effect hereunder may not exceed the "indicated ceiling rate" from time
to time in effect under Tex. Rev. Civ. Stat. Ann. art. 5069-1.04(c) (Vernon
1987). If the applicable state or federal law is amended in the future to allow
a greater rate of interest to be charged under this Note than is presently
allowed by applicable state or federal law, then the limitation of interest
hereunder shall be increased to the maximum rate of interest allowed by
applicable state or federal law as amended, which increase shall be effective
hereunder on the effective date of such amendment, and all interest charges
owing to Lender by reason thereof shall be payable at the same date and in the
same manner as accrued interest on this Note is generally payable pursuant to
the provisions of this Note.
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No agreements, conditions, provisions or stipulation contained in this
Note, the Loan Agreement or any other instrument, document or agreement between
Borrowers and Lender or default of Borrowers, or the exercise by Lender of the
right to accelerate the payment of the maturity of principal and interest, or to
exercise any option whatsoever contained in this Note or any other Loan
Document, or the arising of any contingency whatsoever, shall entitle Lender to
contract for, charge, or receive, in any event, interest exceeding the Maximum
Legal Rate. In no event shall Borrowers be obligated to pay interest exceeding
such Maximum Legal Rate and all agreements, conditions or stipulations, if any,
which may in any event or contingency whatsoever operate to bind, obligate or
compel Borrowers to pay a rate of interest exceeding the Maximum Legal Rate,
shall be without binding force or effect, at law or in equity, to the extent
only of the excess of interest over such Maximum Legal Rate. In the event any
interest is contracted for, charged or received in excess of the Maximum Legal
Rate ("EXCESS INTEREST"), Borrowers acknowledge and stipulate that any such
contract, charge, or receipt shall be the result of an accident and bona fide
error, and that any Excess Interest received by Lender shall be applied, first,
to reduce the principal then unpaid hereunder; second, to reduce the other
Obligations; and third, returned to Borrowers, it being the intention of the
parties hereto not to enter at any time into a usurious or otherwise illegal
relationship. Borrowers recognize that, with fluctuations in the Applicable
Annual Rate and the Maximum Legal Rate, such a result could inadvertently occur.
By the execution of this Note, Borrowers covenant that (i) the credit or return
of any Excess Interest shall constitute the acceptance by Borrowers of such
Excess Interest, and (ii) Borrowers shall not seek or pursue any other remedy,
legal or equitable, against Lender, based in whole or in part upon contracting
for, charging or receiving of any interest in excess of the maximum authorized
by applicable law. For the purpose of determining whether or not any Excess
Interest has been contracted for, charged or received by Lender, all interest at
any time contracted for, charged or received by Lender in connection with this
Note shall be amortized, prorated, allocated and spread in equal parts during
the entire term of this Note.
Time is of the essence for this Note. Unless otherwise provided in the
Loan Agreement, each Borrower, for itself and its legal representatives,
successors and assigns, expressly waives, to the fullest extent permitted by
Applicable Law, presentment, demand, protest, notice of dishonor, notice of
non-payment, notice of maturity, notice of protest, presentment for the purpose
of accelerating maturity, diligence in collection, and the benefit of any
exemption or insolvency laws.
If this Note is collected by or through an attorney at law, then Borrowers
shall be obligated to pay, in addition the principal balance and accrued
interest hereof, reasonable attorney's fees and court costs, in addition to any
other charges for which Borrowers are responsible under the Loan Agreement and
other Loan Documents.
Wherever possible each provision of this Note shall be interpreted in such
a manner as to be effective and valid under applicable law, but if any provision
of this Note shall be prohibited or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or remaining provisions of this
Note. No delay or failure on the part of Lender in the exercise of any right or
remedy hereunder shall operate as a waiver thereof, nor as an acquiescence in
any default, nor shall any single or partial exercise by Lender of any right or
remedy preclude any other right or remedy. Lender, at its
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option, may enforce its rights against any collateral securing this Note without
enforcing its rights against Borrowers, any guarantor of the indebtedness
evidenced hereby or any other property or indebtedness due or to become due to
Borrowers. Borrowers agree that, without releasing or impairing Borrowers'
liability hereunder, Lender may at any time release, surrender, substitute or
exchange any collateral securing this Note and may at any time release any party
primarily or secondarily liable for the indebtedness evidenced by this Note.
This Note shall be governed by, and construed and enforced in accordance
with, the internal laws of the State of Texas.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Borrowers have caused this Note to be duly executed
and delivered in Dallas, Texas on the date first above written.
TECHNICAL PRODUCTS GROUP, INC.,
a Delaware corporation
By:/s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
MARION PROPERTIES, INC.,
a Delaware corporation
By:/s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
DELAND PROPERTIES, INC.,
a Delaware corporation
By:/s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
LINCOLN PROPERTIES, INC.,
a Delaware corporation
By:/s/GARRETT L. DOMINY
Garrett L. Dominy
Executive Vice President
5
EXHIBIT 10.19
COMMERCIAL NET BUILDING AND GROUND LEASE
OF
LINCOLN AIR PARK WEST
This lease agreement is executed in duplicate this ____ day of
__________ 198__, between Airport Authority of the City of Lincoln, Nebraska,
hereinafter referred to as "Authority", and Brunswick Corporation, a
corporation, hereinafter referred to as "Lessee".
WITNESSETH:
WHEREAS, in accordance with Article 5, Chapter 3 of the Statutes of
Nebraska, the City Council of the City of Lincoln, Nebraska, by appropriate
action in 1959, created an Airport Authority and transferred to the Authority
the right to use, occupy and manage certain real estate owned by or acquired in
the name of the City of Lincoln, including the land leased herein, located on
Lincoln Municipal Airport in an area denominated "Lincoln Air Park West"; and
WHEREAS, the Authority deems it advantageous to the support and its
operation of the Airport to lease to the Lessee that certain building and parcel
of land described herein; and
WHEREAS, the Lessee proposes to lease on a net basis from the Authority,
as herein provided, the ground area and building all as herein described.
NOW, THEREFORE, it is mutually agreed between the parties as follows:
1. Authority, in consideration of the rents to be paid by Lessee as
hereinafter set forth, and of the covenants and agreements hereinafter
stipulated to be mutually kept and performed by the parties hereto, does hereby
lease unto Lessee the following-described premises situated in Lincoln Air Park
West upon Lincoln Municipal Airport, Lincoln, Nebraska, to-wit:
Building No. 24 and adjacent sidewalks, drives and grounds as located on
a tract of land approximately 100 feet by 275 feet, as outlined in red
on the attached Exhibit "A".
together with the improvements and appurtenances thereunto
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belonging or in any wise appertaining, including the right of ingress and egress
thereto and therefrom at all times. Authority agrees to keep a street open from
the demised premises to a public street or highway.
2. Lessee shall have and hold said premises for the basic term of one
(1) year beginning the ____ day of ________, 198__ and ending the ____ day of
_________, 198__, unless sooner terminated as hereinafter provided.
3. Lessee shall pay Authority as rent for the premises herein leased
during the term, a total sum of ___________________ ($____________), payable as
follows:
The sum of ___________________ ($__________), in advance on the first
day of each month commencing ____________, 198__, and ending
___________, 198___.
4. All rentals due under this agreement shall be paid, without notice to
the Lessee, to the Airport Authority of the City of Lincoln, Nebraska. An
additional charge of fifteen percent (15%) per annum on unpaid items shall be
made by Authority from the first day of the month due, of any amounts due under
this agreement which shall remain unpaid for more than ten (10) days after due
date. Such charge shall not accrue upon any item about which there exists a bona
fide dispute.
5. Lessee will use the premises for the purpose of conducting the
business of storage, offices, and such other uses as may be incidental and
related thereto.
6. Except as herein otherwise specifically provided, this lease in every
sense shall be without cost to Authority for the development, maintenance and
improvement of the demised premises and Lessee shall, at its sole cost, except
as herein otherwise specifically provided, keep, maintain and repair the
entirety of the demised premises and all improvements and facilities placed
thereon in good order, condition and repair as may be required by ordinary and
reasonable use or fault on the part of the Lessee. By entry hereunder, Lessee
accepts the premises as being in good order, condition and repair and agrees
upon termination of this lease to surrender the premises and
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appurtenances to Authority in the same condition as received, reasonable use and
wear thereof and damage by fire, act of God, or the elements excepted.
7. Lessee shall have the right during the term of this lease to make
alterations, attach fixtures and erect signs in or upon the premises hereby
leased (provided any exterior signs shall be erected only after written approval
of plans by Authority) and all improvements, appliances, fixtures and all other
property of whatever nature made to or placed upon said premises by Lessee shall
be and remain the property of Lessee and may be removed prior to the termination
of this lease, provided only that Lessee shall restore the premises to the same
condition as existing at the time of entry under this lease, ordinary wear and
tear excepted.
8. Lessee, beginning on January 1, 19___, and during the full term or
until earlier termination of this lease, shall cause all improvements owned by
the Authority on the demised premises to be kept insured in an amount not less
than $50,500.00, thereof against perils of fire and extended coverage. Either
party may, at not less than one (1) year intervals, demand a reappraisal of the
actual cash value to be determined by mutual agreement but on failure to agree,
appraisal to be made by a third party selected by the parties. If there are
pressure vessels on the demised premises now or during the term of this lease,
Lessee will cause insurance to be placed to protect the property against the
hazards of the operation or location of this equipment on the premises. Lessee
shall purchase boiler and mechanical parts insurance. The proceeds of any such
insurance paid on account of the perils aforesaid will be used to defray the
costs of repairing the damage done to said improvement. If Lessee cancels the
lease or if Authority cancels the lease due to total destruction or destruction
of more than fifty percent (50%) of the value of the premises, such proceeds
need not be devoted to such repair, restoration, or reconstruction but may be
retained by Authority. Lessee agrees
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to pay the costs of such insurance in addition to the rents herein provided to
be paid by Lessee. The policy or policies will be in the name of the Lincoln
Airport Authority and Lessee as their interests may appear, and Authority agrees
to release Lessee from liability for damage covered under the abovementioned
policies. The policy shall contain a provision that Authority shall be notified
by the insurance company of such non-renewal, material change, modification or
cancellation of such insurance coverage by at least ten (10) days notice to
Authority and the policy shall contain a provision waiving any subrogation right
of the insurance company to recover damages against either Lessee or Authority
by reason of any sums paid by the insurance company under said insurance policy.
9. Lessee agrees to hold harmless and indemnify the Airport Authority
from any and all claims of liability for bodily injury or property damage
resulting from Lessee's occupation or use of the described premises. Lessee
agrees to obtain liability insurance in the amount of Three Hundred Thousand
Dollars ($300,000) including the Airport Authority as an additional insured.
Said insurance policy shall contain a provision to notify the Airport Authority
in writing thirty (30) days prior to any cancellation or reduction of coverage.
10. If the building leased hereunder is destroyed, damaged or taken by
fire or the elements or other casualty or by condemnation and the destruction or
taking is such that in the exercise of reasonable effort it cannot be repaired
or replaced by Authority within one hundred twenty (120) days or if it is such
as to exceed fifty percent (50%) of the value of the premises, Lessee or
Authority may cancel this lease by written notice mailed to the other party
thirty (30) or more days before the effective date of cancellation and at any
time within sixty (60) days after the damage or destruction. If the premises are
totally destroyed or taken, Lessee or Authority may cancel this lease by written
notice mailed to the other party within thirty (30) days of the destruction or
taking. If this lease is not
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cancelled as provided, Authority, at its expense, shall with diligence repair,
rebuild or restore the improvements as nearly as possible to the conditions
existing just prior to the destruction or damage. Lessee's rental during the
period from the date of fire or other casualty or taking to the date of complete
restoration shall be abated either in whole or pro rata in part, according to
the percentage of interference with the conduct of Lessee's business in the
premises.
11. Lessee shall pay for all water, sewer, gas, heat, light, power and
telephone service supplied to the said premises including standard metering
devices for the measurement of such services. In the event it shall become
necessary as a condition of service to make changes upon the premises or within
the building covered by this lease of any wiring, plumbing or similar
installations, Lessee will make such changes and installations, at its expense,
as directed and required by the utility organizations. It is further agreed that
Authority shall have the right, without cost to Lessee, to install and maintain
in, on or across the demised premises, sewer, water, gas, electric, steam and
telephone lines, electric substations, railroad trackage, or other installations
necessary to the operation of the Airport or to service required by other
tenants of the Authority; provided, however, that Authority shall carry out such
work and locate any above-ground structures and tracks in a manner so as not to
unreasonably interfere with Lessee's use of the premises.
12. Lessee agrees that all storage of equipment, materials or supplies
will be maintained within the building (temporary storage for loading or
unloading excepted) and Lessee will cause to be removed at its own expense all
junk, waste, garbage and rubbish and perform necessary mowing and snow removal
and agrees not to deposit the same on any part of the Airport except Lessee may
deposit the same temporarily on the demised premises in connection with
collection for removal.
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13. Lessee shall, in the use of the premises, comply with all applicable
requirements of all municipal, state and Federal authorities now in force or
which may hereafter be in force, and will observe all applicable municipal
ordinances, state and Federal statutes now in force or hereafter to be in force,
and Lessee and its tenants, employees, agents and servants shall obey such
reasonable rules and regulations as may from time to time be promulgated by
Authority or its authorized agents in charge of the airport to insure the safe
or orderly conduct of operations of the airport and traffic to, from and upon
the demised premises.
14. The Lessee for himself, his heirs, personal representatives,
successors in interest, and assigns, as a part of the consideration hereof, does
hereby covenant and agree as a covenant running with the land that in the event
facilities are constructed, maintained, or otherwise operated on the said
property described in this lease, for a purpose for which a Department of
Transportation program or activity is extended or for another purpose involving
the provision of similar services or benefits, the Lessee shall maintain and
operate such facilities and services in compliance with all other requirements
imposed pursuant to 49 CFR Part 21, Nondiscrimination in Federally Assisted
Programs of the Department of Transportation, and as said Regulations may be
amended.
15. Lessee for himself, his personal representatives, successors in
interest, and assigns, as a part of the consideration hereof, does hereby
covenant and agree as a covenant running with the land that: (1) no person on
the grounds of race, color, or national origin shall be excluded from
participation in, denied the benefits of, or be otherwise subjected to
discrimination in the use of said facilities, (2) that in the construction of
any improvements on, over, or under such land and the furnishing of services
thereon, no person on the grounds of race, color, or national origin shall be
excluded from participation in, denied the benefits of, or otherwise be
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subjected to discrimination, (3) that the Lessee shall use the premises in
compliance with all other requirements imposed by or pursuant to 49 CFR Part 21,
Nondiscrimination in Federally Assisted Programs of the Department of
Transportation, and as said Regulations may be amended.
16. Authority reserves the right (but shall not be obligated to Lessee)
to maintain and keep in repair the landing area of the airport and all
publicly-owned facilities of the airport, together with the right to direct and
control all activities of the Lessee in this regard.
17. Authority reserves the right further to develop or improve the
landing area and all publicly-owned air navigation facilities of the airport as
it sees fit, regardless of the desires or views of Lessee, and without
interference or hindrance.
18. Authority reserves the right to take any action it considers
necessary to protect the aerial approaches of the airport against obstruction,
together with the right to prevent Lessee from erecting, or permitting to be
erected, any building or other structure on the airport which in the opinion of
Authority would limit the usefulness of the airport or constitute a hazard to
aircraft.
19. During time of war or national emergency, Authority shall have the
right to enter into an agreement with the United States Government for military
or naval use of part or all of the landing area, the publicly-owned air
navigation facilities and/or other areas or facilities of the airport. If any
such agreement is executed, the provisions of this instrument, insofar as they
are inconsistent with the provisions of the agreement with the Government, shall
be suspended.
20. It is understood and agreed that the rights granted by this
agreement will not be exercised in such a way as to interfere with or adversely
affect the use, operation, maintenance or development of the airport.
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21. There is hereby reserved to Authority, its successors and assigns,
for the use and benefit of the public, a free and unrestricted right of flight
for the passage of aircraft in the airspace above the surface of the premises
herein conveyed, together with the right to cause in said airspace such noise as
may be inherent in the operation of aircraft, now known or hereafter used for
navigation of or flight in the air, using said airspace or landing at, taking
off from, or operating on or about the airport.
22 . This lease shall become subordinate to provisions of any existing
or future agreement between the Authority and the United States of America or
any agency thereof relative to the operation, development, or maintenance of the
airport, the execution of which has been or may be required as a condition
precedent to the expenditure of federal funds for the development of the
airport.
23. Lessee agrees to hold Authority harmless from any claim of damage or
injury to any person or to the goods, wares and merchandise of any person
arising from the use of the premises by Lessee or from failure of Lessee to keep
the premises in good condition and repair as herein provided.
24. Lessee shall not assign this lease, or any interest therein, and
shall not sublet the premises in whole or in part and any such assignment or
subletting shall be void and shall, at the option of Authority, terminate this
lease.
25. Authority shall have free access to the demised premises at all
reasonable times for the purpose of examining or inspecting the conditions
thereof relevant to any right or power reserved by Authority pursuant to the
terms of this Lease.
26. The failure of Lessee to surrender the demised premises on the date
provided herein for the termination of this lease term, and the subsequent
holding over by Lessee, with or without the consent of Authority, shall result
in the creation of a tenancy from month-to-month. This holding over shall not
result in a renewal or extension of this lease, all other terms and
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conditions of this lease shall remain in full force and effect during any
month-to-month tenancy hereunder, except rental rate, which may be increased by
Authority after notice to Lessee.
27. Authority may elect to terminate all of the rights of Lessee
hereunder by giving ten (10) days' written notice of termination to Lessee when
any of the following shall occur:
a. Institution of voluntary bankruptcy proceedings by Lessee.
b. Institution of involuntary bankruptcy proceedings in which
Lessee thereafter is adjudged a bankrupt.
c. Assignment for benefit of creditors of the interest of Lessee
under this lease.
d. Appointment of a receiver for the property or affairs of Lessee.
e. Failure or refusal to pay rent as per the terms of this
agreement.
f. Breach of covenants and terms of this agreement.
Any occurrence set forth above shall constitute a breach of this lease
by Lessee and Authority shall, in that event, be entitled to exercise all
remedies herein provided for a breach by Lessee, as well as any and all remedies
provided by law or in equity. It is further agreed that upon said breach and
after notice as provided above, Authority may re-enter the leased premises and
remove all property of Lessee therefrom.
28. All notices to be given pursuant to this lease shall be addressed to
the Airport Authority, Lincoln Municipal Airport, Lincoln, Nebraska, or to the
Lessee herein named at 4300 Industrial Avenue, Lincoln, Nebraska. Notice shall
be deemed to have been fully given if and when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid and deposited, postage prepaid, in a
post office regularly maintained by the United States Government.
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IN WITNESS WHEREOF, the parties have hereunto set their hands the day
and year first above written.
AIRPORT AUTHORITY OF THE
CITY OF LINCOLN, NEBRASKA,
ATTEST: Lessor
______________________________ BY:__________________________
Secretary Chairman
ATTEST: BRUNSWICK CORPORATION,
Lessee
______________________________ BY:__________________________
Secretary
APPROVED AS TO FORM
____________________________ of
Barney, Carter & Johnson, P.C.
Legal Counsel for the Airport
Authority of the City of Lincoln,
Nebraska
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LEASE EXTENSION AGREEMENT
NO. ____
THIS LEASE EXTENSION AGREEMENT is executed in duplicate on this day of
_________, between Airport Authority of the City of Lincoln, Nebraska,
hereinafter referred to as "Authority", and Lincoln Composites Division of
Technical Products Group, Inc., hereinafter referred to as "Lessee."
WITNESSETH:
WHEREAS, Lessee is in possession of Building No. ____ under a Lease
Agreement dated as of ___________, 197__, and Lease Extension Agreements No. 1,
2, 3, 4, 5, 6, 7 and 8, and an Assignment and Assumption of Lease Agreement, the
term of which expires on __________, 199___; and
WHEREAS, Lessee is desirous of extending this tenancy of Building No.
_____, the new addition and the said improved parking area for an additional
term of one (1) year from and after __________, 199___, and Authority is willing
to extend said Lease on the following terms and conditions.
NOW, THEREFORE, for valuable consideration, including the mutual
agreements herein set forth, the parties hereto agree as follows:
1. Lessee agrees to lease and is hereby granted a lease of the premises
known as Building No. 820, the new addition and the improved parking area
outlined in red on the attached Exhibit "A" for an additional term of one (1)
year beginning __________, 199__, and ending ____________, 1998.
2. Lessee shall pay Authority as rent for the premises herein leased at
the rate of _________________ ($_____) per square foot per year for ________
square feet for a total of the sum of ____________________________ ($__________)
per month, payable in advance on the first day of each month beginning
_________, 199___, and ending ____________, 199___.
<PAGE>
3. All of the provisions and conditions of the said Lease originally
effective _____________ and Lease Extension Agreements No. 1, 2, 3, 4, 5, 6, 7
and 8, and an Assignment and Assumption of Lease Agreement shall be applicable
to the extended one (1) year term except as modified herein and shall continue
in full force and effect during Lessee's extended term.
IN WITNESS WHEREOF, the parties have hereunto set their hands the day
and year first above written.
AIRPORT AUTHORITY OF THE
CITY OF LINCOLN, NEBRASKA,
ATTEST: Lessor
______________________________ BY:_________________________________
Secretary Chairman
LINCOLN COMPOSITES DIVISION OF
ATTEST: TECHNICAL PRODUCTS GROUP, INC.,
Lessee
______________________________ BY:_______________________________
Secretary
APPROVED AS TO FORM
____________________________ of
Johnson & Baker, P.C.
Legal Counsel for the Airport
Authority of the City of Lincoln,
Nebraska
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EXHIBIT 10.20
LEASE
THIS LEASE, dated for reference purposes as October 15, 1997, together with
Addendum No. 1 of same date, (collectively, "Lease") is made and entered into by
and between LPR PARTNERSHIP, a Nebraska general partnership, hereinafter called
"Lessor", and TECHNICAL PRODUCTS GROUP, INC., a Delaware corporation qualified
to do business in Nebraska, by and through its division, LINCOLN COMPOSITES,
hereinafter called "Lessee", WITNESSETH:
1. PREMISES LEASED: Subject to the terms and conditions herein
contained, the Lessor hereby leases to the Lessee the following described
premises, hereinafter called the "premises", to wit;
All that south portion (shown as all that portion which is not
cross-hatched on Exhibit A, attached hereto and incorporated herein by
this reference) of the building ("Building") known as C-3 at 4920
Superior St., Lincoln, Nebraska 68504,
comprising an area of 27,396 square feet. And being a part of a building
containing a total of 45,000 square feet. The "premises" may be enlarged, as set
forth in Addendum No. 1.
2. TERM: This lease shall become effective on December 1, 1997 and shall
continue, subject to the option set forth in Addendum No. 1 to extend the term,
for an initial term of seven months ending June 30, 1998, but automatically
renewing for successive six month terms thereafter until December 31, 2002,
unless: (i) Lessee has terminated the Lease by giving at least 60 days written
notice prior to the end of any term, which, in the case of the initial term,
shall be on or before May 1, 1998, or (ii) Lessor has terminated this Lease by
giving at least 60 days written notice prior to the end of any term and by
offering substantially similar space at a different location, but at the same
rental rate, or (iii) the term has been superseded by conversion to a full
Building lease, as contemplated by Section 1.1 B and C in Addendum No. 1, or
(iv) this Lease is sooner terminated as hereinafter provided. "Term", as used in
this Lease, shall refer to the initial term and to all extensions and renewals,
unless the specific context clearly has another meaning.
3. USE: The Lessee shall use and occupy the premises for a warehouse and
related activities and manufacturing and related activities and for no other
purpose. The Lessee shall not use the premises nor permit them to be used for
any unlawful business or purpose whatsoever.
4. RENTAL: The Lessee shall pay to the Lessor rent, computed as set
forth below, in monthly installments in advance on the first day of each month
throughout the term of this Lease. Rents shall be computed based on the square
footage comprising the premises. The following chart reflects the per square
foot rents payable for all terms, including initial term, renewal, and the
option terms (as described in Addendum No. 1):
<TABLE>
<CAPTION>
RENT/SG. FT. # OF MONTHS DATES MONTHLY RENT FOR 27,396 SG. FT.
------------ ----------- ----- -------------------------------
<S> <C> <C> <C> <C>
$3.65 1 - 31 12/1/97 - 6/30/2000 $8,332.95
$3.90 32-61 7/1/2000 - 12/31/2002 $8,903.70
$4.15 OPTION 1/L/2003 - 6/30/2005 ONLY APPLIES TO 45,000 SQ. FT.
62 - 91
$4.40 OPTION 7/L/2005 - 12/31/2007 ONLY APPLIES TO 45,000 SQ. FT.
92 - 121
</TABLE>
In the event Lessee shall take possession of the premises, or the term should
otherwise begin, on a day other than the first day of the month, then rent shall
be immediately paid for such fractional month prorated on the basis of a thirty
(30) day month and the term of the Lease shall commence on the 1st day of the
month next succeeding. PAYMENT OF RENT IN THE AMOUNT OF $8,332.95 FOR THE MONTH
OF DECEMBER, 1997, IS HEREBY ACKNOWLEDGED. If the monthly rental as established
herein is not received by Lessor on or before the 5th day of each calendar
month, Lessee agrees to pay the Lessor a late charge of five percent (5%), or
such amount as applicable law may allow, on each monthly rental received after
the 5th day of the month. In the event that the beginning of
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<PAGE>
the term of the Lease shall be subsequent to the effective date as set forth in
Paragraph 2, the term of this Lease shall not extend beyond the ending date
provided in Paragraph 2.
SECURITY DEPOSIT: No Security Deposit shall be paid in connection with
this Lease.
5. UTILITIES AND OTHER SERVICES: The Lessor shall not be required to
furnish to the Lessee any utilities or services of any kind.
6. REPAIR AND MAINTENANCE: The Lessee shall, at his sole expense, keep
the interior of the premises, including all windows, doors and glass, in as good
order and repair as it was upon the commencement of this lease, reasonable wear
and tear and damage by fire excepted. Lessee shall also maintain the premises in
a clean and orderly condition, and shall not cause the exterior of the building
or any part of the real property upon which the premises are situated to become
littered, disorderly or unsightly in any manner. The Lessor shall keep the
structural supports, exterior walls and roof of the building in good order and
repair and shall be responsible for the operation and maintenance of all common
areas and facilities as hereinafter provided. The Lessee shall also maintain in
good order and repair all equipment installed and used for the purpose of
heating and air conditioning of the leased premises wherever such equipment may
be located. On default of Lessee in making such repairs, replacements or
maintaining a clean and orderly condition, Lessor may, but shall not be required
to, make such repairs, replacements or cleaning or shall take other necessary
action for Lessee's account, and the expense thereof shall be payable by Lessee
to Lessor within ten days after written notice thereof. Any damage caused or
repairs necessitated with respect to the leased premises or the building and
real property of which the leased premises are a part, by excessive wear and
tear resulting from the operation of the business of Lessee, or from willful or
negligent acts on the part of Lessee, its employees, agents, invitees or
contractors, shall be the responsibility of Lessee and Lessee shall reimburse
Lessor for any expense incurred in connection therewith.
7. LESSEE'S PROPORTIONATE SHARE OF COSTS OF COMMON AREAS AND FACILITIES:
In addition to the rental payable pursuant to Paragraph 4 hereof, the Lessee
shall pay to the Lessor upon demand a proportionate share of the cost of
operating and maintaining all common areas and facilities, including without
limitation all parking areas, access roads, sidewalks, landscaped space and
other space used in common or available for use in common by the Lessee or his
customers, employees, agents or other invitees. Operating and maintaining such
areas and facilities shall include without limitation exterior and parking area
lighting, cleaning, snow removal, line painting, care of grass, shrubs and
plants, payment of water and sewerage charges, maintenance, repair and
replacement of utility systems, and general maintenance of all areas and
facilities provided by the Lessor for the common use of the occupants of the
building. The term "proportionate share" as used in this paragraph or elsewhere
in this lease shall mean such proportionate part of the total costs to which
said share applies as the total square feet of floor area occupied by the Lessee
bears to the total square feet of rentable floor area in the building or
buildings associated with said common areas. Tenant's percentage share of
operating expenses is 60.88%, based upon 27,396 square feet of rented space
divided by 45,000, the total net rental space in the Building.
8. ADDITIONAL RENT: Lessee hereby covenants and agrees to pay the basic
rent hereby reserved as and when due, and also all sums of money, charges or
other amounts required to be paid by Lessee to Lessor or to another person under
this lease which charges or amounts shall be considered "rent" in addition to
the rent provided for herein.
9. USE OF PARKING FACILITIES: The Lessee and its employees and customers
shall have the nonexclusive right, in common with the Lessor and other tenants
of said building, to park automobiles in the parking area provided by the
Lessor, subject to such reasonable rules and regulations as the Lessor may from
time to time impose, including the designation of specific areas in which
automobiles of the Lessee and his employees must be parked.
10. CHARGES FOR UTILITIES: The Lessee shall pay all charges for gas,
electricity, light, heat, power, water and telephone used or supplied upon or in
connection with the premises and shall indemnify the Lessor against any
liability on account thereof. It is the intention that Lessee pay for all
utilities for the premises of any kind and, accordingly, Lessee shall pay its
proportionate share of any utility charge relating to or used in or at the
premises, but which is not separately metered thereto. For the initial three
months of the term, Acton Ltd., the tenant in the adjacent space in the
Building, shall pay utilities for the Building and bill Lessee herein for its
proportionate share.
11. CONDITION OF PREMISES: Except with respect to environmental
conditions that may exist on the premises including, but not limited to, soil
and groundwater contamination, the Lessee has examined the premises and is
satisfied with the "AS IS" physical condition thereof, including all equipment
and appurtenances, and his taking possession thereof shall be conclusive
evidence of his receipt thereof in good and satisfactory order and repair,
unless otherwise specified therein. Lessee acknowledges that no representation
as to the condition or repair of the premises has been made by or on behalf of
the Lessor, except as herein
2
<PAGE>
expressed, and likewise acknowledges that no representation as to the condition
or repair of the premises has been made by or on behalf of the Lessor, except as
herein expressed, and likewise acknowledges that no agreement or promise to
decorate, alter, repair or improve the premises including all equipment and
appurtenances, either before or after the execution hereof, has been made by or
on behalf of the Lessor, except as stated herein. Except with respect to
environmental conditions that may exist on the premises including, but not
limited to, soil and groundwater contamination, the occupancy by Lessee of the
leased premises shall constitute an acknowledgment by Lessee that the leased
premises are in the condition called for by this Lease and that Lessor has
performed all of the Lessor's work with respect thereto and that all
construction and/or remodeling required in accordance with the terms of this
Lease have been fully and satisfactorily completed in accordance with the terms
hereof Lessee shall have the right, but not the obligation, to conduct
environmental investigations on the premises including, but not limited to, soil
arid/or groundwater sampling at any time during the initial term or extension of
the Lease.
12. RESTRICTIONS ON ASSIGNMENT, SUBLETTING AND USE:
12.1 ASSIGNMENT AND SUBLETTING. Lessee agrees not to assign or in
any manner transfer this Lease or any estate or interest therein without the
previous written consent of Lessor which consent should not be unreasonably
withheld; and, not to sublet the premises or any part or parts thereof or allow
anyone to come in with, through or under him without like consent. Any change in
control of Lessee shall be deemed a transfer, which will require prior written
consent of Lessor. Consent by the Lessor to one assignment of this Lease or to
one subletting or to any other occupancy of said premises shall not operate to
exhaust the Lessor's right hereunder.
12.2 USE. Lessee shall not use or permit the premises to be used
for any purpose other than as above stated, nor keep or store in or about the
premises anything which will increase the rate of insurance on the building, nor
permit any change in occupancy or any transfer of this Lease by operation of law
or otherwise, nor make any alterations, additions or improvements, without the
written consent of the Lessor first obtained. Lessee will not invalidate any
policies of insurance now or hereafter in force with respect to said building
and will pay all extra insurance premiums if any, required on account of extra
risk caused by the Lessee's use of the premises. Any construction, remodeling,
additions, improvements or fixtures, except movable office furniture and trade
fixtures, shall be made or installed by the Lessee upon the premises only after
the Lessor has given written consent hereto, and shall become the property of
the Lessor, and shall remain and be surrendered in good condition with the
premises as a part thereof at the termination of this Lease, by lapse of time or
otherwise. If Lessor is required in its sole discretion to make alterations or
improvements to the premises as a result of the nature of Lessee's business,
whether to comply with the provisions of Paragraph 12 or otherwise, Lessee shall
bear the cost thereof. Lessee agrees to pay promptly for any work done or
material furnished in or about the premises and not to suffer or permit any lien
to attach to the premises and Lessee further agrees to cause any such lien or
any claims therefor to be released promptly; provided, however, that in the
event Lessee contests any such claim, Lessee agrees to indemnify and secure
Lessor to Lessor's satisfaction. Notice is hereby given that no mechanic's or
materialmen's or other liens sought to be taken or vested on the premises or the
building of which the premises is a part shall in any manner affect the right,
title or interest of the Lessor therein, and that Lessee shall have no authority
from Lessor to permit or create any such lien. No Items of any kind shall be
stored or left for any period of time outside of the confines of the leased
premises without the prior written consent of Lessor. Lessee shall maintain a
constant temperature of no less than 35 degrees Fahrenheit in the leased
premises.
13. COMPLIANCE WITH LAW: The Lessee shall accomplish any construction or
remodeling with respect to the leased premises (including any plans relating
thereto), and shall keep the premises and operate his business therein, in a
manner which shall be in material compliance with all applicable laws,
ordinances, rules and regulations of the city, county, state and federal
government and any department thereof, will not permit the premises to be used
for any unlawful purpose, and will protect the Lessor and save Lessor and the
premises harmless from any and all fines and penalties that may result from or
be due to any infractions of or non-compliance with such laws, ordinances, rules
and regulations, except where such fines or penalties relate to conditions
existing on the premises prior to the effective date of this Lease.
13.1 USE OF HAZARDOUS MATERIALS. Lessee shall not allow
non-controlled release of hazardous materials as defined by the Environmental
Protection Agencies of the State or Federal Governments. Lessee shall keep the
premises in material compliance with any and all federal, state and local laws,
ordinances and regulations relating to industrial hygiene or to environmental
conditions on the premises.
13.2 INDEMNIFICATION. Lessee hereby agrees to indemnify and hold
harmless Lessor and any successors to Lessor's interest, from and against any
and all claims, damages and liabilities arising in connection with the Lessee's
presence, use, storage, disposal or transport of any hazardous materials on,
from or about the premises or the property on which the premises are located,
from and after the date of this Lease. Lessor hereby agrees to indemnify and
hold harmless Lessee from and against
3
<PAGE>
any and all claims, damages and liabilities arising in connection with the use,
storage, disposal or transport of any hazardous materials on, from or about the
premises or the property on which the premises are located prior to the date of
this Lease or after the date of this Lease if unrelated to Lessee's use,
storage, disposal or transport of any hazardous materials. The indemnification
obligations set forth in this paragraph shall survive the termination or
expiration of this Lease.
13.3 NOTICE. Should Lessor or Lessee, during the term of this
Lease, become aware of any material non-compliance with any federal, state or
local laws, ordinances or regulations relating to industrial hygiene or to
environmental conditions on the premises, it shall immediately notify the other
party. The responsible party shall promptly take steps necessary to achieve
material compliance with such laws, ordinances or regulation.
14. TERMINATION PRIVILEGES UPON DAMAGE BY FIRE OR OTHER CASUALTY: In
case the premises, or any part thereof, "I at any time be destroyed or damaged
by fire or other casualty, without the fault of the Lessee, so that the same
shall be unfit for use or occupancy, then the rent hereby reserved, or a fair
and just proportion thereof, according to the nature and extent of the damage
sustained in loss of use or occupancy, shall be suspended, cease to be payable
and so continue until the premises shall be rebuilt or made fit for use and
occupancy. If such damage to the premises or to the building in which the
premises are situated is to the extent of fifty percent (50%) or more, or, if
the premises have been damaged to the extent that they can no longer be utilized
as an integrated whole, then this Lease may be terminated at the election of the
Lessee or Lessor, notice of which election, if exercised, shall be given in
writing within forty-five (45) days from the date of casualty. In the event that
the building containing the premises is totally destroyed or work to put the
premises in tenant able condition is not commenced within forty-five (45) days
from the time of such damage and continued thereafter, with reasonable
diligence, all things being considered, then this Lease may be terminated at the
election of the Lessee, notice of which election, if exercised, must be given in
writing within sixty (60) days from the date of casualty or at any time
thereafter during the period of repair if the work to put the premises in tenant
able condition is not being pursued with reasonable diligence.
15. PERSONAL PROPERTY AT RISK OF LESSEE: Except as provided in
paragraphs 13.2 and 30, all personal property in the premises shall be at the
risk of the Lessee only. Except as provided in paragraphs 13.2 and 30, the
Lessor shall not be or become liable for any damage to such personal property,
to the premises or to Lessee or any other persons or property as a result of
water leakage, sewerage, electric failure, gas or odors or for any damage
whatsoever done or occasioned by or from any plumbing, gas, water or other pipes
or any fixtures, equipment, wiring or appurtenances whatsoever, or for any
damage caused by water, snow or ice being or coming upon the premises, or for
any damage arising from any act or neglect of other tenants, occupants or
employees of the building in which the premises are situated or arising by
reason of the use of, or any defect in, said building or any of the fixtures,
equipment, wiring or appurtenances therein, or by the act or neglect of any
other person or caused in any other manner whatsoever.
16. INSURANCE PROVIDED BY LESSEE: During the term of this lease, the
Lessee shall, at his own expense and with a company satisfactory to Lessor,
provide and maintain in full force and effect an insurance policy or policies
protecting the Lessor and Lessee and their officers and employees against any
loss, liability or expense from personal injury, death, property damage or
otherwise arising or occurring upon or in connection with the premises or by
reason of the Lessee's operations upon or occupancy of the premises. The Lessor
shall be an additional insured under such policy or policies. Such insurance
shall be written by responsible insurance companies satisfactory to Lessor and
shall be in an amount not less than $500,000 for injuries to any one person, not
less than $1,000,000 for injuries to more than one person arising out of any one
accident or occurrence, and not less than $100,000 for damage to property. All
such policies shall contain endorsements waiving the insurer's rights of
subrogation against Lessor for any reason. Certificates of insurance showing
compliance with the foregoing requirements shall be furnished by the Lessee to
the Lessor. Such certificates shall state that policies will not be canceled nor
altered without at least ten (10) days prior written notice to the Lessor.
17. [Intentionally left blank.]
18. CONDEMNATION OF PREMISES: In the event that the whole of the demised
premises shall be condemned or taken in anymanner for any public or any
quasi-public use, this lease shall terminate as of the date of vesting of title.
In the event that either a portion of the premises or the building of which the
premises are a part is condemned or taken by eminent domain proceedings so as to
render the premises substantially unusable, then in such event, Lessee shall
have the right to cancel and terminate this agreement as of the date of such
taking upon giving to Lessor notice in writing of such election within thirty
(30) days after the receipt by Lessee from Lessor of written notice of such
appropriation or taking. In the event that only a part of the premises shall be
so condemned or taken and such taking shall not render the premises
substantially unusable, then, effective as of the date of vesting of title, the
rent hereunder for such part shall be equitably abated and this lease shall
continue as to such part not so taken. In the event that only a part of the
building shall be so condemned or taken, then if substantial structural
alteration
4
<PAGE>
or reconstruction of the building shall, in the reasonable opinion of Lessor, be
necessary or appropriate as a result of such condemnation or taking (whether or
not the premises be affected), Lessor may, at its option, terminate this lease
and the term herein granted as of the date of such vesting of title by notifying
Lessee in writing within sixty (60) days following the vesting of title. Any
termination hereunder shall be without prejudice to the rights of either the
Lessor or the Lessee to recover compensation from such public authority for any
loss or damages caused by such taking. Neither Lessor nor Lessee shall have any
right in or to any award made to the other by such public authority; provided,
however, to the extent that Lessee is not allowed by local law to make a
recovery against such public authority, Lessor shall receive such condemnation
award and Lessee hereby expressly assigns to Lessor any and all right, title and
interest in and to such award.
19. LESSEE'S PAYMENT OF PORTION OF INCREASE IN TAXES AND INSURANCE:
During the term of this Lease and any extension or renewal thereof, the Lessee
shall annually pay, as an additional obligation hereunder, its proportionate
share (as hereinbefore defined) of any increase in the amount of the regular
real estate taxes becoming due and payable during each year with respect to the
land and building of which the premises form a part over and above the amount of
such taxes due and payable in the annual period from JANUARY 1, 1997 TO DECEMBER
31, 1997. Such additional payment shall be made within ten (10) working days
after notice of payment by the Lessor. A tax bill shall be sufficient evidence
of the amount of any such taxes. If this Lease or any extension or renewal
thereof shall terminate on a date other than the last day of the calendar year,
then such tax payment shall be computed as above provided on a prorate basis for
that portion of the calendar year which shall have elapsed up to and including
such termination date.
Lessor shall maintain at all times during the term of this Lease, fire
and extended coverage insurance on the building and improvements of which the
premises are a part in an amount adequate to cover the cost of replacement in
the event of loss. Lessee shall pay its proportionate share, as defined herein,
of any increases in the premium for such insurance over the premium presently
being paid FOR 1997, THE BASE YEAR; provided, however, that said increase is not
occasioned by some act or emission on the part of Lessor or by some act or
emission of one or more of the other tenants in the building. Such additional
payment shall be made within ten (10) days after demand therefor by Lessor. A
copy of an invoice from the insurance company shall be sufficient evidence of
the amount of any such increase.
20. LESSEE'S DEFAULT, BANKRUPTCY, ETC: Should a petition in bankruptcy
be filed by the Lessee, whether for reorganization, rehabilitation or otherwise,
or should the Lessee be adjudged bankrupt or insolvent by any court, or should a
trustee or receiver in bankruptcy or a receiver of any property of the Lessee by
appointed in any suit or preceding by or against the Lessee, this Lease shall
automatically terminate unless the lessor shall waive such termination provision
in writing delivered to the Lessee within fifteen days after the date when
Lessor has received notice of such occurrence. Should default be made by the
Lessee in the payment of rental herein reserved, or any part thereof or any
other payments provided herein to be made, when and as herein provided; or
should Lessee make default in performing, fulfilling, keeping or observing any
of the Lessee's other covenants, conditions, provisions or agreements herein
contained after 30 days notice from the Lessor, or should the premises become
vacant or abandoned, or should this Lease by operation of law pass to any person
other than the Lessee, or should the leasehold interest be levied upon under
execution, then and in any of such events, the Lessor may, if the Lessor so
desires without demand or notice to the Lessee or any other person, at once
declare this Lease terminated and reenter the premises without a formal notice
or demand and hold and enjoy the same thence forth as if this Lease had riot
been made, without prejudice, however, to any right of action or remedy of the
Lessor in respect to any breach by the Lessee of any of the covenants herein
contained, including, but not limited to, all of those remedies set forth
hereinafter. Should any of the events hereinbefore specified occur, whether or
not Lessor has elected to terminate this Lease as provided herein, the Lessor
shall nevertheless have and is hereby given the right to reenter the premises,
with legal process, and to remove the Lessee's signs and all property and
effects of the Lessee or other occupants of said premises, and if the Lessor so
desires, to relet the premises or any part thereof upon such terms, to such
person or persons and for such period or periods as may seem proper to the
Lessor. In case of such reletting, the Lessee shall be liable to the Lessor for
the difference between the rents and payments herein reserved and agreed upon
for the residue of the entire stipulated term of this Lease and the net rent for
such residue of the term realized by the Lessor by such reletting, such net rent
to be determined by deducting from the entire rent received by Lessor from such
reletting the expenses of recovering possession, reletting, altering and
repairing the premises and collecting rent therefrom; and the Lessee hereby
agrees to pay such deficiency each month as the same may accrue, the Lessee to
pay to the Lessor, within five (5) days after the expiration of each month
during such residue of the term, the difference between the rent and payment for
said month as fixed by this Least and the net amount realized by the Lessor from
the premises during said month. At Lessor's option, and at any time after the
occurrence of an event of default as hereinbefore specified, whether or not the
Lessor has collected any additional rentals or monthly deficiencies after the
occurrence of such event of default, and whether or not the Lessor has elected
to terminate this Lease, the Lessor shall be entitled to recover from the
Lessee, and the Lessee shall pay to the Lessor, on demand, as and for liquidated
and agreed to final damages for the Lessee's default, an amount equal to the
difference between the rent and additional rent reserved hereunder for the
unexpired portion of the Lease term and the then fair and reasonable rental
value of the leased property for the same period.
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In the computation of such damages, the difference between any installment of
rent becoming due hereunder after the date of termination and the fair and
reasonable rental value of the leased property for the period for which such
installment was payable shall be discounted to the date of termination at the
rate of four percent (4%) per annum. If the premises or any part thereof is
relet by the Lessor for the unexpired term of this Lease, or any part thereof,
before presentation of proof of such liquidated damages to any court,
commission, or tribunal, the amount of rent reserved upon such reletting shall
be deemed prima facie to be the fair and reasonable rental value for the part of
the whole of the leased premises so relet during the term of the reletting
period.
21. ADDITIONAL PAYMENTS: All taxes, insurance premiums, costs and
expenses which the Lessee assumes or agrees to pay hereunder shall constitute
contractual obligations of Lessee hereunder, and in the event of nonpayment the
Lessor shall have all of the rights and remedies herein provided for in the case
of nonpayment of rent or breach of condition, and may consolidate such
obligations or pursue remedies individually.
22. RULES AND REGULATIONS: The Lessee shall materially comply with all
such reasonable rules and regulations as do not conflict with the provisions of
the lease and as Lessor may establish uniformly through the building from time
to time provided that Lessee is notified in writing thereof.
23. SIGNS AND OTHER IDENTIFICATION: Except as required by federal, state
or local laws, regulations or ordinances, Lessee shall not place or erect any
signs or identifying marks, insignia or advertising on or about the leased
premises or the building or real property of which the leased premises are a
part except in conformity with rules and regulations established in that regard
under Paragraph 22, or in the absence of such rules and regulations, in
conformity with the sign or identification currently being provided by Lessor
for other tenants in the subject building. Any sign or identification provided
by Lessor shall be at Lessee's expense. In the event Lessee shall place or
caused to be placed any sign, identifying marks, trade mark, insignia or
advertising on or about the leased premises or the building or real property of
which the leased premises are a part, and if the same do not comply with the
terms and provisions of this Paragraph, Lessor shall have the right and power to
remove the same at Lessee's expense. Any damage caused to the leased premises or
the building as a result of the installation of such non-conforming item, or the
subsequent removal thereof by Lessor, shall be the responsibility and obligation
of Lessee and Lessee shall immediately reimburse Lessor in an amount sufficient
to repair such damage. In the event Lessee shall desire to use any sign or
identification other than the sign or identification currently being provided by
the Lessor or not in conform with said rules and regulations, Lessee shall first
receive written consent from Lessor before placing or erecting any signs or
other identification or advertising and the same shall be purchased from and
installed by Lessor at Lessee's expense.
24. SUBORDINATION OF LEASE TO MORTGAGES: This lease shall be subject and
subordinate at all times to the lien of existing mortgages and of mortgages
which hereafter may be made a lien on the premises. Although no instrument or
act on the part of the Lessee shall be necessary to effectuate such
subordination, the Lessee will nevertheless execute and deliver such further
instruments subordinating this lease to the lien of any such mortgages as may be
desired by the mortgagee. The Lessee hereby irrevocably appoints the Lessor his
attorney-in-fact to execute and deliver any such instrument for the Lessee.
Provided, however, and notwithstanding the foregoing provisions hereof, upon
foreclosure of the mortgage with the mortgagee succeeding to the rights of the
Lessor, the Lessee shall, at the option of said mortgagee, attorn to the
mortgagee as follows:
(a) Lessee shall be bound to the mortgagee under all of the terms of the
lease for the balance of the term hereof remaining with the same force and
effect as if the mortgagee were the Lessor under the lease, and Lessee hereby
attorn to the mortgagee as its Landlord, such adornment to be effective and
self-operative, without the execution of further instrument on the part of
either of the parties hereto, and immediately upon the mortgagee succeeding to
the interest of Lessor under this lease and having given written notice of the
same to Lessee. The respective rights and obligations of Lessee and of the
mortgagee upon such adornment shall to the extent of the remaining term of the
lease be the same as now set.
(b) The mortgagee shall be bound to the Lessee under all of the terms of
this lease, and the Lessee shall, from and after such event, have the same
remedies against the mortgagee for the breach of an agreement contained in this
lease that the Lessee might have had under lease against, the Lessor hereunder.
In no event, however, shall the mortgagee be liable for any act or omission of
any prior Lessor, be subject to any offsets or defenses which Lessee might have
against any prior Lessor, or be bound by any rent or additional rent which the
Lessee might have paid to any prior Lessor for more than the current month.
25. SURRENDER INVALID UNLESS WRITTEN: No surrender of the premises for
the remainder of the term hereunder shall be binding upon the Lessor unless
accepted by the Lessor in writing. Without limiting the generality of the
foregoing, it is agreed that the receipt or acceptance of the keys to the
premises by the Lessor shall not constitute an acceptance of a surrender of the
premises.
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26. HOLDING OVER: If the Lessee shall remain in possession of the
premises after the expiration of either the original term of this lease or any
extended term, such possession shall be as a month-to-month tenant only. During
such month-to-month tenancy, unless otherwise agreed in writing by Lessor, rent
shall be payable at one and one-half times the rate as that in effect during the
last month of the preceding term, and the provisions of this Lease shall
otherwise be applicable.
27. WAIVER: One or more waivers of any provision of this lease by the
Lessor shall not be construed as a waiver of a subsequent breach of the same
provision, and the Lessor's consent or approval to or of any act by the Lessee
requiring such consent or approval shall not be deemed to waive or render
unnecessary the Lessor's consent or approval to or of any subsequent similar act
by the Lessee.
28. NOTICES: Any and all notices or demands required or permitted to be
given hereunder shall be deemed to be properly served if sent by registered or
certified mail, postage prepaid, or by facsimile, with transmission confirmed,
addressed to the Lessor at
LPR PARTNERSHIP
5101 Central Park Drive
Lincoln, Nebraska 68504
Phone 402-467-1234
FAX 402-467-5 101
or addressed to the Lessee at TECHNICAL PRODUCTS GROUP, INC.
LINCOLN COMPOSITES DIVISION
4300 Industrial Ave.
Lincoln, Nebraska 68524
Phone 402-464-8211
FAX 402-464-2247
or at such other address or addresses as either party may hereafter designate in
writing to the other. Any notice or demand so mailed shall be effective for all
purposes at the time of deposit thereof in the United States mail.
Lessee is hereby notified that certain partners of LPR Partnership,
the Lessor herein, hold Nebraska Real Estate licenses.
29. NO OTHER AGREEMENTS: This Lease contains the entire understanding
and agreement of the parties, supersedes all prior understandings and agreements
and cannot be revised, adjusted or modified unless in writing signed by the
party against whom the same is to be enforced.
30. INDEMNIFICATION: Except for claims arising out of acts caused by
the affirmative negligence of Lessor or its representatives, Lessee shall
indemnify and defend Lessor and the leased property, at Lessee's expense,
against all claims, expenses and liabilities, including but not limited to
reasonable attorneys' fees incurred in successfully pursuing any of Lessor's
legal remedies hereunder or in defending itself in legal proceedings of any
kind, arising from (a) failure of Lessee to perform any covenant required to be
performed by Lessee hereunder; (b) any accident, injury or damage which shall
happen in or about the leased premises, or resulting from the condition,
maintenance or operation of the leased premises; (c) failure to comply with any
requirements of any governmental authority; (d) any construction lien or
security agreement filed against the leased premises or any equipment or
material therein; and (e) any act or negligence of Lessee, or its agents,
contractors, employees or licensees.
Except for claims arising out of acts caused by the affirmative
negligence of Lessee or its representatives, Lessor shall indemnify and defend
Lessee and the leased property, at Lessor's expense, against all claims,
expenses and liabilities, including but not limited to reasonable attorneys'
fees incurred in successfully pursuing any of Lessee's legal remedies hereunder
or in defending itself in legal proceedings of any kind, arising from (a)
failure of Lessor to perform any covenant required to be performed by Lessor
hereunder; (b) any accident, injury or damage which shall happen in or about the
leased premises, or resulting from the condition, maintenance or operation of
the leased premises; (c) failure to comply with any requirements of any
governmental authority; (d) any construction lien or security agreement filed
against the leased premises or any equipment or material therein; and (e) any
act or negligence of Lessor, or its agents, contractors, employees or licensees.
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31. EXPLANATORY PROVISIONS: The provisions of this lease shall be
binding upon, inure to the benefit of and apply to the respective heirs,
executors, administrators, successors and assigns of the parties hereto. The
masculine pronoun, wherever used, shall include the feminine and neuter, and the
singular shall include the plural. Headings are given to the paragraphs of this
lease solely as a convenience to facilitate reference and shall not be deemed
material or relevant to the construction of the lease or any provision thereof.
32. ADDITIONAL PROVISIONS:
See Addendum No. 1, attached hereto, and incorporated herein.
IN WITNESS WHEREOF, the parties hereto have executed this lease on the dates set
forth below.
LESSOR
LPR PARTNERSHIP
________________________________________ By:________________________________
Witness Donald W. Linscott, Managing
Partner
Date:______________
LESSEE
TECHNICAL PRODUCTS GROUP, INC.
By: LINCOLN COMPOSITES DIVISION
________________________________________ By:________________________________
Witness James E. Fuller, President
Date:______________
APPROVED:
________________________________________ By:_______________________________
Witness Harley Bair
Date:___________________
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ADDENDUM NO. 1 TO LEASE
THIS ADDENDUM NO. 1 TO LEASE, dated October 15, 1997 for reference purposes,
forms a part of that certain Lease of same date, made and entered by and between
LPR PARTNERSHIP, a Nebraska general partnership, hereinafter called "Lessor",
and TECHNICAL PRODUCTS GROUP, INC., a Delaware corporation qualified to do
business in Nebraska, by and through its division, LINCOLN COMPOSITES,
hereinafter called "Lessee". All defined terms in the Lease shall have the same
meanings in this Addendum. Except as modified by this Addendum, all terms and
conditions of the Lease shall remain the same. The Lease is hereby amended as
follows.
1. OPTIONS TO ENLARGE THE PREMISES:
1.1 OPTIONS. Lessee shall have the following mutually exclusive
options, providing they are timely exercised:
A. RIGHT OF FIRST REFUSAL. For so long as Lessee continues
to lease the initial premises, Lessee shall have the right
of first refusal to lease the balance of the Building,
shown as the cross-hatched portions of Exhibit "A" and
comprising a total of 17,604 sq. ft., exercisable for a
period of 48 hours following Lessor's presentation to
Lessee of a bona fide third party offer to Lease the
balance of the Building or portion thereof, on the same
terms and conditions as such third party offer. This right
shall apply to terms beginning on or after March 1, 1998.
B. BUILDING LEASE. Lessee may lease the entire balance,
comprising 17,604 sq. ft., of the Building, for a total of
45,000 sq. ft., for a term commencing April 1, 1998, and
expiring December 31, 1998 unless Lessee has provided
Lessor written notice, on or before November 1, 1998, of
Lessee's renewal of the term for an additional six months
through June 30, 1999. Except with respect to
environmental conditions that may exist on the premises,
including but not limited to, soil and groundwater
contamination, Lessee shall accept the premises "AS IS",
with no duty on the part of the Lessor to make
modifications. With 90 days prior written notice to
Lessor, Lessee may convert this "Building Lease" to a
long-term manufacturing lease, as described in C, below.
C. MANUFACTURING LEASE. Lessee may convert the Lease to a
long-term manufacturing lease of the entire 45,000 sq. ft.
Building, for a term of five years from the effective date
of the converted lease following exercise of this option.
Lessor shall agree to make modifications (as specified by
Lessee and approved by Lessor) at a cost not to exceed
$200,000, which shall be completed by the beginning of the
term. The cost of modifications shall be payable as set
forth in Section 3, below. The beginning of the term shall
be April 1, 1998, unless Lessee is converting this Lease
from a Building Lease, as described in B above. in which
event, the commencement of the term shall be 90 days from
the date Lessor has received notice of such conversion. If
Lessee exercises this option, Lessee may, at its
discretion request Lessor to perform a Phase I and/or
Phase II environmental site assessment of the leased
premises. Upon such request, Lessor shall engage a
mutually agreeable third-party consulting firm, Lessee's
approval of such consulting firm not to be unreasonable
withheld, to conduct the Phase I and/or Phase II
environmental site assessments. The consulting firm shall
perform all investigations of the premises in compliance
with applicable federal, state or local laws.
1.2 EXERCISE DEADLINE. If exercised by notice received by Lessor
ON OR BEFORE JANUARY 15, 1998, Lessee shall have the absolute
right to elect any of the three options set forth in 1.1 above.
Thereafter, Lessee shall have the rights set forth in 1.1 above
only in the sole option and discretion of the Lessor.
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1.3 COVENANT OF FURTHER ASSURANCES. In the event any of the
Section 1.1 options are exercised, the parties agree to take such
further actions and sign such further documents as are necessary
and appropriate in order to effectuate the changes.
2. TERM.
2.1 OPTION TO EXTEND TERM. Lessee shall have the option to extend
the term of the Lease for an additional five year term beyond
expiration of the converted term contemplated by Section 1.1 C.,
above, exercisable by written notice to Lessor at least one
hundred twenty (120) days prior to the expiration of the existing
term. Such extension shall be on all the terms and conditions as
are contained in the Lease, and on the further condition that the
premises shall comprise the entire Building for the extension
term. The rents payable for such extension term shall be at those
rates set forth in Section 4 of the Lease, for the applicable
time periods.
2.2 LIMITATION ON LESSOR'S RIGHT TO REQUIRE LESSEE TO MOVE.
Lessor may not require Lessee to move, as contemplated in Section
2 (ii) of the Lease, prior to January 1, 1999.
3. LONG TERM LEASE MODIFICATIONS TO BUILDING. In the event Lessee
exercises its option to convert the Lease to a long-tem manufacturing Lease as
described in 1.1 C, above, Lessor agrees to make modifications to the Building
at a cost not to exceed $200,000. The modifications shall be in the nature of
new electrical, new air conditioning, additional lighting, and the like, shall
be to Lessee's specifications, and shall comply with all applicable laws,
regulations, and building codes. Lessee acknowledges that Lessor will, if
requested by Lessee, finance such modifications with a commercial lending
institution (probably Havelock Bank) ("Lender") under commercially reasonable
terms. Lessor shall arrange, on behalf of Lessee, to borrow funds to cover the
modifications, in exchange for Lessee's agreement, as set forth herein, to
provide for Lessee's repayment to Lessor of the borrowed funds and to provide
for Lessee's guarantee of the Note evidencing such loan ("Note"). The Note shall
be nonrecourse against the Lessor, and shall be repayable by Lessor to Lender
over the term of the Lease. Although Lessee has agreed to guarantee the Note,
this Addendum is for the purpose of clarifying the intent of the parties that
the Note be repaid by Lessee paying additional rent in amounts equivalent to the
Note payments, and Lessor applying such additional rent payments to Note
payments.
3.1 ADDITIONAL RENT. Lessee hereby agrees to pay to Lessor, as
additional rent, the entire sum represented by the Note described
above, together with interest thereon. Such sum shall be payable
in equal monthly installments sufficient to amortize the entire
Note over the remaining term of the Lease, each month at the same
time as base rent, during the term of the Lease, commencing the
same date as conversion to a manufacturing lease, as described in
Section 1.1 C above. The monody payments shall be at a level
amount, identical to the monthly payments under the Note,
determined in accordance with the interest rate adjustments
described in the Note.
3.2. LESSOR TO PAY NOTE. Lessor hereby agrees that it shall, upon
receipt from Lessee of the installments of the Additional Rent
amount described in paragraph 3.1 above, pay the Note in
accordance with its terms.
3.3. ACCELERATION. Notwithstanding anything in the Lease to the
contrary, in the event: (i) of early termination of the Lease
prior to the expiration of the initial term contemplated by the
Note, (ii) Lessee vacates the premises, (iii) Lessee assigns the
Lease or subleases the premises, or (iv) of Lessee's default
under the Lease, then Lessor may, at its option, declare the
entire unpaid balance of Additional Rent described above, to be
due and payable immediately.
4. MODIFICATIONS TO PREMISES.
4.1 MODIFICATIONS BY LESSEE. Lessee may, at Lessee's expense,
make such further modifications to the premises as are approved
in advance by Lessor. In seeking such approval, which shall not
be unreasonably withheld, Lessee shall provide Lessor with copies
of all plans and specifications for such modifications.
4.2 OVERHEAD DOORS. Lessee may, at Lessee's expense, modify (to
enlarge) the overhead doors on the west side of the Building, as
shown on Exhibit "A".
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4.3 Locks separating north from south portions of the Building.
The Building is presently used by a single user. Lessor will, at
Lessor's expense, provide locks to separate appropriately the
premises from the northern portion of the Building, which is
presently leased to Acton, Ltd. through February, 1998.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum No. 1 to
Lease on the dates set forth below.
LESSOR
LPR PARTNERSHIP
________________________________________ By:________________________________
Witness Donald W. Linscott, Managing
Partner
Date:_____________________
LESSEE
TECHNICAL PRODUCTS GROUP, INC.
By: LINCOLN COMPOSITES DIVISION
________________________________________ By:_______________________________
Witness James E. Fuller, President
Date:____________________________
3
EXHIBIT 10.21
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "AGREEMENT"), is
entered into as of November 1, 1997 (the "EFFECTIVE DATE"), by and between
ADVANCED TECHNICAL PRODUCTS, Inc., a Delaware corporation (the "COMPANY"), and
JAMES S. CARTER (the "EXECUTIVE").
R E C I T A L S:
WHEREAS, TPG Holdings, Inc., A Delaware Corporation ("TPG"), and the
Executive entered into that certain Employment Agreement dated June 1, 1997 (the
"EMPLOYMENT AGREEMENT");
WHEREAS, the terms of the Employment Agreement provided that it would
become effective only upon the merger (the "MERGER") of TPG with and into Lunn
Industries, Inc., a Delaware corporation ("LUNN"), with Lunn surviving under the
name "Advanced Technical Products, Inc.";
WHEREAS, the Merger was consummated on October 31, 1997;
WHEREAS, in accordance with the terms of the Merger, the Company, as the
surviving corporation, assumed all of the liabilities and obligations of TPG
under the Employment Agreement;
WHEREAS, the Company now desires to amend the Employment Agreement to
make certain technical changes to clarify the name of the Company and the
Effective Date and to specifically ratify and adopt the terms of the Employment
Agreement.
Accordingly, the parties agree as follows:
1. EMPLOYMENT DUTIES AND ACCEPTANCE.
1.1 EMPLOYMENT BY THE COMPANY AND DUTIES. The Company hereby
agrees to employ the Executive for a term commencing on the Effective Date and
expiring at the end of the day three (3) years from the Effective Date (such
date, or later date to which this Agreement is extended in accordance with the
terms hereof, the "TERMINATION DATE"), unless earlier terminated as provided in
Section 4 or unless extended as provided herein (the "Term"). The Term shall be
automatically extended commencing on the anniversary of the Effective Date and
on each anniversary of the Effective Date thereafter (such date and each
anniversary of such date being a "RENEWAL DATE"), so as to terminate three (3)
years from such Renewal Date, unless and until at least sixty (60) days prior to
a Renewal Date either party hereto gives written notice to the other that the
term should not be further extended after the next Renewal Date, in which event
the Termination Date shall be three (3) years following the Renewal Date
following such notice. During the Term, the Executive shall serve in the
capacity of Chairman of the Board, President and Chief Executive Officer of the
Company, and shall also serve in those offices and directorships of subsidiary
corporations or entities of the Company to which he may from time to time be
appointed or elected. During the Term, the Executive shall devote all reasonable
efforts and all of his business time and services to the Company, subject to the
direction of the Board of Directors of the Company (the "BOARD"). The Executive
shall not engage in any other business activities except for passive investments
in corporations or partnerships not engaged in the Company Business (as
hereinafter defined) pursuant to Section 3 hereof.
<PAGE>
1.2 ACCEPTANCE OF EMPLOYMENT BY THE EXECUTIVE. The Executive
hereby accepts such employment and shall render the services and perform the
duties described above.
2. COMPENSATION AND OTHER BENEFITS.
2.1 ANNUAL SALARY. The Company shall pay to the Executive an
annual salary at a rate of not less than two hundred sixty-five thousand and
no/100 dollars ($265,000.00) per year (the "ANNUAL SALARY"), subject to increase
at the sole discretion of the Board, provided, however, that the Annual Salary
shall be increased effective as of each Renewal Date of each year during the
Term at a minimum by a percentage equal to the percentage increase in the
Consumer Price Index (Income) for the previous fiscal year. The Annual Salary
shall be payable in accordance with the payroll policies of the Company as from
time to time in effect, but in no event less frequently than once each month,
less such deductions as shall be required to be withheld by applicable law and
regulations.
2.2 BONUSES. The Executive may receive, at the sole discretion of
the Board, an incentive bonus with respect to the fiscal years ending during the
Term (the "INCENTIVE BONUS"), provided that an Incentive Bonus, payable in
respect of a fiscal year, shall not exceed seventy-five percent (75%) of the
Annual Salary for such fiscal year.
2.3 VACATION POLICY. The Executive shall be entitled to a paid
vacation of four weeks during each year of the Term.
2.4 PARTICIPATION IN EMPLOYEE BENEFIT PLANS. The Company agrees
to permit the Executive during the Term, if and to the extent eligible, to
participate in any group life, hospitalization or disability insurance plan,
health program, pension plan, similar benefit plan or other so-called "fringe
benefits" of the Company (collectively, "BENEFITS") which may be available to
other senior executives of the Company on terms no less favorable to the
Executive than the terms offered to such other executives.
2.5 GENERAL BUSINESS EXPENSES. The Company shall pay or reimburse
the Executive for all expenses reasonably and necessarily incurred by the
Executive during the Term in the performance of the Executive's services under
this Agreement. Such payment shall be made upon presentation of such
documentation as the Company customarily requires of its senior executive
employees prior to making such payments or reimbursements.
3. NON-COMPETITION, CONFIDENTIALITY AND COMPANY PROPERTY.
3.1 COVENANTS AGAINST COMPETITION. The Executive acknowledges
that (i) the Company is currently engaged in the business of owning, managing
and operating manufacturing facilities in the aerospace and defense industries
(the "COMPANY BUSINESS"); (ii) his work for the Company will give him access to
trade secrets of and confidential information concerning the Company; and (iii)
the agreements and covenants contained in this Agreement are essential to
protect the business and goodwill of the Company. Accordingly, the Executive
covenants and agrees as follows:
3.1.1 NON-COMPETE. As an independent covenant, and in order
to enforce the provisions of Sections 3.1.3 and 3.1.5 hereof and the other
provisions of this Agreement, the Executive agrees that he shall not during the
Restricted Period (as hereinafter defined) anywhere within the continental
United States directly or indirectly (except in the Executive's capacity as an
officer of the Company), (i) engage or participate in the Company Business; (ii)
enter the employ of, or render any other services to, any
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person engaged in the Company Business except as permitted hereunder; or (iii)
become interested in any such person in any capacity, including, without
limitation, as an individual, partner, shareholder, lender, officer, director,
principal, agent or trustee except as permitted hereunder; provided, however,
that the Executive may own, directly or indirectly, solely as an investment,
securities of any person traded on any national securities exchange or listed on
the National Association of Securities Dealers Automated Quotation System if the
Executive is not a controlling person of, or a member of a group which controls,
such person and the Executive does not, directly or indirectly, own 5% or more
of any class of equity securities, or securities convertible into or exercisable
or exchangeable for 5% or more of any class of equity securities, of such
person. As used herein, the "RESTRICTED PERIOD" shall mean a period commencing
on the date hereof and terminating upon the first to occur of (a) the date on
which the Company terminates or is deemed to terminate the Executive's
employment without Cause (as hereinafter defined), (b) the date the Executive
terminates or is deemed to terminate his employment pursuant to Section 4.6
hereof or (c) the date of termination of this Agreement; provided, however, that
if the Company shall have terminated the Executive's employment for Cause and
such Cause in fact exists or if the Executive shall have terminated his
employment with the Company in breach of the terms of this Agreement, the
Restricted Period shall end two (2) years following the termination of the
Executive's employment hereunder.
3.1.2 CUSTOMERS. As an independent covenant, the Executive also
agrees to refrain during his employment by the Company, and in the event of the
termination of his employment for any reason, for one year thereafter, without
written permission from the Company, from diverting, taking, soliciting and/or
accepting on his own behalf or on the behalf of another person, firm, or
company, the business of any past or present customer of the Company, its
divisions, subsidiaries and/or other affiliated entities, or any identified
prospective or potential customer of the Company, its divisions, subsidiaries
and/or affiliated entities, whose identity became known to the Executive through
his employment by the Company.
3.1.3 CONFIDENTIAL INFORMATION.
3.1.3.1 The Executive acknowledges that the Company has
a legitimate and continuing proprietary interest in the protection of its
confidential information and that it has invested substantial sums and will
continue to invest substantial sums to develop, maintain and protect
confidential information. The Company agrees to provide the Executive access to
confidential information in conjunction with the Executive's duties, including,
without limitation, information of a technical and business nature regarding the
Company's past, current or anticipated business that may encompass financial
information, financial figures, trade secrets, customer lists, details of client
or consultant contracts, pricing policies, operational methods, marketing plans
or strategies, product development techniques or plans, business acquisition
plans, Company employee information, organizational charts, new personnel
acquisition plans, technical processes, designs and design projects, inventions
and research projects, ideas, discoveries, inventions, improvements, trade
secrets, design specifications, writings and other works of authorship. In
exchange, as an independent covenant, the Executive agrees not to make any
unauthorized use, publication, or disclosure, during or subsequent to his
employment by the Company, of any Intellectual Property of a confidential or
trade secret nature, generated or acquired by him during the course of his
employment, except to the extent that the disclosure of Intellectual Property
Information is necessary to fulfill his responsibilities as an employee of the
Company. The Executive understands that confidential matters and trade secrets
include information not generally known by or available to the public about or
belonging to the Company, its divisions, subsidiaries, and related affiliates,
or belonging to other companies to whom the Company, its divisions,
subsidiaries, and related affiliates, may have an obligation to maintain
information in confidence, and that authorization for public disclosure may only
be obtained through the Company's written consent.
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3.1.3.2 The Executive further agrees not to disclose to
the Company, or induce any personnel of the Company to use, any confidential
information, trade secret, or confidential material belonging to others.
3.1.3.3 The Executive agrees that the covenants set
forth in Sections 3.1.3.1 and 3.1.3.2 are independent covenants and indefinite
obligations binding upon the Executive both during and after the termination of
the Executive's relationship with the Company.
3.1.4 PROPERTY OF THE COMPANY. All memoranda, notes, lists,
records, engineering drawings, technical specifications and related documents
and other documents or papers (and all copies thereof) relating to the Company,
including such items stored in computer memories, microfiche or by any other
means, made or compiled by or on behalf of the Executive after the date hereof,
or made available to the Executive after the date hereof relating to the
Company, its affiliates or any entity which may hereafter become an affiliate
thereof, shall be the property of the Company, and shall be delivered to the
Company promptly upon the termination of the Executive's employment with the
Company or at any other time upon request; provided, however, that the
Executive's address books, diaries, chronological correspondence files and
rolodex files shall be deemed to be property of the Executive.
3.1.5 ORIGINAL MATERIAL. The Executive agrees that any
inventions, discoveries, improvements, ideas, concepts or original works of
authorship relating directly to the Company Business, including without
limitation information of a technical or business nature such as ideas,
discoveries, designs, inventions, improvements, trade secrets, know-how,
manufacturing processes, product formulae, design specifications, writings and
other works of authorship, computer programs, financial figures, marketing
plans, customer lists and data, business plans or methods and the like, which
relate in any manner to the actual or anticipated business or the actual or
anticipated areas of research and development of the Company and its divisions,
subsidiaries, affiliates, or related entities, whether or not protectable by
patent or copyright, that have been originated, developed or reduced to practice
by the Executive alone or jointly with others during the Executive's employment
with the Company shall be the property of and belong exclusively to the Company.
The Executive shall promptly and fully disclose to the Company the origination
or development by the Executive of any such material and shall provide the
Company with any information that it may reasonably request about such material.
Either during or subsequent to the Executive's employment, upon the request and
at the expense of the Company or its nominee, and for no remuneration in
addition to that due the Executive pursuant to his employment by the Company,
but at no expense to him, the Executive agrees to execute, acknowledge, and
deliver to the Company or its attorneys any and all instruments which, in the
judgment of the Company or its attorneys, may be necessary or desirable to
secure or maintain for the benefit of the Company adequate patent, copyright,
and other property rights in the United States and foreign countries with
respect to any such inventions, improvements, ideas, concepts, or original works
of authorship embraced within this Agreement.
3.1.6 EMPLOYEES OF THE COMPANY AND ITS AFFILIATES. As an
independent covenant, the Executive agrees to refrain during his employment by
the Company, and in the event of the termination of his employment for any
reason for a period of one year thereafter, from inducing or attempting to
influence any employee of the Company, its divisions, subsidiaries and/or
affiliated entities to terminate his employment.
3.1.7 COMPANY'S INTEREST. The Executive further agrees that
these covenants are made to protect the legitimate business interests of the
Company, including interests in the Company's property described in and pursuant
to Section 3.1.4 and Section 3.1.5, and not to restrict his mobility or to
prevent him from utilizing his general technical skills. The Executive
understands as a part of these
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covenants that the Company intends to exercise whatever legal recourse against
him for any breach of this Agreement and, in particular, for any breach of these
covenants.
3.2 RIGHTS AND REMEDIES UPON BREACH. If the Executive breaches,
or threatens to commit a breach of, any of the provisions contained in Section
3.1 of this Agreement (the "RESTRICTIVE COVENANTS"), the Company shall have the
following rights and remedies, each of which rights and remedies shall be
independent of the others and severally enforceable, and each of which is in
addition to, and not in lieu of, any other rights and remedies available to the
Company under law or in equity:
3.2.1 SPECIFIC PERFORMANCE. The right and remedy to
have the Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and that
money damages would not provide an adequate remedy to the Company.
3.2.2 ACCOUNTING. The right and remedy to require the
Executive to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits derived or received by the
Executive as the result of any action constituting a breach of the Restrictive
Covenants.
3.3 SEVERABILITY OF COVENANTS. The Executive acknowledges and
agrees that the Restrictive Covenants are reasonable and valid in duration and
geographical scope and in all other respects. If any court determines that any
of the Restrictive Covenants, or any part thereof, is invalid or unenforceable,
the remainder of the Restrictive Covenants shall not thereby be affected and
shall be given full effect without regard to the invalid portions.
3.4 COURT REVIEW. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographical scope of, or scope of activities restrained by, such
provision, such court shall have the power to reduce the duration or scope of
such provision, as the case may be, and, in its reduced form, such provision
shall then be enforceable.
3.5 ENFORCEABILITY IN JURISDICTIONS. The Company and the
Executive intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the geographical scope of
such Restrictive Covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants unenforceable by reason of the
breadth of such scope or otherwise, it is the intention of the Company that such
determination not bar or in any way affect the right of the Company to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of such Restrictive Covenants, as to breaches of such
Restrictive Covenants in such other respective jurisdictions, such Restrictive
Covenants as they relate to each jurisdiction being, for this purpose, severable
into diverse and independent covenants.
4. TERMINATION.
4.1 TERMINATION UPON DEATH. If the Executive dies during the
Term, this Agreement shall terminate, provided, however, that in any such event,
the Company shall pay to the Executive, or to his estate, any portion of the
Annual Salary and Incentive Bonuses that shall have been earned by the Executive
prior to the termination but not yet paid, any Benefits that have vested in the
Executive at the time of such termination as a result of his participation in
any of the Company's benefit plans shall be paid to the Executive, or to his
estate or designated beneficiary, in accordance with the provisions of such
plan; and the Company shall reimburse the Executive, or his estate, for any
expenses with respect to which the Executive
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is entitled to reimbursement pursuant to Section 2.6 of this Agreement, and the
Executive's right to indemnification, payment or reimbursement pursuant to
Section 6 of this Agreement shall not be affected by such termination and shall
continue in full force and effect, both with respect to proceedings that are
threatened, pending or completed at the date of such termination and with
respect to proceedings that are threatened, pending or completed after that
date.
4.2 TERMINATION WITH CAUSE. The Company has the right, at any
time during the Term, subject to all of the provisions hereof, exercisable by
serving notice, effective on or after the date of service of such notice as
specified therein, to terminate the Executive's employment under this Agreement
and discharge the Executive with Cause. If such right is exercised, the
Company's obligation to the Executive shall be limited solely to the payment of
unpaid Annual Salary accrued, together with unpaid Incentive Bonus, if any, and
Benefits vested up to the effective date specified in the Company's notice of
termination. As used in this Agreement, the term "CAUSE" shall mean and include
(i) chronic alcoholism or controlled substance abuse as determined by a doctor
mutually acceptable to the Company and the Executive, (ii) an act of proven
fraud or dishonesty on the part of the Executive with respect to the Company or
its subsidiaries; (iii) knowing and material failure by the Executive to comply
with material applicable laws and regulations relating to the business of the
Company or its subsidiaries; (iv) the Executive's material and continuing
failure to perform (as opposed to unsatisfactory performance) his duties
hereunder or a material breach by the Executive of this Agreement except, in
each case, where such failure or breach is caused by the illness or other
similar incapacity or disability of the Executive; or (v) conviction of a crime
involving moral turpitude or a felony. Prior to the effectiveness of termination
for Cause under subclause (i), (ii), (iii) or (iv) above, the Executive shall be
given 30 days' prior notice from the Board specifically identifying the reasons
which are alleged to constitute Cause for any termination hereunder and an
opportunity to be heard by the Board in the event the Executive disputes such
allegations.
4.3 TERMINATION WITHOUT CAUSE. The Company has the right, at any
time during the Term, subject to all of the provisions hereof, exercisable by
serving notice, effective on or after the date of service of such notice as
specified therein, to terminate the Executive's employment under this Agreement
and discharge the Executive without Cause. If the Executive is terminated during
the Term without Cause (including any termination which is deemed to be a
constructive termination without Cause under Section 4.6 hereof), the Company's
obligation to the Executive shall be limited solely to (i) the vesting of all
stock options granted to the Executive by the Company and (ii) the payment, at
the times and upon the terms provided for herein, of the greater of (a) the
Executive's Annual Salary and Incentive Bonus for the number of full months
remaining in the Term of this Agreement had the Executive not been so terminated
and (b) the Executive's Annual Salary for a period of 36 months, in each case
based on the Annual Salary of the Executive in effect on the date of termination
(or, if the Company has reduced the Executive's Annual Salary in breach of this
Agreement, the Executive's Annual Salary before such reduction) together with
all unpaid Incentive Bonus and Benefits awarded or accrued up to the date of
termination. If the Executive is terminated after he has received one Incentive
Bonus, the Incentive Bonus in clause (ii)(a) shall be based on the amount of
that one Incentive Bonus; if he has not yet received an Incentive Bonus, it
shall be based on the maximum Incentive Bonus (i.e., 75% of the Annual Salary).
In the event of a termination by the Company without Cause within 180 days after
a Change of Control (as hereinafter defined), including a constructive
termination without Cause pursuant to Section 4.6, the amounts due to the
Executive pursuant to this Section 4.3 shall be due and payable in one lump-sum
payment within 60 days after such termination. In all other cases, any amounts
due to the Executive pursuant to this Section 4.3 shall be due and payable as
and when they would have become due and payable absent such termination.
4.4 TERMINATION BY THE EXECUTIVE. Any termination of this
Agreement by the Executive during the Term, except such termination as is deemed
to be a constructive termination without Cause by the
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Company under Section 4.6 of this Agreement, shall be deemed to be a breach of
the terms of this Agreement for the purposes of Section 3.1.1 hereof and shall
entitle the Company to discontinue payment of all Annual Salary, Incentive
Bonuses and Benefits accruing from and after the date of such termination.
4.5 TERMINATION UPON DISABILITY. If during the Term the Executive
becomes physically or mentally disabled, whether totally or partially, as
evidenced by the written statement of a competent physician licensed to practice
medicine in the United States who is mutually acceptable to the Company and the
Executive or his closest relative if he is not then able to make such a choice,
so that the Executive is unable substantially to perform his services hereunder
for (i) a period of four consecutive months, or (ii) for shorter periods
aggregating six months during any twelve-month period, the Company may at any
time after the last day of the four consecutive months of disability or the day
on which the shorter periods of disability equal an aggregate of six months, by
written notice to the Executive, terminate the Executive's employment hereunder
and discontinue payments of the Annual Salary, Incentive Bonuses and Benefits
accruing from and after the date of such termination. The Executive shall be
entitled to the full compensation payable to him hereunder for periods of
disability shorter than the periods specified in clauses (i) and (ii) of the
previous sentence.
4.6 CONSTRUCTIVE TERMINATION WITHOUT CAUSE. Notwithstanding any
other provision of this Agreement, the Executive's employment under this
Agreement may be terminated during the Term by the Executive, which shall be
deemed to be constructive termination by the Company without Cause, if one of
the following events shall occur without the consent of the Executive: (i) a
failure to elect or reelect or to appoint or reappoint the Executive to the
office of Chairman of the Board, President and Chief Executive Officer of the
Company or other material change by the Company of the Executive's functions,
duties or responsibilities which change would reduce the ranking or level,
dignity, responsibility, importance or scope of the Executive's position with
the Company from the position and attributes thereof described in Section 1
above; (ii) the assignment or reassignment by the Company of the Executive to a
location not within 35 miles of the Company's current location; (iii) the
liquidation, dissolution, consolidation or merger of the Company, or transfer of
all or substantially all of its assets, other than a transaction in which a
successor corporation with a net worth at least equal to that of the Company
assumes this Agreement and all obligations and undertakings of the Company
hereunder; (iv) a reduction in the Executive's fixed salary; (v) a Change of
Control as hereinafter defined; (vi) the failure of the Company to continue to
provide the Executive with office space, related facilities and secretarial
assistance that are commensurate with the Executive's responsibilities to and
position with the Company; (vii) the notification by the Company of the
Company's intention not to observe or perform one or more of the obligations of
the Company under this Agreement; (viii) the failure by the Company to
indemnify, pay or reimburse the Executive at the time and under the
circumstances required by Section 6 of this Agreement; (ix) the occurrence of
any other material breach of this Agreement by the Company or any of its
subsidiaries; or (x) the delivery of notice by the Company in accordance with
Section 1.1 hereof that it desires to terminate the Agreement, but only if such
notice is given before the Term has been automatically extended three times. Any
such termination shall be made by written notice to the President of the
Company, specifying the event relied upon for such termination and given within
60 days after such event. Any constructive termination shall be effective 60
days after the date the President of the Company has been given such written
notice setting forth the grounds for such termination with specificity;
provided, however, that the Executive shall not be entitled to terminate this
Agreement in respect of any of the grounds set forth above if within 60 days
after such notice the action constituting such ground for termination is no
longer continuing. A constructive termination by the Company without Cause shall
terminate the Restrictive Period hereunder.
4.7 For the purposes hereof, a "CHANGE OF CONTROL OF THE COMPANY"
shall be deemed to have occurred if after the Effective Date (i) any "person"
(as such term is used in Sections 13(d) and 14(d)
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of the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the Company representing 50%
or more of the combined voting power of the Company's then outstanding
securities without the prior approval of at least a majority of the members of
the Board in office immediately prior to such person attaining such percentage
interest; (ii) there occurs a proxy contest or a consent solicitation, or the
Company is a party to a merger, consolidation, sale of assets, plan of
liquidation or other reorganization not approved by at least a majority of the
members of the Board in office, as a consequence of which members of the Board
in office immediately prior to such transaction or event constitute less than a
majority of the Board thereafter; or (iii) during any period of two consecutive
years, other than as a result of an event described in clause (ii) of this
Section 4.7, individuals who at the beginning of such period constituted the
Board (including for this purpose any new director whose election or nomination
for election by the Company's stockholders was approved by a vote of at least a
majority of the directors then still in office who were directors at the
beginning of such period) cease for any reason to constitute at least a majority
of the Board.
5. INSURANCE. The Company may, from time to time, apply for and take
out, in its own name and at its own expense, naming itself or one or more of its
affiliates as the designated beneficiary (which it may change from time to
time), policies for life, health, accident, disability or other insurance upon
the Executive in any amount or amounts that it may deem necessary or appropriate
to protect its interest. The Executive agrees to aid the Company in procuring
such insurance by submitting to medical examinations and by filling out,
executing and delivering such applications and other instruments in writing as
may reasonably be required by an insurance company or companies to which any
application or applications for insurance may be made by or for the Company.
6. INDEMNIFICATION.
6.1 The Company shall, to the maximum extent not prohibited by
law, indemnify the Executive if he is made, or threatened to be made, a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Company to procure a judgment in its favor (collectively, a
"PROCEEDING"), by reason of the fact that the Executive is or was a director or
officer of the Company, or is or was serving in any capacity at the request of
the Company for any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against judgments, fines, penalties,
excise taxes, amounts paid in settlement and costs, charges and expenses
(including attorneys' fees and disbursements) paid or incurred in connection
with any such Proceeding.
6.2 The Company shall, from time to time, reimburse or advance to
the Executive the funds necessary for payment of expenses, including attorneys'
fees and disbursements, incurred in connection with any Proceeding in advance of
the final disposition of such Proceeding; provided, however. that, if required
by the Delaware General Corporation Law, such expenses incurred by or on behalf
of the Executive may be paid in advance of the final disposition of a Proceeding
only upon receipt by the Company of an undertaking, by or on behalf of the
Executive, to repay any such amount so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right of
appeal that the Executive is not entitled to be indemnified for such expenses.
6.3 The right to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 6 shall not be
deemed exclusive of any other rights which the Executive may now or hereafter
have under any law, by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.
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6.4 The right to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 6 shall continue
as to the Executive after he has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of the
Executive.
6.5 The Company shall purchase and maintain director and officer
liability insurance on such terms and providing such coverage as the Board
determines is appropriate, and the Executive shall be covered by such insurance
on the same basis as the other directors and executive officers of the Company,
unless the Board determines in its good faith judgment that such insurance is
too costly.
6.6 The right to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 6 shall be
enforceable by the Executive in any court of competent jurisdiction. The burden
of proving that such indemnification or reimbursement or advancement of expenses
is not appropriate shall be on the Company. Neither the failure of the Company
(including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that such indemnification or reimbursement or advancement of expenses is
proper in the circumstances nor an actual determination by the Company
(including its board of directors, independent legal counsel, or its
stockholders) that the Executive is not entitled to such indemnification or
reimbursement or advancement of expenses shall constitute a defense to the
action or create a presumption that the Executive is not so entitled. The
Executive shall also be indemnified for any expenses incurred in connection with
successfully establishing his right to such indemnification or reimbursement or
advancement of expenses, in whole or in part, in any such proceeding.
6.7 If the Executive serves (i) another corporation of which a
majority of the shares entitled to vote in the election of its directors is held
by the Company, or (ii) any employee benefit plan of the Company or any
corporation referred to in clause (i), in any capacity, then he shall be deemed
to be doing so at the request of the Company.
6.8 The right to indemnification or reimbursement or advancement
of expenses shall be interpreted on the basis of the applicable law in effect at
the time of the occurrence of the event or events giving rise to the applicable
Proceeding.
7. OTHER PROVISIONS.
7.1 CERTAIN DEFINITIONS. As used in this Agreement, the following
terms have the following meanings unless the context otherwise requires:
(i) "AFFILIATE" with respect to the Company means any
other person controlled by or under common control with the Company but
shall not include any stockholder or director of the Company, as such.
(ii) "PERSON" means any individual, corporation,
partnership, firm, joint Company, association, joint-stock company,
trust, unincorporated organization, governmental or regulatory body or
other entity.
(iii) "SUBSIDIARY" means any corporation 50% or more of
the voting securities of which are owned directly or indirectly by the
Company.
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7.2 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, on the date of actual receipt thereof, as follows:
(i) if to the Company, to:
Advanced Technical Products, Inc.
3353 Peachtree Road, Suite 920
Atlanta, Georgia 30326
Telecopy: (404) 231-7277
Attention: Vice President
with a copy to:
Gardere Wynne Sewell & Riggs, L.L.P.
333 Clay Avenue, Suite 800
Houston, Texas 77002
Telecopy: (713) 308-5555
Attention: Eric A. Blumrosen
(ii) if to the Executive, to:
James S. Carter
Advanced Technical Products, Inc.
3353 Peachtree Road, Suite 920
Atlanta, Georgia 30326
Any party may change its address for notice hereunder by notice to the other
party hereto.
7.3 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect thereto.
7.4 WAIVERS AND AMENDMENTS. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof. Nor shall any waiver on the part of any party of any such right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.
7.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas (without giving
effect to the choice of law provisions thereof) where the employment of the
Executive shall be deemed, in part, to be performed and enforcement of this
Agreement or any action taken or held with respect to this Agreement shall be
taken in the courts of appropriate jurisdiction in Harris County, Texas.
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7.6 ASSIGNMENT. This Agreement, and any rights and obligations
hereunder, may not be assigned by the Executive and may be assigned by the
Company (subject to Section 4.6 (iii) hereof) only to a successor by merger or
purchasers of substantially all of the assets of the Company.
7.7 COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
7.8 HEADINGS. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
7.9 NO PRESUMPTION AGAINST INTEREST. This Agreement has been
negotiated. drafted, edited and reviewed by the respective parties, and
therefore, no provision arising directly or indirectly herefrom shall be
construed against any party as being drafted by said party.
7.10 VALIDITY CONTEST. The Company shall promptly pay any and all
legal fees and expenses incurred by the Executive from time to time as a direct
result of the Company's contesting the due execution, authorization, validity or
enforceability of this Agreement.
7.11 BINDING AGREEMENT. This Agreement shall inure to the benefit
of and bit binding upon the Company and its respective successors and assigns
and the Executive and his legal representatives.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ADVANCED TECHNICAL PRODUCTS, INC.
By: /s/ GARRETT L. DOMINY
Garrett L. Dominy,
Executive Vice President
EXECUTIVE
By: /s/ JAMES S. CARTER
James S. Carter
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EXHIBIT 10.22
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "AGREEMENT"), is
entered into as of November 1, 1997 (the "EFFECTIVE DATE"), by and between
ADVANCED TECHNICAL PRODUCTS, Inc., a Delaware corporation (the "COMPANY"), and
GARRETT L. DOMINY (the "EXECUTIVE").
R E C I T A L S:
WHEREAS, TPG HOLDINGS, INC., A DELAWARE CORPORATION ("TPG"), and the
Executive entered into that certain Employment Agreement dated June 1, 1997 (the
"EMPLOYMENT Agreement");
WHEREAS, the terms of the Employment Agreement provided that it would
become effective only upon the merger (the "MERGER") of TPG with and into Lunn
Industries, Inc., a Delaware corporation ("LUNN"), with Lunn surviving under the
name "Advanced Technical Products, Inc.";
WHEREAS, the Merger was consummated on October 31, 1997;
WHEREAS, in accordance with the terms of the Merger, the Company, as the
surviving corporation, assumed all of the liabilities and obligations of TPG
under the Employment Agreement;
WHEREAS, the Company now desires to amend the Employment Agreement to
make certain technical changes to clarify the name of the Company and the
Effective Date and to specifically ratify and adopt the terms of the Employment
Agreement.
Accordingly, the parties agree as follows:
1. EMPLOYMENT DUTIES AND ACCEPTANCE.
1.1 EMPLOYMENT BY THE COMPANY AND DUTIES. The Company hereby
agrees to employ the Executive for a term commencing on the Effective Date and
expiring at the end of the day three (3) years from the Effective Date (such
date, or later date to which this Agreement is extended in accordance with the
terms hereof, the "TERMINATION DATE"), unless earlier terminated as provided in
Section 4 or unless extended as provided herein (the "Term"). The Term shall be
automatically extended commencing on the anniversary of the Effective Date and
on each anniversary of the Effective Date thereafter (such date and each
anniversary of such date being a "RENEWAL DATE"), so as to terminate three (3)
years from such Renewal Date, unless and until at least sixty (60) days prior to
a Renewal Date either party hereto gives written notice to the other that the
term should not be further extended after the next Renewal Date, in which event
the Termination Date shall be three (3) years following the Renewal Date
following such notice. During the Term, the Executive shall serve in the
capacity of Executive Vice President and Chief Financial Officer of the Company,
and shall also serve in those offices and directorships of subsidiary
corporations or entities of the Company to which he may from time to time be
appointed or elected. During the Term, the Executive shall devote all reasonable
efforts and all of his business time and services to the Company, subject to the
direction of the Board of Directors of the Company (the "BOARD"). The Executive
shall not engage in any other business activities except for passive investments
in corporations or partnerships not engaged in the Company Business (as
hereinafter defined) pursuant to Section 3 hereof.
<PAGE>
1.2 ACCEPTANCE OF EMPLOYMENT BY THE EXECUTIVE. The Executive
hereby accepts such employment and shall render the services and perform the
duties described above.
2. COMPENSATION AND OTHER BENEFITS.
2.1 ANNUAL SALARY. The Company shall pay to the Executive an
annual salary at a rate of not less than two hundred fifteen thousand and no/100
dollars ($215,000.00) per year (the "ANNUAL SALARY"), subject to increase at the
sole discretion of the Board, provided, however, that the Annual Salary shall be
increased effective as of each Renewal Date of each year during the Term at a
minimum by a percentage equal to the percentage increase in the Consumer Price
Index (Income) for the previous fiscal year. The Annual Salary shall be payable
in accordance with the payroll policies of the Company as from time to time in
effect, but in no event less frequently than once each month, less such
deductions as shall be required to be withheld by applicable law and
regulations.
2.2 BONUSES. The Executive may receive, at the sole discretion of
the Board, an incentive bonus with respect to the fiscal years ending during the
Term (the "INCENTIVE BONUS"), provided that an Incentive Bonus, payable in
respect of a fiscal year, shall not exceed seventy-five percent (75%) of the
Annual Salary for such fiscal year.
2.3 VACATION POLICY. The Executive shall be entitled to a paid
vacation of four weeks during each year of the Term.
2.4 PARTICIPATION IN EMPLOYEE BENEFIT PLANS. The Company agrees
to permit the Executive during the Term, if and to the extent eligible, to
participate in any group life, hospitalization or disability insurance plan,
health program, pension plan, similar benefit plan or other so-called "fringe
benefits" of the Company (collectively, "BENEFITS") which may be available to
other senior executives of the Company on terms no less favorable to the
Executive than the terms offered to such other executives.
2.5 GENERAL BUSINESS EXPENSES. The Company shall pay or reimburse
the Executive for all expenses reasonably and necessarily incurred by the
Executive during the Term in the performance of the Executive's services under
this Agreement. Such payment shall be made upon presentation of such
documentation as the Company customarily requires of its senior executive
employees prior to making such payments or reimbursements.
3. NON-COMPETITION, CONFIDENTIALITY AND COMPANY PROPERTY.
3.1 COVENANTS AGAINST COMPETITION. The Executive acknowledges
that (i) the Company is currently engaged in the business of owning, managing
and operating manufacturing facilities in the aerospace and defense industries
(the "COMPANY BUSINESS"); (ii) his work for the Company will give him access to
trade secrets of and confidential information concerning the Company; and (iii)
the agreements and covenants contained in this Agreement are essential to
protect the business and goodwill of the Company. Accordingly, the Executive
covenants and agrees as follows:
3.1.1 NON-COMPETE. As an independent covenant, and in order
to enforce the provisions of Sections 3.1.3 and 3.1.5 hereof and the other
provisions of this Agreement, the Executive agrees that he shall not during the
Restricted Period (as hereinafter defined) anywhere within the continental
United States directly or indirectly (except in the Executive's capacity as an
officer of the Company), (i) engage or participate in the Company Business; (ii)
enter the employ of, or render any other services to, any
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person engaged in the Company Business except as permitted hereunder; or (iii)
become interested in any such person in any capacity, including, without
limitation, as an individual, partner, shareholder, lender, officer, director,
principal, agent or trustee except as permitted hereunder; provided, however,
that the Executive may own, directly or indirectly, solely as an investment,
securities of any person traded on any national securities exchange or listed on
the National Association of Securities Dealers Automated Quotation System if the
Executive is not a controlling person of, or a member of a group which controls,
such person and the Executive does not, directly or indirectly, own 5% or more
of any class of equity securities, or securities convertible into or exercisable
or exchangeable for 5% or more of any class of equity securities, of such
person. As used herein, the "RESTRICTED PERIOD" shall mean a period commencing
on the date hereof and terminating upon the first to occur of (a) the date on
which the Company terminates or is deemed to terminate the Executive's
employment without Cause (as hereinafter defined), (b) the date the Executive
terminates or is deemed to terminate his employment pursuant to Section 4.6
hereof or (c) the date of termination of this Agreement; provided, however, that
if the Company shall have terminated the Executive's employment for Cause and
such Cause in fact exists or if the Executive shall have terminated his
employment with the Company in breach of the terms of this Agreement, the
Restricted Period shall end two (2) years following the termination of the
Executive's employment hereunder.
3.1.2 CUSTOMERS. As an independent covenant, the Executive
also agrees to refrain during his employment by the Company, and in the event of
the termination of his employment for any reason, for one year thereafter,
without written permission from the Company, from diverting, taking, soliciting
and/or accepting on his own behalf or on the behalf of another person, firm, or
company, the business of any past or present customer of the Company, its
divisions, subsidiaries and/or other affiliated entities, or any identified
prospective or potential customer of the Company, its divisions, subsidiaries
and/or affiliated entities, whose identity became known to the Executive through
his employment by the Company.
3.1.3 CONFIDENTIAL INFORMATION.
3.1.3.1 The Executive acknowledges that the Company
has a legitimate and continuing proprietary interest in the protection of its
confidential information and that it has invested substantial sums and will
continue to invest substantial sums to develop, maintain and protect
confidential information. The Company agrees to provide the Executive access to
confidential information in conjunction with the Executive's duties, including,
without limitation, information of a technical and business nature regarding the
Company's past, current or anticipated business that may encompass financial
information, financial figures, trade secrets, customer lists, details of client
or consultant contracts, pricing policies, operational methods, marketing plans
or strategies, product development techniques or plans, business acquisition
plans, Company employee information, organizational charts, new personnel
acquisition plans, technical processes, designs and design projects, inventions
and research projects, ideas, discoveries, inventions, improvements, trade
secrets, design specifications, writings and other works of authorship. In
exchange, as an independent covenant, the Executive agrees not to make any
unauthorized use, publication, or disclosure, during or subsequent to his
employment by the Company, of any Intellectual Property of a confidential or
trade secret nature, generated or acquired by him during the course of his
employment, except to the extent that the disclosure of Intellectual Property
Information is necessary to fulfill his responsibilities as an employee of the
Company. The Executive understands that confidential matters and trade secrets
include information not generally known by or available to the public about or
belonging to the Company, its divisions, subsidiaries, and related affiliates,
or belonging to other companies to whom the Company, its divisions,
subsidiaries, and related affiliates, may have an obligation to maintain
information in confidence, and that authorization for public disclosure may only
be obtained through the Company's written consent.
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3.1.3.2 The Executive further agrees not to disclose
to the Company, or induce any personnel of the Company to use, any confidential
information, trade secret, or confidential material belonging to others.
3.1.3.3 The Executive agrees that the covenants set
forth in Sections 3.1.3.1 and 3.1.3.2 are independent covenants and indefinite
obligations binding upon the Executive both during and after the termination of
the Executive's relationship with the Company.
3.1.4 PROPERTY OF THE COMPANY. All memoranda, notes, lists,
records, engineering drawings, technical specifications and related documents
and other documents or papers (and all copies thereof) relating to the Company,
including such items stored in computer memories, microfiche or by any other
means, made or compiled by or on behalf of the Executive after the date hereof,
or made available to the Executive after the date hereof relating to the
Company, its affiliates or any entity which may hereafter become an affiliate
thereof, shall be the property of the Company, and shall be delivered to the
Company promptly upon the termination of the Executive's employment with the
Company or at any other time upon request; provided, however, that the
Executive's address books, diaries, chronological correspondence files and
rolodex files shall be deemed to be property of the Executive.
3.1.5 ORIGINAL MATERIAL. The Executive agrees that any
inventions, discoveries, improvements, ideas, concepts or original works of
authorship relating directly to the Company Business, including without
limitation information of a technical or business nature such as ideas,
discoveries, designs, inventions, improvements, trade secrets, know-how,
manufacturing processes, product formulae, design specifications, writings and
other works of authorship, computer programs, financial figures, marketing
plans, customer lists and data, business plans or methods and the like, which
relate in any manner to the actual or anticipated business or the actual or
anticipated areas of research and development of the Company and its divisions,
subsidiaries, affiliates, or related entities, whether or not protectable by
patent or copyright, that have been originated, developed or reduced to practice
by the Executive alone or jointly with others during the Executive's employment
with the Company shall be the property of and belong exclusively to the Company.
The Executive shall promptly and fully disclose to the Company the origination
or development by the Executive of any such material and shall provide the
Company with any information that it may reasonably request about such material.
Either during or subsequent to the Executive's employment, upon the request and
at the expense of the Company or its nominee, and for no remuneration in
addition to that due the Executive pursuant to his employment by the Company,
but at no expense to him, the Executive agrees to execute, acknowledge, and
deliver to the Company or its attorneys any and all instruments which, in the
judgment of the Company or its attorneys, may be necessary or desirable to
secure or maintain for the benefit of the Company adequate patent, copyright,
and other property rights in the United States and foreign countries with
respect to any such inventions, improvements, ideas, concepts, or original works
of authorship embraced within this Agreement.
3.1.6 EMPLOYEES OF THE COMPANY AND ITS AFFILIATES. As an
independent covenant, the Executive agrees to refrain during his employment by
the Company, and in the event of the termination of his employment for any
reason for a period of one year thereafter, from inducing or attempting to
influence any employee of the Company, its divisions, subsidiaries and/or
affiliated entities to terminate his employment.
3.1.7 COMPANY'S INTEREST. The Executive further agrees that
these covenants are made to protect the legitimate business interests of the
Company, including interests in the Company's property described in and pursuant
to Section 3.1.4 and Section 3.1.5, and not to restrict his mobility or to
prevent him from utilizing his general technical skills. The Executive
understands as a part of these
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covenants that the Company intends to exercise whatever legal recourse against
him for any breach of this Agreement and, in particular, for any breach of these
covenants.
3.2 RIGHTS AND REMEDIES UPON BREACH. If the Executive breaches,
or threatens to commit a breach of, any of the provisions contained in Section
3.1 of this Agreement (the "RESTRICTIVE COVENANTS"), the Company shall have the
following rights and remedies, each of which rights and remedies shall be
independent of the others and severally enforceable, and each of which is in
addition to, and not in lieu of, any other rights and remedies available to the
Company under law or in equity:
3.2.1 SPECIFIC PERFORMANCE. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and that
money damages would not provide an adequate remedy to the Company.
3.2.2 ACCOUNTING. The right and remedy to require the
Executive to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits derived or received by the
Executive as the result of any action constituting a breach of the Restrictive
Covenants.
3.3 SEVERABILITY OF COVENANTS. The Executive acknowledges and
agrees that the Restrictive Covenants are reasonable and valid in duration and
geographical scope and in all other respects. If any court determines that any
of the Restrictive Covenants, or any part thereof, is invalid or unenforceable,
the remainder of the Restrictive Covenants shall not thereby be affected and
shall be given full effect without regard to the invalid portions.
3.4 COURT REVIEW. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographical scope of, or scope of activities restrained by, such
provision, such court shall have the power to reduce the duration or scope of
such provision, as the case may be, and, in its reduced form, such provision
shall then be enforceable.
3.5 ENFORCEABILITY IN JURISDICTIONS. The Company and the
Executive intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the geographical scope of
such Restrictive Covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants unenforceable by reason of the
breadth of such scope or otherwise, it is the intention of the Company that such
determination not bar or in any way affect the right of the Company to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of such Restrictive Covenants, as to breaches of such
Restrictive Covenants in such other respective jurisdictions, such Restrictive
Covenants as they relate to each jurisdiction being, for this purpose, severable
into diverse and independent covenants.
4. TERMINATION.
4.1 TERMINATION UPON DEATH. If the Executive dies during the
Term, this Agreement shall terminate, provided, however, that in any such event,
the Company shall pay to the Executive, or to his estate, any portion of the
Annual Salary and Incentive Bonuses that shall have been earned by the Executive
prior to the termination but not yet paid, any Benefits that have vested in the
Executive at the time of such termination as a result of his participation in
any of the Company's benefit plans shall be paid to the Executive, or to his
estate or designated beneficiary, in accordance with the provisions of such
plan; and the Company shall reimburse the Executive, or his estate, for any
expenses with respect to which the Executive
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is entitled to reimbursement pursuant to Section 2.6 of this Agreement, and the
Executive's right to indemnification, payment or reimbursement pursuant to
Section 6 of this Agreement shall not be affected by such termination and shall
continue in full force and effect, both with respect to proceedings that are
threatened, pending or completed at the date of such termination and with
respect to proceedings that are threatened, pending or completed after that
date.
4.2 TERMINATION WITH CAUSE. The Company has the right, at any
time during the Term, subject to all of the provisions hereof, exercisable by
serving notice, effective on or after the date of service of such notice as
specified therein, to terminate the Executive's employment under this Agreement
and discharge the Executive with Cause. If such right is exercised, the
Company's obligation to the Executive shall be limited solely to the payment of
unpaid Annual Salary accrued, together with unpaid Incentive Bonus, if any, and
Benefits vested up to the effective date specified in the Company's notice of
termination. As used in this Agreement, the term "CAUSE" shall mean and include
(i) chronic alcoholism or controlled substance abuse as determined by a doctor
mutually acceptable to the Company and the Executive, (ii) an act of proven
fraud or dishonesty on the part of the Executive with respect to the Company or
its subsidiaries; (iii) knowing and material failure by the Executive to comply
with material applicable laws and regulations relating to the business of the
Company or its subsidiaries; (iv) the Executive's material and continuing
failure to perform (as opposed to unsatisfactory performance) his duties
hereunder or a material breach by the Executive of this Agreement except, in
each case, where such failure or breach is caused by the illness or other
similar incapacity or disability of the Executive; or (v) conviction of a crime
involving moral turpitude or a felony. Prior to the effectiveness of termination
for Cause under subclause (i), (ii), (iii) or (iv) above, the Executive shall be
given 30 days' prior notice from the Board specifically identifying the reasons
which are alleged to constitute Cause for any termination hereunder and an
opportunity to be heard by the Board in the event the Executive disputes such
allegations.
4.3 TERMINATION WITHOUT CAUSE. The Company has the right, at any
time during the Term, subject to all of the provisions hereof, exercisable by
serving notice, effective on or after the date of service of such notice as
specified therein, to terminate the Executive's employment under this Agreement
and discharge the Executive without Cause. If the Executive is terminated during
the Term without Cause (including any termination which is deemed to be a
constructive termination without Cause under Section 4.6 hereof), the Company's
obligation to the Executive shall be limited solely to (i) the vesting of all
stock options granted to the Executive by the Company and (ii) the payment, at
the times and upon the terms provided for herein, of the greater of (a) the
Executive's Annual Salary and Incentive Bonus for the number of full months
remaining in the Term of this Agreement had the Executive not been so terminated
and (b) the Executive's Annual Salary for a period of 36 months, in each case
based on the Annual Salary of the Executive in effect on the date of termination
(or, if the Company has reduced the Executive's Annual Salary in breach of this
Agreement, the Executive's Annual Salary before such reduction) together with
all unpaid Incentive Bonus and Benefits awarded or accrued up to the date of
termination. If the Executive is terminated after he has received one Incentive
Bonus, the Incentive Bonus in clause (ii)(a) shall be based on the amount of
that one Incentive Bonus; if he has not yet received an Incentive Bonus, it
shall be based on the maximum Incentive Bonus (i.e., 75% of the Annual Salary).
In the event of a termination by the Company without Cause within 180 days after
a Change of Control (as hereinafter defined), including a constructive
termination without Cause pursuant to Section 4.6, the amounts due to the
Executive pursuant to this Section 4.3 shall be due and payable in one lump-sum
payment within 60 days after such termination. In all other cases, any amounts
due to the Executive pursuant to this Section 4.3 shall be due and payable as
and when they would have become due and payable absent such termination.
4.4 TERMINATION BY THE EXECUTIVE. Any termination of this
Agreement by the Executive during the Term, except such termination as is deemed
to be a constructive termination without Cause by the
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Company under Section 4.6 of this Agreement, shall be deemed to be a breach of
the terms of this Agreement for the purposes of Section 3.1.1 hereof and shall
entitle the Company to discontinue payment of all Annual Salary, Incentive
Bonuses and Benefits accruing from and after the date of such termination.
4.5 TERMINATION UPON DISABILITY. If during the Term the Executive
becomes physically or mentally disabled, whether totally or partially, as
evidenced by the written statement of a competent physician licensed to practice
medicine in the United States who is mutually acceptable to the Company and the
Executive or his closest relative if he is not then able to make such a choice,
so that the Executive is unable substantially to perform his services hereunder
for (i) a period of four consecutive months, or (ii) for shorter periods
aggregating six months during any twelve-month period, the Company may at any
time after the last day of the four consecutive months of disability or the day
on which the shorter periods of disability equal an aggregate of six months, by
written notice to the Executive, terminate the Executive's employment hereunder
and discontinue payments of the Annual Salary, Incentive Bonuses and Benefits
accruing from and after the date of such termination. The Executive shall be
entitled to the full compensation payable to him hereunder for periods of
disability shorter than the periods specified in clauses (i) and (ii) of the
previous sentence.
4.6 CONSTRUCTIVE TERMINATION WITHOUT CAUSE. Notwithstanding any
other provision of this Agreement, the Executive's employment under this
Agreement may be terminated during the Term by the Executive, which shall be
deemed to be constructive termination by the Company without Cause, if one of
the following events shall occur without the consent of the Executive: (i) a
failure to elect or reelect or to appoint or reappoint the Executive to the
office of Executive Vice President and Chief Financial Officer of the Company or
other material change by the Company of the Executive's functions, duties or
responsibilities which change would reduce the ranking or level, dignity,
responsibility, importance or scope of the Executive's position with the Company
from the position and attributes thereof described in Section 1 above; (ii) the
assignment or reassignment by the Company of the Executive to a location not
within 35 miles of the Company's current location; (iii) the liquidation,
dissolution, consolidation or merger of the Company, or transfer of all or
substantially all of its assets, other than a transaction in which a successor
corporation with a net worth at least equal to that of the Company assumes this
Agreement and all obligations and undertakings of the Company hereunder; (iv) a
reduction in the Executive's fixed salary; (v) a Change of Control as
hereinafter defined; (vi) the failure of the Company to continue to provide the
Executive with office space, related facilities and secretarial assistance that
are commensurate with the Executive's responsibilities to and position with the
Company; (vii) the notification by the Company of the Company's intention not to
observe or perform one or more of the obligations of the Company under this
Agreement; (viii) the failure by the Company to indemnify, pay or reimburse the
Executive at the time and under the circumstances required by Section 6 of this
Agreement; (ix) the occurrence of any other material breach of this Agreement by
the Company or any of its subsidiaries; or (x) the delivery of notice by the
Company in accordance with Section 1.1 hereof that it desires to terminate the
Agreement, but only if such notice is given before the Term has been
automatically extended three times. Any such termination shall be made by
written notice to the President of the Company, specifying the event relied upon
for such termination and given within 60 days after such event. Any constructive
termination shall be effective 60 days after the date the President of the
Company has been given such written notice setting forth the grounds for such
termination with specificity; provided, however, that the Executive shall not be
entitled to terminate this Agreement in respect of any of the grounds set forth
above if within 60 days after such notice the action constituting such ground
for termination is no longer continuing. A constructive termination by the
Company without Cause shall terminate the Restrictive Period hereunder.
4.7 For the purposes hereof, a "CHANGE OF CONTROL OF THE COMPANY"
shall be deemed to have occurred if after the Effective Date (i) any "person"
(as such term is used in Sections 13(d) and 14(d)
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of the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the Company representing 50%
or more of the combined voting power of the Company's then outstanding
securities without the prior approval of at least a majority of the members of
the Board in office immediately prior to such person attaining such percentage
interest; (ii) there occurs a proxy contest or a consent solicitation, or the
Company is a party to a merger, consolidation, sale of assets, plan of
liquidation or other reorganization not approved by at least a majority of the
members of the Board in office, as a consequence of which members of the Board
in office immediately prior to such transaction or event constitute less than a
majority of the Board thereafter; or (iii) during any period of two consecutive
years, other than as a result of an event described in clause (ii) of this
Section 4.7, individuals who at the beginning of such period constituted the
Board (including for this purpose any new director whose election or nomination
for election by the Company's stockholders was approved by a vote of at least a
majority of the directors then still in office who were directors at the
beginning of such period) cease for any reason to constitute at least a majority
of the Board.
5. INSURANCE. The Company may, from time to time, apply for and take
out, in its own name and at its own expense, naming itself or one or more of its
affiliates as the designated beneficiary (which it may change from time to
time), policies for life, health, accident, disability or other insurance upon
the Executive in any amount or amounts that it may deem necessary or appropriate
to protect its interest. The Executive agrees to aid the Company in procuring
such insurance by submitting to medical examinations and by filling out,
executing and delivering such applications and other instruments in writing as
may reasonably be required by an insurance company or companies to which any
application or applications for insurance may be made by or for the Company.
6. INDEMNIFICATION.
6.1 The Company shall, to the maximum extent not prohibited by
law, indemnify the Executive if he is made, or threatened to be made, a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Company to procure a judgment in its favor (collectively, a
"PROCEEDING"), by reason of the fact that the Executive is or was a director or
officer of the Company, or is or was serving in any capacity at the request of
the Company for any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against judgments, fines, penalties,
excise taxes, amounts paid in settlement and costs, charges and expenses
(including attorneys' fees and disbursements) paid or incurred in connection
with any such Proceeding.
6.2 The Company shall, from time to time, reimburse or advance to
the Executive the funds necessary for payment of expenses, including attorneys'
fees and disbursements, incurred in connection with any Proceeding in advance of
the final disposition of such Proceeding; provided, however. that, if required
by the Delaware General Corporation Law, such expenses incurred by or on behalf
of the Executive may be paid in advance of the final disposition of a Proceeding
only upon receipt by the Company of an undertaking, by or on behalf of the
Executive, to repay any such amount so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right of
appeal that the Executive is not entitled to be indemnified for such expenses.
6.3 The right to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 6 shall not be
deemed exclusive of any other rights which the Executive may now or hereafter
have under any law, by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.
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6.4 The right to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 6 shall continue
as to the Executive after he has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of the
Executive.
6.5 The Company shall purchase and maintain director and officer
liability insurance on such terms and providing such coverage as the Board
determines is appropriate, and the Executive shall be covered by such insurance
on the same basis as the other directors and executive officers of the Company,
unless the Board reasonably determines in its good faith judgment that the cost
of such insurance is too costly.
6.6 The right to indemnification and reimbursement or advancement
of expenses provided by, or granted pursuant to, this Section 6 shall be
enforceable by the Executive in any court of competent jurisdiction. The burden
of proving that such indemnification or reimbursement or advancement of expenses
is not appropriate shall be on the Company. Neither the failure of the Company
(including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that such indemnification or reimbursement or advancement of expenses is
proper in the circumstances nor an actual determination by the Company
(including its board of directors, independent legal counsel, or its
stockholders) that the Executive is not entitled to such indemnification or
reimbursement or advancement of expenses shall constitute a defense to the
action or create a presumption that the Executive is not so entitled. The
Executive shall also be indemnified for any expenses incurred in connection with
successfully establishing his right to such indemnification or reimbursement or
advancement of expenses, in whole or in part, in any such proceeding.
6.7 If the Executive serves (i) another corporation of which a
majority of the shares entitled to vote in the election of its directors is held
by the Company, or (ii) any employee benefit plan of the Company or any
corporation referred to in clause (i), in any capacity, then he shall be deemed
to be doing so at the request of the Company.
6.8 The right to indemnification or reimbursement or advancement
of expenses shall be interpreted on the basis of the applicable law in effect at
the time of the occurrence of the event or events giving rise to the applicable
Proceeding.
7. OTHER PROVISIONS.
7.1 CERTAIN DEFINITIONS. As used in this Agreement, the following
terms have the following meanings unless the context otherwise requires:
(i) "AFFILIATE" with respect to the Company means any
other person controlled by or under common control with the Company but
shall not include any stockholder or director of the Company, as such.
(ii) "PERSON" means any individual, corporation,
partnership, firm, joint Company, association, joint-stock company,
trust, unincorporated organization, governmental or regulatory body or
other entity.
(iii) "SUBSIDIARY" means any corporation 50% or more of
the voting securities of which are owned directly or indirectly by the
Company.
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7.2 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, on the date of actual receipt thereof, as follows:
(i) if to the Company, to:
Advanced Technical Products, Inc.
3353 Peachtree Road, Suite 920
Atlanta, Georgia 30326
Telecopy: (404) 231-7277
Attention: President
with a copy to:
Gardere Wynne Sewell & Riggs, L.L.P.
333 Clay Avenue, Suite 800
Houston, Texas 77002
Telecopy: (713) 308-5555
Attention: Eric A. Blumrosen
(ii) if to the Executive, to:
Garrett L. Dominy
Advanced Technical Products, Inc.
3353 Peachtree Road, Suite 920
Atlanta, Georgia 30326
Any party may change its address for notice hereunder by notice to the other
party hereto.
7.3 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect thereto.
7.4 WAIVERS AND AMENDMENTS. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof. Nor shall any waiver on the part of any party of any such right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.
7.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas (without giving
effect to the choice of law provisions thereof) where the employment of the
Executive shall be deemed, in part, to be performed and enforcement of this
Agreement or any action taken or held with respect to this Agreement shall be
taken in the courts of appropriate jurisdiction in Harris County, Texas.
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7.6 ASSIGNMENT. This Agreement, and any rights and obligations
hereunder, may not be assigned by the Executive and may be assigned by the
Company (subject to Section 4.6 (iii) hereof) only to a successor by merger or
purchasers of substantially all of the assets of the Company.
7.7 COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
7.8 HEADINGS. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
7.9 NO PRESUMPTION AGAINST INTEREST. This Agreement has been
negotiated. drafted, edited and reviewed by the respective parties, and
therefore, no provision arising directly or indirectly herein shall be construed
against any party as being drafted by said party.
7.10 VALIDITY CONTEST. The Company shall promptly pay any and all
legal fees and expenses incurred by the Executive from time to time as a direct
result of the Company's contesting the due execution, authorization, validity or
enforceability of this Agreement.
7.11 BINDING AGREEMENT. This Agreement shall inure to the benefit
of and bit binding upon the Company and its respective successors and assigns
and the Executive and his legal representatives.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ADVANCED TECHNICAL PRODUCTS, INC.
By: /s/ JAMES S. CARTER
James S. Carter,
President and Chief Executive
Officer
EXECUTIVE
By: /s/ GARRETT L. DOMINY
Garrett L. Dominy
EXHIBIT 10.23
1997 ADVANCED TECHNICAL PRODUCTS, INC.
STOCK OPTION PLAN
INTRODUCTION
On June 9, 1997, the Board of Directors of the Company adopted the
following Stock Option Plan:
1. PURPOSE. The purpose of the Plan is to provide Employees with a
proprietary interest in the Company through the granting of Incentive Options
and Nonqualified Options which will:
(a) increase the interest of the Employees in the Company's welfare;
(b) furnish an incentive to the Employees to continue their
services for the Company; and
(c) provide a means through which the Company may attract able
persons to enter its employ.
2. ADMINISTRATION. The Plan shall be administered by the Committee.
3. PARTICIPANTS. The Committee shall, from time to time, select the
particular
Employees of the Company and its Subsidiaries to whom options are to be granted,
and who will, upon such grant, become participants in the Plan. The individuals
eligible for selection by the Committee shall be those Employees whose
performance and responsibilities are determined by the Committee to be
influential to the success of the Company.
4. STOCK OWNERSHIP LIMITATION. No Incentive Option may be granted to an
Employee who owns more than 10% of the voting power of all classes of stock of
the Company or its Parent or Subsidiaries. This limitation will not apply if the
option price is at least 110% of the fair market value of the stock at the time
the Incentive Option
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is granted and the Incentive Option is not exercisable more than five years from
the date it is granted.
5. SHARES SUBJECT TO PLAN. Options may not be granted pursuant to the
terms of the Plan for more than 300,000 shares of Common Stock of the Company,
but this number shall be adjusted to reflect, if deemed appropriate by the
Committee, any stock dividend, stock split, share combination, recapitalization
or the like, of or by the Company. Shares to be optioned and sold may be made
available from either authorized but unissued Common Stock or Common Stock held
by the Company in its treasury. Shares that by reason of the expiration of an
option or otherwise are no longer subject to purchase pursuant to an option
granted under the Plan may be re-offered under the Plan.
6. LIMITATION ON AMOUNT. The aggregate fair market value (determined at
the time of grant) of the shares of Common Stock which any Employee is first
eligible to purchase in any calendar year by exercise of Incentive Options
granted under this Plan and all incentive stock option plans of the Company or
any Parent or Subsidiaries shall not exceed $100,000. For this purpose, the fair
market value (determined at the respective date of grant of each option) of the
stock purchasable by exercise of an Incentive Option (or an installment thereof)
shall be counted against the $100,000 annual limitation for an Employee only for
the calendar year such stock is first purchasable under the terms of the option.
7. ALLOTMENT OF SHARES. Grants of options under the Plan shall be as
described in this Section 7 of the Plan, provided that the grant of an option
shall not be deemed either to entitle the Employee to, or to disqualify the
Employee from, participation in any other grant of options under the Plan.
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(a) The Committee shall determine the number of shares of Common
Stock to be offered from time to time by grant of options to
Employees of the Company or its Subsidiaries.
(b) Any option granted to a person required to report under Section
16(a) of the Securities Exchange Act of 1934, as amended, must
also be approved by the Board in order to be effective.
8. GRANT OF OPTIONS. The maximum number of shares that may be granted
under the Plan in accordance with Section 6 of the Plan may be granted to any
one Employee. The Committee and the Board are authorized to grant both Incentive
Options and Nonqualified Options under the Plan. Incentive Options may only be
granted to employees within the meaning of Section 422 of the Internal Revenue
Code. The grant of options shall be evidenced by stock option agreements
containing such terms and provisions as are approved by the Committee but not
inconsistent with the Plan, including provisions that may be necessary to assure
that any option that is intended to be an Incentive Option will comply with
Section 422 of the Internal Revenue Code. Stock option agreements may provide
that an option holder may request approval from the Committee to exercise an
option or a portion thereof by tendering shares of Common Stock of the Company
at the fair market value per share on the date of exercise in lieu of cash
payment of the exercise price. Moreover, stock option agreements for
Nonqualified Options may provide that the option holder may request approval
from the Committee to pay any withholding associated with the Nonqualified
Option by tendering shares of Common Stock of the Company at the fair market
value per share on the date of exercise. An option agreement may provide, if the
Committee so determines, that upon exercise of the option the Committee may
elect to pay, in lieu of receipt from
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the optionholder of the exercise price and issuance of certificates for the
shares of stock exercised, an amount equal to the excess of the fair market
value per share on the date of exercise over the per share exercise price under
the option, multiplied by the number of shares covered by the option or portion
thereof being exercised ("Stock Appreciation"). Any such option agreement may
provide that the Stock Appreciation shall be paid to the optionholder either in
cash or in Common Stock or in cash and Common Stock (based on the fair market
value of such stock on the date of the exercise by the optionholder). The method
of payment shall be determined by the Committee in its sole discretion. The
option to purchase shares shall terminate with respect to the number of shares
for which the Stock Appreciation is paid. The Company shall execute stock option
agreements upon instructions from the Committee. The Plan shall be submitted to
the Company's stockholders for approval. The Committee and the Board may grant
options under the Plan prior to the time of stockholder approval, which options
will be effective when granted, but if for any reason the stockholders of the
Company do not approve the Plan prior to one year from the date of adoption of
the Plan by the Board, all options granted under the Plan will be terminated and
of no effect, and no option may be exercised in whole or in part prior to such
stockholder approval.
9. OPTION PRICE. The option price for an Incentive Option shall not be
less than 100% of the fair market value per share of the Common Stock on the
date the option is granted. The Committee shall determine the fair market value
of the Common Stock on the date of grant and shall set forth the determination
in its minutes, using any reasonable valuation method.
10. OPTION PERIOD. The Option Period will begin on the date the option
is granted, which will be the date the Committee authorizes the option unless
the Committee specifies a later date. No option may terminate later than ten
years from the date the option is granted. The
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Committee may provide for the exercise of options in installments and upon such
terms, conditions and restrictions as it may determine. The Committee may
provide for termination of an option in the case of termination of employment or
any other reason.
11. RIGHTS IN EVENT OF DEATH OR DISABILITY. If a participant dies or
becomes disabled [within the meaning of Section 22(e)(3) of the Internal Revenue
Code] prior to termination of his right to exercise an option in accordance with
the provisions of his stock option agreement without having totally exercised
the option, the option agreement may provide that it may be exercised, to the
extent of the shares with respect to which the option could have been exercised
by the participant on the date of the participant's death or disability, (i) in
the case of death, by the participant's estate or by the person who acquired the
right to exercise the option by bequest or inheritance or by reason of the death
of the participant, or (ii) in the case of disability, by the participant or his
personal representative, provided the option is exercised prior to the date of
its expiration or 180 days from the date of the participant's death or
disability, whichever first occurs. The date of disability of a participant
shall be determined by the Committee.
12. PAYMENT. Unless cash is paid to the participant upon exercise of the
option, full payment for shares purchased shall be made in cash or by check or,
if allowed by the stock option agreement and approved by the Committee, by
tendering shares of Common Stock at the fair market value per share at the time
of exercise. Likewise, any withholding associated with a Nonqualified Option
may, if allowed by the stock option agreement and approved by the Committee, be
paid by tendering shares of Common Stock at the fair market value per share at
the time of exercise. No shares may be issued until full payment of the purchase
price therefor has been made, and a participant will have none of the rights of
a stockholder until shares are issued to him.
5
<PAGE>
13. EXERCISE OF OPTION. Options granted under the Plan may be exercised
during the Option Period, at such times, in such amounts, in accordance with
such terms and subject to such restrictions as are set forth below. In no event
may an option be exercised or shares be issued pursuant to an option if any
requisite action, approval or consent of any governmental authority of any kind
having jurisdiction over the exercise of options shall not have been taken or
secured. If the option agreement does not contain Stock Appreciation provisions,
the Committee may offer an optionholder, upon such conditions and restrictions
as it deems advisable and in lieu of receipt from him of the exercise price and
issuance of certificates for the shares of stock exercised, the right to elect
to receive payment in cash, Common Stock, or a combination of cash and Common
Stock, as the Committee shall determine, in an amount equal to the Stock
Appreciation.
14. CAPITAL ADJUSTMENTS AND REORGANIZATIONS. The number of shares of
Common Stock covered by each outstanding option granted under the Plan and the
option price shall be adjusted to reflect, as deemed appropriate by the
Committee, any stock dividend, stock split, share combination, exchange of
shares, recapitalization, merger, consolidation, separation, reorganization,
liquidation or the like, of or by the Company.
15. NON-ASSIGNABILITY. Options may not be transferred other than by will
or by the laws of descent and distribution. During a participant's lifetime,
options granted to a participant may be exercised only by the participant or as
provided in section 11 hereof.
16. INTERPRETATION. The Committee shall interpret the Plan and shall
prescribe such rules and regulations in connection with the operation of the
Plan as it determines to be advisable for the administration of the Plan. The
Committee may rescind and amend its rules and regulations.
6
<PAGE>
17. AMENDMENT OR DISCONTINUANCE. The Plan may be amended or discontinued
by the Board without the approval of the stockholders of the Company, except
that any amendment that would (1) materially increase the number of securities
that may be issued under the Plan, or (2) materially modify the requirements of
eligibility for participation in the Plan must be approved by the stockholders
of the Company.
18. EFFECT OF PLAN. Neither the adoption of the Plan nor any action of
the Board or the Committee shall be deemed to give any Employee any right to be
granted an option to purchase Common Stock of the Company or any other rights
except as may be evidenced by the stock option agreement, or any amendment
thereto, duly authorized by the Committee and executed on behalf of the Company
and then only to the extent and on the terms and conditions expressly set forth
therein.
19. TERM. Unless sooner terminated by action of the Board, this Plan
will terminate on June 9, 2007. The Committee may not grant options under the
Plan after that date, but options granted before that date will continue to be
effective in accordance with their terms.
20. DEFINITIONS. For the purpose of this Plan, unless the context
requires otherwise, the following terms shall have the meanings indicated:
(a) "Board" means the Board of Directors of the Company. (b)
"Committee" means the committee or committees of the Board
appointed by the Board to administer the Plan, or in the absence
of such a committee, shall mean the entire Board.
(c) "Common Stock" means the Common Stock which the Company is
currently authorized to issue or may in the future be authorized
to issue (as long as the common stock varies from that currently
authorized, if at all, only in amount
7
<PAGE>
of par value).
(d) "Company" means Lunn Industries, Inc., a Delaware corporation.
(e) "Employee" means any employee, officer, or consultant or
advisor, provided that bona fide services shall be rendered by
consultants or advisors and such services must not be in
connection with the offer or sale of securities in a
capital-raising transaction.
(f) "Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended.
(g) "Incentive Option" means an option granted under the Plan which
meets the requirements of Section 422 of the Internal Revenue
Code.
(h) "Nonqualified Option" means an option granted under the Plan
which is not intended to be an Incentive Option.
(i) "Option Period" means the period during which an option may be
exercised.
(j) "Parent" means any corporation in an unbroken chain of
corporations ending with the Company if, at the time of granting
of the option, each of the corporations other than the Company
owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations
in the chain.
(k) "Plan" means this Stock Option Plan, as amended from time to
time.
(l) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of the
granting of the option, each of the corporations other than the
last corporation in the unbroken chain owns
8
<PAGE>
stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in the
chain, and "Subsidiaries" means more than one of any such
corporations.
9
EXHIBIT 10.24
1997 ADVANCED TECHNICAL PRODUCTS, INC.
INCENTIVE STOCK OPTION AGREEMENT
1. GRANT OF OPTION. Pursuant to the 1997 Advanced Technical
Products, Inc. Stock Option Plan (the "Plan") for key employees of Advanced
Technical Products, Inc. (the "Company") and its subsidiaries, and subject to
the limitations of Section 3 hereof, the Company grants to
-----------------------------
(the "Option Holder")
an incentive option to purchase from the Company a total of _________ shares of
Common Stock $0.01 par value, of the Company at $_____ per share (being at least
the fair market value per share of the Common Stock on the date of this grant),
in the amounts, during the periods and upon the terms and conditions set forth
in this Agreement.
2. TIME OF EXERCISE. Except only as specifically provided
elsewhere in this Agreement, this option is exercisable in the following
cumulative installments:
a. Up to ___% of the total optioned shares at any time after
------------, ----;
b. Up to an additional ___% of the total optioned shares at
any time after _____________, ____;
c. Up to an additional ___% of the total optioned shares at
any time after ___________, ____;
d. Up to an additional ___% of the total optioned shares at
any time after __________, ____; and
e. The remaining ___% of the total optioned shares at any time
after ___________, _____.
<PAGE>
If an installment covers a fractional share, such installment will be rounded
off to the next highest share, except the final installment, which will be for
the balance of the total optioned shares. In the event of the Option Holder's
termination of employment for whatever cause, the option will be exercisable
only to the extent that the Option Holder could have exercised it on the date of
his termination of employment.
3. EXERCISE OF OPTION. The exercise of this option shall
entitle the Option Holder to purchase shares of Common Stock of the Company.
4. SUBJECT TO PLAN. This option and the grant and exercise
thereof are subject to the terms and conditions of the Plan, which is
incorporated herein by reference and made a part hereof, but the terms of the
Plan shall not be considered an enlargement of any benefits under this
Agreement. In addition, this option is subject to any rules and regulations
promulgated pursuant to the Plan, now or hereafter in effect.
5. TERM. This option will terminate at the first of the
following:
a. 5 p.m. on __________, ____.
b. 5 p.m. on the later of the date of expiration or 180 days
following the date of the Option Holder's termination of
employment with the Company and its subsidiaries by reason
of the Option Holder's death or disability (within the
meaning of Section 22(e)(3) of the Internal Revenue Code).
c. 5 p.m. on the date 30 days following the date the Option
Holder's employment with the Company and its subsidiaries
terminates other than by death or disability.
6. WHO MAY EXERCISE. During the lifetime of the Option Holder,
this option may be exercised only by the Option Holder. If the Option Holder
dies or becomes disabled (within the meaning of Section 22(e)(3) of the Internal
Revenue Code) prior to the termination date specified
3
<PAGE>
in Section 5 hereof without having exercised the option as to all of the shares
covered hereby, the option may be exercised to the extent the Option Holder
could have exercised the option on the date of his death or disability at any
time prior to the earlier of the dates specified in Section 5(a) and (b) hereof
by (i) the Option Holder's estate or a person who acquired the right to exercise
the option by bequest or inheritance or by reason of the death of the Option
Holder in the event of the Option Holder's death, or (ii) the Option Holder or
his personal representative in the event of the Option Holder's disability,
subject to the other terms of this Agreement, the Plan and applicable laws,
rules and regulations. For purposes of this Agreement, the Company shall
determine the date of disability of the Option Holder.
7. RESTRICTIONS ON EXERCISE. This option:
a. may be exercised only with respect to full shares and no
fractional share of stock shall be issued;
b. may not be exercised in whole or in part and no cash or
certificates representing shares subject to such option
shall be delivered, if any requisite approval or consent
of any government authority of any kind having
jurisdiction over the exercise of options shall not have
been secured; and
c. may be exercised only if at all times during the period
beginning with the date of the granting of the option and
ending on the date 30 days prior to the date of exercise
the Option Holder was an employee of either the Company or
a subsidiary of the Company; provided, if the Option
Holder's continuous employment is terminated by (i)
disability, the option may be exercised in accordance with
Section 6, or (ii) death, or if the Option Holder dies
within said 30-day period, the option may be exercised in
accordance with Section 6.
8. MANNER OF EXERCISE. Subject to such administrative
regulations as the Board of Directors may from time to time adopt, the Option
Holder or beneficiary shall, in order to exercise this option, give written
notice ("the Notice") to the Company of the exercise price and the number of
shares which he will purchase. Any Notice shall include full payment in United
States dollars of
3
<PAGE>
the option exercise price for the shares of stock being purchased and an
undertaking to furnish or execute such documents as the Company in its
discretion shall deem necessary (i) to evidence such exercise, in whole or in
part, of the option evidenced by this Agreement, (ii) to determine whether
registration is then required under the Securities Act of 1933, or any other
law, as then in effect, and (iii) to comply with or satisfy the requirements of
the Securities Act of 1933, or any other law, as then in effect.
9. NON-ASSIGNABILITY. This option is not assignable or transferable by
the Option Holder except by will or by the laws of descent and distribution.
10. RIGHTS OF STOCKHOLDER. The Option Holder will have no rights as a
stockholder with respect to any shares covered by this option until the issuance
of a certificate or certificates to the Option Holder for the shares. Except as
otherwise provided in Section 11 hereof, no adjustment shall be made for
dividends or other rights for which the record date is prior to the issuance of
such certificate or certificates.
11. CAPITAL ADJUSTMENTS. The number of shares of Common Stock covered
by this option, and the option price thereof, shall be subject to such
adjustment as the Board of Directors of the Company deems appropriate to reflect
any stock dividend, stock split, share combination, exchange of shares,
recapitalization, merger, consolidation, separation, reorganization, liquidation
or the like, of or by the Company.
12. LAW GOVERNING. This Agreement is intended to be performed in the
State of Delaware and shall be construed and enforced in accordance with and
governed by the laws of such State.
13. DATE OF GRANT. The date of grant of this option is __________,
____.
4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer and the Option Holder, to evidence his consent
and approval of all the terms hereof, has duly executed this Agreement, as of
the date specified in Section 13 hereof.
ADVANCED TECHNICAL PRODUCTS, INC,
By: ________________________________
James S. Carter, Chairman of the Board,
President and Chief Executive Officer
OPTION HOLDER:
____________________________________
Name: ______________________________
5
EXHIBIT 10.25
ADVANCED TECHNICAL PRODUCTS, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
On November 6, 1997 (the "Effective Date"), the Board of Directors of
Advanced Technical Products, Inc. (the "Company") adopted a program of granting
stock options to non-employee directors of the Company which is formalized by
the following Non-Employee Directors Stock Option Plan:
1. PURPOSE. The purpose of the Plan is to provide non-employee
directors of the Company with a proprietary interest in the Company
through the granting of options which will
(a) increase the interest of the directors in the
Company's welfare; (b) furnish an incentive to the directors to
continue their services for the Company; and
(c) provide a means through which the Company may
attract able persons to serve on the Board.
2. ADMINISTRATION. The Plan will be administered by the Board or
the Committee.
3. PARTICIPANTS. Each director of the Company who is not an
employee of the Company or any Subsidiary of the Company (an "Eligible
Director") will be granted options under the Plan, and upon such grant
will become a participant in the Plan.
4. SHARES SUBJECT TO PLAN. Options may not be granted under the
Plan for more than 100,000 shares of Common Stock of the Company, but
this number may be adjusted to reflect, if
<PAGE>
deemed appropriate by the Board, any event described in Section 12.
Shares to be optioned and sold may be made available from either
authorized but unissued Common Stock or Common Stock held by the Company
in its treasury. Shares that by reason of the expiration of an option or
otherwise are no longer subject to purchase pursuant to an option
granted under the Plan may be reoffered under the Plan.
5. ALLOTMENT OF SHARES. Grants of options under the Plan shall
be as described in this Section 5.
(a) Each Eligible Director of the Company on the
Effective Date shall be granted an option, effective as of the
date establishing the option price under Section 7 (the "Grant
Date"), to purchase 7,500 shares of Common Stock.
(b) Each Eligible Director of the Company who is
appointed or elected to the Board and has not previously served
as a director of the Company shall be granted an option,
effective as of the Grant Date, to purchase 7,500 shares of
Common Stock.
(c) Each Eligible Director of the Company elected at the
annual stockholders meeting, other than a first-time director
covered by Section 5(b), shall be granted an option, effective
as of the Grant Date, to purchase 1,000 shares of Common Stock.
2
<PAGE>
6. GRANT OF OPTIONS. All options under the Plan shall be
automatically granted as provided in Section 5. The grant of options
shall be evidenced by stock option agreements containing such terms and
provisions as are approved by the Board, or the Committee, but not
inconsistent with the Plan. The Company shall execute appropriate stock
option agreements.
7. OPTION PRICE. The option price shall be equal to the closing
price of Common Stock of the Company on (a) for grants under Section
5(a), the date of adoption of the Plan by the Board, (b) for grants
under Section 5(b), the date of commencement of the Eligible Director's
service on the Board and (c) for grants under Section 5(c), the
applicable date of the Company's annual stockholders meeting.
8. OPTION PERIOD. The Option Period will begin on the Grant Date
and will terminate on the earlier of (i) the tenth anniversary of that
date or (ii) the 180th day after termination of the Eligible Director's
service on the Board.
9. RIGHTS IN EVENT OF DEATH. If a participant dies prior to
termination of his right to exercise an option in accordance with the
provisions of his stock option agreement without having totally
exercised the option, the option may be exercised at any time prior to
the earlier of the date of its expiration or the 180th day after the
participant's death by the participant's estate or by the person who
acquired the right to exercise the option by bequest or inheritance or
by
3
<PAGE>
reason of the death of the participant, subject to the other terms of
the Plan and applicable laws, rules and regulations.
10. PAYMENT. Full payment for shares purchased upon exercising
an option shall be made in cash or by check at the time of exercise, or
on such other terms as are set forth in the applicable option agreement.
No shares may be issued until full payment of the purchase price
therefor has been made, and a participant will have none of the rights
of a stockholder until shares are issued to him.
11. VESTING.
(a) Options described in Sections 5(a) and (b) will vest
in one-third increments on the days immediately preceding each
of the three annual stockholders meetings which follow the Grant
Date, provided that the participant is still a director of the
Company on those dates. Options described in Section 5(c) will
vest 100% on the day immediately preceding the annual
stockholders meeting which follows the Grant Date, provided that
the participant is still a director of the Company on that date.
(b) In no event may an option be exercised or shares be
issued pursuant to an option if any requisite action, approval
or consent of any governmental authority of any kind having
jurisdiction over the exercise of options shall not have been
taken or secured.
4
<PAGE>
12. CAPITAL ADJUSTMENTS AND REORGANIZATIONS. The number of
shares of Common Stock covered by each outstanding option granted under
the Plan and the option price thereof, and the number of shares to be
granted pursuant to Sections 5(b) and (c), may be adjusted to reflect,
as deemed appropriate by the Board, any stock dividend, stock split,
share combination, exchange of shares, recapitalization, merger,
consolidation, separation, reorganization, liquidation or the like, of
or by the Company.
13. NON-ASSIGNABILITY. Options may not be transferred other than
by will or by the laws of descent and distribution. Except as otherwise
provided in the Plan, during a participant's lifetime, options granted
to a participant may be exercised only by the participant.
14. INTERPRETATION. The Board or the Committee shall interpret
the Plan and shall prescribe such rules and regulations in connection
with the operation of the Plan as it determines to be advisable for the
administration of the Plan. The Board or the Committee may rescind and
amend its rules and regulations.
15. AMENDMENT OR DISCONTINUANCE. The Plan may be amended or
discontinued by the Board without the approval of the stockholders of
the Company.
16. EFFECT OF PLAN. Neither the adoption of the Plan nor any
action of the Board or the Committee shall be deemed
5
<PAGE>
to give any director any right to be granted an option to purchase
Common Stock of the Company or any other rights except as may
be evidenced by the stock option agreement, or any amendment thereto,
duly authorized by the Board or the Committee and executed on behalf of
the Company, and then only to the extent and on the terms and conditions
expressly set forth therein.
17. TERM. Unless sooner terminated by action of the Board, the
Plan will terminate on November 5, 2007. Neither the Board nor the
Committee may issue options under the Plan after that date, but options
granted before that date will continue to be effective in accordance
with their terms.
18. DEFINITIONS. For the purposes of the Plan, unless the
context requires otherwise, the following terms shall have the meanings
indicated:
(a) "Plan" means this Non-Employee Directors Stock
Option Plan, as amended from time to time.
(b) "Board" means the board of directors of the Company.
(c) "Committee" means any committee of the Board
appointed by the Board to administer the Plan or any portion of
the Plan.
(d) "Common Stock" means the Common Stock which the
Company is currently authorized to issue or may in the future be
authorized to issue (as long as the common
6
<PAGE>
stock varies from that currently authorized, if at all, only in
amount of par value).
(e) "Option Period" means the period during which an
option may be exercised.
(f) "Subsidiary" means any corporation in an unbroken
chain of corporations beginning with the Company if, at the time
of the granting of the option, each of the corporations other
than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain,
and "Subsidiaries" means more than one of any such corporations.
EXHIBIT 10.26
ADVANCED TECHNICAL PRODUCTS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
1. GRANT OF OPTION. Pursuant to the Advanced Technical Products, Inc.
Non-Employee Directors Stock Option Plan (the "Plan") for non-employee directors
of Advanced Technical Products, Inc. (the "Company"), the Company grants to
--------------------
(the "Option Holder")
an option to purchase from the Company a total of ______ shares of Common Stock,
$0.01 par value, of the Company at $_____ per share (being the closing price per
share of the Common Stock on the date of this grant), in the amounts, during the
periods, and upon the terms and conditions set forth in this Agreement.
2. TIME OF EXERCISE. Except only as specifically provided elsewhere in
this Agreement, this option is exercisable, in whole or in part, in the
following cumulative installments:
i. Up to 33 1/3% of the total optioned shares at any time after
the day preceding the _____ annual meeting of stockholders of the
Company provided that the Option Holder is a director of the Company at
5 p.m. on that date;
ii. Up to an additional 33 1/3% of the total optioned shares at
any time after the day preceding the ______ annual meeting of stockholders of
the Company provided that the Option Holder is a director of the Company at 5
p.m. on that date;
<PAGE>
iii. Up to an additional _______ of the total optioned shares at
any time after the day preceding the 2000 annual meeting of stockholders of the
Company provided that the Option Holder is a director of the Company at 5 p.m.
on that date. If an installment covers a fractional share, such installment will
be rounded off to
the next highest share, except the final installment, which will be for the
balance of the total optioned shares. In the event of the Option Holder's
termination of service on the Board for whatever cause, the option will be
exercisable only to the extent that the Option Holder could have exercised it on
the date of his termination of service. In no event may this option be exercised
in whole or in part after its date of termination specified in Section 5 hereof.
3. EXERCISE OF OPTION. The exercise of this option shall entitle the
Option Holder to purchase shares of Common Stock of the Company.
4. SUBJECT TO PLAN. This option and the grant and exercise thereof are
subject to the terms and conditions of the Plan, which is incorporated herein by
reference and made a part hereof, but the terms of the Plan shall not be
considered an enlargement of any benefits under this Agreement. In addition,
this option is subject to any rules and regulations promulgated pursuant to the
Plan, now or hereafter in effect.
5. TERM. This option shall terminate at the first to occur of the
following, and any portion of the option not exercised on or before that date
shall be forfeited:
(a) 5 p.m. on ________________.
(b) 5 p.m. on the date which is 180 days after termination of the
Option Holder's service on the Board.
2
<PAGE>
6. WHO MAY EXERCISE. During the lifetime of the Option Holder, this
option may be exercised only by the Option Holder. If the Option Holder dies
prior to the termination date specified in Section 5 hereof without having
exercised the option as to all of the shares covered thereby, the option may be
exercised at any time prior to the earlier of the dates specified in Section 5
hereof by the Option Holder's estate or a person who acquired the right to
exercise the option by bequest or inheritance or by reason of the death of the
Option Holder, subject to the other terms of this Agreement and applicable laws,
rules and regulations.
7. RESTRICTIONS ON EXERCISE. The option evidenced by this Agreement:
(a) may be exercised only with respect to full shares and no
fractional share of stock shall be issued; and
(b) may not be exercised in whole or in part and no cash or
certificates representing shares subject to such option
shall be delivered, if any requisite approval or consent
of any governmental authority of any kind having
jurisdiction over the exercise of options shall not have
been secured.
8. MANNER OF EXERCISE. Subject to such administrative regulations as the
Board of the Directors of the Company may from time to time adopt, the Option
Holder or beneficiary shall, in order to exercise this option give written
notice (the "Notice") to the Company of the exercise price and the number of
shares which he will purchase. Any Notice shall include full payment in United
States dollars of the option exercise price for the shares of stock being
purchased and an undertaking to furnish or execute such documents as the Company
in its discretion shall deem necessary (i) to evidence such exercise, in whole
or in part, of the option evidenced by this Agreement, (ii) to determine whether
registration is then required under the Securities Act of 1933, as then in
effect, and (iii) to comply with or satisfy the requirements of the Securities
Act of 1933, or any other law, as then in effect.
3
<PAGE>
In addition, the Option Holder shall tender payment of the amount as may
be requested pursuant to Section 14 hereof by the Company for the purpose of
satisfying its liability to withhold federal, state or local income or other
taxes incurred by reason of the exercise of the option.
9. NON-ASSIGNABILITY. This option is not assignable or transferable by
the Option Holder except by will or by the laws of descent and distribution.
10. RIGHTS OF STOCKHOLDER. The Option Holder will have no rights as a
stockholder with respect to any shares covered by this option until the issuance
of a certificate or certificates to the Option Holder for the shares. Except as
otherwise provided in Section 11 hereof, no adjustment shall be made for
dividends or other rights for which the record date is prior to the issuance of
such certificate or certificates.
11. CAPITAL ADJUSTMENTS. The number of shares of Common Stock covered by
this option, and the option price thereof, shall be subject to such adjustments
as the Board of Directors of the Company deems appropriate to reflect any stock
dividend, stock split, share combination, exchange of shares, recapitalization,
merger, consolidation, separation, reorganization, liquidation or the like, of
or by the Company.
In the event the Company shall be party to any merger, consolidation or
corporate reorganization, as the result of which the Company shall be the
surviving corporation, the rights and duties of the Option Holder and the
Company shall not be affected in any manner. In the event the Company shall sell
all or substantially all of its assets or shall be a party to any merger,
consolidation or corporate reorganization, as the result of which the Company
shall not be the surviving corporation, or in the event any other person or
entity may make a tender or exchange offer for stock of the Company whereby such
other person or entity would own more than 50% of the outstanding
4
<PAGE>
Common Stock of the Company (the surviving corporation, purchaser, or tendering
corporation being collectively referred to as the "purchaser", and the
transaction being collectively referred to as the "transaction"), then the Board
may, at its election, (a) reach an agreement with the purchaser that the
purchaser will assume the obligations of the Company under the option; (b) reach
an agreement with the purchaser that the purchaser will convert the option into
an option of at least equal value as to stock of the purchaser; or (c) not later
than twenty days prior to the effective date of such transaction, notify the
Option Holder and afford to the Option Holder a right for ten days after the
date of such notice to exercise any then unexercised portion of the option.
Within such ten-day period, the Option Holder may exercise any portion of the
option as he may desire and deposit with the Company the requisite cash to
purchase in full and not in installments the Common Stock thereby exercised, in
which case the Company shall, prior to the effective date of the transaction,
issue all Common Stock thus exercised, which shall be treated as issued stock
for purposes of the transaction.
12. LAW GOVERNING. This Agreement is intended to be performed in the
State of Delaware and shall be construed and enforced in accordance with and
governed by the laws of such State.
13. DATE OF GRANT. The date of grant of this option is ________________.
14. WITHHOLDING. It shall be a condition to the obligation of the
Company to issue or transfer shares of stock upon exercise of this option that
the Option Holder pay to the Company, upon its demand, such amount as may be
requested by the Company for the purpose of satisfying its liability to withhold
federal, state or local income or other taxes incurred by reason of the exercise
5
<PAGE>
of this option. If the amount requested is not paid, the Company may refuse to
issue or transfer shares of stock upon exercise of this option.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer and the Option Holder, to evidence his consent
and approval of all the terms hereof, has duly executed this Agreement, as of
the date specified in Section 13 hereof.
ADVANCED TECHNICAL PRODUCTS, INC,
By: _________________________________
Garrett L. Dominy, Executive Vice President
and Chief Financial Officer
OPTION HOLDER:
_____________________________________
Name:________________________________
6
EXHIBIT 10.27
PLAN DOCUMENT
TECHNICAL PRODUCTS GROUP, INC.
DEFERRED COMPENSATION PLAN
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TABLE OF CONTENTS
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ARTICLE I. SCOPE OF PLAN....................................................................1
1.01. Purpose............................................................................1
1.02. Sources of Payments................................................................1
ARTICLE II. DEFINITIONS.....................................................................2
2.01. 401(k) Deferral Restoration Account................................................2
2.02. 401(k) Match Restoration Account...................................................2
2.03. 401(k) Plan........................................................................2
2.04. Accounts...........................................................................2
2.05. Accrued Benefit....................................................................2
2.06. Affiliate..........................................................................2
2.07. Compensation.......................................................................2
2.08. Beneficiary........................................................................2
2.09. Board of Directors.................................................................2
2.10. Change of Ownership ...............................................................2
2.11. Code...............................................................................2
2.12. Company............................................................................2
2.13. Credits............................................................................3
2.14. Early Retirement Date..............................................................3
2.15. Effective Date.....................................................................3
2.16. Employee...........................................................................3
2.17. ERISA..............................................................................3
2.18. Normal Retirement Date.............................................................3
2.19. Notice of Discontinuance...........................................................3
2.20. Participant........................................................................3
2.21. Plan...............................................................................3
2.22. Plan Year..........................................................................3
2.23. Salary Reduction Agreement.........................................................3
2.24. Trust..............................................................................3
2.25. Trust Agreement....................................................................3
2.26. Trustee............................................................................3
ARTICLE III. ELIGIBILITY AND PARTICIPATION..................................................4
3.01. Qualified Individuals..............................................................4
3.02. Participants.......................................................................4
ARTICLE IV. CREDITS.........................................................................5
4.01. Salary Reduction Agreements.......................................................5
4.02. 401(k) Deferral Restoration Account Credits........................................6
4.03. 401(k) Match Restoration Account Credits...........................................6
ARTICLE V. HYPOTHETICAL INVESTMENT OPTIONS..................................................7
5.01. In General.........................................................................7
5.02. Comparable Funds...................................................................7
5.03. Value of Accounts..................................................................7
5.04. Dividend Credits...................................................................7
5.05. Hypothetical Investment Elections..................................................7
5.06. Pro Rata Allocation................................................................7
5.07. No Warranties......................................................................8
5.08. Effective Date.....................................................................8
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ARTICLE VI. VESTING.........................................................................9
6.01. 401(k) Deferral Restoration Account...............................................9
6.02. 401(k) Match Restoration Account..................................................9
ARTICLE VII. BENEFITS......................................................................10
7.01. Commencement of Payment..........................................................10
7.02. Form of Payments.................................................................10
7.03. Hardship Benefits................................................................10
7.04. Disability Benefits..............................................................11
7.05. Death Benefits...................................................................11
7.06. Designation of Beneficiary.......................................................11
7.07. Termination Benefit..............................................................12
7.08. Retirement Benefits..............................................................12
7.09. Coordination with the 401(k) Plan................................................12
ARTICLE VIII. ADMINISTRATION...............................................................13
8.01 Responsibilities and Powers of the Company........................................13
8.02 Outside Services..................................................................13
8.03. Statements........................................................................13
8.04. Payment Schedules.................................................................13
8.05. Expenses..........................................................................13
ARTICLE IX. AMENDMENT AND TERMINATION......................................................14
9.01. Amendment........................................................................14
9.02. Termination......................................................................14
ARTICLE X. MISCELLANEOUS PROVISIONS........................................................15
10.01. Inalienability of Benefits.......................................................15
10.02. No Right of Employment...........................................................15
10.03. Indemnification..................................................................15
10.04. Notice...........................................................................15
10.05. Construction.....................................................................15
10.06. Headings.........................................................................15
10.07. Severability.....................................................................15
10.08. Governing Law....................................................................15
10.09. Counterparts.....................................................................16
EXHIBIT A - SALARY REDUCTION AGREEMENT FORM.................................................17
EXHIBIT B - BENEFIT PAYMENT FORM............................................................18
EXHIBIT C - INITIAL HYPOTHETICAL INVESTMENT FORM............................................19
EXHIBIT D - 401(k) PLAN TRANSFER FORM. . . . . . . . . . . . . . . . . . . .. . . . . 20
EXHIBIT E - BENEFICIARY DESIGNATION FORM....................................................21
EXHIBIT F - NOTICE OF DISCONTINUANCE FORM...................................................24
EXHIBIT G - MODIFIED SALARY REDUCTION AGREEMENT FORM........................................25
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ARTICLE I. SCOPE OF PLAN.
1.01. PURPOSE. This Plan is intended to be an unfunded and nonqualified
deferred compensation arrangement that will provide deferred compensation
benefits to a select group of management or highly compensated employees of
Technical Products Group, Inc. for the purposes of Title I of ERISA.
The Plan is established and maintained by the Company solely for the
purpose of providing benefits for eligible employees in excess of the
limitations on benefits imposed by Code Sections 401(a)(4), 401(a)(17), 401(k),
401(m), 402(g) and 415 on plans to which any of those sections apply.
1.02. SOURCES OF PAYMENTS. The right of the Participant or his
designated beneficiary to receive a distribution of his Accounts hereunder or
any benefit payment shall be an unsecured claim against the general assets of
the Company, and neither the Participant nor his designated beneficiary shall
have any rights in or against the Trust described below, or any other specific
assets of the Company.
The Company will establish a trust and make contributions to the Trust
in order to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan. The Trust is intended to be a grantor trust, of
which the Company is the grantor, within the meaning of subpart E, part I,
subchapter J, chapter 1, subtitle A of the Code. Except as otherwise provided in
the Trust Agreement, the Trustee shall make payments to the Plan participants
and their beneficiaries in such manner and at such times as specified in the
Plan and the Trust Agreement. The Trust assets are subject to the claims of the
Company's creditors in the event of the Company's insolvency or bankruptcy,
pursuant to the terms of the Trust Agreement. The Company intends that this
Trust shall constitute an unfunded arrangement and shall not affect the status
of the Plan as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of ERISA.
Benefits payable to Plan participants and their beneficiaries under the
Trust Agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment, levy, execution or
other legal or equitable process.
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ARTICLE II. DEFINITIONS.
As used in the Plan, the following terms have the meanings set forth
below, unless a different meaning is plainly required by the context.
2.01. 401(K) DEFERRAL RESTORATION ACCOUNT shall mean the separate
account, if any, that may be established for a Participant pursuant to Section
4.02 of this Plan.
2.02. 401(K) MATCH RESTORATION ACCOUNT shall mean the separate account,
if any, that may be established for a Participant pursuant to Section 4.03 of
this Plan.
2.03. 401(K) PLAN shall mean The Technical Products Group, Inc.
Retirement Savings Plan.
2.04. ACCOUNTS shall mean a Participant's 401(k) Deferral Restoration
Account, and 401(k) Match Restoration Account.
2.05. ACCRUED BENEFIT shall mean the value of all Credits to a
Participant's Accounts and due and owing to the Participant or his beneficiaries
pursuant to the terms of this Plan, minus any distributions hereunder.
2.06. AFFILIATE shall mean any business entity that has adopted the
401(k) Plan and of which Technical Products Group, Inc. owns more than fifty
percent (50%).
2.07. COMPENSATION shall mean total wages of the Employee paid or
accrued by the Company, including bonuses and other one-time payments,
commissions, wages deferred under this Plan, stock options, stock appreciation
rights, elective deferrals to the 401(k) Plan and contributions made under an
Internal Revenue Code Section 125 plan, but shall not include the value of any
other employer contributions to any trust, fund, agreement or plan providing
retirement, pension, profit sharing, health, welfare benefit, death, insurance
or similar plans, nor the value of any expense allowances paid to the Employee.
In addition, for Qualified Individuals who Participate in the Plan by virtue of
their service on the Board of Directors of the Company, Compensation shall mean
total director's fees paid to the individual.
2.08. BENEFICIARY shall mean a person or persons designated by a
Participant to receive benefits hereunder upon the death of such Participant.
2.09. BOARD OF DIRECTORS shall mean the board of directors of Technical
Products Group, Inc..
2.10. CHANGE OF OWNERSHIP shall mean either (i) Technical Products
Group, Inc. shall cease to own and control, beneficially and of record, 100% of
the issued and outstanding capital stock of each of the Technical Products,
Marion, DeLand and Lincoln subsidiaries of the Company or (ii) EQUUS Capital
Appreciation Fund L.P. shall cease to own and control, beneficially and of
record, at least 50% of the issued and outstanding capital stock of Technical
Products Group, Inc.
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2.11. CODE shall mean the Internal Revenue Code of 1986, as amended.
2.12. COMPANY shall mean Technical Products Group, Inc. (incorporated in
the state of Georgia), and its successors and assigns.
2.13. CREDITS shall represent the value of benefits payable to a
Participant under the terms of this Plan (whether vested or unvested) and
credited pursuant to Article IV, prior to the conversion of the credits into
stock units pursuant to Section 5.03.
2.14. EARLY RETIREMENT DATE shall mean the same as Normal Retirement
Date.
2.15. EFFECTIVE DATE shall mean the first day of April, 1997, which is
the effective date of this Plan.
2.16. EMPLOYEE shall mean any employee of the Company or any Affiliate.
2.17. ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended.
2.18. NORMAL RETIREMENT DATE shall mean the date on which the Employee
attains age 65.
2.19. NOTICE OF DISCONTINUANCE shall mean the written notice filed with
the controller of the Company in substantially the form attached hereto as
Exhibit F, requesting the discontinuance of the deferral of the Employee's
Compensation.
2.20. PARTICIPANT shall mean an Employee or former Employee who has an
Accrued Benefit under this Plan, and/or any Employee who is eligible to
participate in the Plan and elected to do so pursuant to Section 3.02.
2.21. PLAN shall mean the Technical Products Group, Inc. Deferred
Compensation Plan as set forth herein, effective as of the first day of April 1,
1997, and as it may be amended from time to time.
2.22. PLAN YEAR shall mean the 12-consecutive month period ending on
December 31 except the initial Plan Year shall be a short Plan Year from April
1, 1997 to December 31, 1997.
2.23. SALARY REDUCTION AGREEMENT shall mean the agreement between the
Company and the Participant pursuant to Section 4.01 of this Plan. The form for
such Agreement is Exhibit A.
2.24. TRUST shall mean the Trust established pursuant to Section 1.02 of
the Plan.
2.25. TRUST AGREEMENT shall mean the agreement between the Company and
the Trustee establishing the Trust pursuant to Section 1.02 of the Plan.
2.26. TRUSTEE shall mean Trustee of the Trust established pursuant to
Section 1.02 of the Plan.
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ARTICLE III. ELIGIBILITY AND PARTICIPATION.
3.01. QUALIFIED INDIVIDUALS. A Qualified Individual shall be any
individual who serves on the Board of Directors of the Company or who is
designated by the Company's Chief Executive Officer and who meets the following
criteria:
(1) An Employee whose compensation for services rendered to the Company
or an affiliate, during the past year is in excess of the dollar limit specified
in Code Section 414(q), as indexed; or an individual whose compensation during
the Plan Year is reasonably expected to exceed such threshold; and
(2) who owns Stock or Stock Options of the Company.
3.02. PARTICIPANTS. Qualified Individuals who have been designated as
eligible to participate under the Plan by the Company's Chief Executive Officer,
may elect to become a Participant under the Plan by filing a written notice with
the Company, in the form prescribed by the terms of the Plan.
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ARTICLE IV. CREDITS.
4.01. SALARY REDUCTION AGREEMENTS.
(a) IN GENERAL. Any Qualified Individual eligible to participate in this
Plan may elect to defer annually the receipt of a portion of the Compensation
otherwise payable to him by the Company or any Affiliate, which portion shall be
designated by him as a percentage of his Compensation, and such percentage shall
not exceed the amount equal to 100% of his Compensation that would otherwise be
paid to the Participant by the Employer in cash. This election shall be made by
filing a Salary Reduction Agreement with the Company. Under this Salary
Reduction Agreement the Participant agrees to accept a reduction in his
Compensation and the Company agrees to credit on his behalf the amount of such
reduction to this Plan.
Salary Reduction Agreements shall be executed on the form specified by
the Plan, a copy of which is attached as Exhibit A. Salary Reduction Agreements
shall be signed by the Participant and delivered to the controller of the
Company within the period permitted under the terms of this Article.
(b) INITIAL ELECTIONS TO DEFER COMPENSATION. For Qualified Individuals
who are Participants as of the effective date of this Plan, a Salary Reduction
Agreement shall be delivered to the controller of the Company at 3353 Peachtree
Road, Suite 920, Atlanta, Georgia 30326, by March 31, 1997. The first salary
reduction and Credit to each Participant's 401(k) Deferral Restoration Account
shall be for the pay period beginning on or about April 1, 1997.
For Qualified Individuals who become eligible to participate in the Plan
subsequent to the Plan's effective date, their initial Salary Reduction
Agreement shall be delivered to the controller of the Company at the above
address within thirty (30) days of the date of the eligibility to participate in
the Plan. The initial Salary Reduction Agreement for each Participant will
become effective on the first day of the month following the date the Salary
Reduction Agreement is delivered to the controller of the Company.
(c) TERM OF SALARY REDUCTION AGREEMENT. All initial and subsequent
elections to defer compensation shall continue, pursuant to the Salary Reduction
Agreement, until:
(i) the Participant's employment with the Employer and any Affiliate
terminates because of the Participant's death, early retirement, normal
retirement, disability, or any other cause; or
(ii) the Salary Reduction Agreement is discontinued as provided in
paragraph (d) below; or
(iii) the Salary Reduction Agreement is modified as provided in
paragraph (e) below.
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(d) DISCONTINUANCE OF SALARY REDUCTION AGREEMENT. A Participant may
discontinue his Salary Reduction Agreement for the remainder of any calendar
year by delivering a Notice of Discontinuance to the controller of the Company,
which Notice is attached hereto as Exhibit F. A Notice of Discontinuance shall
be delivered at least twenty (20) days prior to its effective date, and shall
apply only with respect to the Participant's compensation attributable to
services not yet performed. Any Participant who discontinues his Salary
Reduction Agreement shall not be allowed to defer any more compensation for the
remainder of the calendar year in which the discontinuance occurs.
(e) MODIFICATION OF SALARY REDUCTION AGREEMENTS. A Participant will be
allowed to change the amount of his Salary Reduction Agreement once a year. Any
modification of a Participant's Salary Reduction Agreement will be delivered to
the controller of the Company by December 15th of any calendar year, and will be
effective for the following calendar year. A copy of the Modification of a
Salary Reduction Agreement Form is attached as Exhibit G.
4.02. 401(K) DEFERRAL RESTORATION ACCOUNT CREDITS. The amount being
credited on behalf of a Participant pursuant to paragraph (a) of Section 4.01
shall be credited to the Participant's 401(k) Deferral Restoration Account. Such
Credits shall be made as of the date on which the amount being credited would
have been otherwise paid to the Participant.
4.03. 401(K) MATCH RESTORATION ACCOUNT CREDITS. For any Plan Year, each
Participant who receives Credits to his 401(k) Deferral Restoration Account
under a Salary Reduction Agreement may receive Credits to his 401(k) Matching
Restoration Account. Whether or not such Credits shall be made to Participants
shall be determined at the sole and absolute discretion of the Employer. The
amount of the Credits, if any, shall be equal to 6% of the 401(k) Deferral
Restoration Account Credits during the applicable Plan Year minus, if
applicable, compensation (as defined in the 401(k) Plan for employer match
allocation purposes) in excess of the lesser of: (a) the 401(a)(17) limitation
in effect for the Plan Year; or (b) the 402(g) limitation for the Plan Year
divided by 6%.
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ARTICLE V. HYPOTHETICAL INVESTMENT OPTIONS.
5.01. IN GENERAL. All Credits to a Participant's Accounts shall be
allocated among one or more of the Hypothetical Investment Options determined
from time to time by the Company in its sole discretion.
5.02. COMPARABLE FUNDS. Each Hypothetical Investment Option, shall have
a comparable investment fund, which fund shall be an open-ended investment
company registered under the Investment Company Act of 1940, as amended
("Comparable Fund").
5.03. VALUE OF ACCOUNTS. Amounts credited to each of a Participant's
Accounts shall be allocated to a Hypothetical Investment Option or Options
pursuant to Section 5.05, and shall be converted into stock units having a value
equal to the net asset value of the applicable Comparable Investment Fund or
Funds as of the "purchase date". The purchase date is a date no later than ten
(10) business days after the date of a Credit to any of a Participant's
Accounts, except for Dividend Credits which are credited pursuant to Section
5.04 below. As of any given date, the total value of a Participant's Accounts
shall be equal to the number of stock units of each Comparable Fund then in the
Accounts multiplied by the net asset value of the applicable Comparable Fund or
Funds, plus the dollar value of all Credits that have not be converted into
stock units.
The Company has the right to change the Comparable Funds at its sole
discretion, subject to the following limitations:
(i) the Comparable Funds can only be changed effective as of January 1
or July 1 of any Plan Year, or if a Comparable Fund undergoes a material
change; and
(ii) Participants shall be given at least thirty (30) days notice of the
change of Comparable Funds.
5.04. DIVIDEND CREDITS. For each Hypothetical Investment Option in which
the Participant participates, the Participant will receive additional Credits
("Dividend Credits") computed as follows: The Dividend Credits shall be computed
as if all dividends paid on the Comparable Fund were reinvested in whole and
fractional shares of the Comparable Fund on the payment date (the "purchase
date" for Dividend Credits) at the Net Asset Value as of the date of record.
5.05. HYPOTHETICAL INVESTMENT ELECTIONS. At the time the Participant
files his initial Salary Reduction Agreement, the Participant shall file a
Hypothetical Investment Form. The initial Hypothetical Investment Form shall
designate, in whole percents, how his Credits will be allocated among each
Hypothetical Investment Options. Thereafter, on or about the first day of
January and the first day of July of each Plan Year, the Participant shall have
the opportunity to reallocate his present Credits, and to file a subsequent
Hypothetical Investment Form for future Credits to his Accounts. The
Hypothetical Investment Form is attached as Exhibit C.
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5.06. PRO RATA ALLOCATION. All Stock Units of each Hypothetical
Investment Option that have been allocated to a Participant shall be divided PRO
RATA among the Participant's 401(k) Deferral Restoration Account and 401(k)
Match Restoration Account, in accordance with the total credits to each Account,
less withdrawals.
5.07. NO WARRANTIES. Neither the Board of Directors nor the Company
warrants or represents in any way that the value of each Participant's Accounts
will increase and not decrease. Such Participant assumes all risk in connection
with any change in such value.
5.08. EFFECTIVE DATE. The effective date of the allocation of
Participants' Credits to the Hypothetical Investment Options pursuant to
Sections 5.01 through 5.07 is the earlier of (a) ten (10) business days after
the date the Trust is established, or (b) 120 days from the date of the initial
401(k) Deferral Restoration Account Credit. Prior to this date, simple interest
shall be credited to each Participant's account at a rate equal to the 3-year
Treasury Note yield as of the week in which the 401(k) Deferral Restoration
Account is first credited for any Participant.
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ARTICLE VI. VESTING.
6.01. 401(K) DEFERRAL RESTORATION ACCOUNT. Each Participant shall be one
hundred percent (100%) vested, at all times, in the value of his 401(k) Deferral
Restoration Account.
6.02. 401(K) MATCH RESTORATION ACCOUNT. Each Participant shall be one
hundred percent (100%) vested in the value of his 401(k) Match Restoration
Account.
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ARTICLE VII. BENEFITS.
7.01. COMMENCEMENT OF PAYMENT. Benefits will commence within thirty (30)
days of any of the following events: a Participant's early retirement, a
Participant's normal retirement, disability, death or termination of employment
with the Company or in the event of a Change of Ownership of the Company. The
date which is thirty (30) days following any of the above events is the BENEFITS
STARTING DATE. The value of the Participant's Accrued Benefit will be paid to
the Participant, or, if the Participant is deceased, his Beneficiary, pursuant
to Section 7.02.
7.02. FORM OF PAYMENTS. The form of payments shall depend upon the type
of event causing the payment of the Participant's Accrued Benefit. If the event
is a hardship, disability or death, as defined in this Article, the
Participant's Accrued Benefit shall be paid as a single lump sum on his Benefits
Starting Date.
If the event triggering the payment of the Participant's Accrued Benefit
is the Participant's early retirement or normal retirement or termination of
employment with the Company, or a Change of Ownership, then the Participant's
Accrued Benefit shall be paid either in a cash lump sum on his Benefits Starting
Date, or in equal annual installments over a five (5) year period or a ten (10)
year period. The form of payment under these circumstances must be irrevocably
designated by the Participant at the time of entry into the Plan. Such election
shall be made within 30 days of his first becoming eligible to participate in
this Plan. The form for irrevocably electing a form of payments is attached as
Exhibit B.
If the Participant elected to receive his Accrued Benefit in the form of
installment payments, the first installment shall commence on his Benefits
Starting Date, and each installment thereafter shall be paid on the anniversary
of his Benefits Starting Date. A Participant's remaining Accrued Benefit, after
each installment, shall continue to receive Dividend Credits and to be valued
pursuant to Article V. The amount of each installment for the five (5) and ten
(10) year installment payouts shall be equal to his Accrued Benefit on the
payment date multiplied by a fraction. The numerator of the fraction shall be
one (1), and the denominator of the fraction shall be equal to the number of
installments remaining to be paid including the current installment.
All payments of a Participant's Accrued Benefit shall be paid in cash.
7.03. HARDSHIP BENEFITS. In the event the Employee, or former Employee
who is receiving a distribution of his Accrued Benefit pursuant to the
installment method under Section 7.02, suffers a financial hardship (as
hereinafter defined), the Company shall distribute to or utilize on behalf of
the Employee as a hardship benefit (the "Hardship Benefit") any portion of the
Employee's Accrued Benefit up to, but not in excess of, the Termination Benefit
to which the Employee would have been entitled as of the date a Hardship Benefit
is distributed or utilized. Any Hardship Benefit shall be distributed or
utilized at such times as the Company shall determine, and the Employee's
Accrued Benefit shall be reduced by the amount so distributed and/or utilized.
Financial Hardship shall mean a financial need of the Employee caused by an
unforeseeable emergency. For purposes of this Section, an unforeseeable
emergency is a severe financial hardship to the Participant resulting from a
sudden or unexpected illness or accident of the
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Participant or of a dependent (as defined in Code Section 152(a)) of the
Participant, loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant.
Payment under this Section shall not be made to the extent that such
hardship is or may be relieved:
(i) through reimbursement or compensation by insurance; or
(ii) by liquidation of the Participant's assets, to the extent the
liquidation of such assets would not itself cause a severe financial
hardship; or
(iii) by cessation of deferrals under this Plan and the 401(k) Plan.
Withdrawals of amounts because of an unforeseeable emergency shall be made only
to the extent reasonably needed to satisfy the emergency need.
The Company shall make the decision of whether or not, and to what
extent, a Hardship Benefit is payable to the Participant, based on the facts and
circumstances of the case. The Company's decision as to whether or not a
Hardship Benefit is payable, and to what extent it is payable, shall be final,
conclusive and binding on all persons.
Hardship Benefits shall be withdrawn first from a Participants' 401(k)
Deferral Restoration Account, then, if required, from his 401(k) Match
Restoration Account.
7.04. DISABILITY BENEFITS. Notwithstanding any other provision hereof,
the Employee shall be entitled to receive his Accrued Benefit hereunder prior to
his Early Retirement Date or Normal Retirement Date, whichever applies, in any
case in which it is determined by a duly licensed physician selected by the
Company that, because of ill health, accident, disability or general inability
because of age, the Employee is no longer able, properly and satisfactorily, to
perform his regular duties as an Employee. The Employee's Accrued Benefit upon
Disability shall be distributed to him on his Benefits Starting Date in pursuant
to Section 7.02.
7.05. DEATH BENEFITS. In the event of the Employee's death while in the
employment of the Company, the Company shall pay to his Beneficiary his Accrued
Benefit pursuant to Section 7.01. If a Participant or former Participant dies
after the commencement of benefit payments made in the form of annual
installments pursuant to Section 7.02, the Participant's remaining Accrued
Benefit shall be paid to his Beneficiary within 30 days of receiving notice of
his death. Notice of a Participant's death shall be made by delivering to the
controller of the Company a certified copy of the Participant's death
certificate.
7.06. DESIGNATION OF BENEFICIARY. The Beneficiary of any Death Benefit
payable under the Plan shall be the Participant's Spouse. Except, however, the
Participant may designate a Beneficiary other than his Spouse if:
(i) the Spouse has waived in writing his or her right to be the
Participant's Beneficiary;
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(ii) the Participant has no Spouse; or
(iii) the Spouse cannot be located.
If the Beneficiary of any Death Benefit is not the Spouse because one or more of
the preceding conditions is satisfied, then the Participant's Beneficiary of
Death Benefit under this Plan shall be the same as provided by beneficiary
designations to the Plan. If a Participant has failed to designate a Beneficiary
or if the Beneficiary designated by a deceased Participant dies before him or
before complete distribution of the Participant's benefits, such Participant's
benefits shall be paid in accordance with the following order of priority:
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(i) to the Participant's surviving spouse, or if there be none
surviving;
(ii) to the Participant's children, in equal parts, or if there be none
surviving;
(iii) to the Participant's father and mother, in equal parts, or if
there be none surviving;
(iv) to the Participant's estate.
The Beneficiary Designation Form is attached as Exhibit E.
7.07. TERMINATION BENEFIT. In the event of the Employee's termination of
employment before his Early Retirement Date for any reason, other than his
disability or his death, the Company shall pay to the Employee, as compensation
for services rendered prior to such termination, his Accrued Benefit pursuant to
Section 7.02.
7.08. RETIREMENT BENEFITS. The Company shall pay the Employee his
Accrued Benefit pursuant to Section 7.02 to any Participant who separates from
service with the Company on or after his Early Retirement Date or Normal
Retirement Date.
7.09. COORDINATION WITH THE 401(K) PLAN. Immediately following each Plan
Year, and not later than January 31 of the year following the Plan Year, the
Employer shall perform preliminary actual deferral percentage testing and actual
contribution percentage testing to determine, with respect to Participants, the
maximum amount ("Maximum Amount") of additional elective contributions that
could be made to the 401(k) Plan for the 401(k) Plan's plan year that coincides
with the Plan Year. Such Maximum Amount shall be consistent with the limits set
forth in Code ss.401(g) and ss.401(k)(3) and that are in effect for the Plan
Year to which the Maximum Amount relates. For each Participant, the lesser of
(i) the Maximum Amount or (ii) his deferrals for the Plan Year under the Salary
Reduction Agreement shall be distributed to the Participant between March 1 and
March 15 of the year in which the Maximum Amount is determined, unless the
Participant has previously elected to have such amount contributed to the 401(k)
Plan as an elective contribution. The Participant's election to have the Maximum
Amount contributed to the 401(k) Plan shall be made when initially eligible, and
once made, such election shall be IRREVOCABLE. Such election shall be made on
the 401(k) Plan Transfer Form attached hereto as Exhibit D. If the
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Participant so elects to transfer the Maximum Amount to the 401(k) Plan, the
Maximum Amount shall be transferred between March 1 and March 15 of the year in
which the Maximum Amount is determined. In addition, to the extent that the
Employer is required to make matching contributions under the 401(k) Plan with
respect to such elective contributions, the Employer shall make such
contributions out of the matching amounts previously credited to the
Participant's account under the Plan. All such 401(k) Plan matching
contributions shall be debited from the Participant's 401(k) Match Restoration
Account. Any matching contributions associated with such elective contributions
shall be in the same amounts as would be made if the elective deferrals were
directly made to the 401(k) Plan, subject to the actual contribution percentage
test of Code ss.401(m)(2) and, if applicable, the multiple use limitation set
forth in Code ss.401(m)(9). Earnings credited to a Participants' Accounts under
the Plan shall not be transferred to the 401(k) Plan.
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ARTICLE VIII. ADMINISTRATION.
8.01 RESPONSIBILITIES AND POWERS OF THE COMPANY. The Company shall be
solely responsible for the operation and administration of the Plan and shall
have all powers necessary and appropriate to carry out its responsibilities in
operating and administering the Plan, including, but not limited to, the power
to construe and interpret the Plan, and the power to remedy any ambiguities or
inconsistencies in the Plan. Without limiting the generality of the foregoing,
the Company shall have the responsibility and power to determine eligibility or
participation in the Plan, whether a Credit should be made on behalf of a
Participant, the amount of the Credit and the value of the amount so credited,
and the Participant's nonforfeitable interest in his Accounts. The determination
by the Company made in good faith as to any matter respecting the operation and
administration of the Plan shall be conclusive and binding on all persons,
including Participants and their Beneficiaries.
8.02 OUTSIDE SERVICES. The Company may engage counsel and such clerical,
financial, investment, accounting, and other specialized services as the Company
may deem necessary or desirable to the operation and administration of the Plan.
The Company shall be entitled to rely upon any opinions, reports, or other
advice furnished by counsel or other specialists engaged for such purposes and,
in so relying, shall be fully protected in any action, determination, or
omission taken or made in good faith.
8.03. STATEMENTS. The Company shall furnish each Participant with a
quarterly statement of his Accounts, which statements shall summarize for the
period all Credits to each of his Accounts, the vested amount of each of his
Accounts, the changes in his Accounts, and the starting and ending balance of
his Accounts.
8.04. PAYMENT SCHEDULES. The Company shall deliver to the Trustee a
schedule that indicates the amounts payable in respect of each Participant (and
his Beneficiary), that provides a formula or other instructions acceptable to
the Trustee for determining the amounts so payable, the form in which such
amount is to be paid (as provided for or available under the Plan), and the time
of commencement for payment of such amounts. The Company shall also instruct the
Trustee as to the amount or formula for calculating the amount of any
withholding of any federal, state or local taxes that may be required to be
withheld with respect to the payment of benefits pursuant to the terms of the
Plan.
8.05. EXPENSES. The Company shall pay all costs and expenses incurred
in operating and administering the Plan.
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ARTICLE IX. AMENDMENT AND TERMINATION.
9.01. AMENDMENT. The Board of Directors may amend the Plan at any time,
without the consent of the Participants or their Beneficiaries, provided,
however, that no amendment shall divest any Participant or Beneficiary of the
credits to and value of his Account, or of any rights to his account, which he
would have been entitled if the Plan had been terminated immediately prior to
the effective date of such amendment.
9.02. TERMINATION. The Board of Directors may terminate the Plan at any
time. Upon termination of the Plan, distributions of the value of a
Participant's Accounts shall be made in the manner and at the time heretofore
prescribed; provided no additional credits shall be made to the Account of a
Participant following termination of the Plan other than Dividend Credits
thereon credited pursuant to Article V.
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ARTICLE X. MISCELLANEOUS PROVISIONS.
10.01. INALIENABILITY OF BENEFITS. The Participant's interest in his
Accounts, and any benefits payable to the Participant or his Beneficiary, may
not be anticipated, assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, levy, execution or other legal or
equitable process, and any attempt to do so shall be void. Any such benefit or
interest shall not in any manner be liable for or subject to, voluntary or
involuntary garnishment, attachment, execution, or levy, or reliable for or
subject to the debts, contract, liabilities, engagements, or tort of any
Participant or his Beneficiary. In the event that the Board of Directors finds
that any Participant or his Beneficiary has become bankrupt or that any attempt
has been made to anticipate, alienate, sell, transfer, assign, pledge, encumber,
charge, garnish, attach, execute on or levy against any benefit payable under,
or interest in, the Plan, the Board of Directors shall hold or apply such
benefit or interest or any part thereof to or for the benefit of such
Participant or his Beneficiary, his spouse, children, parents or other blood
relatives, or any of them.
Furthermore, the Company has no right of offset with respect to any
benefit payments hereunder for any debt, obligation or other liability
representing an amount the Employee owes to the Company or an Affiliate.
10.02. NO RIGHT OF EMPLOYMENT. Nothing contained herein nor any action
taken under the provisions hereof shall be construed as a contract of employment
for any term of years, nor as conferring upon the Employee any right to be
retained in the employ of the Company in his present capacity, or any capacity.
10.03. INDEMNIFICATION. The Company shall indemnify each Board of
Directors member against any and all claims, loss, damages, expense (including
reasonable counsel fees), and liability arising from any action, failure to act,
or other conduct in the member's official capacity, except when due to a Board
of Directors member's own gross negligence or willful misconduct.
10.04. NOTICE. Any notice, consent or demand required or permitted to be
given under the provisions of this Plan shall be in writing, and shall be signed
by the person giving or making the same. If such notice, consent or demand is
mailed to a Participant or a Beneficiary hereto, it shall be sent by United
States certified mail, postage prepaid, addressed to such person's last known
address as shown on the records of the Company. The date of such mailing shall
be deemed the date of notice, consent or demand. Any Participant may change the
address to which notice is to be sent by giving written notice of the same to
the Company. Notice to the Company shall be delivered to the attention of the
controller, Technical Products Group, Inc., Controller.
10.05. CONSTRUCTION. The terms defined in the Plan shall apply equally
to both singular and plural. The masculine pronoun, whenever used, shall include
the feminine. When used in the Plan, the words "hereof", "herein" and
"hereunder" and words of similar import shall refer to the Plan as a whole and
not to a particular provision of the Plan, unless otherwise specified.
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10.06. HEADINGS. The headings of this Plan are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
10.07. SEVERABILITY. If any provision of this Plan is determined to be
invalid or unenforceable, such determination shall not affect the validity or
enforceability of any other provisions of this Plan.
10.08. GOVERNING LAW. The Plan shall be governed, construed, regulated,
and administered by the laws of the State of Georgia.
10.09. COUNTERPARTS. This Plan may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all
counterparts shall, together, constitute only one Plan.
IN WITNESS WHEREOF, the Company has executed this Plan on the 24th day
of March, 1997.
TECHNICAL PRODUCTS GROUP, INC.
ATTEST BY: /s/ LISA ZIEGLER /s/ GARRETT L. DOMINY
SEAL Executive Vice President
--------------------------
Title
18
EXHIBIT 10.28
RABBI TRUST AGREEMENT
TECHNICAL PRODUCTS GROUP, INC.
DEFERRED COMPENSATION PLAN
<PAGE>
<TABLE>
<CAPTION>
TABLE OF
CONTENTS
<S> <C> <C>
SECTION 1. ESTABLISHMENT OF TRUST..................................................... 1
SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES...................... 2
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO THE TRUST BENEFICIARY
WHEN THE COMPANY IS INSOLVENT.............................................. 2
SECTION 4. PAYMENTS TO THE COMPANY.................................................... 3
SECTION 5. INVESTMENT AUTHORITY....................................................... 3
SECTION 6. DISPOSITION OF INCOME...................................................... 5
SECTION 7. ACCOUNTING BY THE TRUSTEE.................................................. 6
SECTION 8. RESPONSIBILITY OF THE TRUSTEE.............................................. 6
SECTION 9. COMPENSATION AND EXPENSES OF THE TRUSTEE................................... 7
SECTION 10. RESIGNATION AND REMOVAL OF THE TRUSTEE...................................... 7
SECTION 11. APPOINTMENT OF SUCCESSOR.................................................... 7
SECTION 12. AMENDMENT OR TERMINATION.................................................... 8
SECTION 13. MISCELLANEOUS............................................................... 8
SECTION 14. EFFECTIVE DATE................................................................9
</TABLE>
<PAGE>
RABBI TRUST UNDER THE
TECHNICAL PRODUCTS GROUP, INC. DEFERRED COMPENSATION PLAN
This Trust Agreement made this ____ day of _____________, 19___ by and
between Technical Products Group, Inc. (hereinafter called the "Company"), with
its principal place of business at 3353 Peachtree Road, Suite 920, Atlanta,
Georgia, 30326, and Austin Trust Company (hereinafter called the "Trustee"), a
trust company organized and existing under the laws of the State of Texas, as
Trustee.
W I T N E S S E T H :
WHEREAS, the Company has adopted the Technical Products Group, Inc.
Restoration Plan ("Plan"), a non-qualified deferred compensation plan; and
WHEREAS, the Company has incurred or expects to incur liability under
the terms of such Plan with respect to the individuals participating in such
Plan; and
WHEREAS, the Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of the Company's creditors in the event of the Company's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
and
WHEREAS, it is the intention of the Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the trust shall be comprised, held and disposed of as follows:
SECTION 1. ESTABLISHMENT OF TRUST
(a) The Company hereby deposits with the Trustee in trust $100.00, which
shall become the principal of the Trust to be held, administered and disposed of
by the Trustee as provided in this Trust Agreement.
(b) The Trust shall become irrevocable upon execution.
(c) The Trust is intended to be a grantor trust, of which the Company is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be held
separate and apart from other funds of the Company and shall be used exclusively
for the uses and purposes of Plan participants and general creditors as herein
set forth. Plan participants and their beneficiaries shall have no preferred
claim
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on, or any beneficial ownership interest in, any assets of the Trust. Any
right created under the Plan and this Trust Agreement shall be mere unsecured
contractual rights of the Plan participants and their beneficiaries against the
Company. Any assets held by the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the event of
Insolvency, as defined in Section 3(a) herein.
(e) Within 30 days following the end of the Plan year, ending after the
Trust has become irrevocable pursuant to Section 1(b) hereof, the Company shall
be required to irrevocably deposit additional cash or other property to the
Trust in an amount sufficient to pay each Plan participant or beneficiary the
benefits payable pursuant to the terms of the Plan as of the close of the Plan
year.
SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES.
(a) The Company shall deliver to the Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Plan
participant (and his or her beneficiaries), that provides a formula or other
instructions acceptable to the Trustee for determining the amounts so payable,
the form in which such amount to be paid (as provided for or available under the
Plan), and the time of commencement for payment of such amounts. Except as
otherwise provided herein, the Trustee shall make payments to the Plan
participants and their beneficiaries in accordance with such Payment Schedule.
The Trustee shall make provision for the reporting and withholding of any
federal, state or local taxes that may be required to be withheld with respect
to the payment of benefits pursuant to the terms of the Plan and shall pay
amounts withheld to the appropriate taxing authorities or determine that such
amounts have been reported, withheld and paid by the Company.
(b) The entitlement of a Plan participant or his or her beneficiaries to
benefits under the Plan shall be determined by the Company or such party as it
shall designate under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan.
(c) The Company may make payment of benefits directly the Plan
participants or their beneficiaries as they become due under the terms of the
Plan. The Company shall notify the Trustee of its decision to make payment of
benefits directly prior to the time amounts are payable to participants or their
beneficiaries. In addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in accordance with the
terms of the Plan, the Company shall make the balance of each such payment as
its falls due. The Trustee shall notify the Company where principal and earnings
are not sufficient.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO THE TRUST BENEFICIARY
WHEN THE COMPANY IS INSOLVENT.
(a) The Trustee shall cease payment of benefits to Plan participants and
their beneficiaries if the Company is Insolvent. The Company shall be considered
"Insolvent' for purposes of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due, or (ii) the Company is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Company under federal and state law as set
forth below.
(1) The Board of Directors and the Chief Executive Officer of the
Company shall have the duty to inform the Trustee in writing of the
Company's Insolvency. If a person claiming to be a creditor of
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<PAGE>
the Company alleges in writing to the Trustee that the Company has
become Insolvent, the Trustee shall determine whether the Company is
Insolvent and, pending such determination, the Trustee shall discontinue
payment of benefits to Plan participants or their beneficiaries.
(2) Unless the Trustee has actual knowledge of the Company's Insolvency,
or has received notice from the Company or a person claiming to be a
creditor alleging that the Company is Insolvent, the Trustee shall have
not duty to inquire whether the Company is Insolvent. The Trustee may in
all events rely on such evidence concerning the Company's solvency as
may be furnished to the Trustee and that provides the Trustee with a
reasonable basis for making a determination concerning the Company's
solvency.
(3) If any time the Trustee has determined that the Company is
Insolvent, the Trustee shall discontinue payments to Plan participants
or their beneficiaries and shall hold the assets of the Trust for the
benefit of the Company's general creditors. Nothing in this Trust
Agreement shall in any way diminish any rights of Plan participants or
their beneficiaries to pursue their rights as general creditors of the
Company with respect to benefits due under the Plan or otherwise.
(4) The Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Section 2 of this
Trust Agreement only after the Trustee has determined that the Company
is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants of their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by the Company in lieu of the payments
provided hereunder during any such period of discontinuance.
SECTION 4. PAYMENTS TO THE COMPANY.
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, the Company shall have no right or power to direct the Trustee to
return to the Company or to divert to others any of the Trust assets before all
payment of benefits have been made to Plan participants and their beneficiaries
pursuant to the terms of the Plan.
SECTION 5. INVESTMENT AUTHORITY
(a) With respect to the Trust Fund, the Trustee shall have the following
powers and rights, in addition to those vested in it elsewhere in this Agreement
or by law:
(1) To invest the Trust Fund in such bonds, notes, debentures,
mortgages, equipment, trust certificates, investment trust certificates,
preferred or common stock, insurance and annuity contracts, common or
collective trust funds, shares of regulated investment companies, shares
of open-ended investment companies registered under the Investment
Company Act of 1940, as amended, or in such other property, real or
personal, as the Trustee may deem advisable, with the care, skill,
prudence and diligence under the circumstances then prevailing that a
prudent man acting in a like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and with
like aims; and
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<PAGE>
(2) The Trustee may temporarily invest and reinvest the funds in any
marketable short- and medium-term fixed income securities (including
demand and short-term notes and those commonly known as "Master Notes"),
United States Treasury Bills, other short- and medium-term government
obligations, commercial paper, other money market instruments and part
interests in any one or more of the foregoing, or may maintain cash
balances consistent with the liquidity needs of the Plan.
(3) In addition, the Trustee shall have full power and authority to
invest and reinvest all or any part of any investment fund through the
medium of any pooled investment fund or group trust (including one or
more of which it is the Trustee) which is invested principally in the
property of the kind authorized for investment of the respective
investment funds. To the extent of investment of the Trust's assets in
such a pooled fund or group trust, the terms of the instrument
establishing such pooled fund or group trust are made a part hereof as
fully as if set forth at length herein.
(4) To retain, manage, improve, repair, operate and control all
property, real or personal, at any time comprising part of the Trust
Fund; and
(5) To manage, sell, contract to sell, grant options to purchase,
convey, exchange, partition, lease for any term (even though such term
commences in the future or may extend beyond the duration of the Trust),
and otherwise dispose of the Trust Fund from time to time in such a
manner, for such consideration, and upon such terms and conditions as
the Trustee in its discretion shall determine; and
(6) To vote any corporate stock either in person or by proxy for any
purpose; to exercise or sell any stock subscription or conversion right;
to participate in voting trusts; to consent to, take any action in
connection with, and receive and retain any securities resulting from
any merger, consolidation, reorganization, readjustment of the financial
structure, liquidation, sale, lease, or other disposition of the assets
of any corporation or other organization the securities of which may
constitute a portion of the Trust Fund; and
(7) To keep any property in the name of a nominee with or without
disclosure of any fiduciary relationship; and
(8) To take any action with respect to conserving or realizing upon the
value of any property in the Trust Fund; to collect, pay, contest,
compromise, or abandon demands of or against the Trust Fund; to pay any
tax, assessment for other charge attributable to the interest of such
beneficiary; and
(9) To purchase, hold and sell interests or units of participation in
any collective or common trust fund established by the Trustee,
including any such funds which may be established in the future;
(10) To deposit securities in a security depository and permit the
securities so deposited to be held in the name of the depository's
nominee, and to deposit securities issued or guaranteed by the U.S.
government or any agency or instrumentality thereof, including
securities evidenced by book entry rather than by certificate, with the
U.S. Department of the Treasury, a Federal Reserve Bank or other
appropriate custodial entity, in the same account as the Trustee's own
property, provided the Trustee's records and accounts show that such
securities are assets of the Trust Fund; and
(11) Generally, to do all acts, whether or not expressly authorized,
which the Trustee deems necessary or desirable, but acting at all times
according the principles expressed in Section 8.
4
<PAGE>
(b) The Trustee is authorized to contract or make other arrangements
with any other organizations affiliated with or subsidiaries of the Trustee or
related entities, for the provision of services to the Trust or Plan, except
where such arrangements are prohibited by law or regulation.
(c) The Trustee is directed to place securities orders, settle
securities trades, hold securities in custody, and other related activities on
behalf of the Trust through or by any broker/dealer Trustee selects, unless an
Investment Advisor appointed by the Company and approved by the Trustee to act
as Investment Advisor (so called) specifically instructs the use of a specific
broker/dealer. Trades (and related activities) conducted through any
broker/dealer shall be subject to fees and commissions established by the
broker/dealer, which may be paid from the Trust or netted from the proceeds of
trades.
The Trustee is authorized to disclose such information as is necessary
to the operation and administration of the Trust to such persons or
organizations that the Trustee determines have a legitimate business purpose for
obtaining such information.
(d) The Company may appoint an Investment Advisor subject to the
approval of the Trustee. Any such appointment shall be in writing and shall
delineate the duties, responsibilities and liabilities of the Investment Advisor
with respect to any part of the assets of the trust under the control of the
Investment Advisor. Any such Investment Advisor appointed by the Company shall
be an independent person or entity.
If the Company shall appoint an Investment Advisor to whom discretion is
given to invest all or any part of the assets of the Trust, the Trustee shall
segregate each such part into a separate account to be invested by the Trustee
upon the direction of the Investment Advisor. The Trustee shall be under no duty
to question, or make inquiries as to, any action or direction of any Investment
Advisor as provided herein, or any failure to give directions, or to review the
securities subject to the investment direction of any Investment Advisor, or to
make any suggestions to an Investment Advisor with respect to investment and
reinvestment of, or disposing of investments in, any part of the assets of the
Trust subject to the investment discretion of any Investment Advisor, unless the
Trustee knows that by such action or failure to act it will be participating in
a breach of fiduciary duty by the Investment Advisor.
(e) The Trustee may invest in securities (including stock of rights to
acquire stock) or obligations issued by the Company. All rights associated with
assets of the Trust shall be exercised by the Trustee or the person designated
by the Trustee, and shall in no event be exercisable by or rest with Plan
participants, except that voting rights with respect to Trust assets will be
exercised by the Company.
(f) The Company shall have the right at anytime, and from time to time
in its sole discretion, to substitute assets of equal fair market value for any
asset held by the Trust. This right is exercisable by the Company in a
nonfiduciary capacity without the approval or consent of any person in a
fiduciary capacity.
SECTION 6. DISPOSITION OF INCOME.
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
SECTION 7. ACCOUNTING BY THE TRUSTEE.
The Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing
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<PAGE>
between the Company and the Trustee. Within 60 days following the close of each
calendar year and within 60 days after the removal or resignation of the
Trustee, the Trustee shall deliver to the Company a written account of its
administration of the Trust during such year or during the period from the close
of the last preceding year to the date of such removal or resignation, setting
forth all investments, receipts disbursements and other transactions effected by
it, including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued interest paid
or receivable being show separately), and showing all cash, securities and other
property held in the Trust at the end of such year or as of the date of such
removal or resignation, as the case may be.
SECTION 8. RESPONSIBILITY OF THE TRUSTEE.
(a) The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that the
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Company which is contemplated by,
and in conformity, the terms of the Plan or this Trust and is given in writing
by the Company. In the event of a dispute between the Company and a party, the
Trustee may apply to a court of competent jurisdiction to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify the Trustee against
the Trustee's costs, expenses and liability (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments. If the Company does not pay such costs, expenses and liabilities
in a reasonably timely manner, the Trustee may obtain payment from the Trust.
(c) The Trustee may consult with legal counsel (who may also be counsel
for the Company generally) with respect to any of its duties or obligations
hereunder.
(d) The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers conferred on
the Trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if any insurance policy is held as an asset of the
Trust, the Trustee shall have no power to name a beneficiary of the policy other
than the Trust, to assign the policy (as distinct from conversion of the policy
to a different form) other than to a successor Trustee, or to loan to any person
the proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee pursuant to this
Trust Agreement or to applicable law, the Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgate pursuant to the Internal Revenue Code.
(g) The Trustee shall not be liable for any mistake or error in judgment
but shall be liable only for willful misconduct or gross negligence.
(h) No Trustee shall be required to furnish bond or other security
except as herein expressly provided or except if required to do so under
applicable federal law.
(i) In the event of a garnishment, attachment, levy or other legal
process by a creditor of the Company of any of the assets of the Trust under
circumstances set out in Section 3.(b) hereof where Trustee
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cannot ascertain the Insolvency of the Company, the Trustee may interplead the
assets of the Trust into the court where the creditor has brought such action.
The Trustee shall have no liability to the Company for making such interpleader.
SECTION 9. COMPENSATION AND EXPENSES OF THE TRUSTEE.
The Company shall pay all administration and Trustee's fees and
expenses. If not so paid, the fees and expenses shall be paid from the Trust.
SECTION 10. RESIGNATION AND REMOVAL OF THE TRUSTEE.
(a) The Trustee may resign at any time by written notice to the Company,
which shall be effective 60 days after receipt of such notice unless the Company
and the Trustee agree otherwise.
(b) The Trustee may be removed by the Company on 60 days notice or upon
shorter notice accepted by the Trustee.
(c) Upon a Change of Ownership, as defined in Section 13 below, the
Trustee may not be removed by the Company for two (2) years.
(d) If the Trustee resigns or is removed within five (5) years of a
Change of Ownership, as defined herein, the Company shall apply to a court of
competent jurisdiction for the appointment of a successor trustee or for
instructions.
(e) Upon the resignation or removal of the Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the successor
Trustee. The transfer shall be completed within 90 days after receipt of notice
resignation, removal or transfer, unless the Company extends the time limit.
(f) If the Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective date or
resignation or removal under paragraph(s) (a) [or (b)] of this section. If no
such appointment has been made, the Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All expenses of
the Trustee in connection with the proceeding shall be allowed as administrative
expenses of the Trust.
SECTION 11. APPOINTMENT OF SUCCESSOR.
(a) If the Trustee resigns or is removed in accordance with Section
10(a) or 10(b) hereof, the Company may appoint any third party, such as a bank
trust department or other party that may be granted corporate trustee powers
under state law, as a successor to replace the Trustee upon resignation or
removal. The appointment shall be effective when accepted in writing by the new
Trustee, who shall have all of the rights and powers of the former Trustee,
including ownership rights in the Trust assets. The former Trustee shall execute
any instrument necessary or reasonably requested by the Company or the successor
Trustee to evidence the transfer.
(b) The Successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to
Sections 7, and 8 hereof. The successor Trustee shall not be responsible for and
the Company shall indemnify and defend the successor Trustee from any claim
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<PAGE>
or liability resulting from any action or inaction of any prior Trustee or from
any other past event, or any condition existing at the time it becomes successor
Trustee.
SECTION 12. AMENDMENT OR TERMINATION.
(a) This Trust Agreement may be amended by a written instrument executed
by Trustee and the Company. Notwithstanding the foregoing, no such amendment
shall conflict with the terms of the Plan or shall make the Trust revocable
after it has become irrevocable in accordance with Section 1(b) hereof.
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits pursuant
to the terms of the Plan. Upon termination of the Trust, any assets remaining in
the Trust shall be returned to the Company.
(c) Sections 10, 11 and 12 of this Trust Agreement may not be amended by
the Company for five (5) years following a Change of Ownership, as defined
herein.
SECTION 13. MISCELLANEOUS.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment, levy,
execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with laws of the State of Texas.
(d) Change of Ownership shall mean either (i) Technical Products Group,
Inc. shall cease to own and control, beneficially and of record, 100% of the
issued and outstanding capital stock of each of the Technical Products, Marion,
DeLand and Lincoln subsidiaries of the Company or (ii) EQUUS Capital
Appreciation Fund L.P. shall cease to own and control, beneficially and of
record, at least 50% of the issued and outstanding capital stock of Technical
Products Group, Inc.
(e) Until further notice from either party hereto, any notices delivered
pursuant to this Agreement and all other communications shall be in writing and
shall be delivered or sent to the persons at the addresses set forth hereunder.
All notices and other communications shall be effective when received. The party
seeking to rely on notice having been given under this paragraph shall be
responsible for ascertaining its receipt.
For Company:
Technical Products Group, Inc.
3353 Peachtree Road, Suite 920
Atlanta, Georgia 30326
Attention: Gary Dominy
8
<PAGE>
For Trustee:
Austin Trust Company
100 Congress Avenue, Suite 700
Austin, Texas 78701
Attention: Dan Remick
(f) This Agreement between the Company and the Trustee contains the
entire understanding between the parties with respect to its subject matter,
and, as of the effective date of this Agreement, it supersedes and entirely
replaces any and all prior agreements between the Company and the Trustee with
respect to the subject matter of this agreement.
(g) This Agreement shall be binding upon and inure to the benefit of the
parties hereof and their heirs, successors and assignees. This Agreement is not
assignable by any party without the expressed written consent of the other
party.
(h) Titles and captions used in this Agreement are included for
convenience of reference only and in no way define or delimit any provisions or
otherwise after the construction or effect.
(i) Where the context permits, words in the masculine gender shall
include the feminine and neuter genders, the singular shall include the plural,
and the plural shall include the singular.
(j) Each of the parties to this Agreement hereby represents and warrants
that it is duly authorized and empowered to execute, deliver and perform this
Agreement.
(k) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all counterparts shall,
together, constitute only one Agreement.
SECTION 14. EFFECTIVE DATE.
The effective date of this Trust Agreement shall be April 1, 1997.
9
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the day and year
first written above.
TECHNICAL PRODUCTS GROUP, INC.
ATTEST BY: /s/ LISA L. ZIEGLER /s/ GARRETT L. DOMINY
Title:Executive Vice President
TRUSTEE
AUSTIN TRUST COMPANY
ATTEST By:____________________ /s/ DAN REMICK
Title: Vice President
10
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF ADVANCED TECHNICAL PRODUCTS, INC.
NAME OF SUBSIDIARY STATE OF INCORPORATION
------------------ ----------------------
Technical Products Group, Inc. Delaware
Alcore, Inc. Delaware
Lincoln Properties, Inc. Delaware
Marion Properties, Inc. Delaware
Deland Properties, Inc. Delaware
EXHIBIT 23.1
The Board of Directors
Advanced Technical Products, Inc.
We consent to incorporation by reference in the registration statement (No.
33-19759) on Form S-8 of Lunn Industries, Inc. of our report dated march 20,
1998, except as to Note B, which is as of March 31, 1998, relating to the
consolidated balance sheet of Advanced Technical Products, Inc. and subsidiaries
as of December 31, 1997 and the related consolidated statements of income and
cash flows for the year then ended, and all related schedules, which report
appears in the December 31, 1997 annual report on Form 10-K of Advanced
Technical Products, Inc.
KPMG Peat Marwick LLP
Atlanta, Georgia
March 31, 1998
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 10-K of our report dated June 10, 1997 included in
Registration Statement File No. 333-30009. It should be noted that we have not
audited any financial statements of the Company subsequent to December 31, 1996,
or performed any audit procedures subsequent to the date of our report.
/s/ ARTHUR ANDERSEN LLP
Chicago, Illinois
March 31, 1998
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 10-K of our report dated March 14, 1997 included in
Registration Statement File No. 333-30009. It should be noted that we have not
audited any financial statements of the Company subsequent to December 31, 1996,
or performed any audit procedures subsequent to the date of our report.
/s/ ARTHUR ANDERSEN LLP
Chicago, Illinois
March 31, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTIANS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM CONSOLIDATED BALANCE SHEET AND STATEMENT OF INOCME
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 494
<SECURITIES> 0
<RECEIVABLES> 23,866
<ALLOWANCES> 449
<INVENTORY> 34,633
<CURRENT-ASSETS> 60,428
<PP&E> 25,709
<DEPRECIATION> 8,150
<TOTAL-ASSETS> 85,684
<CURRENT-LIABILITIES> 39,220
<BONDS> 2,473
1,000
0
<COMMON> 52
<OTHER-SE> 26,442
<TOTAL-LIABILITY-AND-EQUITY> 85,684
<SALES> 119,433
<TOTAL-REVENUES> 119,433
<CGS> 91,312
<TOTAL-COSTS> 110,318
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,273
<INCOME-PRETAX> 6,842
<INCOME-TAX> 2,634
<INCOME-CONTINUING> 4,208
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 4,208
<EPS-PRIMARY> 0.99
<EPS-DILUTED> 0.95
</TABLE>