U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
(Mark One)
[X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: June 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to _____________
Commission file number: 0-18434
REINHOLD INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in charter)
Delaware 13-2596288
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12827 East Imperial Hwy, Santa Fe Springs, CA 90670
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (562) 944-3281
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]
Check whether the issuer has filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to distribution of securities under a plan confirmed by the Court.
YES [ X ] NO [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class A Common Stock, Par Value $.01 - 1,998,956 shares as of August 16, 1999.
Transitional Small Business Disclosure Format (Check one):
YES [ ] NO [ X ]
<PAGE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1.
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 7
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
PART II - OTHER INFORMATION 20
SIGNATURES 22
EXHIBITS 23
<PAGE>
<TABLE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended
June 30,
1999 1998
----- ------
<S> <C> <C>
Net sales $9,574 $6,990
Cost of goods sold 6,944 5,291
----- ------
Gross profit 2,630 1,699
Selling, general and administrative expenses 1,124 1,041
----- ------
Operating income 1,506 658
Interest (expense) income, net 30 (24)
----- ------
Income before income taxes 1,536 634
Income taxes 173 13
----- ------
Net income $ 1,363 $ 621
===== ======
Basic and diluted earnings per share $ 0.68 $ 0.31
Weighted average common shares outstanding 1,999 1,999
<FN>
See accompanying notes to condensed consolidated financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1999 1998
------ ------
<S> <C> <C>
Net sales $18,262 $11,290
Cost of goods sold 13,460 8,419
------ ------
Gross profit 4,802 2,871
Selling, general and administrative expenses 2,049 1,783
------ ------
Operating income 2,753 1,088
Interest income, net 20 12
------ ------
Income before income taxes 2,773 1,100
Income taxes 301 27
------ ------
Net income $ 2,472 $ 1,073
===== ======
Basic and diluted earnings per share $ 1.24 $ 0.54
Weighted average common shares outstanding 1,999 1,999
<FN>
See accompanying notes to condensed consolidated financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
(Unaudited)
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 6,053 $ 3,622
Accounts receivable 5,555 4,869
Inventories 5,333 4,385
Other current assets 900 928
------ ------
Total current assets 17,841 13,804
Property, plant and equipment, net 5,484 5,476
Other assets 888 935
------ ------
$ 24,213 $ 20,215
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion - long term debt $ 465 $ 454
Accounts payable 3,821 2,976
Accrued expenses 2,724 1,413
------ ------
Total current liabilities 7,010 4,843
Long term pension liability 2,290 2,290
Long term debt - less current portion 1,319 1,550
Other long term liabilities 1,774 1,834
Stockholders' equity
Common stock
Class A - Authorized: 2,500,000 and 1,480,000
shares at June 30, 1999 and December 31, 1998,
respectively. Issued and outstanding: 1,998,956
and 978,956 shares at June 30, 1999
December 31, 1998, respectively 20 10
Class B - Authorized, issued and outstanding:
1,020,000 shares at December 31, 1998 - 10
Additional paid-in capital 7,791 7,791
Retained earnings 6,658 4,186
Accumulated comprehensive loss (2,649) (2,299)
------ ------
Net stockholders' equity 11,820 9,698
------ ------
$ 24,213 $ 20,215
====== ======
<FN>
See accompanying notes to condensed consolidated financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<CAPTION>
Six months Ended
June 30,
----------------
1999 1998
----- -----
<S> <C> <C>
Cash flow from operating activities:
Net income $ 2,472 $ 1,073
Adjustments to reconcile net income to net
cash provided by operating activities (net of effects
of acquisition):
Depreciation and amortization 515 429
Foreign currency translation (350) (50)
Changes in assets and liabilities:
Accounts receivable (686) 571
Inventories (948) 262
Other current assets 28 (242)
Accounts payable 845 390
Accrued expenses 1,311 (410)
Other, net (34) (169)
----- -----
Net cash provided by operating activities 3,153 1,854
Cash flow from investing activities:
Maturity of marketable securities - 750
Acquisition by NP Aerospace - (3,707)
Capital expenditures (491) (197)
----- -----
Net cash (used in) investing activities (491) (3,154)
Cash flow from financing activities:
Proceeds from long-term debt - 2,268
Repayment of long term debt (231) (37)
----- -----
Net cash provided by (used in) financing activities (231) 2,231
----- -----
Net increase in cash and cash equivalents 2,431 931
Cash and cash equivalents, beginning of period 3,622 2,419
----- -----
Cash and cash equivalents, end of period $ 6,053 $ 3,350
===== =====
Cash paid during period for:
Income taxes $ - $ 24
Interest $ 88 $ 26
<FN>
See accompanying notes to condensed consolidated financial statements
</FN>
</TABLE>
<PAGE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
DESCRIPTION OF BUSINESS
Reinhold Industries, Inc. and subsidiary ("Reinhold" or the "Company") is
a manufacturer of advanced custom composite components and sheet molding
compounds for a variety of applications in the United States and Europe.
Reinhold derives revenues from the defense contract industry, the aerospace
industry and other commercial industries.
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements are
those of Reinhold as of June 30, 1999 and December 31, 1998 and for the three
and six months ended June 30, 1999 and 1998. The unaudited condensed
consolidated financial statements have been prepared by the Company as
contemplated by the Securities and Exchange Commission under Rule 10-01 of
Regulation S-X and do not contain certain information that will be included in
the Company's annual financial statements and notes thereto. Accordingly, they
do not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of the
Company, all material adjustments and disclosures necessary for a fair
presentation have been made. Certain prior year amounts have been reclassified
to conform to 1999 presentation. The results of operations for the three and six
months ended June 30, 1999 are not necessarily indicative of the operating
results for the full year. The accompanying unaudited condensed consolidated
financial statements should be read in conjunction with the annual report and
notes thereto for the year ended December 31, 1998, included in the Company's
Form 10-KSB filed with the Securities and Exchange Commission on March 26, 1999.
ACQUIRED BUSINESS
On April 24, 1998, NP Aerospace Limited ("NP Aerospace"), a wholly owned
subsidiary of Reinhold, purchased from Courtaulds Aerospace Limited ("CAL"), a
U.K. Corporation, which is a wholly owned subsidiary of Courtaulds plc, a U.K.
Corporation, certain assets (consisting of Accounts Receivable, Inventory,
Machinery and Equipment, Land and Intellectual Property and Patents) and assumed
certain liabilities of the Ballistic and Performance Composites Division of CAL.
Reinhold, as the Guarantor for NP Aerospace, became obligated to pay to
Courtaulds plc net consideration consisting of (a) Two Million Two Hundred
Thousand pounds sterling ((pound)2,200,000) ($3,706,340 based on an exchange
rate of $1.6847) cash on the Closing Date and (b) within 120 days following the
end of each of the calendar years 1998 through 2001, a cash amount equal to 25%
of the Pre-tax Profit on the light armored vehicle business only, the maximum
aggregate amount of which shall not exceed Twenty Million pounds sterling
((pound)20,000,000).
Additional payments will be capitalized as part of the purchase price, when and
if earned.
The acquisition has been accounted for by the purchase method and,
accordingly, the results of operations of NP Aerospace have been included in the
consolidated financial statements from the date of acquisition.
<PAGE>
Notes to Condensed Consolidated Financial Statements (Continued)
The excess of the fair value of the net identifiable assets acquired over the
purchase price has been allocated to fixed assets as follows (in thousands):
Working capital $3,360
Severance costs (403)
-----
2,957
Cash paid 3,707
-----
Excess over cost allocated to property,
plant and equipment $ 750
=====
The pro forma unaudited results of operations for the three and six months ended
June 30, 1998, assuming consummation of the purchase as of January 1, 1998 are
as follows (in thousands, except earnings per share data):
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, 1998 June 30, 1998
------------- -------------
<S> <C> <C>
Net sales $7,698 $16,212
Net income $ 687 $ 1,205
Basic and diluted earnings per share $ 0.34 $ 0.60
</TABLE>
CHANGE IN CONTROL
On May 21, 1999, pursuant to a Stock Purchase Agreement, dated May 18,
1999, between Keene Creditors Trust (the "Trust"), the holder of all of the
outstanding shares of the Class B Common Stock of Reinhold Industries, Inc. (the
"Company") and Reinhold Enterprises, Inc., a newly formed Indiana corporation
("REI"), the Trust sold 997,475 shares of Class B Common Stock owned by it to
certain purchasers designated by REI (the "Purchasers") at a purchase price of
$9.00 per share. These shares represent approximately 49.9% of the outstanding
common stock of the Company. Pursuant to the Company's Certificate of
Incorporation, upon consummation of the sale of the shares to the Purchasers,
all of the 1,020,000 outstanding shares of Class B Common Stock (including those
retained by the Trust) were automatically converted into 1,020,000 shares of
Class A Common Stock, and at the next meeting of the stockholders of the Company
called for that purpose, the holders of the Class A Common Stock, voting as a
class, will be entitled to elect all of the directors of the Company. Prior to
the sale, the Trust, as the holder of all of the Class B Common Stock, was
entitled to elect two directors, and the holders of the Class A Common Stock
were entitled to elect one director. In connection with the Stock Purchase
Agreement, the amount of authorized Class A Common Stock changed from 1,480,000
shares to 2,500,000 shares.
The Purchasers designated by REI are Massachusetts Mutual Life
Insurance Company, MassMutual High Yield Partners II LLC, MassMutual Corporate
Value Partners Limited , Ralph R. Whitney, Jr. , Glenn Scolnik, Forrest E.
Crisman, Jr., Andrew McNally, IV, Ward S. McNally, Andrew Management IV, L.P.,
BJR Management, L.P. and ECM Management, L.P. Messrs. Whitney, Scolnik, Crisman,
A. McNally and W. McNally are directors and officers of Hammond Kennedy
Whitney & Company, Inc., a private equity firm ("HKW"). Each of the Purchasers
paid for the shares purchased using his or its own available funds.
<PAGE>
Notes to Condensed Consolidated Financial Statements (Continued)
The sale of shares to the Purchasers constitutes an "ownership shift"
within the meaning of Section 382 of the Internal Revenue Code of 1986, as
amended. Section 382 limits the utilization of net operating loss carryforwards
upon certain accumulations of stock of corporate issuers. Additional purchases
of shares by the Purchasers prior to May 22, 2002, or purchases of shares by
other shareholders that result in those shareholders owning more than 5% of the
outstanding Common Stock of the Company prior to May 22, 2002, may result in
significant limitations on the Company's ability to utilize its net operating
loss carryforwards to offset its future income for federal income tax purposes.
The stock purchase agreement provides that it was a condition to
the closing of the sale of the shares that Lawrence H. Diamond and Robert B.
Steinberg, the members of the Board of Directors elected by the Trust (as the
sole holder of Class B Common Stock), resign as directors. Messrs. Diamond
and Steinberg resigned as directors on May 21, 1999. On June 3, 1999,
Ralph R. Whitney, Jr. and Andrew McNally IV were appointed by the remaining
director, Michael T. Furry, as successor directors. The Board of Directors of
the Company now consists of: Michael T. Furry, Ralph R. Whitney, Jr., and Andrew
McNally IV.
STOCK INCENTIVE PLAN
On July 31, 1996, the Company established the Reinhold Stock Incentive
Plan for key employees. The Reinhold Stock Incentive Plan permits the grant of
stock options, stock appreciation rights and restricted stock. The total number
of shares of stock subject to issuance under the Reinhold Stock Incentive Plan
may not exceed 100,000. The maximum number of shares of stock with respect to
which options or stock appreciation rights may be granted to any eligible
employee during the term of the Reinhold Stock Incentive Plan may not exceed
10,000. The shares to be delivered under the Reinhold Stock Incentive Plan may
consist of authorized but unissued stock or treasury stock, not reserved for any
other purpose. All other terms and conditions of the Reinhold Stock Incentive
Plan can be found on Form S-8 filed with the Securities and Exchange Commission
on November 10, 1997.
On June 3, 1999, the Compensation Committee of the Board of Directors
granted 73,000 stock options to key employees at an option price of $8.25 per
share, the prevailing market rate on that date. Mr. Michael T. Furry, President
and CEO, received 10,000 options and Mr. Brett R. Meinsen, Vice President -
Finance, Secretary/Treasurer, received 8,000 options. The remaining 55,000
options were granted to other non-officer/director employees. The options shall
not be exercisable in whole or in part until after June 3, 2002 and expire 10
years from the date of grant.
On June 3, 1999, the Compensation Committee of the Board of Directors
approved and adopted the Reinhold Industries, Inc. Stock Option Agreement (the
"Agreement") by and between the Company and Michael T. Furry, granting Mr. Furry
the option, effective June 3, 1999, to acquire up to 90,000 shares of Class A
common stock of the Company at fair market value at that date ($8.25 per share).
Terms of the Agreement are equivalent to those in the Reinhold Stock Incentive
Plan.
There were no dilutive effects on earnings per share in either the
three or six month period ending June 30, 1999.
<PAGE>
Notes to Condensed Consolidated Financial Statements (Continued)
REPORTING COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standard ("SFAS")
No. 130, "Reporting Comprehensive Income," effective January 1, 1998. SFAS No.
130 establishes standards for reporting and display of comprehensive income and
its components in a full set of general purpose financial statements. SFAS No.
130 also permits an entity to report a total for comprehensive income in the
notes to the interim financial statements. The difference between net income and
total comprehensive income during the six months ended June 30, 1999 and 1998
was a loss on foreign currency translation of $350,000 and $50,000,
respectively.
COMPUTER SOFTWARE COSTS
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use". The Company adopted
SOP 98-1 effective January 1, 1999.The adoption of SOP 98-1 did not have a
significant impact on the Company's operating results.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
modifies the accounting for derivatives and hedging activities and is effective
for all fiscal quarters of fiscal years beginning after June 15, 1999. In June
1999, the Financial Accounting Standards Board issued SFAS No. 137 "Accounting
for Derivative Instruments and Hedging Activities - Deferral of the Effective
date of FASB Statement No. 133" which defers the effective date of SFAS No. 133
by one year. At this time, the Company does not expect the adoption of SFAS No.
133 to have a significant impact on its financial position or results of
operations.
INCOME TAXES
Income taxes for interim periods are computed using the effective tax rate
estimated to be applicable for the full financial year, which is subject to
ongoing review and evaluation by management.
LONG TERM DEBT
On April 22, 1998, the Company borrowed $2,268,000 from The CIT Group
Credit/Finance ("CIT") to fund a portion of the purchase consideration due to
Courtaulds Aerospace. The Company had previously entered into a Five Year Loan
and Security Agreement with CIT in the amount of Four Million Dollars
($4,000,000). The term portion of the loan ($2,268,000) is payable in equal
monthly principal payments of $37,800 plus interest at prime plus 1.75% and is
secured by fixed assets and land. The remainder of the CIT credit facility is a
revolver of One Million Seven Hundred Thirty-Two Thousand Dollars ($1,732,000),
which has not been used as of April 15, 1999.
On April 16, 1999, the Company repaid the outstanding loan with the CIT
Group Credit/Finance through a refinancing with Bank of America National Trust
and Savings Association ("B of A") and cancelled the revolver. The new credit
facility with B of A is a term loan in the amount of $1,861,478 payable in 48
equal monthly principal installments of $38,780 plus interest at a rate which
approximates LIBOR plus 1.75% and is secured by fixed assets.
<PAGE>
Notes to Condensed Consolidated Financial Statements (Continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the following financial instruments approximate
fair value because of the short maturity of those instruments: cash and cash
equivalents, accounts receivable, other current assets, other assets, accounts
payable, accrued expenses and current installments of long term debt. The long
term debt bears interest at a variable market rate, and thus has a carrying
amount that approximates fair value.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
FOREIGN CURRENCY
The reporting currency of the Company is the United States dollar. The
functional currency of NP Aerospace is the UK pound sterling. For consolidation
purposes, the assets and liabilities of the Company's subsidiary are translated
at the exchange rate in effect at the balance sheet date. The consolidated
statement of income is translated at the average exchange rate in effect during
the period being reported. Exchange differences arise mainly from the valuation
rates of the intercompany accounts and are taken directly to Stockholders'
equity. The exchange rate at June 30, 1999 and 1998 was $1.58 and $1.66 for the
condensed consolidated balance sheet and $1.61 and $1.65 for the condensed
consolidated statement of income, respectively.
OPERATING SEGMENTS
The Company adopted SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information" as of December 31, 1998. SFAS No. 131
established new standards for reporting information about operating segments and
related disclosures about products and services, geographic areas and major
customers.
Reinhold is a manufacturer of advanced custom composite components and
sheet molding compounds for a variety of applications in the United States and
Europe. The Company generates revenues from four operating segments: Aerospace,
CompositAir, Commercial and NP Aerospace. Management has determined these to be
Reinhold's operating segments based upon the nature of their products. Aerospace
produces a variety of products for the U.S. military and space programs.
CompositAir produces components for the commercial aircraft seating industry.
The Commercial segment produces lighting housings and pool filters. NP Aerospace
is our subsidiary located in Coventry, England and produces products for law
enforcement, lighting, military, automotive and commercial aircraft.
<PAGE>
Notes to Consolidated Financial Statements (cont'd)
The information in the following tables is derived directly from the
segment's internal financial reporting for corporate management purposes (in
thousands).
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales
Aerospace $ 2,280 3,185
CompositAir 6,556 4,559
Commercial 1,222 1,013
NP Aerospace 8,204 2,533
- ------------------------------------------------------------------------------------------------------------------------------------
Total sales $ 18,262 11,290
- -----------------------------------------------------------------------------------------------------------------------------------
Income before interest and income taxes
Aerospace $ 511 847
CompositAir 1,445 144
Commercial 147 28
NP Aerospace 868 242
Unallocated corporate expenses (218) (173)
- ------------------------------------------------------------------------------------------------------------------------------------
Total income before interest and income taxes $ 2,753 1,088
- ------------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization
Aerospace $ 222 237
CompositAir 133 108
Commercial 78 72
NP Aerospace 82 12
- ------------------------------------------------------------------------------------------------------------------------------------
Total depreciation and amortization $ 515 429
- ------------------------------------------------------------------------------------------------------------------------------------
Capital expenditures
Aerospace $ 64 108
CompositAir 270 16
Commercial 31 46
NP Aerospace 126 27
- ------------------------------------------------------------------------------------------------------------------------------------
Total capital expenditures $ 491 197
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets
Aerospace $ 4,483 4,916
CompositAir 4,369 2,615
Commercial 1,265 1,266
NP Aerospace 10,317 6,493
Unallocated corporate 3,779 4,925
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 24,213 20,215
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements (cont'd)
The table below presents information related to geographic areas in which
Reinhold operated in 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales
United States $ 9,036 7,290
United Kingdom 7,935 2,528
Switzerland 244 -
Germany 969 1,353
Other 78 119
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales $18,262 11,290
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets
United States $13,896 13,722
United Kingdom 10,317 6,493
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $24,213 20,215
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
June 30, 1999
The following discussion should be read in conjunction with the condensed
consolidated financial statements and notes thereto included in Item 1 of this
filing, the financial statements and notes thereto and Management's Discussion
and Analysis of Financial Condition and Results of Operations contained in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1998.
Reinhold is a manufacturer of advanced custom composite components and
sheet molding compounds for a variety of applications in the United States and
Europe. Reinhold derives revenues from the defense contract industry, the
aerospace industry and other commercial industries.
Comparison of Second Quarter 1999 to 1998
In the second quarter of 1999, net sales increased $2.6 million, or 37%,
to $9.6 million, compared to second quarter 1998 sales of $7.0 million. Sales
increased by $1.8 million at NP Aerospace, due mainly to the acquisition in late
April 1998. CompositAir enjoyed a record quarter with sales increasing by $1.1
million or 47%. This increase reflects heavy orders booked in the fourth quarter
of 1998. Sales also increased $0.1 million for Commercial products. However,
there was a decrease of $0.4 million in Aerospace product sales.
Gross profit margin increased to 27.5% in the second quarter of 1999
compared to 24.3% in the second quarter 1998 primarily due to higher CompositAir
sales and the resulting absorption of fixed overhead expenses. Gross profit
margin for Compositair products increased from 20.0% in 1998 to 35.5% in 1999.
Gross profit margin for Aerospace products decreased to 31.2% in 1999 from 40.5%
in 1998. Gross profit margin for Commercial products increased to 23.6% in 1999
from 20.9% in 1998. Gross profit margin for NP Aerospace products increased to
20.6% in 1999 from 19.9% in 1998.
Selling, general and administrative expenses for the second quarter 1999
were $1.1 million (11.7% of sales) compared to $1.0 million (14.9% of sales) for
the same quarter of 1998.
Interest income, net, in the second quarter of 1999 was $0.03 million
compared to interest expense of $0.02 million in the second quarter of 1998 due
to higher cash balances.
Income before income taxes increased to $1.5 million (16.0% of sales) in
the second quarter of 1999 from $0.6 million (9.1% of sales) in the same period
of 1998, reflecting higher sales and gross margins. Income before income taxes
for Aerospace was $0.2 million (15.0% of sales) in 1999 compared to $0.4 million
(24.0% of sales) in 1998. Income before income taxes for CompositAir was $0.9
million (25.3% of sales) in 1999 compared with $0.1 million (4.8% of sales) in
1998. Income before income taxes for Commercial was $0.1 million (10.8% of
sales) in 1999 compared with $0.04 million (6.4% of sales) in 1998. Income
before income taxes for NP Aerospace was $0.5 million (11.3% of sales) in 1999
compared with $0.2 million (7.7% of sales) in 1998.
<PAGE>
Management's Discussion and Analysis (cont'd)
A tax provision of $0.2 million was recorded in the second quarter of
1999. The effective tax rate for the United Kingdom is approximately 30%. In the
United States, the Company intends to use net operating loss carryovers to
offset future taxable income and, accordingly, has an effective tax rate of 3%
for alternative minimum taxes. In determining the recognition 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 not utilized in 1999 is dependent upon the
generation of future taxable income during the periods in which the net
operating losses are deductible. Management considers the projected future
taxable income and tax planning strategies in making this assessment. Based upon
the level of historical taxable income (losses) and projections for future
taxable income over the periods in which the deferred tax assets are deductible,
management believes it is more likely than not the Company will not realize the
benefits of these deductible differences. Income taxes for interim periods are
computed using the effective tax rate estimated to be applicable for the full
financial year, which is subject to ongoing review and adjustment.
Comparison of First Six Months 1999 to 1998
In the first six months of 1999, net sales increased $7.0 million, or 62%,
to $18.3 million, compared to the first six months 1998 sales of $11.3 million.
Sales increased by $5.7 million at NP Aerospace, due mainly to the acquisition
in late April 1998. CompositAir enjoyed a record first half of 1999 with sales
increasing by $2.0 million or 44%. This increase reflects heavy orders booked in
the fourth quarter of 1998. Sales also increased $0.2 million for Commercial
products. However, there was a decrease of $0.9 million in Aerospace sales due
to lost business and sales shifting to subsequent quarters.
Gross profit margin increased to 26.3% in the first six months of 1999
compared to 25.4% in the first six months of 1998 primarily due to higher
CompositAir sales and the resulting absorption of fixed overhead expenses. Gross
profit margin for Aerospace products decreased to 34.9% in 1999 from 41.9% in
1998. Gross profit margin for Commercial products increased to 24.2% in 1999
from 18.4% in 1998. Gross profit margin for NP Aerospace products increased to
20.3% in 1999 from 19.9% in 1998.
Selling, general and administrative expenses for the first six months of
1999 were $2.0 million (11.2% of sales) compared to $1.8 million (15.8% of
sales) for the first six months of 1998.
Interest income, net, in the first six months of 1999 was $0.02 million
compared to interest income, net of $0.01 million in the second quarter of 1998
due to higher cash balances.
Income before income taxes increased to $2.8 million (15.2% of sales) in
the first six months of 1999 from $1.1 million (9.5% of sales) in the same
period of 1998, reflecting higher sales and gross margins. Income before income
taxes for Aerospace was $0.5 million (22.4% of sales) in 1999 compared to $0.8
million (26.6% of sales) in 1998. Income before income taxes for CompositAir was
$1.4 million (22.0% of sales) in 1999 compared with $0.1 million (3.2% of sales)
in 1998. Income before income taxes for Commercial was $0.1 million (12.0% of
sales) in 1999 compared with $0.03 million (2.8% of sales) in 1998. Income
before income taxes for NP Aerospace was $0.8 million (10.1% of sales) in 1999
compared with $0.2 million (7.7% of sales) in 1998.
<PAGE>
Management's Discussion and Analysis (cont'd)
A tax provision of $0.3 million was recorded in the first six months of
1999. The effective tax rate for the United Kingdom is approximately 30%. In the
United States, the Company intends to use net operating loss carryovers to
offset future taxable income and, accordingly, has an effective tax rate of 3%
for alternative minimum taxes. In determining the recognition 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 not utilized in 1999 is dependent upon the
generation of future taxable income during the periods in which the net
operating losses are deductible. Management considers the projected future
taxable income and tax planning strategies in making this assessment. Based upon
the level of historical taxable income (losses) and projections for future
taxable income over the periods in which the deferred tax assets are deductible,
management believes it is more likely than not the Company will not realize the
benefits of these deductible differences. Income taxes for interim periods are
computed using the effective tax rate estimated to be applicable for the full
financial year, which is subject to ongoing review and adjustment.
Liquidity and Capital Resources
As of June 30, 1999, working capital was $10.8 million, up $1.8 million
from December 31, 1998. Cash and cash equivalents of $6.1 million held at June
30, 1999 were $2.4 million higher than cash and cash equivalents held at
December 31, 1998 primarily due to $3.2 million of net cash provided by
operating activities offset by $0.5 million spent on capital expenditures and
repayment of $0.2 of long-term debt. There were no marketable securities held at
June 30, 1999.
Net cash provided by operations amounted to $3.2 million for the six
months ended June 30, 1999. Net cash provided by operations amounted to $1.9
million for the comparable period in 1998. The increase over the prior period
relates to the increased profitability of the Company.
Net cash used in investing activities for the six months ended June 30,
1999 totaled $0.5 million and consisted of property and equipment expenditures
totaling $0.5 million. Net cash used in investing activities for the six months
ended June 30, 1998 consisted of the maturity of $0.8 million of marketable
securities offset by the purchase of certain assets and the assumption of
certain liabilities of the Ballistic and Performance Composites Division of
Courtaulds Aerospace Ltd on April 24, 1998 for $3.7 million and property and
equipment expenditures totaling $0.2 million.
Net cash used in financing activities for the six months ended June 30,
1999 totaled $0.2 million and consisted of the payments made on the CIT and B of
A loans. Net cash provided by financing activities for the six months ended June
30, 1998 totaled $2.2 million and consisted primarily of $2.3 million of
proceeds from the CIT loan.
Expenditures in 1999 and 1998 related to investing and financing
activities were financed by existing cash and cash equivalents and proceeds from
the CIT loan.
The Company does not have any current material commitments of capital
expenditures at June 30, 1999.
<PAGE>
Management's Discussion and Analysis (cont'd)
As discussed in the notes to the unaudited condensed consolidated
financial statements, the Company acquired certain assets and assumed certain
liabilities of the Ballistic and Performance Composites Division of Courtaulds
Aerospace Ltd on April 24, 1998 (the "Closing Date"). On the Closing Date,
Reinhold paid to Courtaulds plc the Two Million Two Hundred Thousand pounds
sterling ((pound)2,200,000) ($3,706,340 based on an exchange rate of $1.6847)
cash due on the Closing Date and will make additional payments in the future as
required by the Asset Sale Agreement.
The source of the funds for a portion of the Purchase Consideration due on
the Closing Date was a Five Year Loan and Security Agreement with The CIT Group
Credit/Finance ("CIT") in the amount of Four Million Dollars ($4,000,000) at an
interest rate of prime plus 1.75%. The term portion of the loan in the amount of
Two Million Two Hundred Sixty-Eight Thousand Dollars ($2,268,000) was received
from CIT. The remainder of the CIT credit facility is a revolver of One Million
Seven Hundred Thirty-Two Thousand Dollars ($1,732,000), which has not been used
at this time. The remaining portion of the purchase consideration not funded by
the CIT loan was funded by Reinhold's cash on hand. Future payments required by
the Agreement are expected to be financed from operating cash flows.
On April 16, 1999, the Company repaid the outstanding loan with the CIT Group
Credit/Finance through a refinancing with Bank of America National Trust and
Savings Association ("B of A") and cancelled the revolver. The new credit
facility with B of A is a term loan in the amount of $1,861,478 payable in 48
equal monthly principal installments of $38,780 plus interest at a rate which
approximates LIBOR plus 1.75% and is secured by fixed assets.
Management believes that the available cash and cash flows from operations
will be sufficient to fund the Company's operating and capital expenditure
requirements.
Change in Control
On May 21, 1999, pursuant to a Stock Purchase Agreement dated May 18,
1999, between Keene Creditors Trust (the "Trust"), the holder of all of the
outstanding shares of the Class B Common Stock of Reinhold Industries, Inc. (the
"Company") and Reinhold Enterprises, Inc., a newly formed Indiana corporation
("REI"), the Trust sold 997,475 shares of Class B Common Stock owned by it to
certain purchasers designated by REI (the "Purchasers") at a purchase price of
$9.00 per share. These shares represent approximately 49.9% of the outstanding
common stock of the Company.
This transaction is more fully described in the accompanying Notes to
Consolidated Financial Statements and on Form 8-K filed with the Securities and
Exchange Commission on June 7, 1999.
<PAGE>
Management's Discussion and Analysis (cont'd)
Forward Looking Statements
This Form 10-QSB contains statements which, to the extent that they are
not recitations of historical fact, constitute "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934 (the
"Exchange Act"). The words "estimate", "anticipate", "project", "intend",
"expect", and similar expressions are intended to identify forward looking
statements. All forward looking statements involve risks and uncertainties,
including, without limitation, statements and assumptions with respect to future
revenues, program performance and cash flow. Readers are cautioned not to place
undue reliance on these forward looking statements which speak only as of the
date of this 10-QSB. The Company does not undertake any obligation to publicly
release any revisions to these forward looking statements to reflect events,
circumstances or changes in expectations after the date of this Form 10-QSB, or
to reflect the occurrence of unanticipated events. The forward looking
statements in this document are intended to be subject to safe harbor protection
provided by Sections 27A of the Securities Act and 21E of the Exchange Act.
1999 Outlook
We expect exceptional financial performance for 1999. Our Aerospace
business unit revenues should increase significantly versus our initial 1999
forecast due to the unpredictability of military contract awards. The Commercial
business unit should report slightly higher sales in 1999 versus 1998. We will
also record twelve months of activity for NP Aerospace in 1999 versus only eight
months in 1998. We expect performance in this business unit to continue to
exceed our pre-acquisition forecasts. CompositAir revenues and profitability,
which were records in the first and second quarter 1999, should decline in the
second half of 1999 due to the fulfillment of unusually high levels of orders
booked in the fourth quarter of 1998.
Recent Accounting Pronouncements
The effective recent accounting pronouncements are included in the notes
to the condensed consolidated financial statements included herein.
<PAGE>
Management's Discussion and Analysis (cont'd)
Year 2000
Many existing computer programs use only two digits to identify a year in
a date. If not corrected, many computer applications and systems could fail or
create erroneous results before or after the year 2000. In the United States,
the Company had anticipated the year 2000 problem in the mid-1980's and
therefore created compliant systems. The internal computer systems in the United
States are Year 2000 compliant. In the United Kingdom, the Company is in the
process of identifying and remediating or replacing any other computer systems
and software that may not function correctly in the year 2000. Additionally, the
Company is planning a program of communications with its significant suppliers,
customers and affiliated companies to determine the readiness of these third
parties and the impact on the Company as a consequence of their own year 2000
issues. The Company's manual assessment of the impact of the year 2000 date
change should be complete by the end of the third quarter 1999. The Company
believes that it will be able to identify, and, if necessary, modify or replace
such systems and software before any year 2000 associated problems. No
assurances can be given that such modification and replacement will be completed
before any year 2000 associated problems arise or that costs arising from
unanticipated problems will not have a material adverse effect on the Company.
The Company's most likely potential risk is a temporary inability of some
customers to order and pay on a timely basis, and for the company to receive
purchases from their vendors on time. The Company's year 2000 efforts are
ongoing and its overall plan will continue to evolve as new information becomes
available.
While the Company anticipates no major interruption in its business
activities, it will be dependent, in part, on the ability of third parties to be
year 2000 compliant. As of June 30, 1999, amounts spent on the Company's year
2000 program were less than $25,000. The Company currently estimates the cost to
remediate both its year 2000 hardware and software issues to be less than
$30,000.
The Company is in the process of assessing the year 2000 readiness of its
critical suppliers. We expect this assessment to be completed by the end of the
third quarter 1999. At this time, we have not formulated a contingency plan, but
expect to have specific contingency plans in place by the end of the third
quarter 1999.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On April 30, 1999, the Annual Meeting of Stockholders of
Reinhold Industries, Inc. was held at its offices at 12827 East
Imperial Highway, Santa Fe Springs, California for the purpose of 1)
electing one member of the Board of Directors for Class A Common
Stockholders and two members of the Board of Directors for Class B
Common Stockholders , and 2 )transacting any other business as may
properly come before the meeting.
Mr. Michael T. Furry received 756,877 votes for and 624 votes
against and was elected as the one member of the Board of Directors
representing the Class A Common Stockholders. Mr. Lawrence H. Diamond
and Mr. Robert B. Steinberg both received 1,020,000 votes for and 0
votes against and were elected as the two members of the Board of
Directors representing the Class B Common Stockholders. No other
issues were voted on at the meeting.
<PAGE>
PART II - OTHER INFORMATION (continued)
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
2.1 Keene Corporation's Fourth Amended Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code dated March 11, 1996, incorporated
herein by reference to Exhibit 99(a) to Keene Corporation's Form 8-K
filed with the Commission on June 28, 1996.
2.2 Motion to Approve Modifications to the Keene Corporation Fourth
Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy
Code dated June 12, 1996, incorporated herein by reference to Exhibit
99(b) to Keene Corporation's Form 8-K filed with the Commission on
June 28, 1996.
2.3 Finding of Fact, Conclusions of Law and Order Confirming Keene's
Fourth Amended Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code, as modified, entered June 14, 1996, incorporated
herein by reference to Exhibit 99(c) to Keene Corporation's Form 8-K
filed with the Commission on June 28, 1996.
3.1 Amended and restated Certificate of Incorporation of Reinhold
Industries, Inc., incorporated herein by reference to Exhibit 99(a),
Exhibit A to the Plan, to Keene Corporation's Form 8-K filed with the
Commission on June 28, 1996.
3.2 Amended and restated By-laws of Reinhold Industries, Inc. (Formerly
Keene Corporation), incorporated herein by reference to Exhibit
99(a), Exhibit B to the Plan, to Keene Corporation's Form 8-K filed
with the Commission on June 28, 1996.
3.3 Certificate of Merger of Reinhold Industries, Inc. into Keene
Corporation, incorporated herein by reference to Exhibit 99(a),
Exhibit C to the Plan, to Keene Corporation's Form 8-K filed with the
Commission on June 28, 1996.
10.1 Management Agreement between Reinhold Industries, Inc. and Hammond,
Kennedy, Whitney & Company, Inc. dated May 31, 1999 on Form 10-QSB
filed with the Commission on August 16, 1999.
10.2 Stock Option Agreement between Reinhold Industries, Inc. and Michael
T. Furry dated June 3, 1999 on Form 10-QSB filed with the Commission
on August 16, 1999.(Confidential Treatment for portions of the
Agreement to be Requested)
10.3 Stock Price Deficiency Payment Agreement between Reinhold Industries,
Inc. and various Stockholders dated June 16, 1999 on Form 10-QSB
filed with the Commission on August 16, 1999.
27 Financial Data Schedule
b. Reports on Form 8-K
On June 7, 1999, the Company filed Form 8-K, dated May 21, 1999, with
the Commission describing the Change in Control related to the sale
of 997,475 shares of Class B Common Stock.
<PAGE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
REINHOLD INDUSTRIES, INC.
Registrant
DATE: August 16, 1999
By: /S/ Brett R. Meinsen
Brett R. Meinsen
Vice President - Finance and Administration,
Treasurer and Secretary
(Principal Financial Officer)
EXHIBIT 10.1
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT ("Agreement") is entered into this 31st day
of May, 1999 (the "Effective Date"), by and between Reinhold Industries, a
Delaware corporation ("Reinhold"), and Hammond, Kennedy, Whitney & Company,
Inc., a New York corporation ("HKW").
RECITAL:
The Board of Directors believes it is in the best interest of Reinhold
to engage HKW to advise, consult and represent Reinhold and its subsidiaries on
strategic direction, merger and acquisition activities and general investment
banking matters on the terms contemplated hereby, and HKW desires to provide
such services as contemplated hereby.
NOW, THEREFORE, in consideration of the premises, the covenants
contained herein, and each act done pursuant thereto, the parties agree as
follows:
1. HKW agrees to advise Reinhold and its subsidiaries on strategic
direction and merger and acquisition activities, including identifying potential
acquisition candidates.
2. Reinhold agrees to pay HKW a fee for HKW's services equal to Twenty
Thousand Dollars ($20,000) per month during the term of this Agreement. Such fee
shall be paid to HKW by Reinhold in monthly installments on or before the
fifteenth day of each month during the term of this Agreement.
3. This Agreement shall commence as of the Effective Date and shall
continue in full force and effect until the second anniversary, and shall
thereafter be automatically renewed for successive one year periods from the
anniversary of the Effective Date unless either party hereto notifies the other
in writing of its intention to terminate the Agreement at least one hundred
twenty (120) days prior to its expiration of the then current term.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the first date set forth above.
REINHOLD INDUSTRIES, INC.
By: /S/ Michael T. Furry
Its: President
HAMMOND, KENNEDY, WHITNEY
& COMPANY, INC.
By: /S/ Glenn Scolink
Glenn Scolnik, President
EXHIBIT 10.2
REINHOLD INDUSTRIES, INC.
STOCK OPTION AGREEMENT
This Stock Option Agreement is entered into by and between Michael T.
Furry (the "Optionee") and Reinhold Industries, Inc., a Delaware corporation
(the "Company").
W I T N E S S E T H:
WHEREAS, Optionee is the President and Chief Executive Officer of the
Company;
WHEREAS, in connection with and consideration for Optionee's
performance of services for the Company, the Board of Directors of the Company
("Board") desires to grant to Optionee certain stock options to purchase shares
of Class A Common Stock of the Company ("Common Stock") pursuant to the terms
and conditions of this Agreement;
NOW THEREFORE, the Company and Optionee hereby agree as follows:
1. Option: Basic Terms. The Optionee is hereby granted an option to
purchase the number of fully paid and non-assessable shares of the
Common Stock of the Company at the option price hereinbelow set
forth, subject to the following additional terms and conditions:
A. Grant of Option.
1. The Company hereby grants to the Optionee an
option (the "Option") to purchase Ninety
Thousand (90,000) shares of Common Stock of
the Company, upon the terms and conditions
set forth below. The date of grant of the
Option is June 3, 1999 (the "Grant Date").
2. The Option granted under this Agreement is a
nonqualified stock option as described in
the regulations under Section 83 of the
Internal Revenue Code of 1986, as amended
(the "Code"), with the transfer of the
Common Stock upon exercise of the Option
being governed by Code Section 83 and the
regulations thereunder. The effect of the
grant and exercise of the Option, as well as
the sale or other disposition of any Common
Stock acquired upon the exercise of the
Option in whole or in part, for federal,
state and local income tax purposes, shall
be Optionee's responsibility.
<PAGE>
B. Duration of Option.
The Option shall expire on the tenth anniversary of the Grant
Date (the "Expiration Date")
C. Purchase Price.
The purchase price for the shares subject to the Option
shall be $8.25 per share (the "Option Price").
2. Exercisability. This Option shall not be exercisable in whole or in
part until June 3, 2002. Subject to Section 6, regarding termination of
Optionee's employment, and Section 8, regarding acceleration of the
exercise date, this Option shall be exercisable at any time after the
third anniversary of the Grant Date.
Notwithstanding the provisions of Section 2, if the Optionee ceases
to be employed by the Company by reason of the Optionee's death or
Disability (defined below), the Option hereunder may be exercised
immediately as to all shares of Common Stock covered hereby, by
Optionee, his guardian or legal representative or the person or
persons to whom such rights under the Option hereunder shall pass by
will or by the laws of descent and distribution, as the case may be;
provided, however, in no event shall such Options become exercisable
prior to the expiration of three (3) years from the Grant Date.
3. Method of Exercise and Payment. This Option may be exercised from time
to time, in whole or in part, to the extent exercisable, only by
giving written notice (the "Exercise Notice") to the Treasurer of the
Company at the offices of the Company, of the election to exercise
the Option and the total number of full shares to be purchased,
and shall be signed by the person or persons exercising the Option.
Such notice shall be accompanied by payment of the full Option Price
and shall duly signed by the holder; provided, however, that this
Option may not be exercised if such exercise would violate any law or
governmental order or regulation. If the offer and sale of the shares
subject to the Option has not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), Optionee shall deliver
to the Company, at the time of exercise, an appropriate "investment
letter" in form and content satisfactory to the Company unless, in the
opinion of counsel for the Company, the shares issued would not be
deemed "restricted securities" within the meaning of such Securities
Act or the rules and regulations promulgated thereunder. Payment for
the shares purchased pursuant to any exercise shall be made in full
at the time of such exercise, in any of the following methods: (i)
in cash or by check payable to the order of the Company; (ii) in Common
Stock of the Company already owned by the Optionee for a period of six
(6) months prior to such exercise, valued as of the date of exercise
of the Option at its "Fair Market Value" (as defined below); or (iii)
a combination of (i) and (ii).
<PAGE>
Optionee agrees to have withheld from any remuneration payable to
him by the Company and/or to pay to the Company, at the time of
exercise of the Option, an amount which is required to be withheld or
paid pursuant to any federal, state or local tax or revenue laws or
regulation, as may be determined by the Company. The Optionee may
satisfy such tax withholding by instructing the Company to withhold
such number of option shares exercised which, when valued at "Fair
Market Value" (defined below) on the date of Exercise, equal the total
tax obligations required to be withheld. For purposes of this
Agreement, the term "Fair Market Value" shall mean the mean of the
high and low prices at which the Common Stock is reported to have
traded on the relevant date as reported on the NASDAQ Electronic
Interdealer Quotation System ("NASDAQ System"); and if there is no
trade on the relevant date, the Fair Market Value shall mean the mean
of the low asked and high bid prices on that date as reported on the
NASDAQ System. If the principal market for the Common Stock shall
become a national securities exchange then the Fair Market Value shall
mean the mean of the high and low prices at which the Common Stock is
reported to have traded on the relevant date; and if there is no trade
on the relevant date, the Fair Market Value shall mean the mean of the
low asked and high bid prices on that date. If no Fair Market Value
has been established in accordance with the foregoing, Fair Market
Value shall be the value established by the Board in good faith.
4. Non-Transferability. This Option shall not be transferred,
sold, pledged, assigned, hypothecated, or disposed of in any manner by
Optionee other than by will or the laws of descent and distribution to
the extent hereinafter set forth. This Option may be exercised during
the holder's lifetime only by the holder hereof or, upon the holder's
legal incapacity to act on his/her own behalf, by the holder's
conservator or other lawful representative. The Option shall be null
and void and without effect upon any attempted assignment or transfer,
except as hereinabove provided, including without limitation, any
purported assignment, whether voluntary or by operation of law,
pledge, hypothecation or other disposition contrary to the provisions
hereof, or levy of execution, attachment, trustee process or similar
process, whether legal or equitable, upon the Option.
5. Termination. To the extent that this Option shall not have
been exercised in full prior to its termination or Expiration Date,
whichever shall be sooner, it shall terminate and become void and of
no effect.
6. Termination of Employment. For purposes of this Agreement, the
term "Retirement" shall mean the termination of employment of the
Optionee with the Company, or any subsidiary of the Company, by reason
of the attainment of the age which the Company, by policy or
otherwise, has established as the age at which salaried employees may
or shall be required to terminate their employment and receive
retirement benefits (other than benefits provided pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985) from the
Company. For purposes of this Agreement, the term "Disability" shall
mean that, for a period of six (6) consecutive months, the Optionee is
unable to engage in any substantial activity required by his
employment by reason of any medically determinable, physical or mental
impairment, which, in the opinion of qualified physicians, is likely
to continue for an indefinite period or result in the death of the
individual within the near future.
<PAGE>
A. Termination of Employment Due to Retirement or Voluntary or
Involuntary Separation. In the event the employment of the Optionee is
terminated by reason of Retirement, any outstanding Options granted to
the Optionee which are then exercisable shall continue to be
exercisable at any time prior to the earlier of the Expiration Date of
the Options and one (1) year after the date of Retirement, or in the
event that the employment of the Optionee is terminated for any reason
other than Retirement, death, Disability or Cause (defined below), any
outstanding options granted to the Optionee which are then exercisable
may continue to be exercisable until the earlier of the Expiration
Date of such Options and three months after the date of termination.
Notwithstanding the preceding provisions, in no event shall such
Options become exercisable prior to the expiration of three (3) years
from the Grant Date. Any Options not exercisable upon Retirement or
other termination except due to death or Disability shall terminate
immediately.
B. Termination of Employment Due to Death or Disability. In the
event the employment of the Optionee is terminated by reason of death
or Disability, the rights under any then outstanding Option granted to
the Optionee pursuant to the Agreement shall become fully exercisable
until the earlier of the Expiration Date of the Option and one (1)
year after the date of such termination. Notwithstanding the preceding
provisions, in no event shall such Options become exercisable prior to
the expiration of three (3) years from the Grant Date.
C. Termination of Employment for Cause. Notwithstanding anything
to the contrary herein, if the employment of the Optionee shall
terminate for Cause (as defined herein), any then any outstanding
Options granted pursuant to the Agreement to the Optionee shall
terminate immediately. For purposes of this Agreement, "Cause" means
the Optionee's knowingly or recklessly causing material injury to the
Company, the Optionee's willful misconduct in the performance of (or
failure to perform) his duties hereunder, or the Optionee's dishonest,
fraudulent or unlawful behavior involving moral turpitude whether or
not in connection with his employment. Whether the Option has been
terminated for "Cause" shall be determined by the a majority of the
directors of the Board, in its sole discretion.
<PAGE>
7. Stock Splits and Capital Adjustments. If, prior to the
complete exercise of this Option, there is any increase or reduction
in the number of shares of Common Stock, or any change (including, but
not limited to, a change in value) in the shares of Common Stock or
exchange of shares of Common Stock for a different number or kind of
shares or other securities of the Company or any other corporation or
other entity, by reason of a reclassification, recapitalization,
merger, consolidation, reorganization, spin-off, split-up, issuance
(other than pursuant to the plan of reorganization) of warrants or
rights or debentures, stock dividend, stock split or reverse stock
split, extraordinary dividend, property dividend, combination or
exchange of shares or otherwise (collectively, a "Change in
Capitalization"), this Option, to the extent that it has not been
exercised, shall entitle the holder, upon the future exercise of this
Option, to such number and kind of securities or other property,
subject to the terms of the Option, to which the holder would be
entitled had he actually owned the stock subject to the unexercised
portion of the Option at the time of the occurrence of the Change in
Capitalization; and the aggregate purchase price upon the future
exercise of the Option shall be the same as if shares of Common Stock
of the Company originally optioned were being purchased as provided
herein.
8. Acceleration of Exercise Date.
A. Reorganization. Without limiting the authority of the
Compensation Committee ("Committee") of the Board of the Directors,
the Committee, shall have the authority to accelerate in whole or in
part the exercisability of Option upon a "Change in Control." A
"Change in Control" is an event or series of events after the Grant
Date by which (i) any "person" or "group" (as such terms are used in
Section 13 (d) and 14(d) of the Securities Act) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities
Act), directly or indirectly, of more than fifty (50%) percent of the
aggregate voting power of all the capital stock of the Company
normally entitled to vote in the election of directors, or (ii) during
any period of two consecutive calendar years individuals who at the
beginning of such period constituted the Board (together with any new
directors whose election by the Board or whose 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 either were
directors at the beginning of such period or whose election or
nomination was previously so approved) cease for any reason to
constitute a majority of the directors of the Board then in office.
Provided, however, such Option shall not become fully vested or
immediately exercisable (1) if, in its sole discretion, the Committee
has affirmatively determined that such immediate vesting or
exercisability is not in the best interests of the Company, in which
event the Option shall be assumed or an equivalent option shall be
substituted by the successor corporation or a parent or subsidiary
thereof, or (2) if such transaction is effected by the Company for the
principal purpose of changing the Company's state of incorporation.
B. Time of Exercise. In the event of such accelerated vesting
pursuant to Section 8.A. above, the Option shall be fully exercisable
during a period to be designated by the Board (but not less than ten
(10) nor more than sixty (60) days prior to the closing date of any
such transaction).
<PAGE>
9. Compliance With Securities Laws.
A. Postponed Issuance. Notwithstanding any provision of this
Option to the contrary, the Company may postpone the issuance and
delivery of shares upon any exercise of this Option until one of the
following conditions shall be met:
1. The shares with respect to which such Option
has been exercised are at the time of the
issue of such shares effectively registered
under applicable Federal and State
securities laws now in force or hereafter
enacted or amended; or
2. Counsel for the Company shall have given an
opinion that registration of such shares
under applicable Federal and State
securities laws, as now in force or
hereafter enacted or amended, is not
required.
B. Investment Representation. In the event that for any reason
the shares to be issued upon exercise of the Option shall not be
effectively registered under the Securities Act, upon any date on
which the Option is exercised in whole or in part, the Company shall
be under no further obligation to issues shares covered by the Option,
unless the Optionee shall give a written representation to the
Company, in form satisfactory to the Company, that such person is
acquiring the shares issued pursuant to such exercise of the Option
for investment and not with a view to, or for sale in connection with,
the distribution of any such shares, and that he will make no transfer
of the same except in compliance with the Securities Act and the rules
and regulations promulgated thereunder and then in force, and in such
event, the Company may place an "investment legend" upon any
certificate for the shares issued by reason of such exercise.
10. No Agreement of Employment. Neither the grant of this Option
nor this Agreement shall be deemed to create any agreement with, or
obligation by, the Company to employ the Optionee for any period of
time, it being understood that employment is strictly "at will" in the
absence of any written agreement to the contrary and, in the absence
of such written agreement, such person may be terminated by the
Company at any time, with or without cause.
11. Severability. If any condition, term or provision of this
Agreement is determined by a court to be illegal or in conflict with
any law, State or Federal, the validity of the remaining portions or
provisions shall not be affected, and the rights and obligations of
the parties shall be construed and enforced as if this Agreement did
not contain the particular condition, terms or provisions determined
to be unenforceable.
12. Entire Agreement; Governing Law. This Agreement contains the
entire understanding and agreement between the parties hereto
respecting the within subject matter, and there are no
representations, agreements, arrangements or understandings, oral or
written, between the parties hereto relating to the subject matter of
this Agreement that are not fully expressed herein. This Agreement
shall be governed by and construed in accordance with the laws and the
State of Delaware.
<PAGE>
WITNESS the signature of its duly authorized office of the Company as
of the date of grant hereof.
REINHOLD INDUSTRIES, INC.
By: /S/ Brett Meinsen
Name: Brett Meinsen
Title:Vice President Finance and Administration
OPTIONEE
/S/ Michael T. Furry
- --------------------
Signature
Michael T. Furry
- --------------------
Name
(1)
- --------------------
Street Address
(1)
- --------------------
City, State, Zip Code
(1)
- --------------------
Social Security No.
(1) - Confidential treatment requested.
EXHIBIT 10.3
AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of the
16th day of June, 1999 by and among the parties named on the attached Schedule 1
(the "Stockholders") and REINHOLD INDUSTRIES, INC., a Delaware corporation (the
"Company").
WITNESSETH:
WHEREAS, in accordance with the terms of a certain Stock Purchase
Agreement between Keene Creditors Trust (the "Trust") and Reinhold Enterprises,
Inc. ("REI") dated May 18, 1999 (the "Purchase Agreement"), REI designated the
Stockholders to purchase, and on May 21, 1999 the Stockholders each purchased
from the Trust, that number of shares of Class B Common Stock of the Company
designated on Schedule 1;
WHEREAS, pursuant to the terms of the Purchase Agreement, the Trust
agreed not to (i) sell, transfer or otherwise dispose of any of its remaining
shares of the Company or (ii) purchase or otherwise acquire any shares of the
Company if after such purchase or acquisition the Trust would be a "5%
shareholder" of the Company within the meaning of Section 382 of the Internal
Revenue Code of 1986, as amended (together, the "Trust Stand Still
Requirements");
WHEREAS, pursuant to the terms of the Purchase Agreement, the rights
and obligations of the Trust under a certain Registration Rights Agreement dated
July 31, 1996 between the Trust and the Company (the "Registration Rights
Agreement") were assigned to Massachusetts Mutual Life Insurance Company,
MassMutual High Yield Partners II LLC and MassMutual Corporate Value Partners
Limited (collectively, the "MassMutual Entities") via a certain Assignment and
Assumption of Registration Rights Agreement dated May 21, 1999 among the Trust
and the MassMutual Entities;
WHEREAS, pursuant to the terms of the Purchase Agreement, each of the
Stockholders entered into a Qualified Designee Assignment and Assumption
Agreement dated May 21, 1999 (the "Assignment and Assumption Agreements")
pursuant to which each Stockholder (i) severally became the assignee of certain
rights and obligations of REI under the Purchase Agreement, (ii) severally made
certain representations and warranties to the Trust and (iii) agreed to make
certain payments to the Trust on a pro rata basis if, on the third anniversary
of the date the Assignment and Assumption Agreements, the Market Value per Share
(as defined in the Assignment and Assumption Agreements) is less than $11.50
("Stock Price Deficiency Payment");
WHEREAS, a form of Assignment and Assumption Agreement is attached
hereto as Exhibit A;
WHEREAS, the Stockholders entered into a certain Stockholders Agreement
dated May 21, 1999, a copy of which is attached hereto as Exhibit B (the
"Stockholders Agreement");
<PAGE>
NOW THEREFORE, in consideration of the terms and conditions contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Agreement of Stockholders. Each Stockholder hereby agrees that he or
it will not, for a period of three years following the Closing Date (as defined
in the Purchase Agreement) amend, modify, terminate or waive the Trust Stand
Still Requirements contained in the Purchase Agreement.
2. Agreement of the MassMutual Entities. Each of the MassMutual
Entities hereby agrees that it will not, for a period of one year following the
Closing Date (as defined in the Purchase Agreement), exercise its registration
rights under the Registration Rights Agreement.
3. Agreement of the Company. The Company hereby agrees as follows:
(A) The Company will not authorize its transfer agent to
effect any transfer of Participating Common Stock (as defined in the
Stockholders Agreement) in violation of the Stockholders Agreement or
without requiring proof of compliance with the Stockholders Agreement
and will issue stop transfer instructions to the transfer agent with
respect to all shares of Participating Common Stock until the end of
the period set forth in the Stockholders Agreement.
(B) All certificates representing Participating Common Stock
(as defined in the Stockholders Agreement) issued by the Company during
the term of the Stockholders Agreement will be endorsed as follows:
The shares of Common Stock represented by this certificate are
subject to, and transferable only in accordance with, a
Stockholders Agreement dated May 21, 1999, a copy of which
agreement is on file with the Secretary of the Company at its
registered office.
(C) After the MassMutual Entities provide written notice to
the Company that they are exercising their rights under this Paragraph
3(c) and until such time as the MassMutual Entities collectively own
less than five percent of the outstanding voting stock of the Company,
the Company shall recommend one person designated by Massachusetts
Mutual Life Insurance Company to be included in the slate of nominees
recommended by the Board of Directors of the Company for election by
the stockholders of the Company at the annual meeting of the
stockholders of the Company, and the Board of Directors shall include
such person in its recommended slate of nominees.
(D) In the event that the Stockholders are required to make
the Stock Price Deficiency Payment in accordance with the terms of the
Assignment and Assumption Agreements, the Company shall reimburse the
Stockholders for the full amount of such payments within a reasonable
time following receipt of a notice from any Stockholder that such
payments were made to the Trust.
<PAGE>
4. Miscellaneous.
(A) Each party hereto shall be responsible for the fees and
expenses of its accountants, attorneys and advisors and any other costs
and expenses incurred by it in the negotiations and consummation of the
transactions contemplated by this Agreement.
(B) All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have
been duly given (a) on the date of service if served personally on the
party to whom notice is to be given, (b) on the day of transmission if
sent via facsimile transmission to the facsimile number given below,
provided that telephonic confirmation of receipt is obtained promptly
after completion of transmission, (c) on the day after delivery to a
nationally recognized overnight courier service or the Express Mail
service maintained by the United States Postal Service, or (d) on the
fifth (5th) day after mailing, if mailed to the party to whom notice is
to be given, by first class mail, registered or certified, postage
prepaid, and addressed as follows:
If to the Company, to:
Reinhold Industries, Inc.
12827 East Imperial Highway
Santa Fe Springs, California 90670
Attention: President
Tel. No. (562) 944-3281
Fax No. (562) 941-8579
If to a Stockholder, to the last known address of such Stockholder
contained in the records of the Company.
Any party may change its address for the purpose of this Section 4(B)
by giving the other parties written notice of its new address in the
manner set forth above.
(C) The section and paragraph headings in this Agreement are
for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
(D) If any provision of this Agreement is declared by any
court or other governmental body to be null, void, or unenforceable,
this Agreement shall be construed so that the provision at issue shall
survive to the extent it is not so declared and that all of the other
provisions of this Agreement shall remain in full force and effect.
(E) This Agreement (and the schedules hereto) contain the
entire understanding among the parties hereto with respect to the
transactions contemplated hereby and thereby and supersede and replace
all prior and contemporaneous agreements, understandings,
representations or warranties, oral or written, with regard to those
transactions. All Schedules hereto are expressly made a part of this
Agreement as fully as though completely set forth herein.
<PAGE>
(F) This Agreement may be amended or modified, and any of the
terms, covenants, representations, warranties, or conditions hereof may
be waived, only by a written instrument executed by the parties hereto,
or in the case of a waiver, by the party waiving compliance. Any waiver
by any party of any condition, or of the breach of any provision, term,
covenant, representation, or warranty contained in this Agreement, in
any one or more instances, shall not be deemed to be or construed as a
further or continuing waiver of any condition or of the breach of any
other provision, term, covenant, representation, or warranty of this
Agreement.
(G) Nothing in this Agreement is intended to confer any rights
or remedies under or by reason of this Agreement on any Party other
than the Company and the Stockholders and their respective successors
and permitted assigns.
(H) No party hereto shall assign or delegate this Agreement or
any rights or obligations hereunder without the prior written consent
of the other parties hereto, and any attempted assignment or delegation
without prior written consent shall be void and of no force or effect.
This Agreement shall inure to the benefit of and shall be binding upon
the successors and permitted assigns of the parties hereto.
(I) This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of Indiana
applicable to contracts made and to be performed in such state.
(J) This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which shall together
constitute the same instrument.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties have executed, or caused to be executed
by their duly authorized representatives, this Agreement as of the date first
written above.
"COMPANY"
REINHOLD INDUSTRIES, INC.
By: /S/ Michael T. Furry
Michael T. Furry, President
"STOCKHOLDERS"
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /S/ Richard C. Morrison
Printed: Richard C. Morrison
Title: Managing Director
MASSMUTUAL HIGH YIELD PARTNERS II LLC , By HYP
Management, Inc., its Managing Member
By: /S/ Richard C. Morrison
Printed: Richard C. Morrison
Title: Vice President
MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED , By
Massachusetts Mutual Life Insurance Company, its
Investment Manager
By: /S/ Richard C. Morrisson
Printed: Richard C. Morrison
Title: Managing Director
<PAGE>
/S/ Andrew McNally, IV
Andrew McNally, IV
/S/ Ward S. McNally
Ward S. McNally
ANDREW MANAGEMENT IV, L.P.
By: /S/ Andrew McNally IV
Printed: Andrew McNally IV
Title: General Partner
BJR MANAGEMENT, L.P.
By: /S/ Betsy McNally Ravenel
Printed: Betsy McNally Ravenel
Title: General Partner
ECM MANAGEMENT, L.P.
By: /S/ Edward C. McNally
Printed: Edward C. McNally
Title: General Partner
RALPH R. WHITNEY, JR., TRUSTEE FOR THE RALPH R.
WHITNEY,JR. MPP FBO RALPH R. WHITNEY, JR. TCM-RO9603
By: /S/ Ralph R. Whitney, Jr.
Ralph R. Whitney, Jr., Trustee
<PAGE>
GLENN SCOLNIK, TRUSTEE FOR THE GLENN SCOLNIK MONEY
PURCHASE PLAN FOR THE BENEFIT OF GLENN SCOLNIK ACCT.
#0ZJ-R47960-80
By: /S/ Glenn Scolnick
Glenn Scolnik, Trustee
FORREST E. CRISMAN , JR., TRUSTEE FOR FORREST E.
CRISMAN, JR. PS PLAN DATED 12/28/89
By: /S/ Forrest E. Crisman, Jr.
Forrest E. Crisman, Jr., Trustee
<PAGE>
SCHEDULE 1
STOCKHOLDER NUMBER OF SHARES PURCHASED
Massachusetts Mutual Life Insurance Company 314,205
MassMutual High Yield Partners II LLC 314,204
MassMutual Corporate Value Partners Limited 119,697
Andrew McNally, IV 14,599
Ward S. McNally 10,869
Andrew Management IV, L.P. 46,737
BJR Management, L.P. 23,368
ECM Management, L.P. 23,368
Glenn Scolnik, trustee for the Glenn Scolnik Money 43,476
Purchase Plan for benefit of Glenn Scolnik Act.
#OZJ-R47960-80
Ralph R. Whitney, Jr. Trustee for the Ralph R. Whitney, 43,476
Jr. MPP FBO Ralph R. Whitney, Jr. TCM-RO9603
Forrest E. Crisman, Jr., Trustee for Forrest E. Crisman, 43,476
Jr. PS Plan dated 12/28/89
TOTAL 997,475
<PAGE>
EXHIBIT A
QUALIFIED DESIGNEE ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS QUALIFIED DESIGNEE ASSIGNMENT AND ASSUMPTION AGREEMENT (the
"Agreement") is made as of the ____ day of May, 1999 by and among REINHOLD
ENTERPRISES, INC., an Indiana corporation ("REI"), ________________________ (the
"Assignee") and KEENE CREDITORS TRUST (the "Seller"). Capitalized terms used but
not defined in this Agreement shall have the meanings set forth in the Purchase
Agreement (as defined below).
RECITALS:
1. REI and the Seller are parties to that certain Stock Purchase
Agreement dated May ___, 1999 (the "Purchase Agreement")
pursuant to which the Seller agreed to sell, and REI and/or
certain Qualified Designees agreed to purchase, 997,475 Class
B Common Shares of Reinhold Industries, Inc. (the "Company").
2. Upon execution of this Agreement, the Assignee shall for all
purposes under the Purchase Agreement be a Qualified Designee
within the meaning of the Purchase Agreement.
AGREEMENT:
In consideration of the terms and conditions contained herein and in
the Purchase Agreement and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Assignment. REI hereby transfers and assigns to the Assignee its
right to purchase [______________] Shares pursuant to the Purchase Agreement and
further transfers and assigns to the Assignee, pro rata with the other Qualified
Designees identified on Schedule 1 attached hereto, all other right, title and
interest of REI in, to and under the Purchase Agreement.
2. Assumption. The Assignee hereby agrees to purchase [_______] Shares
pursuant to the Purchase Agreement and accepts and, severally (but not jointly)
to the extent of the Assignee's pro rata interest in the Purchase Agreement,
assumes and agrees to be bound by REI's (and, where applicable, Purchaser's)
obligations under the Purchase Agreement except that the Assignee does not
assume the obligations of REI under Article XII of the Purchase Agreement. The
parties hereby acknowledge and agree that the obligations of REI under Article
XII of the Purchase Agreement shall remain obligations solely of REI.
3. Representations and Warranties of the Assignee. The Assignee hereby
severally (and not jointly) and to the extent of the Assignee's pro rata
interest in the Purchase Agreement represents and warrants to the Seller as
follows:
<PAGE>
[1. Organization; Good Standing; Qualification; and Power. The
Assignee is a company, organization, entity, account or plan
duly organized, validly existing and, to the extent Assignee
is a corporation or other entity, in good standing, under the
laws of the State of its organization. The Assignee has all
requisite power and authority and all governmental licenses,
authorizations, consents and approvals to execute and deliver
this Agreement and to consummate the transactions contemplated
hereby.]1
[2. Authority. [The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby by
the Assignee have been duly authorized by all necessary action
on the part of the Assignee.] This Agreement constitutes a
valid and legally binding obligation of the Assignee
enforceable against the Assignee in accordance with its terms,
except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or similar laws affecting creditors' rights generally
or by the principles governing the availability of equitable
remedies.
[3. No Conflict or Violation. The execution, delivery and
performance of this Agreement nd the consummation of the
transactions contemplated hereby do not and shall not: [(a)
violate or conflict with the organizational documents of the
Assignee;] (b) violate any provision of law or any order,
judgment, or decree of any court or other governmental or
regulatory authority applicable to the Assignee; or (c)
result in a breach of, or constitute a default (or an event
which, with notice or lapse of time or both would constitute
a default) under, or give rise to any right of termination,
cancellation or acceleration of, or result in the creation
of any Lien upon any of the assets or properties of the
Assigne under , any loan agreement , mortgage , security
agreement, indenture, or other agreement or instrument to
which the Assignee is a party or by which the Assignee is
bound or to which any of its properties or assets is subject
or prohibit the Assignee from consummating the purchase and
sale of the Shares as contemplated hereby.
[4. No Consent. No authorization, consent, approval, exemption, or
other action by or notice to or filing with any court or
administrative or governmental body or any third party is
required to permit the Assignee to execute and deliver this
Agreement, to consummate the transactions contemplated by this
Agreement or to comply with and fulfill the terms and
conditions of this Agreement.
<PAGE>
Securities Matters. The Assignee understands that the offering and sale of the
Shares under the Purchase Agreement is intended to be exempt from the
registration requirements of the Securities Act. The Shares are being acquired
by the Assignee for its own account and without a view to the public
distribution of the Shares or any interest therein. The Assignee is an
"accredited investor" as such term is defined in Regulation D promulgated under
the Securities Act. The Assignee is not a broker-dealer subject to Regulation T
promulgated by the Board of Governors of the Federal Reserve System. The
Assignee has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Shares, and the Assignee is capable of bearing the economic risks of such
investment, including a complete loss of its investment in the Shares. In
evaluating the suitability of an investment in the Shares, the Assignee has
relied upon the representations, warranties, covenants and agreements made by
the Seller in the Purchase Agreement and on such other information regarding the
Company sufficient to allow the Assignee to make an informed decision regarding
purchase of the Shares. The Assignee has not relied upon any other
representations or other information (whether oral or written and including any
estimates, projections or supplemental data) made or supplied by or on behalf of
Seller, the Company or any Affiliate, employee, agent or other representative of
Seller or the Company other than as contemplated by this Section 3.e. The
Assignee acknowledges that Seller has no responsibility for any information
furnished to it other than as set forth in the representations and warranties
made by Seller in the Purchase Agreement. The Assignee understands and agrees
that it may not sell or dispose of any of the Shares other than pursuant to a
registered offering or in a transaction exempt from the registration
requirements of the Securities Act and that the Shares will bear an appropriate
legend to that effect.
[5. Brokers or Finders Commissions. No broker's or finder's fee or
commission or investment banking fee has been or will be
payable, or asserted to be payable by any of the Assignee, the
Seller, the Company or the Subsidiary with respect to the
purchase of the Shares from the Seller or the transactions
contemplated by this Agreement as a result of any agreement
entered into by the Assignee.
[6. Financial Condition. The Assignee has sufficient liquidity
and financial condition to consummate the purchase of the
Shares at Closing.
a. EXCLUSIVITY OF REPRESENTATIONS. THE REPRESENTATIONS AND
WARRANTIES MADE BY THE ASSIGNEE IN THIS AGREEMENT ARE IN LIEU
OF AND ARE EXCLUSIVE OF ALL OTHER REPRESENTATIONS AND
WARRANTIES, INCLUDING ANY IMPLIED WARRANTIES. THE ASSIGNEE
HEREBY DISCLAIMS ANY SUCH OTHER OR IMPLIED REPRESENTATIONS OR
WARRANTIES, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO
SELLER OR ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION.
<PAGE>
4. Indemnification by the Assignee. The Assignee shall indemnify and
hold harmless the Seller from and against any and all Indemnity Losses which the
Seller may suffer, incur or become subject to as a result of or in connection
with (a) any breach of any representation or warranty made by the Assignee in
this Agreement and (b) any and all suits, actions, investigations, proceedings,
demands, assessments, audits, and judgments arising out of any of the foregoing.
The obligations of the Assignee pursuant to the foregoing sentence shall be
several (and not joint) with the other Qualified Designees and to the extent of
the Assignee's pro rata interest in the Purchase Agreement. Indemnification of
the Seller by the Assignee shall be pursuant to the terms, conditions and
limitations contained in Sections 12.03, 12.04, 12.06, 12.07 and 12.08 of the
Purchase Agreement (except that the reference to Article VI in Section 12.08
shall be deemed to refer to Section 3 hereof). The representations and
warranties of the Assignee contained in this Agreement shall survive the Closing
indefinitely.
5. Obligations of the Seller. Seller hereby acknowledges the assignment
and assumption of the rights and obligations of REI under the Purchase Agreement
by the Assignee. Seller further acknowledges and affirms that the
representations, warranties, covenants and agreements of Seller contained in the
Purchase Agreement, including without limitation, the obligation to indemnify
the REI Indemnified Parties shall inure to the benefit of the Assignee to the
same extent as though the Assignee were a party to the Purchase Agreement.
6. Stock Price Adjustment. If, on the third anniversary of the date of
this Agreement, the Market Value per Share of the Class A Common Stock of the
Company is less than Eleven and 50/100 Dollars ($11.50) (the amount of any such
deficiency as of such date being referred to as the "Stock Price Deficiency"),
then no later than 15 Business Days thereafter and as additional consideration
for the Shares, the Qualified Designee shall pay in cash to the Seller its pro
rata portion of an amount equal to (a) 22,525, multiplied by (b) the Stock Price
Deficiency. Notwithstanding the above, the Qualified Designee shall have the
right to assign its obligations under this Section to a corporation, partnership
or other entity with the prior written consent of Seller, which consent shall
not be unreasonably withheld, conditioned or delayed, and upon the assumption of
the obligations by such corporation, partnership or other entity, the Qualified
Designee shall be released from its obligations under this Section. For purposes
of this Section, "Market Value per Share" shall mean the average trading price
of one share of Class A Common Stock of the Company over the 20 trading days
ending on the third anniversary of the date of this Agreement as quoted in the
National Quotation Bureau Pink Sheets or on such exchange or in such interdealer
quotation system or other trading market as the Class A Common Stock of the
Company is then quoted.
For purposes of this Agreement, "pro rata" shall mean the ratio
(expressed as a percentage) that the number of Shares purchased by the Qualified
Designee hereunder bears to the total number of Shares purchased by all
Qualified Designees (as set forth on Schedule 1 attached hereto) at the Closing.
<PAGE>
7. Miscellaneous.
1. Each party hereto shall be responsible for the fees and
expenses of its accountants, attorneys and advisors and any
other costs and expenses incurred by it in the negotiations
and consummation of the transactions contemplated by this
Agreement.
2. All notices, requests, demands, and other communications under
this Agreement shall be in writing and shall be deemed to have
been duly given (a) on the date of service if served
personally on the party to whom notice is to be given, (b) on
the day of transmission if sent via facsimile transmission to
the facsimile number given below, provided that telephonic
confirmation of receipt is obtained promptly after completion
of transmission, (c) on the day after delivery to a nationally
recognized overnight courier service or the Express Mail
service maintained by the United States Postal Service, or (d)
on the fifth (5th) day after mailing, if mailed to the party
to whom notice is to be given, by first class mail, registered
or certified, postage prepaid, and addressed as follows:
If to Seller, to:
Keene Creditors Trust
The Chancery
190 Willis Avenue
Mineola, New York 11501
Tel. No. (516) 873-1412
Fax No. (516) 873-1092
With a copy to:
Ed Kaufmann, Esq.
Hughes Hubbard & Reed, LLP
One Battery Place Plaza
New York, New York 10004
Tel. No. (212) 837-6000
Fax No. (212) 422-4726
which copy alone shall not constitute notice for the purposes of this
Purchase Agreement.
<PAGE>
If to REI, to:
Reinhold Enterprises, Inc.
c/o Hammond Kennedy Whitney & Company, Inc.
8888 Keystone Crossing, Suite 690
Indianapolis, Indiana 46240
Attention: Glenn Scolnik
Tel. No. (317) 574-6900
Fax. No. (317) 574-7515
With a copy to:
Stephen J. Hackman, Esq.
Ice Miller Donadio & Ryan
One American Square, Box 82001
Indianapolis, Indiana 46282
Tel. No. (317) 236-2100
Fax. No. (317) 236-2219
which copy alone shall not constitute notice for the purposes of this
Purchase Agreement.
If to the Assignee, to the address and/or fax number set forth below
such Assignee's signature below.
Any party may change its address for the purpose of this Section 6.b.
by giving the other parties written notice of its new address in the manner set
forth above.
3. The section and paragraph headings in this Agreement are for
reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
4. If any provision of this Agreement is declared by any court or
other governmental body to be null, void, or unenforceable,
this Agreement shall be construed so that the provision at
issue shall survive to the extent it is not so declared and
that all of the other provisions of this Agreement shall
remain in full force and effect.
5. This Agreement and the Transaction Documents (and the
schedules hereto and thereto) contain the entire understanding
among the parties hereto with respect to the transactions
contemplated hereby and thereby and supersede and replace all
prior and contemporaneous agreements, understandings,
representations or warranties, oral or written, with regard to
those transactions. All Schedules hereto are expressly made a
part of this Agreement as fully as though completely set forth
herein.
<PAGE>
6. This Agreement may be amended or modified, and any of the
terms, covenants, representations, warranties, or conditions
hereof may be waived, only by a written instrument executed by
the parties hereto, or in the case of a waiver, by the party
waiving compliance. Any waiver by any party of any condition,
or of the breach of any provision, term, covenant,
representation, or warranty contained in this Agreement, in
any one or more instances, shall not be deemed to be or
construed as a further or continuing waiver of any condition
or of the breach of any other provision, term, covenant,
representation, or warranty of this Agreement.
7. Nothing in this Agreement is intended to confer any rights or
remedies under or by reason of this Agreement on any Person
other than the Seller, REI and the Assignee and their
respective successors and permitted assigns.
8. Except as contemplated by Section 6 above, no party hereto
shall assign or delegate this Agreement or any rights or
obligations hereunder without the prior written consent of the
other parties hereto, and any attempted assignment or
delegation without prior written consent shall be void and of
no force or effect. This Agreement shall inure to the benefit
of and shall be binding upon the successors and permitted
assigns of the parties hereto.
9. This Agreement shall be construed and enforced in accordance
with, and governed by, the laws of the State of New York
applicable to contracts made and to be performed in such
state.
10. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which shall together
constitute the same instrument.
11. Assignee hereby appoints REI as its authorized representative
for purposes of executing and delivering the receipt specified
in Section 3.03(d) of the Purchase Agreement and hereby
authorizes and directs REI to deliver such receipt upon
Seller's delivery and REI's receipt of the items described in
Section 3.02 of the Purchase Agreement.
[Signatures follow next page.]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
"REI"
REINHOLD ENTERPRISES, INC.
By:______________________________________
Its:______________________________________
"SELLER"
KEENE CREDITORS TRUST
By:______________________________________
Richard A. Lippe, Trustee
By:______________________________________
Archie R. Dykes, Trustee
By:______________________________________
John J. Robbins, Trustee
"ASSIGNEE"
-----------------------------------------
Address:__________________________________
Telephone No. (___) _______________________
Fax No. (___) _____________________________
<PAGE>
SCHEDULE 1
Other Qualified Designees
Qualified Designee Number of Shares
<PAGE>
EXHIBIT B
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (the "Agreement") is entered into this day
of May, 1999, among the Persons identified as "Stockholders" on the signature
pages of this Agreement and any other person who hereafter becomes a holder of
Participating Common Stock (as defined in Section 12) and who becomes a party to
this Agreement (hereinafter sometimes each referred to as a "Stockholder" and
collectively as "Stockholders").
Preliminary Statements
8. The authorized capital stock of Reinhold Industries, Inc., a
Delaware corporation (the "Company"), consists of 1,480,000
shares of Class A Common Stock, par value $0.01 per share, and
1,020,000 shares of Class B Common Stock, par value $0.01 per
share. There are 978,956 shares of Class A Common Stock
outstanding on the date of this Agreement, which are held by
various stockholders. All of the shares of Class B Common
Stock are outstanding and are held by Keene Creditors Trust
(the "Trust").
9. Pursuant to a certain Stock Purchase Agreement dated May ,
1999 (the "Purchase Agreement"), the Trust agreed to sell to
Reinhold Enterprises, Inc. ("REI") or its Qualified Designees
997,475 shares of Class B Common Stock of the Company.
10. The Stockholders are the Qualified Designees under the
Purchase Agreement, and each has agreed to purchase that
number of shares of Participating Common Stock set forth on
Schedule 1 hereto.
11. Pursuant to the Certificate of Incorporation of the Company,
upon the sale of the Class B Common Stock pursuant to the
Purchase Agreement, each share of the Class B Common Stock
will convert into Class A Common Stock without further action
of the holders.
12. The Stockholders hereby agree to certain terms and conditions
relevant to the transfer of the Participating Common Stock as
set forth in this Agreement.
Terms and Conditions
In consideration of the mutual covenants and agreements contained in
this Agreement, and intending to be legally bound, the parties agree as set
forth herein. Capitalized terms have the meanings set forth in Section 12 or as
otherwise defined in this Agreement or the Purchase Agreement.
Section 1. [Reserved].
<PAGE>
Section 2. Restrictions on Transfer.
(a) None of the Stockholders shall, directly or indirectly,
offer, sell, transfer or dispose of any Participating Common Stock
without offering the Remaining Stockholders the right of first refusal
in the manner provided in Section 3, except (i) to another Stockholder,
provided the Participating Common Stock so disposed of continues to be
subject to this Agreement, (ii) for gifts or bequests to any person or
distributions from a trust to the beneficiaries thereof, provided that
(A) the transferor shall have obtained and delivered to the Company the
recipient's agreement in a written instrument to be bound by the
provisions of this Agreement applicable to the Stockholders and (B) the
recipient shall be deemed to be a Stockholder for all purposes of this
Agreement, (iii) for sales or exchanges pursuant to mergers, tender
offers or similar transactions which the Board of Directors of the
Company either approves or does not oppose, and (iv) for sales or other
dispositions approved in advance by a majority of the Board of
Directors of the Company.
(b) Notwithstanding any other provision contained in this
Agreement, on or prior to the third anniversary of the date of this
Agreement, no Stockholder shall (i) acquire any additional shares of
Common Stock of the Company (other than by way of stock dividends,
stock splits or other distributions made to all stockholders of the
Company pro rata) or (ii) offer, sell, transfer or dispose of any
Participating Common Stock if such offer, sale, transfer or disposition
would trigger the net operating loss limitations of Internal Revenue
Code Section 382 with respect to the Company.
(c) No sale or transfer (as defined in Section 12 of this
Agreement) of any of the Participating Common Stock shall be valid (and
the Stockholders shall cause the Company not to take any action to
implement, acknowledge or record any transfer of Participating Common
Stock) unless the Stockholder holding the Participating Common Stock
has complied with the terms and conditions of this Agreement prior to
the sale or transfer.
Section 3. Conditions to Transfer by the Stockholders.
(a) Except as provided in Section 2(a), prior to the transfer
of Participating Common Stock by a Stockholder, the transferring
Stockholder shall first notify the Remaining Stockholders in writing at
least 30 days in advance of the intended transfer. The notice shall
contain all of the terms of the proposed transfer, including, without
limitation and to the extent available, the name and address of the
prospective transferee, the purchase price and other terms and
conditions of payment (or the minimum purchase price or basis for
determining the minimum purchase price and minimum acceptable other
terms and conditions), the date on or about which the transfer is to be
made, the number of shares of Participating Common Stock to be
transferred (the "Offered Shares"), and the percentage of the
Stockholder's total holdings of the Participating Common Stock that
those shares represent (the "Stockholder's Notice").
<PAGE>
(b) Except as provided in Section 3(g), within 15 days after
receipt of the Stockholder's Notice each Remaining Stockholder shall be
entitled to purchase from the transferring Stockholder a number of the
Offered Shares which number shall not exceed such Remaining
Stockholder's pro rata share of the Offered Shares and may notify the
transferring Stockholder and the other Remaining Stockholders (an
"Initial Purchase Notice") that the Remaining Stockholder will purchase
on the same terms set forth in the Stockholder's Notice up to his pro
rata share of the Offered Shares. For purposes of this Section, "pro
rata share" of the Offered Shares shall be determined by the ratio
(expressed as a percentage) that the number of shares of Participating
Common Stock held by the Remaining Stockholder bears to the total
number of shares of Participating Common Stock held by all of the
Remaining Stockholders.
(c) If any of the Remaining Stockholders fails to deliver an
Initial Purchase Notice as provided above or delivers an Initial
Purchase Notice but does not elect to purchase his full pro rata share,
any other Remaining Stockholder may, within ten days after expiration
of the Initial Purchase Period, notify the transferring Stockholder and
the other Remaining Stockholders (a "Secondary Purchase Notice") that
such other Remaining Stockholder will purchase all or any portion of
the Offered Shares that were not the subject of an Initial Purchase
Notice on the same terms set forth in the Stockholder's Notice.
(d) If more than one Remaining Stockholder delivers a
Secondary Purchase Notice to the transferring Stockholder and the other
Remaining Stockholders, each Remaining Stockholder desiring to purchase
the Offered Shares shall be entitled to purchase a number of such
shares equal to the product of (i) the total number of Offered Shares
(as set forth in the Stockholder's Notice), multiplied by (ii) the
ratio (expressed as a percentage) that the number of shares of
Participating Common Stock held by the Remaining Stockholder bear to
the total number of shares of Participating Common Stock held by all of
the Remaining Stockholders who have elected to purchase Offered Shares
pursuant to a Secondary Purchase Notice. Each Initial Purchase Notice
and the Secondary Purchase Notice pursuant to this Section 3 when taken
together with the Stockholder's Notice shall constitute a legal, valid,
binding and enforceable contract between the transferring Stockholder
and the Remaining Stockholder(s) on the terms and conditions set forth
therein.
(e) Except as provided in Section 3(g), after compliance with
the terms of this Section 3 and subject to the terms of Section 4, the
transferring Stockholder may transfer such Stockholder's Participating
Common Stock, but only on the same terms and conditions as those
contained in the Stockholder's Notice. If the sale to the third party
is not consummated at the time and on substantially the same terms as
set forth in the Stockholder's Notice, or if the terms of the sale are
materially altered, then the Offered Shares shall once again be subject
to the right of first refusal set forth in this Section 3.
(f) Except as provided in Section 3(g), all Participating
Common Stock transferred to any Person pursuant to Section 3(e) shall
remain subject to the restrictions set forth in Section 2(b) of this
Agreement, and each transferee shall have agreed in writing to be bound
by the restrictions set forth in Section 2(b) as though such transferee
were a Stockholder hereunder.
(g) Notwithstanding the above, the terms of Sections 3(b)
through 3(f) shall not apply in the event of sales of Participating
Common Stock in a registered public offering effected pursuant to the
terms of the Registration Rights Agreement.
<PAGE>
Section 4. Co-Sale Rights.
(a) Upon delivery of a Stockholder's Notice proposing to
effect a sale or transfer of shares of Participating Common Stock to a
person other than a Stockholder, each Remaining Stockholder (including
any Remaining Stockholder who fails to exercise the right of first
refusal pursuant to Section 3) shall have the option to participate in
such sale in the manner hereinafter set forth.
(b) To exercise the option, a Remaining Stockholder shall give
a written notice of election to the transferring Stockholder within
five days after the expiration of the period within which the right of
first refusal described in Section 3 is to be exercised. All Remaining
Stockholders who timely give such notice (the "Co-Selling
Stockholders"), shall have the right to sell their Participating Common
Stock to the proposed purchaser upon the same terms and conditions
specified in the Stockholder's Notice pro rata with the transferring
Stockholder according to the ratio of the number of shares of
Participating Common Stock owned by such Co-Selling Stockholder to the
total number of shares of Participating Common Stock owned by all
Stockholders whose shares are to be sold. The number of shares of
Participating Common Stock to be sold by the transferring Stockholder
shall be reduced by the number of such shares the Co-Selling
Stockholders elect to so sell. Each Co-Selling Stockholder shall bear
his pro rata share of the expenses incident to such sale.
(c) No Co-Selling Stockholder shall be required to make any
representation or warranty in connection with the sale or transfer of
Participating Common Stock pursuant to this Section 4 other than as to
the Co-Selling Stockholder's ownership and authority to sell the
Participating Common Stock proposed to be sold by him free of liens,
claims and encumbrances, but each Co-Selling Stockholder shall be
required to bear his proportionate share of any liability for indemnity
obligations up to but in no event in excess of the net proceeds
received by the Co-Selling Stockholder for the Participating Common
Stock sold by him pursuant to this Section 4.
(d) Failure by the Remaining Stockholders to exercise the
option within the five- day period shall be deemed a declination of any
right to participate in such sale, provided that such sale is completed
within 120 days of the expiration of such five-day period at a price
and on terms and conditions substantially similar to those set forth in
the Stockholder's Notice. If the sale to the third party is not
consummated within such period or if the terms of sale are materially
altered, then the Remaining Stockholders must be given another
opportunity to participate pursuant to the provisions of this Section
4.
(e) Notwithstanding the foregoing, the co-sale rights of the
Stockholders shall not apply in the event of an offer, sale or transfer
of Participating Common Stock held by the personal representative or
estate of any Stockholder to the extent that the Participating Common
Stock is being offered, sold or transferred to a third party in order
to obtain funds to pay federal or state taxes on behalf of the estate;
provided that the personal representative or estate shall have obtained
the recipient's agreement in a written instrument to be bound by the
provisions of the Agreement and the recipient shall be deemed to be a
Stockholder for all purposes of this Agreement.
<PAGE>
(f) Notwithstanding the above, the terms of this Section 4
shall not apply to sales of Participating Common Stock in a registered
public offering effected pursuant to the Registration Rights Agreement
if co-sale of the Co-Selling Stockholders' Participating Common Stock
is not permitted by the Registration Rights Agreement or by the
Company.
Section 5. Term. This Agreement shall be effective as of the date first
written above and will terminate on the date on which the Stockholders or their
permitted assigns cease to hold the Participating Common Stock.
Section 6. Parties Bound by Agreement. All of the terms and provisions
of this Agreement shall be binding upon and shall inure to the benefit of the
parties and their respective personal representatives, heirs, successors and
assigns, including, without limitation, all subsequent holders of securities who
become bound by the terms of this Agreement.
Section 7. Endorsement on Stock Certificates. A copy of this Agreement
shall be delivered to the Company to be kept on file at its registered office,
and all certificates representing Participating Common Stock will be endorsed
conspicuously as follows:
The shares of Common Stock represented by this certificate are
subject to, and transferable only in accordance with, a
Stockholders Agreement, dated as of May 21, 1999, a copy of
which agreement is on file with the Secretary of the Company
at its registered office.
Section 8. [Reserved].
Section 9. Enforcement. The parties agree that there will be
irreparable damage if this Agreement is not specifically enforced or if a breach
or anticipated breach is not enjoined. If any Person who is required by this
Agreement to perform an act refuses to perform that act, one or more of the
parties to this Agreement may institute and maintain proceedings to compel the
specific performance of this Agreement by the Person in default. In addition, if
any Person breaches this Agreement or if a breach is reasonably anticipated, one
or more parties to this Agreement may institute and maintain proceedings to
enjoin any breach or anticipated breach, or to compel specific performance of
this Agreement, and may obtain an injunction against a breach or reasonably
anticipated breach.
Section 10. Applicable Law and Choice of Forum. The parties affirm that
this Agreement has been entered into in the State of Indiana and will be
governed by and construed in accordance with the laws of the State of Indiana,
notwithstanding any state's choice of law rules to the contrary. Further, the
parties expressly agree that any and all actions concerning any dispute arising
under this Agreement will be filed and maintained only in a state or federal
court sitting in the State of Indiana, and each party consents and submits to
the jurisdiction of that state or federal court.
<PAGE>
Section 11. Notices. All notices hereunder will be in writing and will
be deemed to have been duly given if delivered in person, if mailed by first
class certified or registered mail, postage prepaid, or if sent by expedited
courier service, shipping billed to shipper, not later than the day upon which
notice is required or desired to be given pursuant to this Agreement, addressed
as follows:
(a) If to a Stockholder, to the address last shown on the
records of the Company.
(b) If to the legal representative, heirs, or legatees of the
Stockholder, to the address, if any, provided to the
Company with the tender of the Participating Common Stock
for transfer as specified in Section 3.
By giving notice in writing to the Secretary, a Stockholder may change the
address to which notice to him, her or it should thereafter be sent.
Section 12. Definitions. In this Agreement, the following words have
the meanings specified below:
(a) The term "Participating Common Stock" shall mean and
include all shares of the Company's Common Stock (regardless of class)
owned by any Stockholder from time to time, including without
limitation any such shares so owned on the date of this Agreement, any
such shares acquired from the Trust pursuant to the Purchase Agreement
and any such shares acquired after the date of this Agreement. All
Company shares acquired by a Stockholder after the date of this
Agreement shall be deemed to be Participating Common Stock upon
acquisition unless such shares are acquired in the open market in a
transaction that is otherwise permitted by this Agreement.
(b) The term "Person" includes, but is not limited to, an
individual or fiduciary, a trust, an estate, a partnership, an
association, a company, and any similar entity.
(c) The term "Remaining Stockholders" with respect to any
Stockholder's Notice delivered in accordance with Section 3 means the
Stockholder or Stockholders who have not delivered such Stockholder's
Notice proposing to sell or transfer shares of Participating Common
Stock pursuant to the terms of this Agreement.
(d) The term "Secretary" means the Secretary of the Company.
(e) Except as set forth in the next sentence, the terms
"sale," "sell," "transfer" and the like shall include any assignment,
transfer or other disposition, with or without consideration, to any
Person for any purpose. The terms "sale," "sell," "transfer" and the
like shall not include a transfer of Participating Common Stock to (i)
the spouse or any parent, child, grandchild or sibling of the
transferring Stockholder or (ii) a trust established for the benefit of
one of the Persons specified in subparagraph (i); provided, however,
the transfer shall be exempt from the provisions of this Agreement only
if all transferees (and in the case of a minor the Person(s) holding
the shares for the benefit of the minor and who can make a binding
obligation with respect to the Participating Common Stock transferred
to the minor) agree in writing prior to the transfer to be bound by the
terms and conditions of this Agreement as an additional "Stockholder."
(f) The term "Registration Rights Agreement" means that
certain Registration Rights Agreement dated July 31, 1996 between the
Company and Keene Creditors Trust.
<PAGE>
Section 13. Severability. The invalidity or unenforceability of any
particular provision of this Agreement will not affect the other provisions of
this Agreement, and this Agreement will be construed in all respects as if the
invalid or unenforceable provisions were omitted.
Section 14. Modification. No change or modification of this Agreement
will be valid unless it is in writing and duly executed by all the parties, or
their successors and assigns; provided, that a permitted subsequent holder of
securities may become bound by the terms of this Agreement pursuant to a written
instrument signed by such holder without the signature of the other parties
hereto.
Section 15. No Waiver. The failure of any party to insist upon the
performance of any provision of this Agreement or to pursue any right under this
Agreement will not be deemed a waiver of that or any other provision or the
relinquishment of any right.
Section 16. Gender. Reference to or the use of terms herein relating to
gender, whether male, female or neutral, will not be construed so as to limit
the applicability of the terms or conditions of this Agreement to such gender or
genders.
Section 17. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be considered an original. Only one counterpart
of this Agreement executed by the party against which it would be enforced need
be provided to evidence this Agreement. One counterpart will be delivered to
each Stockholder and one to the Company.
Section 18. Costs. Each Stockholder agrees to pay his pro rata share of
the fees and expenses of Ice Miller Donadio & Ryan and Flackman, Goodman &
Potter associated with purchase by the Stockholders from the Trust of
Participating Common Stock pursuant to the Purchase Agreement.
Section 19. No Third Party Beneficiaries. The provisions of this
Agreement are not intended to, and shall not, benefit any Person other than the
parties to this Agreement, and the provisions hereof are not intended to, and
shall not create any third party beneficiary right in any Person.
[Signatures follow next page.]
<PAGE>
The parties have signed this Agreement on the date first above written.
STOCKHOLDERS"
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:_____________________________________
Printed:__________________________________
Title:___________________________________
MASS MUTUAL HIGH YIELD PARTNERS II LLC
By:_____________________________________
Printed:__________________________________
Title:___________________________________
MASS MUTUAL CORPORATE VALUE PARTNERS LIMITED
By:_____________________________________
Printed:__________________________________
Title:___________________________________
----------------------------------------
Andrew McNally, IV
----------------------------------------
Ward S. McNally
<PAGE>
ANDREW MANAGEMENT, IV, L.P.
By:_____________________________________
Printed:__________________________________
Title:___________________________________
BJR MANAGEMENT IV, L.P.
By:_____________________________________
Printed:__________________________________
Title:___________________________________
ECM MANAGEMENT, L.P.
By:_____________________________________
Printed:__________________________________
Title:___________________________________
GLENN SCOLNIK, TRUSTEE FOR THE GLENN SCOLNIK MONEY
PURCHASE PLAN FOR BENEFIT OF GLENN SCOLNIKACT. #OZJ-
R47960-80
By:_____________________________________
Glenn Scolnik, trustee
RALPH R.WHITNEY, JR.TRUSTEE FOR THE RALPH R.WHITNEY,
JR. MPP FBO RALPH R. WHITNEY, JR. TCM-RO9603
By:_____________________________________
Ralph R. Whitney, Jr., Trustee
FORREST E.CRISMAN, JR.TRUSTEE FOR FORREST E.CRISMAN,
JR. PS PLAN DATED 12/28/89
By:_______________________________________
Forrest E. Crisman, Jr., Trustee
<PAGE>
SCHEDULE 1
STOCKHOLDER NUMBER OF SHARES PURCHASED
Massachusetts Mutual Life Insurance Company 314,205
MassMutual High Yield Partners II LLC 314,204
MassMutual Corporate Value Partners Limited 119,697
Andrew McNally, IV 14,599
Ward S. McNally 10,869
Andrew Management IV, L.P. 46,737
BJR Management, L.P. 23,368
ECM Management, L.P. 23,368
Glenn Scolnik, trustee for the Glenn Scolnik Money 43,476
Purchase Plan for benefit of Glenn Scolnik Act.
#OZJ-R47960-80
Ralph R. Whitney, Jr. Trustee for the Ralph R. Whitney, 43,476
Jr. MPP FBO Ralph R. Whitney, Jr. TCM-RO9603
Forrest E. Crisman, Jr., Trustee for Forrest E. Crisman, 43,476
Jr. PS Plan dated 12/28/89
TOTAL 997,475
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENTS OF OPERATIONS ON PAGES 3, 4 AND 5 OF THE COMPANY'S 10-QSB.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Jun-30-1999
<CASH> 6053
<SECURITIES> 0
<RECEIVABLES> 5675
<ALLOWANCES> 120
<INVENTORY> 5333
<CURRENT-ASSETS> 900
<PP&E> 9972
<DEPRECIATION> 4488
<TOTAL-ASSETS> 24213
<CURRENT-LIABILITIES> 7010
<BONDS> 0
0
0
<COMMON> 20
<OTHER-SE> 11800
<TOTAL-LIABILITY-AND-EQUITY> 24213
<SALES> 18262
<TOTAL-REVENUES> 18262
<CGS> 13460
<TOTAL-COSTS> 2049
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80
<INCOME-PRETAX> 2773
<INCOME-TAX> 301
<INCOME-CONTINUING> 2472
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2472
<EPS-BASIC> 1.24
<EPS-DILUTED> 1.24
</TABLE>
