<PAGE>
As filed with the Securities and Exchange Commission on January 24, 1997.
Registration No. 333-__________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GROUP TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 3672 59-2948116
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
10901 MALCOLM MCKINLEY DRIVE
TAMPA, FLORIDA 33612
(813) 972-6000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
ROBERT E. GILL, PRESIDENT
GROUP TECHNOLOGIES CORPORATION
10901 MALCOLM MCKINLEY DRIVE
TAMPA, FLORIDA 33612
TELEPHONE (813) 972-6000
FACSIMILE (813) 972-6978
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
WITH COPIES TO:
DAVID C. SHOBE, ESQ. ROBERT A. HEATH, ESQ.
FOWLER, WHITE, GILLEN, BOGGS, WYATT, TARRANT & COMBS
VILLAREAL AND BANKER, P.A. 2800 CITIZENS PLAZA
SUITE 1700 500 WEST JEFFERSON STREET
501 EAST KENNEDY BOULEVARD LOUISVILLE, KENTUCKY 40202
TAMPA, FLORIDA 33602 TELEPHONE (502) 562-7201
TELEPHONE (813) 222-1123 FACSIMILE (502) 589-0309
FACSIMILE (813) 228-9401
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective and after conditions contained in the Reorganization Agreement have
been satisfied.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===========================================================================================
| | PROPOSED | PROPOSED | AMOUNT
TITLE OF EACH | | MAXIMUM | MAXIMUM | OF
CLASS OF SECURITIES | AMOUNT TO BE | OFFFERING PRICE | AGGREGATE | REGISTRATION
TO BE REGISTERED | REGISTERED | PER UNIT(1) | OFFERING PRICE | FEE
- --------------------|---------------|-------------------|------------------|---------------
<S> | <C> | <C> | <C> | <C>
Common Stock, $.01 | 38,819,673 | $0.63 | $24,291,000 | $8,376.21
par value | | | |
===========================================================================================
</TABLE>
(1) ESTIMATED SOLELY FOR THE PURPOSE OF CALCULATING THE REGISTRATION FEE
PURSUANT TO RULE 457(f)(2) PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, BASED UPON THE BOOK VALUE OF THE SHARES OF THE COMMON STOCK OF GROUP
FINANCIAL PARTNERS, INC., TUBE TURNS TECHNOLOGIES, INC. AND BELL TECHNOLOGIES,
INC. TO BE CONVERTED INTO THE RIGHT TO RECEIVE SHARES OF GTC COMMON STOCK.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>
Group Technologies Corporation
Cross Reference Sheet
Pursuant to Regulation S-K, Item 501(b)
<TABLE>
<CAPTION>
Item
Number Item in S-4 Location or Caption in Proxy Statement-
- ----- ----------- ---------------------------------------
Prospectus
----------
<C> <S> <C>
1. Forepart of the Registration Statement Facing page of Registration Statement; Outside
and Outside Front Cover Page of Front Cover Page
Prospectus
2. Inside Front and Outside Back Cover Available Information; Table of Contents
Pages of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Summary; Risk Factors; The GTC Special
Charges and Other Information Meeting; The GFP Special Meeting; The Tube
Turns Special Meeting; The Bell Special
Meeting; The Reorganization; Ratio of Earnings
to Fixed Charges (not required)
4. Terms of the Transaction Summary; The Reorganization; Effect of the
Reorganization on Rights of Shareholders;
Description of GTC's Capital Stock
5. Pro Forma Financial Information Summary; Unaudited Pro Forma Condensed
Combined Financial Statements
6. Material Contracts with the Company The Reorganization; The Reorganization
Being Acquired Agreement; Certain Relationships and Related
Transactions
7. Additional Information Required for Not Applicable
Reoffering by Persons and Parties
Deemed to be Underwriters
8. Interests of Named Experts and Counsel Not Applicable
9. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act Liabilities
10. Information with Respect to S-3 Not Applicable
Registrants
11. Incorporation of Certain Information by Not Applicable
Reference
12. Information with Respect to S-2 or S-3 Not Applicable
Registrants
13. Incorporation of Certain Information by Not Applicable
Reference
</TABLE>
<PAGE>
Item
Number Item in S-4 Location or Caption in Proxy Statement-
- ------ ----------- ---------------------------------------
Prospectus
----------
14. Information With Respect Summary; Business of GTC; Management's
to Registrants Other than Discussion and Analysis of Financial
S-3 or S-2 Registrants Condition and Results of Operations of GTC;
Selected Historical Consolidated Financial
Data of GTC; Ownership of GTC Common Stock;
Recent Developments; Description of GTC's
Capital Stock; Certain Relationships and
Related Transactions; GTC Index to
Consolidated Financial Statements
15. Information with Respect Not Applicable
to S-3 Companies
16. Information with Respect Not Applicable
to S-2 or S-3 Companies
17. Information With Respect Summary; Business of GFP; Management's
to Companies Other Than Discussion and Analysis of Financial
S-3 or S-2 Companies Condition and Results of Operations of GFP;
Selected Historical Consolidated Financial
Data of GFP; GFP Index to Consolidated
Financial Statements
18. Information if Proxies, Outside Front Cover Page; Summary; The GTC
Consents or Authorizations Special Meeting; The GFP Special Meeting;
are to be Solicited The Tube Turns Special Meeting; The Bell
Special Meeting; The Reorganization;
Ownership of GTC Common Stock; Ownership of
GFP Common Stock; Ownership of Tube Turns
Common Stock; Ownership of Bell Common
Stock; Certain Relationships and Related
Transactions; GTC Executive Compensation;
GTC Compensation Committee Report; Business
of GTC; Experts
19. Information if Proxies, Not Applicable
Consents or Authorizations
are not to be Solicited
or in an Exchange Offer
<PAGE>
(Letterhead of Group Technologies Corporation)
March __, 1997
To the Shareholders of Group Technologies Corporation:
You are cordially invited to attend a Special Meeting of Shareholders of
Group Technologies Corporation ("GTC") to be held at 10901 Malcolm McKinley
Drive, Tampa, Florida 33612 on March __, 1997, at __ .m_., local time (the "GTC
Special Meeting").
At the GTC Special Meeting, you will be asked to approve: (1) the Agreement
and Plan of Reorganization, dated as of January 15, 1997 (the "Reorganization
Agreement"), by and among GTC, Group Financial Partners, Inc. ("GFP"), Tube
Turns Technologies, Inc. ("Tube Turns") and Bell Technologies, Inc. ("Bell"),
including the issuance of shares of GTC's voting common stock, par value $.01
per share (the "GTC Common Stock") contemplated thereby; (2) amendments to
GTC's Articles of Incorporation to change GTC's name to "Avcor Solutions,
Inc.," to create a class of nonvoting common stock and to increase the
authorized shares of voting common stock; (3) an amendment to GTC's Independent
Directors' Stock Option Plan to increase the number of shares of GTC Common
Stock available for issuance thereunder; and (4) an amendment to GTC's 1994
Stock Option Plan for Key Employees to increase the number of shares of GTC
Common Stock available for issuance thereunder. Pursuant to the Reorganization
Agreement, the following events will occur, in chronological order: (i) all of
the outstanding shares of GFP Partners-V, Inc., Unison Commercial Group, Inc.
and BW Riverport, Inc. will be distributed to the shareholders of GFP, (ii) GFP
will merge with and into GTC, (iii) Tube Turns will merge with and into a newly
formed, wholly-owned subsidiary of GTC ("New Tube Turns"), (iv) Bell will merge
with and into a newly formed, wholly-owned subsidiary of GTC ("New Bell") and
(v) GTC will contribute all of the operating assets of GTC (other than the
shares of New Tube Turns and New Bell) into a newly formed, wholly-owned
subsidiary of GTC, and this subsidiary will assume all of the liabilities of
GTC, all in accordance with the Florida Business Corporation Act, as amended,
and the Kentucky Revised Statutes, as amended, (the "Reorganization"). Approval
of the Reorganization Agreement requires the affirmative vote of a majority of
the votes cast by holders of GTC Common Stock entitled to vote at the GTC
Special Meeting.
THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AND THE ANNEXES THERETO
PROVIDE INFORMATION ABOUT EACH OF THE PROPOSALS YOUR BOARD OF DIRECTORS WILL BE
RECOMMENDING AT THE GTC SPECIAL MEETING. THESE DOCUMENTS CONTAIN DETAILED
INFORMATION CONCERNING THE PROPOSED REORGANIZATION AND CERTAIN ADDITIONAL
INFORMATION, INCLUDING, WITHOUT LIMITATION, THE INFORMATION SET FORTH UNDER THE
HEADING "RISK FACTORS," WHICH DESCRIBES, AMONG OTHER ITEMS, RISKS INHERENT IN
THE PROPOSED REORGANIZATION, ALL OF WHICH YOU ARE URGED TO READ CAREFULLY. It
is important that your GTC Common Stock be represented at the GTC Special
Meeting, regardless of the number of shares you hold. Therefore, please sign,
date and return your proxy card as soon as possible, whether or not you plan to
attend the GTC Special Meeting. This will not prevent you from voting your
shares in person if you subsequently choose to attend the GTC Special Meeting.
Shareholders of GTC may obtain the actual GFP Conversion Ratio (as defined
in the Reorganization Agreement) by calling GTC at (800) ___-_______________
after 4:30 p.m. (Eastern Time) on the trading day immediately prior to the date
of the GTC Special Meeting.
<PAGE>
A Special Committee of your Board of Directors consisting of the
independent directors has recommended the Reorganization due to, among other
factors, the expected positive effect on the earnings of GTC resulting from the
Reorganization (assuming Tube Turns and Bell continue to perform as expected
based on past history). The Special Committee engaged J.C. Bradford & Co., LLC
("Bradford"), a nationally recognized investment banking firm, to advise the
Special Committee in connection with the Reorganization. Bradford has delivered
its opinion to the Special Committee, a copy of which is attached hereto, to
the effect that the merger of GFP with and into GTC (the "GFP Merger"); the
merger of Tube Turns with and into New Tube Turns (the "Tube Turns Merger");
and the merger of Bell with and into New Bell (the "Bell Merger"), are fair to
the shareholders of GTC, other than GFP, from a financial point of view. Based
on the foregoing, the Special Committee and your Board of Directors believes
that the Reorganization is fair to, and in the best interests of, GTC and its
shareholders. Based on the recommendation of the Special Committee, the Board
has approved the Reorganization Agreement and recommends that you vote to
approve the Reorganization Agreement and the issuance of GTC Common Stock
pursuant to the Reorganization Agreement.
Sincerely,
Robert E. Gill
President and Chief Executive Officer
<PAGE>
GROUP TECHNOLOGIES CORPORATION
______________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH __, 1997
To the Shareholders of Group Technologies Corporation:
Notice is hereby given that a Special Meeting of Shareholders of Group
Technologies Corporation ("GTC") has been called by the Board of Directors and
will be held at 10901 Malcolm McKinley Drive, Tampa, Florida 33612 on
March __, 1997 at ______ __.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Reorganization dated as of January 15, 1997 among GTC, Group Financial
Partners, Inc., Tube Turns Technologies, Inc. and Bell Technologies, Inc. (the
"Reorganization Agreement"), including the issuance of shares of GTC's voting
common stock, par value $.01 per share ("GTC Common Stock"), contemplated
thereby;
2. To consider and vote upon a proposal to amend the Articles of
Incorporation of GTC to change the name of GTC to Avcor Solutions, Inc.;
3. To consider and vote upon a proposal to amend the Articles of
Incorporation of GTC to create a class of 10,000,000 shares of nonvoting common
stock;
4. To consider and vote upon a proposal to amend the Articles of
Incorporation of GTC to increase the authorized shares of GTC Common Stock from
40,000,000 shares to 60,000,000 shares;
5. To consider and vote upon a proposal to approve an amendment to GTC's
Independent Directors' Stock Option Plan to increase the number of shares of
GTC Common Stock available for issuance thereunder;
6. To consider and vote upon a proposal to approve an amendment to GTC's
1994 Stock Option Plan for Key Employees to increase the number of shares of
GTC Common Stock available for issuance thereunder; and
7. To transact other business as may properly come before the Special
Meeting or any adjournments or postponements thereof.
<PAGE>
The Board of Directors has fixed the close of business on February __, 1997
as the record date for the determination of the holders of GTC Common Stock
entitled to notice of and to vote at the Special Meeting. The Reorganization
Agreement and other related matters are more fully described in the
accompanying Joint Proxy Statement/Prospectus, and the Appendices thereto,
which form a part of this Notice.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. TO
ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, HOWEVER, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. ANY SHAREHOLDER
ATTENDING THE SPECIAL MEETING MAY VOTE IN PERSON EVEN IF THAT SHAREHOLDER HAS
RETURNED A PROXY. ANY SHAREHOLDER MAY REVOKE HIS PROXY AT ANY TIME BEFORE THE
SPECIAL MEETING BY WRITTEN NOTICE TO SUCH EFFECT, BY SUBMITTING A SUBSEQUENTLY
DATED PROXY OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
By Order of the Board of Directors,
Michael L. Schuman
Secretary
Tampa, Florida
March ___, 1997
<PAGE>
GROUP TECHNOLOGIES CORPORATION
REVOCABLE PROXY
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF GROUP TECHNOLOGIES
CORPORATION FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON _______, MARCH __, 1997)
The undersigned hereby appoints Roger W. Johnson, Henry F. Frigon and
Sidney R. Petersen, and any of them, with full powers of substitution, as
attorneys and proxies for the undersigned, to represent and vote shares of
common stock of Group Technologies Corporation ("GTC") standing in my name on
the books and records of GTC at the close of business on February __, 1997
which the undersigned is entitled to cast at the Special Meeting of
Shareholders to be held at 10901 Malcolm McKinley Drive, Tampa, Florida, on
March __, 1997 at _____ __.m., local time, and at any and all adjournments or
postponements, as follows:
1. To approve the Agreement and Plan of Reorganization dated as of
January 15, 1997 among GTC, Group Financial Partners, Inc., Tube Turns
Technologies, Inc. and Bell Technologies, Inc., including the issuance of
shares of GTC voting common stock, par value $.01 per share ("GTC Common
Stock"), contemplated thereby.
[_] FOR [_] AGAINST [_] ABSTAIN
2. To approve an amendment to GTC's Articles of Incorporation to change
GTC's name to "Avcor Solutions, Inc."
[_] FOR [_] AGAINST [_] ABSTAIN
3. To approve an amendment to GTC's Articles of Incorporation to create a
class of 10,000,000 shares of nonvoting common stock.
[_] FOR [_] AGAINST [_] ABSTAIN
4. To approve an amendment to GTC's Articles of Incorporation to increase
the authorized shares of GTC Common Stock from 40,000,000 shares to 60,000,000
shares.
[_] FOR [_] AGAINST [_] ABSTAIN
5. To approve an amendment to GTC's Independent Directors' Stock Option
Plan to increase the number of shares of GTC Common Stock available for issuance
thereunder.
[_] FOR [_] AGAINST [_] ABSTAIN
6. To approve an amendment to GTC's 1994 Stock Option Plan for Key
Employees to increase the number of shares of GTC Common Stock available for
issuance thereunder.
[_] FOR [_] AGAINST [_] ABSTAIN
THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSAL(S) STATED ABOVE IF NO
CHOICE IS MADE HEREON.
<PAGE>
To vote in their discretion upon such other matters as may properly come
before the Special Meeting or any adjournment thereof.
Should the undersigned be present and elect to vote at the Special Meeting
or at any adjournment thereof and, after notification to the Secretary of GTC
at the Special Meeting of the shareholder's decision to terminate this Proxy,
then the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect.
The undersigned acknowledges receipt of a Notice of Special Meeting called
for the ___ day of March, 1997 and the Joint Proxy Statement/Prospectus dated
the ____ day of March, 1997 prior to the execution of this Proxy.
DATE:______________________________
___________________________________
Print Name of Shareholder
___________________________________
Signature of Shareholder
DATE:______________________________
___________________________________
Print Name of Shareholder
___________________________________
Signature of Shareholder
(Please sign exactly as your name appears on the envelope
in which this card was mailed. When signing as attorney,
executor, administrator, trustee or guardian, please give
your full title. If more than one trustee, all should
sign. If shares are held jointly, each holder should
sign.)
<PAGE>
(Letterhead of Group Financial Partners, Inc.)
March __, 1997
To the Shareholders of Group Financial Partners, Inc.:
You are cordially invited to attend a Special Meeting of Shareholders of
Group Financial Partners, Inc. ("GFP") to be held at 455 South Fourth Avenue,
Suite 350, Louisville, Kentucky, on _______, March __, 1997 at the hour of
_____.m., local time (the "GFP Special Meeting").
At the GFP Special Meeting, you will be asked to approve the Agreement and
Plan of Reorganization dated as of January 15, 1997 (the "Reorganization
Agreement"), by and among Group Technologies Corporation ("GTC"), Tube Turns
Technologies, Inc. ("Tube Turns"), Bell Technologies, Inc. ("Bell") and GFP.
Pursuant to the Reorganization Agreement, the following events will occur, in
chronological order: (i) all of the outstanding shares of GFP Partners-V, Inc.,
Unison Commercial Group, Inc. and BW Riverport, Inc. will be distributed to the
shareholders of GFP, (ii) GFP will merge with and into GTC, (iii) Tube Turns
will merge with and into a newly formed, wholly-owned subsidiary of GTC ("New
Tube Turns"), (iv) Bell will merge with and into a newly formed, wholly-owned
subsidiary of GTC ("New Bell") and (v) GTC will contribute all of the assets of
GTC (other than the shares of New Tube Turns and New Bell) into a newly formed,
wholly-owned subsidiary of GTC, and this subsidiary will assume all of the
liabilities of GTC, all in accordance with the Florida Business Corporation
Act, as amended, and the Kentucky Revised Statutes, as amended (the
"Reorganization"). Approval of the Reorganization Agreement requires the
affirmative vote of a majority of the votes cast by holders of the common
stock, no par value per share of GFP (the "GFP Common Stock"), entitled to vote
at the GFP Special Meeting.
THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AND THE ANNEXES THERETO
PROVIDE DETAILED INFORMATION CONCERNING THE PROPOSED REORGANIZATION AND CERTAIN
ADDITIONAL INFORMATION, INCLUDING, WITHOUT LIMITATION, THE INFORMATION SET
FORTH UNDER THE HEADING "RISK FACTORS," WHICH DESCRIBES, AMONG OTHER ITEMS,
RISKS INHERENT IN THE PROPOSED REORGANIZATION, ALL OF WHICH YOU ARE URGED TO
READ CAREFULLY. It is important that your GFP Common Stock be represented at
the GFP Special Meeting, regardless of the number of shares you hold.
Therefore, please sign, date and return your proxy card as soon as possible,
whether or not you plan to attend the GFP Special Meeting. This will not
prevent you from voting your shares in person if you subsequently choose to
attend the GFP Special Meeting.
Shareholders of GFP may obtain the actual GFP Conversion Ratio (as defined
in the Reorganization Agreement) by calling GTC at (800) ___-____ after 4:30
p.m. (Eastern Time) on the trading day immediately prior to the date of the GFP
Special Meeting.
Your Board of Directors believes that the Reorganization is fair to, and
in the best interests of, GFP and its shareholders. The Board of Directors has
unanimously approved the Reorganization Agreement and unanimously recommends
that you vote to approve the Reorganization Agreement.
Sincerely,
Jeffrey T. Gill
President and Chief Executive Officer
<PAGE>
GROUP FINANCIAL PARTNERS, INC.
________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH __, 1997
To the Shareholders of Group Financial Partners, Inc.:
Notice is hereby given that a Special Meeting of Shareholders of Group
Financial Partners, Inc., a Kentucky corporation ("GFP"), has been called by
the Board of Directors and will be held at 455 South Fourth Avenue, Suite 350,
Louisville, Kentucky, on ________, March __, 1997 at the hour of
_____ __.m. local time, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Reorganization dated as of January 15, 1997 (the "Reorganization Agreement")
by and among Group Technologies Corporation, Tube Turns Technologies, Inc.,
Bell Technologies, Inc. and GFP.
2. To transact such other business as may properly come before the Special
Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on February __, 1997
as the record date for the determination of the holders of the common stock, no
par value per share, of GFP entitled to notice of and to vote at the Special
Meeting or any adjournments or postponements thereof. The Reorganization and
other related matters are more fully described in the accompanying Joint Proxy
Statement/Prospectus, and the Appendices thereto, which form a part of this
Notice.
PLEASE DO NOT SEND IN ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. TO
ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, HOWEVER, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. ANY SHAREHOLDER MAY
REVOKE HIS PROXY AT ANY TIME BEFORE THE SPECIAL MEETING BY WRITTEN NOTICE TO
SUCH EFFECT, BY SUBMITTING A SUBSEQUENTLY DATED PROXY OR BY ATTENDING THE
SPECIAL MEETING AND VOTING IN PERSON.
By Order of the Board of Directors,
R. Scott Gill
Secretary
Louisville, Kentucky
March ___, 1997
<PAGE>
GROUP FINANCIAL PARTNERS, INC.
REVOCABLE PROXY
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
GROUP FINANCIAL PARTNERS, INC. FOR A SPECIAL MEETING
OF SHAREHOLDERS TO BE HELD ON MARCH __, 1997)
The undersigned hereby appoints Anthony C. Allen and Richard L. Davis, and
any one or more of them with full power of substitution, as attorneys and
proxies for the undersigned, to represent and vote shares of common stock of
Group Financial Partners, Inc., a Kentucky corporation ("GFP"), standing in my
name on the books and records of GFP at the close of business on February __,
1997, which the undersigned is entitled to cast at the Special Meeting of
Shareholders to be held at 455 South Fourth Avenue, Suite 350, Louisville,
Kentucky, on ______, March __, 1997 at the hour of ___ __.m., local time, and at
any and all adjournments or postponements, as follows:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Reorganization dated as of January 15, 1997 (the "Reorganization Agreement")
by and among Group Technologies Corporation, Tube Turns Technologies, Inc.,
Bell Technologies, Inc. and GFP.
[_] FOR [_] AGAINST [_] ABSTAIN
THIS PROXY WILL BE VOTED FOR THE PROPOSAL STATED ABOVE IF NO CHOICE IS
MADE HEREON.
To vote in their discretion upon such other matters as may properly come
before the Special Meeting or any adjournment thereof.
Should the undersigned be present and elect to vote at the Special Meeting
or at any adjournment thereof and, after notification to the Secretary of GFP at
the Special Meeting of the shareholder's decision to terminate this Proxy, then
the power of said attorneys and proxies shall be deemed terminated and of no
further force and effect.
The undersigned acknowledges receipt of a Notice of Special Meeting called
for the __ day of March, 1997 and the Joint Proxy Statement/Prospectus dated the
__ day of March, 1997 prior to the execution of this Proxy.
DATE:______________________________
___________________________________
Print Name of Shareholder
___________________________________
Signature of Shareholder
DATE:______________________________
___________________________________
Print Name of Shareholder
___________________________________
Signature of Shareholder
(Please sign exactly as your name appears on the
envelope in which this card was mailed. When signing as
attorney, executor, administrator, trustee or guardian,
please give your full title. If more than one trustee,
all should sign. If shares are held jointly, each holder
should sign.)
<PAGE>
(Letterhead of Tube Turns Technologies, Inc.)
March __, 1997
To the Shareholders of Tube Turns Technologies, Inc.:
You are cordially invited to attend a Special Meeting of Shareholders of
Tube Turns Technologies, Inc. ("Tube Turns") to be held at 2900 West Broadway,
Louisville, Kentucky, on _______, March __, 1997 at the hour of ___ __.m., local
time (the "Tube Turns Special Meeting").
At the Tube Turns Special Meeting, you will be asked to approve the
Agreement and Plan of Reorganization dated as of January 15, 1997 (the
"Reorganization Agreement"), by and among Group Technologies Corporation
("GTC"), Bell Technologies, Inc. ("Bell"), Group Financial Partners, Inc.
("GFP") and Tube Turns. Pursuant to the Reorganization Agreement, the following
events will occur, in chronological order: (i) all of the outstanding shares of
GFP Partners-V, Inc., Unison Commercial Group, Inc. and BW Riverport, Inc. will
be distributed to the shareholders of GFP, (ii) GFP will merge with and into
GTC, (iii) Tube Turns will merge with and into a newly formed, wholly-owned
subsidiary of GTC ("New Tube Turns"), (iv) Bell will merge with and into a newly
formed, wholly-owned subsidiary of GTC ("New Bell") and (v) GTC will contribute
all of the assets of GTC (other than the shares of New Tube Turns and New Bell)
into a newly formed, wholly-owned subsidiary of GTC, and this subsidiary will
assume all of the liabilities of GTC, all in accordance with the Florida
Business Corporation Act, as amended, and the Kentucky Revised Statutes, as
amended (the "Reorganization"). Approval of the Reorganization Agreement
requires the affirmative vote of a majority of the votes cast by holders of the
common stock, no par value per share of Tube Turns (the "Tube Turns Common
Stock"), entitled to vote at the Tube Turns Special Meeting.
THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AND THE ANNEXES THERETO
PROVIDE DETAILED INFORMATION CONCERNING THE PROPOSED REORGANIZATION AND CERTAIN
ADDITIONAL INFORMATION, INCLUDING, WITHOUT LIMITATION, THE INFORMATION SET FORTH
UNDER THE HEADING "RISK FACTORS," WHICH DESCRIBES, AMONG OTHER ITEMS, RISKS
INHERENT IN THE PROPOSED REORGANIZATION, ALL OF WHICH YOU ARE URGED TO READ
CAREFULLY. It is important that your Tube Turns Common Stock be represented at
the Tube Turns Special Meeting, regardless of the number of shares you hold.
Therefore, please sign, date and return your proxy card as soon as possible,
whether or not you plan to attend the Tube Turns Special Meeting. This will not
prevent you from voting your shares in person if you subsequently choose to
attend the Tube Turns Special Meeting.
Shareholders of Tube Turns may obtain the actual Tube Turns Conversion
Ratio (as defined in the Reorganization Agreement) by calling GTC at (800) ____-
_______ after 4:30 p.m. (Eastern Time) on the trading day immediately prior to
the date of the Tube Turns Special Meeting.
Your Board of Directors believes that the Reorganization is fair to, and in
the best interests of, Tube Turns and its shareholders. The Board of Directors
has unanimously approved the Reorganization Agreement and unanimously recommends
that you vote to approve the Reorganization Agreement.
Sincerely,
John M. Kramer
President and Chief Executive Officer
<PAGE>
TUBE TURNS TECHNOLOGIES, INC.
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH __, 1997
To the Shareholders of Tube Turns Technologies, Inc.:
Notice is hereby given that a Special Meeting of Shareholders of Tube Turns
Technologies, Inc., a Kentucky corporation ("Tube Turns"), has been called by
the Board of Directors and will be held at 2900 West Broadway, Louisville,
Kentucky on ________, March __, 1997 at the hour of __.m. local time, for the
following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Reorganization dated as of January 15, 1997 (the "Reorganization Agreement")
by and among Group Technologies Corporation, Bell Technologies, Inc., Group
Financial Partners, Inc. and Tube Turns.
2. To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on February __, 1997
as the record date for the determination of the holders of the common stock, no
par value per share, of Tube Turns entitled to notice of and to vote at the
Special Meeting or any adjournments or postponements thereof. The Reorganization
and other related matters are more fully described in the accompanying Joint
Proxy Statement/Prospectus, and the Appendices thereto, which form a part of
this Notice.
PLEASE DO NOT SEND IN ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. TO
ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, HOWEVER, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. ANY SHAREHOLDER MAY
REVOKE HIS PROXY AT ANY TIME BEFORE THE SPECIAL MEETING BY WRITTEN NOTICE TO
SUCH EFFECT, BY SUBMITTING A SUBSEQUENTLY DATED PROXY OR BY ATTENDING THE
SPECIAL MEETING AND VOTING IN PERSON.
By Order of the Board of Directors,
Norman E. Zelesky
Secretary
Louisville, Kentucky
March __, 1997
<PAGE>
TUBE TURNS TECHNOLOGIES, INC.
REVOCABLE PROXY
(SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF TUBE TURNS TECHNOLOGIES, INC. FOR A SPECIAL MEETING
OF SHAREHOLDERS TO BE HELD ON MARCH __, 1997)
The undersigned hereby appoints John M. Kramer and Russell H. Johnson, and
any one or more of them, with full power of substitution, as attorneys and
proxies for the undersigned, to represent and vote shares of common stock of
Tube Turns Technologies, Inc., a Kentucky corporation ("Tube Turns"), standing
in my name on the books and records of Tube Turns at the close of business on
February __, 1997, which the undersigned is entitled to cast at the Special
Meeting of Shareholders to be held at 2900 West Broadway, Louisville, Kentucky,
on ______, March __, 1997 at the hour of _____ __.m., local time, and at any and
all adjournments or postponements, as follows:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Reorganization dated as of January 15, 1997 (the "Reorganization Agreement")
by and among Group Technologies Corporation, Bell Technologies, Inc., Group
Financial Partners, Inc. and Tube Turns.
[_] FOR [_] AGAINST [_] ABSTAIN
THIS PROXY WILL BE VOTED FOR THE PROPOSAL STATED ABOVE IF NO CHOICE IS
MADE HEREON.
To vote in their discretion upon such other matters as may properly come
before the Special Meeting or any adjournment thereof.
Should the undersigned be present and elect to vote at the Special Meeting
or at any adjournment thereof and, after notification to the Secretary of Tube
Turns at the Special Meeting of the shareholder's decision to terminate this
Proxy, then the power of said attorneys and proxies shall be deemed terminated
and of no further force and effect.
The undersigned acknowledges receipt of a Notice of Special Meeting called
for the ___ day of March ___, 1997 and the Joint Proxy Statement/Prospectus
dated the ___ day of March ___, 1997 prior to the execution of this Proxy.
DATE:
------------------------------
-----------------------------------
Print Name of Shareholder
-----------------------------------
Signature of Shareholder
DATE:
------------------------------
-----------------------------------
Print Name of Shareholder
-----------------------------------
Signature of Shareholder
(Please sign exactly as your name appears on the envelope
in which this card was mailed. When signing as attorney,
executor, administrator, trustee or guardian, please give
your full title. If more than one trustee, all should
sign. If shares are held jointly, each holder should
sign.)
<PAGE>
(Letterhead of Bell Technologies, Inc.)
March __, 1997
To the Shareholders of Bell Technologies, Inc.:
You are cordially invited to attend a Special Meeting of Shareholders
of Bell Technologies, Inc. ("Bell") to be held at 6120 Hanging Moss Road,
Orlando, Florida, on _______, March __, 1997 at the hour of _____
.m., local time (the "Bell Special Meeting").
At the Bell Special Meeting, you will be asked to approve the
Agreement and Plan of Reorganization dated as of January 15, 1997 (the
"Reorganization Agreement"), by and among Group Technologies Corporation
("GTC"), Tube Turns Technologies, Inc., Group Financial Partners, Inc. and
Bell. Pursuant to the Reorganization Agreement, the following events will
occur, in chronological order: (i) all of the outstanding shares of GFP
Partners-V, Inc., Unison Commercial Group, Inc. and BW Riverport, Inc. will be
distributed to the shareholders of GFP, (ii) GFP will merge with and into GTC,
(iii) Tube Turns will merge with and into a newly formed, wholly-owned
subsidiary of GTC ("New Tube Turns"), (iv) Bell will merge with and into a
newly formed, wholly-owned subsidiary of GTC ("New Bell"), and (v) GTC will
contribute all of the assets of GTC (other than the shares of New Tube Turns
and New Bell) into a newly formed, wholly-owned subsidiary of GTC, and this
subsidiary will assume all of the liabilities of GTC, all in accordance with
the Florida Business Corporation Act, as amended, and the Kentucky Revised
Statutes, as amended (the "Reorganization"). Approval of the Reorganization
Agreement requires the affirmative vote of a majority of the votes cast by
holders of the common stock, par value $.01 per share of Bell (the "Bell Common
Stock"), entitled to vote at the Bell Special Meeting.
THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AND THE ANNEXES
THERETO PROVIDE DETAILED INFORMATION CONCERNING THE PROPOSED REORGANIZATION AND
CERTAIN ADDITIONAL INFORMATION, INCLUDING, WITHOUT LIMITATION, THE INFORMATION
SET FORTH UNDER THE HEADING "RISK FACTORS," WHICH DESCRIBES, AMONG OTHER ITEMS,
RISKS INHERENT IN THE PROPOSED REORGANIZATION, ALL OF WHICH YOU ARE URGED TO
READ CAREFULLY. It is important that your Bell Common Stock be represented at
the Bell Special Meeting, regardless of the number of shares you hold.
Therefore, please sign, date and return your proxy card as soon as possible,
whether or not you plan to attend the Bell Special Meeting. This will not
prevent you from voting your shares in person if you subsequently choose to
attend the Bell Special Meeting.
Shareholders of Bell may obtain the actual Bell Conversion Ratio (as
defined in the Reorganization Agreement) by calling GTC at (800) ____-_______
after 4:30 p.m. (Eastern Time) on the trading day immediately prior to the date
of the Bell Special Meeting.
Your Board of Directors believes that the Reorganization is fair to,
and in the best interests of, Bell and its shareholders. The Board of Directors
has unanimously approved the Reorganization Agreement and unanimously
recommends that you vote to approve the Reorganization Agreement.
Sincerely,
Thomas W. Lovelock
President and Chief Executive Officer
<PAGE>
BELL TECHNOLOGIES, INC.
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH __, 1997
To the Shareholders of Bell Technologies, Inc.:
Notice is hereby given that a Special Meeting of Shareholders of Bell
Technologies, Inc., a Florida corporation ("Bell"), has been called by the Board
of Directors and will be held at 6120 Hanging Moss Road, Orlando, Florida, on
________, March __, 1997 at the hour of __ _.m. local time, for
the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Reorganization dated as of January 15, 1997 (the "Reorganization Agreement")
by and among Group Technologies Corporation, Tube Turns Technologies, Inc.,
Group Financial Partners, Inc. and Bell.
2. To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on February __, 1997
as the record date for the determination of the holders of the common stock, par
value $.01 per share, of Bell entitled to notice of and to vote at the Special
Meeting or any adjournments or postponements thereof. The Reorganization and
other related matters are more fully described in the accompanying Joint Proxy
Statement/Prospectus, and the Appendices thereto, which form a part of this
Notice.
PLEASE DO NOT SEND IN ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. TO
ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, HOWEVER, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. ANY SHAREHOLDER MAY
REVOKE HIS PROXY AT ANY TIME BEFORE THE SPECIAL MEETING BY WRITTEN NOTICE TO
SUCH EFFECT, BY SUBMITTING A SUBSEQUENTLY DATED PROXY OR BY ATTENDING THE
SPECIAL MEETING AND VOTING IN PERSON.
By Order of the Board of Directors,
Thomas C. Jamieson
Secretary
Orlando, Florida
March __, 1997
<PAGE>
BELL TECHNOLOGIES, INC.
REVOCABLE PROXY
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
BELL TECHNOLOGIES, INC. FOR A SPECIAL MEETING
OF SHAREHOLDERS TO BE HELD ON MARCH __, 1997)
The undersigned hereby appoints Rick A. Affolter and Thomas C. Jamieson and
any one or more of them with full power of substitution, as attorneys and
proxies for the undersigned, to represent and vote shares of common stock of
Bell Technologies, Inc., a Florida corporation ("Bell"), standing in my name on
the books and records of Bell at the close of business on February __, 1997,
which the undersigned is entitled to cast at the Special Meeting of Shareholders
to be held at 6120 Hanging Moss Road, Orlando, Florida, on ______, March __,
1997 at the hour of _____ _.m, local time, and at any and all adjournments or
postponements, as follows:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Reorganization dated as of January 15, 1997 (the "Reorganization Agreement")
by and among Group Technologies Corporation, Tube Turns Technologies, Inc.,
Group Financial Partners, Inc. and Bell.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WILL BE VOTED FOR THE PROPOSAL STATED ABOVE IF NO CHOICE IS MADE
HEREON.
To vote in their discretion upon such other matters as may properly come
before the Special Meeting or any adjournment thereof.
Should the undersigned be present and elect to vote at the Special Meeting
or at any adjournment thereof and, after notification to the Secretary of Bell
at the Special Meeting of the shareholder's decision to terminate this Proxy,
then the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect.
The undersigned acknowledges receipt of a Notice of Special Meeting called
for the ___ day of March, 1997 and the Joint Proxy Statement/Prospectus dated
the ___ day of March 1997 prior to the execution of this Proxy.
DATE:
----------------------------------------
---------------------------------------------
Print Name of Shareholder
---------------------------------------------
Signature of Shareholder
DATE:
----------------------------------------
---------------------------------------------
Print Name of Shareholder
---------------------------------------------
Signature of Shareholder
(Please sign exactly as your name appears on the envelope
in which this card was mailed. When signing as attorney,
executor, administrator, trustee or guardian, please give
your full title. If more than one trustee, all should
sign. If shares are held jointly, each holder should
sign.)
<PAGE>
PROSPECTUS DATED MARCH ____________, 1997
Joint Proxy Statement
GROUP TECHNOLOGIES CORPORATION, GROUP FINANCIAL PARTNERS, INC.,
TUBE TURNS TECHNOLOGIES, INC. AND BELL TECHNOLOGIES, INC.
__________
Prospectus
GROUP TECHNOLOGIES CORPORATION
This Joint Proxy Statement and Prospectus ("Joint Proxy
Statement/Prospectus") is being furnished to shareholders of Group Technologies
Corporation, a Florida corporation ("GTC"), Group Financial Partners, Inc., a
Kentucky corporation ("GFP"), Tube Turns Technologies, Inc., a Kentucky
corporation ("Tube Turns"), and Bell Technologies, Inc., a Florida corporation
("Bell"), in connection with the solicitation of proxies by the Boards of
Directors of GTC, GFP, Tube Turns and Bell for use at their respective Special
Meetings of Shareholders, and any adjournments or postponements thereof
(collectively, the "Special Meetings"), to be held at the time and place and
for the purposes set forth in the accompanying notice. It is anticipated that
the mailing of this Joint Proxy Statement/Prospectus and the enclosed proxy
card will commence on or about March __, 1997.
At the Special Meetings, shareholders of GTC, GFP, Tube Turns and Bell
will, among other things, be asked to approve an Agreement and Plan of
Reorganization (the "Reorganization Agreement"), dated as of January 15,
1997, and the transactions contemplated thereby. As more fully described
herein, and subject to the terms and conditions of the Reorganization
Agreement, the following will occur in chronological order: (i) the
distribution of all of the outstanding shares of GFP Partners-V, Inc.
("Partners-V"), Unison Commercial Group, Inc. ("Unison") and BW Riverport, Inc.
("BW") to the shareholders of GFP (the "Spin Off"), (ii) the merger of GFP with
and into GTC (the "Merger"), (iii) the merger of Tube Turns with and into New
Tube Turns Technologies, Inc., a newly formed, wholly-owned subsidiary of GTC
("New Tube Turns") (the "Tube Turns Merger"), (iv) the merger of Bell with and
into Bell Acquisition Corporation, a newly formed, wholly-owned subsidiary of
GTC ("New Bell") (the "Bell Merger") and (v) the contribution of all of the
assets of GTC (other than the shares of New Tube Turns and New Bell) into a
newly formed, wholly-owned subsidiary of GTC ("New GTC") (the "GTC
Contribution"), and the assumption of all of the liabilities of GTC by New GTC,
all in accordance with the Florida Business Corporation Act, as amended (the
"FBCA"), and the Kentucky Revised Statutes, as amended (the "KRS")
(collectively, the "Reorganization"). The Merger, the Tube Turns Merger and the
Bell Merger are referred to collectively as the "Merger Transactions." For
federal income tax purposes, it is intended that the Merger Transactions will
qualify as a tax free reorganization under Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"), and that the GTC Contribution will
qualify as a tax free transfer of property to a controlled corporation under
Section 351 of the Code. It is not expected that the Spin Off will qualify as a
tax free spin off under Section 355 of the Code.
Subject to the terms of the Reorganization Agreement: (i) the number of
shares of voting common stock, par value $.01 per share of GTC ("GTC Common
Stock") to be issued to the shareholders of GFP in the Merger is equal to the
number of shares of GTC Common Stock determined by multiplying the GFP
Conversion Ratio (as defined in the Reorganization Agreement), by the number of
shares of GFP held by such shareholders, subject to certain adjustments as
provided in the Reorganization Agreement (the "Merger Shares"); (ii) the number
of shares of GTC Common Stock to be issued to the shareholders of Tube Turns,
other than GTC (as successor by merger to GFP), in connection with the Tube
Turns Merger is equal to the number of shares of GTC Common Stock determined by
multiplying the Tube Turns Conversion Ratio (as defined in the Reorganization
Agreement), by the number of shares of Tube Turns held by such shareholders,
subject to certain adjustments as provided in the Reorganization Agreement,
(the "Tube Turns Merger Shares"); and (iii) the number of shares of GTC Common
Stock to be issued to the shareholders of Bell, other than GTC (as successor by
merger to GFP), in connection with the Bell Merger is equal to the number of
shares of GTC Common Stock determined by multiplying the Bell Conversion Ratio
(as defined in the Reorganization Agreement), by the number of shares of Bell
held by such shareholders, subject to certain adjustments as provided in the
Reorganization Agreement (the "Bell Merger Shares"). Each
i
<PAGE>
shareholder of GFP will receive a number of shares of GTC Common Stock
equal to the number of shares of GFP owned by such shareholder multiplied by
the GFP Conversion Ratio. Each shareholder of Tube Turns, other than GTC (as
successor by merger to GFP), will receive a number of shares of GTC Common
Stock equal to the number of shares of Tube Turns owned by such shareholder
multiplied by the Tube Turns Conversion Ratio. Each shareholder of Bell, other
than GTC (as successor by merger to GFP), will receive a number of shares of
GTC Common Stock equal to the number of shares of Bell owned by such
shareholder multiplied by the Bell Conversion Ratio. Fractional shares will be
paid in cash based upon the GTC Average Closing Price as hereinafter defined.
GTC Common Stock is quoted on the Nasdaq Stock Market under the symbol
"GRTK." On January 15, 1997, the closing price for GTC Common Stock as reported
by Nasdaq was $1.50 per share. Had the Reorganization occurred on such date,
the GFP Conversion Ratio would have been 116.6646 and GTC would have issued
approximately 36,865,556 shares of GTC Common Stock to shareholders of GFP in
connection with the Merger, the Tube Turns Conversion Ratio would have been
10.0000, and GTC would have issued approximately 500,300 shares of GTC Common
Stock to shareholders of Tube Turns, other than GTC (as successor by merger to
GFP), in connection with the Tube Turns Merger, and the Bell Conversion Ratio
would have been 22.6667 and GTC would have issued approximately 1,453,817
shares of GTC Common Stock to shareholders of Bell, other than GTC (as
successor by merger to GFP), in connection with the Bell Merger.
FOR CERTAIN FACTORS WHICH SHOULD BE CONSIDERED IN
EVALUATING THE REORGANIZATION, SEE "RISK FACTORS,"
All information contained in this Joint Proxy Statement/Prospectus with
respect to GTC and its subsidiaries has been provided by GTC. All information
contained in this Joint Proxy Statement/Prospectus with respect to GFP, Tube
Turns and Bell has been provided by each of GFP, Tube Turns and Bell,
respectively.
THE SECURITIES TO BE ISSUED IN THE REORGANIZATION HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Joint Proxy Statement/Prospectus, which also constitutes
GTC's Prospectus for up to 38,819,673 shares of GTC Common Stock, is
March __, 1997.
ii
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION WITH RESPECT TO THE MATTERS DESCRIBED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GTC, GFP,
TUBE TURNS OR BELL. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES
OFFERED HEREBY, NOR DOES IT CONSTITUTE THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION OF AN OFFER OR PROXY SOLICITATION. NEITHER THE DELIVERY
OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY SALE MADE HEREBY SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF GTC, GFP, TUBE TURNS OR BELL SINCE THE DATE HEREOF, OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
FORWARD LOOKING STATEMENTS
This Joint Proxy Statement/Prospectus includes forward looking statements
based on current plans and expectations of GTC, GFP, Tube Turns and Bell,
relating to, among other matters, analyses and estimates of amounts that are
not yet determinable. Such forward looking statements are contained in the
sections entitled "Summary," "The Reorganization," "Business of GTC," "Business
of GFP," "Management's Discussion and Analysis of Financial Condition and
Results of Operation of GTC," "Management's Discussion and Analysis of
Financial Condition and Results of Operation of GFP," and other sections of
this Joint Proxy Statement/Prospectus. Such statements involve risks and
uncertainties which may cause actual future activities and results of
operations to be materially different from those suggested in this Joint Proxy
Statement/Prospectus, including, among others, GTC's dependence on its current
management, the risks and uncertainties present in GTC's and GFP's business,
business conditions and growth in the advanced manufacturing, engineering and
testing services industry and the general economy; competitive factors and
price pressures; availability of third party component parts at reasonable
prices; inventory risks due to shifts in market demand and/or price erosion of
purchased components; changes in product mix; cost and yield issues associated
with GTC's manufacturing facilities; GTC's ability to comply with the terms of
its credit facilities; as well as other factors described elsewhere in this
Joint Proxy Statement/Prospectus.
AVAILABLE INFORMATION
GTC (Commission File No. 0-24020) is subject to the informational
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, in accordance therewith, files reports, proxy statements
and other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information filed can
be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Judiciary Plaza, Washington,
D.C. 20549. In addition, such reports, proxy statements and other information
can be inspected and copied at the Commission's Regional Offices at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 or through the
World Wide Web (http://www.sec.gov). Copies of such materials may be obtained
by mail, at prescribed rates, from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. GTC Common Stock
is quoted on the Nasdaq Stock Market (the "Nasdaq Stock Market") and material
filed by GTC can be inspected at the offices of the Nasdaq Stock Market, 9513
Key West Avenue, 3rd Floor, Rockville, Maryland 20850.
This Joint Proxy Statement/Prospectus does not contain all the information
set forth in the Registration Statement on Form S-4 and exhibits relating
thereto, including any amendments (the "Registration Statement"), of which this
Joint Proxy Statement/Prospectus is a part, and which GTC has filed with the
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to GTC and the GTC
Common Stock offered hereby, please refer to such Registration Statement.
Statements contained herein or incorporated herein by reference concerning the
provisions of documents are summaries of such documents and each statement is
qualified in its entirety by reference to the copy of the applicable document
if filed with the Commission or attached as an appendix hereto.
iii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward Looking Statements.................................................................... iii
Available Information......................................................................... iii
Summary....................................................................................... 1
Selected Historical Consolidated Financial Data of GTC........................................ 11
Selected Historical Consolidated Financial Data of GFP........................................ 13
Selected Unaudited Pro Forma Combined Financial Data.......................................... 15
Risk Factors.................................................................................. 16
The Reorganization Parties.................................................................... 24
The GFP Special Meeting....................................................................... 24
The Tube Turns Special Meeting................................................................ 27
The Bell Special Meeting...................................................................... 30
The GTC Special Meeting....................................................................... 33
The Reorganization............................................................................ 43
Unaudited Pro Forma Condensed Combined Financial Statements................................... 62
Recent Developments........................................................................... 66
Description of GTC's Capital Stock............................................................ 66
Effect of the Reorganization on Rights of Shareholders........................................ 67
Certain Relationships and Related Transactions................................................ 78
GTC Executive Compensation.................................................................... 79
GTC Compensation Committee Report............................................................. 82
Ownership of GTC Common Stock................................................................. 84
Business of GTC............................................................................... 86
Management's Discussion and Analysis of Financial Condition and Results of Operations of GTC.. 96
Ownership of GFP Common Stock................................................................. 106
Ownership of Tube Turns Common Stock.......................................................... 107
Ownership of Bell Common Stock................................................................ 108
Business of GFP............................................................................... 109
Management's Discussion and Analysis of Financial Condition and Results of Operations of GFP.. 114
Legal Matters................................................................................. 121
Experts....................................................................................... 121
</TABLE>
APPENDIX A Agreement and Plan of Reorganization
APPENDIX B Text of Subtitle 13 of Section 271B of the Kentucky Revised
Statutes
APPENDIX C Text of Sections 607.1301-607.1320 of the Florida Business
Corporation Act
APPENDIX D Text of Amendments to Articles of Incorporation of GTC
APPENDIX E Text of GTC's 1994 Stock Option Plan for Key Employees as
proposed to be amended
APPENDIX F Text of GTC's Independent Directors' Stock Option Plan as
proposed to be amended
APPENDIX G Opinion of J. C. Bradford & Co., LLC
iv
<PAGE>
SUMMARY
THIS SUMMARY IS NECESSARILY GENERAL AND ABBREVIATED AND HAS BEEN PREPARED
TO ASSIST SHAREHOLDERS IN THEIR REVIEW OF THIS JOINT PROXY
STATEMENT/PROSPECTUS. THIS SUMMARY IS NOT INTENDED TO BE A COMPLETE EXPLANATION
OF THE MATTERS COVERED IN THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS
QUALIFIED IN ALL RESPECTS BY REFERENCE TO THE MORE DETAILED INFORMATION
CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS, THE APPENDICES HERETO AND
THE DOCUMENTS INCORPORATED HEREIN, WHICH SHAREHOLDERS ARE URGED TO READ AND
CONSIDER CAREFULLY. SHAREHOLDERS OF GTC, GFP, TUBE TURNS AND BELL SHOULD
CAREFULLY REVIEW THE MATTERS SET FORTH UNDER "RISK FACTORS," AS PRESENTED IN
THIS JOINT PROXY STATEMENT/PROSPECTUS, BEFORE VOTING UPON THE MATTERS SUBMITTED
HEREIN FOR CONSIDERATION BY SHAREHOLDERS.
THE REORGANIZATION TRANSACTION
In accordance with, and subject to the terms and conditions of, the
Reorganization Agreement, a copy of which is attached to this Joint Proxy
Statement/Prospectus as Appendix A, the following will occur in chronological
order: (i) the Spin Off, (ii) the Merger, (iii) the Tube Turns Merger, (iv) the
Bell Merger and (v) the GTC Contribution.
THE SPIN OFF. At the effective time specified in the Reorganization
Agreement (the "Effective Time"), by virtue of the Spin Off, the shares of
Partners-V, Unison, and BW held by GFP shall be transferred to the shareholders
of GFP.
THE MERGER. At the Effective Time, and subject to the conditions set forth
in the Reorganization Agreement, GFP will be merged with and into GTC in
accordance with the KRS and the FBCA, whereupon the separate existence of GFP
will cease and GTC will continue as the surviving corporation. Subject to the
terms of the Reorganization Agreement, the number of shares of GTC Common Stock
to be issued to shareholders of GFP in the Merger is equal to the GFP
Conversion Ratio multiplied by the shares held by such shareholders, subject to
certain adjustments as provided in the Reorganization Agreement (the "Merger
Shares"). Each share of GTC Common Stock issued and outstanding immediately
prior to the Effective Time which is held by GFP shall be canceled and retired
and all rights in respect thereof shall cease to exist, without any conversion
thereof or payment of any consideration therefor.
THE TUBE TURNS MERGER. Upon the terms and subject to the conditions set
forth in the Reorganization Agreement, and in accordance with the KRS at the
Effective Time, Tube Turns will be merged with and into New Tube Turns in
accordance with the KRS, whereupon the separate existence of Tube Turns shall
cease and New Tube Turns will continue as the surviving corporation. Subject to
the terms of the Reorganization Agreement, the number of shares of GTC Common
Stock to be issued to the shareholders of Tube Turns, other than GTC (as
successor by merger to GFP), in connection with the Tube Turns Merger is equal
to the Tube Turns Conversion Ratio multiplied by the shares held by such
shareholders, subject to certain adjustments as provided in the Reorganization
Agreement (the "Tube Turns Merger Shares"). Each share of Tube Turns common
stock, no par value per share (the "Tube Turns Common Stock"), issued and
outstanding immediately prior to the Effective Time and held by GTC shall be
canceled and extinguished.
THE BELL MERGER. Upon the terms and subject to the conditions set forth in
the Reorganization Agreement, and in accordance with the FBCA at the Effective
Time, Bell will be merged with and into New Bell in accordance with the FBCA,
whereupon the separate existence of Bell shall cease and New Bell will continue
as the surviving corporation. Subject to the terms of the Reorganization
Agreement, the number of shares of GTC Common Stock to be issued to the
shareholders of Bell, other than GTC (as successor by merger to GFP), in
connection with the Bell Merger is equal to the Bell Conversion Ratio
multiplied by the shares held by such shareholders, subject to certain
adjustments as provided in the Reorganization Agreement (the "Bell Merger
Shares"). Each share of Bell common stock, par value $.01 per share (the "Bell
1
<PAGE>
Common Stock"), issued and outstanding immediately prior to the Effective Time
and held by GTC shall be canceled and extinguished. See "The Reorganization--The
Reorganization Transaction."
THE GTC CONTRIBUTION. GTC will contribute all of the assets of GTC (other
than the shares of New Tube Turns and New Bell) into a newly formed, wholly-
owned subsidiary of GTC, and this subsidiary will assume all of the liabilities
of GTC.
PARTIES TO THE REORGANIZATION
GTC
GTC, a Florida corporation, is a subsidiary of GFP and is a leading
provider of advanced manufacturing, engineering and testing services to original
equipment manufacturers ("OEMs") of electronics products. New Tube Turns and New
Bell are wholly-owned subsidiaries of GTC.
GTC's principal executive offices are located at 10901 Malcolm McKinley
Drive, Tampa, Florida 33612, and its telephone number is (813) 972-6000.
GFP
GFP, a Kentucky corporation, is a privately held holding company whose
principal assets are the shares of GTC, Tube Turns and Bell owned by it.
GFP's principal executive offices are located at 455 South Fourth Avenue,
Louisville, Kentucky 40202, and its telephone number is (502) 585-5544.
TUBE TURNS
Tube Turns, a Kentucky corporation, is a subsidiary of GFP and provides a
range of manufacturing services for heavy industry and manufactures a number of
proprietary engineered products.
Tube Turns' principal executive offices are located at 2900 West Broadway,
Louisville, Kentucky 40232, and its telephone number is (502) 774-6300.
BELL
Bell, a Florida corporation, is a subsidiary of GFP and provides a range of
outsourcing services for the electronics industry and manufactures a series of
specialty electronic products.
Bell's principal executive offices are located at 6120 Hanging Moss Road,
Orlando, Florida 32807, and its telephone number is (407) 678-6900.
COMBINED ENTITY
Following the Reorganization, GTC will own and operate New Tube Turns and
New Bell as wholly-owned subsidiaries of GTC and will contribute all of the
assets of GTC (other than the shares of New Tube Turns and New Bell) into a
newly formed, wholly-owned subsidiary of GTC, and this subsidiary will assume
all of the liabilities of GTC. It is expected that such entities, immediately
after the Reorganization, will continue to conduct the business conducted by
GTC, Tube Turns and Bell.
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<PAGE>
SPECIAL MEETINGS
Time, Place and Date
The Special Meeting of GTC shareholders will be held at 10901 Malcolm
McKinley Drive, Tampa, Florida, on March ___, 1997, at ______ __.m., local time
(including any and all adjournments or postponements thereof, the "GTC Special
Meeting"). See "The GTC Special Meeting."
The Special Meeting of GFP shareholders will be held at 455 Fourth Avenue,
Suite 350, Louisville, Kentucky, on March __, 1997, at ___ __.m., local time
(including any and all adjournments or postponements thereof, the "GFP Special
Meeting"). See "The GFP Special Meeting."
The Special Meeting of Tube Turns shareholders will be held at 2900 West
Broadway, Louisville, Kentucky, on March __, 1997, at _____ __.m., local time
(including any and all adjournments or postponements thereof, the "Tube Turns
Special Meeting"). See "The Tube Turns Special Meeting."
The Special Meeting of Bell shareholders will be held at 6120 Hanging Moss
Road, Orlando, Florida, on March __, 1997, at ____ __.m., local time (including
any and all adjournments or postponements thereof, the "Bell Special Meeting").
See "The Bell Special Meeting."
Purpose of the Meetings
The GTC Special Meeting. At the GTC Special Meeting, holders of GTC Common
Stock will consider and vote upon (i) a proposal to approve the Reorganization
Agreement, including the issuance of shares of GTC's Common Stock contemplated
thereby, (ii) a proposal to amend the articles of incorporation of GTC to change
GTC's name to Avcor Solutions, Inc., (iii) a proposal to amend the articles of
incorporation of GTC to create a class of 10,000,000 shares of nonvoting common
stock, (iv) a proposal to amend the articles of incorporation of GTC to increase
the number of authorized shares of GTC Common Stock from 40,000,000 shares to
60,000,000 shares, (v) a proposal to approve an amendment to GTC's Independent
Directors' Stock Option Plan (the "Independent Directors' Plan") to increase the
number of shares of GTC Common Stock available for issuance thereunder, (vi) a
proposal to approve an amendment to GTC's 1994 Stock Option Plan for Key
Employees (the "Key Employees Plan") to increase the number of shares of GTC
Common Stock available for issuance thereunder, and (vii) any other matter that
may properly come before the GTC Special Meeting. See "The GTC Special Meeting--
Purposes of the GTC Special Meeting."
The GFP Special Meeting. At the GFP Special Meeting, holders of GFP Common
Stock will consider and vote upon (i) a proposal to approve the Reorganization
Agreement, and (ii) any other matter that may properly come before the GFP
Special Meeting. See "The GFP Special Meeting--Purposes of the GFP Special
Meeting."
The Tube Turns Special Meeting. At the Tube Turns Special Meeting, holders
of Tube Turns Common Stock will consider and vote upon (i) a proposal to approve
the Reorganization Agreement, and (ii) any other matter that may properly come
before the Tube Turns Special Meeting. See "The Tube Turns Special Meeting--
Purposes of the Tube Turns Special Meeting."
The Bell Special Meeting. At the Bell Special Meeting, holders of Bell
Common Stock will consider and vote upon (i) a proposal to approve the
Reorganization Agreement, and (ii) any other matter that may properly come
before the Bell Special Meeting. See "The Bell Special Meeting--Purposes of the
Bell Special Meeting."
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<PAGE>
Votes Required; Record Date; Revocability of Proxies
GTC. The affirmative vote of the holders of a majority of the shares of GTC
Common Stock outstanding as of the GTC Record Date (defined below) and entitled
to vote at the GTC Special Meeting is required to approve the Reorganization
under the Reorganization Agreement. Approval of the amendments to GTC's articles
of incorporation to change the name of GTC to Avcor Solutions, Inc., to create a
class of nonvoting common stock and to increase the number of authorized shares
of GTC Common Stock, requires that more votes be cast for the proposal than
votes cast against the proposal. The affirmative vote of a majority of the
shares of GTC Common Stock present or represented by proxy at the GTC Special
Meeting and entitled to vote is required to approve the proposal to amend the
Independent Directors' Plan and the Key Employee Plan. Holders of GTC's Common
Stock are entitled to one vote per share. Only holders of GTC's Common Stock at
the close of business on February __, 1997 (the "GTC Record Date") will be
entitled to notice of and to vote at the GTC Special Meeting. As of the GTC
Record Date, directors and executive officers of GTC and their affiliates and
persons and entities related to the foregoing were beneficial owners of
13,222,427 shares of GTC's Common Stock entitled to vote at the GTC Special
Meeting, representing approximately 81.5% of the total number of shares of GTC's
Common Stock entitled to vote at the GTC Special Meeting. The affirmative votes
by the holders of these shares will affect the outcome of the vote. Any proxy
given pursuant to this solicitation may be revoked by (i) filing written notice
to such effect or submitting a later dated proxy to the Secretary of GTC before
the taking of the vote at the GTC Special Meeting, or (ii) attending the GTC
Special Meeting and voting in person. See "The GTC Special Meeting--Record Date;
Voting Rights; Proxies."
GFP. The affirmative vote of the holders of a majority of the shares of GFP
Common Stock outstanding as of the GFP Record Date (defined below) and entitled
to vote at the GFP Special Meeting is required to approve the Reorganization
under the Reorganization Agreement. Holders of GFP Common Stock are entitled to
one vote per share. Only holders of GFP Common Stock at the close of business on
February __, 1997 (the "GFP Record Date") will be entitled to notice of and to
vote at the GFP Special Meeting. As of the GFP Record Date, directors and
executive officers of GFP and their affiliates and persons and entities related
to the foregoing were beneficial owners of 315,467 shares of GFP Common Stock
representing approximately 99.8%of the outstanding shares of GFP Common Stock.
The affirmative votes by the holders of these shares will affect the outcome of
the vote. Any proxy given pursuant to this solicitation may be revoked by (i)
filing written notice to such effect or submitting a later dated proxy to the
Secretary of GFP before the taking of the vote at the GFP Special Meeting, or
(ii) attending the GFP Special Meeting and voting in person. See "The GFP
Special Meeting--Record Date; Voting Rights; Proxies."
Tube Turns. The affirmative vote of the holders of a majority of the shares
of Tube Turns Common Stock outstanding as of the Tube Turns Record Date (defined
below) and entitled to vote at the Tube Turns Special is required to approve the
Reorganization under the Reorganization Agreement. Holders of Tube Turns Common
Stock are entitled to one vote per share. Only holders of Tube Turns Common
Stock at the close of business on February __, 1997 (the "Tube Turns Record
Date") will be entitled to notice of and to vote at the Tube Turns Special
Meeting. As of the Tube Turns Record Date, directors and executive officers of
Tube Turns and their affiliates and persons and entities related to the
foregoing were beneficial owners of 1,314,197 shares of Tube Turns Common Stock
representing approximately 98.2% of the outstanding shares of Tube Turns Common
Stock. The affirmative votes by the holders of these shares will affect the
outcome of the vote. Any proxy given pursuant to this solicitation may be
revoked by (i) filing written notice to such effect or submitting a later dated
proxy to the Secretary of Tube Turns before the taking of the vote at the Tube
Turns Special Meeting, or (ii) attending the Tube Turns Special Meeting and
voting in person. See "The Tube Turns Special Meeting--Record Date; Voting
Rights; Proxies."
Bell. The affirmative vote of the holders of a majority of the shares of
Bell Common Stock outstanding as of the Bell Record Date (defined below) and
entitled to vote at the Bell Special Meeting Common Stock is required to approve
the Reorganization under the Reorganization Agreement. Holders of Bell Common
Stock are entitled to one vote per share. Only holders of Bell Common Stock at
the close of business on February
4
<PAGE>
__, 1997 (the "Bell Record Date") will be entitled to notice of and to vote at
the Bell Special Meeting. As of the Bell Record Date, directors and executive
officers of Bell and their affiliates and persons and entities related to the
foregoing were beneficial owners of 855,582 shares of Bell Common Stock
representing approximately 94.3% of the outstanding shares of Bell Common Stock.
The affirmative votes by the holders of these shares will affect the outcome of
the vote. Any proxy given pursuant to this solicitation may be revoked by (i)
filing written notice to such effect or submitting a later dated proxy to the
Secretary of Bell before the taking of the vote at the Bell Special Meeting, or
(ii) attending the Bell Special Meeting and voting in person. See "The Bell
Special Meeting--Record Date; Voting Rights; Proxies."
REASONS FOR THE REORGANIZATION
In the discussions which led to the signing of the Reorganization
Agreement, the respective management of GTC, GFP, Tube Turns and Bell identified
a number of potential benefits resulting from the Reorganization, including (i)
greater access to capital, (ii) more efficient use of capital resources, (iii)
increased range of service offerings, (iv) increased diversification of
industries, customers and markets served, (v) shared industry experience and
expertise, (vi) more efficient operations and synergies in support services, and
(vii) expanded management depth. Additionally, each Board of Directors evaluated
the benefits and detriments of the proposed Reorganization from the standpoint
of their respective corporations and found the benefits to outweigh any
detriments. See "The Reorganization--Reasons for the Reorganization;
Recommendation of the GTC Board;" "Reasons for the Reorganization;
Recommendation of the GFP Board;" "Reasons for the Reorganization;
Recommendation of the Tube Turns Board;" and "Reasons for the Reorganization;
Recommendation of the Bell Board."
RECOMMENDATION OF THE GTC BOARD AND SPECIAL COMMITTEE
The Board of Directors of GTC (the "GTC Board") has unanimously approved
the Reorganization Agreement and recommends a vote for approval of the
Reorganization Agreement by the shareholders of GTC at the GTC Special Meeting.
A special committee composed of the independent directors of GTC (the "Special
Committee") has reviewed the Reorganization and retained J.C. Bradford & Co.,
LLC ("Bradford") to advise it, among other things, on the fairness of the Merger
Transactions to the shareholders of GTC, other than GFP (the "Unaffiliated
Shareholders"), from a financial point of view. Bradford has delivered its
opinion to the Special Committee to the effect that, subject to the assumptions
set forth therein, the Merger Transactions are fair to the Unaffiliated
Shareholders from a financial point of view. The Special Committee recommended
to the GTC Board that the Reorganization be approved by the GTC Board and
submitted to the GTC shareholders for approval. For a discussion of the factors
considered by the GTC Board and the Special Committee in reaching their
decision, see "The Reorganization--Background of the Reorganization" and "The
Reorganization--Reasons for the Reorganization; Recommendation of the GTC
Board."
The GTC Board has approved the proposed amendments to the GTC Articles of
Incorporation, the amendment to the Independent Directors' Plan, and the
amendment to the Key Employees Plan and recommends a vote for approval of these
proposals at the GTC Special Meeting.
RECOMMENDATION OF THE GFP BOARD
The Board of Directors of GFP (the "GFP Board") has approved the
Reorganization Agreement and recommends a vote for approval of the
Reorganization by the shareholders of GFP at the GFP Special Meeting. The GFP
Board believes that the terms of the Reorganization are fair to, and in the best
interest of, GFP and its shareholders. For a discussion of the factors
considered by the GFP Board in reaching its decision, see "The Reorganization--
Background of the Reorganization" and "The Reorganization--Reasons for the
Reorganization; Recommendation of the GFP Board."
5
<PAGE>
GROUP FINANCIAL PARTNERS
RECOMMENDATION OF THE TUBE TURNS BOARD
The Board of Directors of Tube Turns (the "Tube Turns Board") has approved
the Reorganization Agreement and recommends a vote for approval of the
Reorganization by the shareholders of Tube Turns at the Tube Turns Special
Meeting. The Tube Turns Board believes that the terms of the Reorganization are
fair to, and in the best interest of, Tube Turns and its shareholders. For a
discussion of the factors considered by the Tube Turns Board in reaching its
decision, see "The Reorganization--Background of the Reorganization" and "The
Reorganization--Reasons for the Reorganization; Recommendation of the Tube Turns
Board."
RECOMMENDATION OF THE BELL BOARD
The Board of Directors of Bell (the "Bell Board") has approved the
Reorganization Agreement and recommends a vote for approval of the
Reorganization by the shareholders of Bell at the Bell Special Meeting. The Bell
Board believes that the terms of the Reorganization are fair to, and in the best
interest of, Bell and its shareholders. For a discussion of the factors
considered by the Bell Board in reaching its decision, see "The Reorganization--
Background of the Reorganization" and "The Reorganization--Reasons for the
Reorganization; Recommendation of the Bell Board."
OPINION OF FINANCIAL ADVISOR
The Special Committee has retained Bradford to act as its financial advisor
in connection with the Reorganization and to render an opinion as to the
fairness, from a financial point of view, of the Merger Transactions to the
Unaffiliated Shareholders. The Special Committee selected Bradford as its
financial advisor after interviewing several candidates because, among other
things, Bradford is a nationally recognized investment banking firm, which, as a
part of its investment banking business, engages in the valuation of securities
in connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporations for other purposes. The Special Committee also
selected Bradford because of Bradford's familiarity with the electronics
contract manufacturing industry generally. Representatives of Bradford conducted
interviews with the managements of GTC, GFP, Tube Turns and Bell and performed
extensive analysis relating to the proposed transactions. On December 17, 1996,
Bradford rendered its written opinion to the Special Committee that, subject to
the assumptions set forth therein, the Merger Transactions were fair, from a
financial point of view, to the Unaffiliated Shareholders. Bradford subsequently
confirmed such opinion by delivery of a written opinion to the Special Committee
dated the date hereof. A copy of that opinion, which sets forth the assumptions
made, matters considered and limitations on the review undertaken, is attached
as Appendix G hereto and should be read in its entirety. GTC has retained J.P.
Morgan & Co. ("Morgan") and Needham & Company, Inc. ("Needham") to provide
certain financial advisory services for GTC unrelated to the opinion of Bradford
or the recommendation of the Special Committee to the GTC Board concerning the
Reorganization, including reviewing the advisability of divestiture
opportunities. In its review, and the rendering of its opinion, with the express
permission of the Special Committee, Bradford did not consider the impact any
such divestiture or the impact that any advice of Morgan or Needham could have
on the fairness of the Merger Transactions. See "Recent Developments."
INTERESTS OF CERTAIN PERSONS IN THE REORGANIZATION
In considering the recommendation of the GTC, GFP, Tube Turns and Bell
Boards to approve the Reorganization Agreement and the transactions contemplated
thereby, shareholders should be aware that certain officers and directors of
such entities have interests in the Reorganization that are in addition to the
interests of shareholders of such entities generally, and which may create
perceived conflicts of interest. Robert E. Gill and Jeffrey T. Gill currently
serve in a number of overlapping positions at GTC, GFP, Tube Turns and Bell.
Robert E. Gill serves as Chairman of GFP, President, Chief Executive Officer and
Director of GTC, and Director of Bell and Tube Turns. Jeffrey T. Gill serves as
President, Chief Executive Officer and Director of GFP, Chairman of GTC,
Director of Bell and Chairman of Tube Turns. In addition, as of December
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<PAGE>
31, 1996, Robert E. Gill, Virginia G. Gill, Jeffrey T. Gill, R. Scott Gill and
Patricia G. Gill (collectively, the "Gill Family") own approximately 99% of the
GFP Common Stock, which in turn owns approximately 80% of the GTC Common Stock,
approximately 96% of the Tube Turns Common Stock and approximately 93% of the
Bell Common Stock. Should the Reorganization be completed, the Gill Family
ownership of GTC will increase from approximately 80% to approximately 87%
assuming the arithmetic average of the closing price per share of the GTC Common
Stock, as reported on the Nasdaq Stock Market, for each of the ten (10)
consecutive trading days ending with the trading day which occurs immediately
prior to the date of the approval of the Reorganization by the shareholders of
GTC (the "GTC Average Closing Price") is $1.50. Robert E. Gill will become
Chairman of GTC and Jeffrey T. Gill will become the President and Chief
Executive Officer of GTC. Both men will continue to serve as Directors of GTC
after the Reorganization. Each of the Presidents of Bell and Tube Turns will
have rights to a substantial number of shares of stock under option in GTC
should the Reorganization be completed as planned. In each such case, these
individuals currently serve as Directors of Bell and Tube Turns, respectively.
R. Scott Gill currently serves as a Director of GFP, Bell and Tube Turns and is
expected to serve as a Director of GTC after the Reorganization. Richard L.
Davis currently serves as Vice President and Chief Financial Officer of GFP and
as a Director of Tube Turns. Anthony C. Allen currently serves as Vice President
of Finance of GFP and as a Director of Bell. In each such case, both individuals
will have rights to a substantial number of shares of stock under option in GTC
should the merger be completed as planned. William L. Healey and Robert Sroka
currently serve as Directors of Bell and are expected to serve as Directors of
GTC after the Reorganization. In addition, Morgan (Mr. Sroka's employer) has
been retained to perform certain financial advisory work for GTC. See "The
Reorganization--Interests of Certain Persons in the Reorganization."
CONDITIONS TO THE REORGANIZATION
The obligations of GTC, GFP, Tube Turns and Bell to consummate the
Reorganization are subject to the satisfaction or waiver of certain conditions,
including among others (i) obtaining the approval of the shareholders of GTC,
GFP, Tube Turns and Bell; (ii) the effectiveness of the Registration Statement
with the Commission; (iii) the absence of any injunction prohibiting
consummation of the Reorganization; and (iv) the receipt of opinions of counsel
concerning certain federal income tax consequences of the Reorganization (other
than the Spin Off). See "The Reorganization--Conditions to Consummation of the
Reorganization."
CLOSING DATE
The closing of the Reorganization will occur within ten (10) business days
following the date on which the last of the conditions set forth in the
Reorganization Agreement to be fulfilled shall have been fulfilled, or on such
other date as GTC, GFP, Tube Turns and Bell may agree (the "Closing Date"). It
is estimated that the Reorganization will be consummated on or before March 31,
1997.
EXCHANGE PROCEDURES
On or prior to the Effective Time, a letter of transmittal will be mailed
or delivered to each GFP, Tube Turns and Bell shareholder to be used in
forwarding certificates evidencing the share(s) of such holder's respective
corporation's common stock for surrender and exchange for certificates
evidencing GTC Common Stock to which such holder will become entitled and, if
applicable, cash in lieu of fractional GTC Common Stock. After receipt of such
letter of transmittal, each holder of certificates formerly representing shares
of GFP, Tube Turns and Bell common stock should surrender such certificates to
GTC pursuant to and in accordance with the instructions accompanying such letter
of transmittal, and each holder will receive in exchange therefor certificates
evidencing the whole number of GTC Common Stock to which such holder is
entitled, including any cash which may be payable in lieu of fractional shares
of GTC Common Stock. See "The Reorganization--The Reorganization Transaction."
Such letter of transmittal will be accompanied by instructions specifying other
details of the exchange. GFP, TUBE TURNS AND BELL SHAREHOLDERS SHOULD NOT SEND
IN THEIR CERTIFICATES UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL.
7
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TERMINATION OF THE REORGANIZATION AGREEMENT
The Reorganization Agreement may be terminated and the Reorganization may
be abandoned at any time prior to the Closing Date, in the circumstances
specified in the Reorganization Agreement, including among others, (i) with the
mutual consent of GTC, GFP, Tube Turns and Bell (ii) if the Reorganization is
not consummated on or prior to March 31, 1997, and (iii) if certain
representations and warranties contained in the Reorganization Agreement are
breached. For a discussion of such circumstances, see "The Reorganization
Agreement--Termination of the Reorganization Agreement."
CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS
The rights of shareholders of GFP and Tube Turns, both Kentucky
corporations, are governed by the KRS and by GFP's and Tube Turns' respective
Articles of Incorporation (as amended to date, respectively, the "GFP Articles"
and the "Tube Turns Articles"), and GFP's and Tube Turns' respective Bylaws (as
amended to date, respectively, the "GFP Bylaws" and the "Tube Turns Bylaws").
The rights of shareholders of GTC and Bell, both Florida corporations, are
governed by the FBCA and by GTC's and Bell's respective Articles of
Incorporation (as amended to date, respectively, the "GTC Articles" and the
"Bell Articles"), and GTC's and Bell's respective Bylaws (as amended to date,
respectively, the "GTC Bylaws" and the "Bell Bylaws"). Upon completion of the
Reorganization, GFP's shareholders, and Tube Turns' and Bell's shareholders,
other than GTC (as successor by merger to GFP), will become shareholders of GTC,
and their rights as shareholders of GTC will be determined by the FBCA and the
GTC Articles and GTC Bylaws. The rights of shareholders of GTC differ from
rights of the shareholders of GFP, Tube Turns and Bell. These differences result
from (i) the differences between Kentucky and Florida law, and (ii) differences
between the respective governing instruments of the corporations. For a summary
of these differences, see "Effect of the Reorganization on Rights of
Shareholders."
DISSENTERS' RIGHTS
Under the KRS, shareholders of GFP and Tube Turns will have the right to
dissent from the Reorganization if the Reorganization Agreement is approved and
the Reorganization is consummated. Under the FBCA, shareholders of GTC will not
be entitled to dissenter's rights under Florida law or any other statute if the
Reorganization Agreement is approved and the Reorganization is consummated.
Under the FBCA, shareholders of Bell will have the right to dissent from the
Reorganization if the Reorganization Agreement is approved and the
Reorganization is consummated, and demand the fair value of the shares of Bell
Common Stock held by such holders in cash, if such dissenting shareholders
follow the procedures provided by applicable law which are described elsewhere
in this Joint Proxy Statement/Prospectus. See "The GTC Special Meeting--
Dissenters' Rights;" "The GFP Special Meeting--Dissenters' Rights;" "The Tube
Turns Special Meeting--Dissenters' Rights;" and "The Bell Special Meeting--
Dissenters' Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is intended that, for federal income tax purposes, the Merger
Transactions will be treated as reorganizations within the meaning of Section
368 of the Code and the GTC Contribution will qualify as a tax free transfer of
property to a controlled corporation under Section 351 of the Code, and,
accordingly, that for federal income tax purposes, no gain or loss will be
recognized by GTC, GFP, Tube Turns or Bell as a result of the Merger
Transactions and the GTC Contribution, and shareholders will recognize gain in
connection with the Merger Transactions only to the extent of any cash received
in the Merger Transactions. Consummation of the Reorganization is dependent
upon, among other conditions, receipt by each of GTC, GFP, Tube Turns and Bell
of an opinion of counsel, dated as of the Closing Date, that the Merger
Transactions will be treated as reorganizations within the meaning of Section
368 of the Code and that the GTC Contribution will qualify as a tax free
transfer of property to a controlled corporation under Section 351 of the Code.
No opinion of counsel will be obtained concerning the Spin Off and it is
anticipated that the Spin Off will not qualify as a tax free spin off under the
Code. See "The Reorganization--Certain Federal Income
8
<PAGE>
Tax Consequences." No ruling from the Internal Revenue Service ("IRS") has been
or will be requested regarding the federal income tax consequences of the
Reorganization. See "Risk Factors--Tax Risks."
ACCOUNTING TREATMENT
GTC intends to account for the Reorganization in accordance with generally
accepted accounting principles governing a downstream merger, under which the
Merger is accounted for as a purchase of the minority interests of GTC. Other
than any adjustments necessary to reflect the purchase of the minority interests
of GTC, the assets and liabilities of GTC, Tube Turns and Bell, each of which
are under the common control of GFP, will be combined based on the respective
carrying values of the accounts in the historical financial statements of each
entity. The issuance of GTC Common Stock to the shareholders of Tube Turns and
Bell, other than GTC (as successor by merger to GFP), in connection with the
Tube Turns Merger and the Bell Merger, respectively, will be accounted for as a
purchase and accordingly, the amount by which the fair market value of the GTC
Common Stock issued exceeds the fair market value of the proportional share of
the net assets of Tube Turns and Bell, if any, will be recorded by GTC as
goodwill.
RESALE RESTRICTIONS
Shares of GTC Common Stock to be issued to certain shareholders of GFP,
Tube Turns and Bell in connection with the Reorganization will be subject to
certain resale limitations pursuant to Rule 145 under the Securities Act. In
general, these limitations will consist of volume and manner of sale
restrictions on the resale of the shares of GTC Common Stock. Pursuant to the
Reorganization Agreement, each of GFP, Tube Turns and Bell are required to
deliver to GTC a letter identifying all persons who are, at the time of the
Special Meetings, "affiliates" of each of GFP, Tube Turns and Bell for purposes
of Rule 145 under the Securities Act (each such person an "Affiliate"). It is a
condition to GTC's obligations to consummate the Reorganization that each of
GFP, Tube Turns and Bell must cause each shareholder of GFP, Tube Turns and
Bell, respectively, who is identified as an Affiliate of GFP, Tube Turns or
Bell, as applicable, to deliver to GTC on or prior to the Effective Time, a
written statement to the effect that such person will not offer to sell,
transfer or otherwise dispose of any shares of GTC Common Stock issued to such
person in the Reorganization, except in accordance with the applicable
provisions of the Securities Act and the rules and regulations of the
Commission. GTC may place legends on certificates representing shares of GTC
Common Stock that are issued to such shareholders of GFP, Tube Turns and Bell in
the Reorganization to restrict such transfers.
COMPARATIVE MARKET PRICES OF COMMON STOCK
On October 9, 1996, the last business day preceding the date that GTC made
its public announcement of the proposed Reorganization, the closing sale price
per share of the GTC Common Stock as reported on the Nasdaq Stock Market was
$2.00 per share. On January 15, 1997, the closing sale price per share of the
GTC Common Stock as reported on the Nasdaq Stock Market was $1.50 per share. The
equivalent per share prices of the Tube Turns Common Stock and the Bell Common
Stock held by shareholders other than GFP were $15.00 and $34.00, respectively,
on each such date. The equivalent per share prices of the GFP Common Stock on
October 9, 1996 and January 15, 1997 were $195.63 and $175.00, respectively.
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<PAGE>
GTC made its initial public offering on May 18, 1994 at a price to the
public of $10.00 per share. The shares of GTC's Common Stock are quoted on the
Nasdaq Stock Market under the symbol GRTK. The following table sets forth, for
the periods indicated, the high and low sales prices per share for GTC's Common
Stock as reported by the Nasdaq Stock Market:
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
Year Ended December 31, 1994
Second Quarter (May 18, 1994 - June 30, 1994) $10.500 $10.000
Third Quarter (July 1, 1994 - September 30, 1994) $10.500 $ 7.250
Fourth Quarter (October 1, 1994 - December 31, 1994) $ 8.625 $ 5.000
Year Ended December 31, 1995
First Quarter (January 1, 1995 - March 31, 1995) $ 7.000 $ 4.500
Second Quarter (April 1, 1995 - June 30, 1995) $ 6.000 $ 4.500
Third Quarter (July 1, 1995 - September 30, 1995) $ 8.000 $ 4.500
Fourth Quarter (October 1, 1995 - December 31, 1995) $ 6.250 $ 1.875
Year ended December 31, 1996
First Quarter (January 1, 1996 - March 31, 1996) $ 3.750 $ 2.125
Second Quarter (April 1, 1996 - June 30, 1996) $ 4.250 $ 2.125
Third Quarter (July 1, 1996 - September 30, 1996) $ 3.000 $ 1.750
Fourth Quarter (October 1, 1996 - December 31, 1996) $ 2.625 $ 0.750
</TABLE>
As of December 31, 1996, there were approximately 632 holders of record of
GTC's Common Stock. As of December 31, 1996, there were approximately 11, 145,
and 353 holders of record of the GFP Common Stock, the Tube Turns Common Stock
and the Bell Common Stock, respectively.
No cash dividends have been paid on GTC Common Stock, the GFP Common Stock,
the Tube Turns Common Stock or the Bell Common Stock since the organization of
each respective company. GTC presently intends to retain all of its earnings for
the future operation and growth of its business and does not intend to pay cash
dividends in the foreseeable future. The payment of cash dividends in the future
will be dependent upon GTC's results of operations, earnings, capital
requirements, contractual restrictions and other factors considered relevant by
the GTC Board. The existing credit facilities of GTC, Tube Turns and Bell
prohibit each respective company from declaring or paying any dividends or other
distributions.
There has been no public market for the common stock of GFP, Tube Turns or
Bell. Shares of common stock of GFP, Tube Turns and Bell are closely-held and
are not listed on any exchange or quotation system. Pursuant to the various
stock purchase plans and stock restriction agreements at each of GFP, Tube Turns
and Bell, transactions have occurred within the last twelve months in which each
such company has sold shares to, or repurchased shares from, their employee
shareholders. The per share price of the transactions was approximately $184.00
per share for the GFP Common Stock, approximately $11.00 per share for the Tube
Turns Common Stock and approximately $16.00 per share for the Bell Common Stock.
BECAUSE THE MARKET PRICE OF THE GTC COMMON STOCK IS SUBJECT TO FLUCTUATION,
THE MARKET VALUE OF THE GTC COMMON STOCK THAT HOLDERS OF GFP, TUBE TURNS AND
BELL COMMON STOCK WILL RECEIVE IN THE REORGANIZATION MAY INCREASE OR DECREASE
PRIOR TO THE CLOSING DATE. IN ADDITION, THE MARKET VALUE OF THE GTC COMMON STOCK
MAY INCREASE OR DECREASE FOLLOWING THE REORGANIZATION. SHAREHOLDERS ARE
ENCOURAGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE GTC COMMON STOCK.
10
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF GTC
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
The following selected historical consolidated financial data for GTC
should be read in conjunction with the consolidated financial statements of GTC,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations of GTC." The statement of
operations data set forth below with respect to the years ended December 31,
1993, 1994 and 1995 and the balance sheet data at December 31, 1994 and 1995 are
derived from, and are qualified by reference to, the audited financial
statements of GTC included elsewhere in this Joint Proxy Statement/Prospectus.
The statement of operations data for the years ended December 31, 1991 and 1992
and the balance sheet data at December 31, 1991, 1992 and 1993 are derived from
audited financial statements of GTC not included herein. For 1995 and 1996, the
actual ending dates for the first fiscal nine month periods of GTC were October
1 and September 29, respectively; however, for ease of presentation, September
30, 1995 and 1996 will be used in this Joint Proxy Statement/Prospectus. The
statement of operations data for the nine months ended September 30, 1995 and
1996, and the balance sheet data at September 30, 1996, are unaudited, but in
the opinion of management include all normal, recurring adjustments considered
necessary for a fair presentation. The unaudited results of operations for the
nine months ended September 30, 1996, are not necessarily indicative of results
expected for the full year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------------- ---------------------
1991 1992 1993(1) 1994 1995(2) 1995(2) 1996(3)
---- ---- ------- ---- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.................................. $106,248 $116,572 $243,856 $274,147 $273,647 $208,521 $180,380
Cost of operations....................... 91,843 103,471 200,408 237,867 269,150 199,941 170,549
-------- -------- -------- -------- -------- -------- --------
Gross profit............................. 14,405 13,101 43,448 36,280 4,497 8,580 9,831
Selling, general and administrative
expense................................ 6,515 5,947 21,808 20,561 19,683 14,023 8,597
Research and development................. 296 1,190 4,138 5,170 3,041 2,508 296
-------- -------- -------- -------- -------- -------- --------
Operating income (loss).................. 7,594 5,964 17,502 10,549 (18,227) (7,951) 938
Interest expense......................... 1,777 1,169 1,647 2,048 2,907 1,970 2,682
Other expense............................ -- -- -- 504 521 298 166
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes........ 5,817 4,795 15,855 7,997 (21,655) (10,219) (1,910)
Income taxes............................. 1,773 1,588 5,882 3,297 (3,982) (3,955) 845
-------- -------- -------- -------- -------- -------- --------
Net income (loss)........................ $ 4,044 $ 3,207 $ 9,973 $ 4,700 $(17,673) $ (6,264) $ (2,755)
======== ======== ======== ======== ======== ======== ========
Net income (loss) per share:
Primary................................ $ 0.31 $ 0.24 $ 0.71 $ 0.30 $ (1.13) $ (0.40) $ (0.17)
Fully diluted.......................... $ 0.31 $ 0.24 $ 0.69 $ 0.30 $ (1.13) $ (0.40) $ (0.17)
Shares used in computing per share amounts:
Primary................................ 13,019 13,551 14,066 15,644 15,695 15,680 16,135
Fully diluted.......................... 13,019 13,551 14,554 15,789 15,695 15,680 16,135
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------- SEPTEMBER 30,
1991 1992(4) 1993(5) 1994 1995(6) 1996(7)
-------- ----------- --------------- -------- --------------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................. $16,584 $24,066 $ 37,305 $ 56,622 $ 23,922 $ 4,270
Total assets.................................... 43,407 67,030 111,925 122,566 113,106 75,376
Note payable.................................... - - - - - 804
Current portion of long-term debt............... 2,000 3,000 4,271 2,080 8,171 14,813
Long-term debt, less current portion............ 18,469 21,469 30,362 30,392 23,050 1,923
Redeemable Common Stock and related additional
paid-in capital................................ 1,175 1,971 2,508 - - -
Total shareholders' equity...................... 3,795 6,926 17,340 42,799 25,840 25,227
</TABLE>
--------------
(1) Reflects the results of operations from the date of acquisition of Metrum,
Inc. ("Metrum") and Philips Circuit Assemblies ("PCA") on December 31,
1992 and July 30, 1993, respectively.
(2) Reflects the results of operations through the date of disposition of the
peripheral products and imaging products business units of Metrum on May
31, 1995 and June 6, 1995, respectively.
(3) Reflects the results of operations through the date of disposition of the
instrumentation products business unit of Metrum on February 9, 1996.
(4) Reflects the acquisition of Metrum on December 31, 1992.
(5) Reflects the acquisition of PCA on July 30, 1993.
(6) Reflects the disposition of the peripheral products and imaging products
business units of Metrum on May 31, 1995 and June 6, 1995, respectively.
(7) Reflects the disposition of the instrumentation products business unit of
Metrum on February 9, 1996.
12
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF GFP
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
The following selected historical consolidated financial data for GFP
should be read in conjunction with the consolidated financial statements of
GFP, including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations of GFP." The statement of
operations data set forth below with respect to the years ended December 31,
1993, 1994 and 1995 and the balance sheet data at December 31, 1994 and 1995
are derived from the audited financial statements of GFP included elsewhere in
this Joint Proxy Statement/Prospectus. The statement of operations data for the
years ended December 31, 1991 and 1992 and the balance sheet data at December
31, 1991, 1992 and 1993 are derived from audited financial statements of GFP
not included herein. The statement of operations data for the nine months ended
September 30, 1995 and 1996, and the balance sheet data at September 30, 1996,
are unaudited, but in the opinion of management include all normal, recurring
adjustments considered necessary for a fair presentation. The unaudited results
of operations for the nine months ended September 30, 1996, are not necessarily
indicative of results expected for the full year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------------------------------------------
1991 1992 1993(1) 1994 1995(2)(3) 1995(2)(3) 1996
---------- ----------- -------------- ---------- ------------- ------------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................ $155,455 $163,473 $305,400 $334,885 $336,589 $256,814 $245,252
Cost of operations................. 124,920 135,758 242,909 279,609 312,712 233,759 214,753
-------- -------- -------- -------- -------- -------- --------
Gross profit....................... 30,535 27,715 62,491 55,276 23,877 23,055 30,499
Selling, general and
administrative expense............ 15,470 15,379 35,707 35,471 33,513 24,459 22,751
Depreciation and amortization...... 2,985 3,010 3,098 3,102 2,950 2,309 1,734
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)............ 12,080 9,326 23,686 16,703 (12,586) (3,713) 6,014
Interest expense................... 7,150 5,329 5,536 5,902 6,829 5,058 4,926
Other expense (income), net........ (133) -- 319 (110) 254 303 (608)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before gain on
issuance of stock by subsidiary,
income taxes, minority interests
and extraordinary item............ 5,063 3,997 17,831 10,911 (19,669) (9,074) 1,696
Gain on issuance of stock by
subsidiary........................ -- -- -- 13,307 -- -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes,
minority interests and
extraordinary Item................ 5,063 3,997 17,831 24,218 (19,669) (9,074) 1,696
Income taxes....................... 494 1,199 3,803 9,782 (3,498) (3,326) 2,196
-------- -------- -------- -------- -------- -------- --------
Income (loss) before minority
interests and extraordinary item.. 4,569 2,798 14,028 14,436 (16,171) (5,748) (500)
Minority interests in earnings
(losses) of consolidated
subsidiaries...................... -- -- -- 331 (3,535) (1,253) (551)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
item.............................. 4,569 2,798 14,028 14,105 (12,636) (4,495) 51
Extraordinary gain on
extinguishment of debt............ -- -- -- -- (4,637) -- (1,210)
-------- -------- -------- -------- -------- -------- --------
Net income (loss).................. $ 4,569 $ 2,798 $ 14,028 $ 14,105 $ (7,999) $ (4,495) $ 1,261
======== ======== ======== ======== ======== ======== ========
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-----------------------------------------------------------------------------
1991 1992 1993(1) 1994 1995(2)(3) 1995(2)(3) 1996
---- ---- ------- ---- ---------- ---------- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) per share... $14.41 $8.83 $44.25 $44.50 $(25.31) $(14.18) $3.99
Shares used in computing
per share amounts............ 317 317 317 317 316 317 316
DECEMBER 31,
------------------------------------------------------- SEPTEMBER 30,
1991 1992(4) 1993(5) 1994 1995(6)(7) 1996
---- ------- ------- ---- ---------- ----
(UNAUDITED)
BALANCE SHEET DATA:
Working capital............... $ 24,633 $ 35,014 $ 47,711 $ 61,567 $ 26,022 $ 235
Total assets.................. 104,338 131,677 178,533 188,300 173,028 140,186
Notes payable................. - - 1,705 6,457 5,920 19,724
Current portion of
long-term debt............... 5,588 6,992 7,292 4,357 10,946 17,631
Long-term debt, less
current portion.............. 75,540 78,282 81,122 73,018 52,868 19,440
Total shareholders' equity.... (978) 1,826 15,840 30,033 21,876 23,119
- -------------------
</TABLE>
(1) Reflects the results of operations from the date of acquisition of Metrum
and Services Group Corporation ("SGC") on December 31, 1992 and PCA on
July 30, 1993.
(2) Reflects the results of operations from the date of acquisition of
Associated Testing Laboratories, Inc. ("ATL") on January 31, 1995.
(3) Reflects the results of operations through the respective dates of
disposition of the peripheral products and imaging products business units
of Metrum on May 31, 1995 and June 6, 1995, respectively.
(4) Reflects the acquisition of Metrum and SGC on December 31, 1992.
(5) Reflects the acquisition of PCA on July 30, 1993.
(6) Reflects the acquisition of ATL on January 31, 1995.
(7) Reflects the disposition of the peripheral products and imaging products
business units of Metrum on May 31, 1995 and June 6, 1995, respectively.
14
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following selected unaudited pro forma combined financial data as of
September 30, 1996 and for the nine months ended September 30, 1996 and the
year ended December 31, 1995 have been derived from the Unaudited Pro Forma
Condensed Combined Financial Statements included elsewhere in this Joint Proxy
Statement/Prospectus and should be read in conjunction therewith, including the
related notes thereto. Such unaudited pro forma combined financial data
reflects the pro forma effects of the Reorganization on GTC's historical cost
balance sheet as of September 30, 1996 and statements of operations for the
periods presented.
The following selected unaudited pro forma combined financial data should
also be read in conjunction with the consolidated financial statements of GTC
and GFP, including the respective notes thereto, "Management's Discussion and
Analysis of Financial Condition and Results of Operations of GTC,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of GFP," "Selected Historical Consolidated Financial Data of GTC,"
and "Selected Historical Consolidated Financial Data of GFP" included elsewhere
in this Joint Proxy Statement/Prospectus.
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
------------------ -------------------
<S> <C> <C>
Statement of Operations Data:
Revenue............................... $328,977 $240,963
Operating (loss) income............... (14,881) 5,017
Net loss.............................. (15,316) (107)
SEPTEMBER 30, 1996
------------------
Balance Sheet Data:
Working capital....................... $ 19,758
Total assets.......................... 118,713
Notes payable......................... 804
Current portion of long-term debt..... 17,331
Long-term debt, less current portion.. 14,040
Total shareholders' equity............ 38,065
</TABLE>
COMPARATIVE PER SHARE DATA
The following table sets forth (i) the historical net loss per common share
and the historical book value per common share of GTC Common Stock, (ii) the
historical income (loss) before extraordinary item per common share and the
historical book value per common share of GFP Common Stock, (iii) the unaudited
pro forma combined loss before extraordinary item per common share and the
unaudited pro forma combined book value per common share after giving effect to
the Reorganization using generally accepted accounting principles governing a
downstream merger, and (iv) the unaudited GFP equivalent pro forma combined
loss before extraordinary item per common share and unaudited GFP equivalent
pro forma combined book value per common share based upon the GFP conversion
ratio of 116.6646. The information presented in the table should be read in
conjunction with the respective separate historical audited and unaudited
consolidated financial statements of GTC and GFP and the notes thereto
appearing elsewhere in this Joint Proxy Statement/Prospectus. Also see
"Unaudited Pro Forma Condensed Combined Financial Statements of GTC" and
"Unaudited Pro Forma Condensed Combined Financial Statements of GFP."
15
<PAGE>
The unaudited pro forma combined financial data is not necessarily
indicative of the loss before extraordinary item per common share or book value
per common share that would have been achieved had the Reorganization been
consummated as of the beginning of the periods presented and should not be
construed as representative of such amounts for any future dates or periods.
<TABLE>
<CAPTION>
GFP
HISTORICAL EQUIVALENT
----------------------- PRO FORMA PRO FORMA
GTC GFP COMBINED COMBINED
--- --- ---------- -----------
<S> <C> <C> <C> <C>
Net loss or income (loss) before extraordinary item per common share:
Year ended December 31, 1995........................................ $(1.13) $(39.99) $(0.36) $(41.99)
Nine months ended September 30, 1996................................ (0.17) (3.99) 0.00 0.00
Book value per common share as of September 30, 1996................... 1.56 90.87 0.91 106.16
</TABLE>
RISK FACTORS
In addition to the other information in this Joint Proxy Statement/Prospectus,
the following factors should be considered carefully by shareholders of GTC,
GFP, Tube Turns and Bell before voting on the matters described herein and in
evaluating GTC and its business.
GENERAL RISK FACTORS
CALCULATION OF CONVERSION RATIOS
The conversion ratios in the Reorganization will be calculated based in
part upon a share value number for GTC Common Stock equal to the greater of (i)
$1.50 per share, or (ii) the GTC Average Closing Price. Accordingly, if
shareholders of GFP, Tube Turns and Bell receive shares of GTC Common Stock in
the Reorganization based on a value of $1.50 per share when this amount exceeds
the GTC Average Closing Price, such shareholders could be viewed as having
received, in the Reorganization, shares of GTC Common Stock worth less than the
values of GFP, Tube Turns and Bell. In addition, in the determination of the
values of GFP, Tube Turns and Bell for purposes of the Reorganization, any
proceeds from the exercise of options to be received by GTC for options
converted in the Reorganization into options to purchase GTC Common Stock, were
not included in such valuations. While the Special Committee of the GTC Board
obtained a fairness opinion from Bradford on the Merger Transaction, GFP, Tube
Turns and Bell have not obtained fairness opinions on the Merger Transactions.
See "The Reorganization-Opinion of Financial Advisor."
UNCERTAINTIES RELATED TO THE REORGANIZATION
There can be no assurance that GTC will be successful in efficiently
integrating the acquired businesses into its own, or that GTC will retain key
personnel.
INTERESTS OF CERTAIN PERSONS IN THE REORGANIZATION
Robert E. Gill and Jeffrey T. Gill currently serve in a number of
overlapping positions at GTC, GFP, Tube Turns and Bell. Robert E. Gill serves
as Chairman of GFP, President, Chief Executive Officer and Director of GTC, and
Director of Bell and Tube Turns. Jeffrey T. Gill serves as President, Chief
Executive Officer and Director of GFP, Chairman of GTC, Director of Bell and
Chairman of Tube Turns. In addition, as of December 31, 1996, the Gill Family
controlled approximately 99% of the GFP Common Stock, which in turn controlled
approximately 80% of the GTC Common Stock, approximately 96% of the Tube Turns
Common Stock, and approximately 93% of the Bell Common Stock. Should the
Reorganization be
16
<PAGE>
completed, the Gill Family ownership of GTC will increase from approximately
80% to approximately 87% assuming a GTC Average Closing Price of $1.50, Robert
E. Gill will become Chairman of GTC and Jeffrey T. Gill will become the
President and Chief Executive Officer of GTC. Both men will continue to serve
as Directors of GTC after the Reorganization. Each of the Presidents of Bell
and Tube Turns will have rights to a substantial number of shares of stock
under option in GTC should the merger be completed as planned. In each such
case, these individuals currently serve as Directors of Bell and Tube Turns,
respectively. R. Scott Gill currently serves as a Director of GFP, Bell and
Tube Turns and is expected to serve as a Director of GTC after the
Reorganization. Richard L. Davis currently serves as Vice President and CFO of
GFP and as a Director of Tube Turns. Anthony C. Allen currently serves as Vice
President of Finance of GFP and as a Director of Bell. In each such case, both
individuals will have rights to a substantial number of shares of stock under
option in GTC should the merger be completed as planned. William L. Healey and
Robert Sroka currently serve as Directors of Bell and are expected to serve as
Directors of GTC after the Reorganization. In addition, Morgan (Mr. Sroka's
employer) has been retained to provide certain financial advisory services for
GTC.
CONTROL BY PRINCIPAL SHAREHOLDERS
The Gill Family, who are the principal shareholders of GFP, currently own
approximately 99% of the outstanding shares of GFP and should the
Reorganization be completed, will own approximately 87% of the outstanding
shares of GTC Common Stock assuming a GTC Average Closing Price of $1.50. As a
result of the above specified ownership by the Gill Family, the Gill Family
voting as a group will be able to elect all of the GTC Board and to approve or
disapprove any matter submitted to a vote of shareholders. Robert E. Gill and
Jeffrey T. Gill are members of the GTC Board and will continue to serve as
Directors after the Reorganization. R. Scott Gill is expected to serve on the
GTC Board upon completion of the Reorganization. This may have the effect of
discouraging unsolicited offers to acquire GTC.
STOCK PRICE FLUCTUATIONS
The market price of the GTC Common Stock at the Effective Time may vary
significantly from the prices as of the date of the execution of the
Reorganization Agreement, the date hereof or the date on which the shareholders
vote on the Reorganization, due to changes in the business, operations and
prospects of GTC; market assessments of the likelihood that the Reorganization
will be consummated and the timing thereof; general market and economic
conditions; and other factors. See "The Reorganization--The Reorganization
Transaction."
TAX RISKS
The Merger Transactions are intended to be tax free reorganizations for
federal income tax purposes. No party to the Reorganization intends to request
a ruling from the IRS that the Merger Transactions qualify as tax free
reorganizations under Section 368 of the Code. It is a condition of the closing
of the Reorganization that GTC, GFP, Tube Turns and Bell receive the opinion of
Wyatt, Tarrant & Combs that, based on certain assumptions, qualifications,
conditions and representations, the Merger Transactions will so qualify and
that the GTC Contribution will qualify as a tax free transfer of property to a
controlled corporation under Section 351 of the Code. Such assumptions will be
based in part upon actions to be taken following the closing of the
Reorganization. Persons receiving this Joint Proxy Statement/Prospectus should
be aware that opinions of counsel are not binding on the IRS or any court. In
addition, no opinion of counsel will be obtained concerning the Spin Off. The
Spin Off is expected to result in recognition of gain (but not loss) by GFP
equal to the difference between the value of the shares of Partners-V, Unison
and BW distributed to the shareholders of GFP and GFP's adjusted basis in such
shares. GFP estimates that the tax liability in such event would be
approximately $1.0 million. Currently, GFP Partners-IV, Ltd. (the limited
partnership in which Partners-V is the 99% general partner) has contracted for
the sale of its real property and other assets located in Louisville, Kentucky,
in a transaction which is expected to close in February 1997. If this
transaction closes prior to the Spin Off, the proceeds of sale will be included
with the other assets of
17
<PAGE>
GFP that will be distributed to the shareholders of GFP prior to the Merger. If
the Spin Off is taxable, each GFP shareholder will recognize ordinary income in
an amount up to the lesser of the value of the shares of Partners-V, Unison and
BW it receives, or its pro rata share of GFP's current and accumulated earnings
and profits. If the value of the shares of Partners-V, Unison and BW received
by a GFP shareholder exceeds its pro-rata share of GFP's current and
accumulated earnings and profits, the excess will reduce its adjusted basis in
its shares. To the extent the value of the shares of Partners-V, Unison and BW
also exceeds a GFP shareholder's adjusted basis in its GFP shares, a GFP
shareholder will recognize a capital gain or ordinary income equal to such
excess depending upon whether its GFP shares are a capital asset in its hands.
As the successor corporation in the merger, GTC will become liable for the
federal income taxes incurred in respect of any gain recognized by GFP in the
Spin Off.
DEPENDENCE ON KEY PERSONNEL
The continued success of GTC, GFP, Tube Turns and Bell depends to a large
extent upon the efforts and abilities of key managerial and technical
employees. The loss of services of certain of these key managers could have a
material adverse effect on each company. Each company's business will also
depend upon its ability to continue to attract and retain qualified employees.
GTC, GFP, Tube Turns and Bell do not have employment agreements or
noncompetition agreements with their key employees. Effective October 31, 1996,
Carl P. McCormick resigned his position as GTC's President and Chief Executive
Officer. J. Hardie Harris submitted his resignation as GTC's Vice President and
General Manager of U.S. EMS Operations to become effective as of January 31,
1997. Robert E. Gill replaced Mr. McCormick as President and Chief Executive
Officer of GTC; however, as of the date hereof, no replacement for Mr. Harris
has been announced. GTC has an employment agreement with one of its key
employees and has a severance agreement, including a noncompete clause, with
Mr. McCormick. See "GTC Executive Compensation--Employment Contracts."
ENVIRONMENTAL COMPLIANCE
GTC, GFP, Tube Turns and Bell are subject to a variety of environmental
regulations relating to the use, storage, discharge and disposal of hazardous
chemicals and substances used in their operations. While management of each
company believes that each such company is in compliance with all existing
applicable environmental statutes and regulations, any failure by GTC, GFP,
Tube Turns or Bell to comply with statutes and regulations presently existing,
or enacted in the future, could subject such company to liabilities or the
suspension of production which could materially and adversely impact the
earnings of such company. In addition, compliance with such statutes and
regulations could restrict each company's ability to expand its facilities or
require the acquisition of costly equipment or other significant expenses.
Groundwater contamination has occurred at certain of GTC's and Bell's current
and former properties during the operation of those properties by their
respective predecessors. Environmental contamination has also occurred at
certain of Tube Turns' property during the operation of that property by its
predecessors.
DIFFERENCES IN RIGHTS OF SHAREHOLDERS
The rights of GFP's, Tube Turns' and Bell's shareholders are governed by
the GFP Articles and GFP Bylaws, the Tube Turns Articles and Tube Turns Bylaws,
and the Bell Articles and Bell Bylaws, respectively, and by the KRS in the case
of GFP and Tube Turns, and the FBCA in the case of Bell. After consummation of
the Reorganization, the rights of shareholders of GFP, Tube Turns and Bell, as
shareholders of GTC, will be governed by the FBCA and the GTC Articles and GTC
Bylaws.
Certain material differences exist between the rights of the shareholders
of GFP, Tube Turns and Bell and the rights of the shareholders of GTC,
including the right of the shareholders of GFP and Tube Turns to cumulate their
shares in voting for directors. See "Effects of the Reorganization on Rights of
Shareholders."
18
<PAGE>
LIMITATIONS ON ACQUISITION AND CHANGE IN CONTROL COULD DETER A TAKEOVER WHICH
MIGHT OTHERWISE BE IN THE SHAREHOLDERS' BEST INTERESTS
Any acquisition or change in control of GTC would be limited by: (i)
various anti-takeover statutes of the state of Florida; (ii) certain provisions
of GTC's Articles which would have the effect of limiting a change in control;
and (iii) the concentration of voting stock in the Gill Family. See "Effect of
the Reorganization on Rights of Shareholders" and "Description of Capital
Stock."
SHARES AVAILABLE FOR FUTURE SALE COULD ADVERSELY AFFECT PRICE OF GTC COMMON
STOCK
Sales of a substantial number of shares of GTC Common Stock, or the
perception that such sales could occur, could adversely affect prevailing
market prices for the GTC Common Stock and could impair the future ability of
GTC to raise capital through an offering of equity securities. The GTC Common
Stock to be issued upon consummation of the Reorganization will be freely
tradable, except that shares of GTC Common Stock to be received by persons who
are deemed to be Affiliates of GFP, Tube Turns and Bell at the time of the
Special Meetings may be resold by them only in certain permitted circumstances.
See "The Reorganization--Resale Restrictions." No prediction can be made about
the effect that future sales of GTC Common Stock will have on the market prices
of the GTC Common Stock.
IMMEDIATE AND SUBSTANTIAL DILUTION
The Reorganization will result in substantial dilution of the interests of
GTC's current shareholders in GTC and its equity. Based upon a GTC Average
Closing Price of $1.50 per share and the number of shares outstanding as of the
respective record dates for the Special Meetings, 38,819,673 shares of GTC
Common Stock would be issued to GFP, Tube Turns and Bell shareholders in the
Reorganization (before the elimination of fractional shares). The 13,039,625
shares of GTC Common Stock owned by GFP prior to the Reorganization will be
canceled. Based upon the number of outstanding shares of GTC Common Stock, GFP
Common Stock, Tube Turns Common Stock and Bell Common Stock as of the
respective record dates, the number of shares beneficially owned by the Gill
Family will represent approximately 87% of the 42,000,677 shares of GTC Common
Stock to be outstanding after the Reorganization as compared to approximately
80% of the 16,220,629 shares of GTC Common Stock outstanding prior to the
Reorganization. The dilution resulting from the Reorganization could reduce the
market price of GTC Common Stock unless and until earnings growth or other
business synergies sufficient to offset the effect of such issuance can be
achieved. There can be no assurance that such synergies or earnings growth will
be achieved. See "Selected Unaudited Pro Forma Combined Financial Data--
Comparative Per Share Data" and "The Reorganization--Dilution."
NO INDEMNIFICATION FOR BREACH OF REPRESENTATIONS AND WARRANTIES
The representations and warranties made by each of the parties to the
Reorganization Agreement will not survive the closing of the Reorganization. In
addition, there is no indemnification running to any party in respect of a
breach of any of the representations or warranties contained in the
Reorganization Agreement, and there can be no assurance that such a breach will
not occur or that if it occurs the resulting damage would not be material to
GTC.
RULES FOR INCLUSION IN THE NASDAQ STOCK MARKET
The National Association of Securities Dealers ("NASD") is presently
considering rules which, if adopted, would result in new minimum criteria which
a company must meet for inclusion in either the Nasdaq Stock Market or the
Small Cap Market. Under the recently proposed rules, companies will be required
to meet higher financial standards and maintain a stock market price of at
least $1.00 per share, or else face automatic termination of their designation
for inclusion in either the Nasdaq Stock Market or Small Cap
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Market. Additionally, current rules of the Nasdaq Stock Market state that in
order to remain eligible for Nasdaq listing, a security must have a bid price
of at least $1.00 per share or in the alternative, the market value of publicly
held shares (those held by persons other than officers, directors and 10%
shareholders) must be at least $3,000,000 and the company's net tangible assets
must be at least $4,000,000. On December 31, 1996, GTC received a letter from
the Nasdaq Stock Market concerning GTC's failure to meet the listing
requirements as of December 30, 1996. The closing bid price of GTC Common Stock
on December 30, 1996 was $0.75 and the market value of the public float as of
that date was $2,077,500. Accordingly, on that date the GTC Common Stock did
not meet the Nasdaq listing requirements. Since that date, the closing bid
price of the GTC Common Stock has increased to $1.50 per share as of January
15, 1997, with a corresponding market float of $4,155,000. The Nasdaq is
currently reviewing information provided to it by GTC, including GTC's
definitive plan which management believes will result in its meeting all Nasdaq
Stock Market listing requirements and the timeframe necessary for completion.
While the GTC Common Stock is currently quoted on the Nasdaq Stock Market,
there can be no assurance that its designation for inclusion thereon will not
be terminated if the NASD adopts the proposed regulations and GTC is not able
to meet the higher financial standards, or its stock market price drops below
$1.00 per share. If the designation for GTC Common Stock is terminated, trading
in the GTC Common Stock would thereafter be conducted in the over-the-counter
market in the so-called "pink sheets" or, if then available, the "OTC Bulletin
Board Service." As a result, an investor would likely find it to be more
difficult to dispose of, or to obtain accurate quotations as to the value of,
the GTC Common Stock. If the market price of GTC Common Stock drops below $1.00
per share and delisting occurs prior to the Effective Time of the
Reorganization, the existing shareholders of GTC Common Stock will have
dissenters' rights under the FBCA.
GTC RISK FACTORS
POTENTIAL FLUCTUATIONS IN FINANCIAL RESULTS
GTC's annual and quarterly operating results may be affected by a number of
factors. GTC will generally incur significant start-up costs in the production
of a particular product. Start-up costs are expensed as incurred. Accordingly,
GTC's level of experience in manufacturing a particular product and its
efficiency in minimizing start-up costs can impact GTC's operating results. The
level and timing of orders placed by an OEM customer also may vary due to the
OEM's attempts to manage its inventory, changes in the OEM's manufacturing
strategy and variation in the demand for its products due to, among other
things, product life cycles, competitive conditions and general economic
conditions. The efficiencies of GTC in managing inventories, production
capacity, the degree of automation used in the assembly process, fluctuations
in material costs and the mix of material costs versus labor and manufacturing
and overhead costs are also significant factors affecting the annual and
quarterly operating results of GTC. Other factors include price competition,
the ability to pass on excess costs to customers, the timing of expenditures in
anticipation of increased sales and customer product delivery requirements. Any
one of these factors, or a combination thereof, could adversely affect GTC's
annual and quarterly results of operations. GTC also conducts a portion of its
business under long-term contracts and uses the percentage of completion units
of shipment method of accounting which involves substantial estimation
processes, including estimates of future costs to complete contracts. Revisions
of estimates can and do occur and are reflected in operating results in the
period in which the revision is made. Accordingly, quarterly and annual
operating results are subject to the effect of the revisions of such estimates.
In addition, the use of the units of shipment method of applying the percentage
of completion method of accounting can affect reported quarterly and annual
operating results because revenue is recorded as units are shipped. Therefore,
delays in shipments for any reason, whether internal or imposed by the
customer, will affect quarterly and annual operating results. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
GTC."
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RECENT LOSSES
GTC reported an operating loss of $18,227,000 and a net loss of
$17,673,000 during the year ended December 31, 1995. These losses were the
result of several factors, including among others: (i) the recognition of
certain charges during the second and fourth quarters of 1995 in the amount of
$11,200,000 in the aggregate, which related to a variety of issues, including
the decision to adjust certain accounting estimates, the decision to terminate a
number of unprofitable contracts, the recognition of certain operating lease
liabilities, the recognition of a book to physical inventory adjustment and the
disposition of certain underutilized assets; (ii) the recognition of $2,400,000
in charges related to the divestiture of the name brand products business; (iii)
the recognition of very low margins on an unfavorable revenue mix for its
domestic manufacturing business and (iv) the underutilization of its Tampa
facility. For the nine months ended September 30, 1996, GTC's revenue has
continued to decrease and, accordingly, the revenue base for the Tampa facility
was not sufficient to enable it to report an operating profit in the third
quarter of 1996. While GTC has taken steps to lower both fixed and variable
costs and is actively pursuing new business opportunities with both its existing
customer base and new customers, there is no assurance that the business will
return to profitability during 1997. See "Selected Historical Consolidated
Financial Data of GTC" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations of GTC."
COMPLIANCE WITH FINANCIAL COVENANTS OF CREDIT AGREEMENT/VESTING OF WARRANTS
GTC is not currently in compliance with certain financial covenants
contained in its credit agreement. While the lender has continued to advance
funds to GTC pursuant to the credit agreement, it is under no obligation to do
so and could cease advancing funds at any time, accelerate the indebtedness and
demand payment in full (an "Acceleration Event"). Management is currently
seeking a replacement lender to provide financing. If management is unable to
locate a replacement lender, it may be required to amend its existing credit
agreement. In addition, in connection with such credit agreement, GTC issued to
the lender warrants to purchase 1,200,000 shares of GTC Common Stock for $.01
per share, 200,000 of which were vested on the date of closing of the credit
agreement and the remaining 1,000,000 of which become vested quarterly in 25%
increments beginning in March 1997. While any unvested warrants will be
forfeited at the time GTC repays all debt outstanding under the credit
agreement, there can be no assurance that GTC will be able to pay off its debt
before full or partial vesting of the warrants occurs, which will result in the
dilution of the book value per share to existing shareholders. In addition, upon
an Acceleration Event, any unvested warrants at that time will become fully
vested. See "Dilution."
SALES TO GOVERNMENT AGENCIES AND PRIME CONTRACTORS;
RELIANCE ON KEY CUSTOMERS
GTC sells products and services to a number of governmental agencies
(including the Department of Defense) which, in the aggregate, represented
approximately 47%, 19% and 20% of GTC's revenue in 1993, 1994 and 1995,
respectively. GTC also served as a subcontractor to a variety of prime
contractors under contract with the federal government. Sales to these prime
contractors, in the aggregate, represented approximately 9%, 11% and 9% of GTC's
revenue in 1993, 1994 and 1995, respectively. GTC is not able to predict the
volume of future business to be received from these governmental agencies or
their prime contractors, although it is likely that any reductions in the size
of the United States military budget will result in reductions of purchases of
GTC's products and services by these customers. GTC's largest commercial
customer in 1995 was IBM which represented approximately 16% of GTC's revenue.
The loss of one or more of these customers could have a material adverse affect
on GTC's operating results.
DEPENDENCE ON CERTAIN INDUSTRIES
GTC is dependent upon the continued growth, viability and financial
stability of its OEM customers, which are in turn substantially dependent upon
the growth, viability and financial stability of the industries in which they
operate, including the computer/office equipment, industrial electronics,
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instrumentation and communication industries. These industries have been
characterized by rapid technological change and shortened product life cycles,
and recently have experienced pricing and profit margin pressures. In addition,
GTC's customers are affected by general economic conditions. Adverse changes in
the industries in which the OEMs operate could have a material adverse effect
on GTC's operating results. GTC's business may also be adversely affected by
changes in funding levels for certain government programs and the manner in
which products are acquired under these programs. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations of GTC" and
"Business of GTC--Customers and Marketing."
VARIABILITY OF CUSTOMER REQUIREMENTS AND CUSTOMER FINANCING
The level and timing of orders placed by the customers of GTC vary due to
its customers' attempts to manage their inventory and changes in its customers'
manufacturing strategies and product demands due to, among other things,
product life cycles, competitive conditions or general economic conditions. Due
in part to these factors, most of GTC's customers do not commit to firm
production schedules for more than one quarter in advance. GTC's inability to
forecast the level of customer orders with certainty makes it difficult to
schedule production and maximize utilization of manufacturing capacity. In the
past, GTC has been required to increase staffing and incur other expenses in
order to meet the anticipated demand of its customers. Anticipated orders from
some of GTC's customers have failed to materialize and/or delivery schedules
have been deferred as a result of changes in the customer's business needs,
thereby adversely affecting GTC's operating results. On other occasions,
customers have required rapid increases in production which have placed an
excessive burden on GTC's resources. Such customers' order fluctuations and
deferrals have had an adverse effect on GTC's operating results in the past,
and there can be no assurance that GTC will not experience such effects in the
future. In addition, GTC recognizes significant accounts receivable in
connection with providing manufacturing services to its customers. If one or
more of GTC's principal customers were to become insolvent, or otherwise were
unable to pay for the services provided by GTC, GTC's operating results and
financial condition could be adversely affected. See "Management's Discussion
and Analysis of Financial Condition and Results of Operation of GTC."
LIMITED AVAILABILITY OF COMPONENTS
A substantial part of GTC's revenue is derived from turnkey manufacturing
in which GTC provides materials sourcing, procurement, testing and assembly. In
turnkey manufacturing, GTC could be exposed to the risk of component price
increases, which could adversely affect GTC's gross profit margins. Some of the
products and assemblies manufactured by GTC require one or more components that
are ordered from, or which may be available from, only one source. Some of
these components are allocated in response to supply shortages. In some cases,
supply shortages will substantially curtail production of all assemblies using
a particular component. In addition, at various times there have been industry-
wide shortages of electronic components, in particular memory and logic
devices, and there can be no assurance that such shortages will not occur in
the future. Any such shortages could have a material adverse effect on GTC's
operating results in the future. GTC purchases certain components that are used
in a significant manufacturing contract from a sole source. If there was an
interruption in this source, GTC would be unable to perform its obligations
under this manufacturing contract.
TECHNOLOGICAL CHANGE AND PROCESS DEVELOPMENT
The market for GTC's manufacturing services is characterized by rapidly
changing technology and continuing process development. GTC believes that its
future success will depend in large part upon its ability to develop and market
manufacturing services which meet changing customer needs, maintain
technological leadership and successfully anticipate or respond to
technological changes in manufacturing processes on a cost-effective and timely
basis. There can be no assurance that GTC's process development efforts will be
successful.
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PENDING LITIGATION
GTC is a named party in pending litigation and is in receipt of claims
arising in the normal course of business. In certain of these cases GTC has not
reserved any amounts in respect of the potential exposure of such litigation.
While GTC has retained counsel to defend its position in each such case, there
can be no assurance that GTC will be successful or that damages will not exceed
the amounts which GTC has reserved in respect of some of these litigation
matters. GTC's management does not expect that these matters will have a
material adverse effect on the consolidated financial position or results of
operations of GTC.
INTERNATIONAL OPERATIONS
In addition to its domestic operations, GTC provides manufacturing services
in Brazil and Mexico. Approximately 15% and 27% of GTC's revenue was from
operations outside the United States in the year ended December 31, 1995 and
the nine months ended September 30, 1996, respectively. Risks inherent in these
international operations, in addition to corporate wide risks, include, but are
not limited to, the potential adverse effects of government controls and
political uncertainties, import and export regulations, tax laws, fluctuations
in the value of currency, possible restrictions on the transfer of funds,
economic instability, labor practices and agreements and the burdens of
complying with a variety of foreign laws. Additionally, there can be no
assurances that GTC will continue to successfully expand its international
operations in response to customer demands or that it will be able to maintain
competitive advantages in the international marketplace.
COMPETITION
GTC operates in a highly competitive environment and competes against
numerous domestic and foreign manufacturers. In addition, in the future GTC may
encounter competition from other large electronic manufacturers or distributors
that are selling, or may begin to sell, contract manufacturing services. Some
of GTC's competitors have more extensive international operations and
substantially greater manufacturing, financial, research and development or
marketing resources than GTC. GTC also faces competition from the manufacturing
operation of its current and potential OEM customers, which GTC believes
continue to evaluate the merits of manufacturing products internally versus the
advantages of using contract manufacturers.
TUBE TURNS RISK FACTORS
Tube Turns is a co-defendant in two lawsuits in Louisiana arising out of an
explosion in a coker plant owned by Exxon Corporation located in Baton Rouge,
Louisiana. According to the complaints, Tube Turns is the alleged manufacturer
of a carbon steel pipe elbow which failed causing the explosion which destroyed
the coker plant and caused unspecified damages to surrounding property owners.
The suits are being defended for Tube Turns by its insurance carrier. One of
the actions was brought by Exxon and claims damages for destruction of the
plant which Exxon estimates exceed $100,000,000. In this action Tube Turns is a
co-defendant with the fabricator who built the pipe line in which the elbow was
incorporated and with the general contractor for the plant. The second action
is a class action filed on behalf of the residents living around the plant and
claims damages in an amount as yet undetermined. Exxon is a co-defendant with
Tube Turns, the contractor and the fabricator in this action. Tube Turns
believes that the failure resulted from the installation (without the knowledge
of Tube Turns) of a carbon steel elbow which was not manufactured or intended
for use in coker plants. Tube Turns has no record indicating that it knew that
the elbow would be used in this unintended fashion. Accordingly, Tube Turns has
been advised by its counsel that it should not be liable for the damages caused
by the failure of the allegedly improperly installed elbow. There is no
assurance, however, that Tube Turns will be dismissed or found not liable. The
litigation is in the initial stages and should Tube Turns ultimately be found
liable, the damages could exceed Tube Turns' insurance policy limits which
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could materially and adversely affect Tube Turns' financial performance. Neither
Tube Turns nor GTC are indemnified for this potential liability above the
insurance policy limits.
THE REORGANIZATION PARTIES
Group Technologies Corporation. GTC is a leading provider of advanced
manufacturing, engineering and testing services to the OEMs of electronic
products. GFP owns approximately 80% of the issued and outstanding shares of GTC
Common Stock.
GTC was incorporated under the laws of the State of Florida in 1988. Its
principal executive offices are located at 10901 Malcolm McKinley Drive, Tampa,
Florida 33612, and its telephone number is (813) 972-6000.
Group Financial Partners, Inc. GFP is a privately held holding company
whose principal assets are the shares of GTC, Tube Turns and Bell owned by it.
GFP was incorporated under the laws of the State of Kentucky in 1982. Its
principal executive offices are located at 455 Fourth Avenue, Louisville,
Kentucky 40202, and its telephone number is (502) 585-5544.
Tube Turns Technologies, Inc. Tube Turns provides a range of manufacturing
services for heavy industry and manufactures a number of proprietary engineered
products. GFP owns approximately 96% of the issued and outstanding shares of the
Tube Turns Common Stock.
Tube Turns was incorporated under the laws of the State of Kentucky in
1954. Its principal executive offices are located at 2900 West Broadway,
Louisville, Kentucky 40232, and its telephone number is (502) 774-6300.
Bell Technologies, Inc. Bell provides a range of outsourcing services and
manufactures a series of specialty electronic products. GFP owns approximately
93% of the issued and outstanding shares of the Bell Common Stock.
Bell was incorporated under the laws of the State of Florida in 1986. Its
principal executive offices are located at 6120 Hanging Moss Road, Orlando,
Florida 32807, and its telephone number is (407) 678-6900.
THE GFP SPECIAL MEETING
PURPOSES OF THE GFP SPECIAL MEETING
The Reorganization. At the GFP Special Meeting, holders of GFP Common
Stock will consider and vote upon a proposal to approve the Reorganization
Agreement.
THE MEMBERS OF THE GFP BOARD UNANIMOUSLY APPROVED AND ADOPTED THE
REORGANIZATION AGREEMENT AND THE REORGANIZATION AND RECOMMEND THAT GFP'S
SHAREHOLDERS VOTE FOR APPROVAL OF THE REORGANIZATION AGREEMENT. SEE "THE
REORGANIZATION--BACKGROUND OF THE REORGANIZATION," "THE REORGANIZATION--REASONS
FOR THE REORGANIZATION; RECOMMENDATION OF THE GFP BOARD," AND "THE
REORGANIZATION--INTERESTS OF CERTAIN PERSONS IN THE REORGANIZATION."
Other Matters. GFP's shareholders will also consider and vote upon such
other matters that may properly come before the GFP Special Meeting.
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RECORD DATE; VOTING RIGHTS; PROXIES
The GFP Board has fixed the close of business on February __, 1997 as the
GFP Record Date for determining holders entitled to notice of and to vote at the
GFP Special Meeting.
As of the GFP Record Date, there were 315,916 shares of GFP Common Stock
issued and outstanding, each of which entitles the holder thereof to one vote.
All shares of GFP Common Stock represented by properly executed proxies will,
unless such proxies have been previously revoked, be voted in accordance with
the instructions indicated in such proxies. IF A PROPERLY EXECUTED PROXY HAS
BEEN RETURNED AND NO INSTRUCTIONS ARE INDICATED, SUCH SHARES OF GFP COMMON STOCK
WILL BE VOTED IN FAVOR OF THE REORGANIZATION AGREEMENT IN ACCORDANCE WITH THE
RECOMMENDATION OF THE GFP BOARD. GFP does not know of any matters other than as
described in the accompanying Notice of Special Meeting that are to come before
the GFP Special Meeting. If any other matter or matters are properly presented
for action at the GFP Special Meeting, the persons named in the enclosed form of
proxy and acting thereunder will have the discretion to vote on such matters in
accordance with their best judgment. A shareholder who has given a proxy may
revoke it at any time prior to its exercise by giving written notice thereof to
the Secretary of GFP, by signing and returning a later dated proxy, or by voting
in person at the GFP Special Meeting; however, mere attendance at the GFP
Special Meeting will not in and of itself have the effect of revoking the proxy.
SOLICITATION OF PROXIES
GFP will bear its own cost of solicitation of proxies. Brokerage firms,
fiduciaries, nominees and others will be reimbursed for their out-of-pocket
expenses in forwarding proxy materials to beneficial owners of GFP Common Stock
held in their names. In addition to the use of the mails, proxies may be
solicited by directors, officers and regular employees of GFP, who will not be
specifically compensated for such services, by means of personal calls upon, or
telephonic or telegraphic communications with shareholders or their
representatives.
DISSENTERS' RIGHTS
Pursuant to KRS 271B.13-010 to 271B.13-310, any shareholder of GFP who
desires to dissent from the Reorganization must deliver a written objection to
the Reorganization to GFP before the vote on the Reorganization at the GFP
Special Meeting and must not vote his shares in favor of the Reorganization. The
failure to vote against the Reorganization will not constitute a waiver of the
shareholders' dissenters' rights if all statutory requisites are satisfied; a
vote against the proposed Reorganization will not itself satisfy the notice
requirement of the dissenters' right statute. If the Reorganization is approved
by the required vote, the surviving corporation must deliver, within ten (10)
days after the date of the GFP Special Meeting, a written notice to each
shareholder who has properly delivered a written objection to the Reorganization
and did not vote in favor of the Reorganization. Such notice (the "Dissenters'
Notice") must: (i) state where the dissenter must send a payment demand and when
and where the dissenter must deliver certificates for his shares; (ii) supply a
form for the shareholders' demand for payment; (iii) set a date, not fewer than
thirty (30) days nor more than sixty (60) days after the dissenters' notice is
delivered, by which date the surviving corporation must receive the
shareholders' payment demand; and (iv) include a copy of KRS 271B.13-010 to
271B.13-310. A shareholder who is sent the Dissenters' Notice must demand
payment, certify whether he acquired beneficial ownership of his shares before
the date of the first announcement of the Reorganization (as set forth in the
Dissenters' Notice) and deposit his certificates in accordance with the terms of
the Dissenters' Notice. Any shareholder failing to demand payment by the dates
specified in the Dissenters' Notice or failing to deposit his share certificates
at the place and by the times specified in the Dissenters' Notice will be bound
by the terms of the proposed Reorganization.
At the Effective Time of the Reorganization, or upon its receipt of a
payment demand from the shareholder, the surviving corporation must pay the
amount the surviving corporation estimates to be the fair
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value of the shares, plus accrued interest, to each dissenter who properly
submits payment demand and deposits his shares. The payment must be accompanied
by certain of the surviving corporation's financial statements, a statement of
the surviving corporation's estimate of the fair value of the shares, an
explanation of how interest was calculated and a statement of the dissenters'
right to demand payment if dissatisfied with the payment. The surviving
corporation may elect to withhold payment from any dissenter who became the
beneficial owner of shares after the date of the first announcement of the
Reorganization, in which case the surviving corporation must send an offer to
pay its estimate of the fair value of the shares, together with a statement of
its estimate of the fair value of the shares, an explanation of how the interest
was calculated and a statement of the dissenters' right to demand payment if
dissatisfied with the offer.
A dissenting shareholder may notify the surviving corporation in writing of
his own estimate of the fair value of the shares and the amount of interest due,
and demand payment of his estimate (less any payment already received), or in
the case of a dissenter who acquired his shares after the first announcement of
the Reorganization, reject the surviving corporation's offer and demand payment
of his estimate of the fair value of the shares and interest due, if: (i) the
dissenter believes that the amount paid or offered is less than the fair value
of the shares or that the interest due is incorrectly calculated; (ii) the
surviving corporation fails to make payment within sixty (60) days after the
date set for demanding payment in the dissenters' notice, or (iii) if the
Reorganization does not occur, and the surviving corporation fails to return
deposited certificates within sixty (60) days after the date set for demanding
payment. A dissenter waives his rights to demand payment if dissatisfied with
the surviving corporation's payment for his shares or offer to pay if the
dissenter fails to notify the surviving corporation in writing within thirty
(30) days after the surviving corporation made or offered payment for his
shares.
If a dissenter's demand for payment remains unsettled, the surviving
corporation must commence a proceeding within sixty (60) days after receiving
payment demand in the Jefferson Circuit Court of Jefferson County, Kentucky, and
petition the Court to determine the fair value of the shares and accrued
interest. If the surviving corporation does not commence the proceeding within
the sixty (60) day period, it must pay each dissenter whose demand remains
unsettled the amount the dissenter demanded. The surviving corporation also
must make all dissenters whose demands remain unsettled parties to the
proceeding. Each dissenter will be entitled to judgment for the amount, if any,
for which the Court finds the fair value of his shares, plus interest, exceeds
the amount paid by the surviving corporation, or the fair value plus accrued
interest of any shares for which the surviving corporation offered to pay its
estimate of the fair value of such shares.
All costs of the proceedings will be assessed against the surviving
corporation, except the Court may assess the costs against all or some of the
dissenters, in amounts the Court finds equitable, to the extent the Court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment. The Court may also assess the fees and expenses of counsel and experts
for the respective parties in the amount the Court finds equitable, (i) against
the surviving corporation and in favor of any or all dissenters, if the Court
finds the surviving corporation did not substantially comply with the
requirements of KRS 271B.13-200 to 271B.13-280, or (ii) against either the
surviving corporation or a dissenter, in favor of any other party, if a Court
finds the party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith. If the Court finds that the
services of counsel for any dissenter was of substantial benefit to other
dissenters similarly situated and that the fees for those services should not be
assessed against the surviving corporation, the Court may award to these
counselors reasonable fees to be paid out of the amounts awarded the dissenters
who were benefited.
The foregoing summary of the rights of dissenting shareholders is qualified
in its entirety by reference to the provisions of KRS 271B.13-010 to 271B.13-
310, which are set forth in full in Appendix B to this Joint Proxy
Statement/Prospectus.
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QUORUM
The presence in person or by properly executed proxy of holders of a
majority of the issued and outstanding shares of GFP Common Stock entitled to
vote at the GFP Special Meeting is necessary to constitute a quorum at the GFP
Special Meeting. Abstentions will be counted for purposes of determining whether
a quorum is present at the GFP Special Meeting.
REQUIRED VOTE
Assuming a quorum is present, the approval of the Reorganization Agreement
requires the affirmative vote of a majority of the votes entitled to be cast by
holders of GFP Common Stock. As of the GFP Record Date, directors and executive
officers and their affiliates, and persons and entities related to the
foregoing, were beneficial holders of 315,467 shares of GFP Common Stock,
representing approximately 100% of the issued and outstanding shares of GFP
Common Stock entitled to vote at the GFP Special Meeting. The affirmative votes
of the holders of such shares will affect the outcome of the vote.
Votes cast by proxy or in person at the GFP Special Meeting will be
tabulated by the election inspectors appointed for the meeting and will
determine whether or not a quorum is present. The election inspectors will treat
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum but as shares not voted for purposes of
determining the approval of any matter submitted to the shareholders for a vote.
If a broker indicates on the proxy that it does not have discretionary authority
as to certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
THE MATTERS TO BE CONSIDERED AT THE GFP SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO THE SHAREHOLDERS OF GFP. ACCORDINGLY, SHAREHOLDERS ARE URGED TO
READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS AND THE ANNEXES THERETO, AND TO COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THE TUBE TURNS SPECIAL MEETING
PURPOSES OF THE TUBE TURNS SPECIAL MEETING
The Reorganization. At the Tube Turns Special Meeting, holders of Tube
Turns Common Stock will consider and vote upon a proposal to approve the
Reorganization Agreement.
THE DISINTERESTED MEMBERS OF THE TUBE TURNS BOARD UNANIMOUSLY APPROVED AND
ADOPTED THE REORGANIZATION AGREEMENT AND THE REORGANIZATION AND RECOMMEND THAT
TUBE TURNS' SHAREHOLDERS VOTE FOR APPROVAL OF THE REORGANIZATION AGREEMENT. SEE
"THE REORGANIZATION--BACKGROUND OF THE REORGANIZATION," "THE REORGANIZATION--
REASONS FOR THE REORGANIZATION; RECOMMENDATION OF THE TUBE TURNS BOARD," AND
"THE REORGANIZATION--INTERESTS OF CERTAIN PERSONS IN THE REORGANIZATION."
Other Matters. Tube Turns' shareholders will also consider and vote upon
such other matters that may properly come before the Tube Turns Special Meeting.
RECORD DATE; VOTING RIGHTS; PROXIES
The Tube Turns Board has fixed the close of business on February __, 1997
as the Tube Turns Record Date for determining holders entitled to notice of and
to vote at the Tube Turns Special Meeting.
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As of the Tube Turns Record Date, there were 1,338,630 shares of Tube Turns
Common Stock issued and outstanding, each of which entitles the holder thereof
to one vote. All shares of Tube Turns Common Stock represented by properly
executed proxies will, unless such proxies have been previously revoked, be
voted in accordance with the instructions indicated in such proxies. IF A
PROPERLY EXECUTED PROXY HAS BEEN RETURNED AND NO INSTRUCTIONS ARE INDICATED,
SUCH SHARES OF TUBE TURNS COMMON STOCK WILL BE VOTED IN FAVOR OF THE
REORGANIZATION AGREEMENT IN ACCORDANCE WITH THE RECOMMENDATION OF THE TUBE TURNS
BOARD. Tube Turns does not know of any matters other than as described in the
accompanying Notice of Special Meeting that are to come before the Tube Turns
Special Meeting. If any other matter or matters are properly presented for
action at the Tube Turns Special Meeting, the persons named in the enclosed form
of proxy and acting thereunder will have the discretion to vote on such matters
in accordance with their best judgment. A shareholder who has given a proxy may
revoke it at any time prior to its exercise by giving written notice thereof to
the Secretary of Tube Turns, by signing and returning a later dated proxy, or by
voting in person at the Special Meeting; however, mere attendance at the Tube
Turns Special Meeting will not in and of itself have the effect of revoking the
proxy.
SOLICITATION OF PROXIES
Tube Turns will bear its own cost of solicitation of proxies. Brokerage
firms, fiduciaries, nominees and others will be reimbursed for their out-of-
pocket expenses in forwarding proxy materials to beneficial owners of Tube Turns
Common Stock held in their names. In addition to the use of the mails, proxies
may be solicited by directors, officers and regular employees of Tube Turns, who
will not be specifically compensated for such services, by means of personal
calls upon, or telephonic or telegraphic communications with shareholders or
their representatives.
DISSENTERS' RIGHTS
Pursuant to KRS 271B.13-010 to 271B.13-310, any shareholder of Tube Turns
who desires to dissent from the Reorganization must deliver a written objection
to the Reorganization to Tube Turns before the vote on the Reorganization at the
Tube Turns Special Meeting and must not vote his shares in favor of the
Reorganization. The failure to vote against the Reorganization will not
constitute a waiver of the shareholders' dissenters' rights if all statutory
requisites are satisfied; a vote against the proposed Reorganization will not
itself satisfy the notice requirement of the dissenters' right statute. If the
Reorganization is approved by the required vote, the surviving corporation must
deliver, within ten (10) days after the date of the Tube Turns Special Meeting,
a written notice to each shareholder who has properly delivered a written
objection to the Reorganization and did not vote in favor of the Reorganization.
Such notice (the "Dissenters' Notice") must: (i) state where the dissenter must
send a payment demand and when and where the dissenter must deliver certificates
for his shares; (ii) supply a form for the shareholders' demand for payment;
(iii) set a date, not fewer than thirty (30) days nor more than sixty (60) days
after the dissenters' notice is delivered, by which date the surviving
corporation must receive the shareholders' payment demand; and (iv) include a
copy of KRS 271B.13-010 to 271B.13-310. A shareholder who is sent the
dissenters' notice must demand payment, certify whether he acquired beneficial
ownership of his shares before the date of the first announcement of the
Reorganization (as set forth in the Dissenters' Notice) and deposit his
certificates in accordance with the terms of the Dissenters' Notice. Any
shareholder failing to demand payment by the dates specified in the Dissenters'
Notice or failing to deposit his share certificates at the place and by the
times specified in the Dissenters' Notice will be bound by the terms of the
proposed Reorganization.
At the Effective Time of the Reorganization, or upon its receipt of a
payment demand from the shareholder, the surviving corporation must pay the
amount the surviving corporation estimates to be the fair value of the shares,
plus accrued interest, to each dissenter who properly submits payment demand and
deposits his shares. The payment must be accompanied by certain of the surviving
corporation's financial statements, a statement of the surviving corporation's
estimate of the fair value of the shares, an explanation
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of how interest was calculated and a statement of the dissenters' right to
demand payment if dissatisfied with the payment. The surviving corporation may
elect to withhold payment from any dissenter who became the beneficial owner of
shares after the date of the first announcement of the Reorganization, in which
case the surviving corporation must send an offer to pay its estimate of the
fair value of the shares, together with a statement of its estimate of the fair
value of the shares, an explanation of how the interest was calculated and a
statement of the dissenters' right to demand payment if dissatisfied with the
offer.
A dissenting shareholder may notify the surviving corporation in writing of
his own estimate of the fair value of the shares and the amount of interest due,
and demand payment of his estimate (less any payment already received), or in
the case of a dissenter who acquired his shares after the first announcement of
the Reorganization, reject the surviving corporation's offer and demand payment
of his estimate of the fair value of the shares and interest due, if: (i) the
dissenter believes that the amount paid or offered is less than the fair value
of the shares or that the interest due is incorrectly calculated; (ii) the
surviving corporation fails to make payment within sixty (60) days after the
date set for demanding payment in the dissenters' notice, or (iii) if the
Reorganization does not occur, and the surviving corporation fails to return
deposited certificates within sixty (60) days after the date set for demanding
payment. A dissenter waives his rights to demand payment if dissatisfied with
the surviving corporation's payment for his shares or offer to pay if the
dissenter fails to notify the surviving corporation in writing within thirty
(30) days after the surviving corporation made or offered payment for his
shares.
If a dissenter's demand for payment remains unsettled, the surviving
corporation must commence a proceeding within sixty (60) days after receiving
payment demand in the Jefferson Circuit Court of Jefferson County, Kentucky, and
petition the Court to determine the fair value of the shares and accrued
interest. If the surviving corporation does not commence the proceeding within
the sixty (60) day period, it must pay each dissenter whose demand remains
unsettled the amount the dissenter demanded. The surviving corporation also must
make all dissenters whose demands remain unsettled parties to the proceeding.
Each dissenter will be entitled to judgment for the amount, if any, for which
the Court finds the fair value of his shares, plus interest, exceeds the amount
paid by the surviving corporation, or the fair value plus accrued interest of
any shares for which the surviving corporation offered to pay its estimate of
the fair value of such shares.
All costs of the proceedings will be assessed against the surviving
corporation, except the Court may assess the costs against all or some of the
dissenters, in amounts the Court finds equitable, to the extent the Court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment. The Court may also assess the fees and expenses of counsel and experts
for the respective parties in the amount the Court finds equitable, (i) against
the surviving corporation and in favor of any or all dissenters, if the Court
finds the surviving corporation did not substantially comply with the
requirements of KRS 271B.13-200 to 271B.13-280, or (ii) against either the
surviving corporation or a dissenter, in favor of any other party, if a Court
finds the party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith. If the Court finds that the
services of counsel for any dissenter was of substantial benefit to other
dissenters similarly situated and that the fees for those services should not be
assessed against the surviving corporation, the Court may award to these
counselors reasonable fees to be paid out of the amounts awarded the dissenters
who were benefited.
The foregoing summary of the rights of dissenting shareholders is qualified
in its entirety by reference to the provisions of KRS 271B.13-010 to 271B.13-
310, which are set forth in full in Appendix B to this Joint Proxy
Statement/Prospectus.
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QUORUM
The presence in person or by properly executed proxy of holders of a
majority of the issued and outstanding shares of Tube Turns Common Stock
entitled to vote at the Tube Turns Special Meeting is necessary to constitute a
quorum at the Tube Turns Special Meeting. Abstentions will be counted for
purposes of determining whether a quorum is present at the Tube Turns Special
Meeting.
REQUIRED VOTE
Assuming a quorum is present, the approval of the Reorganization Agreement
requires the affirmative vote of a majority of the votes entitled to be cast by
holders of Tube Turns Common Stock. As of the Tube Turns Record Date, directors
and executive officers and their affiliates, and persons and entities related to
the foregoing, were beneficial holders of 1,314,197 shares of Tube Turns Common
Stock, representing approximately 98.2% of the issued and outstanding shares of
Tube Turns Common Stock entitled to vote at the Tube Turns Special Meeting. The
affirmative votes of the holders of such shares will affect the outcome of the
vote.
Votes cast by proxy or in person at the Tube Turns Special Meeting will be
tabulated by the election inspectors appointed for the meeting and will
determine whether or not a quorum is present. The election inspectors will treat
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum but as shares not voted for purposes of
determining the approval of any matter submitted to the shareholders for a vote.
If a broker indicates on the proxy that it does not have discretionary authority
as to certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
THE MATTERS TO BE CONSIDERED AT THE TUBE TURNS SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO THE SHAREHOLDERS OF TUBE TURNS. ACCORDINGLY, SHAREHOLDERS ARE
URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS JOINT
PROXY STATEMENT/PROSPECTUS AND THE ANNEXES THERETO, AND TO COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THE BELL SPECIAL MEETING
PURPOSES OF THE BELL SPECIAL MEETING
The Reorganization. At the Bell Special Meeting, holders of Bell Common
Stock will consider and vote upon a proposal to approve the Reorganization
Agreement.
THE DISINTERESTED MEMBERS OF THE BELL BOARD UNANIMOUSLY APPROVED AND
ADOPTED THE REORGANIZATION AGREEMENT AND THE REORGANIZATION AND RECOMMEND THAT
BELL'S SHAREHOLDERS VOTE FOR APPROVAL OF THE REORGANIZATION AGREEMENT. SEE "THE
REORGANIZATION--BACKGROUND OF THE REORGANIZATION," "THE REORGANIZATION--REASONS
FOR THE REORGANIZATION; RECOMMENDATION OF THE BELL BOARD," AND "THE
REORGANIZATION--INTERESTS OF CERTAIN PERSONS IN THE REORGANIZATION."
Other Matters. Bell's shareholders will also consider and vote upon such
other matters that may properly come before the Bell Special Meeting.
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RECORD DATE; VOTING RIGHTS; PROXIES
The Bell Board has fixed the close of business on February__, 1997 as the
Bell Record Date for determining holders entitled to notice of and to vote at
the Bell Special Meeting.
As of the Bell Record Date, there were 906,833 shares of Bell Common Stock
issued and outstanding, each of which entitles the holder thereof to one vote.
All shares of Bell Common Stock represented by properly executed proxies will,
unless such proxies have been previously revoked, be voted in accordance with
the instructions indicated in such proxies. IF A PROPERLY EXECUTED PROXY HAS
BEEN RETURNED AND NO INSTRUCTIONS ARE INDICATED, SUCH SHARES OF BELL COMMON
STOCK WILL BE VOTED IN FAVOR OF THE REORGANIZATION AGREEMENT IN ACCORDANCE WITH
THE RECOMMENDATION OF THE BELL BOARD. Bell does not know of any matters other
than as described in the accompanying Notice of Special Meeting that are to
come before the Bell Special Meeting. If any other matter or matters are
properly presented for action at the Bell Special Meeting, the persons named in
the enclosed form of proxy and acting thereunder will have the discretion to
vote on such matters in accordance with their best judgment. A shareholder who
has given a proxy may revoke it at any time prior to its exercise by giving
written notice thereof to the Secretary of Bell by signing and returning a
later dated proxy, or by voting in person at the Bell Special Meeting; however,
mere attendance at the Bell Special Meeting will not in and of itself have the
effect of revoking the proxy.
SOLICITATION OF PROXIES
Bell will bear its own cost of solicitation of proxies. Brokerage firms,
fiduciaries, nominees and others will be reimbursed for their out-of-pocket
expenses in forwarding proxy materials to beneficial owners of Bell Common
Stock held in their names. In addition to the use of the mails, proxies may be
solicited by directors, officers and regular employees of Bell, who will not be
specifically compensated for such services, by means of personal calls upon, or
telephonic or telegraphic communications with shareholders or their
representatives.
DISSENTERS' RIGHTS
A shareholder of Bell may dissent from the Reorganization and receive in
cash the fair value, as of the day prior to the Bell Special Meeting, of the
shares of Bell Common Stock held by such shareholder pursuant to Sections
607.1301, 607.1302 and 607.1320 of the FBCA (the "Florida Dissent Provisions").
Such fair value is exclusive of any appreciation or depreciation in
anticipation of the Reorganization, unless such exclusion would be inequitable.
The appraisal value of the Bell Common Stock may differ from the consideration
that a shareholder of Bell is entitled to receive in the Reorganization. The
following is a summary of the Florida Dissent Provisions, the full text of
which is set forth as Appendix C to this Joint Proxy Statement/Prospectus.
Under the Florida Dissent Provisions, a shareholder of Bell may dissent
from the Reorganization by following the following procedures: (i) the
dissenting shareholder must deliver to Bell, prior to the Bell Special Meeting,
written notice of his intent to demand payment for his shares; (ii) the
dissenting shareholder must refrain from voting in favor of the Reorganization;
(iii) within ten (10) days after the date of the Bell Special Meeting, Bell
shall give written notice of authorization of the Reorganization by the
shareholders to such dissenting shareholder; and (iv) within twenty (20) days
after the giving of notice to the dissenting shareholder, the dissenting
shareholder shall file with Bell a notice of election and a demand for payment
of the fair value of his shares. Any dissenting shareholder filing an election
to dissent shall deposit his certificates for certificated shares with Bell
simultaneously with the filing of the election to dissent. A shareholder may
dissent as to less than all of the shares of Bell Common Stock held by him, and
in such event, he is treated as two separate shareholders. Once Bell offers to
pay the dissenting shareholder for his shares, the notice of election cannot be
withdrawn except with the consent of Bell. However, the right of a dissenting
shareholder to be paid the fair value of his shares shall cease if (i) the
demand is withdrawn, (ii)
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the proposed Reorganization is abandoned, (iii) no demand or petition for
determination of fair value by a court has been made or is filed within the
time provided by law or (iv) a court of competent jurisdiction determines that
such shareholder is not entitled to the relief provided by the Florida Dissent
Provisions.
Within ten (10) days after the later of the expiration of the period in
which the dissenting shareholder may file his notice of election to dissent or
the Effective Time of the Reorganization, the corporation is required to make a
written offer to each dissenting shareholder to purchase the shares of Bell
Common Stock at a price deemed by the surviving corporation to be the fair
value of such shares. If, within thirty (30) days after the making of such
offer, any shareholder accepts the same, payment therefor shall be made within
ninety (90) days after the later of the date such offer was made or the
consummation of the Reorganization. However, if, within such thirty (30) day
period, the surviving corporation and the dissenting shareholder are unable to
agree with respect to a price, then the surviving corporation, within thirty
(30) days after receipt of written demand from such dissenting shareholder
given within sixty (60) days after the Effective Time of the Reorganization,
shall, or at its election within such period may, file an action in a court of
competent jurisdiction in the county in which Bell maintained its registered
office requesting that the fair value of the shares of Bell Common Stock be
determined. If Bell or the surviving corporation shall fail to institute such
proceedings, any dissenting shareholder may do so in the name of Bell. All
dissenting shareholders, except for those that have agreed upon a value with
the corporation, are deemed to be parties to the proceeding as an action
against their shares. In such proceeding, the court may, if it so elects,
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The surviving corporation shall pay
each dissenting shareholder the amount found to be due within ten (10) days
after final determination of the proceedings. Upon payment of such judgment,
the dissenting shareholder will cease to have any interest in the shares of
Bell Common Stock.
Any judgment rendered in any dissent proceeding may, at the discretion of
the court, include an allowance for interest at such rate as the court may deem
fair and equitable. The cost and expenses of any such dissent proceeding shall
be determined by the court and shall be assessed against the surviving
corporation, but all or any part of such costs and expenses may be apportioned
and assessed against the dissenting shareholders, in such amount as the court
deems equitable, if the court determines that the surviving corporation made an
offer to the dissenting shareholders and the shareholders' failure to accept
such offer was arbitrary, vexatious or not in good faith. The expenses awarded
by the court shall include compensation for, and reasonable expenses of any
appraiser but shall not include the fees and expenses of counsel or experts
employed by any party. If the fair value of the shares of Bell Common Stock, as
determined by the proceeding, materially exceeds the amount which the
corporation initially offered to pay, or if no offer was made, the court, in
its discretion, may award to any shareholder who is a party to the proceeding
such sum as the court may determine to be reasonable compensation for any
expert attorney or expert employed by the shareholder in the proceeding.
The foregoing is only a summary of the Florida Dissent Provisions. The full
text of such provisions is set forth as Appendix C to this Joint Proxy
Statement/Prospectus and each Bell shareholder is urged to read these
provisions carefully.
QUORUM
The presence in person or by properly executed proxy of holders of a
majority of the issued and outstanding shares of Bell Common Stock entitled to
vote at the Bell Special Meeting is necessary to constitute a quorum at the
Bell Special Meeting. Abstentions will be counted for purposes of determining
whether a quorum is present at the Bell Special Meeting.
REQUIRED VOTE
Assuming a quorum is present, the approval of the Reorganization Agreement
requires the affirmative vote of a majority of the votes entitled to be cast by
holders of Bell Common Stock. As of the Bell
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Record Date, directors and executive officers and their affiliates, and persons
and entities related to the foregoing, were beneficial holders of 855,582 shares
of Bell Common Stock, representing approximately 94.3% of the issued and
outstanding shares of Bell Common Stock entitled to vote at the Bell Special
Meeting. The affirmative votes of the holders of such shares will affect the
outcome of the vote.
Votes cast by proxy or in person at the Bell Special Meeting will be
tabulated by the election inspectors appointed for the meeting and will
determine whether or not a quorum is present. The election inspectors will treat
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum but as shares not voted for purposes of
determining the approval of any matter submitted to the shareholders for a vote.
If a broker indicates on the proxy that it does not have discretionary authority
as to certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
THE MATTERS TO BE CONSIDERED AT THE BELL SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO THE SHAREHOLDERS OF BELL. ACCORDINGLY, SHAREHOLDERS ARE URGED TO
READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS AND THE ANNEXES THERETO, AND TO COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THE GTC SPECIAL MEETING
PURPOSES OF THE GTC SPECIAL MEETING
At the GTC Special Meeting, holders of GTC Common Stock will consider and
vote upon:
(i) the Reorganization Agreement, including the issuance of shares of GTC
Common Stock in accordance with the Reorganization Agreement;
(ii) a proposed amendment to the GTC Articles to change the name of GTC to
Avcor Solutions, Inc.;
(iii) a proposed amendment to the GTC Articles to increase the number of
authorized shares of GTC Common Stock from 40,000,000 shares to 60,000,000
shares;
(iv) a proposed Amendment to the GTC Articles to create a class of
10,000,000 shares of nonvoting common stock;
(v) a proposed amendment to the Key Employees Plan to increase the number
of shares of GTC Common Stock available for issuance thereunder;
(vi) a proposed amendment to the Independent Directors' Plan to increase
the number of shares of GTC Common Stock available for issuance thereunder; and
(vii) any other matters that may properly come before the GTC Special
Meeting.
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PROPOSAL TO AMEND THE GTC ARTICLES TO CHANGE THE CORPORATE NAME
GTC proposes to amend the GTC Articles to change the name of GTC to Avcor
Solutions, Inc. If the proposed amendment is adopted, Article I of GTC's
Articles will read as follows:
Name. The name of the Corporation is Avcor Solutions, Inc.
The GTC Board recommends a vote by shareholders in favor of changing the
name of GTC to Avcor Solutions, Inc. for a number of reasons, including among
others: (i) the majority of GTC's revenue and earnings post-Reorganization are
expected to be derived from customers and markets outside of the contract
manufacturing industry; (ii) the company post-Reorganization will operate as a
holding company, with each of GTC, Tube Turns and Bell operating as semi-
autonomous, wholly-owned subsidiaries; and (iii) the desire of the GTC Board to
establish a clear distinction between the operations of the holding company and
that of its subsidiaries. The name change may result in some initial confusion
among investors and may lead to some problems as investors adjust to the name
change and an expected change in the symbol under which GTC's stock is quoted
on the Nasdaq Stock Market; however, the GTC Board expects the potential
benefits to be derived from the Reorganization and the name change to outweigh
the potential negative results. See "Reasons for the Reorganization;
Recommendation of the Special Committee and the GTC Board."
THE GTC BOARD RECOMMENDS A VOTE FOR THE PROPOSAL TO CHANGE THE NAME OF GTC
TO AVCOR SOLUTIONS, INC. PROPERLY EXECUTED PROXIES SOLICITED BY THE GTC BOARD
WILL BE VOTED IN FAVOR OF THE PROPOSAL UNLESS SHAREHOLDERS SPECIFY OTHERWISE.
PROPOSAL TO AMEND THE GTC ARTICLES TO INCREASE THE AUTHORIZED COMMON STOCK FROM
40,000,000 SHARES TO 60,000,000 SHARES
The GTC Board has adopted and recommended to the shareholders a proposal to
amend the GTC Articles to increase the number of authorized shares of GTC
Common Stock from 40,000,000 shares to 60,000,000 shares. This amendment is
recommended because the presently authorized capital stock of GTC (40,000,000
shares of GTC Common Stock and 1,000,000 shares of preferred stock, par value
$.01 per share ("Preferred Stock")) is not adequate to cover the number of
shares necessary for issuance if the Reorganization is approved. Assuming a GTC
Average Closing Price of $1.50, 38,819,673 shares of GTC Common Stock will be
issued to the shareholders of GFP, Tube Turns and Bell in connection with the
Merger Transactions which, when combined with the 3,181,004 shares of GTC
Common Stock currently held by the existing Unaffiliated Shareholders, would
exceed the 40,000,000 shares of authorized GTC Common Stock prior to adoption
of this proposed amendment. Upon approval of this proposed amendment,
consummation of the Merger Transactions and issuance of the new shares of GTC
Common Stock to the shareholders of Bell, Tube Turns and GFP in accordance with
the Reorganization Agreement, assuming the GTC Average Closing Price is $1.50,
there would be 42,000,677 shares of GTC Common Stock outstanding and 17,999,323
shares of GTC Common Stock would remain authorized but unissued. In addition to
authorizing shares necessary for the Reorganization, the GTC Board believes
that the availability of the additional authorized but unissued shares for
other corporate purposes, without delay or the necessity for an additional
special shareholders' meeting, would be beneficial to GTC. GTC has pursued a
strategy of making select acquisitions of companies in related industries and
continues to explore opportunities to implement its acquisition strategy. In
connection with any such acquisition, it may be desirable for GTC to issue
equity securities in exchange for equity securities of the company to be
acquired. Alternatively, it may be desirable to issue equity securities in a
public offering or offerings subsequent to an acquisition in order to reduce or
eliminate any debt incurred in connection with such acquisition, or GTC may
issue shares of equity securities as a means of raising capital for the purpose
of facilitating a prospective acquisition or acquisitions. However, other than
the Reorganization and the outstanding options and warrants of GTC, GTC does
not have any
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immediate plans, arrangements, commitments, or understandings with respect to
the issuance of any of the additional shares of GTC Common Stock which would be
authorized by the proposed amendment.
The holders of any of the additional shares of GTC Common Stock issued in
the future would have the same rights and privileges as the holders of the
shares of GTC Common Stock currently authorized and outstanding.
THE GTC BOARD RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND GTC'S ARTICLES TO
INCREASE THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK TO 60,000,000 SHARES.
PROPERLY EXECUTED PROXIES SOLICITED BY THE GTC BOARD WILL BE VOTED IN FAVOR OF
THE PROPOSAL UNLESS SHAREHOLDERS SPECIFY OTHERWISE.
PROPOSAL TO AMEND THE GTC ARTICLES TO CREATE A CLASS OF NONVOTING COMMON STOCK
The GTC Board has approved and recommends that the shareholders approve an
amendment to GTC's Articles creating a class of 10,000,000 shares of nonvoting
common stock, par value $.01 per share, to be designated "Nonvoting Common
Stock" which will have dividends and distribution rights, rights on dissolution
or merger and rights respecting recapitalization of GTC identical to the rights
of GTC Common Stock. The Nonvoting Common Stock will not have voting rights
except for those voting rights required by the FBCA.
If adopted, this proposed amendment would enable GTC to issue up to
10,000,000 shares of nonvoting equity securities in acquisitions, mergers or
other transactions, or for general corporate purposes, without diluting the
voting power of holders of GTC Common Stock. The GTC Board believes that the
maintenance of beneficial, long-term supplier, customer and employee
relationships will be enhanced by preservation of the current voting control of
GTC in the Gill Family. Currently, Robert E. Gill, his wife and their sons,
including Jeffrey T. Gill, Chairman of the GTC Board, indirectly control an
aggregate of approximately 80% of the total votes of GTC Common Stock which
will increase to approximately 87% upon completion of the Reorganization
assuming a $1.50 GTC Average Closing Price. Accordingly, the Company believes
that in certain circumstances it may be desirable to issue nonvoting equity
securities, such as shares of the proposed Nonvoting Common Stock, to enable
GTC to effect acquisitions or raise capital without materially altering the
current voting control of the holders of GTC Common Stock. Issuance of
additional equity securities could significantly dilute the voting power of
holders of GTC Common Stock.
GTC's Common Stock is currently authorized for quotation on the Nasdaq
Stock Market. Accordingly, GTC must comply with the qualification requirements
established by Nasdaq to continue to have its common stock quoted on the Nasdaq
Stock Market. Currently, pursuant to the requirements of Rule 19c-4 promulgated
by the Commission (the "Rule"), Nasdaq will withhold or deny authorization for
a quotation of any common stock if the issuer issues any class of security, or
takes other corporate action, with the effect of nullifying, restricting or
disparately reducing the per share voting rights of holders of an outstanding
class of common stock of such issuer. Accordingly, any issuance of shares of
Nonvoting Common Stock in an exchange offer for shares of GTC Common Stock may
be prohibited and the issuance of shares of GTC Common Stock subsequent to the
issuance of shares of Nonvoting Common Stock may be restricted, depending on
the facts and circumstances under which such shares are issued. While the
issuance of securities with lesser voting rights than an existing class of
securities is generally not prohibited by the Rule, the issuance of such
securities as dividends or in mergers or acquisitions may, depending on the
facts and circumstances, involve application of the Rule. Accordingly, GTC may
seek advice from the NASD to clarify application of the Rule to any proposed
transaction.
GTC is seeking approval of the proposed amendment for strategic purposes
and has no present plan or intention to issue any shares of Nonvoting Common
Stock.
No further action or authorization by GTC's shareholders would be necessary
prior to the issuance of
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shares of Nonvoting Common Stock unless required by applicable law or regulatory
agencies or by the rules of Nasdaq or any stock exchange on which GTC securities
may then be listed.
Shareholders of GTC do not have any preemptive rights to subscribe for any
shares of GTC Common Stock or Nonvoting Common Stock that may be issued.
The complete text of the proposed amendments is set forth as Appendix D to
this Joint Proxy Statement/Prospectus.
USE OF AUTHORIZED STOCK FOR ANTI-TAKEOVER DEFENSES
As stated above, GTC has no immediate plans, arrangements, commitments, or
understandings with respect to the issuance of any additional shares of GTC
Common Stock or Nonvoting Common Stock which would be authorized by the proposed
amendments. However, the increased authorized shares could be used to make a
takeover attempt more difficult such as by using the shares to make a counter-
offer for the shares of the bidder or by selling shares of authorized but
unissued GTC Common Stock to dilute the voting power of the bidder. As of this
date, the GTC Board is unaware of any specific effort to accumulate shares of
GTC Common Stock or to obtain control of GTC by means of a merger, tender offer,
solicitation in opposition to management or otherwise. As long as the Gill
Family maintains control, it is unlikely that such an effort would occur.
GTC also has 1,000,000 shares of authorized Preferred Stock which have not
been issued. The GTC Board (subject to applicable law or rules of regulatory
agencies and requirements of stock exchanges or the Nasdaq Stock Market) has the
power to issue the Preferred Stock without further shareholder approval, with
such rights as the GTC Board deems advisable, including conversion rights,
redemption rights, and liquidation rights. The Preferred Stock could be issued
to deter a takeover by establishing the terms of the Preferred Stock so as to
make the takeover substantially more expensive.
DESCRIPTION OF VOTING COMMON STOCK AND NONVOTING COMMON STOCK
The GTC Common Stock and Nonvoting Common Stock are identical in all
respects, except as follows:
Each share of GTC Common Stock entitles the holder thereof to one vote on
each matter submitted to a shareholders' vote, while no shares of Nonvoting
Common Stock have any voting rights, except for those voting rights required by
the FBCA.
Subject to the limitations described in the GTC Articles, holders of the
GTC Common Stock and Nonvoting Common Stock participate equally in any dividends
(payable in cash, stock or property) and stock splits, when and as declared by
the GTC Board, out of legally available assets of the corporation; provided,
however, that, in the event of a stock split, or a pro rata stock dividend of
like shares declared on outstanding shares, the holders of GTC Common Stock will
receive shares of GTC Common Stock and the holders of Nonvoting Common Stock
will receive shares of Nonvoting Common Stock.
In the event GTC is liquidated, dissolved or wound up, whether voluntarily
or involuntarily, the holders of the GTC Common Stock and Nonvoting Common Stock
participate equally in any distribution.
If at any time while there are shares of GTC Common Stock and Nonvoting
Common Stock issued and outstanding, the GTC Board determines, in its sole
discretion, that legislation or regulations are enacted or any judicial or
administrative determination is made which would prohibit the quotation,
listing, or trading of GTC's Common Stock or Nonvoting Common Stock on the New
York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market, or
which would otherwise have a material adverse effect on GTC,
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due to GTC having more than one class of common shares outstanding, then the GTC
Board may by reversion convert all outstanding shares of Nonvoting Common Stock
into GTC Common Stock on a share-for-share basis. To the extent practicable,
notice of such conversion of Nonvoting Common Stock specifying the date fixed
for said conversion shall be mailed, postage prepaid, at least ten (10) days but
not more than thirty (30) days prior to said conversion date to the holders of
record of shares of GTC Common Stock and Nonvoting Common Stock at their
respective addresses as the same shall appear on the books of the corporation;
provided, however, that no failure or inability to provide such notice will
limit the authority or ability of the GTC Board to convert all outstanding
shares of Nonvoting Common Stock into GTC Common Stock.
THE GTC BOARD RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND GTC'S ARTICLES TO
CREATE A CLASS OF 10,000,000 SHARES OF NONVOTING COMMON STOCK. PROPERLY EXECUTED
PROXIES SOLICITED BY THE GTC BOARD WILL BE VOTED IN FAVOR OF THE PROPOSAL UNLESS
SHAREHOLDERS SPECIFY OTHERWISE.
PROPOSAL TO APPROVE AMENDMENT TO GTC'S 1994 STOCK OPTION PLAN FOR KEY EMPLOYEES
The GTC Board has approved and recommends that the shareholders approve the
amendment to the Key Employees Plan to increase the number of shares reserved
thereunder to 5,000,000 shares of Common Stock. The Key Employees Plan was
adopted by the GTC Board and approved at the 1995 annual meeting of shareholders
of GTC. At a meeting of the GTC Board in December 1996, the GTC Board adopted a
proposal to amend the Key Employees Plan to increase the aggregate number of
shares of GTC Common Stock reserved for issuance under the Key Employees Plan
from 800,000 shares to 5,000,000 shares. A copy of the Key Employees Plan, as
amended by the GTC Board, is attached hereto as Appendix E. The proposal to
amend the Key Employees Plan is subject to shareholder approval. The Key
Employees Plan provides for the grant of incentive stock options (which satisfy
the requirements of Section 422(b) of the Code) ("ISOs") and nonqualified stock
options (which do not satisfy such requirements) ("NSOs") to key employees of
GTC. The material features of the Key Employees Plan as currently in effect are
described below.
As of December 31, 1996, there were stock options outstanding covering
486,058 shares of GTC Common Stock held by 38 persons and only 313,942 shares of
GTC Common Stock remained available for future awards under the Key Employees
Plan. As a part of the Reorganization, GTC will provide to option holders of
GFP, Tube Turns and Bell substitute options entitling them to acquire 3,960,053
of GTC Common Stock based upon an assumed GTC Average Closing Price of $1.50.
The purpose of the proposal is to increase the aggregate number of shares of GTC
Common Stock that may be issued under the Key Employees Plan by 4,200,000 shares
in order to cover these replacement options. In addition, if the proposal is
adopted, there will be 356,581 shares reserved for which options will not have
been granted, assuming the $1.50 GTC Average Closing Price, which may be used in
the future to grant options to employees of GTC who are eligible to participate
in the Key Employees Plan.
The following constitutes a brief discussion of the material features of
the Key Employees Plan and is qualified in its entirety by reference to the copy
of the Key Employees Plan, as amended, which is attached as Appendix E to this
Joint Proxy Statement/Prospectus. The Key Employees Plan permits the grant of
both ISOs, within the meaning of Section 422 of the Code, and NSOs to key
employees, including directors of GTC who are also employees.
The Key Employees Plan is administered by the Option Plan Committee of the
GTC Board (the "Plan Committee"). None of the members of the Plan Committee are
eligible to receive options under the Key Employees Plan. An employee is
selected to receive options under the Key Employees Plan at the discretion of
the Plan Committee based upon the employee's past contributions to GTC or the
Plan Committee's expectations of the employee's ability to contribute materially
in the future to the successful
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performance of GTC. The Plan Committee also determines the number of shares
subject to each option, fixes the period during which each option may be
exercised and fixes the prices at which shares subject to options may be
purchased. The aggregate fair market value (determined as of the date the option
is granted) of the GTC Common Stock for which ISOs will first become exercisable
by a grantee in any calendar year under all ISO plans of GTC and its
subsidiaries can not exceed $100,000. The Plan Committee will make any other
determinations necessary or advisable for the administration of the Key
Employees Plan.
The Key Employees Plan, as amended, will authorize the issuance of up to
5,000,000 shares of GTC Common Stock. Currently the Key Employees Plan has
800,000 shares of GTC Common Stock authorized for issuance. The shares to be
issued under the Key Employees Plan will be currently authorized but unissued
shares or shares held by GTC in its treasury. The number of shares of the GTC
Common Stock available under the Key Employees Plan will be subject to
adjustment by the Plan Committee to prevent dilution in the event of a stock
split, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, stock dividend or certain other events. Shares of GTC Common
Stock subject to unexercised options that expire or are terminated prior to the
end of the period during which options may be granted will be restored to the
number of shares available for issuance under the Key Employees Plan.
Each option granted under the Key Employees Plan will be evidenced by an
agreement which will establish the period in which the option may be exercised.
The maximum term of each ISO is ten (10) years except for an ISO granted to an
employee beneficially owning ten percent (10%) of the GTC Common Stock ("Ten
Percent Owner"). The exercise period for ISOs granted to a Ten Percent Owner may
not exceed five (5) years from the date of grant. The exercise price of all ISOs
and NSOs granted under the Key Employees Plan must be at least 100% of the fair
market value of such shares on the date of grant or, in the case of an ISO
granted to a Ten Percent Owner, 110% of the fair market value of such shares.
No part of any option may be exercised to the extent that the exercise
would cause the grantee to have compensation from GTC in any year in excess of
$1,000,000 and which is nondeductible to GTC pursuant to Section 162(m) of the
Code and regulations issued thereunder. The purchase price of the shares to be
paid to GTC at the time of exercise may be paid in cash or in such other
consideration as the Plan Committee deems appropriate, including GTC Common
Stock already owned by the grantee.
Options granted pursuant to the Key Employees Plan are not transferable
except upon the death of a grantee, in which event they may be transferred only
in accordance with and to the extent provided for in the laws of descent and
distribution of Florida. If a grantee's employment with GTC shall terminate for
any reason other than death, disability or retirement, all rights to exercise
his options shall terminate at the date of such termination of employment. If a
grantee dies while employed by GTC or within three (3) months after termination
of his employment due to a disability, the grantee's options may be exercised by
the person to whom the grantee's options have passed by will or applicable law,
at the earlier of the expiration date of the options or one (1) year after the
grantee's death. If the grantee's employment is terminated because of a
disability and the grantee has not died within the three (3) months following
such termination, the grantee may exercise his options at the earlier of the
expiration date or one (1) year after termination of his employment. If the
grantee's employment terminates by reason of his retirement, his right to
exercise his options shall terminate at the earlier of the expiration date of
the options or three (3) months after the termination of employment. In certain
cases, the GTC Board has amended the Key Employee Plan to allow for an
extension.
ISOs granted under the Key Employees Plan are intended to be "incentive
stock options" as defined by Section 422 of the Code. Under present law, the
grantee of an ISO will not realize taxable income upon the grant or the exercise
of the ISO. GTC will not receive an income tax deduction at either of such
times. If the grantee does not dispose of the shares of GTC Common Stock
acquired upon
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exercising an ISO within either (i) two (2) years after the date of grant of the
ISO, or (ii) one (1) year after the date shares of GTC Common Stock are
transferred to the grantee pursuant to the exercise of the ISO, the gain upon a
subsequent disposition of the shares will be taxed at capital gain rates. If the
grantee, within either of the above periods, disposes of the shares of the GTC
Common Stock acquired upon the exercise of an ISO, the grantee will recognize as
ordinary income an amount equal to the difference between the exercise price and
the fair market value of the shares on the date of exercise. In such event, GTC
would be entitled to a corresponding income tax deduction equal to the amount
recognized as ordinary income by the grantee. The gain in excess of such amount
recognized by the grantee as ordinary income would be taxed as a long-term
capital gain or short-term capital gain (subject to the holding period
requirements for long-term or short-term capital gain treatment).
The exercise of an ISO will result in the inclusion of the excess of the
stock's fair market value on the date of exercise over the exercise price in the
grantee's alternative minimum taxable income. Liability for the alternative
minimum tax is complex and depends upon an individual's overall tax situation.
Upon exercise of a NSO granted under the Key Employees Plan or upon the
exercise of an ISO that does not qualify for the tax treatment described above,
the grantee will realize ordinary income in an amount equal to the excess of the
fair market value of the shares of the GTC Common Stock received over the
exercise price of such shares. That amount increases the grantee's basis in the
stock acquired pursuant to the exercise of the NSO or ISO not qualifying for the
tax treatment described above. Upon a subsequent sale of the stock, the grantee
will recognize short-term or long-term capital gain or loss depending on his
holding period for the stock and upon the stock's subsequent appreciation or
depreciation in value. GTC will be allowed a federal income tax deduction for
the amount recognized as ordinary income by the grantee upon the grantee's
exercise of the option.
The Plan Committee granted the following options during the year ended
December 31, 1995, each of which was exercisable on the date of grant and has a
term of ten (10) years from the date of grant. The number of such options
granted with respect to the Key Employees is set forth below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE VALUE OF OPTIONS
NAME OPTIONS GRANTED PRICE AT DECEMBER 31, 1996 (1)
- ---- --------------- ----- -------------------------
<S> <C> <C> <C>
J. Hardie Harris.................................................... 30,000 $5.25 (2)
All current executive officers as a group (1 person)................ 30,000 5.25 (2)
All employees, including all current officers who
are not executive officers as a group
(2 persons)...................................................... 54,000 5.47 (2)
</TABLE>
- ------------------
(1) Based on the closing price of GTC Common Stock as reported in the Nasdaq
Stock Market on December 31, 1996 ($1.00 per share).
(2) Options were not "in the money" on December 31, 1996. The actual value of
these options, if any, will depend on the excess of the stock price over
the exercise price on the date the option is exercised.
While the Plan Committee intends to continue the Key Employees Plan in
effect until the scheduled termination date on October 27, 2004, the Plan
Committee may modify, amend, or terminate the Key Employees Plan without a vote
of the shareholders. The Plan Committee may seek shareholder approval of
material amendments to the Key Employees Plan in order to qualify the options
issued as ISOs under the Code and/or to meet the requirements for inclusion on
the Nasdaq Stock Market or listing on any exchange on which GTC's securities are
or may be listed.
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<PAGE>
The affirmative vote of at least a majority of the shares of GTC Common
Stock present at the GTC Special Meeting in person or by proxy and entitled to
vote is required to approve the proposal to amend the Key Employees Plan. If
not approved, the amendment will not become effective.
THE GTC BOARD RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE KEY
EMPLOYEES PLAN. PROXIES SOLICITED BY THE GTC BOARD WILL BE VOTED IN FAVOR OF
THE PROPOSAL UNLESS SHAREHOLDERS SPECIFY OTHERWISE.
PROPOSAL TO APPROVE AMENDMENT TO GTC'S INDEPENDENT DIRECTORS' STOCK OPTION PLAN
The Independent Directors' Plan was adopted by the GTC Board and approved
at the 1995 annual meeting of shareholders of GTC. At a meeting of the GTC
Board in December, 1996, the GTC Board adopted a proposal to amend the
Independent Directors' Plan to increase the aggregate number of shares of GTC
Common Stock reserved for issuance under the Independent Directors' Plan from
300,000 shares to 1,000,000 shares. A copy of the Independent Directors' Plan,
as amended by the GTC Board, is attached hereto as Appendix F. The proposal to
amend the Independent Directors' Plan is subject to shareholder approval. The
Independent Directors' Plan provides for the grant of NSOs to independent
directors of GTC. The material features of the Independent Directors' Plan as
currently in effect are described below.
As of December 31, 1996, there were stock options outstanding covering
114,322 shares of GTC Common Stock held by three persons and only 185,678
shares of GTC Common Stock remained available for future awards under the
Independent Directors' Plan. As a part of the Reorganization, GTC will provide
to independent director option holders of Bell substitute options to acquire
shares of GTC Common Stock. The purpose of the proposal is to increase the
aggregate number of shares of GTC Common Stock that may be issued under the
Independent Directors' Plan by 700,000 shares. This proposal will provide for
sufficient shares under the Independent Directors' Plan to accommodate the
Reorganization. In addition, if the proposal is adopted, the directors of GTC
who are eligible to participate in the Independent Directors' Plan could
receive more benefits under the Independent Directors' Plan than they could if
the proposal is not adopted.
The following constitutes a brief discussion of the material features of
the Independent Directors' Plan and is qualified in its entirety by reference
to the copy of the Independent Directors' Plan, as amended, a copy of which is
attached as Appendix F to this Joint Proxy Statement/Prospectus. Only members
of the GTC Board who are not employees of GTC or any of its affiliates will be
eligible to participate in the Independent Directors' Plan. There are currently
three nonemployee members of the GTC Board ("Independent Directors"). In the
event additional directors are elected to the GTC Board after the
Reorganization who are not employees of GTC or any of its affiliates, each such
director will be eligible to participate in the Independent Directors' Plan.
William L. Healey and Robert Sroka currently serve as Directors of Bell and are
expected to serve as Directors of GTC after the Reorganization.
The Independent Directors' Plan is administered by the Plan Committee of
the GTC Board. None of the members of the Plan Committee are eligible to
receive options under the Independent Directors' Plan. The Plan Committee
selects the Independent Directors who will be granted options and determines
the number of shares subject to each option, fixes the period during which each
option may be exercised and fixes the prices at which shares subject to options
may be purchased. The Plan Committee will make any other determinations
necessary or advisable for the administration of the Independent Directors'
Plan.
The Independent Directors' Plan, as amended, authorizes the issuance of up
to 1,000,000 shares of GTC Common Stock. The shares to be issued under the
Independent Directors' Plan will be currently authorized but unissued shares,
or shares held by GTC in its treasury. The number of shares of GTC Common Stock
available under the Independent Directors' Plan will be subject to adjustment
by the Plan Committee to prevent dilution in the event of a stock split,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, stock dividend or certain other events. Shares of GTC
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<PAGE>
Common Stock subject to unexercised options that expire, or are terminated
prior to the end of the period during which options may be granted, will be
restored to the number of shares available for issuance under the Independent
Directors' Plan.
Each option granted under the Independent Directors' Plan is evidenced by
an agreement which will establish the period in which the option may be
exercised. The maximum term of each option is ten (10) years. The exercise
price of all options granted under the Independent Directors' Plan must be at
least 100% of the fair market value of such shares on the date of grant.
The purchase price of the shares to be paid to GTC at the time of exercise
may be paid in cash or in such other consideration as the Plan Committee deems
appropriate, including GTC Common Stock already owned by the grantee.
Options granted pursuant to the Independent Directors' Plan are not
transferable except upon the death of a grantee, in which event, they may be
transferred only in accordance with and to the extent provided for in the laws
of descent and distribution of Florida. If a grantee dies, the grantee's
options may be exercised by the person to whom the grantee's options have
passed by will or applicable law prior to the expiration date of the options.
There will be no federal income tax consequence to GTC or the Independent
Directors upon the grant of options under the Independent Directors' Plan. Upon
exercise of an option, the grantee will realize ordinary income in an amount
equal to the excess of the fair market value of the shares of the GTC Common
Stock received over the exercise price of such shares. That amount increases
the grantee's basis in the stock acquired pursuant to the exercise of the
option. Upon a subsequent sale of the stock, the grantee will recognize short-
term or long-term capital gain or loss depending on his holding period for the
stock and upon the stock's subsequent appreciation or depreciation in value.
GTC will be allowed a federal income tax deduction for the amount recognized as
ordinary income by the grantee upon the grantee's exercise of the option.
The Plan Committee granted the following options during the year ended
December 31, 1995, each of which was exercisable on the date of grant and has a
term of ten (10) years from the date of grant. The number of such options
granted with respect to the Independent Directors is set forth below:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE VALUE OF OPTIONS
NAME OPTIONS GRANTED PRICE AT DECEMBER 31, 1996 (1)
---- --------------- -------- ------------------------
<S> <C> <C> <C>
Henry F. Frigon.................................................. 13,239 $5.24 (2)
Sidney R. Peterson............................................... 12,712 5.22 (2)
All current directors who are not executive officers as a group.. 25,951 5.23 (2)
</TABLE>
--------------
(1) Based on the closing price of GTC's Common Stock as reported in the Nasdaq
Stock Market on December 31, 1996 ($1.00 per share).
(2) Options were not "in the money" on December 31,1996. The actual value of
these options, if any, will depend on the excess of the stock price over
the exercise price on the date the option is exercised.
While the Plan Committee intends to continue the Independent Directors'
Plan in effect until the scheduled termination date on October 27, 2004, the
Plan Committee may modify, amend, or terminate the Independent Directors' Plan
without a vote of the shareholders. The Plan Committee may seek shareholder
approval of material amendments to the Independent Directors' Plan in order to
qualify the options issued to meet the requirements for inclusion on the Nasdaq
Stock Market or listing on any exchange on which GTC's securities are or may be
listed.
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<PAGE>
The affirmative vote of at least a majority of the shares of GTC Common
Stock present at the GTC Special Meeting in person or by proxy and entitled to
vote is required to approve the proposal to amend the Plan. If not approved,
the amendment will not become effective.
THE GTC BOARD RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE INDEPENDENT
DIRECTORS PLAN. PROXIES SOLICITED BY THE GTC BOARD WILL BE VOTED IN FAVOR OF
THE PROPOSAL UNLESS SHAREHOLDERS SPECIFY OTHERWISE.
RECORD DATE; VOTING RIGHTS; PROXIES
The GTC Board has fixed the close of business on February __, 1997 as the
GTC Record Date for determining holders entitled to notice of and to vote at the
GTC Special Meeting.
As of the GTC Record Date, there were 16,220,629 shares of GTC Common
Stock issued and outstanding, each of which entitles the holder thereof to one
vote. All shares of GTC Common Stock represented by properly executed proxies
will, unless such proxies have been previously revoked, be voted in accordance
with the instructions indicated in such proxies. IF A PROPERLY EXECUTED PROXY
HAS BEEN RETURNED AND NO INSTRUCTIONS ARE INDICATED, SUCH GTC COMMON STOCK WILL
BE VOTED IN FAVOR OF THE REORGANIZATION AGREEMENT, IN FAVOR OF THE AMENDMENTS
TO THE GTC ARTICLES IN FAVOR OF THE AMENDMENT TO THE KEY EMPLOYEES PLAN AND IN
FAVOR OF THE AMENDMENT TO THE INDEPENDENT DIRECTORS' PLAN. GTC does not know of
any matters other than as described in the accompanying Notice of Special
Meeting that are to come before the GTC Special Meeting. If any other matter or
matters are properly presented for action at the GTC Special Meeting, the
persons named in the enclosed form of proxy and acting thereunder will have the
discretion to vote on such matters in accordance with their best judgment. A
shareholder who has given a proxy may revoke it at any time prior to its
exercise by giving written notice thereof to the Secretary of GTC, by signing
and returning a later dated proxy, or by voting in person at the GTC Special
Meeting; however, mere attendance at the GTC Special Meeting will not in and of
itself have the effect of revoking the proxy.
Votes cast by proxy or in person at the GTC Special Meeting will be
tabulated by the election inspectors appointed for the meeting and will
determine whether or not a quorum is present. The election inspectors will
treat abstentions as shares that are present and entitled to vote for purposes
of determining the presence of a quorum but as shares not voted for purposes of
determining the approval of any matter submitted to the shareholders for a
vote. If a broker indicates on the proxy that it does not have discretionary
authority as to certain shares to vote on a particular matter, those shares
will not be considered as present and entitled to vote with respect to that
matter.
SOLICITATION OF PROXIES
GTC will bear its own cost of solicitation of proxies. Brokerage firms,
fiduciaries, nominees and others will be reimbursed for their out-of-pocket
expenses in forwarding proxy materials to beneficial owners of GTC Common Stock
held in their names. Proxies may be solicited by directors, officers and
regular employees of GTC, who will not be specifically compensated for such
services, by means of personal calls upon, or telephonic or telegraphic
communications with, shareholders or their representatives.
DISSENTERS' RIGHTS
Under the FBCA, shareholders of GTC will not be entitled to dissenter's
rights under Florida law or any other statute if the Reorganization Agreement
is approved and the Reorganization is consummated. See "Effect of the
Reorganization on Rights of Shareholders--Dissenters' Rights."
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<PAGE>
QUORUM
The presence in person or by properly executed proxy of holders of a
majority of the issued and outstanding shares of GTC Common Stock entitled to
vote at the GTC Special Meeting is necessary to constitute a quorum at the GTC
Special Meeting.
REQUIRED VOTE
Under the Reorganization Agreement, approval of the Reorganization
Agreement requires the affirmative vote of the holders of a majority of the
outstanding shares of GTC Common Stock entitled to vote thereon at the GTC
Special Meeting. Approval of the Reorganization Agreement will constitute
approval of all of the transactions contemplated as a part of the
Reorganization, including the issuance of shares of GTC Common Stock as
required by the Reorganization Agreement.
The approval of the proposed amendments to GTC's Articles and the 1994
Stock Option Plan and Independent Directors Stock Option Plan requires that the
number of votes cast in favor of the proposal at the GTC Special Meeting exceed
the number of votes cast against the proposal.
The approval of the proposed amendments to the Key Employees Plan and the
Independent Directors' Plan requires the approval by shareholders of GTC
holding not less than a majority of the votes represented and entitled to be
voted at the GTC Special Meeting.
Only holders of GTC Common Stock on the GTC Record Date will be entitled
to notice of and to vote on the Reorganization Agreement or any other matters
to be considered at the GTC Special Meeting. As of the GTC Record Date,
directors and executive officers and their affiliates were beneficial owners of
13,222,427 shares of GTC Common Stock entitled to vote at the GTC Special
Meeting, representing approximately 81.5% of the total number of shares of GTC
Common Stock entitled to vote at the GTC Special Meeting. The affirmative votes
by the holders of such shares will affect the outcome of the vote.
THE MATTERS TO BE CONSIDERED AT THE GTC SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO THE SHAREHOLDERS OF GTC. ACCORDINGLY, SHAREHOLDERS ARE URGED TO
READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS AND THE ANNEXES THERETO, AND TO COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THE DISINTERESTED MEMBERS OF THE GTC BOARD UNANIMOUSLY APPROVED AND
ADOPTED THE REORGANIZATION AGREEMENT AND THE REORGANIZATION AND RECOMMEND THAT
GTC'S SHAREHOLDERS VOTE FOR APPROVAL OF THE REORGANIZATION AGREEMENT. THE GTC
BOARD HAS APPROVED THE PROPOSED AMENDMENTS TO THE GTC ARTICLES AND RECOMMENDS
THAT GTC'S SHAREHOLDERS VOTE FOR APPROVAL OF THE AMENDMENTS. THE GTC BOARD HAS
ALSO APPROVED THE PROPOSED AMENDMENTS TO THE KEY EMPLOYEES PLAN AND THE
INDEPENDENT DIRECTORS' PLAN AND RECOMMENDS THAT GTC'S SHAREHOLDERS VOTE FOR
APPROVAL OF THE AMENDMENTS. SEE "THE REORGANIZATION--BACKGROUND OF THE
REORGANIZATION" AND "THE REORGANIZATION--REASONS FOR THE REORGANIZATION;
RECOMMENDATION OF THE GTC BOARD" AND "THE REORGANIZATION--INTERESTS OF CERTAIN
PERSONS IN THE REORGANIZATION."
THE REORGANIZATION
This section of the Joint Proxy Statement/Prospectus describes certain
aspects of the Reorganization and the Reorganization Agreement. The following
description does not purport to be complete and is qualified in its entirety by
reference to the Reorganization Agreement which is attached as
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<PAGE>
Appendix A to this Joint Proxy Statement/Prospectus and is incorporated herein
by reference. Capitalized terms used in this section but not defined in this
Joint Proxy Statement/Prospectus have the meanings ascribed to them in the
Reorganization Agreement. All shareholders are urged to read the Reorganization
Agreement in its entirety.
THE REORGANIZATION TRANSACTION
In accordance with, and subject to the terms and conditions of, the
Reorganization Agreement, the following will occur in chronological order: (i)
the Spin Off, (ii) the Merger, (iii) the Tube Turns Merger, (iv) the Bell
Merger and (v) the GTC Contribution.
THE SPIN OFF. At the Effective Time, by virtue of the Spin Off, the shares
of Partners-V, Unison and BW held by GFP shall be transferred to the
shareholders of GFP.
THE MERGER. At the Effective Time, and subject to the conditions set forth
in the Reorganization Agreement, GFP will be merged with and into GTC in
accordance with the KRS and the FBCA, whereupon the separate existence of GFP
will cease and GTC will continue as the surviving corporation. Subject to the
terms of the Reorganization Agreement, the number of shares of GTC Common Stock
to be issued to shareholders of GFP in the Merger is equal to the GFP
Conversion Ratio multiplied by the shares held by such shareholders, subject to
certain adjustments as provided in the Reorganization Agreement (the "Merger
Shares"). The "GFP Conversion Ratio" is equal to such fraction as is obtained
by dividing the GTC/GFP Merger Shares (as hereinafter defined) by the Total GFP
Shares (as hereinafter defined). The "GTC/GFP Merger Shares" is equal to such
number of whole shares of GTC Common Stock as is obtained by dividing the
Aggregate GFP Consideration (hereinafter defined) by the GTC Average Closing
Price. The "Total GFP Shares" is equal to 315,996. The "Aggregate GFP
Consideration" is equal to $55,298,334. For purposes of computing the Aggregate
GFP Consideration, the shares of Tube Turns Common Stock held by GFP were
valued at $5.50 per share.
Each share of GTC Common Stock issued and outstanding immediately prior to
the Effective Time which is held by GFP shall be canceled and retired and all
rights in respect thereof shall cease to exist, without any conversion thereof
or payment of any consideration therefor. No fractional shares of GTC Common
Stock will be issued in the Merger. All fractional shares of GTC Common Stock
to which a holder of GFP Common Stock immediately prior to the Effective Time
would otherwise be entitled at the Effective Time will be aggregated. If a
fractional share results from such aggregation, such shareholder will be
entitled, after the later of (i) the Effective Time, or (ii) the surrender of
such shareholder's certificate(s) that represent such shares of the GFP Common
Stock, to receive from GTC an amount in cash in lieu of such fractional share,
based on the GTC Average Closing Price.
The GTC Articles and the GTC Bylaws as in effect immediately prior to the
Effective Time shall be the articles of incorporation and bylaws, respectively,
of the surviving corporation of the Merger, and the directors and officers of
GTC immediately prior to the Effective Time shall be the directors and officers
of the surviving corporation of the Merger.
THE TUBE TURNS MERGER. Upon the terms and subject to the conditions set
forth in the Reorganization Agreement, and in accordance with the KRS at the
Effective Time, Tube Turns will be merged with and into New Tube Turns in
accordance with the KRS, whereupon the separate existence of Tube Turns will
cease and New Tube Turns will continue as the surviving corporation. Subject to
the terms of the Reorganization Agreement, the number of shares of GTC Common
Stock to be issued to the shareholders of Tube Turns, other than GTC (as
successor by merger to GFP), in connection with the Tube Turns Merger is equal
to the Tube Turns Conversion Ratio multiplied by the shares held by such
shareholders, subject to certain adjustments as provided in the Reorganization
Agreement (the "Tube Turns Merger Shares"). The "Tube Turns Conversion Ratio"
is equal to such fraction as is obtained by dividing the GTC/Tube Turns Merger
Shares (as hereinafter defined) by the Total Tube Turns Shares (as hereinafter
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defined). The "GTC/Tube Turns Merger Shares" is equal to such number of whole
shares of GTC Common Stock as is obtained by dividing the Aggregate Tube Turns
Consideration (as hereinafter defined) by the GTC Average Closing Price. The
"Total Tube Turns Shares" is equal to 125,030. The "Aggregate Tube Turns
Consideration" is equal to $1,875,450.
Each share of Tube Turns Common Stock issued and outstanding immediately
prior to the Effective Time and held by GTC shall be canceled and extinguished.
No fractional shares of GTC Common Stock will be issued in the Tube Turns
Merger. All fractional shares of GTC Common Stock to which a holder of Tube
Turns Common Stock immediately prior to the Effective Time would otherwise be
entitled at the Effective Time shall be aggregated. If a fractional share
results from such aggregation, such shareholder shall be entitled, after the
later of (i) the Effective Time, or (ii) the surrender of such shareholder's
certificate(s) that represent such shares of the Tube Turns Common Stock, to
receive from GTC an amount in cash in lieu of such fractional share, based on
the GTC Average Closing Price.
The New Tube Turns Articles and the New Tube Turns Bylaws as in effect
immediately prior to the Effective Time shall be the articles of incorporation
and bylaws, respectively, of the surviving corporation of the Tube Turns
Merger, and the directors and officers of New Tube Turns immediately prior to
the Effective Time shall be the directors and officers of the surviving
corporation of the Tube Turns Merger.
THE BELL MERGER. Upon the terms and subject to the conditions set forth in
the Reorganization Agreement, and in accordance with the FBCA at the Effective
Time, Bell will be merged with and into New Bell in accordance with the FBCA,
whereupon the separate existence of Bell will cease and New Bell will continue
as the surviving corporation. Subject to the terms of the Reorganization
Agreement, the number of shares of GTC Common Stock to be issued to the
shareholders of Bell, other than GTC (as successor by merger to GFP), in
connection with the Bell Merger is equal to the Bell Conversion Ratio
multiplied by the shares held by such shareholders, subject to certain
adjustments as provided in the Reorganization Agreement (the "Bell Merger
Shares"). The "Bell Conversion Ratio" is equal to such fraction as is obtained
by dividing the GTC/Bell Merger Shares (as hereinafter defined) by the Total
Bell Shares (as hereinafter defined). The "GTC/Bell Merger Shares" is equal to
such number of whole shares of GTC Common Stock as is obtained by dividing the
Aggregate Bell Consideration (hereinafter defined) by the GTC Average Closing
Price. The "Total Bell Shares" is equal to 173,789. The "Aggregate Bell
Consideration" is equal to $5,908,826.
Each share of Bell Common Stock issued and outstanding immediately prior
to the Effective Time and held by GTC shall be canceled and extinguished. No
fractional shares of GTC Common Stock will be issued in the Bell Merger. All
fractional shares of GTC Common Stock to which a holder of Bell Common Stock
immediately prior to the Effective Time would otherwise be entitled at the
Effective Time shall be aggregated. If a fractional share results from such
aggregation, such shareholder shall be entitled, after the later of (i) the
Effective Time, or (ii) the surrender of such shareholder's certificate(s) that
represent such shares of the Bell Common Stock, to receive from GTC an amount
in cash in lieu of such fractional share, based on the GTC Average Closing
Price.
The New Bell Articles and the New Bell Bylaws as in effect immediately
prior to the Effective Time shall be the articles of incorporation and bylaws,
respectively, of the surviving corporation of the Bell Merger, and the
directors and officers of New Bell immediately prior to the Effective Time
shall be the directors and officers of the surviving corporation of the Bell
Merger.
THE GTC CONTRIBUTION. Immediately after the Spin Off, the Merger, the Tube
Turns Merger and the Bell Merger, GTC will contribute all of the assets of GTC
(other than the shares of New Tube Turns and New Bell) into a newly formed,
wholly-owned subsidiary of GTC, and this subsidiary will assume all of the
liabilities of GTC.
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BACKGROUND OF THE REORGANIZATION
On September 16, 1996, the GTC Board met in Chicago to review a variety of
strategic alternatives that had been prepared by management for purposes of
strengthening the company's financial condition. After the meeting, Robert E.
Gill and Jeffrey T. Gill informed the independent directors of GTC that they
were considering a merger of GTC with GFP, and the further mergers involving
Bell and Tube Turns, as contemplated by the Reorganization, as a means for
achieving this objective. The motivation for the transaction centered on (i)
the need to improve the margins and profitability of GTC, (ii) the need to
improve the ability of GTC to support its future growth initiatives, and (iii)
the benefits to be derived through increased diversification and the addition
of new service offerings.
On September 26 and 27, 1996, the plan was discussed with senior
management at Bell and Tube Turns, and with the GFP Board. Soon thereafter,
calls were made to the independent directors of Bell to inform them of the
planning process that was underway. From early October through the first part
of December, extensive work was performed to complete the definitive terms and
conditions of the transaction, including, among other things, investigation of
the tax implications of the proposed transaction in light of alternative
structures, the transaction values for each of GFP, Bell and Tube Turns, the
composition of the Board of Directors of the surviving entity, and the role of
key officers of GFP, Bell and Tube Turns after completion of the transaction.
On October 10, 1996, GTC issued a press release announcing the proposed
transaction. During this period of time, each of GFP and GTC engaged legal
counsel and the Special Committee was established to review the fairness of the
proposed transaction. The Special Committee retained Bradford to deliver an
opinion as to whether the Merger Transactions were fair to the Unaffiliated
Shareholders from a financial point of view.
As part of its review of the Reorganization, the Special Committee
conducted interviews with senior management of each of Tube Turns and Bell on
December 4, 1996 and December 6, 1996, respectively, and asked the Special
Committee lawyers to perform certain due diligence review procedures. The
Special Committee then met on December 16, 1996, for purposes of considering
and voting on the approval of the Reorganization. Extensive discussions took
place and included outside counsel and Bradford. On December 16, 1996, Bradford
delivered its opinion to the Special Committee that the terms of the Merger
Transactions were fair to the Unaffiliated Shareholders from a financial point
of view. The Special Committee approved the Reorganization and submitted it to
the GTC Board for review and final approval. The GTC Board met on December 17,
1996, and approved the Reorganization. The Board of Directors of each of Tube
Turns, Bell and GFP met on December 18, 1996, December 20, 1996 and December
23, 1996, respectively, and approved the Reorganization. See "The
Reorganization--Opinion of Financial Advisor." At the December 17, 1996 meeting
of the GTC Board, Robert E. Gill and Jeffrey T. Gill disclosed their possible
conflict of interest created by their overlapping positions with GFP, Tube
Turns and Bell but, in accordance with Florida statutes, voted with the
Independent Directors to unanimously accept the recommendation of the Special
Committee and approve the Reorganization, as did the Boards of GFP, Tube Turns
and Bell, and each Board recommended that the transaction be submitted to their
respective shareholders for approval. In addition, the GTC Board unanimously
approved the other proposals to be considered at the Special Meeting, as
described in this Joint Proxy Statement/Prospectus, recommended that such
proposals be submitted to the shareholders of GTC for their approval, and
authorized the issuance of shares of GTC Common Stock in connection with the
Reorganization.
REASONS FOR THE REORGANIZATION; RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE
GTC BOARD
The Special Committee and the GTC Board believe that the terms of the
Reorganization are fair to, and in the best interests of, GTC and its
shareholders, and recommend that the shareholders of GTC vote in person or by
proxy at the GTC Special Meeting FOR the proposal to approve the Reorganization
Agreement.
In reaching their conclusions, the Special Committee and the GTC Board
considered a number of factors, including, among others: (i) the recent poor
financial performance of GTC; (ii) the expected benefits
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to be derived by GTC from the increase in the number of customers and markets
served as a result of the Reorganization; (iii) the need to refinance GTC on a
longer term basis; (iv) the potential for operating efficiencies in certain
administrative areas; (v) Bradford's fairness opinion; (vi) the expected
positive effect on the earnings of GTC expected to result from the
Reorganization, assuming Tube Turns and Bell continue to perform as expected
based on past history; (vii) the expected relative contributions of Tube Turns
and Bell post-Reorganization which are believed to be consistent with post-
Reorganization share ownership of GTC; and (viii) expected increased cash flow
to GTC post-Reorganization which is expected to positively affect GTC's
relationships with its customers and creditors. See "The Reorganization--Opinion
of Financial Advisor."
The recommendation of the Special Committee was determined without the
participation of either Robert E. Gill or Jeffrey T. Gill, who through their
controlling interest of GFP, also control 80% or more of the stock of GTC, Tube
Turns and Bell. The absence of the Gill's participation helped to ensure that
the Special Committee could review the proposed Reorganization based upon its
merits to the Unaffiliated Shareholders.
In considering the foregoing factors, the Special Committee took all
factors into consideration as a whole without assigning any relative weight to
any single factor. The GTC Board, in adopting the recommendation of the Special
Committee, relied on the findings and report of the Special Committee.
The Special Committee also considered certain potentially negative factors
in its deliberations concerning the Reorganization, including, among others,
the Risk Factors disclosed in this Joint Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION; RECOMMENDATION OF THE GFP BOARD
The GFP Board believes that the terms of the Reorganization are fair to,
and in the best interests of, GFP and its shareholders and recommends that the
shareholders of GFP vote in person or by proxy at the GFP Special Meeting FOR
the proposal to approve the Reorganization Agreement. The primary reason that
the GFP Board approved the Reorganization Agreement and is recommending its
approval to the GFP shareholders is that it believes that the Reorganization
will provide its shareholders with increased liquidity for, and more efficient
pricing of, their shareholdings.
In making its determination with respect to the Reorganization, the GFP
Board considered, among other things (i) information relating to the financial
performance, condition, business operations and prospects of GTC, GFP, Tube
Turns and Bell and current industry, economic and market conditions; (ii) the
terms of the Reorganization Agreement; and (iii) the opportunity for GFP
shareholders to become shareholders of a publicly traded company.
The GFP Board also considered certain potentially negative factors in its
deliberations concerning the Reorganization, including, among others, the poor
operating performance of GTC in 1995 and 1996 year-to-date, and the Risk
Factors disclosed in this Joint Proxy Statement/Prospectus.
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REASONS FOR THE REORGANIZATION; RECOMMENDATION OF THE TUBE TURNS BOARD
The Tube Turns Board believes that the terms of the Reorganization are
fair to, and in the best interests of, Tube Turns and its shareholders and
recommends that the shareholders of Tube Turns vote in person or by proxy at
the Tube Turns Special Meeting FOR the proposal to approve the Reorganization
Agreement. The primary reasons that the Tube Turns Board approved the
Reorganization Agreement and is recommending its approval to the Tube Turns
shareholders are that it believes that the Reorganization will (i) provide its
shareholders with increased liquidity for, and more efficient pricing of, their
shareholdings, (ii) provide Tube Turns with greater access to capital and
thereby enhance the company's growth opportunities, (iii) provide for an
expanded range of career growth opportunities for its employees, and (iv)
provide for an opportunity to realize a number of efficiencies in operations
and support services.
In making its determination with respect to the Reorganization, the Tube
Turns Board considered, among other things (i) information relating to the
financial performance, condition, business operations and prospects of GTC,
GFP, Tube Turns and Bell and current industry, economic and market conditions;
(ii) the terms of the Reorganization Agreement; and (iii) the opportunity for
Tube Turns' shareholders to become shareholders of a larger, publicly traded
company.
The Tube Turns Board also considered certain potentially negative factors
in its deliberations concerning the Reorganization, including, among others,
the poor operating performance of GTC in 1995 and 1996 year-to-date, and the
Risk Factors disclosed in this Joint Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION; RECOMMENDATION OF THE BELL BOARD
The Bell Board believes that the terms of the Reorganization are fair to,
and in the best interests of, Bell and its shareholders and recommends that the
shareholders of Bell vote in person or by proxy at the Bell Special Meeting FOR
the proposal to approve the Reorganization Agreement. The primary reasons that
the Bell Board approved the Reorganization Agreement and is recommending its
approval to the Bell shareholders are that it believes that the Reorganization
will (i) provide its shareholders with increased liquidity for, and more
efficient pricing of, their shareholdings, (ii) provide Bell with greater
access to capital and thereby enhance the company's growth opportunities, (iii)
provide for an expanded range of career growth opportunities for its employees,
and (iv) provide for an opportunity to realize a number of efficiencies in
operations and support services.
In making its determination with respect to the Reorganization, the Bell
Board considered, among other things: (i) information relating to the financial
performance, condition, business operations and prospects of GTC, GFP, Tube
Turns and Bell and current industry, economic and market conditions; (ii)the
terms of the Reorganization Agreement; and (iii) the opportunity for Bell
shareholders to become shareholders of a larger publicly traded company.
The Bell Board also considered certain potentially negative factors in its
deliberations concerning the Reorganization, including, among others, the poor
operating performance of GTC in 1995 and 1996 year-to-date, and the Risk
Factors disclosed in this Joint Proxy Statement/Prospectus.
OPINION OF FINANCIAL ADVISOR
The Special Committee has retained Bradford to act as its financial
advisor in connection with the Reorganization. The Special Committee selected
Bradford as its financial advisor because Bradford is a nationally recognized
investment banking firm, which, as a part of its investment banking business,
engages in the valuation of securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporations or
other purposes. The Special Committee also selected Bradford because of
Bradford's familiarity with the electronics contract manufacturing industry
generally. Representatives of Bradford
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attended the meeting of the Special Committee on December 16, 1996 and rendered
Bradford's oral opinion (which was subsequently confirmed in writing on December
17, 1996) that, as of the date of such opinion, the proposed consideration for
the Merger Transactions were fair, from a financial point of view, to the
Unaffiliated Shareholders. On December 16, 1996, the Special Committee
recommended to the GTC Board that the Reorganization be approved by the GTC
Board and submitted to the GTC shareholders for approval. Bradford subsequently
confirmed such opinion by delivery of a written opinion dated the date hereof,
which subsequent opinion supersedes the opinion dated December 17, 1996. A copy
of that opinion, which sets forth the assumptions made, matters considered and
limitations on the review undertaken, is attached as Appendix G hereto and
should be read in its entirety.
In conducting its analysis and delivering its opinions, Bradford
considered such financial and other factors as it deemed appropriate and
feasible under the circumstances including, among other things: (i) drafts and
executed copies of the Reorganization Agreement; (ii) the historical and
current financial position and results of operations of GTC, GFP, Tube Turns,
and Bell; (iii) certain internal operating data and financial analyses and
forecasts of GTC, GFP, Tube Turns, and Bell for the years beginning January 1,
1996 and ending December 31, 2000, as prepared by their respective senior
managements; (iv) certain financial and securities trading data of certain
other companies, the securities of which are publicly traded and that Bradford
believed to be comparable to GTC, Tube Turns and Bell or relevant to the
transactions; (v) the financial terms of other transactions that Bradford
believed to be relevant; (vi) reported price and trading activity for the GTC
Common Stock; and (vii) such other financial studies, analyses and
investigations as Bradford deemed appropriate for purposes of its opinions.
Bradford also held discussions with members of the senior management of GTC,
GFP, Tube Turns and Bell regarding the past and current business operations,
financial condition, and future prospects of each company. In addition,
Bradford took into account its assessment of general economic, market, and
financial conditions and its experience in other transactions as well as its
experience in securities valuation and its knowledge of the industries in which
GTC, GFP, Tube Turns and Bell operate generally.
Bradford's opinions are necessarily based upon general economic, market,
financial, and other conditions as they existed on their respective dates and
the information made available to Bradford through such dates. Bradford relied
upon the accuracy and completeness of all of the financial and other
information reviewed by it for purposes of its opinions and did not assume any
responsibility for independent verification of such information. With respect
to the internal financial analyses and forecasts supplied to Bradford, Bradford
has assumed, and the managements of the respective companies have represented,
that such analyses and forecasts were reasonably prepared on bases reflecting
the best currently available estimates and judgments of such company's senior
management as to the recent and likely future performance of such company. With
the explicit consent of the Special Committee and senior management, Bradford
did not consider, and its opinions did not address, GTC's exploration of
strategic alternatives, including the potential sale of one or more of its four
operating divisions. In addition, Bradford was not asked to consider, and its
opinion does not address the relative merits of the Merger Transactions as
compared to any other transactions in which GTC might engage, including the
disposition of one or more of its operating divisions. Furthermore, Bradford
has not made an independent evaluation or appraisal of the assets and
liabilities of GTC, GFP, Tube Turns, or Bell and has not been furnished with
any such evaluation or appraisal.
In preparing its report to the Special Committee, Bradford performed a
variety of financial and comparative analyses, including (i) pro forma merger
analysis; (ii) relative contribution analysis; (iii) discounted cash flow
analysis; (iv) leveraged buyout valuation analysis; and (v) comparable company
analysis. The summary of Bradford's analyses set forth below does not purport
to be a complete description of the analyses underlying Bradford's opinion. The
preparation of a fairness opinion is a complex process involving subjective
judgments and is not necessarily susceptible to partial analysis or summary
description. In arriving at its opinion, Bradford did not attribute any
particular weight to any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, Bradford believes that its analyses must be
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considered as a whole and that selecting portions of its analyses and the
factors considered by it, without considering all analyses and factors, could
create a misleading or incomplete view of the processes underlying such analyses
and its opinions. With respect to the comparable company analysis, no public
company, acquisition, or transaction utilized as a comparison is identical to
GTC, GFP, Bell, or Tube Turns or the Merger Transactions and such analyses
necessarily involve complex considerations and judgments concerning the
differences in financial and operating characteristics of the companies and
other factors that could affect the acquisition or public trading values of the
companies concerned. In performing its analyses, Bradford made numerous
assumptions with respect to industry performance, general business, economic,
market, and financial conditions, and other matters. The analyses performed by
Bradford are not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than suggested by such
analyses.
The following are some of the financial and comparative analyses which
were performed by Bradford in arriving at its opinion as to the fairness of the
consideration paid by GTC.
(a) Pro Forma Merger Analysis. Bradford reviewed certain forecasted pro
forma financial information for GTC after the Reorganization, as
provided by the management of each of GTC, GFP, Tube Turns and Bell.
Bradford analyzed the impact of the Reorganization on the forecasted
earnings per share ("EPS"), revenues, earnings before interest and
taxes ("EBIT"), earnings before interest, taxes, depreciation and
amortization ("EBITDA") and the net income of the combined company
for the fiscal year ending December 31, 1997. The results of the pro
forma merger analysis suggest that the Reorganization will be
accretive (non-dilutive) to the EPS of GTC in each of the years
analyzed. The actual results achieved by the combined company may
vary from management's projected results and the variations may be
material.
(b) Relative Contribution Analysis. For the year ended December 31, 1996,
Bradford analyzed the estimated revenues, gross profit, EBITDA, EBIT,
and pretax income of each of GTC, Tube Turns and Bell before the
Reorganization in order to compare the contribution of each of GTC,
Tube Turns and Bell as a percentage of GTC after the Reorganization
versus the projected fully-diluted ownership of GTC by the existing
shareholders of each of GTC, Tube Turns and Bell after the
Reorganization. Bradford observed that Tube Turns shareholders and
Bell shareholders, other than GFP, are expected to own approximately
1.2% and 3.5%, respectively, of GTC after the Reorganization. Such
analysis indicated that for the year ended December 31, 1996, Bell
would contribute 19.2% of revenue, 51.1% of EBITDA (before corporate
overhead), and 139.4% of pretax income (before corporate overhead) of
GTC after the Reorganization. Such analysis also indicated that for
the year ended December 31, 1996, Tube Turns would contribute 8.0% of
revenue, 13.4% of EBITDA (before corporate overhead), and 63.5% of
pretax income (before corporate overhead) of GTC after the
Reorganization.
(c) Discounted Cash Flow Analysis. Using discounted cash flow analysis,
based on information obtained from management of each of Bell and
Tube Turns, Bradford discounted to present value the projected future
cash flows that Bell and Tube Turns are projected to produce through
2001, under various circumstances, assuming each of Bell and Tube
Turns performed in accordance with the earnings forecast of
management. Bradford calculated terminal values for Bell and Tube
Turns (i.e., the values at the 2001 year end) by applying multiples
to EBITDA and net income in the year 2001. The cash flow streams and
terminal values were then discounted to present values using
different discount rates chosen to reflect different assumptions
regarding each of Bell's and Tube Turns' cost of capital.
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(d) Leveraged Buyout Valuation Analysis. Bradford utilized projections
for each of Bell and Tube Turns to analyze the value of each as a
stand-alone entity in a leveraged transaction. The analysis focused
on determining the values for Bell and Tube Turns which would enable
an equity investor to achieve a five-year internal rate of return of
at least 35% while maintaining reasonable leverage ratios and debt
amortization. Based upon its experience and understanding of
leveraged transactions, Bradford assumed that these return levels
would be required in a transaction such as the one contemplated by
this analysis, and that such transactions would be funded with a
capital structure consisting of 25% equity, 30% subordinated debt and
45% senior bank financing. The costs for these financing instruments
were examined at various market rates. The subordinated debt
financing was assumed to require an interest rate of 12% and
associated warrants for 15% to 20% of the company's fully-diluted
equity. The senior bank financing was assumed to require an interest
rate of 9%.
(e) Comparable Company Analysis. Using publicly available information,
Bradford reviewed selected financial data, including revenues,
historical and projected earnings and EBITDA for several publicly
traded companies engaged in the digital and analog recording
equipment manufacturing, electronic measurement device manufacturing
and technical contracting services industries (the "Bell Comparable
Group"). Bradford calculated, among other things, current market
price as a multiple of estimated 1996 earnings (which ranged from
9.6x to 33.7x with a median multiple of 12.2x);current market price
as multiple of estimated 1997 earnings (which ranged from 7.0x to
24.9x with a median multiple of 11.7x); total firm value (defined as
equity market value plus net debt) as a multiple of last twelve
months ("LTM") revenues (which ranged from 0.4x to 4.8x with a median
multiple of 0.9x); and total firm value as a multiple of LTM EBITDA
(which ranged from 4.2x to 30.4x with a median multiple of 7.6x).
Bradford then compared the Bell Comparable Group multiples to the
corresponding multiples in the Bell Merger including 12.0x estimated
1996 Bell earnings, 7.6x estimated 1997 Bell earnings, 0.8x LTM Bell
revenues and 6.2x LTM Bell EBITDA.
Bradford also reviewed selected financial data, including revenues,
historical and projected earnings and EBITDA for several publicly
traded companies engaged in the steel processing, automotive
component manufacturing and piping/valve manufacturing industries
(the "Tube Turns Comparable Group"). Bradford calculated, among other
things, current market price as a multiple of estimated 1996 earnings
(which ranged from 8.7x to 45.7x with a median multiple of
11.1x);current market price as multiple of estimated 1997 earnings
(which ranged from 7.4x to 16.8x with a median multiple of 8.9x);
total firm value (defined as equity market value plus net debt) as a
multiple of LTM revenues (which ranged from 0.4x to 2.0x with a
median multiple of 0.6x); and total firm value as a multiple of LTM
EBITDA (which ranged from 5.3x to 13.3x with a median multiple of
5.6x). Bradford then compared the Tube Turns Comparable Group
multiples to the corresponding multiples in the Tube Turns Merger
including 8.6x estimated 1996 Tube Turns earnings, 6.0x estimated
1997 Tube Turns earnings, 0.6x LTM Tube Turns revenues and 5.6x LTM
Tube Turns EBITDA.
Bradford also reviewed selected financial data, including revenues,
historical and projected earnings and EBITDA for several publicly
traded companies engaged in the electronics contract manufacturing
industry (the "GTC Comparable Group"). Bradford calculated, among
other things, current market price as a multiple of estimated 1996
earnings (which ranged from 7.2x to 38.7x with a median multiple of
17.9x);current market price as multiple of estimated 1997 earnings
(which ranged from 9.9x to 24.7x with a median multiple of 15.4x);
total firm value (defined as equity market value plus net debt)
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as a multiple of LTM revenues (which ranged from 0.3x to 3.1x with a
median multiple of 0.7x); and total firm value as a multiple of LTM
EBITDA (which ranged from 5.2x to 73.6x with a median multiple of
9.2x). Bradford then compared the GTC Comparable Group multiples to
the corresponding multiples for GTC. Bradford also noted that the
market price to estimated 1996 earnings multiple for GTC could not be
calculated as GTC is projected to incur a net operating loss for the
year ended December 31, 1996.
Bradford has advised the Special Committee that Bradford does not believe
that any person (including a shareholder of GTC) other than the Special
Committee has the legal right to rely on the fairness opinions for any claim
arising under state law and that, should any such claim be brought, Bradford
will assert such a defense. Furthermore, nothing in the fairness opinions should
be deemed to constitute a recommendation by Bradford to any shareholders of GTC
Common Stock to vote in favor of the Reorganization.
Pursuant to an engagement letter dated November 13, 1996, Bradford has
earned fees totaling $90,000 for its services as financial advisor to the
Special Committee in connection with the Reorganization including delivery of
the fairness opinions. In addition, Bradford will receive an additional $20,000
upon the closing of the Reorganization; GTC has also agreed to indemnify
Bradford against certain liabilities arising out of or in connection with the
services rendered by Bradford in connection with the engagement.
STOCK OPTIONS
At the Effective Time, pursuant to the Option Assumption Agreements
described below, GTC will assume all of GFP's, Tube Turns' and Bell's respective
rights and obligations with respect to certain outstanding stock options held by
certain employees of GFP, Tube Turns and Bell, respectively, which are
outstanding and unexercised at the Effective Time (respectively, the "GFP
Options," the "Tube Turns Options," and the "Bell Options"), whether or not the
GFP Options, the Tube Turns Options and the Bell Options are then exercisable.
GTC will have received from each of the holders of GFP Options, Tube Turns
Options and Bell Options a duly executed Option Assumption Agreement on or prior
to the Closing Date. Immediately following such assumption, GTC will substitute
for each of the GFP Options, the Tube Turns Options and the Bell Options, NSOs
to be granted, as applicable, under the Key Employees Plan and the Independent
Directors' Plan (the "Nonqualified Options") with vesting terms and conditions
matching those contained in the GFP Options, the Tube Turns Options and the Bell
Options, respectively, at the Effective Time to the extent such vesting terms
and conditions are consistent with the terms and conditions of such Plans and
such other revisions to such terms and conditions as GTC, GFP, Tube Turns and
Bell shall mutually agree upon. The Nonqualified Options shall thereafter
evidence the right to purchase the number of shares of GTC Common Stock equal to
the product (rounded up or down as appropriate to a whole share) of (i) the
number of shares of GFP Common Stock, Tube Turns Common Stock or Bell Common
Stock, as appropriate, covered by such GFP Option, Tube Turns Option or Bell
Option, as appropriate, immediately prior to the Effective Time, multiplied by
(ii) the GFP Conversion Ratio, the Tube Turns Conversion Ratio, or the Bell
Conversion Ratio, as appropriate. The exercise price of such Nonqualified
Options for each share of GTC Common Stock subject thereto shall be equal to the
quotient rounded up or down as appropriate (to the nearest whole cent) obtained
by dividing (i) the per share exercise price for shares of GFP Common Stock,
Tube Turns Common Stock or Bell Common Stock, as appropriate, subject to such
GFP Option, Tube Turns Option or Bell Option, as appropriate, immediately prior
to the Effective Time, by (ii) the GFP Conversion Ratio, the Tube Turns
Conversion Ratio, or the Bell Conversion Ratio, as appropriate.
At least ten (10) days prior to the Effective Time, GTC will deliver to
each holder of a GFP Option, a Tube Turns Option and a Bell Option an
appropriate written notice and option assumption agreement (the "Option
Assumption Agreement") setting forth GTC's assumption of the GFP Option, Tube
Turns Option and Bell Option, as appropriate, and substitution of the
Nonqualified Option in accordance with the terms of the Reorganization
Agreement. The form of such Option Assumption Agreement shall be delivered to
GFP, Tube
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Turns and Bell prior to its distribution to holders of the GFP Options, Tube
Turns Options and Bell Options and shall be subject to their reasonable
approval.
Pursuant to the Reorganization Agreement, GTC agrees to cause the shares of
GTC Common Stock issuable upon exercise of the Nonqualified Options to be
registered with the Commission on a Form S-8 Registration Statement as promptly
following the Effective Time as is reasonably practicable. GTC further agrees to
cause the shares of GTC Common Stock issuable upon exercise of the Nonqualified
Options to be registered or exempt from the registration requirements of all
applicable state securities laws, rules and regulations.
Approval by the shareholders of each of GFP, Tube Turns and Bell of the
Reorganization Agreement shall constitute authorization and approval of any and
all of the actions described above regarding such options.
DILUTION
The net tangible book value of GTC at September 30, 1996 was $25,227,000 or
$1.56 per share. Net tangible book value per share is equal to GTC's total
assets (excluding intangible assets) less its total liabilities, divided by the
total number of outstanding shares of GTC Common Stock. After giving effect to
(i) the pro forma adjustments to net tangible book value for the Reorganization;
(ii) the issuance of 38,819,673 shares of GTC Common Stock to the shareholders
of GFP, Tube Turns and Bell; and (iii) the cancellation of 13,039,625 shares of
GTC Common Stock currently held by GFP, the pro forma combined net tangible book
value of GTC would have been $36,266,000 or $0.86 per share. This represents
an immediate decrease in such net tangible book value of $0.70 per share to
the existing shareholders and an immediate dilution of $0.64 per share to new
shareholders receiving shares in the Reorganization. The following table
illustrates this per share dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed conversion price per share..................................... $ 1.50
Net tangible book value per share as of September 30, 1996............. $ 1.56
Decrease per share attributable to new shareholders.................... (0.70)
------
Pro forma combined net tangible book value per share after 0.86
the Reorganization.................................................... ------
Dilution per share to new shareholders................................. $(0.64)
======
</TABLE>
In addition, as of January 15, 1997, certain Executive Officers and
Directors of GFP, Tube Turns and Bell hold options to purchase shares of GFP
Common Stock, Tube Turns Common Stock and Bell Common Stock, respectively, at
various exercise prices per share. At the Effective Time, GTC will convert such
options into options to purchase shares of GTC Common Stock, the number of which
will be determined by multiplying the applicable Conversion Ratio by the number
of options, and the exercise price of which will be determined by dividing the
exercise price of such option by the applicable Conversion Ratio. Based upon a
GTC Average Closing Price of $1.50 per share, the number of shares of GTC Common
Stock issuable under such options would be 4,005,387 and the average exercise
price would be $0.62. If these options were assumed to be exercised in full as
of September 30, 1996, pro forma combined net tangible book value per share
would be $0.84 per share, representing dilution to new shareholders of $0.66
per share. Dilution is determined by subtracting the per share pro forma net
tangible book value of the GTC Common Stock after the Reorganization from the
assumed conversion price per share.
SHARES SUBJECT TO VESTING
At the Effective Time, certain shares of GFP Common Stock, Tube Turns
Common Stock and Bell Common Stock will be subject to vesting requirements under
existing stock purchase and restriction plans of such corporations (the "Stock
Plans"). While the Reorganization Agreement provides that such Stock Plans
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will terminate at the Effective Time, the shares of GTC Common Stock issued for
such shares in the Reorganization will continue to be subject to such vesting
requirements.
ACCOUNTING TREATMENT
GTC intends to account for the Reorganization in accordance with generally
accepted accounting principles governing a downstream merger, under which the
Merger is accounted for as a purchase of the minority interests of GTC. Other
than any adjustments necessary to reflect the purchase of the minority interests
of GTC, the assets and liabilities of GTC, Tube Turns and Bell, each of which
are under the common control of GFP, will be combined based on the respective
carrying values of the accounts in the historical financial statements of each
entity. The issuance of GTC Common Stock to the shareholders of Tube Turns and
Bell, other than GTC (as successor by merger to GFP), in connection with the
Tube Turns Merger and the Bell Merger, respectively, will be accounted for as a
purchase and accordingly, the amount by which the fair market value of the GTC
Common Stock issued exceeds the fair market value of the proportional share of
the net assets of Tube Turns and Bell, if any, will be recorded by GTC as
goodwill.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The parties to the Reorganization have not and do not intend to seek a
ruling from the IRS as to the federal income tax consequences of the
Reorganization. Instead, GTC, GFP, Tube Turns and Bell have obtained the opinion
of Wyatt, Tarrant & Combs (the "Opinion") as to certain of the expected federal
income tax consequences of the Reorganization, a copy of which is attached as an
exhibit to the Registration Statement.
The Opinion does not address, among other matters: (i) state, local,
foreign or other federal tax consequences of the Reorganization not specifically
addressed therein; (ii) federal income tax consequences to shareholders of GFP,
GTC, Bell and Tube Turns subject to special rules under the Code, such as
foreign persons, tax-exempt organizations, insurance companies, financial
institutions, dealers in stocks and securities, and persons who do not own such
stock as a capital asset; (iii) federal income tax consequences affecting shares
of GTC, GFP, Tube Turns and Bell stock acquired upon exercise of stock options,
stock purchase plan rights or otherwise as compensation; (iv) the tax
consequences to holders of warrants, options or other rights to acquire shares
of such stock; and (v) the tax consequences of the Spin Off to any party
thereto.
The Spin Off will, unless the requirements of Sections 368(a)(1)(D) and 355
of the Code are satisfied, result in recognition of gain (but not loss) by GFP
equal to the difference between the value of the shares of Partners-V, Unison
and BW distributed to the shareholders of GFP and GFP's adjusted basis in such
shares. Each GFP shareholder will recognize ordinary income in an amount up to
the lesser of the value of the shares of Partners-V, Unison and BW it receives
or its pro-rata share of GFP's current and accumulated earnings and profits. If
the value of the shares of Partners-V, Unison and BW received by a GFP
shareholder exceed its pro-rata share of GFP's current and accumulated earnings
and profits, the excess will reduce its adjusted basis in its shares. To the
extent the value of the shares of Partners-V, Unison and BW also exceeds a GFP
shareholder's adjusted basis in its GFP shares, it will recognize a capital gain
or ordinary income equal to such excess depending upon whether its GFP shares
are a capital asset in its hands. As the successor corporation in the merger,
GTC would become liable for the federal income taxes incurred in respect of any
gain recognized by GFP in the Spin Off. Counsel will not render an opinion as to
whether the Spin Off satisfies the requirements of Section 368(a)(1)(D) and 355
of the Code, and it is anticipated that the Spin Off will not satisfy those
requirements.
Subject to the conditions, qualifications, representations and assumptions
contained herein and in the Opinion, counsel has opined that:
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<PAGE>
THE MERGER
(i) The Merger of GFP with and into GTC will constitute a
reorganization within the meaning of Section 368(a)(1)(A) of the Code.
(ii) GFP and GTC will each be "a party to a reorganization" within the
meaning of Section 368(b) of the Code.
(iii) No gain or loss will be recognized by GFP as a result of the
Merger.
(iv) No gain or loss will be recognized by GTC as a result of the
Merger.
(v) The tax basis of the assets received by GTC will be the same as
the tax basis of such assets of GFP immediately prior to the Merger.
(vi) The holding period of the assets of GFP received by GTC will in
each instance include the period for which such assets were held by GFP.
(vii) No gain or loss will be recognized by the shareholders of GFP as a
result of the exchange of GFP Common Stock for GTC Common Stock pursuant to the
Merger, except that a gain or loss will be recognized on the receipt of any
cash in lieu of a fractional share. Assuming that the GFP Common Stock is held
as a capital asset by the respective GFP shareholders, any gain or loss
recognized as a result of the receipt of cash in lieu of a fractional share
will be a capital gain or loss equal to the difference between the cash
received and that portion of the holder's tax basis in the GFP shares allocable
to the fractional share.
(viii) The tax basis of GTC Common Stock to be received by the
shareholders of GFP will be the same as the tax basis of the GFP Common Stock
surrendered in exchange therefor (reduced by any amount allocable to a
fractional share interest for which cash is received).
(ix) The holding period of the GTC Common Stock to be received by the
shareholders of GFP will include the holding period of the GFP Common Stock
surrendered in exchange therefor, provided the GFP Common Stock was held as a
capital asset by the shareholders of GFP on the date of the exchange.
(x) A shareholder of GFP who perfects his dissenter's rights and who
receives payment of the fair market value of his shares of GFP Common Stock
will be treated as having received such payment in redemption of such stock.
Such redemption will be subject to the conditions and limitations of Section
302 of the Code.
THE TUBE TURNS MERGER
(i) The acquisition by New Tube Turns of substantially all of the
assets of Tube Turns in exchange for shares of GTC Common Stock and the
assumption of liabilities of Tube Turns pursuant to the Tube Turns Merger will
constitute a reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(D) of the Code.
(ii) Tube Turns, GTC, and New Tube Turns will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code.
(iii) No gain or loss will be recognized by Tube Turns as a result of
the Tube Turns Merger.
(iv) No gain or loss will be recognized by New Tube Turns or GTC as a
result of the Tube Turns Merger.
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<PAGE>
(v) The tax basis of the assets received by New Tube Turns will be the
same as the tax basis of such assets of Tube Turns immediately prior to the
Tube Turns Merger.
(vi) The holding period of the assets of Tube Turns received by New
Tube Turns will in each instance include the period for which such assets were
held by Tube Turns.
(vii) No gain or loss will be recognized by the shareholders of Tube
Turns as a result of the exchange of Tube Turns Common Stock for GTC Common
Stock pursuant to the Tube Turns Merger, except that a gain or loss will be
recognized on the receipt of any cash in lieu of a fractional share. Assuming
that the Tube Turns Common Stock is held as a capital asset by the respective
Tube Turns shareholders, any gain or loss recognized as a result of the receipt
of cash in lieu of a fractional share will be a capital gain or loss equal to
the difference between the cash received and that portion of the holder's tax
basis in the Tube Turns Common Stock allocable to the fractional share.
(viii) The tax basis of GTC Common Stock to be received by the
shareholders of Tube Turns will be the same as the tax basis of the Tube Turns
Common Stock surrendered in exchange therefor (reduced by any amount allocable
to a fractional share interest for which cash is received).
(ix) The holding period of the GTC Common Stock to be received by
shareholders of Tube Turns will include the holding period of the Tube Turns
Common Stock surrendered in exchange therefor, provided the Tube Turns Common
Stock was held as a capital asset by the shareholders of Tube Turns on the date
of the exchange.
(x) A shareholder of Tube Turns who perfects his dissenter's rights
and who receives payment of the fair market value of his shares of Tube Turns
Common Stock will be treated as having received such payment in redemption of
such stock. Such redemption will be subject to the conditions and limitations
of Section 302 of the Code.
THE BELL MERGER
(i) The acquisition by New Bell of substantially all of the assets of
Bell in exchange for shares of GTC Common Stock and the assumption of
liabilities of Bell pursuant to the Bell Merger will constitute a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Code.
(ii) Bell, GTC, and New Bell will each be "a party to a reorganization"
within the meaning of Section 368(b) of the Code.
(iii) No gain or loss will be recognized by Bell as a result of the Bell
Merger.
(iv) No gain or loss will be recognized by New Bell or GTC as a result
of the Bell Merger.
(v) The tax basis of the assets received by New Bell will be the same
as the tax basis of such assets of Bell immediately prior to the Bell Merger.
(vi) The holding period of the assets of Bell received by New Bell will
in each instance include the period for which such assets were held by Bell.
(vii) No gain or loss will be recognized by the shareholders of Bell as
a result of the exchange of Bell shares for GTC Common Stock pursuant to the
Bell Merger, except that a gain or loss will be recognized on the receipt of
any cash in lieu of a fractional share. Assuming that the Bell Common Stock is
held as a capital asset by the respective Bell shareholders, any gain or loss
recognized as a result of the receipt of cash in lieu of a fractional share
will be a capital gain or loss equal to the difference between the cash
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<PAGE>
received and that portion of the holder's tax basis in the Bell Common Stock
allocable to the fractional share.
(viii) The tax basis of GTC Common Stock to be received by the
shareholders of Bell will be the same as the tax basis of the Bell Common Stock
surrendered in exchange therefor (reduced by any amount allocable to a
fractional share interest for which cash is received).
(ix) The holding period of the GTC Common Stock to be received by the
shareholders of Bell will include the holding period of the Bell Common Stock
surrendered in exchange therefor, provided the Bell Common Stock was held as a
capital asset by the shareholders of Bell on the date of the exchange.
(x) A shareholder of Bell who perfects his dissenter's rights and who
receives payment of the fair market value of his shares of Bell Common Stock
will be treated as having received such payment in redemption of such stock.
Such redemption will be subject to the conditions and limitations of Section
302 of the Code.
THE GTC CONTRIBUTION
(i) No gain or loss will be recognized by GTC on its transfer of
assets to New GTC in exchange for New GTC stock and the assumption by New GTC
of certain liabilities of GTC.
(ii) No gain or loss will be recognized by New GTC upon the issuance of
New GTC stock in consideration for the assets transferred to it by GTC.
(iii) The basis of each asset received by New GTC will be the same as
the basis of that asset of GTC immediately before its transfer.
(iv) The holding period of each asset received by New GTC will include
the period during which that asset was held by GTC.
(v) The basis of the New GTC stock received by GTC will be the same as
the basis of the assets transferred by GTC to New GTC, decreased by the sum of
(a) the liabilities of GTC assumed by New GTC and (b) the amount of liabilities
to which the transferred assets are subject.
(vi) The holding period of the New GTC stock received by GTC will
include the period during which GTC held the transferred assets, provided the
transferred assets are capital assets on the date of transfer.
(vii) New GTC will not succeed to any tax attributes, including the
earnings and profits, of GTC.
The Opinion is based on the Code, the Treasury Regulations promulgated
thereunder, judicial decisions and administrative pronouncements of the IRS,
all existing and in effect on the date of this Registration Statement and all
of which are subject to change at any time, possibly retroactively. Any such
change could have a material impact on the conclusions reached in the Opinion.
The Opinion represents only such counsel's best judgment as to the expected
federal income tax consequences of the Reorganization and is not binding on the
IRS or the courts. The IRS may challenge the conclusions stated therein and
shareholders of GTC, GFP, Tube Turns and Bell may incur the cost and expense of
defending positions taken by them with respect to the Reorganization. A
successful challenge by the IRS could have material adverse consequences to the
parties to the Reorganization, including shareholders of GTC, GFP, Tube Turns
and Bell.
In rendering the Opinion, counsel has relied, as to factual matters,
solely on the continuing accuracy of (i) the description of the facts relating
to the Reorganization contained in the Reorganization Agreement and
Registration Statement, (ii) the factual representations and warranties
contained in the Reorganization
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Agreement and Registration Statement and related documents and agreements, and
(iii) certain factual matters addressed by representations made by certain
executive officers of GTC, GFP, Tube Turns, New Tube Turns, Bell and New Bell,
as further described in the Opinion and Exhibits thereunder. Events occurring
after the date of the Opinion could alter the facts upon which the Opinion is
based, in which event the conclusions reached therein and in this summary could
be materially impacted.
ACCORDINGLY, FOR ALL OF THE ABOVE REASONS, SHAREHOLDERS OF GTC, GFP, TUBE
TURNS AND BELL ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC
TAX CONSEQUENCES TO THEM OF THE REORGANIZATION, INCLUDING THE APPLICABILITY AND
EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS.
REGULATORY APPROVALS
Under the Reorganization Agreement, the obligations of GTC, GFP, Tube Turns
and Bell to consummate the Reorganization are conditioned upon the receipt of
certain regulatory approvals. Other than as discussed below, GTC, GFP, Tube
Turns and Bell believe that no such regulatory and other approvals are required.
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C.
(S)18a (the "HSR Act"), the Reorganization may not be consummated by GTC and
certain shareholders of GFP unless notification has been given and certain
information has been furnished to the Federal Trade Commission (the "FTC") and
the Antitrust Division of the United States Department of Justice (the
"Antitrust Division") and the waiting period required by the HSR Act has expired
or been terminated, or an exemption therefrom has been obtained.
RESALE RESTRICTIONS
Shares of GTC Common Stock to be issued to certain shareholders of GFP,
Tube Turns and Bell in connection with the Reorganization will be subject to
certain resale limitations pursuant to Rule 145 under the Securities Act. In
general, these limitations will consist of volume and manner of sale
restrictions on the resale of the shares of GTC Common Stock. Pursuant to the
Reorganization Agreement, each of GFP, Tube Turns and Bell shall deliver to GTC
a letter identifying all persons who are, at the time of the Special Meetings,
Affiliates of each of GFP, Tube Turns and Bell for purposes of Rule 145 under
the Securities Act. It is a condition to GTC's obligations to consummate the
Reorganization that each of GFP, Tube Turns and Bell shall cause each
shareholder of GFP, Tube Turns and Bell, respectively, who is identified as an
Affiliate of GFP, Tube Turns or Bell, as applicable, to deliver to GTC on or
prior to the Effective Time a written statement to the effect that such person
will not offer to sell, transfer or otherwise dispose of any shares of GTC
Common Stock issued to such person in the Reorganization, except in accordance
with the applicable provisions of the Securities Act and the rules and
regulations of the Commission. GTC may place legends on certificates
representing shares of GTC Common Stock that are issued to shareholders of GFP,
Tube Turns and Bell in the Reorganization to restrict such transfers.
NASDAQ STOCK MARKET
The GTC Common Stock is quoted on the Nasdaq Stock Market. Pursuant to the
Reorganization Agreement, GTC agreed to file an additional shares notification
with Nasdaq to approve for listing, subject to official notice of its issuance,
the shares of GTC Common Stock to be issued in connection with the Merger, the
Tube Turns Merger and the Bell Merger. To remain eligible for continued
inclusion in the Nasdaq Stock Market, the GTC Common Stock must meet Nasdaq's
minimum bid requirement, the market value of public float and net tangible asset
requirement. Recently proposed changes to the Nasdaq regulations, if approved,
would impose stricter financial requirements and a minimum market price of $1.00
per share. See "Risk Factors--Rules for Inclusion in the Nasdaq Stock Market."
REPRESENTATIONS AND WARRANTIES
The Reorganization Agreement contains various customary representations and
warranties relating to, among other things: (i) the due organization, power,
authority and standing of GTC, GFP, Tube Turns and Bell and similar corporate
matters; (ii) the authorization, execution, delivery and enforceability of the
Reorganization Agreement; (iii) the capital structure of GTC, GFP, Tube Turns
and Bell; (iv) violations of any instruments or law; (v) required consents or
approvals; (vi) certain documents filed by GTC with the Commission; and (vii)
financial statements of GTC, GFP, Tube Turns and Bell, and the accuracy of
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<PAGE>
information contained therein. With respect to GFP, Tube Turns and Bell, the
Reorganization Agreement contains representations and warranties as to
litigation, conduct of business in the ordinary course and the absence of
certain changes or events that would have a Material Adverse Effect (as defined
in the Reorganization Agreement) on the business, results of operations or
financial condition of GFP, Tube Turns or Bell, as the case may be, insurance,
taxes, properties, environmental matters, employee benefit plans, labor matters,
undisclosed liabilities, contracts and commitments.
For purposes of the Reorganization Agreement, "Material Adverse Effect" is
defined to mean any change or effect that, individually or when taken together
with all other such changes or effects, is or is reasonably likely to be
materially adverse to the business, assets, prospects, liabilities, results of
operations or condition (financial or otherwise) of the entity to which the term
relates and such entities' subsidiaries, taken as a whole.
CERTAIN COVENANTS
Each of GTC, GFP, Tube Turns and Bell have agreed, among other things,
prior to consummation of the Reorganization, except as otherwise permitted by
the Reorganization Agreement: (i) to cooperate fully in making application for
all necessary regulatory approvals and obtaining all other consents necessary
for consummation of the Reorganization; (ii) to carry on its business in the
ordinary course and not engage in any new line of business or enter into any
agreement, transaction or activity or make any commitment except those in the
ordinary course of business; (iii) not to change or amend its articles of
incorporation or bylaws, which change or amendment would have a Material Adverse
Effect; (iv) not to issue, sell or grant options, warrants or rights to purchase
or subscribe to, or enter into any arrangement or contract with respect to the
issuance or sale of any of its capital stock or rights or obligations
convertible into or exchangeable for any shares of its capital stock and, except
as contemplated in the Reorganization Agreement, not alter the terms of any
presently outstanding options or make any changes (by split-up, combination,
reorganization or otherwise) in its capital structure; (v) not to acquire or
enter into an agreement to acquire, by merger, consolidation or purchase of
stock or assets, any business or entity; (vi) to use its reasonable efforts to
preserve intact its corporate existence, goodwill and business organization, to
keep its officers and employees available and to preserve its relationships with
customers, suppliers and others with which it has business relations; (vii) not
to create, incur or assume any long-term debt (including obligations in respect
of capital leases which individually involve annual payments in excess of
$250,000 or, except in the ordinary course of business under existing lines of
credit, create, incur or assume any short-term debt for borrowed money, (viii)
not to assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person, except in the ordinary course of business and consistent with industry
practice, (ix) not to make any loans or advances to any other person, except in
the ordinary course of business and consistent with industry practice, (x) not
to make any capital contributions to, or investments in, any person, except in
the ordinary course of business and consistent with industry practices with
respect to investments, (xi) not to make any single capital expenditure
involving in excess of $1,000,000 in the case of Tube Turns, $500,000 in the
case of Bell, and $2,000,000 in the case of GTC, and to limit the sum of all
capital expenditures to $2,000,000 in the case of Tube Turns, $2,500,000 in the
case of Bell and $5,000,000 in the case of GTC; (xii) not to enter into, modify
or extend in any manner the terms of any employment, severance or similar
agreements with officers and directors nor grant any increase in the
compensation of officers, directors or employees other than increases in the
ordinary course of business or consistent with industry practices; (xiii) to
perform in all material respects all of its obligations under all of each of
their respective material contracts and not enter into, assume or amend any
contract or commitment that would be a material contract other than contracts to
provide products or services entered into in the ordinary course of business;
(xiv) to use its reasonable efforts to maintain in full force and effect and in
the same amounts policies of insurance; and (xv) to use its reasonable efforts
to continue to collect its accounts receivable in the ordinary course of
business and consistent with past practices.
Each of GTC, GFP, Tube Turns and Bell also agreed to provide each other
party and its accountants, counsel and other authorized representatives full
access, during reasonable business hours
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<PAGE>
and under reasonable circumstances, to any and all of its premises, properties,
contracts, commitments, books, records and other information pertaining to its
business as each other party shall from time to time reasonably request. Each of
such parties also agreed not to intentionally take or cause to be taken any
action, whether before or after the Effective Time, that would disqualify the
Merger, the Tube Turns Merger and the Bell Merger as a "reorganization" within
the meaning of Section 368 of the Code.
CONDITIONS TO CONSUMMATION OF THE REORGANIZATION
The respective obligations of GTC, GFP, Tube Turns and Bell to effect the
Reorganization are subject to the fulfillment or waiver of each of the following
conditions, among others: (i) the Reorganization Agreement shall have received
the requisite approval of the holders of the outstanding shares of GTC Common
Stock, GFP Common Stock, Tube Turns Common Stock and Bell Common Stock entitled
to vote thereon; (ii) the Registration Statement shall have become effective
under the Securities Act and shall not be the subject of any stop order, and GTC
shall have received all state securities laws or "Blue Sky" permits and other
authorizations necessary to issue the GTC Common Stock in connection with the
Reorganization and otherwise consummate the transactions contemplated by the
Reorganization Agreement; (iii) no temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction, or other legal restraint or prohibition preventing the
consummation of the transactions contemplated by the Reorganization Agreement,
shall be in effect; (iv) GTC, GFP, Tube Turns and Bell shall have each received
a written opinion of counsel as to certain federal income tax consequences of
the Reorganization (other than the Spin Off); and (v) the applicable waiting
periods under the HSR Act shall have expired.
The obligation of GTC to consummate on the Closing Date the transactions
contemplated by the Reorganization Agreement is subject to the satisfaction of
each of the following conditions on or prior to the Closing Date, unless
expressly waived in writing by GTC: (i) GTC shall have received the written
opinion of counsel for GFP, Tube Turns and Bell; (ii) the representations and
warranties of each of GFP, Tube Turns and Bell set forth in the Reorganization
Agreement shall be true and correct, except to the extent that the aggregate
effect of the inaccuracies in such representations and warranties as of the
applicable times (each considered without any exclusions for lack of Material
Adverse Effect set forth in the individual representation or warranty) does not
constitute a Material Adverse Effect on each of GFP, Tube Turns and/or Bell, and
GTC shall have received a certificate of the chief executive officer of each of
GFP, Tube Turns and Bell to such effect; (iii) each of the agreements and
covenants to be performed and complied with by each of GFP, Tube Turns and Bell
pursuant to the Reorganization Agreement prior to the Effective Time shall have
been duly performed and complied with except to the extent that the aggregate
effect of any nonperformance or noncompliance by GFP, Tube Turns and/or Bell
(each considered without any exclusions for lack of Material Adverse Effect set
forth in the individual covenant or agreement) does not constitute a Material
Adverse Effect on GFP, Tube Turns and/or Bell, and GTC shall have received a
certificate of the chief executive officer of each of GFP, Tube Turns and Bell
to such effect; and (iv) each of GFP, Tube Turns and Bell shall have delivered
to GTC a tax certificate in the form attached to the Reorganization Agreement.
The obligation of each of GFP, Tube Turns and Bell to consummate, on the
Closing Date, the transactions contemplated by the Reorganization Agreement will
be subject to the satisfaction of each of the following conditions on or prior
to the Closing Date, unless expressly waived, in writing, by each of GFP, Tube
Turns and Bell: (i) each of GFP, Tube Turns and Bell shall have received the
written opinion of counsel for GTC; (ii) the representations and warranties of
GTC set forth in the Reorganization Agreement shall be true and correct except
to the extent that the aggregate effect of the inaccuracies in such
representations and warranties as of the applicable times (each considered
without any exclusions for lack of Material Adverse Effect set forth in the
individual representation or warranty) does not constitute a Material Adverse
Effect on GTC, and GFP, Tube Turns and Bell shall have received a certificate of
the chief executive officer of GTC to such effect; and (iii) each of the
agreements and covenants of GTC to be performed and complied with by GTC
pursuant to the Reorganization Agreement prior to the Effective Time shall have
been duly performed and complied with except to the extent that the aggregate
effect of any nonperformance or noncompliance by
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<PAGE>
GTC (each considered without any exclusions for lack of Material Adverse Effect
set forth in the individual covenant or agreement) does not constitute a
Material Adverse Effect on GTC, and GFP, Tube Turns and Bell shall have received
a certificate of the chief executive officer of GTC to such effect.
TERMINATION OF THE REORGANIZATION AGREEMENT
The Reorganization Agreement may be terminated and the Reorganization may
be abandoned at any time prior to the Closing Date, before or after the approval
of the shareholders of GTC, GFP, Tube Turns and Bell, in the following
circumstances:
(i) by the mutual written consent of GTC, GFP, Tube Turns and Bell;
(ii) by GTC, if GFP, Tube Turns or Bell breaches any of its respective
representations, warranties or covenants which breach has a Material Adverse
Effect on the breaching party;
(iii) by GFP, Tube Turns or Bell if GTC breaches any representation,
warranty or covenant of GTC which breach has a Material Adverse Effect on GTC;
and
(iv) by GFP, Tube Turns, Bell or GTC if the transactions contemplated by
the Reorganization Agreement shall not have been consummated on or before March
31, 1997, unless the failure to so consummate by such time is due to the breach
of the Reorganization Agreement by the party seeking to terminate.
EXPENSES
Each party to the Reorganization Agreement shall be responsible for the
payment or other satisfaction of its own expenses incurred in connection
therewith. If the Reorganization is not consummated, the parties will have
incurred substantial expenses in connection with the aborted transaction.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined financial statements were
derived from, should be read in conjunction with, and are qualified in their
entirety by reference to, the separate consolidated financial statements of GTC
and GFP and the notes thereto. In the opinion of management, all adjustments
necessary to present fairly such pro forma condensed combined financial
statements, as set forth in the accompanying explanatory notes, have been made.
The unaudited pro forma condensed combined statements of operations, which
include results of operations as if the Reorganization had been consummated on
January 1, 1995, do not reflect transaction costs anticipated to be incurred or
the effects of potential cost savings and operating synergies anticipated to
result from the Reorganization. See "Summary--Summary Financial Data," and
"Summary--Comparative Per Share Data."
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------------
TO
YEAR ENDED TO ELIMINATE
DECEMBER 31, 1995 DECONSOLIDATE THE REAL FOR THE
------------------- GTC ESTATE REORGAN- PRO FORMA
GTC GFP FROM GFP(a) ENTITIES(c) IZATION COMBINED
-------- -------- ----------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenue............................................... $273,647 $336,589 $(273,647) $(7,612) $ - $328,977
Cost of operations.................................... 269,150 312,712 (269,150) - - 312,712
-------- -------- --------- ------- -------- --------
Gross profit.......................................... 4,497 23,877 (4,497) (7,612) - 16,265
Selling, general and administrative expense........... 22,724 33,513 (22,724) (2,426) - 31,087
Depreciation and amortization......................... - 2,950 - (2,891) - 59
-------- -------- --------- ------- -------- --------
Operating loss........................................ (18,227) (12,586) 18,227 (2,295) - (14,881)
Interest expense, net................................. 2,907 6,829 (2,907) (3,432) - 3,397
Other expense (income), net........................... 521 254 (521) (58) - 196
-------- -------- --------- ------- -------- --------
Loss before income taxes, minority interest and
extraordinary item................................... (21,655) (19,669) 21,655 1,195 - (18,474)
Income taxes.......................................... (3,982) (3,498) 3,982 340(d) - (3,158)
-------- -------- --------- ------- -------- --------
Loss before minority interests and extraordinary item. (17,673) (16,171) 17,673 855 - (15,316)
Minority interests.................................... - (3,535) 3,535(b) - - -
-------- -------- --------- ------- -------- --------
Loss before extraordinary item........................ $(17,673) $(12,636) $ 14,138 $ 855 $ - $(15,316)
======== ======== ========= ======= ======== ========
Loss per share before extraordinary item
Primary.............................................. $ (1.13) $ (39.99) $ (0.36)
Fully diluted........................................ $ (1.13) $ (39.99) $ (0.36)
Weighted average shares outstanding
Primary............................................. 15,695 316 42,000(e)
Fully diluted....................................... 15,695 316 42,000(e)
</TABLE>
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------------------
TO
NINE MONTHS ENDED TO ELIMINATE
SEPTEMBER 30, 1996 DECONSOLIDATE THE REAL FOR THE
-------------------- GTC ESTATE REORGAN- PRO FORMA
GTC GFP FROM GFP(a) ENTITIES(c) IZATION COMBINED
-------- --------- ------------ ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue........................................... $180,380 $245,252 $(180,380) $(4,289) $ -- $240,963
Cost of operations................................ 170,549 214,753 (170,549) -- -- 214,753
-------- -------- --------- ------- -------- --------
Gross profit...................................... 9,831 30,499 (9,831) (4,289) -- 26,210
Selling, general and administrative expense....... 8,893 22,751 (8,893) (1,600) -- 21,151
Depreciation and amortization..................... -- 1,734 -- (1,692) -- 42
-------- -------- --------- ------- -------- --------
Operating income.................................. 938 6,014 (938) (997) -- 5,017
Interest expense, net............................. 2,682 4,926 (2,682) (1,377) -- 3,549
Other expense (income), net....................... 166 (608) (166) -- -- (608)
-------- -------- --------- ------- -------- --------
(Loss) before income taxes, minority interest
and extraordinary item.......................... (1,910) 1,696 1,910 380 -- 2,076
Income taxes...................................... 845 2,196 (845) (13)(d) -- 2,183
-------- -------- --------- ------- -------- --------
Loss before minority interests and extraordinary
item............................................ (2,755) (500) 2,755 393 -- (107)
Minority interests................................ -- (551) 551(b) -- -- --
-------- -------- --------- ------- -------- --------
(Loss) income before extraordinary item........... $ (2,755) $ 51 $ 2,204 $ 393 $ -- $ (107)
======== ======== ========= ======= ======== ========
(Loss) income per share before extraordinary item
Primary......................................... $ (0.17) $ 0.16 $ (0.00)
Fully diluted................................... $ (0.17) $ 0.16 $ (0.00)
Weighted average shares outstanding
Primary......................................... 16,135 316 42,000(e)
Fully diluted................................... 16,135 316 42,000(e)
</TABLE>
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------------------------
TO
TO ELIMINATE
SEPTEMBER 30, 1996 DECONSOLIDATE THE REAL FOR THE
------------------- GTC ESTATE REORGAN- PRO FORMA
GTC GFP FROM GFP(a) ENTITIES(c) IZATION COMBINED
-------- --------- -------------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents............. $ 1,224 $ 3,829 $ (1,224) $ (3) $ - $ 3,826
Accounts receivable................... 21,192 34,404 (21,192) (217) - 34,187
Inventories........................... 25,990 39,417 (25,990) - 39,417
Other current assets.................. 3,780 3,048 (3,780) (100) - 2,948
------- -------- -------- -------- ----------- --------
Total current assets.................. 52,186 80,698 (52,186) (320) - 80,378
Property, plant and equipment, net.... 22,256 54,337 (22,256) (20,924) - 33,413
Other assets.......................... 934 5,151 (934) (229) - 4,922
------- -------- -------- -------- ----------- --------
$75,376 $140,186 $(75,376) $(21,473) $ - $118,713
======= ======== ======== ======== =========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable...................... $17,146 $ 21,327 $(17,146) $ (113) $ - $ 21,214
Accrued liabilities................... 15,153 21,781 (15,153) (510) - 21,271
Notes payable......................... 804 19,724 (804) (18,920) - 804
Current portion of long-term debt..... 14,813 17,631 (14,813) (300) - 17,331
------- -------- -------- -------- ----------- --------
Total current liabilities............. 47,916 80,463 (47,916) (19,843) - 60,620
Long-term debt........................ 1,923 19,440 (1,923) (5,400) - 14,040
Other noncurrent liabilities.......... 310 11,567 (310) (528) (5,051)(h) 5,988
------- -------- -------- -------- ----------- --------
Total liabilities..................... 50,149 111,470 (50,149) (25,771) (5,051) 80,648
Minority interests in subsidiaries.... - 5,597 - - (5,597)(i) -
Common stock.......................... 162 8,078 (162) - (7,658)(j) 420
Additional paid-in capital............ 24,675 - (24,675) 4,298 30,317 (k) 35,131
Retained earnings..................... 390 15,041 (390) - (12,011)(l) 3,030
------- -------- -------- -------- ----------- --------
Total shareholders' equity............ 25,227 23,119 (25,227) 4,298 10,648 38,065
------- -------- -------- -------- ----------- --------
$75,376 $140,186 $(75,376) $(21,473) $ - $118,713
======= ======== ======== ======== =========== ========
</TABLE>
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<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
a) To eliminate the results of operations of GTC included in the consolidated
statement of operations of GFP.
b) To eliminate minority interests' proportional share in the loss of GTC
recorded in the consolidated statement of operations of GFP.
c) To eliminate the results of operations of real estate entities included in
the consolidated statement of operations of GFP which will be divested
prior to the Reorganization.
d) To eliminate the income tax expense attributable to the real estate
entities recorded in the consolidated statement of operations of GFP.
e) Average number of shares outstanding is calculated based on the shares of
GTC assumed to be issued and outstanding had the Reorganization taken place
as of January 1, 1995. The GTC Average Closing Price was assumed to be
$1.50 for purposes of determining the additional shares assumed to have
been issued.
f) To eliminate the balance sheet of GTC included in the consolidated balance
sheet of GFP.
g) To eliminate the balance sheet of real estate entities included in the
consolidated balance sheet of GFP. Additional paid-in capital reflects the
negative net asset balance of the real estate entities.
h) To eliminate deferred income taxes on the gain recognized by GFP on the
issuance of shares to minority shareholders in connection with the initial
public offering of GTC common stock.
i) To reclassify the minority interests of GTC, Bell and Tube Turns into
shareholders' equity.
j) To reclassify the common stock of GFP ($8,078) as additional paid-in
capital of GTC, net of the associated par value ($420) for the shares of
GTC common stock assumed to be outstanding after the Reorganization.
k) To adjust additional paid-in capital for the Reorganization as a result of
the following entries:
<TABLE>
<CAPTION>
<S> <C>
Additional paid-in capital of GTC ($24,675), net
of amounts invested by GFP ($2,736)................. $ 21,939
Common stock of GFP reclassified to additional
paid-in capital..................................... 8,078
Minority interests of Bell and Tube Turns............. 558
Increase to par value of pro forma outstanding
shares.............................................. (258)
--------
$ 30,317
========
</TABLE>
l) To adjust retained earnings for the Reorganization as a result of the
following entries:
<TABLE>
<CAPTION>
<S> <C>
Gain recorded by GFP ($13,307) on the issuance of
shares to minority shareholders in connection
with the initial public offering of GTC Common
Stock, net of deferred income taxes ($5,051)........ $ (8,256)
Cumulative amount of minority interests'
proportional share of GTC earnings since
the date of the initial public offering of GTC
Common Stock........................................ (3,755)
--------
$(12,011)
========
</TABLE>
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<PAGE>
RECENT DEVELOPMENTS
On November 6, 1996 and January 8, 1997, GTC retained Morgan and Needham,
respectively, to provide certain financial advisory services, including, among
other things, a review of the potential divestiture of one or more of the
company's operating divisions for purposes of improving the balance sheet and
near term business prospects of GTC. As of the date of this Joint Proxy
Statement/Prospectus, GTC continues to review the desirability of potential
divestiture opportunities identified by Morgan or Needham. The financial
projections supplied by management for Bradford's review and consideration in
connection with rendering the fairness opinion to the Special Committee were
based upon management's assumption that no principal operating units of GTC
would be divested in 1997 or thereafter. Should developments warrant a change
in this assumption prior to the closing of the Reorganization, Bradford will be
requested to update its fairness opinion for the Special Committee to reflect
this change in circumstances.
DESCRIPTION OF GTC'S CAPITAL STOCK
GTC COMMON STOCK
Each of GTC and Bell is a Florida corporation subject to the provisions of
the FBCA. The following description of GTC's Common Stock and certain
provisions of the GTC Articles and GTC Bylaws is a summary and is qualified in
its entirety by reference to the provisions of the GTC Articles and GTC Bylaws.
GTC is authorized to issue 40,000,000 shares of GTC Common Stock. As of
December 31, 1996, there were 16,220,629 shares of GTC Common Stock outstanding
which were held by 632 shareholders of record. At the GTC Special Meeting, the
shareholders of GTC will be requested to approve amendments to the GTC Articles
to increase the authorized shares of GTC Common Stock from 40,000,000 shares to
60,000,000 shares and to create a new class of nonvoting common stock
consisting of 10,000,000 shares, par value $.01 per share. See "Proposal to
Amend the GTC Articles of Incorporation to Increase the Authorized Common Stock
from 40,000,000 Shares to 60,000,000 Shares" and "Proposal to Amend the GTC
Articles to Create a Class of Nonvoting Common Stock."
The holders of GTC Common Stock are entitled to one vote per share on all
matters to be voted upon by the shareholders. Subject to preferences that may
be applicable to any outstanding Preferred Stock, the holders of GTC Common
Stock are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the GTC Board out of funds legally available
therefor. In the event of liquidation, dissolution or winding up of GTC, the
holders of GTC Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities, subject to prior distribution rights of
Preferred Stock, if any, then outstanding. The GTC Common Stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the GTC Common Stock. All
outstanding shares of GTC Common Stock are fully paid and nonassessable, and
the shares of GTC Common Stock to be issued upon completion of the transaction
will be fully paid and nonassessable.
GTC PREFERRED STOCK
GTC is authorized to issue 1,000,000 shares of Preferred Stock. The GTC
Board has the authority to issue the Preferred Stock in one or more series and
to fix the rights, preferences, privileges and restrictions thereof, including
dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption, redemption prices, liquidation preferences, sinking fund
provisions, and the number of shares constituting any series or the designation
of such series, without further vote or action by the shareholders. The
issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of GTC without further action by the
shareholders and may adversely affect the voting and other rights of the
holders of GTC Common Stock. The issuance of Preferred Stock with voting and
conversion rights may adversely affect the voting power of the holders of GTC
Common Stock, including the loss of voting control to others. At present, GTC
has no plans to issue any of the Preferred Stock.
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<PAGE>
CERTAIN PROVISIONS OF THE GTC ARTICLES AND GTC BYLAWS
Certain provisions of the GTC Articles and GTC Bylaws may make it more
difficult for a third party to acquire GTC or to change control of the GTC
Board, thereby reducing GTC's vulnerability to an unsolicited takeover bid. The
GTC Articles authorize the issuance of 1,000,000 shares of Preferred Stock (the
rights and preferences of which may be determined by the GTC Board), thus
providing GTC with the flexibility to issue stock for various purposes,
including deterrence of takeover bids, without further shareholder approval.
The GTC Board, without shareholders' approval, can issue Preferred Stock with
voting and conversion rights which could adversely affect the voting power of
the GTC Common Stock.
The GTC Articles also limit the circumstances under which directors of GTC
may be held monetarily liable for their acts and provide that any further
elimination or limitation of such liability of directors hereafter adopted
under Florida law will be applicable to GTC's directors. The GTC Articles
further provide that any repeal or modification of this provision by GTC's
shareholders will not adversely affect any right or protection of a director
existing at the time of such repeal or modification. Under this provision,
directors of GTC may be held monetarily liable only for (i) acts or omissions
not in good faith or which involve intentional misconduct or are known to the
director to be a violation of law; (ii) distributions made in violation of the
FBCA; or (iii) any transaction from which the director derives an improper
personal benefit.
Certain of these provisions, particularly in light of the relatively high
degree of share ownership of GTC by GFP (80.4% of the issued and outstanding
shares of GTC Common Stock as of January 15, 1997) and by GTC's officers and
directors (including the share ownership of GFP, 81.5% of the issued and
outstanding shares of Common Stock as of January 15, 1997), could have the
effect of deterring certain corporate transactions, including tender or
exchange offers for GTC Common Stock. The provisions could also have the effect
of maintaining incumbent management or of discouraging or defeating proposals
that might be viewed as favorable by some holders of the GTC Common Stock other
than GTC's officers and directors.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the GTC Common Stock is First Union
National Bank of North Carolina.
EFFECT OF THE REORGANIZATION ON RIGHTS OF SHAREHOLDERS
Each of GTC and Bell is a Florida corporation subject to the provisions of
the FBCA. Each of GFP and Tube Turns is a Kentucky corporation subject to the
provisions of the KRS. Shareholders of GFP, Tube Turns and Bell, whose rights
are governed by the GFP Articles and GFP Bylaws, the Tube Turns Articles and
Tube Turns Bylaws, and the Bell Articles and Bell Bylaws, respectively, will,
upon consummation of the Reorganization, become shareholders of GTC whose
rights will then be governed by the GTC Articles and GTC Bylaws and by the
FBCA. The following is a summary of the material differences in the rights of
shareholders of GTC, GFP, Tube Turns and Bell and is qualified in its entirety
by reference to the governing law and the Articles of Incorporation or Bylaws
of each of GTC, GFP, Tube Turns and Bell. Certain topics discussed below are
also subject to federal law and the regulations promulgated thereunder.
REMOVAL OF DIRECTORS
The FBCA provides that shareholders may remove one or more directors with
or without cause unless the articles of incorporation provide that directors
may be removed only for cause. The GTC Articles and Bell Articles do not
include such a provision. Under the FBCA a director generally may be removed
only if the number of votes cast to remove him exceed the number of votes cast
not to remove him.
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<PAGE>
The KRS provides that shareholders may remove one or more directors with or
without cause unless the articles of incorporation provide that directors may
be removed only for cause. The GFP Articles and Tube Turns Articles do not
include such a provision. Under the KRS, a director may not be removed if the
number of votes sufficient to elect him under cumulative voting are voted
against his removal.
NUMBER OF DIRECTORS
The GTC Articles provide that the affairs of the corporation are to be
conducted by a board of directors of not fewer than three (3) nor more than
twelve (12) members, the number to be set by the directors as provided in the
GTC Bylaws. The GTC Board has the power to increase or decrease the number of
directors on the GTC Board last approved by the shareholders pursuant to and in
accordance with the limitations provided by Florida law; provided, however,
that at no time shall the number of directors be fewer than three (3) nor more
than twelve (12) without amendment of the GTC Articles. Any additional director
or directors elected to fill a vacancy must be elected by the vote of a
majority of the directors then in office, although less than a quorum, and any
director so chosen will hold office for a term that expires at the time of the
next annual meeting of shareholders at which directors are elected. In no case
will a decrease in the number of directors shorten the term of any incumbent
director.
The GFP Articles provide that the business and affairs of GFP shall be
managed by a board of directors of not less than four (4) members, the exact
number to be set in the manner provided in the GFP Bylaws. The Tube Turns
Articles provide that the affairs of Tube Turns shall be conducted by a board
of directors consisting of not less than three (3) persons, the exact number of
directors to be set in the Tube Turns Bylaws. Under the KRS, vacancies in the
board of directors may be filled by the shareholders, by the board of directors
or, if the directors remaining in office constitute less than a quorum, by the
affirmative vote of a majority of all of the directors remaining in office.
The Bell Articles provide that the initial board of directors of Bell shall
consist of five (5) members. Under the Bell Bylaws, the number of directors is
currently nine (9).
CONFLICT-OF-INTEREST TRANSACTIONS
Under the FBCA, a contract or other transaction between a corporation and
one or more of its directors or between a corporation and an entity in which
one or more of its directors are financially interested is not void or voidable
merely because of the director's interest in the transaction if (i) the
transaction is approved or ratified, after disclosure of the interest, by the
disinterested directors or the shareholders or (ii) the transaction or contract
is fair and reasonable to the corporation at the time it is authorized. For a
transaction to be approved by the disinterested directors after a disclosure of
the interested directors relationship or interest, the affirmative vote of a
majority of the directors on the board who have no relationship or interest in
the transaction is required. The transaction may not, however, be authorized,
approved or ratified by one director acting alone. If a majority of the
disinterested directors approves the transaction, a quorum is deemed to be
present under the FBCA. If an interested director is present or if a director
votes on a matter in which the director has an interest, the director's
presence or vote will not affect the validity of the action taken under the
FBCA, provided the transaction was otherwise approved by a sufficient vote of
disinterested directors. The presence or vote of interested directors may be
counted for purposes of determining whether the transaction was approved under
other sections of the FBCA. As long as a majority of fully informed
disinterested directors apply business judgment in good faith to authorize the
transaction, or the transaction is approved by the shareholders who are
informed of the conflict, judicial inquiry into substantive fairness is not
appropriate and the business judgment rule will remove the transaction from the
scope of judicial inquiry. The FBCA does not contain a similar provision
relating to officers. Thus, officers are subject to common law guidelines.
The FBCA also provides that a corporation may lend money to, guarantee an
obligation of, or otherwise assist an officer, director or employee of the
corporation or of a subsidiary, whenever, in the
68
<PAGE>
judgment of the board of directors, the loan, guaranty or assistance may
reasonably be expected to benefit the corporation. The loan, guaranty or other
assistance may be with or without interest and may be unsecured or secured in a
manner approved by the board of directors, including a pledge of shares of
stock of the corporation. Such transactions are expressly subject to the
conflict of interest statute discussed above.
Under the KRS, a transaction with a corporation in which a director of the
corporation has a direct or indirect interest is not voidable by the
corporation solely because of the director's interest in the transaction if (i)
the transaction is authorized, approved or ratified, after disclosure of the
material facts of the transaction and the director's interest therein, by the
disinterested directors or the disinterested shareholders or (ii) the
transaction is fair to the corporation. For a transaction to be approved by the
disinterested directors after disclosure of the material facts of the
transaction and the director's interest therein, the affirmative vote of a
majority of directors on the board of directors (or on a committee thereof) who
have no direct or indirect interest in the transaction is required. The
transaction may not be authorized, approved or ratified by a single director.
If a majority of the directors who have no direct or indirect interest in the
transaction vote to authorize, approve or ratify the transaction, a quorum is
deemed to be present under the KRS. If an interested director is present or
votes on a matter in which the director has an interest, the director's
presence or vote will not affect the validity of the action taken under the
KRS, provided the transaction was otherwise approved by a sufficient vote of
disinterested directors. As long as a majority of fully informed disinterested
directors apply business judgment and good faith to authorize the transaction,
or the transaction is approved by the shareholders as set forth above, judicial
inquiry into the substantive fairness of the transaction is not appropriate and
the business judgment rule will remove the transaction from the scope of
judicial inquiry. The KRS does not contain a similar provision relating to
officers, and officers, therefore, are subject to common law guidelines.
The KRS also provides that a corporation may not lend money to or guarantee
the obligation of a director of the corporation unless the particular loan or
guarantee is approved by a majority of the votes represented by the outstanding
voting shares of all classes, voting as a single voting group, except the votes
and shares owned by or voted under the control of the benefited director, or
the corporation's board of directors determines that the loan or guarantee
benefits the corporation and either approves the specific loan or guarantee or
a general plan authorizing loans and guarantees.
SPECIAL MEETINGS
Special meetings of a Florida corporation's shareholders may be called by
its board of directors, by the persons authorized to do so in its articles of
incorporation or bylaws or by the holders of not less than 10% of all votes
entitled to be cast on any issue proposed to be considered at the special
meeting, unless a greater percentage not to exceed 50% is required by the
articles of incorporation. The GTC Articles and GTC Bylaws provide that special
meetings of shareholders may be called only by the GTC Board pursuant to a
resolution adopted by a majority of the directors in writing or by the holders
of not less than 50% of all shares entitled to cast votes at the meeting.
Notice of a special meeting must include a description of the purpose or
purposes for which the meeting is called. The Bell Bylaws provide that special
meetings of shareholders may be called by the Bell Board.
Special meetings of a Kentucky corporation's shareholders may be called by
its board of directors, by the persons authorized to do so in its articles of
incorporation or bylaws or by the holders of not less than 33 1/3% (or such
higher or lower percent as is contained in the articles of incorporation) of
all the votes entitled to be cast on any issue proposed to be considered at the
special meeting. The GFP Bylaws authorize its president to call a special
meeting of shareholders. The Tube Turns Bylaws provide that special meetings of
shareholders may be called upon the written request of any director. Notice of
a special meeting of a Kentucky corporation must include a description of the
purpose or purposes for which the meeting is called.
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<PAGE>
Required Vote for Authorization of Certain Actions
Under the FBCA, directors are generally elected by a plurality of the
votes cast by the shareholders entitled to vote at a shareholders' meeting at
which a quorum is present. With respect to matters other than the election of
directors, unless a greater number of affirmative votes is required by the FBCA
or a Florida corporation's articles of incorporation (but not its bylaws), if a
quorum exists, action on any matter generally is approved by the shareholders
if the votes cast by the holders of the shares represented at the meeting and
entitled to vote on the matter favoring the action exceed the votes cast
opposing the action. Accordingly, under the FBCA, abstentions have no impact on
the outcome of a vote. The GTC Articles and Bell Articles do not include a
provision requiring a greater vote on any matter than that required by the
FBCA.
Under the KRS, at each election for directors, each shareholder entitled
to vote shall have as many votes in the aggregate as he shall be entitled to
vote under the corporation's articles of incorporation, multiplied by the
number of directors to be elected at such election, and each shareholder may
cast the whole number of votes for one (1) candidate or distribute such votes
among two (2) or more candidates. With respect to matters other than the
election of directors, unless a greater number of affirmative votes is required
by the KRS or a Kentucky corporation's articles of incorporation (but not its
bylaws), if a quorum exists, action on any matter generally is approved if the
votes cast by the holders of the shares represented at the meeting and entitled
to vote on the matter favoring the action exceed the votes cast opposing the
action. Accordingly, under the KRS abstentions have no impact on the outcome of
a vote. The GFP Articles and Tube Turns Articles do not include a provision
requiring a greater vote on any matter than that required by the KRS.
Action by Written Consent
Action By Written Consent of Shareholders of Florida Corporations. Under
the FBCA and in accordance with the GTC Bylaws and Bell Bylaws, any action
required or permitted to be taken at any annual or special meeting of the
shareholders may be taken without a meeting, without prior notice and without a
vote, if one or more consents in writing, setting forth the action so taken,
are dated and signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Such written consent(s) must be delivered to the corporation by
delivery to its principal office in Florida, its principal place of business,
the corporate secretary, or another officer or agent of the corporation having
custody of the book in which proceedings of meetings of shareholders are
recorded. Within ten (10) days after obtaining such authorization by written
consent, notice must be given to those shareholders who have not consented in
writing or who are not entitled to vote on the action.
Action by Written Consent of Shareholders of Kentucky Corporations. Under
the KRS, except as provided in the articles of incorporation of a Kentucky
corporation, any action required or permitted to be taken at a shareholder's
meeting may be taken without a meeting and without prior notice, if one or more
written consents describing the action taken, and signed by the shareholders
taking the action, are delivered to the corporation for inclusion in the
minutes or filing with the corporate records. If the articles of incorporation
of a Kentucky corporation so provide, any action except the election of
directors may be so taken if the action is taken by shareholders entitled to
vote on the action representing not less than 80% (or such higher percentage
required by the KRS or the articles of incorporation) of the votes entitled to
be cast. The GFP Articles do not provide for such action by less than all of
such shareholders. The Tube Turns Articles, however, do provide that such
action by not less than 80% of the votes entitled to be cast may be taken.
Prompt notice of the taking of any action by shareholders without a meeting by
less than unanimous written consent must be given to those shareholders
entitled to vote on the action who have not consented in writing.
Action by Written Consent of Directors of Florida Corporations. Under the
FBCA and in accordance with the GTC and Bell Bylaws, any action required or
permitted to be taken at a meeting of the board of
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directors or at a meeting of a committee, may be taken without a meeting if a
consent, in writing, setting forth the action so taken is signed by all of the
directors, or all of the members of the committee, as the case may be, and
included in minutes or filed with the corporate records.
Action by Written Consent of Directors of Kentucky Corporations. Under the
KRS and in accordance with the GFP Bylaws and Tube Turns Bylaws, any action
required or permitted to be taken at a meeting of the Board of Directors or at
a meeting of a committee, may be taken without a meeting if a consent, in
writing, setting forth the actions so taken shall be signed by all of the
directors, or all of the members of the committee, as the case may be, and
included in minutes or filed with the corporate records.
Inspection Rights
Under the FBCA, a shareholder is entitled to inspect and copy the articles
of incorporation, bylaws, certain board of directors and shareholder
resolutions, certain written communication to shareholders, a list of the names
and business addressees of the corporation's directors and officers, and the
corporation's most recent annual report, during regular business hours if the
shareholder gives at least five (5) business days' prior written notice to the
corporation. In addition, a shareholder of a Florida corporation is entitled to
inspect and copy other books and records of the corporation during regular
business hours if the shareholder gives at least five (5) business days' prior
written notice to the corporation and (i) the shareholder's demand is made in
good faith and for a proper purpose, (ii) the demand describes with
particularity its purpose and the records to be inspected or copied, and (iii)
the requested records are directly connected with such purpose. The FBCA also
provides that a corporation may deny any demand for inspection if the demand
was made for an improper purpose or if the demanding shareholder has, within
two (2) years preceding such demand, sold or offered for sale any list of
shareholders of the corporation or any other corporation, has aided or abetted
any person in procuring a list of shareholders for such purpose or has
improperly used any information secured through any prior examination of the
records of the corporation or any other corporation.
Under the KRS, a shareholder is entitled to inspect and copy the articles
of incorporation, bylaws, certain board and shareholder resolutions, certain
written communications to shareholders, a list of the names and business
addresses of the corporation's directors and officers, and the corporation's
most recent annual report during regular business hours if the shareholder
gives at least five (5) days' prior written notice to the corporation. In
addition, a shareholder of a Kentucky corporation is entitled to inspect and
copy certain other books and records of the corporation during regular business
hours if the shareholder gives at least five (5) business days' prior written
notice to the corporation and (i) the shareholder's demand is made in good
faith and for a proper purpose, (ii) the demand describes with reasonable
particularity its purpose and the record desired to be inspected, and (iii) the
records are directly connected with such purpose.
Amendment of Bylaws
Under the FBCA, the board of directors of a corporation may amend or
repeal the corporation's bylaws, unless a corporation's articles of
incorporation or the FBCA, reserve the power to amend for the shareholders. The
GTC Bylaws provide that the board of directors may alter, amend or rescind the
bylaws, subject to the rights of shareholders to replace or modify such
actions. The Bell Bylaws provide that the Bell Board may alter, amend or repeal
the bylaws.
Under the KRS, the board of directors of a corporation may amend or repeal
the corporation's bylaws, unless the articles of incorporation or the KRS
reserve this power exclusively to the shareholders in whole or in part or the
shareholders, in amending or repealing a particular bylaw, provided expressly
that the board of directors may not amend or repeal that bylaw. The GFP Bylaws
provide that the board of directors may alter, amend or rescind the bylaws. The
Tube Turns Bylaws provide that the board of directors may alter or repeal the
bylaws.
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Amendment of Articles of Incorporation
An amendment to a Florida corporation's articles of incorporation must be
approved by the corporation's shareholders, except that certain immaterial
amendments specified in the FBCA may be made by the board of directors. Unless
a specific section of the FBCA or a Florida corporation's articles of
incorporation require a greater vote, an amendment to a Florida corporation's
articles of incorporation generally must be approved by a majority of the votes
entitled to be cast on the amendment. The GTC Articles and Bell Articles do not
include any provision requiring greater than a majority of votes to amend their
respective articles of incorporation.
An amendment to a Kentucky corporation's articles of incorporation must be
approved by the corporation's shareholders except that certain immaterial
amendments specified in the KRS may be made by the board of directors. Unless
the KRS, the Kentucky corporation's articles of incorporation or the board of
directors requires a greater vote or a vote by voting groups, the amendment to
a Kentucky corporation's articles of incorporation generally is approved if the
votes cast favoring the action exceed the votes cast opposing the action. The
GFP Articles and Tube Turns Articles do not include any provisions requiring
greater voting requirements to amend their articles of incorporation.
Voluntary Dissolution
Under the FBCA, a corporation may be voluntarily dissolved if (i) the
board of directors adopts, and a majority of shares approve, a proposal for
dissolution, or (ii) shareholders approve dissolution by written consent
without a meeting. The KRS contains a similar provision.
Liability of Directors
The FBCA provides that a director is not personally liable for monetary
damages to the corporation or any other person for any act or omission as a
director unless the director breached or failed to perform his statutory duties
as a director and such breach or failure (i) constitutes a violation of
criminal law, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful, (ii)
constitutes a transaction from which the director derived an improper personal
benefit, (iii) results in an unlawful distribution, (iv) in a derivative action
or an action by a shareholder, constitutes conscious disregard for the best
interest of the corporation or willful misconduct, or (v) in a proceeding other
than a derivative action or an action by a shareholder, constitutes
recklessness or an act or omission which was committed in bad faith or with
malicious purpose or in a manner exhibiting wanton and willful disregard of
human rights, safety or property.
Under the KRS, in addition to any other limitation on a director's
liability for monetary damages contained in any provision of the Kentucky
corporation's articles of incorporation, any action taken as a director or any
failure to take any action as a director, will not be the basis for monetary
damages or injunctive relief unless (i) the director has breached or failed to
perform the duties of the director's office in compliance with the KRS, and
(ii) in the case of an action for monetary damages, the breach or failure to
perform constitutes willful misconduct or wanton or reckless disregard for the
best interest of the corporation and its shareholders.
The Tube Turns Articles currently contain a provision that a director
shall not be liable to the corporation or its shareholders for monetary damages
for any act or omission constituting a breach of his duties as a director
unless such act or omission (i) is one in which the director has a personal
financial interest which is in conflict with the financial interest of the
corporation or its shareholders, (ii) is not in good faith or involves
intentional misconduct or is known to the director to be a violation of law,
(iii) is a vote for or assent to a distribution made in violation of the
articles of incorporation or which renders the corporation unable to pay its
debts as they become due in the usual course of business or which results in
the corporation's total liabilities exceeding its assets, or (iv) is a
transaction from which the director derived an
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improper personal benefit. If the KRS is amended after adoption of this
provision of the Tube Turns Articles to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of Tube Turns shall be eliminated or limited to the fullest
extent permitted by the KRS, as so amended. Any repeal or modification of this
provision of the Tube Turns Articles by the shareholders of the corporation
shall not adversely affect any right or protection of a director existing at
the time of such repeal or modification. The GFP Articles do not contain such a
provision.
The GTC Articles currently include a provision eliminating the personal
liability of its directors except for liability (i) for acts or omissions not
in good faith or which involve intentional misconduct or are known to the
director to be a violation of law, (ii) for distributions made in violation
of the FBCA, or (iii) for any transaction from which the director derives an
improper personal benefit.
If the FBCA is amended after approval by the shareholders of the articles
of incorporation to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the
corporation shall be eliminated or limited to the fullest extent permitted by
the FBCA, as so amended. Any repeal or modification of the articles of
incorporation by the shareholders of the corporation shall not adversely affect
any right or protection of a director of the corporation existing at the time
of such repeal or modification. The Bell Articles do not contain such a
provision.
Indemnification
Under the FBCA, a corporation may generally indemnify its officers,
directors, employees and agents against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement of any proceedings (other than
derivative actions), if they acted in good faith and in manner they reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe their conduct was unlawful. A similar standard is applicable in
derivative actions, except that indemnification may be made only for (i)
expenses (including attorney's fee) and certain amounts paid in settlement, and
(ii) in the event the person seeking indemnification has been adjudicated
liable, amounts deemed proper, fair and reasonable by the appropriate court
upon application thereto. The FBCA provides that to the extent that such
persons have been successful in defense of any proceeding, they must be
indemnified by the corporation against expenses actually and reasonably
incurred in connection therewith. The FBCA also provides that, unless a
corporation's articles of incorporation provide otherwise, if a corporation
does not indemnify such persons, they may seek, and a court may order,
indemnification under certain circumstances even if the board of directors or
shareholders of the corporation have determined that the persons are not
entitled to indemnification. The GTC Bylaws provide that directors, officers,
employees or agents will be indemnified to the full amount against any
liability, and the reasonable cost or expense (including attorneys' fees,
monetary or other judgments, fines, excise taxes or penalties and amounts paid
or to be paid in settlement) incurred by such person in such person's capacity
as a director, officer, employee or agent or arising out of such person's
status as a director, officer, employee or agent; provided, however, no such
person shall be indemnified against any such liability, cost or expense
incurred in connection with any action, suit or proceeding in which such person
shall have been adjudged liable on the basis that personal benefit was
improperly received by such person or if such indemnification would be
prohibited by law.
The Bell Bylaws provide that Bell shall indemnify and may advance expenses
to directors, officers, employees and agents to the fullest extent that is
expressly permitted or required by Florida or other law.
Under the KRS, a corporation may generally indemnify officers, directors,
employees and agents against expenses (including attorney's fees) in a
proceeding if they conducted themselves in good faith and they reasonably
believed that their conduct was in or not opposed to the best interests of the
corporation, and in the case of criminal proceedings, they had no reasonable
cause to believe their conduct was unlawful. A corporation may not indemnify
officers, directors, employees or agents in a derivative proceeding in which
such persons were adjudged liable to the corporation, or in connection with any
other proceeding charging
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improper personal benefit to such person, in which such person was adjudged
liable on the basis that personal benefit was improperly received. In the case
of a derivative action, indemnification is limited to reasonable expenses
incurred in the proceeding. The KRS provides that unless limited by its
articles of incorporation, a corporation must indemnify such persons who were
wholly successful, on the merits or otherwise, in the defense of any
proceeding, against reasonable expenses incurred. The KRS also provides that a
court may order indemnification in certain circumstances.
The GFP Bylaws provide that GFP shall indemnify and may advance expenses
to directors, officers, employees and agents to the fullest extent that is
expressly permitted or required by Kentucky or other law.
The Tube Turns Articles provide that directors will be indemnified to the
full amount against any liability, and the reasonable cost or expenses
(including attorneys' fees, monetary or other judgments, fines, excise taxes or
penalties and amounts paid or to be paid in settlement) incurred by such person
in such person's capacity as a director; provided, however, that no such person
shall be indemnified in connection with any proceeding in which such person
shall have been adjudged liable on the basis that personal benefit was
improperly received by such person or if such indemnification would be
prohibited by law. The Tube Turns Bylaws provide that it shall indemnify its
officers, directors and employees to the extent permitted by Kentucky law.
Business Combination Statute (Affiliated Transactions)
The FBCA contains an affiliated transactions statute which provides that
certain transactions involving a corporation and a shareholder owning 10% or
more of the corporation's outstanding voting shares (an "Affiliated
Shareholder") must generally be approved by the affirmative vote of the holders
of 66 2/3% of the voting shares other than those owned by the Affiliated
Shareholder. The transactions covered by the statute include, with certain
exceptions, (i) mergers and consolidations to which the corporation and the
Affiliated Shareholder are parties, (ii) sales or other dispositions of
substantial amounts of the corporation' s assets to the Affiliated Shareholder,
(iii) issuances by the corporation of substantial amounts of its securities to
the Affiliated Shareholder, (iv) the adoption of any plan for the liquidation
or dissolution of the corporation proposed by or pursuant to an arrangement
with the Affiliated Shareholder, (v) any reclassification of the corporation's
securities which has the effect of substantially increasing the percentage of
the outstanding voting shares of the corporation beneficially owned by the
Affiliated Shareholder, and (vi) the receipt by the Affiliated Shareholder of
certain loans or other financial assistance from the corporation. These special
voting requirements do not apply in any of the following circumstances: (i) if
the transaction was approved by a majority of the corporation's disinterested
directors; (ii) if the corporation did not have more than 300 shareholders of
record at any time during the preceding three years; (iii) if the Affiliated
Shareholder has been the beneficial owner of at least 80% of the corporation's
outstanding voting shares for five years; (iv) if the Affiliated Shareholder is
the beneficial owner of at least 90% of the corporation's outstanding voting
shares, exclusive of those acquired in a transaction not approved by a majority
of disinterested directors; or (v) if the consideration received by each
shareholder in connection with the transaction satisfies the "fair price"
provisions of the statute. This statute applies to any Florida corporation
unless the original articles of incorporation or an amendment to the articles
of incorporation or bylaws contain a provision expressly electing not to be
governed by this statute. Such an amendment to the article of incorporation or
bylaws must be approved by the affirmative vote of a majority of disinterested
shareholders and is not effective until 18 months after approval. The GTC
Articles and GTC Bylaws and the Bell Articles and Bell Bylaws do not contain a
provision electing not to be governed by the statute.
The KRS contains a business combination statute which provides that certain
transactions involving a corporation and a shareholder owning 10% or more of the
corporation's outstanding voting shares (an "Interested Shareholder") must be
approved by either a majority of the independent members of the board of
directors who are also continuing directors, or approved by the affirmative vote
of at least (i) 80% of the votes entitled to be cast by outstanding shares of
voting stock of the corporation, voting together as a single voting group; and
(ii) two-thirds of the votes entitled to be cast by holders of voting stock
other than voting stock
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beneficially owned by the Interested Shareholder who is, or whose affiliate is,
a party to the transaction, or by an affiliate of such Interested Shareholder,
voting together as a single voting group, unless a fair price is paid in the
transaction. The transactions covered by the Kentucky statute are substantially
similar to the transactions covered by the Florida statute. The requirements of
shareholder vote and board of directors approval do not apply to a business
combination of a corporation which does not have on the date any Interested
Shareholder became an Interested Shareholder: (i) 500 or more beneficial
shareholders; (ii) its principal office located in Kentucky; and (iii) more
than 200 beneficial shareholders residing in Kentucky, more than 10% of its
beneficial shareholders residing in Kentucky, more than 10% of its outstanding
stock owned by Kentucky residents, more than 100 employees working in the
state, or assets of at least $1,000,000. The statute also provides that a
corporation shall not engage in a business combination with a 10% shareholder
for five years after the date on which the person became a 10% shareholder
unless the business combination is approved by a majority of independent
directors before such date.
BUSINESS COMBINATION PROVISIONS OF ARTICLES OF INCORPORATION
The GTC Articles do not contain any provision specifically addressing
business combinations. The Bell Articles, GFP Articles and Tube Turns Articles
also do not contain any provision specifically addressing business
combinations.
CONTROL SHARE ACQUISITION ACT
The FBCA also contains a control share acquisition statute which provides
that a person who acquires shares in an issuing public corporation in excess of
certain specified thresholds will generally not have any voting rights with
respect to such shares unless the voting rights are approved by a majority of
the shares entitled to vote, excluding interested shares. This statute does not
apply to acquisitions of shares of a corporation if, prior to the pertinent
acquisition of shares, the corporation's articles of incorporation or bylaws
provide that the corporation shall not be governed by the statute. This statute
also permits a corporation to adopt a provision in its articles of
incorporation or bylaws providing for the redemption by the corporation of such
acquired shares in certain circumstances. Unless otherwise provided in the
corporation's articles of incorporation or bylaws prior to the pertinent
acquisition of shares, in the event that such shares are accorded full voting
rights by the shareholders of the corporation and the acquiring shareholder
acquires a majority of the voting power of the corporation, all shareholders
who did not vote in favor of according voting rights to such acquired shares
are entitled to dissenters' rights. The GTC Articles and GTC Bylaws and the
Bell Articles and Bell Bylaws do not contain any provisions with respect to
this statute.
The KRS does not contain a control share acquisition statute.
DIVIDENDS AND OTHER DISTRIBUTIONS
A Florida corporation may make distributions to shareholders as long as,
after giving effect to such distribution (i) the corporation would be able to
pay its debts as they become due in the usual course of business, and (ii) the
corporation's total assets would not be less than the sum of its total
liabilities plus (unless the articles of incorporation permit otherwise, which
the GTC Articles and Bell Articles do not) the amount that would be needed if
the corporation were to be dissolved at the time of the distribution to satisfy
the preferential rights upon dissolution of shareholders whose preferential
rights are superior to those receiving the distribution. Under the FBCA, a
corporation's redemption of its own capital stock is deemed to be a
distribution.
A Kentucky corporation may make distributions to shareholders, subject to
any restriction in the articles of incorporation of the corporation, as long
as, after giving effect to such distribution, (i) the corporation would be able
to pay its debts as they become due in the usual course of business, and (ii)
the corporation's total assets would not be less than the sum of its total
liabilities plus (unless the articles of incorporation permit otherwise, which
the GFP Articles and Tube Turns Articles do not) the amount that
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would be needed if the corporation were to be dissolved at the time of the
distribution to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those in receiving the
distribution. Under the KRS, a corporation's redemption of its own stock is
deemed to be a distribution.
DISSENTERS' RIGHTS
A shareholder of a Florida corporation, with certain exceptions, has the
right to dissent from, and obtain payment of the fair value of his shares in
the event of: (i) a merger or consolidation to which the corporation is a
party; (ii) a sale or exchange of all or substantially all of the corporation's
property other than in the usual and regular course of business; (iii) the
approval of a control share acquisition; (iv) a statutory share exchange to
which the corporation is a party as the corporation whose shares will be
acquired; (v) an amendment to the articles of incorporation if the shareholder
is entitled to vote on the amendment and the amendment would adversely affect
the shareholder; and (vi) any corporate action taken to the extent that the
articles of incorporation provide for dissenters' rights with respect to such
action. The FBCA provides that unless a corporation's articles of incorporation
provide otherwise, which the GTC Articles and Bell Articles do not, a
shareholder does not have dissenters' rights with respect to a plan of merger,
share exchange or proposed sale or exchange of property if the shares held by
the shareholder are either registered on a national securities exchange or
designated as a national market system security on or an interdealer quotation
system by the NASD or held of record by 2,000 or more shareholders.
A shareholder of a Kentucky corporation, with certain exceptions, has the
right to dissent from, and obtain payment of the fair value of his shares in
the event of: (i) a merger to which the corporation is a party if shareholder
approval is required or if the corporation is a subsidiary that is merged with
its parent pursuant to the KRS; (ii) a share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan; (iii) a sale or exchange of substantially all
of the corporation's property other than in the usual and regular course of
business if the shareholder is entitled to vote on the sale or exchange; (iv)
an amendment of the articles of incorporation that materially and adversely
affects rights in respect of a dissenter's shares; (v) any transaction subject
to the requirements of the Kentucky business combination statutes or exempted
from the voting requirements of such provisions; or (vi) any corporate action
taken pursuant to a shareholder vote to the extent the articles of
incorporation, bylaws or a resolution of the board of directors provides that
voting or nonvoting shareholders are entitled to dissent.
PREEMPTIVE RIGHTS
Under the FBCA, the shareholders of a corporation do not have a preemptive
right to acquire the corporation's unissued shares except to the extent the
articles of incorporation provide. The provisions of the KRS are similar. The
GTC Articles provide no holder of shares of the corporation of any class, as
such, shall have any preemptive right to subscribe for stock, obligations,
warrants, subscription rights, or other securities of the corporation of any
class, regardless of when authorized. The GFP Articles, Tube Turns Articles and
Bell Articles contain similar provisions.
DERIVATIVE ACTIONS
Under the FBCA, a person may not bring a derivative action unless the
person was a shareholder of the corporation at the time of the challenged
transaction or unless the person acquired the shares by operation of law from a
person who was a shareholder at such time. The FBCA also provides that a
complaint in a derivative proceeding must be verified and must allege with
particularity that a demand was made to obtain action by the board of directors
and that the demand was refused or ignored. Under the FBCA, a derivative
proceeding may be settled or discontinued only with court approval, and the
court may dismiss a derivative proceeding if the court finds that certain
independent directors (or a committee of independent persons appointed by such
directors) have determined in good faith after conducting a reasonable
investigation that the maintenance of the action is not in the best interests
of the corporation. The FBCA also provides that if an action was brought
without reasonable cause the court may require the plaintiff
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to pay the corporation's reasonable expenses, and if the plaintiff is
successful the court may require the corporation to pay the reasonable expenses
of the plaintiff.
Under the KRS, a person may not commence a derivative action unless he was
a shareholder of the corporation at the time of the challenged transaction or
unless he became a shareholder through transfer by operation of law from one
who was a shareholder at that time. The KRS also requires that the complaint be
verified, and must allege with particularity the demand made, if any, to obtain
action by the board of directors and either that the demand was refused and
ignored or why demand was not made. A derivative proceeding may not be
discontinued or settled without court approval. If the court determines that a
proposed discontinuance or settlement will substantially affect the interest of
the corporation's shareholders or a class of shareholders, the court will
direct that notice be given to affected shareholders. Under the KRS, the court
may require the plaintiff to pay any defendant's reasonable expenses, including
attorney's fees incurred in a proceeding, if it finds that the proceeding was
commenced without reasonable cause.
QUORUM FOR SHAREHOLDER MEETINGS
Under the FBCA, unless otherwise provided in a corporation's articles of
incorporation (but not its bylaws), a majority of shares entitled to vote on a
matter constitutes a quorum at a meeting of shareholders, but in no event may a
quorum consist of less than 33 1/3% of the shares entitled to vote on such
matter. The GTC Articles and Bell Articles do not include a provision altering
the shareholder quorum requirement. The provisions of the KRS are similar
except a quorum may not be reduced by the articles of incorporation to less
than such majority. The GFP Articles and Tube Turns Articles do not include a
provision altering this quorum requirement.
TREASURY STOCK
A Florida corporation may also reacquire its own issued and outstanding
capital stock. Under the FBCA, however, all capital stock reacquired by a
Florida corporation is automatically returned to the status of authorized but
not issued or outstanding, and is not deemed treasury stock. The KRS contains a
similar provision.
BOARD VACANCIES
The FBCA provides that a vacancy on the board of directors generally may be
filled by the affirmative vote of a majority of the remaining directors or by
the shareholders, unless the articles of incorporation provide otherwise. The
GTC Articles and Bell Articles do not alter this provision. The provisions of
the KRS are similar. The GFP Articles and Tube Turns Articles do not alter this
provision.
OTHER CONSTITUENCIES
The FBCA contains a so-called "stakeholder" statute, providing that
directors of a Florida corporation, in discharging their duties to the
corporation and in determining what they believe to be in the best interests of
the corporation, may, in addition to considering the effects of any corporate
action on the shareholders and the corporation, consider the effects of the
corporate action on employees, suppliers and customers of the corporation or
its subsidiaries and the communities in which the corporation and its
subsidiaries operate. The KRS does not include such a provision.
SHAREHOLDER RIGHTS PLANS
The FBCA has a provision which explicitly authorizes corporations to adopt
"poison pill" or "shareholder rights" plans. These plans may be adopted in a
number of forms, but generally involve the distribution by the corporation to
its shareholders of rights or options which are triggered by a hostile takeover
attempt or by a party acquiring a specified percentage of a class of the
corporation's securities. These plans
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can make hostile takeovers excessively or prohibitively expensive unless the
board of directors cancels the plan. The KRS does not include such a provision.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Robert E. Gill, President, Chief Executive Officer and a Director of GTC,
serves as Chairman of the Board of GFP, a private holding company which holds
controlling interests in GTC, Tube Turns and Bell and as a Director and
executive officer of Tube Turns and Bell. Jeffrey T. Gill, Chairman of the
Board of GTC, serves as a Director and President and Chief Executive Officer of
GFP, as Chairman of the Board of Tube Turns and as a Director of Bell. Robert
E. Gill (including those shares owned by his wife Virginia G. Gill) and Jeffrey
T. Gill (including those shares owned by his wife Patricia G. Gill) own 39.3%
and 32.3%, respectively, of the outstanding shares of GFP Common Stock.
R. Scott Gill serves as President and Chief Executive Officer of Unison, Vice
President and Director of GFP, and as a Director of Tube Turns and Bell.
Richard L. Davis, Vice President of GTC, serves as Vice President and Chief
Financial Officer of GFP and as a Director and executive officer of Tube Turns.
Anthony C. Allen, Vice President of GTC, serves as Vice President of Finance of
GFP and as a Director and executive officer of Bell.
GTC paid GFP management fees in the amount of $488,000 and $548,000 for the
years ended December 31, 1993 and 1994, respectively. The management fee paid
to GFP for the year ended December 31, 1995 consisted of a cash payment of
$274,000 and the issuance of 69,813 shares of GTC Common Stock valued at
$300,000. The number of shares issued was determined monthly and was computed
based upon a monthly management fee of $50,000 and the per share price equal to
the average closing price of the GTC Common Stock on the last three trading
days of each calendar month from July 1995 to January 1996. The management fee
was paid to GFP in exchange for financial advisory and management consulting
services. The management fee to GFP was suspended as of January 31, 1996, and
accordingly, the only payment in 1996 consisted of the issuance of 17,391
shares of GTC Common Stock.
GTC issued 59,090 shares of GTC Common Stock to GFP in a private placement
transaction in October 1995 to provide funding for GTC's expansion into Brazil.
The shares were sold to GFP in exchange for $325,000. The per share price of
the transaction was equal to the closing price of the GTC Common Stock on the
trading day immediately preceding the date of sale.
In connection with the restructuring of GTC's credit agreement on March 29,
1996, GFP invested $1,000,000 in GTC in exchange for 374,531 shares of GTC
Common Stock. The per share price of the transaction was equal to the average
closing price of the GTC Common Stock on the three trading days preceding the
date of sale.
GTC and its domestic subsidiaries are parties to a tax sharing agreement
with GFP and were included in the consolidated federal income tax return of GFP
from GTC's inception through March 22, 1995. Effective March 23, 1995, as a
result of a decrease in GFP's ownership percentage of GTC, GTC did not meet the
80-percent-voting power and value requirements defined by the Code for
affiliated group membership and ceased to be an includable member of GFP's
affiliated group. Effective March 29, 1996, as a result of the aforementioned
investment by GFP of $1,000,000 in GTC, GFP's ownership percentage in GTC
exceeded 80% and, therefore, became an includable member of GFP's affiliated
group. GTC and its domestic subsidiaries separately filed its initial
consolidated federal income tax return for the period March 23, 1995 through
December 31, 1995, and will separately file a final consolidated federal income
tax return for the period January 1, 1996 to March 29, 1996.
GTC engages in certain business transactions with Bell involving the
provision of certain turnkey circuit card manufacturing services to Bell. GTC
believes the terms and conditions of these transactions are the same as those
which would be determined on an arms-length basis and are not material to the
financial performance of GTC. In 1995, the amount received by GTC from
transactions with Bell was not material.
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<PAGE>
On February 9, 1996, the assets of the instrumentation products business
unit of Metrum, Inc., a subsidiary of GTC ("Metrum"), were sold to Bell for
$10,104,000 cash and an earn-out provision which provides for additional
payments to GTC of up to $3,000,000 in the event annual earnings before interest
and taxes exceeds defined amounts through December 31, 2000. The proceeds from
the sale transactions were used to reduce GTC's debt balance and to fund working
capital needs. Due to the common ownership interest of GFP in GTC and Bell, GTC
requested and obtained an independent opinion, which indicated that the
consideration received by GTC for the sale of the instrumentation products
business was fair, from a financial point of view, to the Unaffiliated
Shareholders. In addition, due to the common ownership, the amount by which the
sales price exceeded the net book value of assets and liabilities transferred
has been recorded by GTC as a contribution to its capital of $613,000. GTC
reported this transaction on a Form 8-K filed with the Commission on February
23, 1996, and amended on March 28, 1996.
GTC EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth the annual and long-term compensation paid
or accrued by GTC during the years indicated to GTC's Chief Executive Officer
and GTC's other four highest paid executive officers (collectively, the "Named
Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION (1) COMPENSATION AWARDS
----------------------- -------------------------
RESTRICTED ALL
STOCK OPTIONS/ OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (2) AWARDS(3)(4) SARS COMPENSATION (5)
- -------------------------------- ---- -------- --------- ------------ -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Carl P. McCormick (6)........... 1995 $289,130 $ - $ - - $12,688
President & Chief Executive 1994 269,135 - - - 10,016
Officer 1993 207,987 63,213 - 300,000 9,491
Aviram Margalith................ 1995 149,151 - - - 7,187
Vice President & 1994 129,206 - - - 6,689
General Manager of 1993 117,166 - 20,480 - 5,507
Federal Systems and
International EMS
Operations
J. Hardie Harris(7)............. 1995 119,450 - - 30,000 4,988
Vice President & General
Manager of U.S. EMS
Operations
Jack Calderon(8)................ 1995 139,796 - - - -
Vice President & General 1994 131,698 - 13,490 - 6,627
Manager of International 1993 106,544 - - 90,000 5,497
Operations
Gregory A. Tymn(9).............. 1995 135,560 50,000(10) - 100,000 6,577
Vice President of
Finance & Chief
Financial Officer
</TABLE>
(1) Includes amounts deferred pursuant to GTC's 401(k) Plan. The Named
Officers received certain perquisites and benefits; however, GTC has
concluded that the aggregate amount of such personal benefits and other
compensation is the lesser of $50,000 or 10% of the total annual salary
and bonus of each of the Named Officers.
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<PAGE>
(2) Cash bonuses earned in the respective fiscal years were paid to the
respective recipient in the first quarter of the fiscal year following the
year in which it was earned.
(3) Noncash bonuses earned in the respective fiscal years in the form of
restricted stock awards were granted to the respective recipient in the
first quarter of the fiscal year following the year in which it was
earned.
(4) The amount of the restricted stock awards in each year was computed by
multiplying the value of GTC Common Stock awarded to the respective
recipient by the value per share at the grant date based on a market
valuation model which, in the opinion of management, approximated the fair
market value of the stock. For awards prior to August 1, 1993, the
weighted average per share price used in valuing the awards was $2.03. For
awards after July 30, 1993 and prior to May 18, 1994, the fair market
value per share at the grant date was based upon the estimated initial
public offering price. There have been no awards after May 17, 1994;
however, any such award would have been valued at the closing bid price of
the GTC Common Stock as reported by Nasdaq on the date of grant.
(5) Matching and Profit Sharing Contributions made pursuant to GTC's 401(k)
Plan.
(6) Effective October 31, 1996, Carl P. McCormick resigned his positions as
President and Chief Executive Officer of GTC.
(7) J. Hardie Harris was hired as Vice President and General Manager of U.S.
EMS Operations of GTC on April 3, 1995. Mr. Harris submitted his
resignation for these positions effective January 31, 1997.
(8) Effective January 4, 1996, Jack Calderon resigned his positions as Vice
President and General Manager of International Operations of GTC.
(9) Effective January 8, 1996, Gregory A. Tymn resigned his positions as Vice
President of Finance and Chief Financial Officer of GTC.
(10) Hiring bonus of $50,000 was paid upon Mr. Tymn's employment on March 27,
1995.
OPTION GRANTS IN LAST FISCAL YEAR
Set forth below is information on stock options granted during the fiscal
year ended December 31, 1995 to the Named Officers of GTC.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
------------------------------------------------ VALUE AT ASSUMED
NO. OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---- ---------- ------------ --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Carl P. McCormick... - - $ - - $ - $ -
Aviram Margalith.... - - - - - -
J. Hardie Harris.... 10,000 6% 5.25 3/26/03 21,373 49,808
10,000 6% 5.25 3/26/05 25,066 60,038
10,000 6% 5.25 3/26/05 33,017 83,671
Jack Calderon....... - - - - - -
Gregory A. Tymn..... 25,000 14% 6.00 3/26/02 61,065 142,308
25,000 14% 6.00 3/26/03 71,618 171,538
25,000 14% 6.00 3/26/05 94,334 239,061
25,000 14% 6.00 3/26/05 94,334 239,061
</TABLE>
- --------
(1) Each grant was made pursuant to the Key Employees Plan.
(2) The 5% and 10% assumed rates of appreciation are required by rules of the
Commission and do not represent GTC's estimate or projection of the future
GTC Common Stock price.
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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
Set forth below is information on each exercise of stock options during
the fiscal year ended December 31, 1995, and the value as of December 31, 1995,
of unexercised stock options held by the Named Officers.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END(2)
ACQUIRED ON VALUE -------------------------- ----------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ----------- ----------- ----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Carl P. McCormick(3).. - $ - 300,000 300,000 $249,000 $45,000
Aviram Margalith...... - - 180,000 - 149,400 -
J. Hardie Harris(4)... - - - 30,000 - -
Jack Calderon(5)...... 90,000 310,950 - 90,000 - 13,500
Gregory A. Tymn(6).... - - - 100,000 - -
</TABLE>
_______________
(1) Based on the fair market value of the underlying securities and exercise
price on the date of exercise.
(2) Based on a market value of the underlying securities of $2.50 at December
31, 1995, minus the exercise price of the options.
(3) Effective October 31, 1996, Carl P. McCormick resigned his positions as
President and Chief Executive Officer of GTC. All options held by Mr.
McCormick which are or will become exercisable on or before December 31,
1998, will remain valid and effective for the stated term of each such
option. All options which become exercisable after December 31, 1998 were
canceled at December 31, 1996.
(4) J. Hardie Harris submitted his resignation as Vice President and General
Manager of U.S. EMS Operations of GTC to become effective January 31,
1997, and all options held will be canceled at that date.
(5) Effective January 4, 1996, Jack Calderon resigned his positions as Vice
President and General Manager of International EMS Operations of GTC, and
all options were canceled at that date.
(6) Effective January 8, 1996, Gregory A. Tymn resigned his positions as Vice
President of Finance and Chief Financial Officer of GTC and all options
were canceled at that date.
COMPENSATION OF DIRECTORS
Prior to September 1, 1995, directors of GTC did not receive any cash
compensation for services provided as directors. Directors who were not
employees of GTC, GFP or any of its affiliates ("Independent Directors") were
eligible to receive stock option grants pursuant to the Independent Directors'
Plan.
Effective September 1, 1995, Independent Directors are paid an annual
retainer of $15,000 and a fee of $1,000 for attending each Board meeting.
Independent Directors may elect to receive their annual retainer and meeting
fees in the form of stock options granted pursuant to the Independent
Directors' Plan in lieu of cash. During 1995, each Independent Director elected
to receive their annual retainer and meeting fees in the form of stock options.
Independent Directors also receive initial and annual grants of stock options
for each elected term as a director under the Independent Directors' Plan.
During 1995, Mr. Frigon and Mr. Petersen were granted options to purchase 6,239
shares and 5,712 shares, respectively, for annual retainer and meeting fees,
and each was granted options to purchase 7,000 shares upon reelection to the
Board. No director exercised stock options in 1995. All directors are
reimbursed for travel and related expenses incurred by them in attending Board
meetings. Directors who are employees of GTC, GFP or any of its affiliates are
not eligible to receive compensation for services rendered as a director.
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<PAGE>
EMPLOYMENT CONTRACTS
GTC entered into a separation agreement in December, 1996, with Carl P.
McCormick, the former President and Chief Executive Officer of GTC. Under the
separation agreement, Mr. McCormick resigned as President, Chief Executive
Officer and as a Director of GTC effective October 31, 1996, but continued as
an employee of GTC through December 31, 1996. Effective January 1, 1997, Mr.
McCormick was placed on lay-off status through December 31, 1998. During the
remainder of 1996, Mr. McCormick assisted in the transition of his duties and
provided certain other services to GTC. Through December 31, 1996, Mr.
McCormick continued to receive salary and benefits at his then current level
and received a car allowance and previously approved club memberships and
similar benefits. GTC also agreed to reimburse Mr. McCormick for professional
executive outplacement services up to a maximum of $5,000. GTC will continue to
pay Mr. McCormick a salary of $175,000 per year from January 1, 1997 through
December 31, 1998, and during this period Mr. McCormick will continue to
receive customary medical and dental benefits at his cost. GTC also agreed to
amend its Key Employees Plan so that all stock options granted to and held by
Mr. McCormick that will have vested by December 31, 1998, will remain valid and
effective for the stated term of the options. Mr. McCormick agreed to certain
nonsolicitation, noncompetition and confidentiality agreements with GTC and
executed a general release of GTC for any employment based claims.
GTC COMPENSATION COMMITTEE REPORT
INTRODUCTION
The Compensation Committee of the GTC Board (the "Committee") is made up
of four (4) members who are also members of the full GTC Board. The Committee
meets in February of each fiscal year to establish target base compensation
levels for GTC's executive officers to be effective in March of that year and
to determine bonus compensation for the fiscal year just completed. Once
reviewed and approved by the Committee, all issues pertaining to executive
compensation are submitted to the entire GTC Board for approval.
COMPENSATION PHILOSOPHY
GTC's executive compensation policies are designed to attract and retain
qualified personnel by providing competitive compensation and to reinforce
long-term strategic objectives through the use of incentive compensation
programs. In order to provide incentive to executive officers, a percentage of
their annual compensation is paid as bonus. The amount of the bonus for each
person is determined on the basis of several indicators of corporate
performance as outlined below.
COMPENSATION PLANS
The following are the key components of GTC's executive officer
compensation:
Base Compensation. The Committee establishes base salaries for executive
officers based upon its review of base salaries of executive officers in
companies of comparable size and in similar industries, according to
information that is obtained from independent sources and services. The
Committee also takes into consideration the executive officer's level of
experience and business judgment, as well as a number of other qualitative and
subjective factors. There is no factor or formula that is applied to determine
a specific dollar value of base compensation.
Bonuses. GTC's executive and corporate bonus plans provide for incentive
compensation to GTC's executive officers and other key employees. Bonuses paid
under the bonus plans are based on the performance of GTC as measured by
financial objectives, all of which are established by the Committee at the
beginning of the fiscal year. The maximum bonus which could be paid under the
bonus plans in 1995 was 105% of base salary. The corporate financial objectives
for 1995 related to revenue, net income and cash
82
<PAGE>
flow from operations, each weighted equally in importance. The Committee
established additional compensation parameters to be included in determining
bonuses paid under bonus plans beginning with fiscal year 1995, including
additional quantitative performance measures, certain qualitative factors
relating to customer and employee satisfaction and the Committee's discretion
in awarding a portion of the bonus based on subjective considerations. The
financial objectives and other compensation parameters are reviewed by the
Committee each year, and those used in a particular year are intended to
reflect those areas most necessary to maximize the return to investors.
Long-Term Incentive Compensation. The Key Employees Plan provides for
long-term incentive compensation for executive officers of GTC. A portion of
the total compensation package for GTC's executive officers is in the form of
stock option awards. These awards provide executive officers with an equity
interest in GTC, thereby aligning the interests of the executive officers and
shareholders and providing incentive to maximize shareholder value over the
longer term. During the fiscal year ended December 31, 1995, no stock options
were granted to the Chief Executive Officer, and options exercisable for up to
an aggregate of 130,000 shares were granted to certain Named Officers. See "GTC
Executive Compensation Option Grants in Last Fiscal Year."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Committee was formed in August 1994 and is composed of Jeffrey T.
Gill, Robert E. Gill, Henry F. Frigon and Sidney R. Petersen. No member of the
Compensation Committee is or was formerly an officer or an employee of GTC or
its subsidiaries.
No interlocking relationship exists between the GTC Board or the Committee
and the board of directors or compensation committee of any other company, nor
has any such interlocking relationship existed in the past.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
Recently enacted Section 162(m) of the Code generally limits the corporate
deduction for compensation paid to certain executive officers to $1.0 million,
unless the compensation is performance-based. It is the Committee's intention
that, so long as it is consistent with its overall compensation objectives,
virtually all executive compensation shall be deductible for federal income tax
purposes. It is the Committee's opinion that the shareholders' interest will be
better served over the longer term by preserving the deductibility of its
executive officers' compensation.
COMPENSATION OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
Mr. McCormick's base salary for 1995 was determined in the same manner as
that of all other executives, including a review of base salaries paid to chief
executive officers of companies of a comparable size and in similar industries.
Mr. McCormick's base salary for 1995 was at the median of the chief executive
officer salaries of the comparable companies included in the review. GTC did
not achieve the bonus plan's financial objectives defined at the beginning of
1995 and therefore the Committee elected not to award a bonus to the Chief
Executive Officer or the other executive officers for the 1995 fiscal year,
despite the achievement of a significant number of corporate and strategic
objectives. The specific financial objectives are not included herein because
they are believed to represent confidential business information.
MEMBERS OF THE COMPENSATION COMMITTEE
Henry F. Frigon
Jeffrey T. Gill
Robert E. Gill
Sidney R. Petersen
83
<PAGE>
GTC PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
return, calculated on a dividend reinvestment basis, from the effective date of
the initial public offering of GTC Common Stock (May 18, 1994) through December
31, 1995 for GTC, the Nasdaq Stock Market Total Return Index--US Companies, and
the Nasdaq Stock Market--Electronic Component Stocks Index. The Performance
Graph assumes $100 was invested on May 18, 1994 in GTC's Common Stock or the
respective indexes. There can be no assurance as to future trends in the
cumulative total shareholder return of the GTC Common Stock or of the following
indexes. GTC does not make or endorse any predictions as to future stock
performance.
<TABLE>
<CAPTION>
NASDAQ
ELECTRONIC NASDAQ
COMPONENT U.S.
DATE GTC STOCKS STOCKS
-------- ------ ---------- ------
<S> <C> <C> <C>
5/18/94 100.00 100.00 100.00
5/31/94 100.00 99.82 100.24
6/30/94 100.00 94.22 96.58
7/29/94 85.00 94.46 98.56
8/31/94 95.00 105.40 104.84
9/30/94 90.00 104.96 104.57
10/31/94 72.50 109.04 106.63
11/30/94 56.25 108.10 103.09
12/31/94 60.00 109.19 103.38
1/31/95 70.00 113.26 103.96
2/28/95 50.00 128.12 109.46
3/31/95 52.50 136.66 112.70
4/30/95 55.00 157.83 116.25
5/31/95 47.50 170.61 119.25
6/30/95 46.25 194.21 128.91
7/31/95 65.00 214.36 138.39
8/31/95 68.75 210.12 141.19
9/30/95 57.50 209.24 144.44
10/31/95 45.00 219.17 143.61
11/30/95 37.50 199.35 146.98
12/31/95 25.00 180.86 146.20
1/31/96 27.50 180.81 146.92
2/29/96 27.50 188.60 152.52
3/31/96 25.00 179.73 153.03
4/30/96 31.25 210.47 165.72
5/31/96 36.25 223.48 173.33
6/30/96 30.00 205.32 165.50
7/31/96 23.75 198.82 150.77
8/31/96 20.63 213.23 159.21
9/30/96 20.00 248.85 171.41
10/31/96 17.50 267.22 169.55
11/30/96 18.75 309.90 180.09
12/31/96 10.00
</TABLE>
OWNERSHIP OF GTC COMMON STOCK
The following table sets forth certain information with respect to
beneficial ownership of GTC Common Stock, including beneficial ownership (i) of
each person (or group of affiliated persons) who is
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<PAGE>
known by GTC to own beneficially more than 5% of the shares of GTC Common Stock,
(ii) by each of GTC's directors who owns shares, (iii) by each of the Named
Officers reflected in the Summary Compensation Table and (iv) by all directors
and executive officers as a group. Except as otherwise indicated, the persons
named in the table have sole voting and investment power with respect to all
shares of GTC Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
------------------------------------------
AFTER THE
DECEMBER 31, 1996 REORGANIZATION
--------------------- -------------------
NAME NUMBER PERCENT NUMBER PERCENT
---- ---------- -------- ---------- -------
<S> <C> <C> <C> <C>
Group Financial Partners, Inc. (1)................... 13,049,400 80.4% 35,915,407 87.1%
455 South Fourth Avenue
Louisville, Kentucky 40202
Carl P. McCormick (2)................................ 432,486 2.6% 432,486 1.0%
David D. Johnson..................................... 1,525 * 1,525 *
Avarim Margalith (3)................................. 211,516 1.3% 211,516 *
J. Hardie Harris..................................... -- * -- *
Henry F. Frigon (4).................................. 58,251 * 58,251 *
Sidney R. Petersen (5)............................... 56,571 * 56,571 *
Roger W. Johnson (6)................................. 7,000 * 7,000 *
All directors and executive officers as a group (7).. 13,816,749 82.2% 36,682,756 87.7%
</TABLE>
___________
* less than 1%
(1) GFP directly owns shares of GTC Common Stock. Robert E. Gill, Jeffrey T.
Gill, R. Scott Gill, Virginia G. Gill and Patricia G. Gill own 19.4%,
32.2%, 27.9%, 19.8% and 0.1%, respectively (99.4% in the aggregate), of
the GFP Common Stock and, therefore, may be deemed to have an indirect
beneficial interest in the shares of GTC Common Stock owned by GFP.
Robert E. Gill and Jeffrey T. Gill are also directors of GTC.
(2) Includes 300,000 shares issuable under currently exercisable options.
(3) Includes 180,000 shares issuable under currently exercisable options.
(4) Includes 53,251 shares issuable under currently exercisable options.
(5) Includes 54,071 shares issuable under currently exercisable options.
(6) Includes 7,000 shares issuable under currently exercisable options.
(7) Includes the shares of GTC Common Stock in which Robert E. Gill and
Jeffrey T. Gill may be deemed to have an indirect beneficial interest.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires GTC's officers and directors,
and persons who beneficially own more than 10% of a registered class of GTC's
equity securities, to file reports of ownership on Form 3 and changes in
ownership on Forms 4 and 5 with the Commission and the NASD. Federal securities
regulations require that officers, directors and greater than 10% shareholders
furnish GTC with copies of all Section 16(a) forms they file.
Based solely on GTC's review of the copies of such forms and written
representations furnished to GTC by these reporting persons, GTC believes that
during 1995 and the preceding year, except as previously disclosed, its
officers, directors, and greater than 10% beneficial owners were in compliance
with
85
<PAGE>
all applicable filing requirements.
BUSINESS OF GTC
GENERAL
GTC is a leading provider of advanced manufacturing, engineering and
testing services to OEMs of electronic products. GTC was incorporated on
December 27, 1988 as a subsidiary of GFP. On May 21, 1989, GTC acquired certain
assets and assumed certain liabilities of the Defense Communications and
Production division of Honeywell, Inc. ("Honeywell"). GTC's operating
subsidiaries include Group Technologies S.A. de C.V. ("GTC Mexico"), a majority-
owned subsidiary located in Mexico City, Mexico where it operates one
manufacturing plant, Group Technologies Suprimentos de Informatica Industria e
Comercio Ltda. ("GTC Brazil"), a majority-owned subsidiary located in the state
of Sao Paulo, Brazil where it operates two separate manufacturing operations,
one in Hortolandia and one in Campinas. Substantially all of the assets of
Metrum, which remains a wholly-owned subsidiary of GTC, were divested on
February 9, 1996, and GTC immediately ceased all operations at its Littleton,
Colorado facility.
GTC custom manufactures complex circuit card assemblies, subsystems and
end-user products for use in a wide variety of markets, including avionics,
gaming, personal computer, photography, space, telecommunications, workstation
and government systems. GTC's customers include Apple, Farallon, Hewlett-
Packard, Honeywell, Hughes, IBM, International Game Technology, Kulicke &
Soffa, LAM Research, Lockheed-Martin, Lucent Technologies, Northrop Grumman,
Paradyne, Plantronics, Polaroid, Telular and various agencies of the United
States government.
GTC offers its customers traditional turnkey manufacturing solutions,
including basic design services (such as board layout, production and testing),
materials management (including selection, sourcing and procurement), automated
assembly and quality assurance. GTC believes that it is unique in its ability
to offer its customers a broad range of sophisticated engineering services
which complement its basic manufacturing services. GTC also provides high-level
engineering services, such as Application Specific Integrated Circuit ("ASIC")
design, software development and product redesign.
RECENT DEVELOPMENTS
A number of events occurred during 1995 and 1996 which significantly
impacted GTC's ability to: (i) meet its planned volume, (ii) achieve an optimum
mix of work, and (iii) manage its domestic manufacturing operations profitably.
GTC also completed a number of strategic initiatives designed to effectively
deal with these problems and to focus its business on its core manufacturing
capabilities.
EVENTS IMPACTING THE BUSINESS
While the operating performance of GTC's domestic manufacturing and
engineering services businesses during 1996 was positively impacted by the
favorable settlement of a contract claim dispute, the operating performance of
these businesses during both 1995 and 1996 has been negatively impacted by the
completion of certain key contracts and a reduction in customer demand which
have combined to create a significant amount of under-utilized capacity at
GTC's Tampa facility. Similarly, the operating performance of GTC's operations
in Mexico City, Mexico during 1996 was negatively impacted by the completion of
certain key contracts and/or a reduction in customer demand.
On March 29, 1996, GTC entered into an agreement (the "1996 Credit
Agreement") with its primary lender to amend and restate the revolving credit
agreement entered into between the parties on November 24, 1994. The 1996
Credit Agreement provides GTC with a two-year revolving line of credit
facility, a $3,300,000 two-year facility and an additional $5,000,000 facility
for the period through December 31, 1996. In connection with the execution of
the 1996 Credit Agreement, GTC issued its primary lender warrants on
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<PAGE>
March 29, 1996 to purchase 1,200,000 shares of GTC Common Stock, 200,000 of
which were vested at the date of issuance and the remaining 1,000,000 of which
became vested quarterly in 25% increments beginning one year from the date of
issuance. GTC recorded an original issue discount for the 1996 Credit Agreement
equal to the fair market value of the exercisable warrants and GTC is amortizing
this discount over the twelve-month period beginning in April 1996. In addition
to the expense incurred from amortizing loan costs associated with the 1996
Credit Agreement, GTC has experienced an increase in the rate of interest on its
borrowings, which together have had a negative impact on GTC's operating
performance.
The combined negative impact of the aforementioned and other events has
caused GTC to incur significant losses during 1995 and 1996. As a result, GTC,
as of September 29, 1996, was not in compliance with certain financial covenants
contained in the 1996 Credit Agreement, and the related $11,621,000 of debt has
been classified as current as of September 29, 1996. However, the lender waived
such items of noncompliance through November 30, 1996. As of the date of this
Joint Proxy Statement/Prospectus, GTC is not in compliance with certain
financial covenants contained in the 1996 Credit Agreement. Although GTC's
lender has to date advanced funds pursuant to the terms of the 1996 Credit
Agreement, the lender has no obligation to do so and could cease advancing funds
at any time. GTC is investigating alternative sources of financing which, if
obtained, will enable GTC to repay the debt outstanding under the 1996 Credit
Agreement.
STRATEGIC INITIATIVES
GTC initiated several highly focused programs during 1995 and 1996 to
incrementally improve its manufacturing processes, communications systems,
materials management, contract management, accounting and marketing efforts.
GTC remains optimistic that additional improvements to its operating
performance will continue to be realized by the business as a result of these
programs.
GTC successfully reduced the break-even point for its commercial
manufacturing operations in Tampa, Florida by taking steps to reduce its
headcount and overhead costs during 1995 and 1996. While GTC recorded certain
expenses in 1995 and 1996 as a result of taking these steps, management
believes the steps will facilitate GTC's efforts to return to profitability.
During 1995 and 1996, GTC successfully divested all of its name brand
products businesses in order to enable GTC to focus its resources on GTC's core
contract manufacturing capabilities. GTC generated a total of approximately
$16,400,000 in cash from the sale of these assets. The instrumentation products
business unit was sold to Bell in February 1996 for $10,104,000.
GTC acquired and expanded an operation in Hortolandia, Brazil from IBM
Brasil during the third quarter of 1995. In order to meet the needs of its
expanding customer base in Brazil, GTC, during the third quarter of 1996,
opened a second manufacturing facility which is located in Campinas, Brazil.
GTC now employs approximately 300 people in Brazil.
INDUSTRY BACKGROUND
OEMs originally utilized contract manufacturing sources primarily to
reduce labor costs in the production of electronic assemblies and to provide
for additional manufacturing capacity in times of peak demand. These early
contract manufacturers typically were employed on a consignment basis in which
the OEM provided the circuit and production designs, procured all components
and performed the final product testing. During this period of time, the
industry was characterized by small regional job shops with few, if any,
competitors of significant size.
During the early 1980s, the commercialization of the personal computer
began to fuel substantial growth in the electronics industry and with it, the
growth of contract manufacturers. At about the same time, significant
advancements were made in manufacturing know-how as surface mount technology
("SMT") began to replace pin-through-hole technology as the preferred method
for the assembly of circuit boards.
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SMT provided the OEMs with significant cost savings while at the same time
increasing the performance of their products. Many of the benefits, especially
those relating to cost reduction, were passed along to consumers, which GTC
believes helped to sustain the double-digit growth of the electronics industry
into the 1990s.
Despite the rapid growth in the industry, the market soon became
characterized by intense price competition and demands for more frequent
product introductions. In an effort to survive and meet the requirements of the
marketplace, OEMs were forced to restructure and focus their resources on core
strategic competencies, such as product development, software design and
marketing, and to outsource capital intensive manufacturing operations to
specialists. As contract manufacturers began to perform more turnkey services,
the relationship between OEMs and contract manufacturers became more strategic
in nature, with the two now linked in a close relationship to deliver cost
effective, high-quality products quickly to the marketplace.
GTC believes that the strategic use of contract manufacturers has provided
significant benefits to both the contract manufacturers and to the OEMs.
Contract manufacturers have benefited from the economies of scale resulting
from larger and more frequent orders from OEMs, as well as from the strategic
and operational benefits arising from the stability of longer-term
relationships. OEMs in turn have benefited from significantly reduced
manufacturing costs, reduced levels of investment in property, plant, equipment
and working capital, reduced cycle time for new product introductions,
increased flexibility, and access to the most advanced manufacturing
technologies available.
GTC believes that the contract manufacturing industry has grown through a
series of phases during which first price and then quality became the principal
methods of differentiation among contract manufacturers. During the 1980s, the
low overhead, low cost, high volume contract manufacturer was in favor and
served primarily to provide OEMs with low cost products. By the early 1990s,
price alone no longer served to differentiate contract manufacturers and
quality became an important additional selling point. Contract manufacturers
which were able to deliver products to exacting international standards of
quality began to grow more rapidly. As a result, the contract manufacturing
industry began to standardize around global quality certifications, such as ISO
9000.
GTC believes that the contract manufacturing industry is entering a new
phase now that both low price and high quality are considered to be entry level
standards for companies in the industry. In the future, successful contract
manufacturers will become increasingly important in helping OEMs to introduce
new products, faster, more frequently and with a greater number of features
than in previous generations. The production volumes are expected to be smaller
with the products targeted at specialized niche markets. GTC believes that its
ability to provide OEMs with product design enhancements, quick-turn
prototyping and complete system solutions will be critical to the future
success of its relationships with OEMs.
The contract manufacturing industry is characterized by a high degree of
customer and market concentration and is anticipated to grow significantly.
Technology Forecasters, Inc. estimates that the North American electronics
contract manufacturing industry is expected to grow from $15.8 billion in 1994
to approximately $63.1 billion by 1999, reflecting a compound annual growth
rate of approximately 30% and that the worldwide electronics contract
manufacturing industry is expected to grow from $34.9 billion in 1994 to
approximately $117 billion by 1999, reflecting a compound annual growth rate of
approximately 27%. GTC believes that the integration of digital and wireless
technologies into new products will help generate growth from several markets
outside of the computer industry, such as telecommunications, industrial
electronics and medical instrumentation. In addition to growth in the
electronics industry, GTC believes that further growth in the contract
manufacturing industry will come from an increasing need for OEMs to reduce
product time to market and to manage more complex product designs, inventories
and component procurements.
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BUSINESS STRATEGY
GTC's objectives are to provide a broad range of value-added manufacturing
and engineering services that will help its customers compete more effectively
in the marketplace and to improve GTC's financial performance through
implementation of the following strategies.
MANUFACTURING AND SERVICE CAPABILITY
GTC intends to continue to expand the geographical presence of its
operations internationally to better serve the needs of its customer base. GTC
plans to expand its operations in Mexico and Brazil, and to continue to
increase the range of manufacturing technologies and services it has to offer
to its customers. GTC believes major opportunities will develop for companies
that become leading providers of new packaging and interconnect technologies
such as multichip module, flip chips, ball grid array and micro ball grid
array.
VALUE-ADDED SERVICES
GTC intends to continue to utilize its advanced engineering services
capabilities to provide its customers with complete system solutions which
exceed the scope of traditional turnkey services provided by most contract
manufacturers. GTC believes that the ability to provide its customers with
these services, which include software development, ASIC design, prototype
development, product re-engineering, feature enhancement, product
ruggedization, cost reduction, product miniaturization, and EMI interference
and Tempest shielding is instrumental in moving new products to market quickly
and regularly.
DIVERSIFIED CUSTOMER BASE
GTC intends to pursue customers across a number of industries in order to
avoid the customer and market concentration that is more typical of other
companies in the industry. GTC's quality and technical certifications enable it
to provide a series of advanced design engineering and manufacturing services
for customers requiring special certifications, such as NASA, FAA and MIL-STD,
in markets that are not considered to be traditional sources of business for
contract manufacturers. GTC believes that its customer base is well-balanced
and that it will strengthen its prospects for future growth by serving a
variety of customers and industries.
MANUFACTURING SERVICES
GTC provides its customers with a broad variety of solutions, from low-
volume prototype assembly to high-volume turnkey systems manufacturing. The
primary segments within the electronics industry served by GTC include
avionics, gaming, personal computer, photography, space, telecommunications,
workstation and government systems. GTC employs a multi-disciplined engineering
team which provides comprehensive manufacturing and design support to
customers. The turnkey systems solutions offered by GTC include design
conversion and enhancement, materials procurement, system assembly, testing and
final system configuration.
GTC's Tampa facility is certified to ISO 9001, the international standard
for quality assurance in design, development, production, installation and
service. GTC's facilities in Mexico City, Mexico and Hortolandia, Brazil are
certified to ISO 9002. GTC believes that its operations are one of the most
widely certified in the contract manufacturing industry, enabling GTC to
compete in a broad array of niche markets. GTC has quality systems which meet
the requirements of NHB5300.4 specification (as audited by Astro-Martin
Marietta and NASA), NSA 91-15 specification (as audited by NSA) and MIL-Q-9858A
(as audited by the U.S. Army and Navy, Lockheed Martin and Northrop Grumman).
The quality systems also meet the standards for FAA avionics based on an audit
conducted by Honeywell.
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GTC has invested in capital equipment and has established relationships
with manufacturers of equipment that enable it to provide its customers with
advanced manufacturing technologies. GTC's manufacturing capabilities are
enhanced by up-to-date manufacturing techniques. Among these are just-in-time
procurement, continuous flow manufacturing, statistical process control, total
quality management, stringent and real-time engineering change control routines,
and total cycle time reduction techniques. GTC also has invested in integrated
manufacturing support systems to maximize performance. These systems provide a
continuous flow of information from the initial estimating phase of a project
through final shipment.
GTC believes that its worldwide sourcing of components, combined with the
high volume of its orders, enables GTC to obtain very competitive component
pricing and availability. Materials are scheduled to arrive in a just-in-time
manner, thereby minimizing stocking and storage costs. Upon receipt, materials
are inspected, if required, and delivered to their point of use, reducing the
amount of cycle time required to process them. Materials are controlled and
segregated on a customer-by-customer basis. This allows accurate pricing of
materials between customers and minimizes the likelihood that GTC's
relationships with customers are disrupted.
GTC believes that it has fostered fair and strong relationships with its
suppliers. These relationships are built upon a history of GTC providing
suppliers with accurate and timely information when ordering materials and
listening to the suppliers' needs. In return, suppliers are expected to provide
highly competitive material prices with flexible delivery schedules, to honor
their commitments for delivery of materials on time, and to meet or exceed all
quality requirements. Although GTC historically has paid its suppliers in a
timely manner, GTC extended payment terms with its suppliers beginning in the
third quarter of 1995. GTC has been successful in continuing to work on
reasonable credit terms with its supplier base.
GTC provides varied levels of testing services, ranging from in-circuit
test, burn-in test and environmental stress screening to functional test.
Increasingly, GTC is asked to provide final systems assembly ("box build")
services. As a result, testing procedures and equipment are required to ensure
that finished products are tested to standards that reflect their required use.
ENGINEERING SERVICES
GTC will continue to utilize its advanced engineering services
capabilities to provide its customers with complete system solutions that exceed
the scope of traditional turnkey services provided by most contract
manufacturers. GTC believes that the ability to provide its customers with these
services, including software development, ASIC design, prototype development,
product re-engineering, feature enhancement, product ruggedization, cost
reduction, product miniaturization, and EMI interference and Tempest shielding
is instrumental in moving new products to market quickly and regularly. GTC's
engineers perform design work on a contract basis for a number of customers,
including those requiring high levels of security clearance.
CUSTOMERS AND MARKETING
GTC serves a wide variety of markets, including avionics, gaming, personal
computer, photography, space, telecommunications, workstation and government
systems. GTC has pursued the diversification of its market segments and customer
base and sought relationships with leading OEMs in the markets it serves. GTC's
principal sources of new business originate from the expansion of existing
relationships, referrals and direct sales through senior management, direct
sales personnel, market specialists and one independent sales representative.
Market specialists, supported by the executive staff, identify and attempt to
develop relationships with potential OEM customers who meet a certain profile,
which includes financial stability, industry leadership, need for technology
driven turnkey manufacturing, anticipated unit volume growth and long-term
relationship potential. GTC's customers include Apple, Farallon, Hewlett-
Packard, Honeywell, Hughes, IBM, International Game Technology, Kulicke & Soffa,
LAM Research, Lockheed-Martin, Lucent Technologies, Northrop Grumman, Paradyne,
Plantronics, Polaroid, Telular, and various agencies of the United States
government. In 1993, 1994 and 1995, GTC's largest individual commercial customer
was IBM,
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which accounted for approximately 8%, 14% and 16%, respectively, of GTC's
revenue. GTC's sales of products and services to United States government
agencies represented approximately 47%, 19% and 20% of GTC's revenue in 1993,
1994 and 1995, respectively. GTC's sales of products and services to a variety
of prime contractors under contract with the federal government, in the
aggregate, represented approximately 47%, 11% and 9% of GTC's revenue in 1993,
1994 and 1995, respectively.
GTC's sales efforts are supported by advertising in numerous trade media,
sales literature, participation in trade shows and direct mail promotions. GTC
promotes the concept of manufacturing relationships with each of its customers.
The focus of this relationship is centered on the belief that GTC and its
employees must become an essential part of every customer's operations. To
facilitate this relationship, GTC employs program managers who are dedicated to
one or more customers to ensure that customer contract requirements are met and
that information critical to the success of each project is communicated and
acted upon in an expedient fashion. This requires that program managers maintain
close contact with people inside GTC and with the customers that they support,
communicating project status in addition to resolving specific issues which
arise. GTC believes that this form of dedicated relationship is critical to
meeting the dynamic needs of its customers.
COMPETITION
GTC operates in a highly competitive environment and competes against
numerous domestic and foreign manufacturers. GTC's competitors include SCI
Systems, Solectron, AVEX Electronics, Jabil Circuit, Plexus, DII Group, IEC
Electronics, Sanmina and Benchmark Electronics. In addition, GTC may encounter
competition in the future from other large electronic manufacturers which are
selling, or may begin to sell, contract manufacturing services. GTC may also
face competition from the manufacturing operations of its current and potential
OEM customers, which GTC believes continue to evaluate the merits of
manufacturing products internally versus the merits of contract manufacturing.
GTC believes that the primary basis of competition in its targeted markets
are time to market, capability, price, manufacturing quality, advanced
manufacturing technology and reliable delivery. GTC believes that it generally
competes favorably with respect to each of these factors. To remain competitive,
GTC must continue to provide technologically advanced manufacturing services,
maintain world-class quality levels, offer flexible delivery schedules, deliver
finished products on a reliable basis and compete favorably on the basis of
price.
BACKLOG
GTC's order backlog at December 31, 1996 was approximately $65 million as
compared to order backlog at December 31, 1995 and 1994 of approximately $124
million and $177 million, respectively. The decrease in GTC's backlog is
primarily attributable to a reduction in government contracts. Much of GTC's
government-related business has typically been associated with military
projects, and the overall reduction in the nation's defense budget has
significantly curtailed the potential projects available to contract
manufacturers. Backlog consists of firm purchase orders and commitments which
are to be filled within the next twelve months. However, since orders and
commitments may be rescheduled or canceled, backlog is not a definitive
indicator of future financial performance.
SUPPLIERS
GTC procures components from a broad group of suppliers, determined on an
assembly-by-assembly basis. Some of the products and assemblies manufactured by
GTC require one or more components that may be available from only a single
source. Some of these components are allocated in response to supply shortages.
GTC attempts to ensure the continuity of supply of these components. In cases
where unanticipated customer demand or supply shortages occur, GTC attempts to
arrange for alternative sources of supply, where available, or defers planned
production to meet the anticipated
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availability of the critical component. In some cases, supply shortages will
substantially curtail production of all assemblies using a particular component.
In addition, at various times there have been industry-wide shortages of
electronic components, in particular memory and logic devices. While GTC has not
experienced material shortages in the recent past, such shortages could produce
significant short-term interruptions of GTC's future operations.
GTC believes that it has good relationships with its suppliers, though the
delay of payments beginning in the third quarter of 1995, due to GTC's financial
difficulties, resulted in credit problems with certain suppliers. However, GTC
has been able to arrange and maintain reasonable credit terms with its suppliers
during 1996.
RESEARCH AND DEVELOPMENT
GTC invested $4.1 million, $5.2 million and $3.0 million, in research and
development in 1993, 1994 and 1995, and $0.3 million in the nine months ended
September 30, 1996, respectively. This investment has been made primarily in
support of GTC's name brand products line of business, the majority of which was
divested by the end of the first quarter of 1996. GTC also utilizes its research
and development capability to develop processes and technologies for the benefit
of its customers. GTC plans to continue its investment in research and
development in the future at reduced levels due to the divestiture of name brand
products, but cannot forecast the impact of such expenditures upon the overall
success of its sales.
PROPRIETARY RIGHTS, PATENTS AND TRADEMARKS
GTC regards its manufacturing processes and circuit designs as proprietary
trade secrets and confidential information. GTC relies largely upon a
combination of trade secret laws, agreements with its OEM customers, internal
security systems, confidentiality procedures and employee agreements to maintain
the trade secrecy of its circuit designs and manufacturing processes. Although
GTC takes steps to protect its trade secrets, there can be no assurance that
misappropriation will not occur.
GTC licenses some technology from third parties which it uses in providing
manufacturing services to its OEM customers. GTC believes that such licenses are
generally available on commercial terms from a number of licensors. Generally,
the agreements governing such technology grant to GTC nonexclusive, worldwide
licenses with respect to the subject technology and terminate upon a material
breach by GTC.
Although GTC does not believe that its circuit designs or manufacturing
processes infringe on the proprietary rights of third parties, there can be no
assurance that third parties will not assert infringement claims against GTC in
the future with respect to current or future designs or processes. Any such
assertion may require GTC to enter into a royalty arrangement or result in
costly litigation.
CERTIFICATIONS
GTC believes that its operations are among the most widely certified in
the contract manufacturing industry. GTC's Tampa facility is certified to ISO
9001, the international standard for quality assurance in design, development,
production, installation and service. GTC's facilities in Mexico City, Mexico
and Hortolandia, Brazil are certified to ISO 9002. ISO 9002 is the international
standard for quality assurance in product installation and service, but does not
cover product design or development, and is the more common level of
certification for a contract manufacturer. GTC also meets NASA's NHB5300.4
specification for space programs and numerous military specifications including
MIL-Q-9858A (quality program), MIL-STD-2000 (high reliability soldering), MIL-
STD 45662 (calibration and metrology) and MIL-STD-801D (environmental testing).
GTC also meets certain manufacturing and quality practices required by the FAA.
GTC will continue to utilize these certifications to provide service to these
and other niche markets.
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GOVERNMENT REGULATION
GTC's operations are subject to certain federal, state and local regulatory
requirements relating to environmental, waste management, health and safety
matters. Management believes that GTC's business is operated in material
compliance with applicable regulations promulgated by the Occupational Safety
and Health Administration and the Environmental Protection Agency and
corresponding state agencies which, respectively, pertain to health and safety
in the workplace and the use, discharge and storage of chemicals employed in the
manufacturing process. Current costs of compliance are not material to GTC.
However, new or modified requirements, not presently anticipated, could be
adopted creating additional expense for GTC.
GTC's former leased facility located on Waters Avenue in Tampa, Florida is
currently subject to remediation activities related to ground water
contamination by methylene chloride and other volatile organic compounds which
occurred during the operation of the facility by a predecessor of GTC. Through a
series of evaluations, it was determined that the ground water contamination is
also present off site. In December 1986, Honeywell, a prior operator of the
facility, entered into a consent order (the "Consent Order") with the State of
Florida Department of Environmental Regulation under which Honeywell agreed to
take certain corrective action to remediate the contamination. These remediation
activities include the installation of recovery wells and the treatment of the
contaminated ground water. Under the Consent Order, Honeywell assumed the
responsibility for initiating and conducting these remediation activities
including the annual cost associated with these remediation activities,
currently estimated to be up to $500,000 per year. At the time GTC purchased the
assets of the business located on this site, it obtained an agreement from the
seller, Philips Electronics North America Corporation, to indemnify and hold GTC
harmless with respect to such matters. GTC vacated the property in December
1994, at which time its lease obligation expired.
In the course of Metrum's acquisition of certain assets of a business from
Alliant Techsystems, Inc. ("Alliant"), Metrum and GTC became aware of ground
water contamination that will require remedial action at the facility where the
business was located in Littleton, Colorado. Evaluations indicate that certain
chlorinated solvents were disposed of on the site by a previous owner of the
business and have contaminated the ground water. There has been no final
determination on the total scope of actions which will be required to remediate
the ground water contamination, although it is estimated that the clean-up cost
could reach as high as $20 million in the aggregate. As part of the agreement
for the purchase and sale of the assets of the business, Alliant agreed to
indemnify and hold Metrum harmless with respect to such matters. Metrum leased
the facility from Alliant and continued operations on the site until
substantially all of the assets of the business were sold to Bell on February 9,
1996. Metrum and GTC agreed to indemnify and hold Bell harmless with respect to
such matters.
EMPLOYEES
As of December 31, 1996, GTC employed approximately 1,500 employees, of
which approximately 800 are employed in the U.S., 400 are employed in Mexico and
300 are employed in Brazil. GTC employs approximately 110 people in finance,
sales or administration, 1,290 people in manufacturing operations and 100 people
in various engineering functions. Approximately 350 of GTC's domestic employees
are represented by the International Brotherhood of Teamsters collective
bargaining unit. In 1993, GTC and the International Brotherhood of Teamsters
signed a five-year contract. GTC believes its relationships with its employees
are good.
GEOGRAPHIC SEGMENTS
All of GTC's operations for 1993, 1994 and 1995 and the nine months ended
September 30, 1996, were located in the United States, Mexico and Brazil. See
Note 18 to Notes to Consolidated Financial Statements of GTC for financial
information about GTC's geographic segments.
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EXECUTIVE OFFICERS
The following table contains certain information concerning the directors
and executive officers of GTC.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH GTC AND PRINCIPAL OCCUPATION
- ---- --- ------------------------------------------
<S> <C> <C>
Jeffrey T. Gill.................... 40 Director; President and Chief Executive Officer of GFP
Robert E. Gill..................... 71 Director; Chairman of the Board of GFP and President and
Chief Executive Officer of GTC
Sidney R. Petersen................. 66 Director; Retired; formerly Chairman and Chief Executive
Officer of Getty Oil, Inc.
Henry F. Frigon.................... 62 Director; Retired; formerly President and Chief Executive
Officer of BATUS, Inc.
Roger W. Johnson................... 62 Director; Former Administrator of U.S. General Services
Administration
Aviram Margalith................... 46 Vice President and General Manager of
International EMS Operations
David D. Johnson................... 40 Vice President and Chief Financial Officer
J. Hardie Harris................... 39 Vice President and General Manager of Tampa
EMS Operations
</TABLE>
All directors hold office until the next annual meeting of shareholders or
until their successors are elected and qualified. Officers are appointed by the
GTC Board and serve at the discretion of the GTC Board.
JEFFREY T. GILL has served as Chairman of the Board of GTC since 1992 and
as a Director of GTC since 1989. Mr. Gill co-founded GFP and has served as its
President and Chief Executive Officer since 1992 and as a Director since its
inception in 1983. Mr. Gill serves as a Director and Chairman of the Board of
the following GFP subsidiaries: Tube Turns and Unison. Mr. Gill serves as a
Director, President and Chief Executive Officer of Partners-V; Director, Vice
President and Secretary of BW and as a Director of Bell and Metrum, each of
which is a direct or indirect subsidiary of GFP. Jeffrey T. Gill is the son of
Robert E. Gill.
ROBERT E. GILL has served as a Director of GTC since 1989 and as Chairman
of the Board of GTC from 1989 to 1992. He was elected to serve as the President
and Chief Executive Officer of GTC in October 1996. Mr. Gill co-founded GFP and
has served as its Chairman of the Board since its inception in 1983 and as
President and Chief Executive Officer from 1983 through 1992. Mr. Gill also
serves as a Director of the following GFP subsidiaries: Bell, Tube Turns, Unison
and Partners-V, as well as a Director, President and Chief Executive Officer of
BW, also a subsidiary of GFP. Mr. Gill was previously employed as Chairman of
the Board, President and Chief Executive Officer of Armor Elevator Company,
Inc., Vice President of A.O. Smith Corporation and as President of Elevator
Electric Company. Robert E. Gill is the father of Jeffrey T. Gill.
SIDNEY R. PETERSEN has served as a Director of GTC since 1994. Mr. Petersen
retired as Chairman of the Board and Chief Executive Officer of Getty Oil, Inc.
in 1984. Mr. Petersen served Getty Oil in a variety of increasingly responsible
management positions since 1955. Mr. Petersen currently serves as Director of
Avery Dennison Corporation, Union Bank of California, Seagull Energy
Corporation, and NICOR, Inc. and its subsidiary, Northern Illinois Gas Company.
HENRY F. FRIGON has served as a Director of GTC since 1994. Mr. Frigon is
currently a private investor and business consultant. Mr. Frigon most recently
served as Executive Vice President-Corporate Development and Strategy and Chief
Financial Officer of Hallmark Cards, Inc. from 1990 through 1994. Mr. Frigon
retired as President and Chief Executive Officer of BATUS, Inc. in March 1990,
after serving with that
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company for over 10 years. Mr. Frigon currently serves as Director of H & R
Block, Inc., CompuServe, Inc., Buckeye Cellulose Corporation and Dimon, Inc.
ROGER W. JOHNSON has served as a Director of GTC since 1996. Mr. Johnson
most recently served as Administrator of the United States General Services
Administration from 1993 through 1996. Mr. Johnson served as Chairman and Chief
Executive Officer of Western Digital Corporation from 1982 through 1993.
AVIRAM MARGALITH has served as Vice President and General Manager of
International EMS Operations since January 1996. Dr. Margalith served as Vice
President of Engineering for GTC from 1989 to 1994 and as Vice President and
General Manager of Federal Systems and Engineering during 1995. He was
previously employed in various management positions with Honeywell.
DAVID D. JOHNSON was elected to serve as Vice President and Chief Financial
Officer effective March 1996. Mr. Johnson served as Financial Director, Far East
South for Molex Incorporated from 1993 to 1996. Mr. Johnson served Molex in
various management positions since 1984. Prior to this, Mr. Johnson was a senior
manager for KPMG Peat Marwick in San Francisco, California.
J. HARDIE HARRIS has served as Vice President and General Manager of Tampa
Electronic Manufacturing Services Operations since April 1995. Mr. Harris has
submitted his resignation for these positions to become effective January 31,
1997. Mr. Harris served as Vice President of Avex Electronics, Inc. from 1991 to
March 1995. Prior thereto, Mr. Harris was employed by Bostrom Seating, Inc. in
various management positions from 1987 to 1991.
PROPERTIES
GTC's headquarters are in a 308,000 square foot office and manufacturing
facility on Malcolm McKinley Drive in Tampa, Florida which GTC occupies under a
ten-year lease expiring in April 2002 (with two additional five-year options).
GTC also leases a 118,000 square foot office and manufacturing facility located
on Poniente 152 No. 659 in Mexico City, Mexico with a term expiring in July 1997
(with two additional three-year options). GTC occupies approximately 20,000
square feet of a manufacturing facility in Hortolandia, Brazil in connection
with its manufacturing services agreement with its customer. In order to meet
its other manufacturing requirements in Brazil, GTC also leases approximately
30,000 square feet of space at a facility in Campinas, Brazil, with a term
expiring in July 1999 (plus an option to renew for an unspecified period).
LEGAL PROCEEDINGS
GTC is, from time to time, a party to litigation which arises in the normal
course of its business. There is no litigation pending or, to GTC's knowledge,
threatened which, if determined adversely, would have a material adverse effect
upon the business or financial condition of GTC.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF GTC
NINE MONTHS ENDED SEPTEMBER 30, 1996
RESULTS OF OPERATIONS
The following table sets forth certain data, expressed as a percentage of
revenue, from GTC's Consolidated Statement of Operations for the three and nine
month periods ended September 30, 1995, and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30,
-------------------- -------------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue...................................... 100.0% 100.0% 100.0% 100.0%
Cost of operations........................... 95.7 98.3 95.9 94.5
----- ----- ----- -----
Gross profit................................. 4.3 1.7 4.1 5.5
Selling, general and administrative expense.. 4.9 5.0 6.7 4.8
Research and development..................... 0.8 0.0 1.2 0.2
----- ----- ----- -----
Operating (loss) income...................... (1.4) (3.3) (3.8) 0.5
Interest expense............................. 0.8 1.5 1.0 1.5
Other expense (income), net.................. (0.2) 0.2 0.1 0.1
----- ----- ----- -----
Loss before income taxes..................... (2.0) (5.0) (4.9) (1.1)
Income tax expense (benefit)................. (0.9) 0.9 (1.9) 0.4
----- ----- ----- -----
Net loss..................................... (1.1)% (5.9)% (3.0)% (1.5)%
===== ===== ===== =====
</TABLE>
Revenue for the third quarter of 1996 was $48.2 million, a decrease of
$23.4 million or 32.7% from $71.6 million for the third quarter of 1995.
Revenue for the first nine months of 1996 was $180.4 million, a decrease of
$28.1 million or 13.5% from $208.5 million for the first nine months of 1995.
The overall decrease in revenue reflects several changes in GTC's business
which occurred during 1995 and in the first nine months of 1996. The
composition of revenue for the comparable year-to-year periods varied primarily
as a result of GTC's expansion into Latin America and its reduced domestic
operations, including the disposition of its name brand products business units
during 1995 and in the first quarter of 1996. The net decrease of $28.1 million
for the nine month period is comprised of an increase in foreign operations of
$23.7 million offset by a reduction in Tampa based operations of $26.5 million,
and a $25.3 million decrease in revenue associated with the disposition of
substantially all of the assets of Metrum and the Badger business unit.
The increase in revenue from GTC's foreign operations in the first nine
months of 1996 was generated by the growth in GTC's Mexican and Brazilian
manufacturing services operations of $16.8 million and $6.9 million,
respectively. The principal increase in revenue from the Mexican operation was
provided by a turnkey contract which began in the second half of 1995 and which
was completed during the third quarter of 1996. The increase in Brazilian
revenue was principally due to the fact that GTC initially commenced operations
in Brazil during the third quarter of 1995, whereas it operated in Brazil for a
full nine months during 1996. GTC also commenced operations at a facility
located in Campinas, Brazil, in August 1996.
Revenue for GTC's domestic manufacturing and engineering services
businesses decreased by $24.0 million and $2.5 million, respectively, over the
first nine months of the prior year. The majority of the domestic manufacturing
services revenue decrease was related to a reduction in customer demand and to
periodic cancellations of non-profitable contracts during the first nine months
of 1995.
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GTC significantly reduced the fixed costs of its Tampa facility during
1995, thus lowering the break-even point of its manufacturing services
operation. While GTC continued to strategically lower both fixed and variable
costs during the first nine months of 1996, the revenue base for the Tampa
facility was not sufficient to enable it to report an operating profit in the
third quarter of 1996. Additionally, the completion of a contract has created
additional under-utilized production capacity at GTC's Tampa manufacturing
facility. While a near term replacement of this business is not foreseen, GTC
is actively pursuing new business opportunities with both its existing customer
base and new customers.
To enhance GTC's prospects for achieving an adequate revenue load in future
periods, management has structured the marketing and sales function to optimize
GTC's capabilities toward the achievement of new business generation. GTC's
marketing efforts for its domestic manufacturing services operations are
focused to identify high product mix and advanced packaging demands, and are
designed to attract and win profitable contracts which will utilize GTC's value
added engineering capability. Management has also consolidated certain
manufacturing support and materials functions to improve GTC's performance on
its existing programs. If GTC is unable to attract new business which will
generate profitable revenue for its Tampa facility during the remainder of 1996
and 1997, its financial performance during these periods may be adversely
affected. Management will closely monitor the progress of these activities and
will take additional actions designed to minimize the impact of any potential
revenue shortfall.
Revenue for the name brand products business units was $6.1 million for the
first nine months of 1996, which includes $4.1 million of revenue derived from
a favorable contract claim settlement. The instrumentation products business
unit of Metrum and GTC's Badger business unit were sold during the first
quarter of 1996. The aggregate decrease in revenue for the year-to-year
comparable periods related to the disposition of name brand products businesses
was $25.3 million. The sale of these business units completed the disposition
of GTC's entire line of name brand products, which also included two sale
transactions in the second quarter of 1995.
Gross profit for the third quarter of 1996 decreased to $0.8 million, or
1.7% of revenue, from $3.1 million, or 4.3% of revenue, in the third quarter of
1995. Gross profit for the first nine months of 1996 increased to $9.8 million,
or 5.5% of revenue, from $8.6 million, or 4.1% of revenue, in the first nine
months of 1995. The decrease in gross profit in the third quarter of 1996 is
primarily attributable to the disposition of GTC's name brand products business
units and the under-utilized capacity of its Tampa based operations. The net
increase in gross profit during the first nine months of 1996 is principally
related to a $7.7 million increase in gross profit from GTC's core
manufacturing and engineering services businesses, partially offset by a $6.5
million decrease in gross profit from the name brand products business. The
$7.7 million increase in gross profit is associated with a reduced level of
inventory reserves and adjustments, contract estimate changes and severance
costs as compared to the same period in 1995. Additionally, the gross margin
amount for the first nine months of 1996 also includes a favorable name brand
products business claim settlement of $4.1 million.
Selling, general and administrative expense for the third quarter of 1996
decreased to $2.4 million, or 5.0% of revenue, from $3.5 million, or 4.9% of
revenue, in the third quarter of 1995. Selling, general and administrative
expense for the first nine months of 1996 decreased to $8.6 million, or 4.8% of
revenue, from $14.0 million, or 6.7% of revenue, for the same period in 1995.
The decrease in the first nine months of 1996 reflects the disposition of the
name brand products business units and the result of ongoing cost reduction
activities.
Research and development expense for the third quarter and first nine
months of 1996 decreased $0.6 million and $2.2 million, respectively, from the
comparable prior year periods. GTC's research and development efforts have
historically been concentrated on the name brand products business units. GTC's
manufacturing and engineering services businesses are expected to continue to
require comparatively lower levels of research and development in the future.
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Interest expense for the third quarter and first nine months of 1996
increased $0.2 million and $0.7 million, respectively, from the comparable
prior year periods. Although GTC's average debt outstanding during the first
nine months of 1996 was lower than the comparable prior year period, the
weighted average interest rate on borrowings increased during 1996.
Additionally, $0.6 million of the increase for the first nine months of 1996
resulted from GTC's expansion into Latin America.
Income tax expense for the three and nine month periods ended September 30,
1996, consists primarily of income taxes on earnings in foreign countries.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $3.0 million for the first
nine months of 1996. Inventories and accounts receivable decreased by $13.3
million and $7.1 million, respectively, attributable to the completion or
curtailment of certain commercial contracts during 1996.
GTC's accounts payable decreased by $20.0 million during the first nine
months of 1996. The decrease is attributable to utilization of a portion of the
proceeds from the sales of businesses and a reduction in inventory
requirements. While GTC has maintained extended payment terms with its
suppliers, GTC has long-term relationships with a majority of its suppliers and
has been successful in maintaining reasonable credit terms with its supplier
base.
Net cash provided by investing activities was $9.2 million for the first
nine months of 1996. Capital expenditures were $2.4 million and the divestiture
of Metrum's instrumentation products business and GTC's Badger business unit
generated net proceeds of $10.1 million and $1.5 million, respectively. The
majority of the proceeds from the sale transactions were used to reduce GTC's
debt outstanding and to reduce accounts payable.
Net cash used in financing activities was $13.1 million for the first nine
months of 1996. On March 29, 1996, GTC entered into a credit agreement with its
bank which provided GTC with a revolving credit facility and two term
facilities. The revolving credit facility is for a term of two years and
provides credit availability up to $27.5 million through December 1996 and
$22.5 million through March 1998, subject to a borrowing base consisting of
eligible accounts receivable and inventories. At September 30, 1996,
availability on GTC's revolving credit facility was approximately $4.6 million.
The term facilities include a $3.3 million term note payable in installments
over two years and a $5.0 million term note payable in installments during
December 1996. Of the $5.0 million term note payable, approximately $4.2
million was paid down during the first nine months of 1996 and the remaining
balance was paid in October 1996.
In connection with the new credit agreement, GFP invested $1.0 million in
GTC in exchange for shares of GTC Common Stock. As a condition of the
consummation of the restructured credit agreement, GTC also issued to the bank
warrants to purchase 1.2 million shares of GTC Common Stock for $.01 per share,
0.2 million of which were vested on date of closing and the remaining 1.0
million of which become vested quarterly in 25% increments beginning March
1997. The bank will forfeit any unvested warrants in the event GTC repays all
debt outstanding prior to any warrant vesting date. GTC is investigating
alternative sources of financing which, if obtained, will enable GTC to repay
the debt to the bank prior to March 29, 1997. At September 30, 1996, GTC was
not in compliance with certain financial covenants contained in the credit
agreement. The bank waived such items of noncompliance through November 30,
1996. As of the date of this Joint Proxy Statement/Prospectus, GTC is not in
compliance with certain financial covenants contained in the credit agreement.
While the bank continues to advance funds pursuant to the credit agreement, it
is under no obligation to do so and could cease advancing funds at any time.
GTC's principal sources of liquidity currently consist of funds available
under its revolving credit facility and its ability to manage asset turnover.
GTC's ability to manage its working capital position and to generate profitable
revenue for its Tampa facility will impact GTC's accounts receivable and
inventories
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collateral base and, therefore, the availability of borrowings under the
revolving credit facility. The maximum available borrowings under the revolving
credit facility of $27.5 million through December 1996 and $22.5 million
thereafter should provide GTC with sufficient resources to meet its cash
requirements through the next twelve months. However, GTC is not in compliance
with certain financial covenants contained in the credit agreement and the bank
is under no obligation to advance funds pursuant to the credit agreement. If
the bank discontinues its advances of funds under the credit agreement or if
GTC is unable to maintain the collateral base required to utilize this
borrowing capacity, its liquidity may be adversely affected. Should it become
evident that a potential deficiency in short-term liquidity exists, management
will undertake proactive measures, including seeking alternative sources of
working capital and capital equipment financing, the sale of certain assets and
actions to maximize the amounts of accounts receivable and inventories eligible
as collateral. Cash requirements for periods beyond the next twelve months
depend on GTC's profitability, its ability to manage working capital
requirements and its rate of growth.
Inflation did not have a material effect on GTC's operations in the first
nine months of either 1996 or 1995.
FISCAL YEAR 1995
GTC faced numerous difficulties and challenges during 1995 which resulted
in GTC's first net loss since fiscal 1989. For the year ended December 31,
1995, GTC reported an operating loss of $18.2 million and a net loss of $17.7
million. The operating loss included certain charges recognized during the
second and fourth quarters of $11.2 million in the aggregate and $2.4 million
of charges related to the divestiture of GTC's name brand products business.
The 1995 financial performance of GTC's core manufacturing services
business was the worst in GTC's history. GTC earned very low margins on an
unfavorable revenue mix for its domestic manufacturing business. The impact of
operational issues which contributed to the poor financial performance
manifested itself in a number of significant charges recognized by GTC during
the second and fourth quarters of 1995. These charges related to a variety of
issues, including decisions by management concerning certain accounting
estimates, terminations of contracts, operating lease liabilities, book to
physical inventory adjustments and dispositions of assets. Management focused
its attention during the year toward the actions necessary to return GTC's core
manufacturing services business to profitability. Management believed that the
focus of GTC's human and financial resources should be directed to its core
business and, therefore, made decisions during 1995 to begin the divestiture of
substantially all of GTC's line of name brand products. Another factor
considered by management in reaching its decision to divest these operations
was GTC's need to reduce its outstanding debt under its revolving credit
agreement, which resulted in part from technical default under the credit
agreement. GTC recognized charges related to the divestitures of these product
lines during the second and fourth quarters.
GTC's manufacturing services business expanded during 1995 as a result of
the start-up of an operation in Brazil and growth in its Mexican operation. The
domestic manufacturing services business, which is located in Tampa, Florida,
was the primary cause of the decline in manufacturing services profitability
during 1995. GTC's domestic production capacity began the year underutilized as
a large government contract was completed late in 1994 and orders on two
commercial contracts were reduced due to the customers' need to reduce their
inventory levels. GTC also lost opportunities with two commercial customers due
to a change in outsourcing strategies which resulted in the loss of a
significant level of planned business.
GTC initiated marketing actions to attract new business and successfully
obtained a number of new contracts, including both government and commercial
customers. Production on these contracts began in the second quarter; however,
many start-up production difficulties were experienced, including customer
design related delays and material shortages due to industry-wide allocations
of certain components. Several of the
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new contracts were small relative to the overall size of GTC's production
capacity and were priced very competitively.
GTC's ability to generate the expected level of profitability on contracts
is highly dependent on its ability to effectively manage materials. Throughout
the first three quarters of 1995, GTC's materials management system had not
reached a level of stability that consistently provided GTC's procurement and
production areas with timely, accurate data concerning certain inventory items.
Given the increased production activities on the start-up of new contracts, the
instability of the materials management system negatively impacted GTC's
ability to perform profitably on these new contracts as well as the ongoing
contracts. After a series of hardware and software modifications during the
first three quarters, management noted significant improvements in the
stability of the materials management system during the fourth quarter.
Management believes that its materials management system is now adequate for
GTC's operations for the foreseeable future.
Management's efforts to reverse the negative trend in earnings, which began
in the fourth quarter of 1994, were increased during 1995. The marketing
efforts which produced new business in the first half of 1995 were expanded
during the second half of the year. GTC received a number of new orders as a
result of the marketing efforts; however, new contracts did not offset the
impact of the loss of the two large commercial customers in the first half of
1995, nor did it offset the impact of production schedule delays on other
contracts. The contract manufacturing industry experienced a high growth rate
during 1995, and GTC's marketing initiatives were aimed at attracting a share
of this growth while ensuring that the pricing of new contracts would be at a
level which would provide a reasonable return on GTC's investment. During the
third quarter, GTC engaged an independent consultant to serve as a facilitator
for a team of employees, comprised of a cross section from each of GTC's
functional areas, to prepare a recommendation to management of actions which
would assist GTC's return to profitability. One action proposed by the team of
employees, known as the "reinvention team," and implemented by management
during the fourth quarter was to restructure GTC's domestic electronic
manufacturing services operations into three discrete technology centers. The
technology centers are designed and focused to attract and win contracts that
will be optimum for the process technology, level of service and cost structure
for that technology center. This action resulted in improved accuracy of cost
allocations and thereby improved contract pricing. GTC's marketing efforts were
also aligned with the technology center concept to attract profitable contracts
for the respective technology centers. Another reinvention team action
implemented during the fourth quarter involved a series of material logistic
improvement programs.
GTC's international manufacturing services business grew significantly
during 1995, generating revenue, gross profit and operating loss of $40.2
million, $1.1 million and $1.5 million, respectively. GTC entered into a
manufacturing services agreement in July 1995 to provide contract manufacturing
services in Brazil to GTC's largest customer, IBM. GTC acquired certain
manufacturing equipment from IBM concurrent with this agreement in exchange for
a $4.9 million note payable to IBM for the purchase price of the equipment. The
Brazilian operation began contributing to revenue and operating profit during
the third quarter. GTC's Mexican operation achieved high growth during 1995 as
it ramped up during the third and fourth quarters on its largest contract.
Margins during this start-up phase have been low resulting in an operating
loss; however, margins are expected to improve as the manufacturing process on
this contract matures, which is the typical pattern for commercial contracts.
SECOND AND FOURTH QUARTER CHARGES
GTC recognized charges during the second and fourth quarters of 1995 of
$5.7 million and $8.6 million, respectively, including $0.7 million charged to
other expense. These charges related to a variety of issues, including
decisions by management concerning certain accounting estimates, terminations
of contracts, operating lease liabilities, and book to physical inventory
adjustments.
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Management exercises careful judgment in its determination of the adequacy
of its reserves for excess and obsolete inventories and the collectibility of
accounts receivable. Charges recognized by GTC during the second and fourth
quarters were the result of thorough evaluations conducted by management in the
respective quarters of these reserve balances. GTC charged $2.0 million and
$3.2 million to cost of operations during the second and fourth quarters,
respectively, to increase its reserve for excess and obsolete inventories.
Included in the fourth quarter charge for excess and obsolete inventories was
$2.2 million related to Badger inventories. The Badger product line was
divested in March 1996. GTC charged $0.8 million and $0.3 million to selling,
general and administrative expense during the second and fourth quarters,
respectively, to increase its reserve for uncollectible accounts receivable.
Concurrent with its review of inventory levels during the second quarter,
management also evaluated a number of its contracts which were not meeting
GTC's volume or margin targets. The review resulted in improved pricing on
certain contracts; however, it also resulted in decisions, mutually agreed to
with customers, to terminate unprofitable contracts. GTC charged $1.8 million
and $0.5 million to cost of operations during the second and fourth quarters,
respectively, to recognize estimated losses on terminated or unprofitable
contracts.
During the fourth quarter, management evaluated the probability of a
contribution to future earnings from a certain specialized manufacturing
equipment item currently under lease. The operating lease was entered into in
November 1994 and GTC has since been unsuccessful in attracting customers
requiring this specific technology. During the implementation of the technology
center concept during the fourth quarter, management determined that this
equipment did not adequately match the strategies of any of the technology
centers. Following its review of the business opportunities for this equipment,
management elected to pursue the disposition of the equipment through a sale or
assignment of lease. Management charged $1.1 million to cost of operations
during the fourth quarter to recognize the net present value of future costs
associated with this lease.
GTC also conducts annual physical inventory counts to confirm that
inventories accurately reflect the quantities of items on hand. GTC conducted
its physical inventory count for its domestic and international manufacturing
businesses on October 31, 1995 and December 31, 1995, respectively. Management
subsequently completed the reconciliation of its perpetual inventory records to
its physical count which resulted in a fourth quarter charge to cost of
operations of approximately $1.7 million. The significant difference between
the perpetual and physical amounts was not anticipated by management.
Management believes that improvements in the stability of GTC's material
management system and the implementation of additional inventory control
procedures will reduce the likelihood of significant book to physical
adjustments in the future. GTC is also implementing user training programs to
certify the users on the materials management system. GTC performed its
physical inventory counts on a semi-annual basis during 1996 and will continue
to evaluate its inventory control and physical inventory count procedures to
minimize the risk of material adjustments in the future.
GTC also recognized certain other charges during the second quarter
totaling $0.6 million related to employee severance costs and terminated
acquisition costs. GTC also recognized certain other charges during the fourth
quarter totaling $1.8 million related to the write-off of terminated financing
agreement costs, the disposal of idle manufacturing equipment and account
reconciliations.
DISPOSITIONS OF ASSETS
GTC's product offerings historically included a line of name brand
products. All sales of GTC's Metrum subsidiary were considered name brand
products consisting of product lines of computer peripheral products, digital
color imaging products and instrumentation recording products. GTC also
marketed a line of ruggedized hand-held outdoor computers under the Badger
label. Management decided during 1995 to divest its name brand products
businesses and successfully closed on sale transactions for substantially all
of the assets of the peripherals products and imaging products businesses
during the second quarter of 1995
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and the instrumentation products and Badger products businesses during the first
quarter of 1996. The aggregate sales price of the name brand products businesses
was approximately $18.0 million, which consisted of cash of $16.4 million and a
note receivable of $1.6 million. In each transaction for Metrum's product lines,
the sale price approximated the recorded cost of the net assets sold. GTC
retained approximately $2.4 million in liabilities associated with the Metrum
business which related primarily to certain employee benefits, accrued income
taxes and commissions. GTC retained certain warranty obligations and one
contract related to the Badger product line due to the customer being in
competition with the buyer of the assets. GTC recorded charges of $0.2 million
and $0.3 million to cost of operations and other expense, respectively, during
the second quarter related to the Metrum divestitures and a $2.2 million charge
to cost of operations during the fourth quarter to write down its Badger
inventories to the negotiated sale price.
Revenue from GTC's name brand products line, in the aggregate, has
typically generated higher gross profit margins than has revenue from GTC's
manufacturing and engineering services. However, the development of name brand
products and the maintenance and growth of the market position of these name
brand products require significantly higher amounts of research and development
and selling, general and administrative expenditures than are required by GTC's
manufacturing and engineering services. For the year ended December 31, 1995,
revenue, gross margin and operating income from name brand products were $38.4
million, $12.0 million and $0.9 million, respectively.
RESULTS OF OPERATIONS
The following table sets forth certain data from GTC's Consolidated
Statements of Operations for the years ended December 31, 1993, 1994 and 1995
expressed as a percentage of revenue:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Revenue....................................... 100.0% 100.0% 100.0%
Cost of operations............................ 82.2 86.8 98.4
----- ----- -----
Gross profit.................................. 17.8 13.2 1.6
Selling, general and administrative expense... 8.9 7.5 7.2
Research and development...................... 1.7 1.9 1.1
----- ----- -----
Operating income (loss)....................... 7.2 3.8 (6.7)
Interest expense.............................. 0.7 0.7 1.1
Other expense................................. -- 0.2 0.2
----- ----- -----
Income (loss) before income taxes............. 6.5 2.9 (8.0)
Income taxes (benefit)........................ 2.4 1.2 (1.5)
----- ----- -----
Net income (loss)............................. 4.1% 1.7% (6.5)%
===== ===== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenue decreased by 0.2% to $273.6 million for 1995, as compared to $274.1
million for 1994. The net change in revenue was derived from an increase in
sales by GTC's expanding international EMS operations offset by a decrease in
sales related to the divestiture of certain of GTC's name brand product lines
during the second quarter, a decline in sales from the balance of the name brand
product lines and a decrease in sales from commercial customers of GTC's
domestic manufacturing services business.
Gross profit decreased to $4.5 million for 1995, compared to $36.3 million
for 1994. The gross margin decreased to 1.6% in 1995 as compared to 13.2% in
1994. The decline in gross profit is attributable to depressed margins on GTC's
domestic and international manufacturing services and charges totaling $12.0
million related to inventories, estimated losses on terminated contracts, asset
disposals and severance
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costs. The charges are described under the caption "Second and Fourth Quarter
Charges" included herein above. The lower margin performance on the domestic
and international manufacturing service resulted from the start-up of new
contracts in GTC's Tampa and Mexican operations which replaced certain high
margin contracts completed in the fourth quarter of 1994. Additionally, a
higher percentage of GTC's 1994 revenue was realized from contracts performed
with consigned materials at relatively high gross margins as compared to 1995.
During 1994, GTC also recognized gross profit of $4.5 million resulting from
favorable changes in contract and claim estimates and $2.7 million from the
settlement of a government contract termination claim.
Selling, general and administrative expense was $19.7 million or 7.2% of
revenue in 1995, as compared to $20.6 million or 7.5% of revenue for 1994.
Selling, general and administrative expense decreased due to company-wide cost
reduction initiatives implemented at various times throughout 1995 and the
divestiture of two of Metrum's lines of name brand products during the second
quarter. These reductions offset the impact of a $1.1 million provision for
uncollectible accounts during 1995 and increased costs associated with
international EMS operations.
Research and development expense was $3.0 million or 1.1% of revenue in
1995, as compared to $5.2 million or 1.9% of revenue for 1994. Reductions in
research and development expense were implemented in the first quarter of 1995,
and the second quarter divestitures resulted in further reductions. Interest
expense was $2.9 million or 1.1% of revenue in 1995, as compared to $2.0
million or 0.7% of revenue in 1994. Interest expense increased due to a
significant increase in the average debt outstanding and an increase in GTC's
interest rate which occurred during the third quarter of 1995.
Income taxes include current and deferred tax benefits and expense in 1994
and 1995. GTC recorded a $4.4 million valuation allowance against its deferred
tax assets during 1995. GTC also recorded a current tax benefit for the amount
of federal and state income taxes refundable as a result of the 1995 operating
loss.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Revenue increased by 12.4% to $274.1 million for 1994, as compared to
$243.9 million for 1993. The overall growth in GTC's commercial contract
manufacturing revenue was partly offset by a reduction in order volume from
GTC's two largest commercial customers and the continued decline in revenue
attributable to long-term government contracts. The two commercial customers
decreased orders with GTC in the second and third quarters of the year to
balance their inventory levels. To help offset these lower-than-expected
shipments, GTC undertook an accelerated marketing effort. Although GTC was
successful in obtaining additional orders from a growing customer base, these
contracts were in the early stages of the manufacturing cycle during the fourth
quarter and, therefore, revenue derived therefrom only partially offset the
aforementioned reduction in revenue from existing customers.
The diversification strategy employed by GTC was also reflected in the
reduction of its concentration of government agency business from approximately
47% of revenue in 1993 to approximately 19% of revenue in 1994. GTC's
subcontract business for prime government contractors increased from
approximately 9% of revenue in 1993 to approximately 11% of revenue in 1994.
Revenue earned during 1993 includes approximately $45.1 million for the
operations of PCA from July 30, 1993. The PCA operations were integrated with
GTC's base contract manufacturing business in 1993.
Gross profit was $36.3 million or 13.2% of revenue for 1994, as compared to
$43.4 million or 17.8% of revenue for 1993. A major factor contributing to the
lower gross margin was the shift in business, particularly during the second
half of 1994, toward contracts with new customers. Margins during the inception
of a new contract are typically low because of start-up costs. As the
manufacturing cycle related to a product matures, margins generally increase.
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Gross margins during the second half of 1994 were further pressured by the
relocation of a 140,000 square foot manufacturing operation into GTC's main
facility located on Malcolm McKinley Drive in Tampa. During the fourth quarter
of 1994, GTC completed the relocation of these operations which had been
acquired from PCA in 1993. GTC incurred one-time costs as a result of the
relocation, and shipments on certain contracts were delayed into 1995. GTC also
experienced manufacturing inefficiencies due to equipment down-time, product
re-work, reduced labor productivity and disruptions in materials management as
a result of the move.
Two other factors affecting GTC's gross margins for 1994 were start-up
costs associated with the expansion into Mexico and a decline in the relative
contribution of revenue from name brand products, principally marketed by the
Metrum subsidiary. The ramp-up in manufacturing operations for new contracts at
the Mexico City facility led to increased expenses, which reduced the
profitability of this operation. Sales of name brand products as a percent of
revenue declined from 21% in 1993 to 17% in 1994. Sales of digital color
imaging products and mass storage systems, which represent a portion of the
products marketed by Metrum, did not reach a sufficient volume to generate
satisfactory production efficiencies and to support targeted pricing levels.
GTC took actions to improve the profitability of these products, including
workforce reductions.
GTC's operating results for 1993 and 1994 reflect the resolution of certain
long-term contract-related claims and changes in estimates. GTC recognized
gross profit in 1993 of approximately $3.5 million from the net effect of a
$7.1 million settlement of a contract change order for secured communications
equipment, less accrued losses of approximately $3.6 million on certain other
contracts. GTC recognized gross profit in 1994 of approximately $4.5 million
resulting from favorable changes in contract and claim estimates. GTC also
successfully negotiated the settlement of a government contract termination
claim and recognized gross profit of approximately $2.7 million in 1994.
Selling, general and administrative expense was $20.6 million or 7.5% of
revenue for 1994 as compared to $21.8 million or 8.9% of revenue for 1993. The
decrease in selling, general and administrative expense, resulted from GTC's
continued efforts to contain expenses while still expanding sales. During 1994,
GTC identified certain redundant administrative functions and systems which
arose as a result of the acquisition of PCA. Actions to reduce those costs
included consolidation of two facilities in Tampa and a reduction in salaried
workforce.
Research and development expense was $5.2 million or 1.9% of revenue for
1994 as compared to $4.1 million or 1.7% of revenue for 1993. GTC's research
and development expenditures increased as a result of continued development of
name brand products.
Interest expense increased to $2.0 million or 0.7% of revenue for 1994 as
compared to $1.6 million or 0.7% of revenue for 1993. Rising interest rates on
substantially equivalent borrowing levels is reflected in GTC's cost of
borrowing.
Other expense includes certain relocation expenses associated with the
consolidation of GTC's Tampa manufacturing operations, severance costs related
to workforce reductions and foreign currency exchange losses due to the
devaluation of the Mexican new peso, which, in the aggregate, amounted to $0.5
million or 0.2% of revenue in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $9.4 million in 1995, as
compared to net cash used in operating activities of $12.9 million in 1994. The
increase of $22.3 million is primarily attributable to a reduction in
inventories and an increase in accounts payable. The inventory reduction
resulted from a decrease in the excess of GTC's costs related to long-term
contracts over progress payments received. The increase in accounts payable
reflects the year-end balances due to GTC's suppliers which are beyond their
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normal payment terms. The forbearance agreement between GTC and its bank which
was effective November 7, 1995 subjected GTC's credit availability to a
collateral pool resulting in a temporary reduction in liquidity and the need to
extend payment terms with suppliers. GTC has long-term relationships with a
majority of its suppliers and as a result, has been successful in continuing to
work on reasonable credit terms with its supplier base.
Net cash used in investing activities was $7.3 million and $2.8 million in
1994 and 1995, respectively. Capital expenditures in 1994 and 1995 were $7.3
million and $8.0 million, respectively. GTC's investments in manufacturing
equipment are required to maintain its competitive position and respond to
technological changes. GTC also acquired equipment to support the growth of its
international operations during 1995. The divestiture of two of GTC's name
brand product lines during 1995 generated net proceeds of approximately $5.2
million.
Net cash provided by financing activities was $14.4 million during 1994 and
net cash used by financing activities was $5.8 million in 1995. During 1994,
GTC completed the initial public offering of its common stock which provided
net proceeds of $17.8 million. During 1995, GTC reduced debt outstanding on its
revolving credit agreement by $4.7 million. GFP invested $325,000 during 1995
to provide funding for the start-up of GTC's Brazilian operation.
At December 31, 1995 GTC was in technical default under certain terms and
covenants of its revolving credit agreement. GTC and its bank entered into a
forbearance agreement, effective November 7, 1995 which expired on January 31,
1996. The bank continued to provide financing under terms substantially similar
to those contained in the forbearance agreement until the debt was restructured
on March 29, 1996.
The credit agreement entered into on March 29, 1996, provides GTC with a
revolving credit facility and two term facilities. The revolving credit
facility is for a term of two years and provides credit availability up to
$27.5 million through December 1996 and $22.5 million through March 1998,
subject to a borrowing base consisting of eligible accounts receivable and
inventories. The term facilities include a $3.3 million term note payable due
in two years and a $5.0 million term note payable in two equal installments in
August and December 1996. Of the $5.0 million term note payable, $4.2 million
was repaid in the first nine months of 1996 and the remaining balance was
repaid in October 1996.
In connection with the new credit agreement, GFP agreed to invest $1.0
million in GTC in exchange for shares of GTC Common Stock. As a condition of
the consummation of the restructured credit agreement, GTC also issued warrants
to the bank to purchase 1.2 million shares of GTC Common Stock for $.01 per
share, 0.2 million of which become vested at closing and the remaining 1.0
million of which become vested quarterly in 25% increments beginning one year
from closing. The bank will forfeit any unvested warrants in the event GTC
repays all debt outstanding prior to any warrant vesting date.
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OWNERSHIP OF GFP COMMON STOCK
The authorized capital stock of GFP consists of 1,000,000 shares of GFP
Common Stock. As of December 31, 1996, there were 315,996 shares outstanding
which were held by 11 shareholders. The holders of GFP Common Stock are entitled
to one vote per share on all matters to be voted upon by the shareholders.
The following table sets forth certain information with respect to
beneficial ownership of the GFP Common Stock as of December 31, 1996, including
beneficial ownership (i) by each person (or group of affiliated persons) who is
known by GFP to beneficially own more than 5% of the shares of GFP Common Stock,
(ii) by each of GFP's directors who owns shares, and (iii) by all directors and
executive officers as a group. Except as otherwise indicated below, the persons
named in the table have sole voting and investment power with respect to all
shares of GFP Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-------------------------
NAME NUMBER PERCENT
---- ------ -------
<S> <C> <C>
Jeffrey T. Gill (1).............................. 102,683 32.2%
455 South Fourth Avenue
Louisville, Kentucky 40202
R. Scott Gill.................................... 88,305 27.9
455 South Fourth Avenue
Louisville, Kentucky 40202
Virginia G. Gill (2)............................. 62,494 19.8
455 South Fourth Avenue
Louisville, Kentucky 40202
Robert E. Gill (3)............................... 61,364 19.4
455 South Fourth Avenue
Louisville, Kentucky 40202
Anthony C. Allen (4)............................. 3,162 *
Richard L. Davis (5)............................. 2,909 *
All directors and executive officers as a group.. 320,917 99.8
</TABLE>
- --------------
* Less than 1%
(1) Includes 253 shares held by Mr. Gill's spouse and 650 shares issuable to
Mr. Gill's spouse under currently exercisable options.
(2) Shares held as trustee for the Virginia G. Gill Trust Dated The Fourth Day
Of November 1993, for which Virginia G. Gill has sole voting and investment
power.
(3) Shares held as trustee for the Robert E. Gill Trust Dated The Fourth Day
Of November 1993, for which Robert E. Gill has sole voting and investment
power.
(4) Includes 2,200 shares issuable under currently exercisable options.
(5) Includes 2,600 shares issuable under currently exercisable options.
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OWNERSHIP OF TUBE TURNS COMMON STOCKECT Common Stock
The authorized capital stock of Tube Turns consists of 2,000,000 shares of
Tube Turns Common Stock. As of December 31, 1996, there were 1,338,630 shares
outstanding which were held by 145 shareholders. The holders of Tube Turns
Common Stock are entitled to one vote per share on all matters to be voted upon
by the shareholders.
The following table sets forth certain information with respect to
beneficial owners of the Tube Turns Common Stock as of December 31, 1996,
including beneficial ownership (i) by each person (or group of affiliated
persons) who is known by Tube Turns to beneficially own more than 5% of the
shares of Tube Turns Common Stock, (ii) by each of Tube Turns' directors who
owns shares, and (iii) by all directors and executive officers as a group. The
persons named in the table have sole voting and investment power with respect
to all shares of the Tube Turns Common Stock shown as beneficially owned by
them.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-------------------------
NAME NUMBER PERCENT
---- --------- -------
<S> <C> <C>
Group Financial Partners, Inc. (1)................... 1,288,600 96.3%
455 South Fourth Avenue
Louisville, Kentucky 40202
John M. Kramer (2)................................... 45,347 3.3
Russell H. Johnson, Jr. (3).......................... 22,425 1.7
Norman E. Zelesky (4)................................ 7,654 *
Kevin H. Kramer...................................... 171 *
All directors and executive officers as a group (5).. 1,364,197 98.2
</TABLE>
- ----------
* Less than 1%
(1) GFP directly owns shares of Tube Turns Common Stock. Robert E. Gill,
Jeffrey T. Gill, R. Scott Gill, Virginia G. Gill and Patricia G. Gill own
19.4%, 32.2%, 27.9%, 19.8% and 0.1%, respectively (99.4% in the
aggregate), of the outstanding stock of GFP and, therefore, may be deemed
to have an indirect beneficial interest in the shares of Tube Turns Common
Stock owned by GFP. Robert E. Gill, Jeffrey T. Gill and R. Scott Gill are
also directors of Tube Turns.
(2) Includes 30,000 shares issuable under currently exercisable options.
(3) Includes 15,000 shares issuable under currently exercisable options.
(4) Includes 5,000 shares issuable under currently exercisable options.
(5) Includes the shares of Tube Turns Common Stock in which Robert E. Gill,
Jeffrey T. Gill and R. Scott Gill may be deemed to have an indirect
beneficial interest.
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OWNERSHIP OF BELL COMMON STOCK
The authorized capital stock of Bell consists of 1,500,000 shares of Bell
Common Stock. As of December 31, 1996, there were 906,833 shares outstanding
which were held by 353 shareholders. The holders of Bell Common Stock are
entitled to one vote per share on all matters to be voted upon by the
shareholders.
The following table sets forth certain information with respect to
beneficial owners of the Bell Common Stock as of December 31, 1996, including
beneficial ownership (i) by each person (or group of affiliated persons) who is
known by Bell to beneficially own more than 5% of the shares of Bell Common
Stock, (ii) by each of Bell's directors who owns shares, and (iii) by all
directors and executive officers as a group. The persons named in the table
have sole voting and investment power with respect to all shares of the Bell
Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-------------------------
NAME NUMBER PERCENT
---- ------- --------
<S> <C> <C>
Group Financial Partners, Inc. (1)................... 842,694 92.9%
455 South Fourth Avenue
Louisville, Kentucky 40202
Edmund J. Laveck (2)................................. 39,338 4.2
Thomas W. Lovelock (3)............................... 7,304 *
Thomas C. Jamieson (4)............................... 8,161 *
John B. Krauss....................................... 10 *
Robert Sroka (5)..................................... 2,000 *
All directors and executive officers as a group (6).. 899,507 94.6
</TABLE>
* Less than 1%
(1) GFP directly owns shares of Bell Common Stock. Robert E. Gill, Jeffrey T.
Gill, R. Scott Gill, Virginia G. Gill and Patricia G. Gill own 19.4%,
32.2%, 27.9%, 19.8% and 0.1%, respectively (99.4% in the aggregate), of
the outstanding stock of GFP and, therefore, may be deemed to have an
indirect beneficial interest in the shares of Bell Common Stock owned by
GFP. Robert E. Gill, Jeffrey T. Gill and R. Scott Gill are also directors
of Bell.
(2) Includes 30,500 shares issuable under currently exercisable options.
(3) Includes 6,125 shares issuable under currently exercisable options and 94
shares owned by Mr. Lovelock's son.
(4) Includes 5,300 shares issuable under currently exercisable options.
(5) Includes 2,000 shares issuable under currently exercisable options.
(6) Includes the shares of Bell Common Stock in which Robert E. Gill, Jeffrey
T. Gill and R. Scott Gill may be deemed to have an indirect beneficial
interest.
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BUSINESS OF GFP
GENERAL
GFP is a private holding company that was founded in 1983 by Robert E.
Gill and Jeffrey T. Gill. The initial strategy of GFP was to acquire divisions
of Fortune 500 companies which were viewed to be underperforming. Once
purchased, GFP's strategy was to install employee profit sharing plans, stock
purchase plans and provide management of the companies with the autonomy to run
the companies as stand-alone enterprises. Each company assumed responsibility
for the management of its own treasury function and, as the acquisition
indebtedness was reduced, management of each company was free to utilize the
balance sheet and excess cash flow of its business to acquire businesses that
were synergistic and/or diversified the risk of its main business operation.
Between 1986 and 1995, GFP acquired thirteen (13) businesses from a
variety of companies. Over the years, these businesses were combined to form
GTC, Bell and Tube Turns. As of December 1996, GFP owned 80% or more of the
common stock of each of Bell, GTC and Tube Turns. The sole material assets of
GFP consist of its investments in these operating companies and certain
commercial real estate.
Between 1984 and 1988, GFP also invested in the purchase of commercial
real estate. The objective was to utilize the investment as an inflationary
hedge and to increase the after tax cash flow of GFP by using the accelerated
depreciation then available for real estate to reduce the consolidated taxable
earnings of GFP. GFP formed Unison to manage these properties. In 1995, GFP
made the decision to exit the real estate business and to concentrate the
investment of its resources in support of its other businesses. As of December
1996, the sole remaining commercial property was under contract to be sold on
or before the end of February 1997.
It is anticipated that after the completion of the Reorganization, Robert
E. Gill will become the Chairman of GTC and Jeffrey T. Gill will become the
President and Chief Executive Officer of GTC. After consummation of the
Reorganization, the Gill Family will continue to control in excess of 80% of
the shares of the GTC Common Stock.
BELL TECHNOLOGIES, INC.
THE COMPANY
Bell was founded as F. W. Bell, Inc. in 1944 to market products that
measured an electrical circuit's performance through the uninterrupted
measurement of its electromagnetic field. Over the ensuing forty years, Bell
occupied a small but profitable niche selling gaussmeters and probes into a
wide variety of industrial and research applications. Bell was acquired in 1986
by GFP from Allegheny International, Inc. ("Allegheny").
In December 1992, Bell expanded beyond its core product business with the
acquisition of Viking Laboratories and Metrum Services from Alliant.
Concurrently with these acquisitions, GFP merged Continental Testing
Laboratories, Inc. (another company purchased from Allegheny in 1986) into
Bell. Bell expanded further in 1995 with the acquisition of Associated Testing
Laboratories from Publicker Industries, Inc. and again in 1996, with the
acquisition of Teslatronics from its principal shareholder and the acquisition
of Metrum from GTC.
Today, Bell is a leading provider of electronic products and services to
the high technology segment of the electronics industry. Bell manufactures and
distributes a line of high density digital tape recorders (Metrum), current
sensors, gaussmeters and probes (F. W. Bell), and provides a wide variety of
electronic testing (Associated, Continental/Viking) and calibration services
(Metrum Services).
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SALES AND MARKETING
Bell sells its products and services through its direct sales force, as
well as through a series of domestic and international sales representatives
and distributors. Bell utilizes a central marketing organization to insure that
a consistent marketing message is delivered to all customers across all
divisions. National sales organizations exist in all divisions to serve the
specific needs of the varying customer base. In addition to the centralized
marketing organization, the managers of each of the testing and calibration
branches provide sales and marketing coverage for their specific geographical
regions. Bell's sales efforts are supported by advertising in numerous trade
media, sales literature, participation in trade shows and direct mail
promotions.
Bell considers its presence in international markets important to its
success in attracting new customers, to retaining existing customers, and to
servicing certain customers' manufacturing facilities outside of the U.S.,
principally in the Pacific Rim. Bell markets and sells its products overseas
primarily through independent sales representatives. Bell's overseas sales are
subject to risks common to many technology export activities, such as the
imposition of government controls, the need to comply with a variety of foreign
and U.S. export laws, political and economic instability, trade restrictions,
changes in tariffs and taxes, and the greater difficulty associated with the
administration of business oversees.
CUSTOMERS
Bell's customers include Allied Signal, Bailey Controls, Boeing,
Honeywell, General Electric, ITT, Lockheed-Martin, Westinghouse, Fluke, General
Motors, Hughes Aircraft, John Deere, various agencies of the U.S. government,
as well as hundreds of smaller customers located in various countries around
the world. Bell's principal sources of new business originate from the
expansion of existing relationships, referrals and direct sales through senior
management, direct sales personnel, distributors and sale representatives. Bell
considers repeat business to be important to its success and strives to
maintain close relationships with its customers. No single customer accounted
for 10% or more of revenue in any of the past three years.
COMPETITION
The market for Bell's products and services is highly competitive and is
divided among a large number of companies, most of which provide only regional
and/or local coverage. Bell believes that the amount of competition can vary in
any given market based upon the technical capabilities and characteristics of
the products and services offered and the local needs of the individual
customer. Bell faces competition from a wide variety of large and small
companies, including Ampex, DataTape, Loral, Lake Shore Cryotronics, LEM USA,
GE, AT&T, Simco, National Technical Services and QPL.
EMPLOYEES
Bell has approximately 500 employees. Many of these employee's have
specialized skills that are of great value to Bell. The future success of Bell
will depend in large part upon its ability to attract and retain highly skilled
technical, managerial, sales, financial and marketing personnel. Bell has never
experienced a work stoppage or strike and none of its employees are represented
by a union or covered by a collective bargaining agreement. Bell believes that
its relationships with its employees are good.
PROPERTIES
Bell owns a 62,000 square foot facility situated on ten acres of land on
Hanging Moss Road in Orlando, Florida. Bell's principal executive offices and
corporate headquarters are located in this facility, along with various
testing, calibration and manufacturing operations. The electronic testing
division of Bell leases an aggregate of 94,000 square feet in facilities
located in Arizona, California, Massachusetts and New Jersey. The repair and
calibration division leases offices in Arizona, California, Georgia, Illinois,
Maryland,
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Massachusetts, Michigan, Ohio and Texas, and has approximately 76,000
square feet under lease. The instrumentation division leases approximately
70,000 square feet in a single facility located in Colorado. This facility in
Colorado is subject to certain environmental contamination. See "Business of
GTC-Government Regulation."
Lease commitments for these facilities are short term, ranging in length
typically from one to three years. Management believes that its existing
facilities are in good condition and are suitable and adequate to meet its
requirements for the foreseeable future and that suitable additional or
substitute space will be readily available as needed. Most of the manufacturing
and testing equipment, fixtures and furnishings are owned by Bell and are
considered by it to be modern, efficient and adequate for Bell's immediate
requirements. Bell believes that its operations are in compliance in all
material respects with requirements relating to the environmental quality and
energy conservation.
GROUP TECHNOLOGIES CORPORATION
THE COMPANY
GTC is a leading provider of advanced manufacturing, engineering and
testing services to OEMs of electronic products. GTC's predecessor company was
founded in 1965 as the Defense Communications and Production division of
Honeywell and served as one of Honeywell's "Centers for Manufacturing
Excellence" until 1989, at which time the division was acquired by GTC.
GTC custom manufacturers complex circuit card assemblies, subsystems and
end-user products for use in a wide variety of markets, including avionics,
gaming, network products, personal computer, photography, space,
telecommunications, utility, workstation and government systems.
GTC expanded rapidly from its role as a government contractor with two
customers into one of the largest commercial contract manufacturers in the U.S.
GTC fueled this growth with the acquisition of (i) Metrum from Alliant in 1992
(subsequently divested to Bell in 1996), (ii) Philips Circuit Assemblies from
Philips Electronics North American Corporation in 1993, (iii)
Telecomunicaciones Y Sistemas from Philips Mexicana, S.A. de C.V. in 1994, and
(iv) the ECAT Center from IBM Brasil in 1995. GTC supported this growth and
strengthened its balance sheet with the completion of a $20 million initial
public offering of its stock in 1994.
SALES AND MARKETING
GTC serves a wide variety of markets, including avionics, gaming, network
products, personal computer, photography, space, telecommunications, utility,
workstation and government systems. GTC has pursued the diversification of its
market segments and customer base and sought relationships with leading
manufacturers in the markets it serves. The company's principal sources of new
business originate from the expansion of existing relationships, referrals and
direct sales through senior management, direct sales personnel, market
specialists and independent sales representatives. Market specialists,
supported by the executive staff, identify and attempt to develop relationships
with potential customers who meet a certain profile, which includes financial
stability, industry leadership, need for technology driven turnkey
manufacturing, anticipated unit volume growth and longer term relationship
potential.
GTC's sales efforts are supported by advertising in numerous trade media,
sales literature, participation in trade shows and direct mail promotions. GTC
promotes the concept of manufacturing relationships with each of its customers.
The focus of this relationship is centered on the belief that GTC and its
employees must become an essential part of every customer's operations. To
facilitate this relationship, GTC has program managers who are dedicated to one
or more customers to ensure that customer contract requirements are met and
that information critical to the success of each project is communicated and
acted upon in an expedient fashion. This requires that program managers
maintain close contact with people inside
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the company and with the customers that they support, communicating project
status in addition to resolving specific issues which arise. GTC believes that
this form of dedicated relationship is critical to meeting the dynamic needs of
its customers.
CUSTOMERS
GTC's customers include Apple, Farallon, Hewlett-Packard, Honeywell,
Hughes, IBM, International Game Technology, Kulicke & Soffa, LAM Research,
Lockheed-Martin, Lucent Technologies, Northrop Grumman, Paradyne, Plantronics,
Polaroid, Telular and various agencies of the U.S. government. In 1993, 1994
and 1995, GTC's largest individual commercial customer was IBM, which accounted
for approximately 8%, 14% and 16%, respectively, of GTC's revenue. GTC's sales
of products and services to U.S. government agencies represented approximately
47%, 19% and 20% of GTC's revenue in 1993, 1994 and 1995, respectively. GTC's
sales of products and services to a variety of prime contractors under contract
with the federal government, in the aggregate, represented approximately 47%,
11% and 9% of GTC's revenue in 1993, 1994 and 1995, respectively.
COMPETITION
GTC operates in a highly competitive environment and competes against
numerous domestic and foreign manufacturers. GTC's competitors include SCI
Systems, Solectron, AVEX Electronics, Jabil Circuit, Plexus, DII Group, IEC
Electronics, Sanmina and Benchmark Electronics. In addition, GTC may encounter
competition in the future from other large electronic manufacturers which are
selling, or begin to sell, contract manufacturing services. GTC may also face
competition from the manufacturing operations of its current and potential
customers, which GTC believes continue to evaluate the merits of manufacturing
products internally versus the merits of contract manufacturing.
EMPLOYEES
As of December 31, 1996, GTC employed approximately 1,500 employees, of
which approximately 800 are employed in the U.S., 400 are employed in Mexico and
300 are employed in Brazil. GTC employs approximately 110 people in finance,
sales or administration, 1,290 people in manufacturing operations and 100 people
in various engineering functions. Approximately 350 of GTC's domestic employees
are represented by the International Brotherhood of Teamsters collective
bargaining unit. In 1993, GTC and the International Brotherhood of Teamsters
signed a five-year contract. GTC believes its relationships with its employees
are good.
PROPERTIES
GTC's headquarters are in a 308,000 square foot office and manufacturing
facility on Malcolm McKinley Drive in Tampa, Florida which GTC occupies under a
ten-year lease expiring in April 2002 (with two additional five-year options).
GTC also leases a 118,000 square foot office and manufacturing facility located
on Poniente 152 No. 659 in Mexico City, Mexico with a term expiring in July
1997 (with two additional three-year options). GTC occupies approximately
20,000 square feet of a manufacturing facility in Hortolandia, Brazil in
connection with its manufacturing services agreement with its customer. In
order to meet its other manufacturing requirements in Brazil, GTC also leases
approximately 30,000 square feet of space at a facility in Campinas, Brazil,
with a term expiring in July 1999 (plus an option to renew for an unspecified
period).
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TUBE TURNS TECHNOLOGIES, INC.
THE COMPANY
Tube Turns was founded in 1927 by the Girdler Corporation and originally
manufactured elbows and fittings for high pressure oil and gas pipelines. Tube
Turns has been a leader in the forgings market for over fifty years and
continues to benefit from wide-spread name recognition. Tube Turns was acquired
in 1988 by GFP from Sumitomo Metals and in 1991 was merged with Tri-Tech, a
company that had been purchased by GFP from Sumitomo in 1986.
Today, Tube Turns is a leading contract manufacturer of forged products
and proprietary piping components for use in a wide variety of markets,
including the energy, power train and aerospace industries. Tube Turns
manufactures heavy duty truck axles, aircraft engine cylinders and shafts, high
pressure closures for storage tanks, insulated joints for underground piping,
and numerous other forged and fabricated products.
SALES AND MARKETING
Tube Turns serves a broad range of Fortune 500, specialty and niche
companies in a wide variety of markets, including the energy, aerospace and
power train industries. Tube Turns depends in large part on repeat business and
its ability to retain customers for extended periods of time to insure the
financial success of the company. The company's principle sources of new
business originate from the expansion of existing relationships, inquiries
stemming from the company's name being found on end-user specification lists,
referrals and direct sales. The executive staff also identifies and attempts to
develop relationships with project managers and potential customers who meet a
certain profile.
Tube Turns markets its products to potential customers through senior
management, direct sales personnel and independent representatives worldwide.
Tube Turns identifies prospective customers through networking in the industry
and attempts to develop long-term business relationships. Though competition is
intense for new accounts, once an account is won, it is generally retained
unless the company does not meet the needs of the customer. Prospective
accounts are identified through networking in the industry, outside sales
efforts to get on end user specification lists requiring suppliers to use the
company's products, direct contact with pipeline project managers, advertising
in trade journals and through direct mail. Most new business is received from
inquiries due to being on end user specification lists. Tube Turns is currently
marketing most heavily in the Southwest and Northeast corridors of the U.S. and
internationally. Though virtually all the company's products are used
internationally, many companies working on the international pipelines
incorporating Tube Turns' products are located in the Southwest and Northeast
corridor of the United States.
CUSTOMERS
The company's major customers include Rockwell, John Deere, Caterpillar,
TCM, Pratt & Whitney, Dow Chemical, Exxon, Shell and Smith Systems. The
company's two largest customers are Rockwell and John Deere, which accounted
for 9.0% and 14.0% of total revenue, respectively, during 1995. Tube Turns
markets it line of proprietary products to hundreds of small customers in the
energy, gas transmission and chemical industries.
COMPETITION
Tube Turns faces substantial competition in its chosen market segments
from both established competitors and potential new entrants. The company's
major competitors include Commercial Forge, Midwest Forge, Fox Valley Forge and
Portland Forge. The company believes that its name, its reputation for being a
very responsive, low cost supplier and the quality of its products broadens its
appeal to local, national
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and international customers. In the market for proprietary products, the
company's major competitors include GD Engineering, Huber Yale, Perry Equipment,
Thaxton, EPI, Bi-Braze and Alltech. Tube Turns also faces international
competition from companies including TD Williamson in Great Britain, Prochind
and Zunt in Italy, RMA in Germany, and Hydratech in Mexico. Tube Turns believes
that its name, reputation, niche in the high pressure piping market and ability
to both fabricate and machine its products broadens its appeal to local,
national and international customers.
EMPLOYEES
As of December 1996, Tube Turns employed approximately 156 persons, the
majority of which belonged to one of three unions. Many of these employees have
specialized skills of value to the company. The company's future success will
depend in large part upon its ability to attract and retain highly skilled
engineering, technical, managerial, sales, financial, and marketing personnel.
Tube Turns believes its relationships with non-union employees to be good.
Tube Turns employs 120 union workers represented by three unions. The
United Steelworkers of America has 106 members, the International Brotherhood
of Electrical Workers has 4 members, and the International Association of
Machinists and Aerospace Workers has 10 members. The current union contracts
expire in June 2000 and have set wages and benefits. In June 1995, Tube Turns
experienced a one-week work stoppage by the United Steelworkers of America
prior to the signing of the current contract with that union. The company
believes its relationships with its union employees are good.
PROPERTIES
The headquarters of Tube Turns are located in a 383,000 square foot office
and manufacturing facility at 2900 West Broadway in Louisville, Kentucky. Tube
Turns owns its headquarters facility, as well as an unoccupied 58,000 square
foot facility that is being offered for sale. Tube Turns believes that its
existing facilities are in good condition and are suitable and adequate to meet
its requirements for the foreseeable future and that suitable additional or
substitute space will be available as needed. All of the manufacturing
equipment, fixtures and furnishings are owned by the company and are considered
by the company to be efficient and adequate for the company's immediate
requirements. The facility of Tube Turns was subject to environmental
contamination by a predecessor owner. Tube Turns has obtained an indemnity from
Sumitomo Metal Industries, Ltd., Sumitomo Corporation and Sumitomo Corporation
of America for these matters.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF GFP
The following discussion and analysis is based on the Consolidated
Financial Statements of GFP which include the accounts of GFP and its majority-
owned subsidiaries. GFP's majority-owned subsidiaries for all periods presented
include the Reorganization Parties and certain other entities engaged in the
ownership and operation of commercial real estate properties. The
Reorganization Parties are a unique blend of companies which provide contract
manufacturing services and a complementing range of products to a wide variety
of customers.
As part of the Reorganization, GFP will divest its ownership in its
remaining real estate entities through the Spin Off. For the years ended
December 31, 1993, 1994 and 1995, the real estate entities accounted for $8.9
million (2.9%), $9.1 million (2.7%) and $8.1 million (2.4%), respectively, of
GFP's consolidated revenue. For the years ended December 31, 1993 and 1994, the
real estate entities accounted for $3.0 million (12.7%) and $2.9 million
(17.6%), respectively, of GFP's consolidated operating income, and for the year
ended December 31, 1995, the real estate entities reported operating income of
$2.3 million, while the consolidated operating loss was $12.6 million. At
December 31, 1993, 1994 and 1995, the real estate entities accounted for $35.2
million (19.7%), $32.6 million (17.3%) and $26.5 million (15.3%),
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respectively, of consolidated total assets.
Due to the relative size of GTC as compared to the balance of GFP's
consolidated operations, the following discussion and analysis should be read
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations of GTC" included elsewhere in this
document. For the years ended December 31, 1993, 1994 and 1995, GTC accounted
for $243.9 million (79.8%), $274.1 million (81.9%) and $273.6 million (81.3%),
respectively, of GFP's consolidated revenue. For the years ended December 31,
1993 and 1994, GTC accounted for $17.5 million (74.9%) and $10.5 million
(63.2%), respectively, of GFP's consolidated operating income, and for the year
ended December 31, 1995, GTC reported an operating loss of $18.2 million, while
the consolidated operating loss was $12.6 million. At December 31, 1993, 1994
and 1995, GTC accounted for $111.9 million (62.7%), $122.6 million (65.1%) and
$113.1 (65.4%), respectively, of consolidated total assets.
Revenue, operating income (loss) and net income (loss) for GTC, Tube Turns
and Bell for the years ended December 31, 1993, 1994 and 1995 and working
capital and total assets as of December 31, 1993, 1994 and 1995 are as follows
(in thousands):
<TABLE>
<CAPTION>
YEARS ENDED OR AS OF NINE MONTHS ENDED
DECEMBER 31, OR AS OF SEPTEMBER 30,
---------------------------- ----------------------
1993 1994 1995 1995 1996
-------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
GTC
Revenue.................. $243,856 $274,147 $273,647 $208,521 $180,380
Operating income (loss).. 17,502 10,549 (18,227) (7,951) 938
Net income (loss)........ 9,973 4,700 (17,673) (6,264) (2,755)
Working capital.......... 37,305 56,622 23,922 13,765 4,270
Total assets............. 111,925 122,566 113,106 129,814 75,376
Bell
Revenue.................. $ 31,164 $ 30,264 $ 33,499 $ 24,851 $ 42,445
Operating income......... 2,675 2,233 2,537 1,749 4,275
Net income............... 1,871 1,092 1,071 613 2,035
Working capital.......... 3,503 3,658 3,923 3,828 11,077
Total assets............. 13,279 13,691 16,224 16,694 27,993
Tube Turns
Revenue.................. $ 22,641 $ 23,148 $ 23,858 $ 17,794 $ 18,160
Operating income......... 741 1,359 1,335 706 737
Net income............... 269 998 1,091 568 1,120
Working capital.......... 5,348 5,283 4,749 4,543 5,383
Total assets............. 15,546 15,714 15,674 14,790 16,703
</TABLE>
The following discussion and analysis should be read in conjunction with
the "Selected Historical Consolidated Financial Data of GFP," the "Selected
Unaudited Pro Forma Combined Financial Data" and the Consolidated Financial
Statements of GFP and accompanying notes included elsewhere in this document.
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
Revenue for the first nine months of 1996 was $245.3 million, a decrease
of $11.5 million or 4.5% from $256.8 million for the first nine months of 1995.
The overall decrease in revenue reflects several changes in GFP's business
which occurred during 1995 and in the first nine months of 1996. The primary
components of the change in revenue are an increase in foreign operations of
$23.7 million offset by a reduction in Tampa based operations of $26.5 million
and a $9.3 million decrease in revenue associated with the disposition of
certain product lines.
Revenue at the Mexico facility increased due to a large contract which
began in the second half of
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<PAGE>
1995, while the Brazil operation commenced operations in the third quarter of
1995. The majority of the domestic manufacturing services revenue decrease was
related to a reduction in customer demand and to decisions by management to
cancel certain non-profitable contracts during the first nine months of 1995.
Revenue for the first nine months of 1996 also includes $4.1 million of revenue
derived from a favorable contract claim settlement.
GTC's percentage of consolidated revenue for the nine months ended
September 30, 1996 decreased by 7.7% to 73.5% from 81.2% for the comparable
prior year period. In February 1996, the net assets associated with an
instrumentation product line were acquired by Bell from GTC which caused Bell's
revenue to increase by $16.0 million, or 6.2% of consolidated revenue, for the
comparable nine month periods. The divestiture of real estate properties in the
fourth quarter of 1995 and the second quarter of 1996 has caused rental revenue
to decline to $4.6 million or 1.9% of consolidated revenue for the nine months
ended September 30, 1996, a decrease of 0.7% from the comparable prior year
period.
Operating income was $6.0 million for the nine months ended September 30,
1996 as compared to an operating loss of $3.7 million for comparable prior year
period. The $9.7 million increase in operating income resulted from improved
profitability for each business unit, excluding the real estate entities. The
real estate entities provided operating income of $1.0 million for the nine
months ended September 30, 1996, a decrease of $1.2 million from the comparable
prior year period, due to a decrease in the number of properties owned by GFP.
The largest component of the improved profitability was GTC's increase from
an $8.0 million operating loss for the first nine months of 1995 to operating
income of $0.9 million for the first nine months of 1996. Gross margins from the
contract manufacturing business improved significantly as provisions for
obsolete inventories, contract estimate changes and severance costs charged to
operations during the nine months ended September 30, 1996 were lower than those
provisions made in the same period of 1995. Additionally, the impact of the $4.1
million favorable contract claim settlement was included in its entirety in
gross profit and operating income for the nine months ended September 30, 1996.
Bell's operating income for the first nine months of 1996 increased by $2.6
million from the prior year as a result of the acquisition of the
instrumentation product line.
A decrease in consolidated selling, general and administrative expenses of
$1.7 million contributed to the improvement in GFP's operating profit.
Reductions in the fixed and variable costs of the Tampa contract manufacturing
facility which began in 1995 were continued in 1996.
Interest expense for first nine months of 1996 decreased to $4.9 million
from $5.1 million for the comparable prior year period.
GFP divested certain facilities consisting of excess manufacturing and
office space associated with Tube Turns' forgings manufacturing operation in
1996 and recognized a gain of $0.8 million which is included in other income.
Income tax expense for the nine months ended September 30, 1996, consists
primarily of income taxes on earnings in foreign countries.
GFP recorded the minority shareholders' proportionate share of the net
loss of GTC for the nine month periods as a reduction in the consolidated loss
before extraordinary items.
During the nine months ended September 30, 1996, GFP recognized a gain of
$2.0 million on the extinguishment of debt related to the divestiture of a
commercial real estate property. GFP recognized applicable income taxes of $0.8
million on the transaction.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $7.4 million for the nine
months ended September 30, 1996. Accounts receivable and inventories decreased
by $5.5 million and $13.9 million, respectively, due to the decline in volume in
GFP's domestic contract manufacturing operations and improved control and
management of inventories. GFP also reduced accounts payable by $20.0 million,
primarily attributable to the decline in volume and a reduction in balances with
suppliers.
Net cash used in investing activities was $2.3 million for the nine months
ended September 30, 1996. GFP made capital expenditures of $5.2 million in 1996.
GTC received proceeds of $1.5 million in February 1996 for the sale of its
Badger product line and Tube Turns received proceeds of $0.9 million from the
disposition of certain underutilized land and buildings in September 1996.
Net cash used in financing activities was $7.0 million for the nine months
ended September 30, 1996. The acquisition of the assets of the instrumentation
product line by Bell from GTC was financed with a $10.0 million term note with a
bank. GTC applied the proceeds from the transaction to reduce the outstanding
balance on its revolving credit agreement and to finance working capital. GTC
also decreased outstanding borrowings on its term note and further reduced its
revolving credit balance as a result of the net cash provided by operating
activities.
At September 30, 1996, GTC was not in compliance with certain of the
financial ratio covenants of its revolving credit agreement. The bank waived its
rights to declare a default with regard to these specific incidents of
noncompliance until November 30, 1996. Management believed that GTC would be out
of compliance with certain covenants within twelve months and had, therefore,
classified $11.6 million of the debt as current as of September 30, 1996.
In connection with the Reorganization, GFP is seeking to enter into a
financing agreement, the proceeds from which will be used to retire the
outstanding balance of all borrowings of the Reorganization Parties effective on
the Merger Date. Management believes that it will be successful in these efforts
to refinance GFP's debt.
GFP's real estate entities also decreased borrowings in each of 1993, 1994
and 1995 through the scheduled payments on mortgage notes. The extinguishment of
debt related to the divestiture of a real estate property during the second
quarter of 1996 further reduced GFP's total outstanding debt. GFP also divested
a property during the fourth quarter of 1996 and retired the debt outstanding on
the related mortgage note. The mortgage notes on GFP's only remaining commercial
real estate property mature in March 1997 and are classified as current
liabilities in GFP's balance sheet. Management intends to divest this property
prior to the Reorganization.
GFP believes that sufficient resources will be available to meet its cash
requirements through the next twelve months, unless GTC's lender declines to
continue advances under the credit agreement. Cash requirements for periods
beyond the next twelve months depend on GFP's consolidated profitability, its
working capital requirements, its capital expenditure requirements and its rate
of growth.
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
Revenue was $305.4 million, $334.9 million and $336.6 million for 1993,
1994 and 1995, respectively, representing increases of $29.5 million or 9.7%
from 1993 to 1994 and $1.7 million or 0.5% from 1994 to 1995. GFP's revenue
growth has been slowed by reductions in volume during both 1994 and 1995 with
certain of its domestic commercial contract manufacturing customers, reductions
in volume with government customers through the completion of a large government
contract during the fourth quarter of 1994, the general decline in government
spending in recent years, and the divestiture of certain of its name brand
product lines during the second quarter of 1995. The cumulative impact of these
contractions has
117
<PAGE>
served to offset revenue growth from GTC's entry into international contract
manufacturing operations, the expansion of Bell's electronic testing services
and increased volume and pricing for Tube Turns' forged and fabricated product
lines for commercial customers.
The revenue increase from 1993 to 1994 reflects an overall expansion of
GTC's contract manufacturing business, including the July 1993 acquisition of a
domestic operation which had a customer base consisting exclusively of
commercial customers and the July 1994 acquisition of a contract manufacturing
operation in Mexico. The growth resulting from the contract manufacturing
business was partially offset during 1994 by a reduction in order volume from
GTC's two largest commercial customers and the continued decline in revenue
attributable to long-term government contracts. Revenue derived from overall
sales of forged products, electronic products and other electronic testing and
calibration services were generally equal for the year-to-year comparable
periods.
The revenue increase from 1994 to 1995 reflects the growth in GTC's
international contract manufacturing operations and Bell's electronic testing
services which was offset by a decline in domestic contract manufacturing
revenue coupled with a decrease in GTC's product offerings as a result of the
divestiture of two product lines. The Mexico operation continued to increase its
revenue base, primarily as a result of the start-up on a large contract during
the second half of 1995. GTC also entered into a manufacturing services
agreement in July 1995 to provide contract manufacturing services in Brazil
which generated additional revenue growth. Revenue generated by the Mexico and
Brazil operations during 1995 was $40.2 million. Bell also acquired an
electronic testing facility in January 1995 to expand its geographic presence
and increase its testing capabilities.
GTC's domestic contract manufacturing operation, which suffered volume
reductions during 1994, experienced further declines during 1995. GTC's
aggressive sales efforts during 1994 and 1995 to counterbalance the reduction in
volume yielded a number of new contracts; however, the volumes and pricing
associated with these contracts were not sufficient to maintain 1995 revenue at
the previous year level. Revenue also decreased in response to the divestiture
of two product lines during the second quarter of 1995. The divestitures were
accomplished through the sale of the net assets associated with the non-
strategic product lines to unrelated entities.
Operating income was $23.4 million and $16.7 million for 1993 and 1994,
respectively, as compared to an operating loss of $12.6 million for 1995. The
decline in profitability at GTC has dominated the year-to-year changes in
profitability of the Reorganization Parties. On a combined basis, the
Reorganization Parties, excluding GTC, experienced stable operating income of
$3.2 million from 1993 to 1994 and a 4.3% increase in operating income from 1994
to 1995. Operating income contributed by the real estate entities decreased from
$2.9 million in each of 1993 and 1994 to $2.3 million in 1995 as a result of the
divestiture of a commercial office building.
The decrease in profitability from 1993 to 1994 was impacted by lower gross
margins resulting from the shift in business, particularly during the second
half of 1994, toward contracts with new customers. Margins during the start-up
phase of a new contract are typically low and improve as the manufacturing
process on the contract matures. GTC's margins were further pressured by the
consolidation of two manufacturing facilities in Tampa which involved the
relocation of a 140,000 square foot operation to the main contract manufacturing
facility. GTC incurred one-time costs as a result of the relocation, and
shipments on certain contracts were delayed into 1995. GTC also experienced
manufacturing inefficiencies at its Tampa contract manufacturing operation due
to equipment down-time, product rework, reduced labor productivity and
disruptions in materials management as a result of the move. GTC's expansion
into contract manufacturing operations in Mexico in 1994 and the associated
increase in operations for new contracts at that facility led to increased
expenses, which reduced the profitability of this operation. Operating profit
levels of GFP's products experienced mixed results from 1993 to 1994, with sales
generally stable from year-to-year, as an increase in forged and engineered
product profitability combined to offset a reduction in electronic product
operating profits.
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<PAGE>
GFP's operating results for 1993 and 1994 also include the resolution of
certain long-term contract-related claims and changes in estimates. GTC
recognized gross profit in 1993 of approximately $3.5 million from the net
effect of a $7.1 million settlement of a contract change order for secured
communications equipment, less accrued losses of approximately $3.6 million on
certain other contracts. GTC recognized gross profit in 1994 of approximately
$4.5 million resulting from favorable changes in contract and claim estimates.
GTC also successfully negotiated the settlement of a government contract
termination claim and recognized gross profit of approximately $2.7 million in
1994.
The decrease in profitability from 1994 to 1995 is attributable to
depressed margins on GTC's domestic and international contract manufacturing
services and charges totaling $12.0 million related to inventories, estimated
losses on terminated contracts, asset disposals and severance costs. The lower
margin performance on the domestic and international manufacturing operations
resulted from the start-up of new contracts in GTC's Tampa and Mexico operations
which replaced certain high margin contracts completed in the fourth quarter of
1994. Additionally, a higher percentage of GTC's 1994 revenue was realized from
contracts performed with consigned materials at relatively high gross margins as
compared to 1995.
Interest expense was $5.5 million, $5.9 million and $6.8 million in 1993,
1994 and 1995, respectively. The increase from 1993 to 1994 is attributable to
an increase in the prime interest rate and corresponding increased cost on GFP's
variable rate debt. The increase from 1994 to 1995 is due to an increase in the
average debt outstanding and an increase in the interest rate of GTC's revolving
credit facility during the third quarter of 1995.
During 1994, GFP recognized a gain of $13.3 million on the issuance of
2,050,000 shares of GTC's common stock in an initial public offering. The gain
was based upon the increase in GFP's proportional share of GTC's total
shareholders' equity giving effect to the initial public offering as compared to
the book value of GFP's investment in GTC prior to the offering.
Income taxes include current and deferred tax benefits and expense in 1993,
1994 and 1995. GFP recorded a $4.4 million valuation allowance against its
deferred tax assets during 1995. GFP also recorded a current tax benefit for the
amount of federal and state income taxes refundable which were generated by
GTC's 1995 operating loss.
GFP recorded the minority shareholders' proportionate share of the net
income or net loss of GTC for the periods subsequent to the initial public
offering of GTC common stock as a reduction in the consolidated income or loss.
During 1995, GFP recognized a gain of $7.0 million on the extinguishment of
debt related to the divestiture of a commercial real estate property. GFP
recognized applicable income taxes of $2.4 million on the transaction.
LIQUIDITY AND CAPITAL RESOURCES
Cash at December 31, 1993, 1994 and 1995 was $11.0 million, $6.4 million
and $5.7 million, respectively. Net cash provided by operating activities was
$19.5 million and $14.9 million in 1993 and 1995, respectively, while operating
activities used net cash of $4.4 million in 1994.
Net cash was used in operating activities in 1994 primarily as a result of
an increase in working capital. Accounts receivable and inventories increased by
$1.9 million and $6.8 million, respectively, from 1993 to 1994 to support the
increase in revenue. Other current assets increased by $4.7 million from 1993 to
1994, which includes refundable federal income taxes of $2.8 million at year-end
1994. Current liabilities
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<PAGE>
were reduced from 1993 to 1994 as accounts payable and accrued liabilities
decreased by $4.5 and $7.0 million, respectively.
Net cash was provided by operating activities in 1995 as reductions in
working capital generated an offset to the consolidated operating loss. Accounts
receivable and inventories were reduced by the impact of $8.5 million in
provisions for doubtful accounts and excess and obsolete inventories combined
with a reduction of $4.0 million in accounts receivable and inventories. The
accounts receivable and inventory provisions were the result of thorough
evaluations conducted by management regarding the adequacy of its reserves for
excess and obsolete inventories and the collectibility of accounts receivable.
The balance of the reduction in accounts receivable and inventories resulted
from a decline in GTC's domestic contract manufacturing operations. An increase
in accounts payable of $8.8 million related to the extension of payment terms to
GTC's supplier base as a result of a reduction in borrowing capacity on its
revolving credit note.
Net cash used in investing activities was $21.1 million, $10.2 million and
$7.0 million in 1993, 1994 and 1995, respectively. GFP invested $7.5 million,
$11.9 million and $10.2 million in capital assets during 1993, 1994 and 1995,
respectively, to improve its technological capabilities and increase production
capacity. GFP sold various excess and idle real property and equipment during
1993, 1994 and 1995, and divested two product lines in 1995, together providing
net cash of $5.2 million.
A series of acquisitions were completed during 1993, 1994 and 1995. GTC
acquired a contract manufacturing operation in Tampa in July 1993 for $13.8
million and an earn-out provision payable to the seller for up to $2.2 million.
The cash portion of the purchase price was financed by borrowings from a bank.
GTC acquired a contract manufacturing operation in Mexico City, Mexico in July
1994 for $1.2 million which is payable to the seller under an earn-out
provision. Bell acquired an electronic testing operation in Massachusetts in
January 1995 for $2.2 million which was financed by borrowings from a bank. GTC
acquired a contract manufacturing operation in Hortolandia, Brazil in July 1995
for $4.9 million which is payable to the seller.
Net cash provided by financing activities was $2.7 million and $10.0
million in 1993 and 1994, respectively, and net cash of $8.6 million was used in
financing activities during 1995. The various credit agreements of GFP's
subsidiaries have experienced several modifications during the three year period
ending December 31, 1995 as a result of refinancings, acquisitions, and, in the
case of GTC, technical defaults occurred during 1995 under certain terms and
conditions of its revolving credit agreement. During each of 1993 and 1994, Bell
had a net reduction in total borrowings and a net increase in 1995 attributable
to its acquisition of ATL. During 1994, Tube Turns refinanced a term note and
revolving credit note with a $5.0 million revolving credit note and reduced
total borrowings in each of 1993, 1994 and 1995.
During 1993, GTC obtained a $25.0 million revolving credit note and a $15.0
million term note which was used to retire its original acquisition debt and to
finance the acquisition of PCA. During 1994, the completion of the initial
public offering of GTC's common stock provided net cash of $17.9 million. The
proceeds from the offering were used to repay the balance of the $15.0 million
term note and to reduce outstanding borrowings on the revolving credit note.
Also during 1994, GTC's revolving credit and term notes were restructured with
the same bank in the form of a $100.0 million revolving credit facility. The
increase in working capital during 1994 required GTC to increase its borrowings
under the revolving credit facility. In November 1995, GTC and its bank entered
into a forbearance agreement which subjected GTC's credit availability to a
collateral pool which resulted in a reduction in liquidity. The forbearance
agreement expired in January 1996, and the bank continued to provide financing
under terms similar to those contained in the forbearance agreement until the
debt was restructured on March 29, 1996.
GFP's real estate entities also decreased borrowings in each of 1993, 1994
and 1995 through the scheduled payments on mortgage notes. The extinguishment of
debt related to the divestiture of a real estate property during 1995 further
reduced GFP's consolidated outstanding debt.
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<PAGE>
LEGAL MATTERS
The validity of the issuance of the shares of GTC Common Stock offered
pursuant to this Joint Proxy Statement/Prospectus will be passed upon for GTC by
Fowler, White, Gillen, Boggs, Villareal and Banker, P.A., counsel to GTC. In
addition, Wyatt, Tarrant & Combs has advised GFP that the information set forth
in the description of federal income tax consequences contained in the section
entitled "The Reorganization--Certain Federal Income Tax Consequences," subject
to the limitations set forth therein, contains a summary of the material federal
income tax considerations relevant to the GFP, Tube Turns and Bell shareholders
receiving GTC Common Stock pursuant to the Reorganization.
EXPERTS
The consolidated financial statements and schedule of GTC at December 31,
1994 and 1995 and for each of the three years in the period ended December 31,
1995, appearing in this Prospectus and Registration Statement, have been audited
by Ernst & Young LLP, independent certified public accountants, as set forth in
their report thereon (which contains an emphasis paragraph with respect to the
debt covenant violation mentioned in Note 10 to the consolidated financial
statements) appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements and schedule of GFP at December 31,
1994 and 1995, and for each of the three years in the period ended December 31,
1995, appearing in this Prospectus and Registration Statement, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
(which contains an emphasis paragraph with respect to the debt covenant
violation mentioned in Note 20 to the consolidated financial statements)
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
OTHER MATTERS
The Board of Directors of each of GTC, Bell, GFP and Tube Turns know of no
other matters to be presented at the Special Meetings other than as described in
the Notice of Special Meeting accompanying this Joint Proxy
Statement/Prospectus. If any other matter does properly come before the Special
Meeting, the appointees named in the proxies will vote their proxies in
accordance with their best judgment.
121
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following audited financial statements of GTC and GFP, respectively,
together with the related reports of Ernst & Young LLP, and unaudited condensed
financial statements of GTC and GFP, respectively, are filed as part of this
Joint Proxy Statement/Prospectus:
<TABLE>
<CAPTION>
PAGE
----
GROUP TECHNOLOGIES CORPORATION
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Years ended
December 31, 1993, 1994 and 1995)
Report of Independent Certified Public Accountants........................ F-2
Consolidated Balance Sheets............................................... F-3
Consolidated Statements of Operations..................................... F-4
Consolidated Statements of Shareholders' Equity........................... F-5
Consolidated Statements of Cash Flows..................................... F-6
Notes to Consolidated Financial Statements................................ F-7
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets (December 31, 1995 and September 29, 1996).... F-24
Consolidated Statements of Operations (Three months and nine months
ended October 1, 1995 and September 29, 1996)........................... F-25
Consolidated Statements of Cash Flows (Nine months ended October 1, 1995
and September 29, 1996)................................................. F-26
Notes to Condensed Consolidated Financial Statements...................... F-27
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Years ended
December 31, 1993, 1994 and 1995)
Report of Independent Public Accountants.................................. F-30
Consolidated Balance Sheets............................................... F-31
Consolidated Statements of Operations..................................... F-32
Consolidated Statements of Shareholders' Equity........................... F-33
Consolidated Statements of Cash Flows..................................... F-34
Notes to Consolidated Financial Statements................................ F-35
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets (December 31, 1995 and September 30, 1996).... F-55
Consolidated Statements of Operations (Three months and nine months ended
September 30, 1995 and 1996)............................................ F-56
Consolidated Statements of Cash Flows (Nine months ended September 30,
1995 and 1996).......................................................... F-57
Notes to Condensed Consolidated Financial Statements...................... F-58
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Group Technologies Corporation
We have audited the accompanying consolidated balance sheets of Group
Technologies Corporation as of December 31, 1994 and 1995, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1995. Our audits also
included the financial statement schedules listed in the index at Item 21(b).
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Since the date of completion of our audit of the accompanying
financial statements and initial issuance of our report thereon dated March 29,
1996, the Company, as described in Note 10, has not complied with certain credit
agreement covenants and the bank could cease advancing funds under the related
agreement at any time. Note 10 describes management's plans to address this
issue.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Group Technologies Corporation at December 31, 1994 and 1995, and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Ernst & Young LLP
Tampa, Florida
March 29, 1996,
except for Note 10, as to which the date is
January 16, 1997
F-2
<PAGE>
GROUP TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
----- -------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents................................... $ 1,328 $ 2,143
Accounts receivable, net.................................... 36,312 31,167
Inventories, net............................................ 62,425 46,499
Other current assets........................................ 4,722 7,965
-------- --------
Total current assets....................................... 104,787 87,774
Property and equipment, net.................................. 16,224 24,090
Other assets................................................. 1,555 1,242
-------- --------
$122,566 $113,106
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 30,735 $ 37,789
Accrued liabilities......................................... 15,350 17,892
Current portion of
long-term debt.............................................. 2,080 8,171
-------- --------
Total current liabilities.................................. 48,165 63,852
Long-term debt............................................... 30,392 23,050
Other liabilities............................................ 1,210 364
-------- --------
Total liabilities......................................... 79,767 87,266
Commitments and contingencies
Shareholders' equity:
Preferred Stock, $.01 par value, 1,000,000 shares
authorized in 1994 and 1995; no shares issued and
outstanding................................................. -- --
Common Stock, $.01 par value, 40,000,000 shares authorized;
15,626,547 and 15,828,707 shares issued and outstanding
in 1994 and 1995, respectively............................. 156 158
Additional paid-in capital.................................. 21,825 22,537
Retained earnings........................................... 20,818 3,145
-------- --------
Total shareholders' equity................................. 42,799 25,840
-------- --------
$122,566 $113,106
======== ========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-3
<PAGE>
GROUP TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1993 1994 1995
-----------------------------
<S> <C> <C> <C>
Revenue....................................................... $243,856 $274,147 $273,647
Cost of operations............................................ 200,408 237,867 269,150
-------- -------- --------
Gross profit................................................ 43,448 36,280 4,497
Selling, general and administrative expense................... 21,808 20,561 19,683
Research and development...................................... 4,138 5,170 3,041
-------- -------- --------
Operating income (loss)..................................... 17,502 10,549 (18,227)
Interest expense.............................................. 1,647 2,048 2,907
Other expense................................................. -- 504 521
-------- -------- --------
Income (loss) before income taxes........................... 15,855 7,997 (21,655)
Income taxes.................................................. 5,882 3,297 (3,982)
-------- -------- --------
Net income (loss)........................................... $ 9,973 $ 4,700 $(17,673)
======== ======== ========
Net income (loss) per share:
Primary..................................................... $ 0.71 $ 0.30 $ (1.13)
Fully diluted............................................... $ 0.69 $ 0.30 $ (1.13)
Shares used in computing per share amounts:
Primary..................................................... 14,066 15,644 15,695
Fully diluted............................................... 14,554 15,789 15,695
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
GROUP TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------- PAID-IN RETAINED DEFERRED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS COMPENSATION EQUITY
----------- ------ ------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992..................... 12,508,800 $125 $ 875 $5,952 $ (26) $ 6,926
Accretion of redeemable common stock to
redemption value................................ -- -- -- (215) -- (215)
Compensation expense recorded in connection with
issuance of redeemable common stock............. -- -- -- 782 -- 782
Deferred compensation............................ -- -- -- -- (126) (126)
Net income....................................... -- -- -- 9,973 -- 9,973
---------- ---- ------- ------ ------- -------
Balance at December 31, 1993..................... 12,508,800 125 875 16,492 (152) 17,340
Common stock issued.............................. 2,050,560 20 17,793 -- -- 17,813
Compensation expense recorded in connection with
issuance of redeemable common stock............. -- -- -- 277 -- 277
Deferred compensation............................ -- -- -- -- 152 152
Conversion of redeemable common stock to
shareholders' equity............................ 1,067,187 11 3,157 (651) -- 2,517
Net income....................................... -- -- -- 4,700 -- 4,700
---------- ---- ------- ------ ------- -------
Balance at December 31, 1994..................... 15,626,547 156 21,825 20,818 -- 42,799
Common stock issued and issuable................. 202,160 2 712 -- -- 714
Net loss......................................... -- -- -- (17,673) -- (17,673)
---------- ---- ------- -------- -------- -------
Balance at December 31, 1995..................... 15,828,707 $158 $22,537 $3,145 $ -- $25,840
========== ==== ======= ====== ======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
GROUP TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................................. $ 9,973 $ 4,700 $(17,673)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization.................................................. 4,023 5,402 5,596
Compensation paid with redeemable common stock................................. 996 429 --
Deferred income taxes.......................................................... (1,986) 2,499 741
Provision for inactive, obsolete and unsalable inventories..................... 216 540 6,939
Provision for doubtful accounts................................................ 1,005 571 1,293
Provision for idle leased equipment............................................ -- -- 1,104
Other.......................................................................... -- 273 778
Changes in operating assets and liabilities, net of acquisitions and
dispositions:
Accounts receivable.......................................................... (392) (2,856) 1,875
Inventories.................................................................. (16,644) (7,172) 3,287
Other current and non-current assets......................................... (258) (4,403) (3,752)
Accounts payable............................................................. 11,455 (3,829) 8,043
Accrued and other liabilities................................................ 3,336 (9,052) 1,183
-------- -------- --------
Net cash provided by (used in) operating activities......................... 11,724 (12,898) 9,414
Cash flows from investing activities:
Capital expenditures.............................................................. (5,735) (7,271) (8,042)
Purchase of the net assets of acquired entities................................... (13,833) -- --
Proceeds from disposal of assets.................................................. -- -- 5,214
-------- -------- --------
Net cash used in investing activities....................................... (19,568) (7,271) (2,828)
Cash flows from financing activities:
Net (repayments) proceeds under line of credit agreement.......................... (2,609) 19,212 (4,667)
Proceeds from long-term debt...................................................... 28,653 -- --
Repayments of long-term debt...................................................... (18,171) (22,573) (1,505)
Net proceeds from issuance of common stock........................................ 147 17,801 401
-------- -------- --------
Net cash provided by (used in) financing activities......................... 8,020 14,440 (5,771)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents............................... 176 (5,729) 815
Cash and cash equivalents at beginning of year..................................... 6,881 7,057 1,328
-------- -------- --------
Cash and cash equivalents at end of year........................................... $ 7,057 $ 1,328 $ 2,143
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BUSINESS
Group Technologies Corporation (the "Company") was incorporated on
December 27, 1988 as a subsidiary of Group Financial Partners, Inc. (the
"Parent"), a private holding company. On May 21, 1989, the Company acquired
certain assets and assumed certain liabilities of the Defense Communications and
Production division of Honeywell, Inc. The Parent owns approximately 80% of the
outstanding Common Stock of the Company.
The Company is a leading provider of advanced manufacturing,
engineering and testing services to original equipment manufacturers ("OEMs") of
electronic products. The Company custom manufactures complex circuit card
assemblies, subsystems and end-user products for use in a wide variety of
markets, including avionics, gaming, personal computer, photography, space,
telecommunications, workstation and government systems.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its majority owned subsidiaries (hereinafter collectively referred
to as the "Company"). The Company's operating subsidiaries are Metrum, Inc.
("Metrum"), Group Technologies, S.A. de C.V. ("GTC Mexico") and Group
Technologies Suprimentos de Informatica Industria e Comercio Ltda. ("GTC
Brazil"). On February 9, 1996, substantially all of the assets of Metrum were
sold (see Note 4). All significant intercompany transactions and accounts have
been eliminated.
Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all liquid investments with an original maturity
of three months or less when purchased to be cash equivalents.
Inventories
Contract inventories are stated at actual production costs, reduced by
the cost of units for which revenue has been recognized. Gross contract
inventories are considered work in process. Progress payments under long term
contracts are specified in the contracts as a percentage of cost and are
liquidated as contract items are completed and shipped. Other inventories are
stated at lower of cost (first-in, first-out) or market. Inventories of Metrum
are stated at lower of cost (last-in, first-out) or market.
Property and Equipment
Property and equipment is stated at cost. Leasehold improvements are
amortized over the lease term using the straight-line method. Machinery,
equipment, furniture and fixtures are depreciated over the
F-7
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
estimated economic lives (three to twelve years). Expenditures for maintenance,
repairs and renewals of minor items are expensed as incurred. Major renewals and
improvements are capitalized.
Effective January 1, 1995, the Company changed its method of
depreciation for financial reporting purposes for newly acquired machinery,
equipment, furniture and fixtures from principally an accelerated method to the
straight-line method. Management believes that the straight-line method of
depreciation provides a preferable matching between expected productivity and
cost allocation since the equipment's operating capacity and consumption
generally remains consistent over time. The change had no cumulative effect on
prior year earnings and was not material to operating results for the year ended
December 31, 1995.
Amortization
Noncompete agreements are amortized over five years and patents and
other intangible assets are amortized over their composite economic life of
seven years, using the straight-line method. The excess of the fair value of the
net assets of an acquired business over the purchase price of such net assets
(negative goodwill) is amortized using the straight-line method over five years.
Negative goodwill included in other non-current liabilities at December 31, 1994
and 1995 was $791,000 and $261,000, respectively. In connection with the
disposition of a portion of Metrum's assets during 1995, negative goodwill with
an unamortized basis of $330,000 was included in the net book value of assets
sold for purposes of determining the loss. Accumulated amortization of negative
goodwill at December 31, 1994 and 1995 was $524,000 and $396,000, respectively.
Contract Revenue Recognition
A portion of the Company's business is conducted under long term
fixed-price contracts with OEMs, the United States Government and its prime
contractors. Contract revenue is included in the statement of operations as
units are completed and shipped using the units of delivery, percentage of
completion method of accounting. The costs attributed to contract revenue are
based upon the estimated average costs of all units to be shipped. The
cumulative average costs of units shipped to date is adjusted through current
operations as estimates of future costs to complete change (see Contract
Accounting).
Revenue recognized under the percentage of completion method of
accounting amounted to $118,800,000 and $60,500,000 and $57,945,000 in 1993,
1994 and 1995, respectively. Substantially all such amounts were accounted for
under the units of delivery method. All other revenue is recognized as product
is shipped and title passes.
Contract Accounting
For long-term contracts, the Company capitalizes in inventory direct
material, direct labor and factory overhead as incurred. The Company also
capitalizes certain general and administrative costs for estimating and bidding
on contracts awarded (of which $308,000 and $209,000 remained in inventory at
December 31, 1994 and 1995, respectively). Selling costs are expensed as
incurred. Costs to complete long-term contracts are estimated on a monthly
basis. Estimated margins at completion are applied to cumulative contract
revenue to arrive at costs charged to operations.
Accounting for long term contracts under the percentage of completion
method involves substantial estimation processes, including determining the
estimated cost to complete a contract. As contracts may require performance over
several accounting periods, formal detailed cost to complete estimates are
F-8
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
performed which are updated monthly via performance reports. Management's
estimates of costs to complete change due to internal and external factors such
as labor rate and efficiency variances, revised estimates of warranty costs,
estimated future material prices and customer specification and testing
requirement changes. Changes in estimated costs are reflected in gross profits
in the period in which they are known. If increases in projected costs to
complete are sufficient to create a loss contract, the entire estimated loss is
charged to operations in the period the loss first becomes known. Provisions for
losses on firm fixed price contracts amounted to $628,000, $1,226,000 and
$700,000 in 1993, 1994 and 1995, respectively.
The Company recognized revenue and income before income taxes in 1993
of approximately $7,100,000 upon the favorable settlement of a government
contract value engineering change proposal for which all the costs had been
charged to operations in previous years. The Company also determined losses
before income taxes of approximately $3,600,000 were attributable to certain
contracts which were completed or terminated and charged the estimated loss to
cost of operations in 1993. The Company recognized profit before income taxes in
1994 of approximately $4,500,000 resulting from favorable changes in contract
and contract claim estimates for which all related costs had been charged to
operations in previous years. Approximately $3,100,000 of such estimate
revisions were recognized by the Company during the fourth quarter of 1994. The
Company also successfully negotiated the settlement of a government contract
termination claim and recognized income before income taxes of approximately
$2,700,000 in 1994.
Research and Development
Company sponsored research and development costs are expensed as
incurred.
Income Taxes
The Company and its domestic subsidiaries were included in the
consolidated federal income tax return of the Parent from the Company's
inception through March 22, 1995. Effective March 23, 1995, as a result of a
decrease in the Parent's ownership percentage of the Company, the Company did
not meet the 80-percent-voting power and value requirements defined by the
Internal Revenue Code for affiliated group membership and ceased to be an
includable member of the Parent's affiliated group. The Company and its domestic
subsidiaries will separately file its initial consolidated federal income tax
return for the period March 23, 1995 through December 31, 1995.
For financial reporting purposes during the tax periods in which the
Company was included in the Parent's consolidated federal income tax return,
income taxes were accounted for on a separate return basis, including deferred
income taxes. For those tax periods, liabilities for federal income taxes,
calculated on a stand-alone basis were payable to the Parent and federal income
tax refunds were due from the Parent.
The Company has applied the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires an
asset and liability approach in accounting for income taxes for all years
presented.
Concentrations of Credit Risk
Financial instruments which potentially expose the Company to
concentrations of credit risk, as defined by Statement of Financial Accounting
Standard No. 105, consist of accounts receivable. The Company's OEM customer
base consists primarily of large computer and electronic manufacturers and its
commercial accounts receivable are concentrated with a few of these large
companies. Although the
F-9
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
Company is directly affected by the well being of the computer and electronics
industry, management does not believe significant credit risk exists at December
31, 1995.
The Company earned revenue from the United States Government and its
agencies of approximately $114,400,000 (47% of revenue), $51,200,000 (19% of
revenue) and $53,643,000 (20% of revenue) during 1993, 1994 and 1995,
respectively. The Company also served as a subcontractor to a variety of prime
contractors under contract with the federal government, which in the aggregate,
represented approximately 9%, 11% and 9% of the Company's revenue in 1993, 1994
and 1995, respectively. The Company's largest commercial customer was IBM which
represented approximately 14% and 16% of the Company's revenue in 1994 and 1995.
No other single customer accounted for more than 10% of the Company's revenue in
1993, 1994 or 1995.
Foreign Currency Translation
The United States dollar is the functional currency for the Company's
GTC Mexico and GTC Brazil subsidiaries. Foreign currency transaction gains and
losses, which are insignificant in all years presented, are included in
determining net income.
Stock Based Compensation
The Company grants stock options under its Stock Option Plans to
employees and independent directors (see Note 13). The Company accounts for
stock option grants in accordance with APB Opinion No. 25, "Accounting for Stock
Issued to Employees," and, accordingly, recognizes no compensation expense for
the stock option grants.
Net Income (Loss) Per Share
Net income per share is computed using the weighted average number of
issued and issuable common shares, redeemable common shares and equivalent
shares outstanding. Net loss per share is computed using the weighted average
number of issued and issuable common shares outstanding. The computation of
fully diluted net loss per share was antidilutive during the year ended December
31, 1995; therefore, the number of shares used for computing primary and fully
diluted loss per share are the same. Stock issued within one year of the
Company's initial public offering at below the estimated initial public offering
price is reflected as outstanding for 1993 and 1994. All share and per share
data in the accompanying financial statements retroactively reflect a 6-for-1
stock split effected March 4, 1994.
Impact of Recently Issued Accounting Standards
In March 1995, Statement of Financial Accounting Standard No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," was issued which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' underlying carrying amount. Statement No. 121 also
addresses the accounting for long-lived assets that are expected to be disposed
of. The Company will adopt Statement No. 121 in the first quarter of 1996 and,
based on current circumstances, does not believe the effect of adoption will be
material.
In October 1995, Statement of Financial Accounting Standard No. 123,
"Accounting for Stock-Based Compensation," was issued which provides an
alternative to APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
in accounting for stock-based compensation issued to employees. The Statement
F-10
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
allows for a fair value based method of accounting for employee stock options
and similar equity instruments. However, for companies that continue to account
for stock-based compensation arrangements under Opinion No. 25, Statement No.
123 requires disclosure of the pro forma effect on net income and earnings per
share of its fair value based accounting for those arrangements. These
disclosure requirements are effective for fiscal years beginning after December
15, 1995, or upon initial adoption of the statement, if earlier. The Company
continues to evaluate the provisions of Statement No. 123 and has not determined
whether it will adopt the recognition and measurement provisions of that
Statement, which the Company expects would result in increased compensation
expense in future periods.
(3) ACQUISITIONS
On July 30, 1993, the Company acquired certain assets and assumed
certain liabilities of the Philips Circuit Assemblies ("PCA") division of
Philips Electronics North America Corporation. The transaction was accounted for
as a purchase in which the purchase price of $13,833,000 and a liability of
$2,192,000 to the seller based on sales to certain customers of PCA during the
next 5 years were allocated based on fair values of assets acquired and
liabilities assumed. No goodwill resulted from this transaction. The 1993
consolidated statement of operations includes amounts for PCA from July 31,
1993.
On July 4, 1994, GTC Mexico, a wholly-owned subsidiary of the Company,
acquired certain assets and assumed certain liabilities of Philips Mexicana,
S.A. de C.V. The transaction was accounted for as a purchase in which a
liability of $1,200,000 to the seller based on sales to customers of GTC Mexico
during the next 5 years was allocated based on fair values of assets acquired
and liabilities assumed. No goodwill resulted from this transaction. The 1994
consolidated statement of operations includes amounts for GTC Mexico from July
4, 1994.
On July 18, 1995, GTC Brazil acquired certain manufacturing equipment
of IBM Brasil-Industria, Maquinas e Sevicos Ltda. ("IBM Brasil"). The
transaction was accounted for as a purchase in which the purchase price of
$4,900,000, in the form of a note payable to the seller, was allocated based on
fair values of assets acquired. No goodwill resulted from this transaction. The
1995 consolidated statement of operations includes amounts for GTC Brazil from
July 18, 1995.
The following unaudited pro forma results of operations data give
effect to the acquisition of PCA as if the acquisition was consummated as of the
beginning of 1993. This unaudited pro forma financial data may not be indicative
of the results that actually would have occurred if the Company had acquired PCA
as of the beginning of 1993 or those that may be obtained in the future. The
acquisitions of GTC Mexico and GTC Brazil did not have a significant effect on
the Company's consolidated results of operations in 1994 and 1995, respectively.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
-----------------------------
(IN THOUSANDS, EXCEPT FOR
PER SHARE AMOUNTS)
<S> <C>
Revenue.......................... $292,152
Net income....................... 11,706
Net income per share:
Primary........................ 0.83
Fully diluted.................. 0.80
</TABLE>
F-11
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(4) DISPOSITIONS
The Company completed two transactions during 1995 and one transaction
on February 9, 1996, which, in the aggregate, resulted in the sale of
substantially all of the assets of its Metrum subsidiary. On May 31, 1995, the
assets of the peripherals products business unit of Metrum were sold to
MountainGate Data Systems, Inc., a subsidiary of Lockheed Martin Corporation for
$5,247,000, consisting of cash of $3,655,000 and a note receivable from the
buyer of $1,592,000. On June 6, 1995, the assets of the imaging business unit of
Metrum were sold to Sienna Imaging, Inc. for $1,331,000 cash. On February 9,
1996, the assets of the instrumentation products business unit of Metrum were
sold to F.W. Bell, Inc. ("Bell"), also a subsidiary of the Parent, for
$10,000,000 cash and an earn-out provision which provides for additional
payments to the Company, up to $3,000,000 in the event annual earnings before
interest and taxes exceeds defined amounts through December 31, 2000. The sales
price for each transaction approximated the net book value of the respective
business units on the date of sale. The proceeds from the sale transactions were
used to reduce the Company's debt balance and to fund working capital needs.
Revenue, net income and net income per share for Metrum were $31,268,000,
$2,348,000 and $0.15, respectively, for the year ended December 31, 1995.
Due to the common ownership interest of the Parent in the company and
Bell, the Company requested and obtained an independent opinion, which indicated
that the consideration received by the Company for the sale of the
instrumentation products business was fair, from a financial point of view, to
the unaffiliated shareholders of the Company. In addition, due to the common
ownership, the amount by which the sales price exceeds the net book value of
assets and liabilities transferred, which amount has not yet been determined,
will be recorded by the Company as a contribution to its capital.
On March 22, 1996, the Company sold substantially all of the assets
related to its Badger line of name brand products. The Company recorded a
$2,200,000 charge to cost of operations during the fourth quarter of 1995 to
reduce inventory to the sale price.
(5) ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE> DECEMBER 31,
<CAPTION> -------------------
1994 1995
------- ---------
(IN THOUSANDS)
<S> <C> <C>
Commercial customers.......................... $31,423 $28,088
U.S. Government............................... 5,427 3,862
------- -------
36,850 31,950
Allowance for doubtful accounts............... (538) (783)
------- -------
$36,312 $31,167
======= =======
</TABLE>
Accounts receivable from the U.S. Government includes amounts due
under long-term contracts, which are all billed, at December 31, 1994 and 1995
of $4,013,000 and $2,568,000, respectively. The provision for doubtful accounts
was $1,005,000, $571,000 and $1,293,000 for the years ended December 31, 1993,
1994 and 1995, respectively.
F-12
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
(6) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Raw materials............................................................... $ 30,245 $ 34,469
Work in process............................................................. 15,095 6,840
Finished goods.............................................................. 1,028 330
Costs relating to long-term contracts and programs, net of amounts
attributed to revenue recognized to date................................... 39,514 25,766
Progress payments related to long-term contracts and programs............... (21,227) (12,300)
Reserve for inactive, obsolete and unsalable................................ (2,230) (8,606)
-------- --------
$ 62,425 $ 46,499
======== ========
</TABLE>
The above amounts include inventory valued under the last-in, first-
out ("LIFO") method totaling $11,167,000 and $5,318,000 at December 31, 1994 and
1995, respectively, which approximates replacement cost at those dates.
Provisions for obsolete, inactive and unsalable inventories were $216,000,
$540,000 and $6,939,000 for the years ended December 31, 1993, 1994 and 1995,
respectively.
(7) OTHER CURRENT ASSETS
Other current assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Net deferred tax assets..................................................... $ 403 $ 589
Refundable income taxes, due from Parent.................................... 2,842 5,000
Other....................................................................... 1,477 2,376
-------- --------
$ 4,722 $ 7,965
======== ========
</TABLE>
(8) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Leasehold improvements..................................................... $ 6,997 $ 6,954
Machinery, equipment, furniture and fixtures............................... 27,885 39,780
-------- --------
34,882 46,734
Less accumulated depreciation.............................................. (18,658) (22,644)
-------- --------
$ 16,224 $ 24,090
======== ========
</TABLE>
Depreciation expense was $4,187,000, $5,350,000 and $5,073,000 for the
years ended December 31, 1993, 1994 and 1995, respectively.
F-13
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
(9) ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Payments received from customers in excess of contract costs.. $ 4,784 $ 5,340
Employee benefit plan accruals................................ 5,370 4,045
Other......................................................... 5,196 8,507
------- -------
$15,350 $17,892
======= =======
</TABLE>
Included in other current liabilities are employee payroll deductions,
advance payments, accrued operating expenses and accrued interest, none of which
exceed 5% of total current liabilities.
(10) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revolving credit agreement (a)................................ $30,256 $25,583
Other (b)..................................................... 2,216 5,638
------- -------
Total long-term debt........................................ 32,472 31,221
Less current portion of long-term debt........................ (2,080) (8,171)
------- -------
$30,392 $23,050
======= =======
</TABLE>
(a) On November 24, 1994, the Company entered into a credit agreement (the
"Revolving Credit Agreement"), under the terms of which a bank committed a
maximum of $100,000,000 to the Company for cash borrowings and letters of
credit. At December 31, 1995, the Company was in default under certain
terms and covenants of the Revolving Credit Agreement. On November 7, 1995,
the Company and the bank entered into a Forbearance Agreement, which
provided the Company with continuing availability of liquidity until a new
financing agreement could be reached. To further respond to the need for
liquidity, management took certain actions to reduce cash expenditures and
otherwise generate cash. Among these actions were the disposition of
substantially all of the assets of the name brand products line of business
(as described in Note 4), headcount reductions, delay of payments to
suppliers and reduction of discretionary expenses.
On March 29, 1996, the Company entered into a financing agreement (the
"1996 Credit Agreement") with its bank to replace the Revolving Credit
Agreement. The 1996 Credit Agreement provides the Company with a revolving
line of credit facility (the "Revolver"), a $3,300,000 two-year facility
(the "Term Note") and an additional $5,000,000 facility (the "1996 Note")
for the period through December 31, 1996. Borrowings under the 1996 Credit
Agreement are secured by substantially all of the assets of the Company.
Under the terms of the 1996 Credit Agreement, the Company will pay interest
monthly on outstanding borrowings at the prime rate (8.50% at December 31,
1995) plus a spread (between 1.25% and 2.0%). The Company will be provided
credit availability on the Revolver equal to the lesser of $27,500,000 or
the applicable amount of its eligible accounts receivable and inventories
through December 31, 1996. Effective January 1, 1997, through the maturity
date of March 1998, the Company's credit availability on the Revolver will
equal the lesser of $22,500,000 or the applicable amount of its eligible
accounts receivable and inventories. Principal payments on the Term Note
are due
F-14
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
monthly commencing seven months from closing. The 1996 Note is payable in
two equal installments on August 30, 1996 and December 31, 1996.
The Company, in conjunction with the 1996 Credit Agreement, paid a $250,000
fee and issued warrants to purchase 1,200,000 shares of common stock at
$0.01 per share to the lender in consideration for execution of the
financing agreement. On the closing date, 200,000 of the warrants are
exercisable and the balance of the warrants become exercisable in quarterly
increments of 250,000 beginning one year from closing. The warrants will
expire 5 years following the issue date. The lender will forfeit any
unvested warrants in the event the Company repays all debt outstanding
under the 1996 Credit Agreement prior to any vesting date.
As a result of the 1996 Credit Agreement and the actions begun in 1995 to
reduce expenditures and improve profitability, the Company believes that
sufficient resources will be available to meet its cash requirements
through 1996. Cash requirements beyond the next twelve months depend on the
Company's profitability, its ability to manage working capital requirements
and its rate of growth.
(b) In connection with the acquisitions of PCA and GTC Mexico, the Company
agreed to make additional payments to the sellers over a five-year period
from the respective dates of acquisition based upon sales to certain
customers. The Company believes the maximum future payments are probable
and recorded debt equal to the net present value of the maximum future
payments on the date of acquisition. At December 31, 1995, $696,000 and
$600,000 was payable to the sellers of PCA and GTC Mexico, respectively.
In connection with the acquisition of GTC Brazil, the Company is obligated
on a note payable to IBM Brasil. The note is for a term of 3 years and is
secured by GTC Brazil's equipment. The Company recorded the note at its net
present value discounted at current market interest rates for comparable
financing. The principal balance of the note is subject to annual
adjustment under an economic price adjustment clause in the debt agreement.
The adjustment calculated in 1995 was not significant. At December 31,
1995, $4,306,000 was payable to the seller.
The 1996 Credit Agreement requires maintenance of certain financial
ratios and contains other restrictive covenants, including prohibiting the
Company from paying dividends. At September 29, 1996 the Company was not in
compliance with certain covenants, including minimum earnings before interest,
income taxes, depreciation and amortization ("EBITDA"). The bank has waived its
rights with regard to such items of non-compliance through November 30, 1996.
While the bank continues to advance funds under the 1996 Credit Agreement, it is
under no obligation to continue to do so, and could cease advancing funds at any
time. While under no current obligation to do so, management intends to
refinance this debt in the first quarter of 1997.
The borrowings under the previous bank agreement at December 31, 1995
are classified in the accompanying balance sheet as if the 1996 Credit Agreement
was in place on that date. The weighted average interest rate related to the
Revolving Credit Agreement was 6.8% and 8.3% for 1994 and 1995, respectively.
F-15
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The annual maturities of long-term debt for each year ended December 31 are
presented below. Maturities of debt incurred under the 1996 Credit Agreement
have been reported on the basis that the commitment to lend under this agreement
will be terminated at the end of its current term.
<TABLE>
<S> <C>
1996........................................................ $ 8,171
1997........................................................ 2,332
1998........................................................ 20,718
</TABLE>
Interest paid during 1993, 1994 and 1995 was $1,876,000, $2,161,000 and
$3,427,000, respectively.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, accounts receivable, accounts payable and accrued liabilities are
reflected in the financial statements at their carrying amount which
approximates fair value because of the short-term maturity of those instruments.
The carrying amount of debt outstanding under the Company's revolving credit
agreement approximates fair value, due to the short-term nature of this
instrument. The carrying amount of other long-term debt is assumed to
approximate fair value because there have not been any significant changes in
market conditions or specific circumstances since the instruments were recorded
at fair value.
(12) EMPLOYEE BENEFIT PLANS
The Company sponsors defined contribution plans (the "Plans") for
substantially all domestic employees of the Company. The Plans are intended to
meet the requirements of Section 401(k) of the Internal Revenue Code. The Plans
allow the Company to match participant contributions as approved by the Board of
Directors. Contributions to the Plans during 1993, 1994 and 1995 were
$1,982,000, $2,271,000 and $1,783,000, respectively.
The Company has partially self-insured employee medical plans. The plans
limit the Company's annual obligations to fund claims to specified amounts per
participant and in the aggregate. The Company is insured for amounts in excess
of these limits. Employees are responsible, in some instances, for payment of a
portion of the premiums. During 1993, 1994 and 1995, the Company charged
$4,174,000, $5,287,000 and $4,526,000, respectively, to operations related to
reinsurance premiums, medical claims incurred and estimated, and administrative
costs for its employee medical plans. Claims paid during 1993, 1994 and 1995 did
not exceed the aggregate limits.
(13) STOCK PLANS
In January 1990, the Company's Board of Directors adopted a stock option
plan, a stock purchase plan and various incentive plans and adopted a formula
price (the "Formula Price") valuation as a basis for establishing a value for a
share of Common Stock. All shares of Common Stock issued to employees were
subject to a restriction agreement, under which the Company was required to
redeem all shares offered for redemption at the option of the employee or upon
the termination, retirement, disability or death of the employee. On May 18,
1994, the effective date of the Offering, the 1990 Stock Option Plan and the
Stock Purchase Plan were terminated and all restrictions on outstanding shares
lapsed.
Stock Purchase Plan
The Company maintained a stock purchase plan (the "Stock Purchase Plan")
from 1990 through May 1994. Eligible employees were permitted to purchase Common
Stock annually for cash or semi-annually
F-16
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
through payroll deductions and were awarded one bonus share of Common Stock (a
"Bonus Share") for every three shares purchased. The Company amortized
compensation expense related to Bonus Shares on a straight-line method over an
eighteen month vesting period. When the Stock Purchase Plan was terminated in
1994 all Bonus Shares became fully vested and the Company recognized the
unamortized compensation related to the Bonus Shares as an expense.
In addition, compensation expense of $289,000 and $247,000 was recorded in
1993 and 1994, respectively, on shares purchased between August 1, 1993 and
April 3, 1994 for the excess of the fair market value over the purchase price.
The following table summarizes shares issued under the Stock Purchase Plan
for the years ended December 31, 1993 and 1994:
<TABLE>
<CAPTION>
SHARES FAIR MARKET VALUE
------- -----------------
(IN THOUSANDS)
<S> <C> <C>
1993.................................. 203,622 $860
1994................................... 20,520 295
</TABLE>
Incentive Plans
The Company's incentive plans (the "Incentive Plans") provide for incentive
awards to be made to certain employees for individual performance and to all
employees or certain key employees based upon the achievement of selected
financial measures of the Company for each calendar year as compared to its
business plan. The Company recognizes compensation expense for the Incentive
Plans in the year in which the individual performance and financial measures are
achieved and shares issued are valued at fair market value at date of issuance.
For the year ended December 31, 1995, no shares were issued under the
Incentive Plans. The following table summarizes shares issued under the
Incentive Plans for the years ended December 31, 1993 and 1994:
<TABLE>
<CAPTION>
SHARES FAIR MARKET VALUE
------- -----------------
(IN THOUSANDS)
<S> <C> <C>
1993.................................. 40,950 $492
1994................................... 560 6
</TABLE>
Stock Option Plans
In 1994, the Board of Directors adopted the 1994 Stock Option Plan for Key
Employees (the "1994 Plan") and the Independent Directors' Stock Option Plan
(the "Directors Plan"). The 1994 Plan replaced the Stock Option Plan adopted in
January 1990 (the "1990 Plan") and terminated on May 18, 1994. Options remain
outstanding and exercisable under the 1990 Plan; however, no further grants will
be made under the 1990 Plan.
Under the 1990 Plan, options were granted to employees at the discretion of
the Board of Directors. Under the 1994 Plan, options may be granted to employees
to purchase a maximum of 300,000 shares of Common Stock. During 1993, options to
purchase 450,000 shares were granted under the 1990 Plan. During 1994, no
options were granted under the 1990 Plan or the 1994 Plan. During 1995, options
to purchase 179,000 shares were granted under the 1994 Plan.
F-17
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED
Under the Directors Plan, options may be granted to members of the Board of
Directors who are not employees of the Parent, the Company or its subsidiaries
to purchase a maximum of 120,000 shares of Common Stock. During 1994 and 1995,
options to purchase 10,000 and 25,951 shares, respectively, were granted under
the Directors Plan.
Options granted under the 1990 Plan have a maximum term of 13 years.
Options granted under the 1994 Plan and the Directors' Plan have a maximum term
of 10 years. The exercise price of all options granted under such plans must be
at least 100% of the fair market value of such shares on the date of grant. The
Option Plan Committee of the Board of Directors was formed in 1994 to administer
the 1994 Plan and the Directors Plan. The Option Plan Committee selects the
individuals who will be granted options and determines the number of shares
subject to each option, fixes the period during which each option may be
exercised and fixes the price at which shares subject to options may be
purchased.
The following table summarizes option activity for the three years ended
December 31, 1995:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-----------------------
OPTION
PRICE
SHARES PER SHARE
---------- -----------
<S> <C> <C>
Balance at December 31, 1992.. 720,000 $1.67-2.12
Granted...................... 450,000 2.12-2.35
Terminated/forfeited......... (90,000) 1.67
--------- ----------
Balance at December 31, 1993.. 1,080,000 1.67-2.35
Granted...................... 10,000 7.75
Terminated/forfeited......... (60,000) 2.12
--------- ----------
Balance at December 31, 1994.. 1,030,000 1.67-7.75
Granted...................... 204,951 4.50-6.38
Exercised.................... (90,000) 1.67
Terminated/forfeited......... (125,000) 6.00-6.25
--------- ----------
Balance at December 31, 1995.. 1,019,951 $1.67-7.75
========= ==========
</TABLE>
At December 31, 1995, options to purchase 545,951 shares were exercisable
under the Company's stock option plans.
(14) SHAREHOLDERS' EQUITY
On February 18, 1994, the Company increased the number of shares of
authorized Common Stock from 8,000,000 to 40,000,000 and authorized a new class
of 1,000,000 shares of no par value Preferred Stock, none of which have been
issued. On March 4, 1994, a 6-for-1 stock split was approved and ratified by the
Board of Directors.
On February 2, 1996, the Board of Directors approved, subject to further
approval by the shareholders, the Group Technologies Corporation Employee Stock
Purchase Plan (the Purchase Plan) and reserved 1,000,000 shares of Common Stock
for issuance under the Purchase Plan.
On April 20, 1994, the Company's Articles of Incorporation were amended to
change the no par value Common Stock and Preferred Stock to $.01 par value. The
stock and the change to $.01 par value Common Stock have been retroactively
reflected in the accompanying consolidated financial statements.
F-18
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
On May 18, 1994, the Company completed an initial public offering of
2,000,000 shares of Common Stock at $10.00 per share (the "Offering"). The net
proceeds of the Offering, after deducting applicable issuance costs and expenses
were $17,348,000, of which $13,393,000 was used to reduce the Company's
outstanding debt. On June 23, 1994, the Company issued an additional 50,000
shares of Common Stock at $10.00 per share and applied the net proceeds of
approximately $465,000 to reduce the Company's outstanding debt. The effect on
unaudited pro forma earnings per share giving effect to the Offering as if the
Offering were consummated as of the beginning of 1994 is not significant.
(15) COMMITMENTS AND CONTINGENCIES
The Company leases all of its real property and certain computer,
manufacturing and office equipment. The real property operating leases have
terms ranging from five to ten years and contain various renewal and rent
escalation clauses. The equipment operating leases have terms of up to five
years. Future minimum noncancelable lease payments for each year ending December
31, are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996................................ $4,249
1997................................ 3,867
1998................................ 3,278
1999................................ 1,936
2000................................ 1,152
Thereafter.......................... 1,704
</TABLE>
Rent expense for the years ended December 31, 1993, 1994 and 1995, was
$3,736,000, $3,354,000 and $5,194,000, respectively.
The Company is involved in certain litigation and contract issues
arising in the normal course of business. While the outcome of these matters
cannot, at this time, be predicted in light of the uncertainties inherent
therein, management does not expect that these matters will have a material
adverse effect on the consolidated financial position or results of operations
of the Company.
(16) INCOME TAXES
The components of income tax expense (benefit) are:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1993 1994 1995
-------- ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes currently payable (refundable):
Federal...................................... $ 7,245 $ 528 $(5,263)
State........................................ 623 270 112
Foreign...................................... -- -- 428
------- ------ -------
7,868 798 (4,723)
Deferred income taxes:
Federal...................................... (1,830) 2,301 668
State........................................ (156) 198 73
------- ------ -------
(1,986) 2,499 741
------- ------ -------
$ 5,882 $3,297 $(3,982)
======= ====== =======
</TABLE>
F-19
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
Income taxes paid during 1993 and 1994 were $7,027,000 and $6,421,000,
respectively, including federal income taxes paid to the Parent of $6,755,000
and $5,628,000, respectively. Income tax refunds received during 1995 were
$2,350,000, all of which was received from the Parent. At December 31, 1994 and
1995, federal income taxes receivable from the Parent of $2,842,000 and
$5,073,000, respectively, were included in other current assets.
The following is a reconciliation of income tax expense to that
computed by applying the federal statutory rates of 35% in 1993 and 34% in 1994
and 1995 to income before income taxes:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1993 1994 1995
------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal tax at the statutory rate..................... $5,549 $2,719 $(7,363)
State income taxes net of federal tax benefit......... 302 305 (76)
State tax net operating loss carry forward............ -- -- (1,080)
Change in valuation allowance for deferred tax asset.. -- -- 4,367
Other................................................. 31 273 170
------ ------ -------
$5,882 $3,297 $(3,982)
====== ====== =======
</TABLE>
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. The Company's deferred tax asset at December 31, 1995
consists of deductible temporary differences and a state income tax net
operating loss carryforward. Due to the uncertain nature of the ultimate
realization of these deferred tax assets based upon the current years'
performance and the expiration of the net operating loss carryforward, the
Company has established a valuation allowance against its deferred tax assets up
to the amount of prior year federal taxable income available for carryback to
offset future years' income. The Company will recognize the benefits associated
with the deferred tax assets only as reassessment demonstrates they are
realizable. Realization is entirely dependent upon future earnings in specific
tax jurisdictions. While the need for this valuation allowance is subject to
periodic review, if the allowance is reduced, the tax benefits will be recorded
in future operations as a reduction of the Company's income tax expense. The
Company was able to carry back its current year federal income tax net operating
loss to generate refundable income taxes and, as a result, the remaining amount
of federal taxable income available for carry back in future years declined.
F-20
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Compensation and benefit accruals.. $ 1,149 $ 920
Inventory valuation................ -- 2,279
Net operating loss carryforward.... -- 1,080
Other.............................. 1,048 1,037
------- ------
2,197 5,316
Valuation allowance................. -- (4,367)
Deferred tax liabilities:
Basis difference in inventories.... (1,517) --
Contract provisions................ -- (360)
------- ------
Net deferred tax asset.............. $ 680 $ 589
======= ======
</TABLE>
During the year ended December 31, 1995, the Company recorded a valuation
allowance of $4,367,000 on its deferred tax assets to reduce the total to an
amount that management believes will more likely than not be realized.
Realization of deferred tax assets is dependent upon sufficient taxable income
during the period that temporary differences and carryforwards are expected to
be available to reduce taxable income.
At December 31, 1995, for state income tax purposes, the Company had a net
operating loss carryforward of approximately $19,642,000, which will expire in
2010.
(17) RELATED PARTY TRANSACTIONS
The Company paid a corporate allocation (0.2% of revenue) to the Parent of
$488,000 and $548,000 during 1993 and 1994, respectively. The Company's
corporate allocation for 1995 consisted of a payment of $274,000 during 1995 and
the issuance of 69,813 shares of Common Stock valued at $300,000 based on the
fair market value of the shares on the issuance date which was charged to
operations. The Company is also a party to a consolidated federal income tax
sharing agreement with the Parent applicable to the tax periods during which the
Company was included in the Parent's consolidated federal income tax return.
The Company issued 59,090 shares of its common stock to the Parent in a
private placement transaction in October 1995. The shares were sold to the
Parent in exchange for $325,000. The per share price of the transaction was
equal to the closing price of the Common Stock on the day immediately preceding
the date of sale.
On February 9, 1996, the Company sold substantially all of the assets of
its Metrum subsidiary to Bell (see Note 4). Bell is also a subsidiary of the
Parent.
F-21
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(18) GEOGRAPHIC SEGMENTS
The Company is a multinational corporation with operations in the United
States, Mexico and Brazil. For the years ended December 31, 1993, and 1994,
revenue, operating profit and identifiable assets of the Company's foreign
operations were not significant. Information about the Company's operations in
geographic areas for the year ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Revenue:
United States.............................. $233,515
Foreign.................................... 40,132
--------
$273,647
========
Operating Profit (Loss):
United States.............................. $(16,172)
Foreign.................................... (2,055)
--------
$(18,227)
========
Identifiable Assets:
United States.............................. $ 87,049
Foreign.................................... 26,057
--------
$113,106
========
</TABLE>
Identifiable assets of foreign subsidiaries are those assets related to the
operations of those subsidiaries. United States assets consist of all other
operating assets of the Company.
(19) QUARTERLY INFORMATION (UNAUDITED):
The following is a summary of the unaudited quarterly results of operations
for 1994 and 1995:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------
1994 1995
---------------------------------- --------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue...................................... $68,044 $71,543 $69,137 $65,423 $65,100 $71,867 $71,554 $ 65,126
Cost of operations........................... 57,538 60,283 59,374 60,672 60,032 71,463 68,446 69,209
------- ------- ------- ------- ------- ------- ------- --------
Gross profit................................. 10,506 11,260 9,763 4,751 5,068 404 3,108 (4,083)
Selling, general and administrative expense.. 5,437 5,438 5,288 4,398 4,971 5,542 3,510 5,660
Research and development..................... 1,713 1,391 1,196 870 985 938 585 533
------- ------- ------- ------- ------- ------- ------- --------
Operating income (loss)...................... 3,356 4,431 3,279 (517) (888) (6,076) (987) (10,276)
Interest expense, net........................ 486 516 428 618 628 752 590 937
Other (income) expense, net.................. -- -- -- 504 (78) 492 (116) 223
------- ------- ------- ------- ------- ------- ------- --------
Income (loss) before income taxes............ 2,870 3,915 2,851 (1,639) (1,438) (7,320) (1,461) (11,436)
Income taxes................................. 1,076 1,520 1,002 (301) (535) (2,738) (682) (27)
------- ------- ------- ------- ------- ------- ------- --------
Net income (loss)............................ $ 1,794 $ 2,395 $ 1,849 $(1,338) $ (903) $(4,582) $ (779) $(11,409)
======= ======= ======= ======= ======= ======= ======= ========
Net income (loss) per share:
Primary..................................... $ 0.13 $ 0.15 $ 0.11 $ (0.06) $ (0.06) $ (0.29) $ (0.05) $ (0.73)
Fully Diluted............................... $ 0.12 $ 0.15 $ 0.11 $ (0.06) $ (0.06) $ (0.29) $ (0.05) $ (0.73)
</TABLE>
F-22
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The Company recognized charges during the second and fourth quarters of
$5.7 million and $8.6 million, respectively. The second quarter charges
increased cost of operations by $4.4 million, selling, general and
administrative expense by $0.8 million and other expense by $0.5 million. The
fourth quarter charges increased cost of operations by $7.6 million, selling,
general and administrative expense by $0.8 million and other expense by $0.2
million.
The second quarter charges to cost of operations were primarily related to
the increase to the excess and obsolete inventory reserve of $2.0 million, the
recognition of estimated losses on terminated or unprofitable contracts of $1.8
million and employee severance costs of $0.6 million. The second quarter charges
to selling, general and administrative expense related primarily to the increase
in the reserve for uncollectible accounts receivable. The second quarter charges
to other expense related primarily to the costs to dispose of the Metrum assets
and the costs incurred in investigating an acquisition opportunity that was
ultimately abandoned.
The fourth quarter charges to cost of operations were primarily related to
the inventory adjustment for the discontinued Badger line of name brand products
of $2.2 million, inventory adjustments required based upon the October physical
inventory count of $1.7 million, the disposition of specialized manufacturing
equipment under lease amounting to $1.1 million, an increase to the excess and
obsolete inventory reserve of $1.0 million, an adjustment for account
reconciliations of $0.8 million, and the recognition of estimated losses on
terminated or unprofitable contracts of $0.5 million. The fourth quarter charges
to selling, general and administrative expense related primarily to the
acceleration of loan fee amortization due to the Company's refinancing agreement
described in Note 10 and the increase in the reserve for uncollectible accounts
receivable. The fourth quarter charges to other expense related primarily to the
loss on sale of equipment.
F-23
<PAGE>
GROUP TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
DECEMBER 31, SEPTEMBER 29,
1995 1996
------------ -------------
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
Current assets:
Cash and cash equivalents....................... $ 2,143 $ 1,224
Accounts receivable, net........................ 31,167 21,192
Inventories, net................................ 46,499 25,990
Other current assets............................ 7,965 3,780
-------- -------
Total current assets........................... 87,774 52,186
Property and equipment, net...................... 24,090 22,256
Other assets..................................... 1,242 934
-------- -------
$113,106 $75,376
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................ $ 37,789 $17,146
Accrued liabilities............................. 17,892 15,153
Note payable.................................... -- 804
Current portion of long-term debt............... 8,171 14,813
-------- -------
Total current liabilities...................... 63,852 47,916
Long-term debt................................... 23,050 1,923
Other liabilities................................ 364 310
-------- -------
Total liabilities............................. 87,266 50,149
Shareholders' equity:
Preferred Stock, $.01 par value, 1,000,000
shares authorized; no shares issued and
outstanding.................................... -- --
Common Stock, $.01 par value, 40,000,000
shares authorized; 15,828,707 and
16,220,629 shares issued and outstanding in
1995 and 1996, respectively.................... 158 162
Additional paid-in capital...................... 22,537 24,675
Retained earnings............................... 3,145 390
-------- -------
Total shareholders' equity.................... 25,840 25,227
-------- -------
$113,106 $75,376
======== =======
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
F-24
<PAGE>
GROUP TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
OCTOBER 1, SEPTEMBER 29, OCTOBER 1, SEPTEMBER 29,
1995 1996 1995 1996
----------- -------------- ----------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenue...................................... $71,554 $48,190 $208,521 $180,380
Cost of operations........................... 68,446 47,376 199,941 170,549
------- ------- -------- --------
Gross profit............................... 3,108 814 8,580 9,831
Selling, general and administrative expense.. 3,510 2,393 14,023 8,597
Research and development..................... 585 2 2,508 296
------- ------- -------- --------
Operating (loss) income.................... (987) (1,581) (7,951) 938
Interest expense............................. 590 756 1,970 2,682
Other (income) expense, net.................. (116) 93 298 166
------- ------- -------- --------
Loss before income taxes................... (1,461) (2,430) (10,219) (1,910)
Income tax (benefit) expense................. (682) 388 (3,955) 845
------- ------- -------- --------
Net loss..................................... $ (779) $(2,818) $ (6,264) $ (2,755)
======= ======= ======== ========
Net loss per share:
Primary.................................... $ (0.05) $ (0.17) $ (0.40) $ (0.17)
Fully diluted.............................. $ (0.05) $ (0.17) $ (0.40) $ (0.17)
Shares used in computing per share amounts:
Primary.................................... 15,690 16,221 15,680 16,135
Fully diluted.............................. 15,690 16,221 15,680 16,135
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-25
<PAGE>
GROUP TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------
OCTOBER 1, SEPTEMBER 29,
1995 1996
----------- -------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss......................................... $(6,264) $ (2,755)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization................ 3,425 3,887
Other........................................ (262) 230
Changes in operating assets and liabilities,
net of dispositions:
Accounts receivable........................ (7,419) 7,097
Inventories................................ 11,604 13,264
Other current and non-current assets....... (3,091) 1,888
Accounts payable........................... (4,162) (19,655)
Accrued and other liabilities.............. 738 (998)
------- --------
Net cash (used in) provided by operating
activities............................. (5,431) 2,958
Cash flows from investing activities:
Capital expenditures............................. (7,567) (2,376)
Proceeds from disposal of assets................. -- 11,561
------- --------
Net cash (used in) provided by investing
activities............................. (7,567) 9,185
Cash flows from financing activities:
Net proceeds (repayments) under revolving
credit agreement............................... 13,804 (8,511)
Repayments of notes payable and long-term debt... (988) (5,551)
Net proceeds from issuance of common stock....... 75 1,000
------- --------
Net cash provided by (used in) financing
activities............................. 12,891 (13,062)
------- --------
Net decrease in cash and cash equivalents.......... (107) (919)
Cash and cash equivalents at beginning of period... 1,328 2,143
------- --------
Cash and cash equivalents at end of period......... $ 1,221 $ 1,224
======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-26
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATIONAL STRUCTURE
Group Technologies Corporation (the "Company") is a leading provider of
advanced manufacturing, engineering and testing services to original equipment
manufacturers ("OEMs") of electronic products. The Company custom manufactures
complex circuit card assemblies, subsystems and end-user products for use in a
wide variety of markets, including avionics, gaming, personal computer,
photography, space, telecommunications, workstation and government systems.
The consolidated financial statements include the accounts of the Company
and its majority owned subsidiaries (hereinafter collectively referred to as the
"Company"). The Company's operating subsidiaries are Group Technologies, S.A. de
C.V. ("GTC Mexico") and Group Technologies Suprimentos de Informatica Industria
e Comercio Ltda. ("GTC Brazil"). Substantially all of the assets of Metrum, Inc.
("Metrum"), which remains a wholly owned subsidiary of the Company, were sold on
February 9, 1996 (see Note 6); however, certain non-operating assets and
liabilities were retained.
(2) BASIS OF PRESENTATION
The unaudited consolidated financial statements and related notes have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission and on substantially the same basis as the annual
consolidated financial statements. The consolidated financial statements include
the accounts of the Company and its subsidiaries. All significant intercompany
transactions and accounts have been eliminated.
In the opinion of management, the consolidated financial statements reflect
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial position, operating results, and cash flows
for those periods presented. Operating results for the three and nine month
periods ended September 29, 1996 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1996. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements, and notes thereto, for the year ended December 31, 1995 as
presented in the Company's annual report on Form 10-K.
(3) NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of common
shares outstanding during the applicable period.
F-27
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(4) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 29,
1995 1996
------------ -------------
(UNAUDITED)
<S> <C> <C>
Raw materials.................................................................................. $ 34,469 $17,767
Work in process................................................................................ 6,840 4,320
Finished goods................................................................................. 330 409
Costs relating to long-term contracts and programs, net of amounts attributed to revenue
recognized to date........................................................................... 25,766 19,402
Progress payments related to long-term contracts and programs.................................. (12,300) (8,438)
Reserve for inactive, obsolete and unsalable inventories....................................... (8,606) (7,470)
-------- -------
$ 46,499 $25,990
======== =======
</TABLE>
The amounts detailed above include inventories valued under the last-in,
first-out ("LIFO") method totaling $5,318,000 at December 31, 1995, which
approximates replacement cost at that date. No inventories were valued under
LIFO at September 29, 1996.
(5) NOTE PAYABLE AND LONG-TERM DEBT
On March 29, 1996, the Company entered into a financing agreement (the
"1996 Credit Agreement") with its bank to replace the revolving credit agreement
entered into on November 24, 1994. The 1996 Credit Agreement provides the
Company with a two-year revolving line of credit facility (the "Revolver"), a
$3,300,000 two-year facility (the "Term Note") and an additional $5,000,000
facility (the "1996 Note") for the period through December 31, 1996. Borrowings
under the 1996 Credit Agreement are secured by substantially all of the assets
of the Company. Under the terms of the 1996 Credit Agreement, the Company will
pay interest monthly on outstanding borrowings at the prime rate (8.25% at
September 29, 1996) plus a spread (between 1.0% and 2.0%). The Company will be
provided credit availability on the revolver equal to the lesser of $27,500,000
or the applicable amount of its eligible accounts receivable and inventories
through December 31, 1996. Effective January 1, 1997 through the maturity date
of March 1998, the Company's credit availability on the Revolver will equal the
lesser of $22,500,000 or the applicable amount of its eligible accounts
receivable and inventories. Principal payments on the Term Note are due monthly
commencing in the fourth quarter of 1996. The balance on the 1996 Note at
September 29, 1996 was $804,000, which was fully paid as of October 3, 1996.
The Company, in conjunction with the 1996 Credit Agreement, paid a $250,000
fee and issued warrants to purchase 1,200,000 shares of Common Stock at $0.01
per share to the lender in consideration for execution of the financing
agreement. At September 29, 1996, 200,000 of the warrants were exercisable and
the balance of the warrants become exercisable in quarterly increments of
250,000 beginning March 1997. The warrants will expire 5 years following the
issue date. The lender will forfeit any unvested warrants in the event the
Company repays all debt outstanding under the 1996 Credit Agreement prior to any
warrant vesting date. The Company recorded an original issue discount for the
1996 Credit Agreement equal to the fair market value of the exercisable options
and is amortizing this discount over the 12 month period beginning April 1996.
F-28
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 29,
1995 1996
------------ -------------
(UNAUDITED)
<S> <C> <C>
REVOLVER.............................................................................. $25,583 $ 8,321
TERM NOTE............................................................................. -- 3,300
OTHER................................................................................. 5,638 5,355
------- --------
TOTAL LONG-TERM DEBT.................................................................. 31,221 16,976
UNAMORTIZED ORIGINAL ISSUE DISCOUNT RELATED TO ISSUANCE OF WARRANTS EXERCISABLE ON
DATE OF ISSUANCE..................................................................... -- (240)
CURRENT PORTION OF LONG-TERM DEBT..................................................... (8,171) (14,813)
------- --------
$23,050 $ 1,923
======= ========
</TABLE>
Available borrowings on the Revolver at September 29, 1996 were
approximately $4,643,000. The Interest rate on all debt outstanding under the
1996 Credit Agreement at September 29, 1996 was 10.25%. As a result of the
Company's early repayment of the 1996 Note on October 3, 1996, the interest rate
was reduced to 9.5%.
The 1996 Credit Agreement requires maintenance of certain financial ratios
and contains other restrictive covenants, including prohibiting the Company from
paying dividends. At September 29, 1996 the Company was not in compliance with
certain covenants, including minimum earnings before interest, income taxes,
depreciation and amortization ("EBITDA"). The bank has waived its rights with
regard to such items of non-compliance through November 30, 1996. Management
believes the Company may be in non-compliance with similar covenants within
twelve months and has, therefore, classified the debt as current. While under no
current obligation to do so, management intends to refinance this debt in the
first quarter of 1997.
(6) DISPOSITIONS
On February 9, 1996, the assets of the instrumentation products business
unit of Metrum were sold to Bell Technologies, Inc. ("Bell"), formerly F.W.
Bell, Inc., for $10,104,000 cash and an earn-out provision which provides for
additional payments to the Company, up to $3,000,000 in the event annual
earnings before interest and taxes exceeds defined amounts through December 31,
2001. The Company and Bell are both majority owned subsidiaries of Group
Financial Partners, Inc. (the "Parent"). Due to the common ownership interest of
the Parent in the Company and Bell, the Company requested and obtained an
independent opinion, which indicated that the consideration received by the
Company for the sale of the instrumentation products business was fair, from a
financial point of view, to the unaffiliated shareholders of the Company. In
addition, due to the common ownership, the amount by which the sales price
exceeded the net book value of assets and liabilities transferred has been
recorded by the Company as a contribution to its capital of $613,000.
On March 22, 1996, the Company sold substantially all of the assets related
to its Badger name brand product business unit for its carrying value of
$1,457,000.
F-29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Group Financial Partners Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Group
Financial Partners Inc. and Subsidiaries as of December 31, 1994 and 1995, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1995.
Our audits also included the financial statement schedule (Item 21(b)). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Since the date of completion of our audit of the accompanying financial
statements and initial issuance of our report thereon dated May 3, 1996, the
Company, as described in Note 20, has not complied with certain credit agreement
covenants, and the bank could cease advancing funds under the related agreement
at any time. Note 20 describes management's plans to address this issue.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Group Financial Partners Inc. and Subsidiaries at December 31, 1994 and 1995,
and the consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
Ernst & Young LLP
Louisville, Kentucky
May 3, 1996,
except for Note 20, as to which the date is
January 16, 1997
F-30
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
DECEMBER 31,
--------------------
1994 1995
------- --------
ASSETS
<TABLE>
<CAPTION>
Current assets:
<S> <C> <C>
Cash and cash equivalents................................ $ 6,381 $ 5,696
Accounts receivable, net................................. 43,608 39,531
Inventories, net......................................... 70,577 54,970
Other current assets..................................... 5,971 7,869
-------- --------
Total current assets.................................... 126,537 108,066
Property, plant and equipment, net........................ 57,524 59,832
Other assets.............................................. 4,239 5,130
-------- --------
$188,300 $173,028
======== ========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Current liabilities:
<S> <C> <C>
Accounts payable......................................... $ 33,731 $ 41,543
Accrued liabilities...................................... 20,425 23,635
Notes payable............................................ 6,457 5,920
Current portion of long-term debt........................ 4,357 10,946
-------- --------
Total current liabilities............................... 64,970 82,044
Noncurrent liabilities:
Long-term debt........................................... 73,018 52,868
Other noncurrent liabilities............................. 11,222 10,459
-------- --------
Total noncurrent liabilities............................ 84,240 63,327
Commitments and contingencies
Minority interests in subsidiaries........................ 9,057 5,781
Shareholders' equity:
Common stock, no par value:
Authorized shares-1,000,000
Issued and outstanding shares - 316,739 in 1994
and 316,114 in 1995.................................... 8,162 8,091
Retained earnings........................................ 21,871 13,785
-------- --------
Total shareholders' equity............................. 30,033 21,876
-------- --------
$188,300 $173,028
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-31
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1993 1994 1995
-------- --------- --------
<S> <C> <C> <C>
Revenue.............................................................. $305,400 $334,885 $336,589
Cost and expenses:
Cost of services rendered and products sold......................... 242,909 279,609 312,712
Selling, general and administrative expense......................... 35,707 35,471 33,513
Depreciation and amortization....................................... 3,098 3,102 2,950
Interest expense, net............................................... 5,536 5,902 6,829
Other (income) expense, net......................................... 319 (110) 254
-------- -------- --------
Total cost and expenses.............................................. 287,569 323,974 356,258
-------- -------- --------
Income (loss) before gain on issuance of stock by
subsidiary, income taxes, minority interests and
extraordinary item.............................................. 17,831 10,911 (19,669)
Gain on issuance of stock by subsidiary.............................. -- 13,307 --
-------- -------- --------
Income (loss) before income taxes, minority
interests and extraordinary item................................ 17,831 24,218 (19,669)
Income taxes......................................................... 3,803 9,782 (3,498)
-------- -------- --------
Income (loss) before minority interests and
extraordinary item.............................................. 14,028 14,436 (16,171)
Minority interests in earnings (losses) of consolidated
subsidiaries, net.................................................. -- 331 (3,535)
-------- -------- --------
Income (loss) before extraordinary item......................... 14,028 14,105 (12,636)
Extraordinary gain on extinguishment of debt (net of applicable tax
of $2,389).......................................................... -- -- (4,637)
-------- -------- --------
Net income (loss).................................................... $ 14,028 $ 14,105 $ (7,999)
======== ======== ========
Net income (loss) per share.......................................... $ 44.25 $ 44.50 $ (25.31)
Shares used in computing per share amounts........................... 317 317 316
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-32
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
----------------- RETAINED SHAREHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
-------- ------- --------- --------------
<S> <C> <C> <C> <C>
Balance at January 1, 1993..................................... 317,124 $8,057 $(6,231) $ 1,826
Common Stock issued............................................ 456 82 -- 82
Common Stock redeemed.......................................... (755) (55) (2) (57)
Common stock in subsidiaries redeemed from minority interests.. -- -- (39) (39)
Net income..................................................... -- -- 14,028 14,028
------- ------ ------- -------
Balance at December 31, 1993................................... 316,825 8,084 7,756 15,840
Common Stock issued............................................ 188 96 -- 96
Common Stock redeemed.......................................... (274) (18) (41) (59)
Common stock in subsidiaries redeemed from minority interests.. -- -- 51 51
Net income..................................................... -- -- 14,105 14,105
------- ------ ------- -------
Balance at December 31, 1994................................... 316,739 8,162 21,871 30,033
Common Stock issued............................................ 130 24 -- 24
Common Stock redeemed.......................................... (755) (95) (87) (182)
Net loss....................................................... -- -- (7,999) (7,999)
------- ------ ------- -------
Balance at December 31, 1995................................... 316,114 $8,091 $13,785 $21,876
======= ====== ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-33
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1993 1994 1995
------------ ----------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................................. $ 14,028 $ 14,105 $ (7,999)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization.................................................... 8,539 10,076 10,244
Deferred income taxes............................................................ (4,427) 7,182 (125)
Minority interests in earnings (losses) of consolidated subsidiaries, net........ -- 331 (3,535)
Provision for excess and obsolete inventories.................................... 264 573 6,990
Provision for doubtful accounts.................................................. 1,117 650 1,523
Extraordinary gain on extinguishment of debt, net of tax......................... -- -- (4,637)
Gain on issuance of stock by subsidiary.......................................... -- (13,307) --
Other noncash charges............................................................ 1,614 772 1,879
Changes in operating assets and liabilities, net of acquisitions and
dispositions:
Accounts receivable............................................................. 644 (1,862) 1,027
Inventories..................................................................... (17,241) (6,838) 2,950
Other current and noncurrent assets............................................. (190) (4,652) (2,144)
Accounts payable................................................................ 10,350 (4,480) 8,801
Accrued and other liabilities................................................... 4,764 (6,985) (36)
-------- -------- --------
Net cash provided by (used in) operating activities............................ 19,462 (4,435) 14,938
Cash flows from investing activities:
Capital expenditures............................................................... (7,476) (11,871) (10,201)
Proceeds from sale of assets....................................................... -- 1,344 5,928
Purchase of the net assets of acquired entities.................................... (13,833) -- (2,245)
Changes in nonoperating assets and liabilities..................................... 202 300 (509)
-------- -------- --------
Net cash used in investing activities.......................................... (21,107) (10,227) (7,027)
Cash flows from financing activities:
Net (repayments) proceeds under revolving credit agreements........................ (2,838) 19,068 (6,573)
Proceeds from long-term debt....................................................... 28,653 1,085 2,240
Principal payments on long-term debt............................................... (23,261) (27,950) (4,151)
Payments for retirement of Common Stock, net....................................... (55) (59) (148)
Proceeds from issuance of common stock in subsidiaries to minority interests, net.. 150 17,855 36
-------- -------- --------
Net cash provided by (used in) financing activities............................ 2,649 9,999 (8,596)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents................................ 1,004 (4,663) (685)
Cash and cash equivalents at beginning of year...................................... 10,040 11,044 6,381
-------- -------- --------
Cash and cash equivalents at end of year............................................ $ 11,044 $ 6,381 $ 5,696
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-34
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Consolidation Policy
Group Financial Partners Inc. ("GFP"), located in Louisville,
Kentucky, is a private holding company which owns a majority interest in the
entities described below. The accompanying consolidated financial statements
include the accounts of GFP and its subsidiaries (collectively, the "Company").
All significant accounts and transactions between GFP and its subsidiaries have
been eliminated. The Company records gains or losses arising from issuances of
stock by subsidiaries as non-operating income or expense in its consolidated
statement of operations.
GFP is the parent for the following corporations (the "Operating
Companies"): Tube Turns Technologies Inc.; Bell Technologies Inc.; Group
Technologies Corporation; and Unison Commercial Group, Inc. GFP or a subsidiary
is the General Partner of the following limited partnerships (the "Real Estate
Companies"): GFP Partners-II, Limited; GFP Partners-III, Limited; GFP Partners-
IV, Limited; and GFP Partners-VI, Limited. As of December 31, 1995, GFP owned
80% or greater of the outstanding common stock of each of the Operating
Companies. Partnerships in which the Company or a subsidiary serves as General
Partner with a 99% interest are accounted for as subsidiaries in the
accompanying consolidated financial statements.
Tube Turns Technologies, Inc. ("TTT"), located in Louisville,
Kentucky, manufactures forgings, fittings and related subassemblies primarily
for the aerospace, commercial vehicle, petrochemical and defense markets.
Bell Technologies, Inc. ("Bell"), headquartered in Orlando, Florida,
manufactures magnetic sensing components and instruments, provides qualification
and reliability testing and electronic component screening services and provides
maintenance, calibration and repair services for test and measurement equipment
to customers located primarily in the United States.
Group Technologies Corporation ("GTC"), located in Tampa, Florida, is
a leading provider of advanced manufacturing, engineering and testing services
to original equipment manufacturers ("OEMs") of electronic products. GTC custom
manufactures complex circuit card assemblies, subsystems and end-user products
for use in a wide variety of markets, including avionics, gaming, medical
instrumentation, personal computer, space, telecommunications, utility,
workstation and government systems. GTC is the parent for Group Technologies,
S.A. de C.V. ("GTC Mexico") located in Mexico City, Mexico; Metrum, Inc.
("Metrum") located in Littleton, Colorado; and Group Technologies Suprimentos de
Informatica Industria e Comercio Ltda. ("GTC Brazil") located in Hortolandia,
Brazil. Substantially all of the assets of Metrum were sold during 1995 and 1996
(see Note 3).
Unison Commercial Group, Inc. ("Unison"), located in Louisville,
Kentucky, provides management and other services to commercial office buildings
and other improved real estate.
GFP Partners-II, Limited ("P-II") formerly owned a commercial office
building and land (the "515 Building") located at 515 West Market Street in
Louisville, Kentucky (see Note 3).
GFP Partners-III, Limited ("P-III") owns a commercial office building
and land located at 500 New Circle Road in Lexington, Kentucky.
F-35
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
GFP Partners-IV, Limited ("P-IV") owns a commercial office building
and land located at 455 Fourth Avenue and a parking garage and land located at
430 South Third Street in Louisville, Kentucky. The General Partner in P-IV is
GFP Partners-V, Inc., a wholly-owned subsidiary of Unison.
GFP Partners-VI, Limited ("P-VI") owns a capital lease on an
industrial warehouse and land located at 6310 Cane Run Road in Louisville,
Kentucky. The General Partner in P-VI is BW Riverport, Inc., a wholly-owned
subsidiary of GFP.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Inventories
Contract inventories are stated at actual production costs, reduced by
the cost of units for which revenue has been recognized. Gross contract
inventories are considered work in process. Progress payments under long-term
contracts are specified in the contracts as a percentage of cost and are
liquidated as contract items are completed and shipped. Other inventories are
stated at lower of cost (first-in, first-out method) or market. Certain
inventories of TTT and Metrum are stated at lower of cost (last-in, first-out
method) or market.
Property, Plant and Equipment
Property, plant and equipment, including property under capitalized
leases, is stated on the basis of cost. Buildings and building improvements are
depreciated over their estimated economic lives principally using the straight-
line method. Machinery, equipment, furniture and fixtures are depreciated over
their estimated economic lives principally using accelerated methods.
Depreciation methods and lives are generally consistent for financial reporting
and income tax purposes. Expenditures for maintenance, repairs and renewals of
minor items are expensed as incurred. Major renewals and improvements are
capitalized.
Effective January 1, 1995, GTC changed its method of depreciation for
newly acquired machinery, equipment, furniture and fixtures from principally an
accelerated method to the straight-line method. Management believes that the
straight-line method of depreciation provides a preferable matching between
expected productivity and cost allocation since the equipment's operating
capacity and consumption generally remains consistent over time. The change had
no cumulative effect on prior year earnings and was not material to operating
results for the year ended December 31, 1995.
Amortization
Patents, non-compete agreements, product drawings, and similar
intangible assets are amortized over their estimated economic lives using the
straight-line method. Lease commissions and tenant improvement allowances are
deferred and amortized over the related lease terms using the straight-line
method. Accumulated amortization at December 31, 1994 and 1995 was $2,319,000
and $1,809,000, respectively.
The excess of the fair value of the net assets of an acquired business
over the purchase price of such net assets (negative goodwill) is being
amortized using the straight-line method over five years.
F-36
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
Negative goodwill included in other noncurrent liabilities at December 31, 1994
and 1995 was $791,000 and $261,000, respectively. Accumulated amortization of
negative goodwill at December 31, 1994 and 1995 was $524,000 and $396,000,
respectively.
Minority Interests in Subsidiaries
Minority interests in subsidiaries represents employee shareholders'
share of the common stock of TTT, Bell and Unison and minority shareholders'
proportionate share of the equity of GTC.
Contract Revenue Recognition
A portion of the Company's business is conducted under long-term,
fixed-price contracts with OEMs, the United States Government and its prime
contractors. Contract revenue is included in the consolidated statement of
operations as units are completed and shipped using the units of delivery,
percentage of completion method of accounting. The costs attributed to contract
revenue are based upon the estimated average costs of all units to be shipped.
The cumulative average costs of units shipped to date is adjusted through
current operations as estimates of future costs to complete change (see Contract
Accounting).
Revenue recognized under the percentage of completion method of
accounting amounted to $118,800,000, $60,500,000 and $57,945,000 in 1993, 1994
and 1995, respectively. Substantially all such amounts were accounted for under
the units of delivery method. All other revenue is recognized as product is
shipped and title passes.
Contract Accounting
For long-term contracts, the Company capitalizes in inventory direct
material, direct labor and factory overhead as incurred. The Company also
capitalizes certain general and administrative costs for estimating and bidding
on contracts awarded (of which $308,000 and $209,000 remained in inventory at
December 31, 1994 and 1995, respectively). Selling costs are expensed as
incurred. Costs to complete long-term contracts are estimated on a monthly
basis. Estimated margins at completion are applied to cumulative contract
revenue to arrive at costs charged to operations.
Accounting for long-term contracts under the percentage of completion
method involves substantial estimation processes, including determining the
estimated cost to complete a contract. As contracts may require performance over
several accounting periods, formal detailed cost to complete estimates are
performed which are updated monthly via performance reports. Management's
estimates of costs to complete change due to internal and external factors such
as labor rate and efficiency variances, revised estimates of warranty costs,
estimated future material prices and customer specification and testing
requirement changes. Changes in estimated costs are reflected in gross profits
in the period in which they are known. If increases in projected costs to
complete are sufficient to create a loss contract, the entire estimated loss is
charged to operations in the period the loss first becomes known. Provisions for
losses on firm fixed priced contracts amounted to $628,000, $1,226,000 and
$700,000 in 1993, 1994 and 1995, respectively.
The Company recognized income before taxes in 1994 of approximately
$4,500,000, resulting from favorable changes in contract and contract claim
estimates for which all related costs had been charged to operations in previous
years. The Company also successfully negotiated the settlement of a government
contract termination claim and recognized income before taxes of approximately
$2,700,000 in 1994. The Company recognized revenue and income before taxes in
1993 of approximately $7,100,000 upon the
F-37
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
favorable settlement of a government contract value engineering change proposal
for which all the costs had been charged to operations in previous years. The
Company also determined losses before income taxes of approximately $3,600,000
were attributable to certain contracts which were completed or terminated and
charged the estimated loss to cost of operations in 1993.
Research and Development
Company-sponsored research and development costs are expensed as
incurred. Research and development expense was $4,138,000, $5,170,000 and
$3,041,000 for the years ended December 31, 1993, 1994 and 1995, respectively.
Income Taxes
GFP files a consolidated federal income tax return which includes all
domestic subsidiaries in which it has at least an 80% ownership interest.
Effective March 23, 1995, GTC did not meet the 80% voting power and value
requirements defined by the Internal Revenue Code for affiliated group
membership and ceased to be an includable member in GFP's affiliated group. GTC
and its domestic subsidiaries will file a separate consolidated federal income
tax return for the period beginning March 23, 1995 through December 31, 1995.
Subsidiaries prepare income tax provisions on a stand-alone basis.
The Company has applied the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires an
asset and liability approach in accounting for income taxes for all years
presented.
Concentrations of Credit Risk
Financial instruments which potentially expose the Company to
concentrations of credit risk consist of accounts receivable. The Company's OEM
customer base consists primarily of large computer and electronic manufacturers
and its commercial accounts receivable are concentrated with a few of these
large companies. Although the Company is directly affected by the well being of
the computer and electronics industry, management does not believe significant
credit risk exists at December 31, 1995. The Company performs periodic credit
evaluations of its customers' financial condition and does not require
collateral on its commercial accounts receivable. Credit losses are provided for
in the financial statements and consistently have been within management's
expectations.
The Company earned revenue from the United States Government and its
agencies of approximately $114,625,000, $51,352,000 and $53,643,000 during 1993,
1994 and 1995, respectively. The Company also served as a subcontractor to a
variety of prime contractors under contract with the federal government which,
in the aggregate, represented 10%, 12% and 10% of the Company's revenue in 1993,
1994 and 1995, respectively. The Company's largest commercial customer was IBM
which represented approximately 11% and 13% of the Company's revenue in 1994 and
1995, respectively. No other single customer accounted for more than 10% of the
Company's revenue in 1993, 1994 or 1995.
Foreign Currency Translation
The United States dollar is the functional currency for GTC Mexico and
GTC Brazil. Foreign currency transaction gains and losses, which are
insignificant in all years presented, are included in determining net income.
F-38
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
Stock Based Compensation
Stock options are granted under Stock Option Plans to employees and
independent directors of subsidiaries (see Note 15). The Company accounts for
stock option grants in accordance with APB Opinion No. 25, "Accounting for Stock
Issued to Employees."
Net Income (Loss) Per Share
Net income per share is computed using the weighted average number of
issued and issuable common shares, redeemable common shares and equivalent
shares outstanding. Net loss per share is computed using the weighted average
number of issued and issuable common shares outstanding. The computation of
fully diluted net loss per share was antidilutive during the year ended December
31, 1995; therefore, the number of shares used for computing primary and fully
diluted loss per share are the same.
Impact of Recently Issued Accounting Standards
In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which requires impairment losses to be recorded on long-lived assets used
in operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the asset's
underlying carrying amount. SFAS No. 121 also addresses the accounting for long-
lived assets that are expected to be disposed. The Company will adopt SFAS No.
121 in the first quarter of 1996 and, based on current circumstances, does not
believe the effect of adoption will be material.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-
Based Compensation," which provides an alternative to Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting
for stock-based compensation issued to employees. SFAS No. 123 allows for a fair
value based method of accounting for employee stock options and similar equity
instruments. However, for companies that continue to account for stock-based
compensation arrangements under Opinion No. 25, SFAS No. 123 requires disclosure
of the pro forma effect on net income and earnings per share of its fair value
based accounting for those arrangements. These disclosure requirements are
effective for fiscal years beginning after December 15, 1995, or upon initial
adoption of the statement, if earlier. GFP continues to evaluate the provisions
of SFAS No. 123 and has not determined whether it will adopt the recognition and
measurement provisions of that statement, which GFP expects would result in
increased compensation expense in future periods.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain amounts in the Company's 1993 and 1994 consolidated financial
statements have been reclassified to conform with the 1995 presentation.
F-39
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(2) ACQUISITIONS
On July 30, 1993, GTC acquired certain assets and assumed certain
liabilities of the Philips Circuit Assemblies ("PCA") division of Philips
Electronics North America Corporation. The transaction was accounted for as a
purchase in which the purchase price of $13,833,000 and a liability of
$2,192,000, payable to the seller based on sales to certain customers of PCA
during the next five years, were allocated based on fair values of assets
acquired and liabilities assumed. No goodwill resulted from this transaction.
The 1993 consolidated statement of operations includes amounts for PCA from July
31, 1993.
On July 4, 1994, GTC Mexico acquired certain assets and assumed
certain liabilities of Philips Mexicana, S.A. de C.V. The transaction was
accounted for as a purchase in which a liability of $1,200,000, payable to the
seller based on sales to certain customers of GTC Mexico during the next five
years, was allocated based on fair values of assets acquired and liabilities
assumed. The 1994 consolidated statement of operations includes amounts for GTC
Mexico from July 4, 1994.
On January 31, 1995, Bell acquired certain assets and assumed certain
liabilities of Associated Testing Laboratories, Inc. ("ATL"). The transaction
was accounted for as a purchase in which the purchase price of $2,245,000 was
allocated based on the fair values of assets acquired and liabilities assumed.
Goodwill in the amount of $1,000,000 was recorded as a result of the transaction
and will be amortized over fifteen years. The acquisition was financed by a term
note with a bank. The 1995 consolidated statement of operations includes amounts
for ATL from January 31, 1995.
On July 18, 1995, GTC Brazil acquired certain manufacturing equipment
of IBM Brasil-Industria, Maquinas e Sevicos Ltda. ("IBM Brasil"). The
transaction was accounted for as a purchase in which the purchase price of
$4,900,000, in the form of a note payable to the seller, was allocated based on
fair values of assets acquired. No goodwill resulted from this transaction. The
1995 consolidated statement of operations includes amounts for GTC Brazil from
July 18, 1995.
(3) DISPOSITIONS
GTC completed a series of transactions which, in the aggregate,
resulted in the sale of substantially all of the assets of its name brand
products business units, including the assets of its Metrum subsidiary. On May
31, 1995, the assets of the peripherals products business unit of Metrum were
sold for $5,247,000, consisting of cash of $3,655,000 and a note receivable from
the buyer of $1,592,000. On June 6, 1995, the assets of the imaging business
unit of Metrum were sold for $1,331,000 in cash. On February 9, 1996, the assets
of the instrumentation products business unit of Metrum were sold to Bell (see
Note 17). On March 22, 1996, GTC sold substantially all of the assets related to
its Badger line of name brand products for $1,457,000 in cash. The sales price
for each transaction approximated the net book value of the respective business
units on the date of sale. The proceeds from the sale transactions were used to
reduce GTC's debt balance and to fund working capital needs.
On October 1, 1995, P-II and its lender, which held a promissory note
secured by a mortgage on the 515 Building, executed an agreement which
transferred title for the 515 Building to the lender in exchange for a release
of P-II's liability for payment of the unpaid balance of the principal and
accrued and unpaid interest due on the mortgage. As a result of the exchange,
the Company recognized a gain on the extinguishment of debt of $4,637,000, net
of applicable income taxes of $2,389,000, in its 1995 consolidated statement of
operations.
F-40
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(4) INITIAL PUBLIC OFFERING OF SUBSIDIARY STOCK
On May 18, 1994, GTC completed an initial public offering of 2,000,000
shares of common stock at $10.00 per share (the "Offering"). The net proceeds of
the Offering, after deducting applicable issuance costs and expenses, were
approximately $17,348,000, of which $13,393,000 was used to repay the
outstanding principal on the GTC term note and $3,955,000 was applied toward the
GTC line of credit note. On June 23, 1994, GTC issued an additional 50,000
shares of common stock at $10.00 per share and applied the net proceeds of
approximately $465,000 toward the GTC line of credit note. The Offering and the
concurrent termination of the redemption obligation of GTC for all shares owned
by employees generated a gain of $13,307,000 in the Company's 1994 consolidated
statement of operations and reduced GFP's ownership interest in GTC to
approximately 80%.
(5) ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Commercial.......................................................................................... $38,688 $36,205
U.S. Government..................................................................................... 5,617 4,416
------- -------
44,305 40,621
Allowance for doubtful accounts..................................................................... (697) (1,090)
------- -------
$43,608 $39,531
======= =======
</TABLE>
Accounts receivable from the U.S. Government includes amounts due under
long-term contracts, all of which are billed at December 31, 1994 and 1995 of
$2,568,000 and $4,013,000, respectively. The provision for doubtful accounts was
$1,117,000, $650,000 and $1,523,000 for the years ended December 31, 1993, 1994
and 1995, respectively.
(6) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Raw materials....................................................................................... $ 30,271 $ 37,363
Work-in process..................................................................................... 22,158 12,139
Finished goods...................................................................................... 2,052 1,274
Costs relating to long-term contracts and programs, net of amounts attributed to revenue recognized
to date............................................................................................ 40,995 25,766
Progress payments related to long-term contracts and programs....................................... (21,970) (12,300)
LIFO reserve........................................................................................ (456) (709)
Reserve for excess and obsolete inventories......................................................... (2,473) (8,563)
-------- --------
$ 70,577 $ 54,970
======== ========
</TABLE>
The preceding amounts include inventories valued under the last-in, first-
out ("LIFO") method totaling $16,175,000 and $10,798,000 at December 31, 1994
and 1995, respectively, which approximates
F-41
<PAGE>
GROUP FINANCIAL PARTNERS INC, AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
replacement cost. Provisions for obsolete, inactive and unsalable inventories
were $264,000, $573,000 and $6,990,000 for the years ended December 31, 1993,
1994 and 1995, respectively.
(7) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Land and land improvements.................... $ 6,596 $ 5,753
Buildings and building improvements........... 56,641 49,054
Machinery, equipment, furniture and fixtures.. 42,984 56,604
Facilities in progress........................ 1,164 333
-------- --------
107,385 111,744
Accumulated depreciation...................... (49,861) (51,912)
-------- --------
$ 57,524 $ 59,832
======== ========
</TABLE>
Depreciation expense was $8,363,000, $9,641,000 and $9,350,000 for the
years ended December 31, 1993, 1994 and 1995, respectively.
(8) LEASING ARRANGEMENTS
The Company leases commercial office and industrial space to tenants under
various types of leases, including month-to-month rentals and noncancelable
operating leases with terms up to 10 years. Certain of the leases contain
renewal options, specified increases in required lease payments over the terms
of the lease, or provisions for increased payments based upon a price index.
Minimum future rentals scheduled to be received from noncancelable operating
leases for each year ending December 31, are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996................................................ $ 4,130
1997................................................ 3,649
1998................................................ 2,638
1999................................................ 2,144
2000................................................ 1,569
2001 and thereafter................................. 2,947
--------
$ 17,077
========
</TABLE>
The cost and related accumulated depreciation of property held for lease as
of December 31, 1995, is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Land and land improvements.......................... $ 4,698
Buildings and building improvements................. 38,732
Equipment, furniture and fixtures................... 458
--------
43,888
Accumulated depreciation........................... (18,037)
--------
$ 25,851
========
</TABLE>
F-42
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(9) ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1994 1995
------------- -----------
(IN THOUSANDS)
<S> <C> <C>
Payments received from customers in excess of contract costs................................ $ 4,920 $ 5,340
Employee benefit plan accruals.............................................................. 5,999 5,470
Other....................................................................................... 9,506 12,825
------------- ------------
$ 20,425 $ 23,635
============= ============
</TABLE>
Included in other current liabilities are employee payroll deductions,
advance payments, accrued operating expenses and accrued interest, none of which
exceed 5% of total current liabilities.
(10) NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1994 1995
------------- -----------
(IN THOUSANDS)
<S> <C> <C>
Bell Line of Credit Note.................................................................... $ 457 $ 112
P-III Mortgage Note......................................................................... 6,000 5,808
------------- -----------
$ 6,457 $ 5,920
============= ===========
</TABLE>
Bell has a line of credit note pursuant to its loan agreement (see
Note 11) under the terms of which a bank committed a maximum of $2,700,000 to
Bell for cash borrowings and letters of credit. Under the terms of the loan
agreement, Bell pays interest on outstanding borrowings on the line of credit
note at the prime rate (8.5% at December 31, 1995). The line of credit note is
subject to renewal in May of each year. Available borrowings on the line of
credit note at December 31, 1995 were $2,588,000.
P-III has a mortgage note entered into on September 30, 1986. The
mortgage note is payable monthly with interest at 9.5%. The mortgage note
matured on October 1, 1995 and is secured by P-III's real property, related
personal property and an assignment of leases and rentals. Discussions between
P-III and the bank to restructure the terms of the mortgage note are currently
in progress.
F-43
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
<TABLE>
<CAPTION>
(11) LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31,
1994 1995
------- --------
(IN THOUSANDS)
<S> <C> <C>
TTT Revolving Credit Agreement............. $ 1,704 $ 143
Bell Term Note............................. 2,800 2,000
Bell Mortgage Note......................... 2,287 2,146
Bell Equipment Term Note................... 425 325
Bell 1995 Note............................. -- 2,010
GTC Revolving Credit Agreement............. 30,256 25,583
P-II Mortgage Note......................... 10,779 --
P-IV Mortgage Note......................... 18,127 17,775
P-IV Second Mortgage Note.................. 2,000 1,650
P-VI Industrial Revenue Bonds.............. 6,528 6,228
Other...................................... 2,469 5,954
------- --------
77,375 63,814
Less current portion....................... (4,357) (10,946)
------- --------
$73,018 $ 52,868
======= ========
</TABLE>
On December 22, 1994, TTT entered into a revolving credit agreement, under
the terms of which a bank committed a maximum of $5,000,000 for cash borrowings
and letters of credit. Under the terms of the revolving credit agreement, TTT
pays interest on outstanding borrowings at the prime rate. An annual commitment
fee of no more than 0.125% on the average unused portion of the line of credit
is payable quarterly. The revolving credit agreement expires in December 1999
and borrowings are secured by substantially all of the assets of TTT.
Bell has a loan agreement with a bank entered into on January 31, 1990,
which provided for a mortgage note, an equipment term note and a line of credit
note. A second amendment to the loan agreement on December 31, 1992 increased
the maximum borrowings on the line of credit note and provided for an additional
term note. A third amendment to the loan agreement on March 1, 1994 increased
the amount borrowed under the mortgage note and the equipment term note. A
fourth amendment to the loan agreement on January 31, 1995 provided for a note
to finance the acquisition of ATL. The mortgage note is payable monthly with
interest at 7.86% and matures in April 2001. The equipment term note is payable
quarterly with interest at the prime rate and matures in April 1999. The term
note is payable quarterly with interest at the prime rate plus a spread (between
0.25% and 0.75%). The 1995 note is payable quarterly with interest at the prime
rate plus 0.25% and matures in January 2001. All borrowings under the Bell loan
agreement are secured by substantially all of the assets of Bell.
On November 24, 1994, GTC entered into a credit agreement (the "Revolving
Credit Agreement"), under the terms of which a bank committed a maximum of
$100,000,000 for cash borrowings and letters of credit. At December 31, 1995,
GTC was in default under certain terms and covenants of the Revolving Credit
Agreement. On November 7, 1995, GTC and the bank entered into a Forbearance
Agreement which provided GTC with continuing availability of liquidity until a
new financing agreement could be reached.
F-44
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
On March 29, 1996, GTC entered into a financing agreement (the "1996 Credit
Agreement") with its bank to replace the Revolving Credit Agreement. The 1996
Credit Agreement provides GTC with a revolving line of credit facility (the
"Revolver"), a $3,300,000 two-year facility (the "Term Note") and an additional
$5,000,000 facility (the "1996 Note") for the period through December 31, 1996.
Borrowings under the 1996 Credit Agreement are secured by substantially all of
the assets of GTC. Under the terms of the 1996 Credit Agreement, GTC will pay
interest monthly on outstanding borrowings at the prime rate plus a spread
(between 1.25% and 2.0%). GTC will be provided credit availability on the
Revolver equal to the lesser of $27,500,000 or the applicable amount of its
eligible accounts receivable and inventories through December 31, 1996.
Effective January 1, 1997 through the maturity date of March 1998, GTC's credit
availability on the Revolver will equal the lesser of $22,500,000 or the
applicable amount of its eligible accounts receivable and inventories. Principal
payments on the Term Note are due monthly commencing seven months from closing.
The 1996 Note is payable in two equal installments on August 30, 1996 and
December 31, 1996. Borrowings under the Revolving Credit Agreement at December
31, 1995 are classified in the accompanying balance sheet as if the 1996 Credit
Agreement was in place on that date.
GTC, in conjunction with the 1996 Credit Agreement, paid a $250,000 fee and
issued warrants to purchase 1,200,000 shares of common stock at $0.01 per share
to the lender in consideration for execution of the financing agreement. On the
closing date, 200,000 of the warrants are exercisable and the balance of the
warrants become exercisable in quarterly increments of 250,000 beginning one
year from closing. The warrants will expire five years following the issue date.
The lender will forfeit any unvested warrants in the event GTC repays all debt
outstanding under the 1996 Credit Agreement prior to any vesting date.
P-IV has a mortgage note and second mortgage note entered into on December
22, 1986. The mortgage note is payable monthly with interest at the prime rate
plus 0.5%. The second mortgage note is payable semi-annually with interest at
8.5%. The mortgage note and second mortgage note mature in March 1997 and are
secured by P-IV's real property, related personal property and an assignment of
leases and rentals. The mortgage note is guaranteed by GFP and both mortgage
notes are guaranteed by certain shareholders of GFP. For the year ended December
31, 1995, the calculation of a certain financial ratio for P-IV was less than
the amount defined by its first mortgage note; however, the bank issued a waiver
with respect to this calculation through January 1, 1997.
P-VI entered into a capital lease for its real property on May 23, 1988. P-
VI's obligations under the capital lease are equal to the debt service
requirements of the Industrial Revenue Bonds issued to finance the development
of the real property and $528,000 deferred interest due at maturity. Interest on
the Industrial Revenue Bonds at a variable rate (4.0% at December 31, 1995) is
payable monthly and principal is payable annually. The capital lease expires in
December 2014 and is secured by P-VI's real property, related personal property
and an assignment of leases and rentals and a guarantee by GFP up to $200,000 at
December 31, 1995. P-VI has an option during the term of the capital lease, and
for a period of 90 days thereafter, to purchase the real property for an amount
equal to the principal outstanding on the Industrial Revenue Bonds. The cost of
property under P-VI's capital lease at December 31, 1994 and 1995 was $6,928,000
for both years with accumulated depreciation of $1,575,000 and $1,812,000,
respectively.
Long-term debt is subject to various credit agreements which contain a
number of restrictive financial covenants and other covenants, including
covenants requiring the respective subsidiary to maintain a minimum level of
working capital, tangible net worth and various financial ratios. At September
30, 1996, GTC was not in compliance with certain covenants contained in its debt
agreement (see Note
F-45
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
20). The various credit agreements also contain certain restrictive covenants
which impose limitations with respect to, among other things, dividends, capital
expenditures, additional borrowings, investments, and cash transfers to GFP and
between and among subsidiaries.
The annual maturities of long-term debt for each year ended December 31 are
presented below. Maturities of debt incurred under revolving credit agreements
have been reported on the basis that the commitment to lend under these
agreements will be terminated at the end of their current terms.
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
1996................................................ $10,946
1997................................................ 22,963
1998................................................ 22,206
1999................................................ 1,080
2000................................................ 519
2001 and thereafter................................. 6,100
-------
$63,814
=======
</TABLE>
Interest paid during 1993, 1994 and 1995 was $5,855,000, $6,179,000 and
$7,381,000, respectively.
(12) Fair Value Of Financial Instruments
Cash, accounts receivable, accounts payable and accrued liabilities are
reflected in the financial statements at their carrying amount which
approximates fair value because of the short-term maturity of those instruments.
The carrying amount of debt outstanding under the Company's revolving credit
agreements approximates fair value due to the short-term nature of these
instruments. The carrying amount of other long-term debt is assumed to
approximate fair value because there have not been any significant changes in
market conditions or specific circumstances since the instruments were recorded
at fair value.
(13) Employee Benefit Plans
TTT has a number of noncontributory defined benefit pension plans (the "TTT
Pension Plans") covering substantially all employees. TTT Pension Plans covering
salaried and management employees provide pension benefits that are based on the
employees' highest 5-year average compensation within 10 years before
retirement. TTT Pension Plans covering hourly employees and union members
generally provide benefits at stated amounts for each year of service. TTT's
funding policy is to make the minimum annual contributions required by the
applicable regulations. Pension expense for 1993, 1994 and 1995 was $526,000,
$476,000 and $708,000, respectively. The net pension cost of the TTT Pension
Plans included the following components:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1993 1994 1995
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Service cost benefits earned during the period............ $ 147 $ 149 $ 147
Interest cost of projected benefit obligation............. 1,047 1,047 1,175
Net amortizations and deferrals........................... 589 (879) 1,323
Actual return on plan assets.............................. (1,257) 159 (1,937)
------ ------ ------
$ 526 $ 476 $ 708
====== ====== ======
</TABLE>
F-46
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
The significant assumptions used in accounting for the TTT Pension Plans
are as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Discount rate used in determining present values............................. 9.75% 8.00%
Annual increase in future compensation levels................................ 5.75% 4.00%
Expected long-term rate of return on assets.................................. 8.50% 8.50%
</TABLE>
The funded status of the TTT Pension Plans and amounts recognized in the
Company's consolidated balance sheet is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accumulated benefit obligation, including vested benefits of 1994 -
$11,085,000; 1995 - $13,768,000............................................ $11,574 $14,828
======= =======
Projected benefit obligation for service rendered to date.................... $11,848 $15,074
Plan assets at fair value (primarily debentures, stocks and cash)............ 8,286 9,300
------- -------
Projected benefit obligation in excess of plan assets........................ 3,562 5,774
Unrecognized prior service cost.............................................. (338) (1,217)
Unrecognized net gain........................................................ 1,934 1,423
------- -------
Accrued pension cost......................................................... $ 5,158 $ 5,980
======= =======
Included in:
Current liabilities........................................................ $ 454 $ 1,252
Noncurrent liabilities..................................................... $ 4,704 $ 4,728
</TABLE>
The Company sponsors defined contribution plans (the "Defined
Contribution Plans") for substantially all employees of the Company. The Defined
Contribution Plans are intended to meet the requirements of Section 401(k) of
the Internal Revenue Code. The Defined Contribution Plans allow the Company to
match participant contributions as approved by the respective Board of Directors
of GFP and of each of the Operating Companies, and certain of the Defined
Contribution Plans include required base contributions and discretionary
contributions. Contributions to the Defined Contribution Plans for 1993, 1994
and 1995 were $2,561,000, $3,280,000 and $3,079,000, respectively.
The Company has partially self-insured medical plans (the "Medical
Plans") for the employees of GTC and Metrum. The Medical Plans limit the
Company's annual obligations to fund claims to specified amounts per participant
and in the aggregate. The Company is insured for amounts in excess of these
limits. Employees are responsible, in some instances, for payment of a portion
of the premiums. During 1993, 1994 and 1995, the Company charged $4,174,000,
$5,287,000 and $4,526,000, respectively, to operations related to reinsurance
premiums, medical claims incurred and estimated, and administrative costs for
the Medical Plans. Claims paid during 1993, 1994 and 1995 did not exceed the
aggregate limits.
Effective January 1, 1995, the Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." SFAS
No. 106 requires the accrual basis of reporting for certain health care
insurance benefits provided by TTT. The implementation of SFAS No. 106 did not
have a material effect on the Company's consolidated financial statements for
the year ended December 31, 1995.
F-47
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(14) COMMITMENTS AND CONTINGENCIES
The Company leases certain of its real property and certain computer,
manufacturing and office equipment under operating leases with terms ranging
from month-to-month to 10 years and which contain various renewal and rent
escalation clauses. Future minimum noncancelable lease payments for each year
ending December 31, are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996..................................................... $ 5,130
1997..................................................... 4,588
1998..................................................... 3,873
1999..................................................... 2,370
2000..................................................... 1,545
2001 and thereafter...................................... 2,119
-------
$19,625
=======
</TABLE>
Rent expense for the years ended December 31, 1993, 1994 and 1995 was
$3,961,000, $4,393,000 and $6,104,000, respectively.
TTT is a co-defendant in two lawsuits in Louisiana arising out of an
explosion in a coker plant owned by Exxon Corporation located in Baton Rouge,
Louisiana. According to the complaints, TTT is the alleged manufacturer of a
carbon steel pipe elbow which failed causing the explosion which destroyed the
coker plant causing damages in excess of $100,000,000 and caused unspecified
damages to surrounding property owners. One of the actions was brought by Exxon
and the second action is a class action filed on behalf of the residents living
around the plant. TTT believes that the failure resulted from the installation
(without the knowledge of TTT) of a carbon steel elbow which was not
manufactured or intended for use in coker plants. TTT intends to vigorously
defend its case and believes that a settlement or related judgment would not
result in a material loss to TTT or the Company. No amounts are recorded on the
books of the Company in anticipation of a loss as a result of this contingency.
The Company is involved in certain litigation and contract issues arising
in the normal course of business. While the outcome of these matters cannot, at
this time, be predicted in light of the uncertainties inherent therein,
management does not expect that these matters will have a material adverse
effect on the consolidated financial position or results of operations of the
Company.
(15) STOCK PLANS
The Company has various stock option plans, stock purchase plans and
incentive plans which provide for the issuance of common stock to the employees
of each company. The Company has also adopted a formula price (the "Formula
Price") valuation as a basis for establishing a value for a share of common
stock for all stock which is not publicly traded. Stock issued to employees is
subject to restriction agreements (the "Stock Restriction Agreements"), under
which each company, except GTC, is required to redeem all shares offered for
redemption at the option of its employees or upon the termination, disability or
death of its employees. Effective with its initial public offering on May 18,
1994, GTC terminated its existing stock plans and all restrictions on
outstanding shares held by its employees lapsed. Effective March 31, 1996,
Unison terminated its existing stock plans and repurchased all outstanding
shares from its employees.
F-48
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
The Company's obligation to redeem shares subject to the Stock Restriction
Agreements includes common stock held by employee shareholders in TTT, Bell and
Unison and common stock held by the principal and employee shareholders of GFP.
The principal shareholders of GFP consist of five members of the Gill family,
who, in the aggregate, own approximately 99.4% of the issued and outstanding
stock of GFP. The aggregate redemption obligation of the Company for all common
stock held by employee shareholders as of December 31, 1995 was approximately
$1,901,000 based on the Formula Price as applied to each company.
Stock Option Plan
Under the stock option plans (the "Stock Option Plans"), options to
purchase common stock may be granted to certain key employees and independent
directors of subsidiaries. Options granted under the Stock Option Plans have
maximum terms ranging from 8 to 13 years. The exercise price of all options
issued under the Stock Option Plans must be at least 100% of the Formula Price
or, in the case of GTC, the fair market value of such shares on the date of
grant. Stock options issued by companies which do not have publicly traded
common stock are subject to agreements which require the respective companies to
redeem the options for the amount by which the Formula Price on the exercise
date exceeds the exercise price. Each company's Board of Directors or its
designated committee selects the individuals who will be granted options and
determines the number of shares subject to each option, fixes the period during
which each option may be exercised and fixes the price at which shares subject
to options may be purchased.
Additional information with respect to the Stock Option Plans as of
December 31, 1995 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------- NUMBER
NUMBER OPTION PRICE OF SHARES
OF SHARES PER SHARE EXERCISABLE
--------- ------------ -----------
<S> <C> <C> <C>
GFP............................ 6,880 $45.99-73.40 6,530
TTT............................ 60,000 $9.05 60,000
Bell........................... 84,650 $9.92-15.49 39,850
GTC............................ 1,019,951 $1.67-7.75 545,951
</TABLE>
During the years ended December 31, 1993, 1994 and 1995, no options to
purchase common stock were exercised by the option holders of GFP.
Stock Purchase Plan
The stock purchase plans (the "Stock Purchase Plans") permit eligible
employees to purchase common stock of their respective companies for cash or
through payroll deductions for the Formula Price at the purchase date. An
employee is awarded one bonus share of common stock (a "Bonus Share") for every
three shares purchased. Bonus Shares vest over periods ranging from 18 to 24
months following the award date. Deferred compensation is recorded for Bonus
Shares and is amortized on a straight-line basis over the vesting period.
Incentive Plans
The incentive plans (the "Incentive Plans") provide for incentive awards to
be made to certain employees for individual performance and to all employees or
certain key employees based upon the achievement of selected financial measures
of the respective companies for each calendar year as
F-49
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
compared to its business plan. Compensation expense is recognized for the
Incentive Plans in the year in which the individual performance and financial
measures are achieved. The incentive awards are generally paid to the employee
with 50% in cash and 50% in Bonus Shares of common stock of their respective
companies.
(16) INCOME TAXES
The components of income tax (benefit) expense are:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1993 1994 1995
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal.............................................. $ 7,493 $2,219 $(4,315)
State................................................ 737 381 493
Foreign and other.................................... -- -- 449
------- ------ -------
8,230 2,600 (3,373)
Deferred:
Federal.............................................. (4,280) 6,439 (161)
State................................................ (147) 743 36
------- ------ -------
(4,427) 7,182 (125)
------- ------ -------
$(3,803) $9,782 $(3,498)
======= ====== =======
</TABLE>
Income taxes paid during 1993, 1994 and 1995 were $5,720,000, $8,851,000
and $954,000, respectively. Income tax refunds received during 1995 were
$2,377,000.
The following is a reconciliation of income tax expense to that computed by
applying the federal statutory rate of 34% in 1993, 1994 and 1995 to income
before income taxes, minority interest and extraordinary item:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1993 1994 1995
------- ------ -------
<S> <C> <C> <C>
Federal tax at the statutory rate....................... $ 6,241 $8,234 $(6,688)
State income taxes net of federal tax benefit........... 482 921 339
Federal tax net operating loss carryforward............. (2,528) -- --
State tax net operating loss carryforward............... -- -- (1,080)
Change in valuation allowance for deferred tax asset.... -- -- 4,367
Alternative minimum tax credit carryforward (1,058) -- --
Other................................................ 666 627 (436)
------- ------ -------
$ 3,803 $9,782 $(3,498)
======= ====== =======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of deferred tax assets and liabilities include temporary differences
in inventory valuations, depreciation of property and equipment, contract
provisions, provisions for pensions and various liabilities, net operating loss
carry forwards, different bases for the cost of certain assets and gains on
issuances of subsidiaries' stock.
F-50
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
Deferred income tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Current................................................. $ 1,198 $ 5,264
Noncurrent.............................................. 2,419 2,359
------- -------
3,617 7,623
Valuation allowance..................................... (1,000) (5,367)
------- -------
2,617 2,256
Deferred tax liabilities:
Current................................................. (709) (170)
Noncurrent.............................................. (5,305) (5,360)
------- -------
(6,014) (5,530)
------- -------
Net deferred tax liability............................... $(3,397) $(3,274)
======= =======
</TABLE>
During the year ended December 31, 1995, the Company recorded a valuation
allowance of $4,367,000 on its deferred tax assets to reduce the total to an
amount that management believes will more likely than not be realized.
Realization of deferred tax assets is dependent upon sufficient taxable income
during the period that temporary differences and carryforwards are expected to
be available to reduce taxable income.
(17) RELATED PARTY TRANSACTION
On February 9, 1996, Bell purchased the assets of the instrumentation
products business unit of Metrum from GTC for $10,104,000 cash and an earn-out
provision which provides for additional payments to GTC, up to $3,000,000, in
the event annual earnings before interest and taxes exceeds defined amounts
through December 31, 2000. Due to the common ownership of GFP in GTC and Bell,
an independent opinion was obtained which indicated that the consideration
received by GTC for the sale of the instrumentation products business was fair,
from a financial point of view, to unaffiliated shareholders of GTC.
F-51
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(18) GEOGRAPHIC SEGMENTS
The Company is a multinational corporation with operations in the United
States, Mexico and Brazil. For the years ended December 31, 1993 and 1994,
revenue, operating profit and identifiable assets of the Company's foreign
operations were not significant. Information about the Company's operations in
geographic areas for the year ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Revenue:
United States............................................. $296,457
Foreign................................................... 40,132
--------
$336,589
========
Operating Profit (Loss):
United States............................................. $(10,531)
Foreign................................................... (2,055)
--------
$(12,586)
========
Identifiable Assets:
United States............................................. $146,971
Foreign................................................... 26,057
--------
$173,028
========
</TABLE>
Identifiable assets of foreign subsidiaries are those assets related to the
operations of those subsidiaries. United States assets consist of all other
operating assets of the Company.
F-52
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(19) SUPPLEMENTARY INFORMATION ON CERTAIN SUBSIDIARIES
Condensed financial data as of December 31, 1994 and 1995, and for each of
the three years in the period ended December 31, 1995, for the Company's TTT and
Bell subsidiaries, respectively, are presented below. The condensed financial
data for these subsidiaries excludes intercompany eliminations.
<TABLE>
<CAPTION>
TTT BELL
---------------- ----------------
DECEMBER 31, DECEMBER 31,
---------------- ----------------
1994 1995 1994 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets:
Cash and cash equivalents................. $ 578 $ 119 $ 2 $ 127
Accounts receivable, net.................. 2,453 3,038 4,727 5,189
Inventories, net.......................... 5,746 5,480 2,406 2,991
Other current assets...................... 103 95 644 549
------- ------- ------- -------
Total current assets........................ 8,880 8,732 7,779 8,856
Property and equipment, net................. 3,846 3,471 5,502 6,122
Other assets................................ 2,988 3,471 410 1,246
------- ------- ------- -------
Total assets................................ $15,714 $15,674 $13,691 $16,224
======= ======= ======= =======
Current liabilities:
Accounts payable.......................... $ 2,106 $ 1,818 $ 691 $ 1,847
Accrued liabilities....................... 1,491 2,165 1,857 1,226
Note payable.............................. -- -- 457 112
Current portion of long-term debt......... -- -- 1,116 1,748
------- ------- ------- -------
Total current liabilities................... 3,597 3,983 4,121 4,933
Long-term debt.............................. 1,704 143 4,649 5,049
Other liabilities........................... 4,704 4,728 254 307
------- ------- ------- -------
Total noncurrent liabilities................ 6,408 4,871 4,903 5,356
Shareholders' equity:
Common stock.............................. 2,276 2,297 9 9
Additional paid-in capital................ -- -- 5,621 5,818
Retained earnings......................... 3,433 4,523 (963) 108
------- ------- ------- -------
Total shareholders' equity.................. 5,709 6,820 4,667 5,935
------- ------- ------- -------
Total liabilities and shareholders' equity.. $15,714 $15,674 $13,691 $16,224
======= ======= ======= =======
</TABLE>
F-53
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
<TABLE>
<CAPTION>
TTT BELL
----------------------------------- ---------------------------------
YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31,
----------------------------------- ---------------------------------
1993 1994 1995 1993 1994 1995
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................................... $22,641 $23,148 $23,858 $31,164 $30,264 $33,499
Costs and expenses:
Cost of services rendered and products sold...... 20,133 20,063 20,730 23,013 22,911 24,859
Selling, general and administrative expense...... 1,767 1,726 1,793 5,476 5,120 6,103
Interest expense, net............................ 279 224 70 485 479 658
Other (income) expense, net...................... -- (703) (446) 319 -- 121
------- ------- ------- ------- ------- -------
Total costs and expenses.......................... 22,179 21,310 22,147 29,293 28,510 31,741
------- ------- ------- ------- ------- -------
Income before income taxes........................ 462 1,838 1,711 1,871 1,754 1,758
Income taxes...................................... 193 840 620 707 662 687
------- ------- ------- ------- ------- -------
Net income........................................ $ 269 $ 998 $ 1,091 $ 1,164 $ 1,092 $ 1,071
======= ======= ======= ======= ======= =======
</TABLE>
F-54
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
<TABLE>
<CAPTION>
TTT BELL
-------------------------------- --------------------------------
Years Ended December 31, Years Ended December 31,
-------------------------------- --------------------------------
1993 1994 1995 1993 1994 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Statement Of Cash Flows Data:
Cash flows from operating activities:
Net income....................................... $ 269 $ 998 $1,091 $1,164 $1,092 $1,071
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 663 667 581 755 905 1,117
Other............................................ 225 (655) (233) 159 371 329
Changes in operating assets and liabilities...... 572 1,032 (117) (942) 613 83
------ ------ ------ ------ ------ ------
Net cash provided by operating activities........ 1,729 2,042 1,322 1,136 2,981 2,600
Cash flows from investing activities:
Capital expenditures............................. (128) (1,436) (369) (764) (2,091) (802)
Proceeds from sale of assets..................... -- 1,344 708 -- -- --
Purchase of the net assets of acquired entities.. -- -- -- -- -- (2,245)
Changes in nonoperating assets and liabilities... 235 259 (485) (33) -- --
------ ------ ------ ------ ------ ------
Net cash provided by (used in)
investing activities............................ 107 167 (146) (797) (2,091) (3,047)
Cash flows from financing activities:
Net (repayments) proceeds under line of credit
agreement....................................... (1,100) 1,104 (1,561) 871 (1,248) (345)
Proceeds from long-term debt..................... -- -- -- -- 1,085 2,240
Repayments of long-term debt..................... (600) (3,000) -- (2,403) (1,061) (1,361)
Net proceeds from issuance of common stock....... (8) (7) (74) 8 63 38
------ ------ ------ ------ ------ ------
Net cash (used in) provided by financing
activities...................................... (1,708) (1,903) (1,635) (1,524) (1,161) 572
------ ------ ------ ------ ------ ------
Net increase (decrease) in cash and cash
equivalents...................................... 128 306 (459) (1,185) (271) 125
Cash and cash equivalents at beginning of year.... 144 272 578 1,458 273 2
------ ------ ------ ------ ------ ------
Cash and cash equivalents at end of year.......... $ 272 $ 578 $ 119 $ 273 $ 2 $ 127
====== ====== ====== ====== ====== ======
</TABLE>
(20) Subsequent Event
At September 30, 1996, GTC was not in compliance with certain
covenants contained in its debt agreements, including minimum earnings before
interest, income taxes, depreciation and amortization. The bank has waived its
rights with regard to such items of non-compliance through November 30, 1996.
While the bank continues to advance funds under the 1996 Credit Agreement, it is
under no obligation to do so, and could cease advancing funds at any time. While
under no obligation to do so, management intends to refinance this debt in the
first quarter of 1997.
F-55
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 5,696 $ 3,829
Accounts receivable, net............................. 39,531 34,404
Inventories, net..................................... 54,970 39,417
Other current assets................................. 7,869 3,048
-------- --------
Total current assets............................... 108,066 80,698
Property and equipment, net........................... 59,832 54,337
Other assets.......................................... 5,130 5,151
-------- --------
$173,028 $140,186
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 41,543 $ 21,327
Accrued liabilities.................................. 23,635 21,781
Notes payable........................................ 5,920 19,724
Current portion of long-term debt.................... 10,946 17,631
-------- --------
Total current liabilities..................... 82,044 80,463
Noncurrent liabilities:
Long-term debt....................................... 52,868 19,440
Other noncurrent liabilities......................... 10,459 11,567
-------- --------
Total noncurrent liabilities........................ 63,327 31,007
Commitments and contingencies
Minority interests in subsidiaries.................... 5,781 5,597
Shareholders' equity:
Common Stock, no par value
Authorized shares-1,000,000
Issued and outstanding shares-316,114 in 1995
and 315,996 in 1996................................. 8,091 8,078
Retained earnings.................................... 13,785 15,041
-------- --------
Total shareholders' equity....................... 21,876 23,119
-------- --------
$173,028 $140,186
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-56
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ----------------------------
1995 1996 1995 1996
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue.............................................................. $87,701 $71,077 $256,814 $245,252
Cost and expenses:
Cost of operations.................................................. 79,962 63,021 233,759 214,753
Selling, general and administrative expense......................... 6,920 7,756 24,459 22,751
Depreciation and amortization....................................... 749 534 2,309 1,734
Interest expense, net............................................... 1,606 1,536 5,058 4,926
Other (income) expense, net......................................... (25) (707) 303 (608)
------- ------- -------- --------
Total cost and expenses.............................................. 89,212 72,140 265,888 243,556
------- ------- -------- --------
(Loss) income before income taxes, minority interests and
extraordinary items.............................................. (1,511) (1,063) (9,074) 1,696
Income taxes......................................................... (627) 1,252 (3,326) 2,196
------- ------- -------- --------
Loss income before minority interests and extraordinary items..... (884) (2,315) (5,748) (500)
Minority interests in losses of consolidated subsidiaries............ (156) (565) (1,253) (551)
------- ------- -------- --------
(Loss) income before extraordinary items.......................... (728) (1,750) (4,495) 51
Extraordinary gain on extinguishment of debt
(net of applicable tax of $805)..................................... -- -- -- (1,210)
------- ------- -------- --------
Net (loss) income.................................................... $ (728) $(1,750) $ (4,495) $ 1,261
======= ======= ======== ========
Net (loss) income per share.......................................... $ (2.30) $ (5.54) $ (14.18) $ 3.99
Shares used in computing per share amounts........................... 317 316 317 316
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-57
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1995 1996
------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................................ $(4,495) $ 1,261
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Depreciation and amortization.......................................... 7,021 7,411
Extraordinary gain on extinguishment of debt........................... -- (1,210)
Minority interests in losses of consolidated subsidiaries.............. (1,253) (551)
Other.................................................................. (272) (555)
Changes in operating assets and liabilities, net of dispositions:
Accounts receivable................................................... (8,454) 5,545
Inventories........................................................... 11,696 13,867
Other current and non-current assets.................................. (2,993) 2,869
Accounts payable...................................................... (4,425) (19,992)
Accrued and other liabilities......................................... 1,710 (1,207)
------- --------
Net cash (used in) provided by operating activities.................. (1,465) 7,438
Cash flows from investing activities:
Capital expenditures..................................................... (9,639) (5,180)
Changes in other assets and liabilities.................................. -- 492
Proceeds from disposal of assets......................................... 403 2,396
------- --------
Net cash used in investing activities.................................... (9,236) (2,292)
Cash flows from financing activities:
Net proceeds (repayments) under revolving credit agreement............... 13,108 (8,763)
Proceeds from long-term debt............................................. -- 10,000
Principal payments on long-term debt..................................... (2,643) (8,101)
Payments for retirement of Common Stock, net............................. (132) (18)
Payments for retirement of common stock
in subsidiaries to minority interests, net.............................. (14) (131)
------- --------
Net cash provided by (used in) financing activities.................. 10,319 (7,013)
------- --------
Net decrease in cash and cash equivalents................................. (382) (1,867)
Cash and cash equivalents at beginning of period.......................... 6,381 5,696
------- --------
Cash and cash equivalents at end of period................................ $ 5,999 $ 3,829
======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-58
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying consolidated balance sheet of Group Financial Partners
Inc. and Subsidiaries (the "Company") as of September 30, 1996, and the related
consolidated statements of operations and cash flows for the nine months ended
September 30, 1995 and 1996, have been prepared on substantially the same basis
as the annual consolidated financial statements. In the opinion of the Company,
the financial statements reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
position, operating results, and cash flows for the periods presented. The
results of operations for the three and nine months ended September 30, 1996 are
not necessarily indicative of results to be expected for the entire year. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements, and notes thereto, for the year ended
December 31, 1995.
(2) DISPOSITIONS
On March 22, 1996, Group Technologies Corporation ("GTC") sold
substantially all of the assets related to its Badger line of name brand
products for $1,457,000 in cash. The sales price for the transaction
approximated the net book value of the business unit on the date of sale. The
proceeds from the sale transaction were used to reduce GTC's debt balance and to
fund working capital needs.
Effective April 1, 1996, GFP Partners-III, Limited ("P-III") and its
lender, which held a promissory note secured by a mortgage on a commercial
office building and land located at 500 New Circle Road in Lexington, Kentucky
(the "North Park Building"), executed an agreement which transferred title for
the North Park Building to the lender in exchange for a release of P-III's
liability for payment of the unpaid balance of the principal and accrued and
unpaid interest due on the mortgage. As a result of the exchange, the Company
recognized a gain on the extinguishment of debt of $2,015,000, net of applicable
income taxes of $805,000 in its 1996 consolidated statement of operations.
(3) BORROWING UNDER REVOLVING CREDIT AGREEMENT
On March 29, 1996, GTC entered into a financing agreement (the "1996 Credit
Agreement") with its bank to replace a Revolving Credit Agreement. The 1996
Credit Agreement provides GTC with a revolving line of credit facility (the
"Revolver"), a $3,300,000 two-year facility (the "Term Note") and an additional
$5,000,000 facility (the "1996 Note") for the period through December 31, 1996.
Borrowings under the 1996 Credit Agreement are secured by substantially all of
the assets of GTC. Under the terms of the 1996 Credit Agreement, GTC will pay
interest monthly on outstanding borrowings at the prime rate plus a spread
(between 1.0% and 2.0%). GTC will be provided credit availability on the
Revolver equal to the lesser of $27,500,000 or the applicable amount of its
eligible accounts receivable and inventories through December 31, 1996.
Effective January 1, 1997, through the maturity date of March 1998, GTC's credit
availability on the Revolver will equal the lesser of $22,500,000 or the
applicable amount of its eligible accounts receivable and inventories. Principal
payments on the Term Note are due monthly commencing in the fourth quarter of
1996. The 1996 Note is payable in two equal installments on August 30, 1996 and
December 31, 1996. The balance on the 1996 Note at September 30, 1996 was
$804,000, which was fully paid as of October 3, 1996.
GTC, in conjunction with the 1996 Credit Agreement, paid a $250,000 fee and
issued warrants to purchase 1,200,000 shares of common stock at $0.01 per share
to the lender in consideration for execution of the financing agreement. On the
closing date, 200,000 of the warrants were exercisable and the balance of the
warrants become exercisable in quarterly increments of 250,000 beginning March
F-59
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
1997. The warrants will expire five years following the issue date. The lender
will forfeit any unvested warrants in the event GTC repays all debt outstanding
under the 1996 Credit Agreement prior to any warrant vesting date.
The 1996 Credit Agreement requires maintenance of certain financial ratios
and contains other restrictive covenants, including prohibiting GTC from paying
dividends. At September 30, 1996, GTC was not in compliance with certain
covenants, including minimum earnings before interest, income taxes,
depreciation and amortization ("EBITDA"). The bank has waived its rights with
regard to such items of non-compliance through November 30, 1996. Management
believes the Company may be in non-compliance with similar covenants within
twelve months and has, therefore, classified the debt as current.
On August 6, 1996, Bell Technologies, Inc. ("Bell") modified its loan
agreement to provide for a working capital note and a reducing revolving credit
note. Maximum borrowings available under the working capital note are
$5,000,000, and the maturity date is May 1, 1999. Maximum borrowings available
under the reducing revolving credit note are $14,000,000, and the maturity date
is September 1, 2001. The reducing revolving credit note is payable quarterly
with interest at the prime rate or LIBOR plus a spread (between 1.00% and
2.75%).
F-60
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(4) SUPPLEMENTARY INFORMATION ON CERTAIN SUBSIDIARIES
Condensed financial data as of September 30, 1996, and for the nine month
periods ended September 30, 1995 and 1996, for the Company's TTT and Bell
subsidiaries, respectively, are presented below. The condensed financial data
for these subsidiaries excludes intercompany eliminations.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------
TTT Bell
------- --------
<S> <C> <C>
BALANCE SHEET DATA:
Current assets:
Cash and cash equivalents............................................... $ -- $ 1,517
Accounts receivable, net................................................ 3,372 9,580
Inventories, net........................................................ 5,962 7,465
Other current assets.................................................... 90 556
------- --------
Total current assets..................................................... 9,424 19,118
Property and equipment, net............................................. 3,836 7,189
Other assets............................................................. 3,443 1,686
------- --------
Total assets............................................................. $16,703 $ 27,993
======= ========
Current liabilities:
Accounts payable........................................................ $ 2,216 $ 1,858
Accrued liabilities..................................................... 1,825 3,665
Current portion of long-term debt....................................... -- 2,518
------- --------
Total current liabilities................................................ 4,041 8,041
Long-term debt........................................................... 3 12,114
Other liabilities........................................................ 4,728 557
------- --------
Total noncurrent liabilities............................................. 4,731 12,671
Shareholders' equity:
Common stock............................................................ 2,292 9
Additional paid-in capital.............................................. -- 5,125
Retained earnings....................................................... 5,639 2,147
------- --------
Total shareholders' equity.............................................. 7,931 7,281
------- --------
Total liabilities and shareholders' equity............................... $16,703 $ 27,993
======= ========
</TABLE>
F-61
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT-CONTINUED
<TABLE>
<CAPTION>
TTT BELL
------------------ -------------------
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1995 1996 1995 1996
------- ------- ------- --------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................................................... $17,794 $18,160 $24,851 $ 42,445
Costs and expenses:
Cost of services rendered and products sold............................. 15,903 16,179 18,462 28,047
Selling, general and administrative expense............................. 1,185 1,244 4,640 10,123
Interest expense........................................................ 62 13 498 942
Other expense........................................................... (198) (774) 205 --
------- ------- ------- --------
Total costs and expenses.................................................. 16,952 16,662 23,805 39,112
------- ------- ------- --------
Income before income taxes................................................ 842 1,498 1,046 3,333
Income taxes.............................................................. 274 378 433 1,298
------- ------- ------- --------
Net income................................................................ $ 568 $ 1,120 $ 613 $ 2,035
======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
TTT BELL
------------------ -------------------
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1995 1996 1995 1996
------- ------- ------- --------
<S> <C> <C> <C> <C>
STATEMENT OF CASH FLOWS DATA:
Cash flows from operating activities:
Net income.............................................................. $ 568 $ 1,120 $ 613 $ 2,035
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization.......................................... 421 451 866 1,339
Other.................................................................. (228) (814) 27 --
Changes in operating assets and liabilities............................ 315 (753) (443) 1,398
------- ------- ------- --------
Net cash provided by operating activities............................... 1,076 4 1,063 4,772
Cash flows from investing activities:
Capital expenditures.................................................... (562) (923) (602) (1,522)
Proceeds from sale of assets............................................ 403 939 -- --
Purchase of the net assets of acquired entities......................... -- -- -- (10,104)
Changes in nonoperating assets and liabilities.......................... -- 10 -- 496
------- ------- ------- --------
Net cash provided by (used in) in investing activities.................. (159) 26 (602) (11,130)
Cash flows from financing activities:
Net (repayments) proceeds under line of credit agreement................ (1,415) (140) 719 (112)
Proceeds from long-term debt............................................ -- -- -- 10,000
Repayments of long-term debt............................................ -- -- (934) (2,045)
Payments for retirement of common stock................................. (80) (9) -- (95)
------- ------- ------- --------
Net cash (used in) provided by financing activities..................... (1,495) (149) (215) 7,748
------- ------- ------- --------
Net (decrease) increase in cash and cash equivalents...................... (578) (119) 246 1,390
Cash and cash equivalents at beginning of year............................ 578 119 2 127
------- ------- ------- --------
Cash and cash equivalents at end of year.................................. $ -- $ -- $ 248 $ 1,517
======= ======= ======= ========
</TABLE>
F-62
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of January
15, 1997 (the "Agreement"), by and among GROUP FINANCIAL PARTNERS, INC., a
Kentucky corporation ("GFP"), BELL TECHNOLOGIES, INC., a Florida corporation and
a subsidiary of GFP ("Bell"), TUBE TURNS TECHNOLOGIES, INC., a Kentucky
corporation and a subsidiary of GFP ("Tube Turns") and GROUP TECHNOLOGIES
CORPORATION, a Florida corporation and a subsidiary of GFP ("Group Tech").
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, the Board of Directors of each of GFP, Tube Turns, Bell and
Group Tech, as applicable, have approved, to occur in the following
chronological order, [i] the distribution of all of the outstanding shares of
GFP Partners-V, Inc. ("Partners-V"), Unison Commercial Group, Inc. ("Unison")
and BW Riverport, Inc. ("BW") to the shareholders of GFP (the "Spin Off"), [ii]
the merger of GFP with and into Group Tech (the "Merger"), [iii] the merger of
Tube Turns with and into New Tube Turns Technologies, Inc. ("New Tube Turns"), a
newly formed, wholly owned subsidiary of Group Tech (the "Tube Turns Merger"),
[iv] the merger of Bell with and into Bell Acquisition Corporation ("New Bell"),
a newly formed, wholly owned subsidiary of Group Tech (the "Bell Merger") and
[v] the contribution of all of the assets of Group Tech (other than the shares
of New Tube Turns and New Bell) into a newly formed, wholly owned subsidiary of
Group Tech and the assumption of the liabilities of Group Tech by this
subsidiary (the "Group Tech Contribution"), all in accordance with the Florida
Business Corporation Act, as amended (the "FBCA") and the Kentucky Revised
Statutes, as amended (the "KRS");
WHEREAS, the Board of Directors of each of GFP, Tube Turns, Bell and
Group Tech, as applicable, has determined that each of the Spin Off, the Merger,
the Tube Turns Merger, the Bell Merger and the Group Tech Contribution, as
applicable, is fair to and in the best interest of the stockholders of GFP, Tube
Turns, Bell and Group Tech, as applicable, and resolved to approve and adopt
this Agreement and the transactions contemplated hereby and, subject to the
terms and conditions set forth herein, to recommend the approval and adoption of
this Agreement by the stockholders of GFP, Tube Turns, Bell and Group Tech;
WHEREAS, for federal income tax purposes, it is intended that [i] the
Merger, the Tube Turns Merger and the Bell Merger shall qualify as tax free
reorganizations under Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), and [ii] the Group Tech Contribution shall qualify as a
tax-free transfer of property to a controlled corporation under Section 351 of
the Code.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Definitions. As used in this Agreement, the
following terms shall have the following meanings unless the context otherwise
requires:
(i) "Bell Shareholder Approval" means the approval of the Bell Merger by
the holders of shares of Bell Common Stock (hereinafter defined) voted, in
person or by proxy, at the stockholders meeting of Bell held to approve such
transaction.
(ii) "Business Day" means each day that banking institutions in New York
City are not authorized or obligated by law or executive order to close.
(iii) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
(iv) "GFP Stockholder Approval" means the approval of the Spin Off and the
Merger by the holders of shares of GFP Common Stock (hereinafter defined) voted,
in person or by proxy, at the stockholders meeting of GFP held to approve such
transactions.
(v) "Group Tech Stockholder Approval" means the approval of the Merger and
the Group Tech Contribution by the holders of shares of Group Tech Common Stock
voted, in person or by proxy, at the stockholders meeting of Group Tech held to
approve such transactions.
(vi) "Hazardous Wastes" include, without limitation: [i] hazardous
substances or hazardous wastes, as those terms are defined by the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601
et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq., and any other applicable federal, state or local law, rule, regulation,
ordinance or requirement, all as amended or hereafter amended; [ii] petroleum,
including without limitation crude oil or any fraction thereof which is liquid
at standard conditions of temperature and pressure (60 degrees Fahrenheit and
14.7 pounds per square inch absolute); [iii] any radioactive material, including
without limitation any source, special nuclear, or by-product material as
defined in 42 U.S.C. Section 2011 et seq.; and [iv] asbestos or any asbestiform
minerals in any form or condition.
A-2
<PAGE>
(vii) "Knowledge" means, (i) with respect to any Person that is a
corporation, the actual knowledge after due inquiry of any of such Person's
respective executive officers or directors or (ii) with respect to any Person
that is a group, the actual knowledge after due inquiry of the members of such
group.
(viii) "Lien" means and includes any lien, security interest, pledge,
charge, option, right of first refusal, claim, mortgage, lease, easement or any
other encumbrance whatsoever.
(ix) "Material Adverse Effect" means any change or effect that,
individually or when taken together with all other such changes or effects, is
or is reasonably likely to be materially adverse to the business, assets,
prospects, liabilities, results of operations or condition (financial or
otherwise) of the entity to which the term relates and such entity's (or
entities') Subsidiaries, taken as a whole.
(x) "Person" means any individual, corporation, general or limited
partnership, limited liability company, firm, joint venture, association,
enterprise, joint stock company, trust, unincorporated organization or other
entity.
(xi) "Subsidiary" or "Subsidiaries" of any Person, means any corporation,
partnership, limited liability company, joint venture or other legal entity of
which such Person (either alone or through or together with any other
Subsidiary), owns, directly or indirectly, 50% or more of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
(xii) "Tube Turns Shareholder Approval" means the approval of the Tube
Turns Merger by the holders of shares of Tube Turns Common Stock (hereafter
defined) voted, in person or by proxy, at the stockholders meeting of Tube
Turns held to approve such transaction.
ARTICLE II
THE SPIN OFF OF GFP PARTNERS-V, INC.,
UNISON COMMERCIAL GROUP, INC. AND BW RIVERPORT, INC.
Section 2.01. The Spin Off. (a) Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the KRS at the
Effective Time, all of the issued and outstanding shares of Partners-V, Unison
and BW shall be distributed by GFP to the shareholders of GFP in accordance with
and as set forth in the letter (the "GFP Disclosure Letter") delivered by GFP to
GTC prior to the execution hereof.
A-3
<PAGE>
Section 2.02. Distribution of Shares. At the Effective Time, by virtue
of the Spin Off, GFP shall transfer, and GFP shall cause Partners-V, Unison and
BW to transfer, the shares of Partners-V, Unison and BW held by GFP on the books
of Partners-V, Unison and BW to the shareholders of GFP in accordance with the
GFP Disclosure Letter, and to thereafter cancel the certificates representing
shares of Partners-V, Unison and BW held by GFP immediately prior to the
Effective Time.
ARTICLE III
THE MERGER OF GROUP FINANCIAL PARTNERS, INC.
Section 3.01. The Merger. (a) Upon the terms and subject to the
conditions set forth in this Agreement and the exhibits hereto, and in
accordance with the KRS and the FBCA at the Effective Time, GFP shall be merged
with and into Group Tech in accordance with the KRS and the FBCA, whereupon the
separate existence of GFP shall cease and Group Tech shall continue as the
surviving corporation (for purposes of this Article, the "Surviving
Corporation").
(b) As promptly as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all the conditions set forth in Article XI
hereof, GFP and Group Tech shall file articles of merger, executed in accordance
with the relevant provisions of the KRS and the FBCA, with the Secretary of
State of each of the Commonwealth of Kentucky and the State of Florida and make
all other filings or recordings required by the KRS and/or the FBCA in
connection with the Merger. A plan of merger in substantially the form attached
as Exhibit A hereto and incorporated by reference herein shall be attached to,
included in and filed with such articles of merger. The Merger shall become
effective at such time as the articles of merger are duly filed with the
Secretary of State of the Commonwealth of Kentucky and the Secretary of State of
the State of Florida or at such later time as is specified in the articles of
merger (for purposes of this Article, the "Effective Time"). The date on which
the Effective Time occurs shall, for purposes of this Article, be the "Effective
Date".
Section 3.02. Effects of the Merger. At the Effective Time, the Merger
shall have the effects set forth in the applicable provisions of the KRS and the
FBCA. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, all the properties, rights, privileges, powers, and
franchises of GFP and Group Tech, shall vest in the Surviving Corporation
without further act or deed, and all debts, liabilities and duties of GFP and
Group Tech shall become the debts, liabilities and duties of the Surviving
Corporation.
A-4
<PAGE>
Section 3.03. Conversion of Shares; Adjustments. At the Effective
Time, by virtue of the Merger and without any action on the part of GFP or Group
Tech or the stockholders of either of the foregoing entities:
(i) each share of the outstanding common stock, no par value per
share, of GFP ("GFP Common Stock"), issued and outstanding immediately
prior to the Effective Time shall be cancelled and extinguished and
automatically converted into the right to receive such shares of common
stock, $.01 par value, of Group Tech ("Group Tech Common Stock") as is
equal to the GFP Conversion Ratio (hereinafter defined);
(ii) each share of Group Tech Common Stock issued and outstanding
immediately prior to the Effective Time which is held by GFP shall be
cancelled and retired and all rights in respect thereof shall cease to
exist, without any conversion thereof or payment of any consideration
therefor; and
(iii) each share of Group Tech Common Stock issued and
outstanding immediately prior to the Effective Time and which is not held
by GFP shall be unchanged after the Effective Time.
Section 3.04. Exchange of Certificates. (a) On or prior to the
Effective Time, Group Tech shall make available to each record holder who, as of
the Effective Time, was a holder of an outstanding certificate or certificates
which immediately prior to the Effective Time represented shares of GFP Common
Stock (for purposes of this Article, the "Certificate" or "Certificates"), a
form of letter of transmittal and instructions for use in effecting the
surrender of the Certificates for payment therefor and conversion thereof.
Delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to Group Tech and the form
of letter of transmittal shall so reflect. Upon surrender to Group Tech of a
Certificate, together with such letter of transmittal duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor one or
more certificates as requested by the holder (properly issued, executed and
countersigned, as appropriate) representing that number of whole shares of Group
Tech Common Stock to which such holder of GFP Common Stock shall have become
entitled pursuant to the provisions of Section 3.03 hereof, and the Certificate
so surrendered shall forthwith be cancelled. No interest will be paid or accrued
on any cash payable upon the surrender of the Certificates. If any portion of
the consideration to be received pursuant to Section 3.03 hereof, upon exchange
of a Certificate, is to be issued or paid to a Person other than the Person in
whose name the Certificate surrendered in exchange therefor is registered, it
shall be a condition of such issuance and payment that the Certificate so
surrendered shall be properly
A-5
<PAGE>
endorsed or otherwise be in proper form for transfer. From the Effective Time
until surrender in accordance with the provisions of this Section 3.04, each
Certificate shall represent for all purposes only the right to receive the
consideration provided in Section 3.03 hereof. All payments in respect of
shares of GFP Common Stock that are made in accordance with the terms hereof
shall be deemed to have been made in full satisfaction of rights pertaining to
such securities.
(b) In the case of any lost, mislaid, stolen or destroyed
Certificate, the holder thereof may be required, as a condition precedent to
delivery to such holder of the consideration described in Section 3.03, to
deliver to Group Tech a lost stock certificate affidavit and satisfactory
indemnity agreement as Group Tech may direct as indemnity against any claim that
may be made against Group Tech with respect to the Certificate alleged to have
been lost, mislaid, stolen or destroyed.
(c) After the Effective Time, there shall be no transfers on the
stock transfer books of Group Tech of the shares of GFP Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to Group Tech for transfer, they shall be
cancelled and exchanged for the consideration described in Section 3.03 hereof.
Section 3.05. Stock Options. (a) At the Effective Time, Group Tech
shall assume all of GFP's rights and obligations with respect to certain
outstanding stock options held by certain employees of GFP, which are
outstanding and unexercised at the Effective Time (the "GFP Options"), whether
or not the GFP Options are then exercisable. Immediately following such
assumption, Group Tech shall substitute for the GFP Options non-qualified
options to be granted under the Group Tech 1994 Stock Option Plan for Key
Employees (the "Non-Qualified Options (GFP)") with vesting terms and conditions
matching those contained in the GFP Options at the Effective Time to the extent
such vesting terms and conditions are consistent with the terms and conditions
of the Group Tech 1994 Stock Option Plan for Key Employees and such other
revisions to such terms and conditions as Group Tech and GFP shall mutually
agree upon. Each Non-Qualified Option (GFP) shall thereafter evidence the right
to purchase the number of shares of Group Tech Common Stock equal to the product
(rounded up or down as appropriate to a whole share) of (i) the number of shares
of GFP Common Stock covered by such GFP Option immediately prior to the
Effective Time, multiplied by (ii) the GFP Conversion Ratio. The exercise price
of such Non-Qualified Options (GFP) for each share of Group Tech Common Stock
subject thereto shall be equal to the quotient rounded up or down as appropriate
to a whole cent) obtain by dividing (i) the per share exercise price for shares
of GFP Common Stock subject to such GFP Option immediately prior to the
Effective Time, by (ii) the GFP Conversion Ratio.
A-6
<PAGE>
(b) At least ten (10) days prior to the Effective Time, Group Tech
shall deliver to each holder of a GFP Option an appropriate written notice and
option assumption agreement (the "Option Assumption Agreement") setting forth
Group Tech's assumption of the GFP Option and substitution of the Non-Qualified
Option (GFP) in accordance with the terms of this Section 3.05. The form of such
Option Assumption Agreement shall be delivered to GFP prior to its distribution
to holders of the GFP Options and shall be subject to its reasonable approval.
Group Tech shall have received from each of the holders of GFP Options a duly
executed Option Assumption Agreement on or prior to the Closing Date. GFP shall
not grant any options under any plan or otherwise after the date of this
Agreement.
(c) Group Tech agrees to cause the shares of Group Tech Common Stock
issuable upon exercise of the Non-Qualified Options to be registered with the
Securities and Exchange Commission (the "Commission") on a form S-8 Registration
Statement as promptly following the Effective Time as is reasonably practicable.
Group Tech further agrees to cause the shares of Group Tech Common Stock
issuable upon exercise of the Non-Qualified Options to be registered or exempt
from the registration requirements of all applicable state securities laws,
rules and regulations.
(d) Approval by the stockholders of GFP of this Agreement shall
constitute authorization and approval of any and all of the actions described in
this Section 3.05.
Section 3.06. Dissenting Shares. (a) To the extent that appraisal
rights are available under the KRS, shares of GFP Common Stock that are issued
and outstanding immediately prior to the Effective Time and that have not been
voted for adoption of the Merger and with respect to which appraisal rights have
been properly demanded in accordance with the KRS (for purposes of this Article,
"Dissenting Shares") shall not be converted into the right to receive the
consideration provided for in Section 3.03 hereof at or after the Effective Time
unless and until the holder of such shares becomes ineligible for such
appraisal. If a holder of Dissenting Shares becomes ineligible for such
appraisal, then, as of the Effective Time or the occurrence of such event
whichever later occurs, such holder's Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into and represent the right to receive
the consideration provided for in Section 3.03 hereof. If any holder of GFP
Common Stock shall assert the right to be paid the fair value of such GFP Common
Stock as described above, GFP shall give Group Tech notice thereof and Group
Tech shall have the right to participate in all negotiations and proceedings
with respect to any such demands. GFP shall not, except with the prior written
consent of Group Tech, voluntarily make any payment with respect to, or settle
or offer to settle, any such demand for payment. Payment for Dissenting Shares
shall be made as required by the KRS.
A-7
<PAGE>
(b) To the extent that appraisal rights are available under the FBCA,
shares of Group Tech Common Stock that are issued and outstanding immediately
prior to the Effective Time and that have not been voted for adoption of the
Merger and with respect to which appraisal rights have been properly demanded in
accordance with the FBCA shall receive payment as required by the FBCA.
Section 3.07. Articles of Incorporation of Surviving Corporation. The
Articles of Incorporation of Group Tech, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended as provided therein and in accordance with
applicable law.
Section 3.08. By-Laws of Surviving Corporation. The By-Laws of Group
Tech in effect at the Effective Time shall be the By-Laws of the Surviving
Corporation and thereafter may be amended or repealed in accordance with their
terms or the terms of the Articles of Incorporation of the Surviving Corporation
and as provided by applicable law.
Section 3.09. Directors and Officers of Surviving Corporation. From
and after the Effective Time: (i) the directors of Group Tech immediately prior
to the Effective Time shall be the directors of the Surviving Corporation; and
(ii) the officers of Group Tech immediately prior to the Effective Time shall be
the officers of the Surviving Corporation, in each case, until their respective
successors are duly elected or appointed and qualify in the manner provided in
the Articles of Incorporation and By-Laws of the Surviving Corporation or as
otherwise provided by applicable law.
Section 3.10. GFP Conversion Ratio and Adjustment Event. (a) The "GFP
Conversion Ratio" shall be equal to such fraction as is obtained by dividing the
Group Tech Merger Shares (as hereinafter defined) by the Total GFP Shares (as
hereinafter defined). For purposes of this Article, the "Group Tech Merger
Shares" shall be equal to such number of whole shares of Group Tech Common Stock
as is obtained by dividing the Aggregate GFP Consideration (hereinafter defined)
by the Average Closing Price (hereinafter defined). The "Total GFP Shares" shall
be equal to 315,996. The "Aggregate GFP Consideration" shall be equal to FIFTY
FIVE MILLION TWO HUNDRED NINETY EIGHT THOUSAND THREE HUNDRED THIRTY FOUR DOLLARS
($55,298,334).
(b) In the event of any change in Group Tech Common Stock or GFP
Common Stock between the date of this Agreement and the Effective Time by reason
of any stock dividend, stock split, subdivision, reclassification,
recapitalization, combination, exchange of shares or the like (an "Adjustment
Event"), the GFP Conversion Ratio shall be appropriately adjusted so that each
holder of GFP Common Stock will receive in the Merger the same
A-8
<PAGE>
proportionate amount of the Group Tech Common Stock such holder would have been
entitled to receive if the Effective Time had been immediately prior to such
Adjustment Event.
Section 3.11. Fractional Shares. No scrip or fractional shares of
Group Tech Common Stock shall be issued in the Merger. All fractional shares of
Group Tech Common Stock to which a holder of GFP Common Stock immediately prior
to the Effective Time would otherwise be entitled at the Effective Time shall be
aggregated. If a fractional share results from such aggregation, such
stockholder shall be entitled, after the later of (a) the Effective Time, or (b)
the surrender of such stockholder's Certificate(s) that represent such shares of
the GFP Common Stock, to receive from Group Tech an amount in cash in lieu of
such fractional share, based on the Average Closing Price (as hereinafter
defined). For purposes of this Agreement, the "Average Closing Price" shall be
the greater of (i) $1.50 per share of Group Tech Common Stock, or (ii) the
arithmetic average of the closing price per share of the Group Tech Common
Stock, as reported on The Nasdaq National Market, for each of the ten (10)
consecutive trading days ending with the trading day which occurs immediately
prior to the date of the Group Tech Stockholder Approval.
Section 3.12. GFP Stock Plans. At the Effective Time, the GFP Stock
Purchase Plan, Stock Option Plan and Stock Restriction Agreement shall terminate
and any shares of GFP Common Stock subject to vesting requirements under such
plans shall, upon conversion into the right to receive shares of Group Tech
Common Stock in accordance with this Agreement, continue to be subject to such
vesting requirements. Approval by the stockholders of GFP of this Agreement
shall constitute authorization and approval of any and all of the actions
described in this Section 3.12.
ARTICLE IV
THE MERGER OF
TUBE TURNS TECHNOLOGIES, INC.
Section 4.01. The Tube Turns Merger. (a) Upon the terms and subject to
the conditions set forth in this Agreement and the exhibits hereto, and in
accordance with the KRS at the Effective Time, Tube Turns shall be merged with
and into New Tube Turns in accordance with the KRS, whereupon the separate
existence of Tube Turns shall cease and New Tube Turns shall continue as the
surviving corporation (for purposes of this Article, the "Surviving
Corporation").
(b) As promptly as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all the conditions set forth in Article XI
hereof, Tube Turns and New Tube Turns shall file articles of merger, executed in
accordance with the relevant
A-9
<PAGE>
provisions of the KRS, with the Secretary of State of the Commonwealth of
Kentucky and make all other filings or recordings required by the KRS in
connection with the Tube Turns Merger. A plan of merger in substantially the
form attached as Exhibit B hereto and incorporated by reference herein shall be
attached to, included in and filed with such articles of merger. The Tube Turns
Merger shall become effective at such time as the articles of merger are duly
filed with the Secretary of State of the Commonwealth of Kentucky or at such
later time as is specified in the articles of merger (for purposes of this
Article, the "Effective Time"). The date on which the Effective Time occurs
shall, for the purposes of this Article, be the "Effective Date".
Section 4.02. Effects of the Tube Turns Merger. At the Effective Time,
the Tube Turns Merger shall have the effects set forth in the applicable
provisions of the KRS. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers, and franchises of Tube Turns and New Tube Turns, shall vest in the
Surviving Corporation without further act or deed, and all debts, liabilities
and duties of Tube Turns and New Tube Turns shall become the debts, liabilities
and duties of the Surviving Corporation.
Section 4.03. Conversion of Shares; Adjustments. At the Effective
Time, by virtue of the Tube Turns Merger and without any action on the part of
Tube Turns or New Tube Turns or the stockholders of either of the foregoing
entities:
(i) each share of the common stock of Tube Turns, no par value
per share (the "Tube Turns Common Stock"), issued and outstanding
immediately prior to the Effective Time, and held by a Person other than
Group Tech, shall be cancelled and extinguished and automatically converted
into the right to receive such shares of Group Tech Common Stock as is
equal to the Tube Turns Conversion Ratio; and
(ii) each share of Tube Turns Common Stock issued and outstanding
immediately prior to the Effective Time, and held by Group Tech, shall be
cancelled and extinguished.
Section 4.04. Exchange of Certificates. (a) On or prior to the
Effective Time, Group Tech and New Tube Turns shall make available to each
record holder (other than Group Tech) who, as of the Effective Time, was a
holder of an outstanding certificate or certificates which immediately prior to
the Effective Time represented shares of Tube Turns Common Stock (for purposes
of this Article, the "Certificate" or "Certificates"), a form of letter of
transmittal and instructions for use in effecting the surrender of the
Certificates for payment therefor and conversion thereof. Delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certifi-
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cates to Group Tech and the form of letter of transmittal shall so reflect. Upon
surrender to Group Tech of a Certificate, together with such letter of
transmittal duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor one or more certificates as requested by the
holder (properly issued, executed and countersigned, as appropriate)
representing that number of whole shares of Group Tech Common Stock to which
such holder of Tube Turns Common Stock shall have become entitled pursuant to
the provisions of Section 4.03 hereof, and the Certificate so surrendered shall
forthwith be cancelled. No interest will be paid or accrued on any cash payable
upon the surrender of the Certificates. If any portion of the consideration to
be received pursuant to Section 4.03 hereof, upon exchange of a Certificate, is
to be issued or paid to a Person other than the Person in whose name the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such issuance and payment that the Certificate so surrendered shall
be properly endorsed or otherwise be in proper form for transfer. From the
Effective Time until surrender in accordance with the provisions of this Section
4.04, each Certificate shall represent for all purposes only the right to
receive the consideration provided in Section 4.03 hereof. All payments in
respect of shares of Tube Turns Common Stock that are made in accordance with
the terms hereof shall be deemed to have been made in full satisfaction of
rights pertaining to such securities.
(b) In the case of any lost, mislaid, stolen or destroyed Certificate,
the holder thereof may be required, as a condition precedent to delivery to such
holder of the consideration described in Section 4.03, to deliver to Group Tech
and New Tube Turns a lost stock certificate affidavit and satisfactory indemnity
agreement as Group Tech and New Tube Turns may direct as indemnity against any
claim that may be made against Group Tech and/or New Tube Turns with respect to
the Certificate alleged to have been lost, mislaid, stolen or destroyed.
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of New Tube Turns of the shares of Tube Turns Common Stock that
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to Group Tech for transfer, they
shall be cancelled and exchanged for the consideration described in Section 4.03
hereof.
Section 4.05. Stock Options. (a) At the Effective Time, Group Tech
shall assume all of Tube Turns' rights and obligations with respect to certain
outstanding stock options held by certain employees of Tube Turns, which are
outstanding and unexercised at the Effective Time (the "Tube Turns Options"),
whether or not the Options are then exercisable. Immediately following such
assumption, Group Tech shall substitute for such Tube Turns Options
non-qualified options to be granted under the Group Tech 1994 Stock Option Plan
for Key Employees (the "Non-
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<PAGE>
Qualified Options (Tube Turns)") with vesting terms and conditions matching
those contained in the Tube Turns Options at the Effective Time to the extent
such vesting terms and conditions are consistent with the terms and conditions
of the Group Tech 1994 Stock Option Plan for Key Employees and such other
revisions to such terms and conditions as Group Tech and Tube Turns shall
mutually agree upon. Each Non-Qualified Option (Tube Turns) shall thereafter
evidence the right to purchase the number of shares of Group Tech Common Stock
equal to the product (rounded up or down as appropriate to a whole share) of (i)
the number of shares of Tube Turns Common Stock covered by such Tube Turns
Option immediately prior to the Effective Time, multiplied by (ii) the Tube
Turns Conversion Ratio. The exercise price of such Non-Qualified Options (Tube
Turns) for each share of Group Tech Common Stock subject thereto shall be equal
to the quotient (rounded up or down as appropriate to a whole cent) obtained by
dividing (i) the per share exercise price for shares of Tube Turns Common Stock
subject to such Option immediately prior to the Effective Time, by (ii) the Tube
Turns Conversion Ratio.
(b) At least ten (10) days prior to the Effective Time, Group Tech
shall deliver to each holder of a Tube Turns Option an appropriate written
notice and option assumption agreement (the "Option Assumption Agreement")
setting forth Group Tech's assumption of the Tube Turns Option and substitution
of the Non-Qualified Option (Tube Turns) in accordance with the terms of this
Section 4.05. The form of such Tube Turns Option Assumption Agreement shall be
delivered to Tube Turns prior to its distribution to holders of the Tube Turns
Options and shall be subject to its reasonable approval. Group Tech shall have
received from each of the holders of Options a duly executed Option Assumption
Agreement on or prior to the Closing Date. Tube Turns shall not grant any
options under any plan or otherwise after the date of this Agreement.
(c) Group Tech agrees to cause the shares of Group Tech Common Stock
issuable upon exercise of the Non-Qualified Options (Tube Turns) to be
registered with the Securities and Exchange Commission (the "Commission") on a
Form S-8 Registration Statement as promptly following the Effective Time as is
reasonably practicable. Group Tech further agrees to cause the shares of Group
Tech Common Stock issuable upon exercise of the Non-Qualified Options (Tube
Turns) to be registered or exempt from the registration requirements of all
applicable state securities laws, rules and regulations.
(d) Approval by the stockholders of Tube Turns of this Agreement shall
constitute authorization and approval of any and all of the actions described
in this Section 4.05.
Section 4.06. Dissenting Shares. To the extent that appraisal rights
are available under the KRS, shares of Tube Turns
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Common Stock that are issued and outstanding immediately prior to the Effective
Time and that have not been voted for adoption of the Tube Turns Merger and with
respect to which appraisal rights have been properly demanded in accordance with
the KRS (for purposes of this Article, "Dissenting Shares") shall not be
converted into the right to receive the consideration provided for in Section
4.03 hereof at or after the Effective Time unless and until the holder of such
shares becomes ineligible for such appraisal. If a holder of Dissenting Shares
becomes ineligible for such appraisal, then, as of the Effective Time or the
occurrence of such event whichever later occurs, such holder's Dissenting
Shares shall cease to be Dissenting Shares and shall be converted into and
represent the right to receive the consideration provided for in Section 4.03
hereof. If any holder of Tube Turns Common Stock shall assert the right to be
paid the fair value of such Tube Turns Common Stock as described above, Tube
Turns shall give New Tube Turns and Group Tech notice thereof and New Tube Turns
and Group Tech shall have the right to participate in all negotiations and
proceedings with respect to any such demands. Tube Turns shall not, except with
the prior written consent of Group Tech and New Tube Turns, voluntarily make any
payment with respect to, or settle or offer to settle, any such demand for
payment. Payment for Dissenting Shares shall be made as required by the KRS.
Section 4.07. Articles of Incorporation of Surviving Corporation. The
Articles of Incorporation of New Tube Turns, as in effect immediately prior to
the Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended as provided therein and in accordance with
applicable law, provided that, as of the Effective Time, such Articles of
Incorporation shall be amended to change the name of New Tube Turns to "Tube
Turns Technologies, Inc."
Section 4.08. By-Laws of Surviving Corporation. The By-Laws of New
Tube Turns in effect at the Effective Time shall be the By-Laws of the Surviving
Corporation and thereafter may be amended or repealed in accordance with their
terms or the terms of the Articles of Incorporation of the Surviving
Corporation and as provided by applicable law.
Section 4.09. Directors and Officers of Surviving Corporation. From
and after the Effective Time: (i) the directors of New Tube Turns immediately
prior to the Effective Time shall be the directors of the Surviving Corporation;
and (ii) the officers of New Tube Turns immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, in each case, until their
respective successors are duly elected or appointed and qualify in the manner
provided in the Articles of Incorporation and By-Laws of the Surviving
Corporation or as otherwise provided by applicable law.
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Section 4.10. Tube Turns Conversion Ratio and Adjustment Event. (a)
The "Tube Turns Conversion Ratio" shall be equal to such fraction as is obtained
by dividing the Group Tech Merger Shares (as hereinafter defined) by the
Total Tube Turns Shares (as hereinafter defined). For purposes of this Article,
the "Group Tech Merger Shares" shall be equal to such number of whole shares of
Group Tech Common Stock as is obtained by dividing the Aggregate Tube Turns
Consideration (as hereinafter defined) by the AVerage Closing Price. The "Total
Tube Turns Shares" shall be equal to 125,030. The "Aggregate Tube Turns
Consideration" shall be equal to ONE MILLION EIGHT HUNDRED SEVENTY FIVE THOUSAND
FOUR HUNDRED FIFTY DOLLARS ($1,875,450).
(b) In the event of any change in Group Tech Common Stock or Tube
Turns Common Stock between the date of this Agreement and the Effective Time by
reason of any stock dividend, stock split, subdivision, reclassification,
recapitalization, combination, exchange of shares or the like (an "Adjustment
Event"), the Tube Turns Conversion Ratio shall be appropriately adjusted so that
each holder of Tube Turns Common Stock will receive in the Merger the same
proportionate amount of Group Tech Common Stock such holder would have been
entitled to receive if the Effective Time had been immediately prior to such
Adjustment Event.
Section 4.11. Fractional Shares. No scrip or fractional shares of
Group Tech Common Stock shall be issued in the Tube Turns Merger. All fractional
shares of Group Tech Common Stock to which a holder of Tube Turns Common Stock
immediately prior to the Effective Time would otherwise be entitled at the
Effective Time shall be aggregated. If a fractional share results from such
aggregation, such stockholder shall be entitled, after the later of (a) the
Effective Time or (b) the surrender of such stockholder's Certificate(s) that
represent such shares of Tube Turns Common Stock, to receive from Group Tech an
amount in cash in lieu of such fractional share, based on the Average Closing
Price.
Section 4.12. Tube Turns Stock Plans. At the Effective Time, the Tube
Turns Employee Stock Purchase Plan, Stock Option Plan dated January 22, 1991,
and Stock Restriction Agreement shall terminate and any shares of Tube Turns
Common Stock subject to vesting requirements under such plans shall, upon
conversion into the right to receive shares of Group Tech Common Stock in
accordance with this Agreement, continue to be subject to such vesting
requirements. Approval by the stockholders of Tube Turns of this Agreement shall
constitute authorization and approval of any and all of the actions described in
this Section 4.12.
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ARTICLE V
THE MERGER OF BELL TECHNOLOGIES, INC.
Section 5.01. The Bell Merger. (a) Upon the terms and subject to the
conditions set forth in this Agreement and the exhibits hereto, and in
accordance with the FBCA at the Effective Time, Bell shall be merged with and
into New Bell in accordance with FBCA, whereupon the separate existence of Bell
shall cease and New Bell shall continue as the surviving corporation (for
purposes of this Article, the "Surviving Corporation").
(b) As promptly as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all the conditions set forth in Article XI
hereof, Bell and New Bell shall file articles of merger, executed in accordance
with the relevant provisions of the FBCA, with the Secretary of State of Florida
and make all other filings or recordings required by the FBCA
in connection with the Bell Merger. A plan of merger in substantially the form
attached as Exhibit C hereto and incorporated by reference herein shall be
attached to, included in and filed with such articles of merger. The Bell Merger
shall become effective at such time as the articles of merger are duly filed
with the Secretary of State of the State of Florida or at such later time as is
specified in the articles of merger (for purposes of this Article, the
"Effective Time"). The date on which the Effective Time occurs shall, for the
purposes of this Article, be the "Effective Date".
Section 5.02. Effects of the Bell Merger. At the Effective Time, the
Bell Merger shall have the effects set forth in the applicable provisions of
the FBCA. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all the properties, rights, privileges, powers, and
franchises of Bell and New Bell, shall vest in the Surviving Corporation
without further act or deed, and all debts, liabilities and duties of Bell and
New Bell shall become the debts, liabilities and duties of the Surviving
Corporation.
Section 5.03. Conversion of Shares; Adjustments. At the Effective
Time, by virtue of the Bell Merger and without any action on the part of Bell or
New Bell or the stockholders of either of the foregoing entities:
(i) each share of the common stock of Bell, $.01 par value per
share (the "Bell Common stock"), issued and outstanding immediately prior
to the Effective Time, and held by a Person other than Group Tech, shall be
cancelled and extinguished and automatically converted into the right to
receive such shares of Group Tech Common Stock as is equal to the Bell
Conversion Ratio; and
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(ii) each share of Bell Common Stock issued and outstanding
immediately prior to the Effective Time, and held by Group Tech, shall be
cancelled and extinguished.
Section 5.04. Exchange of Certificates. (a) On or prior to the
Effective Time, Group Tech and New Bell shall make available to each record
holder (other than Group Tech) who, as of the Effective Time, was a holder of an
outstanding certificate or certificates which immediately prior to the Effective
Time represented shares of Bell Common Stock (for purposes of this Article, the
"Certificate" or "Certificates"), a form of letter of transmittal and
instructions for use in effecting the surrender of the Certificates for payment
therefor and conversion thereof. Delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon proper delivery of the
Certificates to Group Tech and the form of letter of transmittal shall so
reflect. Upon surrender to Group Tech of a Certificate, together with such
letter of transmittal duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor one or more certificates as requested
by the holder (properly issued, executed and countersigned, as appropriate)
representing that number of whole shares of Group Tech Common Stock to which
such holder of Bell Common Stock shall have become entitled pursuant to the
provisions of Section 5.03 hereof, and the Certificate so surrendered shall
forthwith be cancelled. No interest will be paid or accrued on any cash payable
upon the surrender of the Certificates. If any portion of the consideration to
be received pursuant to Section 5.03 hereof, upon exchange of a Certificate, is
to be issued or paid to a Person other than the Person in whose name the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such issuance and payment that the Certificate so surrendered shall
be properly endorsed or otherwise be in proper form for transfer. From the
Effective Time until surrender in accordance with the provisions of this Section
5.04, each Certificate shall represent for all purposes only the right to
receive the consideration provided in Section 5.03 hereof. All payments in
respect of shares of Bell Common Stock that are made in accordance with the
terms hereof shall be deemed to have been made in full satisfaction of rights
pertaining to such securities.
(b) In the case of any lost, mislaid, stolen or destroyed Certificate,
the holder thereof may be required, as a condition precedent to delivery to such
holder of the consideration described in Section 5.03, to deliver to Group Tech
and New Bell a lost stock certificate affidavit and satisfactory indemnity
agreement as Group Tech and New Bell may direct as indemnity against any claim
that may be made against Group Tech and/or New Bell with respect to the
Certificate alleged to have been lost, mislaid, stolen or destroyed.
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of New Bell of the shares of Bell
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<PAGE>
Common Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to Group Tech for transfer,
they shall be cancelled and exchanged for the consideration described in Section
5.03 hereof.
Section 5.05. Stock Options. (a) At the Effective Time, Group Tech
shall assume all of Bell's rights and obligations with respect to certain
outstanding stock options held by certain employees of Bell which are
outstanding and unexercised at the Effective Time (the "Bell Options"), whether
or not the Bell Options are then exercisable. Immediately following such
assumption, Group Tech shall substitute for such Bell Options non-qualified
options to be granted under the Group Tech 1994 Stock Option Plan for Key
Employees and the Group Tech Independent Directors' Stock Option Plan (the "Non-
Qualified Options (Bell)") with vesting terms and conditions matching those
contained in the Bell Options at the Effective Time to the extent such vesting
terms and conditions are consistent with the terms and conditions of the Group
Tech 1994 Stock Option Plan for Key Employees and the Group Tech Independent
Directors' Stock Option Plan and such other revisions to such terms and
conditions as Group Tech and Bell shall mutually agree upon. Each Non-Qualified
Option (Bell) shall thereafter evidence the right to purchase the number of
shares of Group Tech Common Stock equal to the product (rounded up or down as
appropriate to a whole share) of (i) the number of shares of Bell Common Stock
covered by such Bell Option immediately prior to the Effective Time, multiplied
by (ii) the Bell Conversion Ratio. The exercise price of such Non-Qualified
Options (Bell) for each share of Group Tech Common Stock subject thereto shall
be equal to the quotient (rounded up or down as appropriate to a whole cent)
obtained by dividing (i) the per share exercise price for shares of Bell Common
Stock subject to such option immediately prior to the Effective Time, by (ii)
the Bell Conversion Ratio.
(b) At least ten (10) days prior to the Effective Time, Group Tech
shall deliver to each holder of a Bell Option an appropriate written notice and
option assumption agreement (the "Option Assumption Agreement") setting forth
Group Tech's assumption of the Bell Option and substitution of the Non-Qualified
Option (Bell) in accordance with the terms of this Section 5.05. The form of
such Option Assumption Agreement shall be delivered to Bell prior to its
distribution to holders of the Bell Options and shall be subject to its
reasonable approval. Group Tech shall have received from each of the holders of
Bell Options a duly executed Option Assumption Agreement on or prior to the
Closing Date. Bell shall not grant any options under any plan or otherwise after
the date of this Agreement.
(c) Group Tech agrees to cause the shares of Group Tech Common Stock
issuable upon exercise of the Non-Qualified Options (Bell) to be registered with
the Securities and Exchange Commission (the "Commission") on a Form S-8
Registration Statement as promptly
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following the Effective Time as is reasonably practicable. Group Tech further
agrees to cause the shares of Group Tech Common Stock issuable upon exercise of
the Non-Qualified Options (Bell) to be registered or exempt from applicable
state securities laws, rules and regulations.
(d) Approval by the stockholders of Bell of this Agreement shall
constitute authorization and approval of any and all of the actions described in
this Section 5.05.
Section 5.06. Dissenting Shares. To the extent that appraisal rights
are available under he FBCA, shares of Bell Common Stock that are issued and
outstanding immediately prior to the Effective Time and that have not been voted
for adoption of the Bell Merger and with respect to which appraisal rights have
been properly demanded in accordance with the FBCA (for purposes of this
Article, "Dissenting Shares") shall not be converted into the right to receive
the consideration provided for in Section 5.03 hereof at or after the Effective
Time unless and until the holder of such shares becomes ineligible for such
appraisal. If a holder of Dissenting Shares becomes ineligible for such
appraisal, then, as of the Effective Time or the occurrence of such event
whichever later occurs, such holder's Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into and represent the right to receive
the consideration provided for in Section 5.03 hereof. If any holder of Bell
Common Stock shall assert the right to be paid the fair value of such Bell
Common stock as described above, Bell shall give New Bell and Group Tech notice
thereof and New Bell and Group Tech shall have the right to participate in all
negotiations and proceedings with respect to any such demands. Bell shall not,
except with the prior written consent of Group Tech and New Bell, voluntarily
make any payment with respect to, or settle or offer to settle, any such demand
for payment. Payment for Dissenting Shares shall be made as required by the
FBCA.
Section 5.07. Articles of Incorporation of Surviving Corporation. The
Articles of Incorporation of New Bell, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until amended as provided therein and in accordance with applicable
law, provided that, as of the Effective Time, such Articles of Incorporation
shall be amended to change the name of New Bell to "Bell Technologies, Inc."
Section 5.08. By-Laws of Surviving Corporation. The By-Laws of New
Bell in effect at the Effective Time shall be the By-Laws of the Surviving
Corporation and thereafter may be amended or repealed in accordance with their
terms or the terms of the Articles of Incorporation of the Surviving Corporation
and as provided by applicable law.
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Section 5.09. Directors and Officers of Surviving Corporation. From
and after the Effective Time: (i) the directors of New Bell immediately prior to
the Effective Time shall be the directors of the Surviving Corporation; and (ii)
the officers of New Bell immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, in each case, until their respective
successors are duly elected or appointed and qualify in the manner provided in
the Articles of Incorporation and By-Laws of the Surviving Corporation or as
otherwise provided by applicable law.
Section 5.10. Bell Conversion Ratio and Adjustment Event. (a) The
"Bell Conversion Ratio" shall be equal to such fraction as is obtained by
dividing the Group Tech Merger Shares (as hereinafter defined) by the Total Bell
Shares (as hereinafter defined). For purposes of this Article, the "Group Tech
Merger Shares" shall be equal to such number of whole shares of Group Tech
Common Stock as is obtained by dividing the Aggregate Bell Consideration (as
hereinafter defined) by the Average Closing Price. The "Total Bell Shares" shall
be equal to 173,789. The "Aggregate Bell Consideration" shall be equal to FIVE
MILLION NINE HUNDRED EIGHT THOUSAND EIGHT HUNDRED TWENTY-SIX DOLLARS
($5,908,826).
(b) In the event of any change in Group Tech Common Stock or Bell
Common Stock between the date of this Agreement and the Effective Time by reason
of any stock dividend, stock split, subdivision, reclassification,
recapitalization, combination, exchange of shares or the like (an "Adjustment
Event") the Bell Conversion Ration shall be appropriately adjusted so that each
holder of Bell Common Stock will receive in the Merger the same proportionate
amount of Group Tech Common Stock such holder would have been entitled to
receive if the Effective Time had been immediately prior to such Adjustment
Event.
Section 5.11. Fractional Shares. No scrip or fractional shares of
Group Tech Common Stock shall be issued in the Bell Merger. All fractional
shares of Group Tech Common Stock to which a holder of Bell Common Stock
immediately prior to the Effective Time would otherwise be entitled at the
Effective Time shall be aggregated. If a fractional share results from such
aggregation, such stockholder shall be entitled, after the later of (a) the
Effective Time or (b) the surrender of such stockholder's Certificate(s) that
represent such shares of Bell Common Stock, to receive from Group Tech an amount
in cash in lieu of such fractional share, based on the Average Closing Price.
Section 5.12. Bell Stock Plans. At the Effective Time, the Bell
Employee Stock Purchase Plan dated July 6, 1988, Stock Option Plan dated January
24, 1990, as amended October 24, 1990, Employee Stock Restriction Agreement
dated July 1, 1988, as amended April 28, 1994, as further amended April 27,
1995, 1995 Stock
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Option Plan for Key Employees and the Independent Directors' Stock Option Plan
shall terminate and any shares of Bell Common Stock subject to vesting
requirements under such plans shall, upon conversion into the right to receive
shares of Group Tech Common Stock in accordance with this Agreement, continue to
be subject to such vesting requirements. Approval by the stockholders of Bell of
this Agreement shall constitute authorization and approval of any and all
actions described in this Section 5.12.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF GFP
With and subject to such exceptions as are set forth in the GFP
Disclosure Letter, GFP represents and warrants to Group Tech as follows:
Section 6.01. Organization and Qualification. GFP is a corporation
duly organized, validly existing and in good standing under the laws of Kentucky
and has all requisite corporate power and authority to own, lease and operate
its assets, properties and business and to carry on its business as it is now
being conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which the ownership or leasing of its properties makes such
qualification necessary, except where the failure to so qualify would not have a
Material Adverse Effect on GFP.
Section 6.02. Capitalization. The authorized capital stock of GFP
consists of 1,000,000 shares of GFP Common Stock. As of September 30, 1996,
there were (i) 315,966 shares of GFP Common Stock issued and outstanding, all of
which were duly authorized, validly issued, fully paid and nonassessable and are
not subject to any preemptive rights, and (ii) 6,600 shares of unissued GFP
Common Stock issuable upon exercise of outstanding options under the Group
Financial Partners, Inc. Stock Option Plan. Except as set forth in the GFP
Disclosure Letter, since September 30, 1996, no shares of GFP Common Stock have
been issued by GFP, except pursuant to the exercise of outstanding options in
accordance with their terms, and no options have been granted and the vesting
schedule of any outstanding options has not been changed (in either case,
whether or not under such GFP stock option plan). The GFP Disclosure Letter sets
forth, as of the date hereof, a true and complete list of all of the
Subsidiaries of GFP (except Group Tech and the Subsidiaries of Group Tech),
including the jurisdiction of incorporation or organization of each such
Subsidiary and the percentage of each such Subsidiary's outstanding capital
stock or other ownership interest owned by GFP or another Subsidiary of GFP or
by any other Person. Each of the outstanding shares of capital stock of the
Subsidiaries of GFP listed on the GFP Disclosure Letter is duly authorized,
validly issued, fully paid and nonassessable and is not subject to any
preemptive rights. Except as
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set forth above, there are no options, warrants, voting agreements or other
rights, agreements, arrangements or commitments to which GFP is a party of any
character relating to the issued or unissued capital stock of, or other equity
interests in, GFP or obligating GFP to grant, issue or sell any shares of the
capital stock of, or other equity interests in, GFP by sale, lease, license or
otherwise.
Section 6.03. Authority. GFP has the requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby (for purposes
of this Article, collectively, the "Transactions"). The execution and delivery
of this Agreement by GFP and the consummation by GFP of the Transactions have
been duly authorized by all necessary corporate action, and no other corporate
proceedings on the part of GFP are necessary to authorize this Agreement or to
consummate the Transactions (other than the GFP Stockholder Approval). This
Agreement has been duly executed and delivered by GFP and constitutes a legal,
valid and binding obligation of GFP, except that the enforcement thereof may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (b) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
Section 6.04. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by GFP do not, the performance of this
Agreement by GFP will not and the consummation of the Merger and the other
Transactions by GFP will not, (i) conflict with or violate the Articles of
Incorporation, as amended, or By-Laws, as amended, of GFP (ii) subject to (x)
obtaining GFP Stockholder Approval and (y) obtaining the consents, approvals,
authorizations and permits of, and making filings with or notifications to, any
governmental or regulatory authority, or notifications to, any governmental or
regulatory authority, domestic or foreign ("Governmental Entities"), pursuant to
the applicable requirements, if any, of the Securities Act of 1933, as amended,
and the rules and regulations thereunder (the "Securities Act"), the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"Exchange Act"), state securities or blue sky laws and the rules and regulations
thereunder ("Blue Sky Laws"), the National Association of Securities Dealers
Automated Quotation System ("Nasdaq"), the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act"), or with respect to the filing and recordation of appropriate
merger documents as required by the KRS, conflict with or violate any federal,
state, local or foreign law, statute, ordinance, rule, regulation, order,
judgment or decree (collectively, "Laws") applicable to GFP or by which any of
its respective properties are bound or affected, or (iii) other than as set
forth on the GFP Disclosure Letter, result in any breach of or constitute a
default (or an event that with
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notice or lapse of time or both would become a default) under, or give to others
any rights or termination, amendment, acceleration or cancellation of, or result
in the creation of any Lien on any of the properties or assets of GFP pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which GFP is a party or
by which GFP or any of its respective properties are bound or affected, except
for any such conflicts or violations described in clause (ii) and except for
such conflicts or violations which will not, individually or in the aggregate,
have a Material Adverse Effect on GFP.
(b) The execution and delivery of this Agreement by GFP do not, and
the performance of the Transactions by GFP will not, require any action by or in
respect of, or filing with, any Governmental Entities, except (i) for applicable
requirements, if any, of the Securities Act, Exchange Act, Blue Sky Laws, Nasdaq
or the HSR Act, and the filing and recordation of appropriate merger documents
as required by the KRS or the FBCA or (ii) where the failure to obtain such
consents, approvals or authorizations, or to make such filings, would not
adversely affect the ability of GFP to consummate, or prevent or materially
delay the consummation of, the Merger or any of the other Transactions and would
not have a Material Adverse Effect on GFP.
Section 6.05. Litigation. Except as set forth in the GFP Disclosure
Letter, there are no actions, suits, proceedings, arbitrations or investigations
pending or, to the Knowledge of GFP, threatened against GFP which if adversely
decided would individually or in the aggregate, have a Material Adverse Effect
on GFP. GFP is not subject to any judgment, order, writ, injunction, or decree
that would have a Material Adverse Effect on it.
Section 6.06. Compliance with Applicable Laws. GFP holds all permits,
licenses, variances, exemptions, orders, franchises and approvals of all
Governmental Entities necessary for the lawful conduct of its business (the "GFP
Permits"), except where the failure so to hold would not have a Material Adverse
Effect on GFP. GFP is in compliance with the terms of the GFP Permits, except
where the failure so to comply would not have a Material Adverse Effect on GFP.
To GFP's Knowledge, GFP is in material compliance with all applicable Laws. As
of the date of this Agreement, no investigation or review by any Governmental
Entity with respect to GFP is pending or, to GFP's knowledge, threatened, the
outcome of which is reasonably likely to have a Material Adverse Effect on GFP.
Section 6.07. Taxes. Each member of the consolidated group of which
GFP is a member or has ever been a member (other than Group Tech and the
Subsidiaries of Group Tech) (for purposes of this Article, the "Group") has
filed or caused to be filed all federal and state income tax returns required to
be filed and in
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which the filing included or was required to include GFP (for purposes of this
Article, "Income Tax Returns"), and all such Income Tax Returns were correct and
complete in all material respects. Each member of the Group has filed or caused
to be filed all other tax returns, including franchise, gross receipts, payroll,
sales, use, withholding, occupancy, excise, real and personal property, and
employment, required to be filed in which the filing included or was required to
include GFP or any GFP Subsidiary (other than Group Tech and the Subsidiaries of
Group Tech) (for purposes of this Article, the "Other Tax Returns") and all such
Other Tax Returns are correct and complete in all material respects, except for
inaccuracies or omissions which do not and will not have a Material Adverse
Effect on GFP. With respect to the Income Tax Returns and the Other Tax Returns,
each member of the Group has paid, or made adequate provisions for the payment
of, all material taxes, interest payments, penalties and additions shown on
such returns to be owed by it. Except as set forth on the GFP Disclosure Letter,
the Income Tax Returns of GFP have not been audited during its existence, and,
to the Knowledge of GFP, no audit, examination or investigation is threatened
against GFP by any taxing authority. No unpaid tax deficiencies or additional
liabilities have been proposed by any governmental representative which have not
been resolved; and no agreements for the extension of time for the assessment of
any amounts of tax have been entered into at the present time by or on behalf of
any member of the Group.
Section 6.08. Employee Benefits; Labor. (a) The GFP Disclosure
Letter lists each bonus, pension (as defined in ERISA), profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, providing benefits to any
current or former employee, officer or director of GFP maintained, or
contributed to, by GFP (for purposes of this Article, collectively, "Benefit
Plans"), and any employment, consulting, severance, termination or
indemnification agreement, arrangement or understanding between GFP and any
officer, director or employee of GFP.
(b) The Benefit Plans are in compliance in all material respects
with the applicable provision of ERISA, the Code and all other applicable laws.
(c) Each Benefit Plan which is an "Employee Benefit Pension Plan" as
defined in Section 3(2) of ERISA (for purposes of this Article, "Pension Plan"),
has been the subject of determination letters from the Internal Revenue Service
to the effect that such Pension Plans are qualified and exempt from Federal
income taxes under Section 401(a) and 501(a), respectively, of the Code, and no
such determination letter has been revoked nor, to the knowledge of GFP, has
revocation been threatened, nor has any such
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Pension Plan been amended since the date of its most recent determination letter
or application therefor in any respect that would adversely affect its
qualification or, materially increase its costs.
Section 6.09. Financial Statements; Undisclosed Liabilities. GFP has
made available to Group Tech: (i) the audited consolidated balance sheets of GFP
as of December 31, 1995, and the audited consolidated statements of income,
stockholders' equity and cash flows for the respective fiscal years then ended,
including the notes thereto, examined by and accompanied by the report of Ernst
& Young, independent public accountants with respect to GFP; and (ii) the
unaudited consolidated balance sheet of GFP as of September 30, 1996 and the
related unaudited consolidated statement of income and stockholders' equity for
the nine-month period ended September 30, 1996. All of the foregoing financial
statements are hereinafter collectively referred to as the "GFP Financial
Statements" and the balance sheet as of September 30, 1996 is hereinafter
referred to, for purposes of this Article, as the "1996 Balance Sheet." The GFP
Financial Statements present fairly the consolidated financial position and
consolidated results of operations of GFP as of the dates and for the periods
indicated, in each case in conformity with generally accepted accounting
principles ("GAAP"), consistently applied, except as otherwise stated in the GFP
Financial Statements. GFP does not have any material liabilities or material
obligations or commitments except those disclosed in the GFP Financial
Statements, those entered into in the ordinary course of business since
September 30, 1996, those disclosed in or permitted by other sections or
provisions of this Agreement, and those incurred in connection with the
transactions contemplated hereby.
Section 6.10. Title to Properties and Assets; Liens. Except as set
forth on the GFP Disclosure Letter, GFP has good and valid title to all of its
respective properties and assets free and clear of all Liens, except for (i)
Liens and imperfections of title that do not have a Material Adverse Effect on
GFP, and (ii) Liens reflected in the GFP Financial Statements and/or the 1996
Balance Sheet.
Section 6.11. Business Contracts. (a) The GFP Disclosure Letter
contains a list of all material contracts, leases, agreements and arrangements,
written or oral, in force on the date hereof (for purposes of this Article, the
"Business Contracts") to which GFP is a party and that after the Effective Time
will involve the payment to or from GFP amounts in excess of $100,000 in any
single case or $100,000 per year.
(b) Except as disclosed on the GFP Disclosure Letter, (i) each of the
Business Contracts, after giving effect to the consummation of the Transactions,
constitutes a valid and binding obligation of GFP, and is in full force and
effect and legally
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enforceable in all material respects in accordance with its terms against the
other parties thereto, (ii) GFP has complied with all of the material provisions
of such Business Contracts, and (iii) to GFP's Knowledge, there has not occurred
any event that (whether with or without notice, lapse of time, or the happening
or occurrence of any other event) would constitute a default thereunder. Except
as disclosed on the GFP Disclosure Letter the parties to the Business Contracts
other than GFP are not, to GFP's Knowledge, in material default under any such
Business Contract nor is GFP aware of any intent on the part of the other party
to any Business Contract to cancel or not to renew.
Section 6.12. Intangible Property. (a) Except as set forth on the GFP
Disclosure Letter, each material trademark, trade name, patent, service mark,
brand mark, brand name, computer program, database, industrial design and
copyright owned, used or useful in connection with and material to the operation
of GFP as well as all registrations thereof and pending applications therefor,
and each license or other contract relating thereto (for purposes of this
Article, collectively, the "Intangible Property") is in good standing and is
owned by GFP free and clear of any and all Liens. The use of the Intangible
Property by GFP does not conflict with, infringe upon, violate or interfere with
or constitute an appropriation of any right, title, interest or goodwill,
including, without limitation, any intellectual property right, trademark, trade
name, patent, service mark, brand mark, brand name, computer program, database,
industrial design, copyright or any pending application therefor of any other
Person and there have been no claims made and GFP has not received any notice of
any claim or otherwise knows that any of the Intangible Property is invalid or
conflicts with the asserted rights of any other Person or has not been used or
enforced or has failed to be used or enforced in a manner that would result in
the abandonment, cancellation or unenforceability of any of the Intangible
Property.
(b) To GFP's Knowledge, GFP possesses all Intangible Property
necessary for the operation of its business and has not forfeited or otherwise
relinquished any Intangible Property.
(c) All of the licenses or other contracts relating to the Intangible
Property (for purposes of this Article, collectively, the "Intangible Property
Licenses"), are in full force and effect and are valid and enforceable in all
material respects in accordance with their respective terms, and there is no
default (or any event that with notice or the lapse of time or both could become
a default) under any Intangible Property License either by GFP or, to GFP's
Knowledge, by any other party thereto.
Section 6.13. Absence of Changes or Events. Except as set forth in the
GFP Disclosure Letter, since September 30, 1996 GFP has conducted its business
only in the ordinary course, and has not:
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(a) Suffered any casualty loss or destruction which is not
covered by insurance, which would have a Material Adverse Effect on GFP;
(b) Made any declaration, setting aside or payment or any
dividend or other distribution of assets (whether in cash, stock or
property) with respect to the capital stock of GFP or any direct or
indirect redemption, purchase or other acquisition of such stock; provided
that GFP may declare and pay dividends on any outstanding GFP Common Stock
at or prior to the Closing;
(c) Materially increased the aggregate compensation payable or to
become payable to employees of GFP or materially increased any bonus,
insurance, pension or other employee benefit plan, payment or arrangement
for such employees or entered into or amended any employment, consulting,
severance or similar agreement other than increases and bonuses in the
ordinary course of GFP's business or consistent with industry practice;
(d) Paid, discharged or satisfied any claim, liability or
obligation which had a Material Adverse Effect on GFP;
(e) Sold, transferred or otherwise disposed of any of its assets
which had a Material Adverse Effect on GFP;
(f) Entered into any commitment or transaction which had a
Material Adverse Effect on GFP; or
(g) Agreed in writing, or otherwise, to take any action described
in this Section.
Section 6.14. Environmental Matters. To GFP's Knowledge, GFP is in
compliance in all material respects with all applicable federal, state and local
laws, rules, regulations, ordinances and requirements relating to health, safety
and the environment (collectively "Environmental Laws"), including but not
limited to any pertaining to Hazardous Wastes. To the extent that any violation
of such Environmental Laws by GFP may exist, such violation does not and will
not have a Material Adverse Effect on GFP.
Section 6.15. GFP Stockholder Approval. No consent or approval of the
stockholders of GFP other than the GFP Stockholder Approval is required for
approval and adoption of this Agreement and the Transactions.
Section 6.16. Proxy Statement and Registration Statement. The
information with respect to GFP, its officers, directors and affiliates in the
definitive proxy statement to be furnished to
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the stockholders of GFP (for purposes of this Article, the "Proxy Statement")
that will form a part of the Registration Statement on Form S-4 relating to the
shares of Group Tech Common stock to be issued in connection with the Merger,
the Tube Turns Merger and the Bell Merger (the "Registration Statement") or in
the Registration Statement will not, in the case of the Proxy Statement, on the
date the Proxy Statement is first mailed to stockholders of GFP or on the
effective date of the GFP Stockholder Approval, or, in the case of the
Registration Statement, at the time it becomes effective and at the Effective
Time, as such Proxy Statement or Registration Statement is then amended or
supplemented, contain any untrue statement of a material fact, or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
Section 6.17. Full Disclosure. (a) No representation or warranty of
GFP contained in this Agreement (including the exhibits and schedules hereto)
pursuant to the terms hereof contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein, in light of the circumstances under which they were made, not
misleading.
(b) From time to time prior to the Effective Time, GFP shall promptly
supplement or amend the schedules under this Article VI with respect to any
matter that, if existing or known as of the date of this Agreement, would be
required to be set forth in such schedules. Any such supplement or amendment
shall not be deemed to modify or affect the provisions of Section 11.02(b)
hereof.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF GROUP TECH
With and subject to such exceptions as are set forth in the letter
(the "Group Tech Disclosure Letter") delivered by Group Tech to GFP, Tube Turns
and Bell prior to the execution hereof, Group Tech represents and warrants to
GFP, Tube Turns and Bell as follows:
Section 7.01. Organization and Qualification. Group Tech is a
corporation duly organized, validly existing and in good standing under the laws
of Florida and has all requisite corporate power and authority to own, lease
and operate its assets, properties and business and to carry on its business as
it is now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the ownership or leasing of its
properties makes such qualification necessary, except where the failure to so
qualify would not have a Material Adverse Effect on Group Tech.
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Section 7.02. Capitalization. The authorized capital stock of Group
Tech consists of 40,000,000 shares of Group Tech Common Stock and 1,000,000
shares of preferred stock, $.01 par value, of Group Tech ("Group Tech Preferred
Stock"). As of September 30, 1996, there were (i) 16,220,629 shares of Group
Tech Common Stock issued and outstanding, all of which were duly authorized,
validly issued, fully paid and nonassessable and are not subject to any
preemptive rights, and (ii) 1,308,772 shares of unissued Group Tech Common Stock
issuable upon exercise of outstanding options under the Group Technologies
Corporation Stock Option Plan, adapted January 22, 1990, as amended, the Group
Technologies Corporation Independent Directors Stock Option Plan, as amended,
and the Group Technologies Corporation 1994 Stock Option Plan for Key Employees,
as amended, and (iii) no shares of Group Tech Preferred Stock issued and
outstanding. Except as set forth in the Group Tech Disclosure Letter, since
September 30, 1996, no shares of Group Tech Common Stock have been issued by
Group Tech, except pursuant to the exercise of outstanding options in accordance
with their terms, and no options have been granted and the vesting schedule of
any outstanding options has not been changed (in either case, whether or not
under such Group Tech stock option plan). The Group Tech Disclosure Letter sets
forth, as of the date hereof, a true and complete list of all of the
Subsidiaries of Group Tech, including the jurisdiction of incorporation or
organization of each such Subsidiary and the percentage of each such
Subsidiary's outstanding capital stock or other ownership interest owned by
Group Tech or another Subsidiary of Group Tech or by any other Person. Each of
the outstanding shares of capital stock of the Subsidiaries of Group Tech listed
on the Group Tech Disclosure Letter is duly authorized, validly issued, fully
paid and nonassessable and is not subject to any preemptive rights. Except as
set forth above and on the Group Tech Disclosure Letter there are no options,
warrants, voting agreements or other rights, agreements, arrangements or
commitments to which Group Tech or any of its Subsidiaries is a party of any
character relating to the issued or unissued capital stock of, or other equity
interests in, Group Tech or any of its Subsidiaries or obligating Group Tech or
any of its Subsidiaries to grant, issue or sell any shares of the capital stock
of, or other equity interests in, Group Tech or any of its Subsidiaries, by
sale, lease, license or otherwise.
Section 7.03. Authority. Group Tech has the requisite corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby (for purposes
of this Article, collectively, the "Transactions"). The execution and delivery
of this Agreement by Group Tech and the consummation by Group Tech of the
Transactions have been duly authorized by all necessary corporate action, and no
other corporate proceedings on the part of Group Tech are necessary to authorize
this Agreement or to consummate the Transactions (other than the Group Tech
Stockholder Approval). This Agreement has been duly executed and delivered by
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Group Tech and constitutes a legal, valid and binding obligation of Group Tech,
except that the enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
Section 7.04. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Group Tech do not, the performance
of this Agreement by Group Tech will not and the consummation of the Merger and
the other Transactions by Group Tech will not, (i) conflict with or violate the
Articles of Incorporation, as amended, or By-Laws, as amended, of Group Tech or
any of its Subsidiaries, (ii) subject to (x) obtaining Group Tech Stockholder
Approval and (y) obtaining the consents, approvals, authorizations and permits
of, and making filings with or notifications to, any Governmental Entities,
pursuant to the applicable requirements, if any, of the Securities Act, the
Exchange Act, Blue Sky Laws, Nasdaq, the HSR Act, or with respect to the filing
and recordation of appropriate merger documents as required by the KRS and the
FBCA, conflict with or violate any Laws applicable to Group Tech or any of its
Subsidiaries or by which any of their respective properties are bound or
affected, or (iii) other than as set forth on the Group Tech Disclosure Letter,
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of any Lien on any of the properties or assets of Group Tech
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Group Tech
is a party or by which Group Tech or any of its respective properties is bound
or affected, except for any such conflicts or violations described in clause
(ii) and except for such conflicts or violations which will not, individually or
in the aggregate, have a Material Adverse Effect on Group Tech.
(b) The execution and delivery of this Agreement by Group Tech do
not, and the performance of the Transactions by Group Tech will not, require any
action by or in respect of, or filing with, any Govermental Entities, except (i)
for applicable requirements, if any, of the Securities Act, Exchange Act, Blue
Sky Laws, Nasdaq or the HSR Act, and the filing and recordation of appropriate
merger documents as required by the FBCA or (ii) where the failure to obtain
such consents, approvals or authorizations, or to make such filings, would not
adversely affect the ability of Group Tech to consummate, or prevent or
materially delay the consummeration of, the Merger or materially delay the
consummation of, the Merger or any of the other Transactions and would not have
a Material Adverse Effect on Group Tech.
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Section 7.05. Litigation. Except as set forth in the Group Tech
Disclosure Letter, there are no actions, suits, proceedings, arbitrations or
investigations pending or, to the Knowledge of Group Tech, threatened against
Group Tech which if adversely decided would, individually or in the aggregate,
have a Material Adverse Effect on Group Tech. Group Tech is not subject to any
judgment, order, writ, injunction, or decree that would have a Material Adverse
Effect on it.
Section 7.06. Compliance with Applicable Laws. Group Tech holds all
permits, licenses, variances, exemptions, orders, franchises and approvals of
all Governmental Entities necessary for the lawful conduct of its business (the
"Group Tech Permits"), except where the failure so to hold would not have a
Material Adverse Effect on Group Tech. Group Tech is in compliance with the
terms of the Group Tech Permits, except where the failure so to comply would not
have a Material Adverse Effect on Group Tech. To Group Tech's Knowledge, Group
Tech is in material compliance with all applicable Laws. As of the date of this
Agreement, no investigation or review by any Governmental Entity with respect to
Group Tech is pending or, to Group Tech's knowledge threatened, the outcome of
which is reasonably likely to have a Material Adverse Effect on Group Tech.
Section 7.07. Taxes. Group Tech has filed or caused to be filed all
federal and state income tax returns required to be filed and in which the
filing included or was required to include Group Tech (for purposes of this
Article, "Income Tax Returns"), and all such Income Tax Returns were correct and
complete in all material respects. Group Tech has filed or caused to be filed
all other tax returns, including franchise, gross receipts, payroll, sales, use,
withholding, occupancy, excise, real and personal property, and employment,
required to be filed in which the filing included or was required to include
Group Tech or any Group Tech Subsidiary (for purposes of this Article, the
"Other Tax Returns") and all such Other Tax Returns are correct and complete in
all material respects, except for inaccuracies or omissions which do not and
will not have a Material Adverse Effect on Group Tech. With respect to the
Income Tax Returns and the Other Tax Returns, Group Tech has paid, or made
adequate provisions for the payment of, all material taxes, interest payments,
penalties and additions shown on such returns to be owed by it. The Income Tax
Returns of Group Tech have not been audited during its existence, and, to the
Knowledge of Group Tech, no audit, examination or investigation is threatened
against Group Tech by any taxing authority. No unpaid tax deficiencies or
additional liabilities have been proposed by any governmental representative
which have not been resolved; and no agreements for the extension of time for
the assessment of any amounts of tax have been entered into at the present time
by or on behalf of Group Tech.
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Section 7.08. Employee Benefits; Labor. (a) The Group Tech Disclosure
Letter lists each bonus, pension (as defined in ERISA), profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, providing benefits to any
current or former employee, officer or director of Group Tech maintained, or
contributed to, by Group Tech (for purposes of this Article, collectively,
"Benefit Plans"), and any employment, consulting, severance, termination or
indemnification agreement, arrangement or understanding between Group Tech and
any officer, director or employee of Group Tech.
(b) The Benefit Plans are in compliance in all material respects with
the applicable provisions of ERISA, the Code and all other applicable laws.
(c) Each Benefit Plan which is an "Employee Benefit Pension Plan" as
defined in Section 3(2) of ERISA (for purposes of this Article, "Pension Plan"),
has been the subject of determination letters from the Internal Revenue Service
to the effect that such Pension Plans are qualified and exempt from Federal
income taxes under Section 401(a) and 501(a), respectively, of the Code, and no
such determination letter has been revoked nor, to the knowledge of Group Tech,
has revocation been threatened, nor has any such Pension Plan been amended since
the date of its most recent determination letter or application therefor in any
respect that would adversely affect its qualification or, materially increase
its costs.
Section 7.09. Title to Properties and Assets; Liens. Except as set
forth on the Group Tech Disclosure Letter, Group Tech has good, valid and
marketable title to, or valid and subsisting leasehold interests in, all of its
respective properties and assets, reflected in the Group Tech Financial
Statements (hereinafter defined) or acquired since September 30, 1996, free and
clear of all Liens, except for (i) Liens and imperfections of title that do not
materially interfere with the present use by Group Tech of the property subject
thereto or affected thereby or that otherwise do not have a Material Adverse
Effect on Group Tech, (ii) Liens for assessments or governmental charges, or
landlords', mechanics', workmen's, materialmen's or similar liens, in each case
that are not delinquent or that are being contested in good faith and (iii)
Liens reflected in the Group Tech Financial Statements.
Section 7.10. Business Contracts. (a) The Group Tech Disclosure
Letter contains a list of all material contracts, leases, agreements and
arrangements, written or oral, in force on the date hereof (for purposes of this
Article, the "Business Contracts") to which Group Tech is a party and that after
the Effective Time will involve the payment to or from Group Tech
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amounts in excess of $500,000 in any single case or $500,000 per year.
(b) Except as disclosed on the Group Tech Disclosure Letter, (i) each
of the Business Contracts, after giving effect to the consummation of the
Transactions, constitutes a valid and binding obligation of Group Tech, and is
in full force and effect and legally enforceable in all material respects in
accordance with its terms against the other parties thereto, (ii) Group Tech has
complied with all of the material provisions of such Business Contracts, and
(iii) to Group Tech's Knowledge, there has not occurred any event that (whether
with or without notice, lapse of time, or the happening or occurrence of any
other event) would constitute a default thereunder. Except as disclosed on the
Group Tech Disclosure Letter, the parties to the Business Contracts other than
Group Tech are not, to Group Tech's knowledge, in material default under any
such Business Contract nor is Group Tech aware of any intent on the part of the
other party to any Business Contract to cancel or not to renew.
Section 7.11. Intangible Property. (a) Except as set forth on the
Group Tech Disclosure Letter, each material trademark, trade name, patent,
service mark, brand name, computer program, database, industrial design and
copyright owned, used or useful in connection with and material to the operation
of Group Tech as well as all registrations thereof and pending applications
therefor, and each license or other contract relating thereto (for purposes of
this Article, collectively, the "Intangible Property") is in good standing and
is owned by Group Tech free and clear of any and all Liens. The use of the
Intangible Property by Group Tech does not conflict with, infringe upon, violate
or interfere with or constitute an appropriation of any right, title, interest
or goodwill, including, without limitation, any intellectual property right,
trademark, trade name, patent, service mark, brand mark, brand name, computer
program, database, industrial design, copyright or any pending application
therefor of any other Person and there have been no claims made and Group Tech
has not received any notice of any claim or otherwise knows that any of the
Intangible Property is invalid or conflicts with the asserted rights of any
other Person or has not been used or enforced or has failed to be used or
enforced in a manner that would result in the abandonment, cancellation or
unenforceability of any of the Intangible Property.
(b) To Group Tech's Knowledge, Group Tech possesses all Intangible
Property necessary for the operation of its business and has not forfeited or
otherwise relinquished any Intangible Property.
(c) All of the licenses or other contracts relating to the Intangible
Property (for purposes of this Article, collectively, the "Intangible Property
Licenses") are in full force and
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effect and are valid and enforceable in all material respects in accordance with
their respective terms, and there is no default (or any event that with notice
or the lapse of time or both could become a default) under any Intangible
Property License either by Group Tech or, to Group Tech's Knowledge, by any
other party thereto.
Section 7.12. Absence of Changes or Events. Except as set forth in
the Group Tech Disclosure Letter, since September 30, 1996 Group Tech has
conducted its business only in the ordinary course, and has not:
(a) Suffered any casualty loss or destruction which is not
covered by insurance, which would have a Material Adverse Effect on Group
Tech;
(b) Made any declaration, setting aside or payment of any
dividend or other distribution of assets (whether in cash, stock or
property) with respect to the capital stock of Group Tech or any direct or
indirect redemption, purchase or other acquisition of such stock; provided
that Group Tech may declare and pay dividends on any outstanding Group Tech
Common Stock at or prior to the Closing;
(c) Materially increased the aggregate compensation payable or to
become payable to employees of Group Tech or materially increased any
bonus, insurance, pension or other employee benefit plan, payment or
arrangement for such employees or entered into or amended any employment,
consulting, severance or similar agreement other than increases and bonuses
in the ordinary course of Group Tech's business or consistent with industry
practice;
(d) Paid, discharged or satisfied any claim, liability or
obligation which had a Material Adverse Effect on Group Tech;
(e) Sold, transferred or otherwise disposed of any of its assets
which had a Material Adverse Effect on Group Tech;
(f) Entered into any commitment or transaction which had a
Material Adverse Effect on Group Tech; or
(g) Agreed in writing, or otherwise, to take any action described
in this Section.
Section 7.13. Environmental Matters. To Group Tech's Knowledge, Group
Tech is in compliance in all material respects with all Environmental Laws,
including but not limited to any pertaining to Hazardous Wastes. To the extent
that any violation
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of such Environmental Laws by Group Tech may exist, such violation does not and
will not have a Material Adverse Effect on Group Tech.
Section 7.14. Group Tech Stockholder Approval. No consent or approval
of the stockholders of Group Tech other than the Group Tech Stockholder Approval
is required for approval and adoption of this Agreement and the Transactions.
Section 7.15. Insurance. The Group Tech Disclosure Letter sets forth
all material insurance policies, including property, casualty, liability and
other insurance maintained with respect to the assets or businesses of Group
Tech. To the Knowledge of Group Tech, all such policies and bonds are legal,
valid and enforceable and in full force and effect and Group Tech is not in
breach or default in any material respect (including with respect to the payment
of premiums or the giving of notices) and no event has occurred which, with
notice or the lapse of time, would constitute such a material breach or default,
or permit termination, modification or acceleration under the policy by the
insurer.
Section 7.16. Proxy Statement and Registration Statement. The
information with respect to Group Tech, its officers, directors and affiliates
in the definitive information statement to be furnished to the stockholders of
Group Tech (for purposes of this Article, the "Proxy Statement") that will form
a part of the Registration Statement or in the Registration Statement will not,
in the case of the Proxy Statement, on the date the Proxy Statement is first
mailed to stockholders of Group Tech or on the effective date of the Group Tech
Stockholder Approval, or, in the case of the Registration Statement, at the time
it becomes effective and at the Effective Time, as such Proxy Statement or
Registration Statement is then amended or supplemented, contain any untrue
statement of a material fact, or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section 7.17. Group Tech Commission Reports and Financial Statements.
Group Tech has heretofore made available to GFP, Tube Turns and Bell (i) Group
Tech's annual report on Form 10-K for the year ended December 31, 1995,
including all exhibits thereto and items incorporated therein by reference, (ii)
Group Tech's quarterly report on Form 10-Q for the quarter ended September 30,
1996, including all exhibits thereto and items incorporated therein by
reference, (iii) the proxy statement relating to Group Tech's most recent annual
meeting of stockholders, and (iv) all current reports on Form 8-K filed by Group
Tech with the SEC since December 31, 1995, including all exhibits thereto and
items incorporated therein by reference (items (i) through (iv) in this sentence
being referred to herein collectively as the "Group Tech Commission Reports").
As of their respective dates, the Group Tech Commission Reports did not contain
any untrue
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statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Since December 31,
1995, Group Tech has filed all forms, reports and documents with the SEC
required to be filed by it pursuant to the Securities Laws each of which
complied as to form, at the time such form, document or report was filed, in all
material respects with the applicable requirements of the Securities Laws,
including, but not limited to, Regulation S-X, promulgated under the Exchange
Act.
The consolidated balance sheets of Group Tech and Group Tech
Subsidiaries as of December 31, 1994 and December 31, 1995 and the related
statements of operations, changes in shareholders' equity and cash flows for the
years ended December 31, 1994 and December 31, 1995, together with the notes
thereto, are included in Group Tech's annual reports on Form 10-K for the fiscal
years ended December 31, 1994 and December 31, 1995, respectively, as filed with
the SEC, and the unaudited consolidated balance sheets of Group Tech and Group
Tech Subsidiaries as of March 31, 1996, June 30, 1996 and September 30, 1996,
and the related unaudited statements of operations, changes in shareholders'
equity and cash flows for the periods then ended are included in Group Tech's
quarterly reports on Form 10-Q for the quarters ended March 31, 1996, June 30,
1996 and September 30, 1996, respectively, as filed with the SEC (together, the
"Group Tech Financial Statements"). The Group Tech Financial Statements have
been prepared in accordance with GAAP applied on a consistent basis (except as
disclosed therein) and fairly present, in all material respects, the
consolidated financial position and the consolidated results of operations,
changes in shareholders' equity and cash flows of Group Tech and consolidated
Group Tech Subsidiaries as of the dates and for the periods indicated (subject,
in the case of interim financial statements, to normal recurring year-end
adjustments, none of which are expected to be material, and the absence of
footnote disclosure). Group Tech and Group Tech Subsidiaries do not have any
material liabilities or material obligations, except those disclosed in the
Group Tech Financial Statements, those entered into in the ordinary course of
business since September 30, 1996, those disclosed or permitted by other
sections or provisions of this Agreement and those incurred in conjunction with
the transactions contemplated hereby.
Section 7.18. Fairness Opinion. The Board of Directors of Group Tech
has received a written opinion, dated the date hereof, from J.C. Bradford &
Company to the effect that, from a financial point of view, the Merger, the Tube
Turns Merger and the Bell Merger are fair to Group Tech and its shareholders
(other than GFP).
Section 7.19. Full Disclosure. (a) No representation or warranty of
Group Tech contained in this Agreement (including
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the exhibits and schedules hereto) pursuant to the terms hereof contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein, in light of the circumstances under
which they were made, not misleading and, to Group Tech's Knowledge, there is no
fact material to its business that has not been disclosed pursuant to this
Agreement.
(b) From time to time prior to the Effective Time, Group Tech shall
promptly supplement or amend the schedules under this Article VII with respect
to any matter that, if existing or known as of the date of this Agreement,
would be required to be set forth in such schedules. Any such supplement or
amendment shall not be deemed to modify or affect the provisions of Section
11.03(b) hereof.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF TUBE TURNS
With and subject to such exceptions as are set forth in the letter
(the "Tube Turns Disclosure Letter") delivered by Tube Turns to Group Tech prior
to the execution hereof, Tube Turns represents and warrants to Group Tech as
follows:
Section 8.01. Organization and Qualification. Tube Turns is a
corporation duly organized, validly existing and in good standing under the laws
of Kentucky and has all requisite corporate power and authority to own, lease
and operate its assets, properties and business and to carry on its business as
it is now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the ownership or leasing of its
properties makes such qualification necessary, except where the failure to so
qualify would not have a Material Adverse Effect on Tube Turns.
Section 8.02. Capitalization. The authorized capital stock of Tube
Turns consists of 2,000,000 shares of Tube Turns Common Stock. As of September
30, 1996, there were (i) 1,338,670 shares of Tube Turns Common Stock issued and
outstanding, all of which were duly authorized, validly issued, fully paid and
nonassessable and are not subject to any preemptive rights, and (ii) 55,000
shares of unissued Tube Turns Common Stock issuable upon exercise of outstanding
options under the Tube Turns Technologies, Inc. Stock Option Plan. Except as set
forth in the Tube Turns Disclosure Letter, since September 30, 1996, no shares
of Tube Turns Common Stock have been issued by Tube Turns, except pursuant to
the exercise of outstanding options in accordance with their terms, and no
options have been granted and the vesting schedule of any outstanding options
has not been changed (in either case, whether or not under such Tube Turns stock
option plan). The
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Tube Turns Disclosure Letter sets forth, as of the date hereof, a true and
complete list of all of the Subsidiaries of Tube Turns, including the
jurisdiction of incorporation or organization of each such Subsidiary and the
percentage of each such Subsidiary's outstanding captial stock or other
ownership interest owned by Tube Turns or another Subsidiary of Tube Turns or by
any other Person. Each of the outstanding shares of capital stock of the
Subsidiaries of Tube Turns listed on the Tube Turns Disclosure Letter is duly
authorized, validly issued, fully paid and nonassessable and is not subject to
any preemptive rights. Except as set forth above, there are no options,
warrants, voting agreements or other rights, agreements, arrangements or
commitments to which Tube Turns is a party of any character relating to the
issued or unissued capital stock of, or other equity interests in, Tube Turns or
obligating Tube Turns to grant, issue or sell any shares of the capital stock
of, or other equity interests in, Tube Turns by sale, lease, license or
otherwise.
Section 8.03. Authority. Tube Turns has the requisite corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby
(for purposes of this Article, collectively, the "Transactions"). The execution
and delivery of this Agreement by Tube Turns and the consummation by Tube Turns
of the Transactions have been duly authorized by all necessary corporate action,
and no other corporate proceedings on the part of Tube Turns are necessary to
authorize this Agreement or to consummate the Transactions (other than the Tube
Turns Stockholder Approval). This Agreement has been duly executed and delivered
by Tube Turns and constitutes a legal, valid and binding obligation of Tube
Turns, except that the enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
Section 8.04. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Tube Turns do not, the performance
of this Agreement by Tube Turns will not and the consummation of the Tube Turns
Merger and the other Transactions by Tube Turns will not, (i) conflict with or
violate the Certificate of Incorporation, as amended, or By-Laws, as amended, of
Tube Turns (ii) subject to (x) obtaining Tube Turns Stockholders Approval and
(y) obtaining the consents, approvals, authorizations and permits of, and making
filings with or notifications to, any Governmental Entities, pursuant to the
applicable requirements, if any, of the Securities Act, the Exchange Act, Blue
Sky Laws, Nasdaq, the HSR Act, or with respect to the filing and recordation of
appropriate merger documents as required by the KRS, conflict with or violate
any Laws applicable to Tube Turns or by which any of their respective properties
are bound or affected, or
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(iii) other than as set forth on the Tube Turns Disclosure Letter, result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of any Lien on any of the properties or assets of Tube Turns pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Tube Turns is a
party or by which Tube Turns or any of its respective properties is bound or
affected, except for any such conflicts or violations described in clause (ii)
and except for such conflicts or violations which will not, individually or in
the aggregate, have a Material Adverse Effect on Tube Turns.
(b) The execution and delivery of this Agreement by Tube Turns do not,
and the performance of the Transactions by Tube Turns will not, require any
action by or in respect of, or filing with, any Governmental Entities, except
(i) for applicable requirements, if any, of the Securities Act, Exchange Act,
Blue Sky Laws, Nasdaq or the HSR Act, and the filing and recordation of
appropriate merger documents as required by the KRS or (ii) where the failure to
obtain such consents, approvals or authorizations, or to make such filings,
would not adversely affect the ability of Tube Turns to consummate, or prevent
or materially delay the consummation of, the Tube Turns Merger or any of the
other Transactions and would not have a Material Adverse Effect on Tube Turns.
Section 8.05. Litigation. Except as set forth in the Tube Turns
Disclosure Letter, there are no actions, suits, proceedings, arbitrations or
investigations pending or, to the Knowledge of Tube Turns, threatened against
Tube Turns which if adversely decided would individually or in the aggregate,
have a Material Adverse Effect on Tube Turns. Tube Turns is not subject to any
judgment, order, writ, injunction, or decree that would have a Material Adverse
Effect on it.
Section 8.06. Compliance with Applicable Laws. Tube Turns holds all
permits, licenses, variances, exemptions, orders, franchises and approvals of
all Governmental Entities necessary for the lawful conduct of its business (the
"Tube Turns Permits"), except where the failure so to hold would not have a
Material Adverse Effect on Tube Turns. Tube Turns is in compliance with the
terms of the Tube Turns Permits, except where the failure so to comply would not
have a Material Adverse Effect on Tube Turns. To Tube Turns' Knowledge, Tube
Turns is in material compliance with all applicable Laws. As of the date of this
Agreement, no investigation or review by any Governmental Entity with respect to
Tube Turns is pending or, to Tube Turns' knowledge, threatened, the outcome of
which is reasonably likely to have a Material Adverse Effect on Tube Turns.
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Section 8.07. Taxes. Tube Turns has filed or caused to be filed all
federal and state income tax returns required to be filed and in which the
filing included or was required to include Tube Turns (for purposes of this
Article, "Income Tax Returns"), and all such Income Tax Returns were correct and
complete in all material respects. Tube Turns has filed or caused to be filed
all other tax returns, including franchise, gross receipts, payroll, sales, use,
withholding, occupancy, excise, real and personal property, and employment,
required to be filed in which the filing included or was required to include
Tube Turns or any Tube Turns Subsidiary (for purposes of this Article, the
"Other Tax Returns") and all such Other Tax Returns are correct and complete in
all material respects, except for inaccuracies or omissions which do not and
will not have a Material Adverse Effect on Tube Turns. With respect to the
Income Tax Returns and the Other Tax Returns, Tube Turns has paid, or made
adequate provisions for the payment of, all material taxes, interest payments,
penalties and additions shown on such returns to be owed by it. The Income Tax
Returns of Tube Turns have not been audited during its existence, and, to the
Knowledge of Tube Turns, no audit, examination or investigation is threatened
against Tube Turns by any taxing authority. No unpaid tax deficiencies or
additional liabilities have been proposed by any governmental representative
which have not been resolved; and no agreements for the extension of time for
the assessment of any amounts of tax have been entered into at the present time
by or on behalf of Tube Turns.
Section 8.08. Employee Benefits; Labor. (a) The Tube Turns Disclosure
Letter lists each bonus, pension (as defined in ERISA), profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, providing benefits to any
current or former employee, officer or director of Tube Turns maintained, or
contributed to, by Tube Turns (for purposes of this Article, collectively,
"Benefit Plans"), and any employment, consulting, severance, termination or
indemnification agreement, arrangement or understanding between Tube Turns and
any officer, director or employee of Tube Turns.
(b) The Benefit Plans are in compliance in all material respects with
the applicable provisions of ERISA, the Code and all other applicable laws.
(c) Each Benefit Plan which is an "Employee Benefit Pension Plan" as
defined in Section 3(2) of ERISA (for purposes of this Article, "Pension Plan"),
has been the subject of determination letters from the Internal Revenue Service
to the effect that such Pension Plans are qualified and exempt from Federal
income taxes under Section 401(a) and 501(a), respectively, of the Code, and no
such determination letter has been revoked nor, to the Knowledge of Tube Turns,
has revocation been threatened, nor has
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any such Pension Plan been amended since the date of its most recent
determination letter or application therefor in any respect that would adversely
affect its qualification or, materially increase its costs.
Section 8.09. Financial Statements; Undisclosed Liabilities. Tube
Turns has made available to Group Tech: (i) the unaudited balance sheets of Tube
Turns as of December 31, 1995, and the unaudited statements of income,
stockholders' equity and cash flows for the respective fiscal years then ended;
and (ii) the unaudited balance sheet of Tube Turns as of September 30, 1996 and
the related unaudited statement of income and stockholders' equity for the nine-
months period ended September 30, 1996. All of the foregoing financial
statements are hereinafter collectively referred to as the "Tube Turns Financial
Statements" and the balance sheet as of September 30, 1996 is hereinafter
referred to, for purposes of this Article, as the "1996 Balance Sheet." The Tube
Turns Financial Statements present fairly the financial position and results of
operations of Tube Turns as of the dates and for the periods indicated, in each
case in conformity with GAAP, consistently applied, except as otherwise stated
in the Tube Turns Financial Statements. Tube Turns does not have any material
liabilities or material obligations or commitments except those disclosed in the
Tube Turns Financial Statements, those entered into in the ordinary course of
business since September 30, 1996, those disclosed in or permitted by other
sections or provisions of this Agreement, and those incurred in connection with
the transactions contemplated hereby.
Section 8.10. Title to Properties and Assets; Liens. Except as set
forth on the Tube Turns Disclosure Letter, Tube Turns has good, valid and
marketable title to, or valid and subsisting leasehold interests in, all of its
respective properties and assets, reflected in the Tube Turns Financial
Statements and/or the 1996 Balance Sheet or acquired since the date of the 1996
Balance Sheet, free and clear of all Liens, except for (i) Liens and
imperfections of title that do not materially interfere with the present use by
Tube Turns of the property subject thereto or affected thereby or that otherwise
do not have a Material Adverse Effect on Tube Turns, (ii) Liens for assessments
or governmental charges, or landlords', mechanics', workmen's, materialmen's or
similar liens, in each case that are not delinquent or that are being contested
in good faith and (iii) Liens reflected in the Tube Turns Financial Statements
and/or the 1996 Balance Sheet.
Section 8.11. Business Contracts. (a) The Tube Turns Disclosure Letter
contains a list of all material contracts, leases, agreements and arrangements,
written or oral, in force on the date hereof (for purposes of this Article, the
"Business Contracts") to which Tube Turns is a party and that after the
Effective Time will involve the payment to or from Tube Turns
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amounts in excess of $500,000 in any single case or $1,000,000 per year.
(b) Except as disclosed on the Tube Turns Disclosure Letter, (i) each
of the Business Contracts, after giving effect to the consummation of the
Transactions, constitutes a valid and binding obligation of Tube Turns, and is
in full force and effect and legally enforceable in all material respects in
accordance with its terms against the other parties thereto, (ii) Tube Turns has
complied with all of the material provisions of such Business Contracts, and
(iii) to Tube Turns' Knowledge, there has not occurred any event that (whether
with or without notice, lapse of time, or the happening or occurrence of any
other event) would constitute a default thereunder. Except as disclosed on the
Tube Turns Disclosure Letter, the parties to the Business Contracts other than
Tube Turns are not, to Tube Turns' Knowledge, in material default under any such
Business Contracts nor is Tube Turns aware of any intent on the part of the
other party to any Business Contract to cancel or not to renew.
Section 8.12. Intangible Property. (a) Except as set forth on the Tube
Turns Disclosure Letter, each material trademark, trade name, patent, service
mark, brand mark, brand name, computer program, database, industrial design and
copyright owned, used or useful in connection with and material to the operation
of Tube Turns as well as all registrations thereof and pending applications
therefor, and each license or other contract relating thereto (for purposes of
this Article, collectively, the "Intangible Property") is in good standing and
is owned by Tube Turns free and clear of any and all Liens. The use of the
Intangible Property by Tube Turns does not conflict with, infringe upon, violate
or interfere with or constitute an appropriation of any right, title, interest
or goodwill, including, without limitation, any intellectual property right,
trademark, trade name, patent, service mark, brand mark, brand name, computer
program, database, industrial design, copyright or any pending application
therefor of any other Person and there have been no claims made and Tube Turns
has not received any notice of any claim or otherwise knows that any of the
Intangible Property is invalid or conflicts with the asserted rights of any
other Person or has not been used or enforced or has failed to be used or
enforced in a manner that would result in the abandonment, cancellation or
unenforceability of any of the Intangible Property.
(b) To Tube Turns' Knowledge, Tube Turns possesses all Intangible
Property necessary for the operation of its business and has not forfeited or
otherwise relinquished any Intangible Property.
(c) All of the licenses or other contracts relating to the Intangible
Property (for purposes of this Article, collectively, the "Intangible Property
Licenses") are in full force and
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effect and are valid and enforceable in all material respects in accordance with
their respective terms, and there is no default (or any event that with notice
or the lapse of time or both could become a default) under any Intangible
Property License either by Tube Turns or, to Tube Turns' Knowledge, by any other
party thereto.
Section 8.13. Absence of Changes or Events. Except as set forth in the
Tube Turns Disclosure Letter, since September 30, 1996 Tube Turns has conducted
it business only in the ordinary course, and has not:
(a) Suffered any casualty loss or destruction which is not
covered by insurance, which would have a Material Adverse Effect on Tube
Turns;
(b) Made any declaration, setting aside or payment of any
dividend or other distribution of assets (whether in cash, stock or
property) with respect to the capital stock of Tube Turns or any direct or
indirect redemption, purchase or other acquisition of such stock; provided
that Tube Turns may declare and pay dividends on any outstanding Tube Turns
Common Stock at or prior to the Closing;
(c) Materially increased the aggregate compensation payable or to
become payable to employees of Tube Turns or materially increased any
bonus, insurance, pension or other employee benefit plan, payment or
arrangement for such employees or entered into or amended any employment,
consulting, severance or similar agreement other than increases and bonuses
in the ordinary course of Tube Turns' business or consistent with industry
practice;
(d) Paid, discharged or satisfied any claim, liability or
obligation which had a Material Adverse Effect on Tube Turns;
(e) Sold, transferred or otherwise disposed of any of its assets
which had a Material Adverse Effect on Tube Turns;
(f) Entered into any commitment or transaction which had a
Material Adverse Effect on Tube Turns; or
(g) Agreed in writing, or otherwise, to take any action
described in this Section.
Section 8.14. Environmental Matters. To Tube Turns' Knowledge, Tube
Turns is in compliance in all material respects with all Environmental Laws,
including but not limited to any pertaining to Hazardous Wastes. To the extent
that any violation
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of such Environmental Laws by Tube Turns may exist, such violation does not and
will not have a Material Adverse Effect on Tube Turns.
Section 8.15. Tube Turns Stockholder Approval. No consent or approval
of the stockholders of Tube Turns other than the Tube Turns Stockholder Approval
is required for approval and adoption of this Agreement and the Transactions.
Section 8.16. Insurance. The Tube Turns Disclosure Letter sets forth
all material insurance policies, including property, casualty, liability and
other insurance maintained with respect to the assets or businesses of Tube
Turns. To the Knowledge of Tube Turns, all such policies and bonds are legal,
valid and enforceable and in full force and effect and Tube Turns is not in
breach or default in any material respect (including with respect to the payment
of premiums or the giving of notices) and no event has occurred which, with
notice or the lapse of time, would constitute such a material breach or default,
or permit termination, modification or acceleration under the policy by the
insurer.
Section 8.17. Proxy Statement and Registration Statement. The
information with respect to Tube Turns, its officers, directors and affiliates
in the definitive information statement to be furnished to the stockholders of
Tube Turns (for purposes of this Article, the "Proxy Statement") that will form
a part of the Registration Statement or in the Registration Statement will not,
in the case of the Proxy Statement, on the date the Proxy Statement is first
mailed to stockholders of Tube Turns or on the effective date of the Tube Turns
Stockholder Approval, or, in the case of the Registration Statement, at the time
it becomes effective and at the Effective Time, as such Proxy Statement or
Registration Statement is then amended or supplemented, contain any untrue
statement of a material fact, or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section 8.18. Full Disclosure. (a) No representation or warranty of
Tube Turns contained in this Agreement (including the exhibits and schedules
hereto) pursuant to the terms hereof contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein, in light of the circumstances under which they were made, not
misleading.
(b) From time to time prior to the Effective Time, Tube Turns shall
promptly supplement or amend the schedules under this Article VIII with respect
to any matter that, if existing or known as of the date of this Agreement, would
be required to be set forth in such schedules. Any such supplement or amendment
shall not be deemed to modify or affect the provisions of Section 11.02(b)
hereof.
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ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF BELL
With and subject to such exceptions as are set forth in the letter
(the "Bell Disclosure Letter") delivered by Bell to Group Tech prior to the
execution hereof, Bell represents and warrants to Group Tech as follows:
Section 9.01. Organization and Qualification. Bell is a corporation
duly organized, validly existing and in good standing under the laws of Florida
and has all requisite corporate power and authority to own, lease and operate
its assets, properties and business and to carry on its business as it is now
being conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which the ownership or leasing of its properties makes such
qualification necessary, except where the failure to so qualify would not have a
Material Adverse Effect on Bell.
Section 9.02. Capitalization. The authorized capital stock of Bell
consists of 1,500,000 shares of Bell Common Stock. As of September 30, 1996
there were (i) 907,489 shares of Bell Common Stock issued and outstanding, all
of which were duly authorized, validly issued, fully paid and nonassessable and
are not subject to any preemptive rights, and (ii) 109,650 shares of unissued
Bell Common Stock issuable upon exercise of outstanding options under the F.W.
Bell, Inc. Stock Option Plan dated January 24, 1990, the F.W. Bell, Inc.
1995 Stock Option Plan for Key Employees and the F.W. Bell, Inc.
Independent Directors Stock Option Plan. Except as set forth in the Bell
Disclosure Letter, since September 30, 1996, no shares of Bell Common Stock have
been issued by Bell, except pursuant to the exercise of outstanding options in
accordance with their terms, and no options have been granted and the vesting
schedule of any outstanding options has not been changed (in either case,
whether or not under such Bell stock option plan). The Bell Disclosure Letter
sets forth, as of the date hereof, a true and complete list of all of the
Subsidiaries of Bell, including the jurisdiction of incorporation or
organization of each such Subsidiary and the percentage of each such
Subsidiary's outstanding capital stock or other ownership interest owned by Bell
or another Subsidiary of Bell or by any other Person. Each of the outstanding
shares of capital stock of the Subsidiaries of Bell listed on the Bell
Disclosure Letter is duly authorized, validly issued, fully paid and
nonassessable and is not subject to any preemptive rights. Except as set forth
above, there are no options, warrants, voting agreements or other rights,
agreements, arrangements or commitments to which Bell is a party of any
character relating to the issued or unissued capital stock of, or other equity
interests in, Bell or obligating Bell to grant, issue or sell any shares of the
capital stock of, or other equity interests in, Bell by sale, lease, license or
otherwise.
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Section 9.03. Authority. Bell has the requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby (for purposes
of this Article, collectively, the "Transactions"). The execution and delivery
of this Agreement by Bell and the consummation by Bell of the Transactions have
been duly authorized by all necessary corporate action, and no other corporate
proceedings on the part of Bell are necessary to authorize this agreement or to
consummate the transactions (other than, in the case of the Bell Merger, the
approval of the majority of the outstanding shares of Bell Common Stock (the
"Bell Stockholder Approval"). This Agreement has been duly executed and
delivered by Bell and constitutes a legal, valid and binding obligation of Bell,
except that the enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
Section 9.04. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Bell do not, the performance of this
Agreement by Bell will not and the consummation of the Bell Merger and the other
Transactions by Bell will not, (i) conflict with or violate the Articles of
Incorporation, as amended, or By-Laws, as amended, of Bell (ii) subject to (x)
obtaining Bell Stockholder Approval and (y) obtaining the consents, approvals,
authorizations and permits of, and making filings with or notifications to, any
Governmental Entities, pursuant to the applicable requirements, if any, of the
Securities Act, the Exchange Act, Blue Sky Laws, Nasdaq, the HSR Act, or with
respect to the filing and recordation of appropriate merger documents as
required by the FBCA, conflict with or violate any Laws applicable to Bell or by
which any of their respective properties are bound or affected, or (iii) other
than as set forth on the Bell Disclosure Letter, result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of any
lien on any of the properties or assets of Bell pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Bell is a party or by which Bell or any
of its respective properties is bound or affected, except for any such conflicts
or violations described in clause (ii) and except for such conflicts or
violations which will not, individually or in the aggregate, have a Material
Adverse Effect on Bell.
(b) The execution and delivery of this Agreement by Bell do not, and
the performance of the Transactions by Bell will not, require any action by or
in respect of, or filing with, any Governmental Entities, except (i) for
applicable requirements, if
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any, of the Securities Act, Exchange Act, Blue Sky Laws, Nasdaq or the HSR Act,
and the filing and recordation of appropriate merger documents as required by
the FBCA or (ii) where the failure to obtain such consents, approvals or
authorizations, or to make such filings, would not adversely affect the ability
of Bell to consummate, or prevent or materially delay the consummation of, the
Bell Merger or any of the other Transactions and would not have a Material
Adverse Effect on Bell.
Section 9.05. Litigation. Except as set forth in the Bell Disclosure
Letter, there are no actions, suits proceedings, arbitrations or investigations
pending or, to the Knowledge of Bell, threatened against Bell which if adversely
decided would individually or in the aggregate, have a Material Adverse Effect
on Bell. Bell is not subject to any judgment, order, writ, injunction, or decree
that would have a Material Adverse Effect on it.
Section 9.06. Compliance with Applicable Laws. Bell holds all permits,
licenses, variances, exemptions, orders, franchises and approvals of all
Governmental Entities necessary for the lawful conduct of its business (the
"Bell Permits"), except where the failure so to hold would not have a Material
Adverse Effect on Bell. Bell is in compliance with the terms of the Bell
Permits, except where the failure so to comply would not have a Material Adverse
Effect on Bell. To Bell's Knowledge, Bell is in material compliance with all
applicable Laws. As of the date of this Agreement, no investigation or review by
any Governmental Entity with respect to Bell is pending or, to Bell's knowledge,
threatened, the outcome of which is reasonably likely to have a Material Adverse
Effect on Bell.
Section 9.07. Taxes. Bell has filed or caused to be filed all federal
and state income tax returns required to be filed and in which the filing
included or was required to include Bell (for purposes of this Article, "Income
Tax Returns"), and all such Income Tax Returns were correct and complete in all
material respects. Bell has filed or caused to be filed all other tax returns,
including franchise, gross receipts, payroll, sales, use, withholding,
occupancy, excise, real and personal property, and employment, required to be
filed in which the filing included or was required to include Bell or any Bell
Subsidiary (for purposes of this Article, the "Other Tax Returns") and all such
Other Tax Returns are correct and complete in all material respects, except for
inaccuracies or omissions which do not and will not have a Material Adverse
Effect on Bell. With respect to the Income Tax Returns and the Other Tax
Returns, Bell has paid, or made adequate provisions for the payment of, all
material taxes, interest payments, penalties and additions shown on such returns
to be owed by it. The Income Tax Returns of Bell have not been audited during
its existence, and, to the Knowledge of Bell, no audit, examination or
investigation is threatened against Bell by any taxing authority. No unpaid tax
deficiencies or additional liabilities have been
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proposed by any governmental representative which have not been resolved; and no
agreements for the extension of time for the assessment of any amounts of tax
have been entered into at the present time by or on behalf of Bell.
Section 9.08. Employee Benefits; Labor. (a) The Bell Disclosure
Letter lists each bonus, pension (as defined in ERISA), profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, providing benefits to any
current or former employee, officer or director of Bell maintained, or
contributed to, by Bell (for purposes of this Article, collectively, "Benefit
Plans"), and any employment, consulting, severance, termination or
indemnification agreement, arrangement or understanding between Bell and any
officer, director or employee of Bell.
(b) The Benefit Plans are in compliance in all material respects with
the applicable provisions of ERISA, the Code and all other applicable laws.
(c) Each Benefit Plan which is an "Employee Benefit Pension Plan" as
defined in Section 3(2) of ERISA (for purposes of this Article, "Pension Plan"),
has been the subject of determination letters from the Internal Revenue Service
to the effect that such Pension Plans are qualified and exempt from Federal
income taxes under Section 401(a) and 501(a), respectively, of the Code, and no
such determination letter has been revoked nor, to the Knowledge of Bell, has
revocation been threatened, nor has any such Pension Plan been amended since the
date of its most recent determination letter or application therefor in any
respect that would adversely affect its qualification or, materially increase
its costs.
Section 9.09. Financial Statements; Undisclosed Liabilities. Bell has
made available to Group Tech: (i) the audited balance sheets of Bell as of
December 31, 1993, 1994 and 1995, and the audited statements of income,
stockholders' equity and cash flows for the respective fiscal years then ended,
including the notes thereto, examined by and accompanied by the report of Ernst
& Young, independent public accountants with respect to Bell; and (ii) the
unaudited balance sheet of Bell as of September 30, 1996 and the related
unaudited statement of income and stockholders' equity for the nine-month period
ended September 30, 1996. All of the foregoing financial statements are
hereinafter collectively referred to as the "Bell Financial Statements" and the
balance sheet as of September 30, 1996 is hereinafter referred to, for purposes
of this Article, as the "1996 Balance Sheet." The Bell Financial Statements
present fairly the financial position and results of operations of Bell as of
the dates and for the periods indicated, in each case in conformity with GAAP,
consistently
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applied, except as otherwise stated in the Bell Financial Statements. Bell does
not have any material liabilities or material obligations or commitments except
those disclosed in the Bell Financial Statements, those entered into in the
ordinary course of business since September 30, 1996, those disclosed in or
permitted by other sections or provisions of this Agreement, and those incurred
in connection with the transactions contemplated hereby.
Section 9.10. Title to Properties and Assets; Liens. Except as set
forth on the Bell Disclosure Letter, Bell has good, valid and marketable title
to, or valid and subsisting leasehold interests in, all of its respective
properties and assets, reflected in the Bell Financial Statements and/or the
1996 Balance Sheet or acquired since the date of the 1996 Balance Sheet, free
and clear of all Liens, except for (i) Liens and imperfections of title that do
not materially interfere with the present use by Bell of the property subject
thereto or affected thereby or that otherwise do not have a Material Adverse
Effect on Bell, (ii) Liens for assessments or governmental charges, or
landlords', mechanics', workmen's, materialmen's or similar liens, in each case
that are not delinquent or that are being contested in good faith and (iii)
Liens reflected in the Bell Financial Statements and/or the 1996 Balance Sheet.
Section 9.11. Business Contracts. (a) The Bell Disclosure Letter
contains a list of all material contracts, leases, agreements and arrangements,
written or oral, in force on the date hereof (for purposes of this Article, the
"Business Contracts") to which Bell is a party and that after the Effective Time
will involve the payment to or from Bell amounts in excess of $100,000 in any
single case or $100,000 per year.
(b) Except as disclosed on the Bell Disclosure Letter, (i) each of
the Business Contracts, after giving effect to the consummation of the
Transactions, constitutes a valid and binding obligation of Bell, and is in full
force and effect and legally enforceable in all material respects in accordance
with its terms against the other parties thereto, (ii) Bell has complied with
all of the material provisions of such Business Contracts, and (iii) to Bell's
Knowledge, there has not occurred any event that (whether with or without
notice, lapse of time, or the happening or occurrence of any other event) would
constitute a default thereunder. Except as disclosed on the Bell Disclosure
Letter, the parties to the Business Contracts other than Bell are not, to Bell's
Knowledge, in material default under any such Business Contract nor is Bell
aware of any intent on the part of the other party to any Business Contract to
cancel or not to renew.
Section 9.12. Intangible Property. (a) Except as set forth on the
Bell Disclosure Letter, each material trademark, trade name, patent, service
mark, brand mark, brand name, computer program, database, industrial design and
copyright owned, used or
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useful in connection with and material to the operation of Bell as well as all
registrations thereof and pending applications therefor, and each license or
other contract relating thereto (for purposes of this Article, collectively, the
"Intangible Property") is in good standing and is owned by Bell free and clear
of any and all Liens. The use of the Intangible Property by Bell does not
conflict with, infringe upon, violate or interfere with or constitute an
appropriation of any right, title, interest or goodwill, including, without
limitation, any intellectual property right, trademark, trade name, patent,
service mark, brand mark, brand name, computer program, database, industrial
design, copyright or any pending application therefor of any other Person and
there have been no claims made and Bell has not received any notice of any claim
or otherwise knows that any of the Intangible Property is invalid or conflicts
with the asserted rights of any other Person or has not been used or enforced or
has failed to be used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of any of the Intangible
Property.
(b) To Bell's Knowledge, Bell possesses all Intangible Property
necessary for the operation of its business and has not forfeited or otherwise
relinquished any Intangible Property.
(c) All of the licenses or other contracts relating to the Intangible
Property (for purposes of this Article, collectively, the "Intangible Property
Licenses") are in full force and effect and are valid and enforceable in all
material respects in accordance with their respective terms, and there is no
default (or any event that with notice or the lapse of time or both could become
a default) under any Intangible Property License either by Bell or, to Bell's
Knowledge, by any other party thereto.
Section 9.13. Absence of Changes or Events. Except as set forth in
the Bell Disclosure Letter, since September 30, 1996 Bell has conducted its
business only in the ordinary course, and has not:
(a) Suffered and casualty loss or destruction which is not
covered by insurance, which would have a Material Adverse Effect on Bell;
(b) Made any declaration, setting aside or payment of any
dividend or other distribution of assets (whether in cash, stock or
property) with respect to the capital stock of Bell or any direct or
indirect redemption, purchase or other acquisition of such stock; provided
that Bell may declare and pay dividends on any outstanding Bell Common
Stock at or prior to the Closing;
(c) Materially increased the aggregate compensation payable or
to become payable to employees of Bell or materially increased any bonus,
insurance, pension or other employee
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benefit plan, payment or arrangement for such employees or entered into or
amended any employment, consulting, severance or similar agreement other
than increases and bonuses in the ordinary course of Bell's business or
consistent with industry practice;
(d) Paid, discharged or satisfied any claim, liability or
obligation which had a Material Adverse Effect on Bell;
(e) Sold, transferred or otherwise disposed of any of its assets
which had a Material Adverse Effect on Bell;
(f) Entered into any commitment or transaction which had a
Material Adverse Effect on Bell; or
(g) Agreed in writing, or otherwise, to take any action
described in this Section.
Section 9.14. Environmental Matters. To Bell's Knowledge, Bell is in
compliance in all material respects with all Environmental Laws, including but
not limited to any pertaining to Hazardous Wastes. To the extent that any
violation of such Environmental Laws by Bell may exist, such violation does not
and will not have a Material Adverse Effect on Bell.
Section 9.15. Bell Stockholder Approval. No consent or approval of
the stockholders of Bell other than the Bell Stockholder Approval is required
for approval and adoption of this Agreement and the Transactions.
Section 9.16. Insurance. The Bell Disclosure Letter sets forth all
material insurance policies, including property, casualty, liability and other
insurance maintained with respect to the assets or businesses of Bell. To the
Knowledge of Bell, all such policies and bonds are legal, valid and enforceable
and in full force and effect and Bell is not in breach or default in any
material respect (including with respect to the payment of premiums or the
giving of notices) and no event has occurred which, with notice or the lapse of
time, would constitute such a material breach or default, or permit termination,
modification or acceleration under the policy by the insurer.
Section 9.17. Proxy Statement and Registration Statement. The
information with respect to Bell, its officers, directors and affiliates in the
definitive information statement to be furnished to the stockholders of Bell
(for purposes of this Article, the "Proxy Statement") that will form a part of
the Registration Statement or in the Registration Statement will not, in the
case of the Proxy Statement, on the date the Proxy Statement is first mailed to
stockholders of Bell or on the effective date of the Bell Stockholder Approval,
or, in the case of the Registration
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Statement, at the time it becomes effective and at the Effective Time, as such
Proxy Statement or Registration Statement is then amended or supplemented,
contain any untrue statement of a material fact, or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 9.18. Full Disclosure. (a) No representation or warranty of
Bell contained in this Agreement (including the exhibits and schedules hereto)
pursuant to the terms hereof contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein, in light of the circumstances under which they were made, not
misleading.
(b) From time to time prior to the Effective Time, Bell shall
promptly supplement or amend the schedules under this Article IX with respect to
any matter that, if existing or known as of the date of this Agreement, would be
required to be set forth in such schedules. Any such supplement or amendment
shall not be deemed to modify or affect the provisions of Section 11.02(b)
hereof.
ARTICLE X
COVENANTS AND AGREEMENTS
Section 10.01. Cooperation. Each of GFP, Tube Turns, Bell and Group
Tech, as applicable, shall proceed expeditiously and cooperate fully in making
application for all necessary regulatory approvals, in the procurement of any
other consents and approvals, and in the taking of any other action and the
satisfaction of all other requirements prescribed by law or otherwise,
necessary for consummation of the transactions on the terms provided herein.
Each of GFP, Tube Turns, Bell and Group Tech, as applicable, shall use all best
efforts (i) to take, or cause to be taken, all actions necessary to comply
promptly with all legal requirements which may be imposed on such party to
consummate the transactions contemplated by this Agreement, and [ii] to obtain
(and to cooperate with the other parties to obtain) any consent, authorization,
order or approval of, or any exemption by, any governmental entity or any other
public or private third party which is required to be obtained or made by such
party in connection with the transactions contemplated by this Agreement.
Section 10.02. Conduct of Business. Except as set forth on the GFP
Disclosure Letter, the Group Tech Disclosure Letter, the Tube Turns Disclosure
Letter or the Bell Disclosure Letter, as applicable, from the date hereof to the
Effective Time, each of GFP, Tube Turns, Bell and Group Tech will, except as
required in connection with the transactions contemplated by this Agreement:
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(a) Carry on its business in the ordinary course in substantially the
same manner as heretofore conducted and not engage in any new line of business
or enter into any agreement, transaction or activity or make any commitment
except those in the ordinary course of business and not otherwise prohibited
under this Section 10.02;
(b) Neither change nor amend its articles of incorporation or bylaws,
which change or amendment would have a Material Adverse Effect on the Person
effecting the change;
(c) Not issue, sell or grant options, warrants or rights to purchase
or subscribe to, or enter into any arrangement or contract with respect to the
issuance or sale of any of its capital stock or rights or obligations
convertible into or exchangeable for any shares of its capital stock and, except
as contemplated herein, not alter the terms of any presently outstanding options
or make any changes (by split-up, combination, reorganization or otherwise) in
its capital structure;
(d) Not declare or pay any dividend or other distribution of assets
(whether in cash, stock or property) with respect to its capital stock;
(e) Not acquire or enter into an agreement to acquire, by merger,
consolidation or purchase of stock or assets, any business or entity;
(f) Use its reasonable efforts to preserve intact its corporate
existence, goodwill and business organization, to keep its officers and
employees available and to preserve its relationships with customers, suppliers
and others with which it has business relations on the date hereof;
(g) Not (i) create, incur or assume any long-term debt (including
obligations in respect of capital leases which individually involve annual
payments in excess of $250,000 or, except in the ordinary course of business
under existing lines of credit, create, incur or assume any short-term debt for
borrowed money, (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other Person, except in the ordinary course of business and consistent with
industry practice, (iii) make any loans or advances to any other Person, except
in the ordinary course of business and consistent with industry practice, (iv)
make any capital contributions to, or investments in, any Person, except in the
ordinary course of business and consistent with industry practices with respect
to investments, or (v) make any capital expenditure involving in excess of
$1,000,000 (in the case of Tube Turns), $500,000 (in the case of Bell) or
$2,000,000 (in the case of Group Tech) in the case of any single expenditure or
$2,000,000 (in the case of Tube Turns), $2,500,000 (in the case of Bell) or
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$5,000,000 (in the case of Group Tech) in the case of all capital expenditures;
(h) Not enter into, modify or extend in any manner the terms of any
employment, severance or similar agreements with officers and directors nor
grant any increase in the compensation of officers, directors or employees,
whether now or hereafter payable, including any such increase pursuant to any
option, bonus, stock purchase, pension, profit-sharing, deferred compensation,
retirement or other plan, arrangement, contract or commitment other than
increases in the ordinary course of business or consistent with industry
practices;
(i) Perform in all material respects all of its obligations under all
of each of their respective Business Contracts (except those being contested in
good faith) and not enter into, assume or amend any contract or commitment that
would be a Business Contract other than contracts to provide products or
services entered into in the ordinary course of business;
(j) Use its reasonable efforts to maintain in full force and effect
and in the same amounts policies of insurance comparable in amount and scope of
coverage to that maintained on the date hereof;
(k) Use its reasonable efforts to continue to collect its accounts
receivable in the ordinary course of business and consistent with past
practices;
Section 10.03. Inspection and Access to Information. (a) Between the
date of this Agreement and the Effective Time, each party hereto will provide
each other party and its accountants, counsel and other authorized
representatives full access, during reasonable business hours and under
reasonable circumstances to any and all of its premises, properties, contracts,
commitments, books, records and other information (including tax returns filed
and those in preparation) and will cause their respective officers to furnish to
the other parties and their authorized representatives any and all financial,
technical and operating data and other information pertaining to its business,
as each other party shall from time to time reasonably request.
(b) All non-public information obtained by any of the parties hereto
or any of their representatives pursuant to this Agreement or in connection with
the matters contemplated hereby concerning the business, operations or affairs
of the other will be kept confidential and will not be used for any purpose
other than the consummation of the transactions contemplated hereby, or be
disclosed to any other Person, except for such disclosure to its employees,
agents and representatives who have a need to know the same and who have been
advised of the confidential nature of such information and who agree to abide by
the terms hereof and except
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for such disclosure as may be required by applicable law, court order or
governmental agency request. In the event this Agreement is terminated in
accordance with its terms, any non-public information furnished by any party to
any other party hereto will be promptly returned.
Section 10.04. Proxy Statement and Registration Statement. Group Tech
shall prepare and file with the SEC as soon as is reasonably practicable the
Registration Statement and shall use all reasonable efforts to have the
Registration Statement declared effective by the SEC as promptly as practicable.
Group Tech also shall take any action required to be taken under applicable Blue
Sky Laws in connection with the issuance of Group Tech Common Stock in
connection with the Merger, the Tube Turns Merger and the Bell Merger. Each of
the parties hereto will furnish each other with all information concerning
themselves, their subsidiaries, directors, officers and stockholders and such
other matters as may be necessary or advisable for the Registration Statement,
the Information Statement, the Stock Market Additional Shares Notification,
filings under applicable Blue Sky Laws, and any other statement or application
made by or on behalf of any of the parties hereto to any governmental body in
connection with the transactions contemplated by this Agreement.
Section 10.05. Stock Market Additional Shares Notification. Group
Tech will file an additional shares notification with Nasdaq to approve for
listing, subject to official notice of its issuance, the shares of Group Tech
Common Stock to be issued in connection with the Merger, the Tube Turns Merger
and the Bell Merger (the "Stock Market Additional Shares Notification"). Group
Tech shall exercise reasonable good faith efforts to cause the shares of Group
Tech Common Stock to be issued in the Merger, the Tube Turns Merger and the Bell
Merger to be approved for listing on the applicable stock exchange, subject to
official notice of issuance, prior to the Effective Time.
Section 10.06. Affiliates. Each of GFP, Tube Turns and Bell shall
deliver to Group Tech a letter identifying all Persons who are, at the time the
Merger, the Tube Turns Merger and the Bell Merger, as applicable, is submitted
to the stockholders of GFP, Tube Turns or Bell, as applicable, for approval,
"affiliates" of each of GFP, Tube Turns and Bell for purposes of Rule 145 under
the Securities Act (the "Affiliates"). Each of GFP, Tube Turns and Bell shall
cause each Person who is identified as an Affiliate in such letter to deliver to
Group Tech on or prior to the Effective Time a written statement, in form
satisfactory to the parties hereto, that such Person will not offer to sell,
transfer or otherwise dispose of any of the shares of Group Tech Common Stock
issued to such Person pursuant to the Merger, the Tube Turns Merger, or the Bell
Merger, as applicable, except in accordance with the applicable provisions of
the Securities Laws. Group Tech shall be entitled to place legends on any
certificates of Group
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Tech Common Stock issued to such Affiliates to restrict transfer of such shares
as set forth above; provided, however, such legends shall be removed at the
request of an Affiliate not earlier than three (3) years after the Closing Date.
Section 10.07. Public Announcements. The timing and content of all
announcements regarding any aspect of this Agreement to the financial community,
government agencies, employees or the general public shall be mutually agreed
upon in advance (unless the parties disagreeing to said announcement are advised
by counsel that any such announcement or other disclosure not mutually agreed
upon in advance is required to be made by law or applicable rule of Nasdaq and
then only after making a reasonable attempt to comply with the provisions of
this Section 10.07).
Section 10.08. Rule 144 Information. Group Tech shall comply with the
public information requirements set forth in Rule 144(c) under the Securities
Act for a period of three (3) years following the Closing Date.
Section 10.09. Tax Treatment. Neither GFP, Tube Turns, Bell nor Group
Tech shall intentionally take or cause to be taken any action, whether before or
after the Effective Time, that would disqualify the Merger, the Tube Turns
Merger and the Bell Merger as a "reorganization" within the meaning of Section
368 of the Code.
Section 10.10. Order of Transactions. The parties hereto hereby agree
the transactions contemplated hereby shall be consummated in the following
order:
(a) The Spin Off.
(b) The Merger.
(c) The Tube Turns Merger and the Bell Merger.
(d) The Group Tech Contribution.
Section 10.11. Financial Statements and SEC Reports. Prior to the
Effective Time, each of GFP and Group Tech shall deliver to the other, as soon
as available but in no event later than 45 days after the end of each fiscal
quarter, a consolidated balance sheet as of the last day of such fiscal period
and the consolidated statements of income, stockholders' equity and cash flows
of such party and its subsidiaries for the fiscal period then ended prepared in
accordance with generally accepted accounting principles with such exceptions as
are noted on such financial statements, and in the case of Group Tech, the
requirements of Form 10-Q (or Form 10-K as the case may be) under the Exchange
Act. Prior to the Effective Time, Group Tech shall deliver to GFP as
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soon as available all forms, reports and other documents filed by Group Tech
with the SEC.
ARTICLE XI
CONDITIONS
Section 11.01. Conditions to Each Party's Obligations. The respective
obligations of each party to effect the transactions contemplated hereby shall
be subject to the fulfillment at or prior to the Closing of each of the
following conditions:
(a) Injunction. There shall be no effective injunction, writ or
preliminary restraining order or any order of any nature issued by a court or
governmental agency of competent jurisdiction to the effect that the Spin Off,
the Merger, the Tube Turns Merger or the Bell Merger may not be consummated as
herein provided, no proceeding or lawsuit shall have been commenced and be
continuing by any governmental or regulatory agency for the purpose of obtaining
any such injunction, writ or preliminary restraining order and no written notice
shall have been received from any such agency indicating an intent to restrain,
prevent, materially delay or restructure the transactions contemplated by this
Agreement.
(b) Tax Opinion. GFP, Tube Turns, Bell and Group Tech shall each
have received a written opinion of counsel, which counsel shall be reasonably
acceptable to GFP, Tube Turns, Bell and Group Tech, concerning certain federal
income tax consequences of the Merger, the Tube Turns Merger, the Bell Merger
and the Group Tech Contribution, substantially in the form attached hereto as
Exhibit D.
(c) HSR Act. The applicable waiting periods shall have expired, been
terminated, or been determined to be inapplicable, under the HSR Act.
(d) Registration Statement. The Registration Statement shall be
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall be in effect and no
proceedings for such purpose, or under the proxy rules of the SEC pursuant to
the applicable Securities Laws and with respect to the transactions contemplated
hereby, shall be pending before or threatened by the SEC. All applicable Blue
Sky Laws shall have been complied with in connection with the issuance of Group
Tech Common Stock to be issued in connection with the Merger, the Tube Turns
Merger and the Bell Merger and no stop order suspending the effectiveness of
any qualification or registration of such Group Tech Common Stock under such
Blue Sky Laws shall have been issued and pending or threatened by the
authorities of any such state.
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(e) Stockholder Approvals. The GFP Stockholder Approval, Group Tech
Stockholder Approval, Bell Stockholder Approval and Tube Turns Stockholder
Approval shall have been obtained.
(f) The Nasdaq National Market Additional Shares Notification. The
Group Tech Common Stock to be issued pursuant to this Agreement shall have been
approved for listing on the Nasdaq National Market, subject only to official
notice of issuance by Group Tech.
Section 11.02. Conditions to Group Tech's Obligations. The obligation
of Group Tech to consummate on the Closing Date the transactions contemplated by
this Agreement will be subject to the satisfaction of each of the following
conditions on or prior to the Closing Date, unless expressly waived in writing
by Group Tech:
(a) Opinion of Counsel for GFP, Tube Turns and Bell. Group Tech shall
have received the written opinion of counsel for GFP, Tube Turns and Bell, dated
the Closing Date, substantially in the forms attached as Exhibits E, F and G to
this Agreement.
(b) Representations and Warranties. The representations and
warranties of each of GFP, Tube Turns and Bell set forth in this Agreement shall
be true and correct in all respects as of the date of this Agreement and as of
the Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (i) except for any such
representations and warranties made as of a specified date, which shall be true
and correct in all respects as of such date and (ii) to the extent that the
aggregate effect of the inaccuracies in such representations and warranties as
of the applicable times (each considered without any exclusions for lack of
Material Adverse Effect set forth in the individual representation or warranty)
does not constitute a Material Adverse Effect on each of GFP, Tube Turns and/or
Bell when compared to the state of facts which would exist if all such
representations and warranties were true in all respects as of the applicable
times.
(c) Performance of this Agreement. Each of the agreements and
covenants to be performed and complied with by each of GFP, Tube Turns and Bell
pursuant to this Agreement prior to the Effective Time shall have been duly
performed and complied with except to the extent that the aggregate effect of
any non-performance or noncompliance by GFP, Tube Turns and/or Bell (each
considered without any exclusions for lack of Material Adverse Effect set forth
in the individual covenant or agreement) does not constitute a Material Adverse
Effect on GFP, Tube Turns and/or Bell when compared to the state of facts which
would exist if all such agreements and covenants had been performed and complied
with by each of GFP, Tube Turns and Bell.
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(d) Delivery of Certificates. Each of GFP, Tube Turns and Bell shall
have delivered to Group Tech a certificate dated the Closing Date and signed by
the chief executive officer of GFP, Tube Turns and Bell certifying as to the
matters set forth in Sections 11.02(b) and 11.02(c).
(e) Tax Representations of GFP, Tube Turns and Bell. Each of GFP,
Tube Turns and Bell shall have delivered to Group Tech a certificate dated the
Closing Date in substantially the form attached hereto as Exhibit H.
Section 11.03. Conditions to GFP's, Tube Turns' and Bell's
Obligations. The obligation of each of GFP, Tube Turns and Bell to consummate,
on the Closing Date, the transactions contemplated by this Agreement will be
subject to the satisfaction of each of the following conditions on or prior to
the Closing Date, unless expressly waived, in writing, by each of GFP, Tube
Turns and Bell:
(a) Opinion of Counsel for Group Tech. Each of GFP, Tube Turns and
Bell shall have received the written opinion of counsel to Group Tech, dated the
Closing Date, substantially in the form attached as Exhibit I to this Agreement.
(b) Representations and Warranties. The representations and
warranties of Group Tech set forth in this Agreement shall be true and correct
in all respects as of the date of this Agreement and as of the Effective Time
with the same effect as though all such representations and warranties had been
made on and as of the Effective Time (i) except for any such representations and
warranties made as of a specified date, which shall be true and correct in all
respects as of such date and (ii) to the extent that the aggregate effect of the
inaccuracies in such representations and warranties as of the applicable times
(each considered without any exclusions for lack of Material Adverse Effect set
forth in the individual representation or warranty) does not constitute a
Material Adverse Effect on Group Tech when compared to the state of facts which
would exist if all such representations and warranties were true in all respects
as of the applicable times.
(c) Performance of this Agreement. Each of the agreements and
covenants of Group Tech to be performed and complied with by Group Tech pursuant
to this Agreement prior to the Effective Time shall have been duly performed and
complied with except to the extent that the aggregate effect of any non-
performance or noncompliance by Group Tech (each considered without any
exclusions for lack of Material Adverse Effect set forth in the individual
covenant or agreement) does not constitute a Material Adverse Effect on Group
Tech when compared to the state of facts which would exist if all such
agreements and covenants had been performed and complied with by Group Tech.
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<PAGE>
(d) Delivery of Certificate. Group Tech shall have delivered to each
of GFP, Tube Turns and Bell a certificate dated as of the Closing Date and
signed by the chief executive officer of Group Tech certifying as to the matters
set forth in Sections 11.03(b) and 11.03(c).
ARTICLE XII
NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties contained in this Agreement by any
party hereto or set forth in any certificate or other instrument delivered by
or on behalf of the parties pursuant to this Agreement shall expire at the
Effective Time.
ARTICLE XIII
TERMINATION
Section 13.01. Termination. (a) Anything contained in this Agreement
to the contrary notwithstanding, this Agreement may be terminated at any time
prior to the Closing Date:
(i) by the mutual written consent of GFP, Tube Turns, Bell and
Group Tech;
(ii) by GFP, Tube Turns, Bell or Group Tech if the Closing shall
not have occurred on or before March 31, 1997 unless such failure to close
shall be due to the failure of the party seeking such termination to
perform or observe in all material respects the covenants and agreements
hereof to be performed or observed by such party;
(iii) by Group Tech, if GFP, Tube Turns or Bell breaches any of
its respective representations, warranties or covenants set forth in this
Agreement which breach has a Material Adverse Effect on the breaching
party;
(iv) by GFP, Tube Turns or Bell, if Group Tech breaches any
representation, warranty or covenant of Group Tech contained in this
Agreement which breach has a Material Adverse Effect on Group Tech.
(b) In the event of a termination pursuant to Section 13.01(a)(iii)
or Section 13.01(a)(iv), the non-breaching party shall have the right to sue the
breaching party(ies) for any and all damages incurred as a result of the failure
of the breaching party(ies) to perform hereunder.
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<PAGE>
ARTICLE XIV
CLOSING
The Closing shall take place at 10:00 a.m. at the offices of Wyatt,
Tarrant & Combs, Louisville, Kentucky, within ten (10) days after the date on
which the last of the conditions (excluding conditions that by their terms
cannot be satisfied until the Closing Date) set forth in Article XI hereof, or
at such other date, time and place as GFP, Tube Turns, Bell and Group Tech may
agree in writing.
ARTICLE XV
MISCELLANEOUS
Section 15.01. Confidentiality. (a) Prior to Closing. Unless and until
the Closing has occurred, and except as may be otherwise required by applicable
law, each party hereto shall, and shall cause its employees, agents, and
representatives to, maintain in confidence and not otherwise use information,
documents, and data furnished to it, or to any Person on its behalf, by any
other party in connection herewith.
(b) Failure to Close. If the Closing does not occur on the Closing
Date, each of GFP, Tube Turns, Bell and Group Tech shall return all written
information, documents, and data obtained pursuant to the terms hereof.
Notwithstanding anything else in this Agreement to the contrary, if the
transactions contemplated by this Agreement are not closed, the agreement of
each party to maintain in confidence all information received by it and not to
use such information in competition with the other shall continue in perpetuity
and none of such information shall be used by any parry, its employees, agents,
or representatives or affiliates thereof in the business operations of any such
Person, except to the extent that such information was: (i) possessed by such
party prior to the disclosure thereof by the other party; (ii) disclosed to such
party by an independent third party without a violation of any obligation of
confidentiality on the part of such third party; or (iii) ascertainable from
public or published information or trade sources.
Section 15.02. Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be mailed by
first class, registered, or certified mail, postage prepaid, or sent via
overnight reputable courier service, or delivered personally or via facsimile
with copy sent by mail as provided above:
A-60
<PAGE>
If to GFP, to: Copy to:
Jeffrey T. Gill Wyatt, Tarrant & Combs
President and Chief Executive 2800 Citizens Plaza
Officer Louisville, Kentucky 40202
Group Financial Partners, Inc. Attn: Robert A. Heath
455 Fourth Avenue Facsimile No.: (502) 589-0309
Louisville, Kentucky 40202
Facsimile No.: (502) 585-1602
If to Tube Turns, to: Copy to:
John M. Kramer Wyatt, Tarrant & Combs
President and Chief Executive 2800 Citizens Plaza
Officer Louisville, Kentucky 40202
Tube Turns Technologies, Inc. Attn: Robert A. Heath
2900 West Broadway Facsimile No.: (502) 589-0309
Louisville, Kentucky 40232
Facsimile No.: (502) 774-6300
If to Bell, to: Copy to:
Thomas W. Lovelock Wyatt, Tarrant & Combs
President and Chief Executive 2800 Citizens Plaza
Officer Louisville, Kentucky 40202
Bell Technologies, Inc. Attn: Robert A. Heath
6120 Hanging Moss Road Facsimile No.: (502) 589-0309
Orlando, Florida 32807
Facsimile No.: (407) 678-0578
If to Group Tech, to: Copy to:
President Fowler, White, Gillen, Boggs,
Group Technologies Corporation Villareal and Banker, P.A.
10901 Malcolm McKinley Drive Suite 1700
Tampa, Florida 33612 401 East Kennedy Boulevard
Facsimile No.: (813) 972-6978 Tampa, Florida 33602
Attn: David Shobe
Facsimile No.: (813) 228-9401
or to such other address of which the addressee shall have notified the sender
in writing. Notices mailed in accordance with this section shall be deemed given
three (3) days after being mailed, and notices sent by overnight courier service
shall be deemed given one (1) day after placed in the hands of a representative
of such service and notice given by facsimile shall be deemed given on the date
of transmission subject to sender's receipt of a confirmation copy.
Section 15.03. Third Party Rights. It is the intention of the parties
that nothing in this Agreement shall be deemed to
A-61
<PAGE>
create any right with respect to any Person not a party to this Agreement.
Section 15.04. Parties in Interest; Assignment. All covenants and
agreements contained in this Agreement by or on behalf of any of the parties to
this Agreement shall bind and inure to the benefit of their respective heirs,
executors, successors, and assigns, whether so expressed or not. No party to
this Agreement may assign its rights or delegate its obligations under this
Agreement to any other Person without the express prior written consent of the
other parties.
Section 15.05. Construction; Governing Law. The section headings
contained in this Agreement are inserted as a matter of convenience and shall
not affect in any way the construction of the terms of this Agreement. This
Agreement shall be governed by and interpreted in accordance with the laws of
the Commonwealth of Kentucky.
Section 15.06. Entire Agreement; Amendment and Waiver. This Agreement,
including the Exhibits and Schedules hereto and documents and instruments
executed and delivered at the Closing in connection herewith, constitute and
contain the entire Agreement among the parties hereto with respect to the
transactions contemplated hereby and supersede any prior writing by the parties.
The waiver of a breach of any term or condition of this Agreement must be in
writing signed by the party sought to be charged with such waiver and such
waiver shall not be deemed to constitute the waiver of any other breach of the
same or any other term or condition of this Agreement. This Agreement may not be
changed orally, but only in a writing signed by the parties hereto.
Section 15.07. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
the remaining provisions.
Section 15.08. Counterparts. This Agreement may be executed in one or
more counterparts, any one of which need not contain the signatures of more than
one party but all of which taken together shall constitute one and the same
Agreement.
Section 15.09. Expenses. Except as otherwise specifically provided in
this Agreement, each party to this Agreement shall pay any and all fees and
expenses that such party may incur in connection with the negotiation,
execution, or closing of this Agreement and the other transactions contemplated
by this Agreement.
Section 15.10. Time of Essence. Time is of the essence to the
performance of the obligations set forth in this Agreement.
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<PAGE>
IN WITNESS WHEREOF, GFP, Tube Turns, Bell and Group Tech have caused
this Agreement and Plan of Reorganization to be executed by their duly
authorized officers as of the day and year first written above.
"GFP"
GROUP FINANCIAL PARTNERS, INC.
By: /s/ Jeffrey T. Gill
-----------------------------
Title: President and CEO
--------------------------
"Tube Turns"
TUBE TURNS TECHNOLOGIES, INC.
By: /s/ John M. Kramer
-----------------------------
Title: President and CEO
--------------------------
"Bell"
BELL TECHNOLOGIES, INC.
By: /s/ Thomas W. Lovelock
-----------------------------
Title: President and CEO
--------------------------
"Group Tech"
GROUP TECHNOLOGIES CORPORATION
By: /s/ Robert E. Gill
-----------------------------
Title: President and CEO
--------------------------
A-63
<PAGE>
EXHIBIT A
PLAN OF MERGER
--------------
THIS PLAN OF MERGER (the "Plan") is made and entered effective as of
the 15th day of January, 1997, by and between GROUP FINANCIAL PARTNERS, INC., a
Kentucky corporation ("GFP") and GROUP TECHNOLOGIES CORPORATION, a Florida
corporation ("Group Tech").
W I T N E S S E T H :
The respective Boards of Directors of GFP, Tube Turns Technologies,
Inc., a Kentucky corporation, Group Tech, and Bell Technologies, Inc., a Florida
corporation ("Bell") have determined that it is desirable to effect an Agreement
and Plan of Reorganization (the "Agreement"), for the general welfare and
advantage of their respective shareholders, under which plan, inter alia, GFP
would be merged with and into Group Tech, in accordance with the terms of the
Agreement and this Plan.
The Boards of Directors of GFP and Group Tech have approved and
adopted this Plan and have authorized the execution hereof.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and undertakings herein contained, the parties hereby agree as
follows:
ARTICLE 1
---------
THE MERGER
----------
A. The Merger. Upon the terms and subject to the conditions set forth in
the Agreement and this Plan, and in accordance with the Kentucky Revised
Statutes, as amended ("KRS") and the Florida Business Corporation Act, as
amended ("FBCA") at the Effective Time (as hereinafter defined), GFP shall be
merged with and into Group Tech in accordance with the KRS and the FBCA (the
"Merger"), whereupon the separate existence of GFP shall cease and Group Tech
shall continue as the surviving corporation (sometimes referred to herein as the
"Surviving Corporation").
B. Articles of Merger. Upon the terms and conditions set forth in the
Agreement and this Plan, Articles of Merger (the "Articles of Merger") shall be
duly prepared and executed by GFP and Group Tech and thereafter delivered to the
Secretary of State of each of the Commonwealth of Kentucky and the State of
Florida for filing as provided in the KRS and the FBCA. The Merger shall become
effective upon filing with the Kentucky Secretary of State and the Florida
Secretary of State or at such time and date
A-A-1
<PAGE>
thereafter as is provided in the Articles of Merger (the "Effective Time"). The
date on which the Effective Time occurs shall be the "Effective Date".
C. Effect of Filing. At the Effective Time, the Merger shall have the
effects set forth in the applicable provisions of the KRS and the FBCA. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the properties, rights, privileges, powers, and franchises of GFP and
Group Tech, shall vest in the Surviving Corporation without further act or deed,
and all debts, liabilities and duties of GFP and Group Tech shall become the
debts, liabilities and duties of the Surviving Corporation.
ARTICLE 2
---------
CONVERSION OF SHARES
--------------------
A. Conversion of Shares; Adjustments. At the Effective Time, by virtue of
the Merger and without any action on the part of GFP or Group Tech or the
stockholders of either of the foregoing entities:
[1] each share of the outstanding common stock, no par value per
share, of GFP (the "GFP Common Stock"), issued and outstanding immediately
prior to the Effective Time, shall be cancelled and extinguished and
automatically converted into the right to receive such shares of common
stock, $.01 par value per share, of Group Tech ("Group Tech Common Stock")
as is equal to the GFP Conversion Ratio (as hereinafter defined);
[2] each share of Group Tech Common Stock issued and outstanding
immediately prior to the Effective Time which is held by GFP shall be
cancelled and retired and all rights in respect thereof shall cease to
exist, without any conversion thereof or payment of any consideration
therefor; and
[3] each share of Group Tech Common Stock issued and outstanding
immediately prior to the Effective Time and which is not held by GFP shall
be unchanged after the Effective Time.
B. Exchange of Certificates.
------------------------
[1] On or prior to the Effective Time, Group Tech shall make
available to each record holder who, as of the Effective Time, was a holder
of an outstanding certificate or certificates which immediately prior to
the Effective Time represented shares of GFP Common Stock (for purposes of
this Article, the "Certificate" or "Certificates"), a form of letter of
transmittal and instructions for use in effecting
A-A-2
<PAGE>
the surrender of the Certificates for payment therefor and conversion
thereof. Delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to
Group Tech and the form of letter of transmittal shall so reflect. Upon
surrender to Group Tech of a Certificate, together with such letter of
transmittal duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor one or more certificates as requested by
the holder (properly issued, executed and countersigned, as appropriate)
representing that number of whole shares of Group Tech Common Stock to
which such holder of GFP Common Stock shall have become entitled pursuant
to the provisions of Article 2 hereof, and the Certificate so surrendered
shall forthwith be cancelled. No interest will be paid or accrued on any
cash payable upon the surrender of the Certificates. If any portion of the
consideration to be received pursuant to Article 2 hereof, upon exchange of
a Certificate, is to be issued or paid to a Person (as hereinafter defined)
other than the Person in whose name the Certificate surrendered in exchange
therefor is registered, it shall be a condition of such issuance and
payment that the Certificate so surrendered shall be properly endorsed or
otherwise be in proper form for transfer. From the Effective Time until
surrender in accordance with the provisions of this Article 2, each
Certificate shall represent for all purposes only the right to receive the
consideration provided in Article 2 hereof. All payments in respect of
shares of GFP Common Stock that are made in accordance with the terms
hereof shall be deemed to have been made in full satisfaction of rights
pertaining to such securities.
[2] In the case of any lost, mislaid, stolen or destroyed
Certificate, the holder thereof may be required, as a condition precedent
to delivery to such holder of the consideration described in Article 2, to
deliver to Group Tech a lost stock certificate affidavit and satisfactory
indemnity agreement as Group Tech may direct as indemnity against any claim
that may be made against Group Tech with respect to the Certificate alleged
to have been lost, mislaid, stolen or destroyed.
[3] After the Effective Time, there shall be no transfers on the
stock transfer books of Group Tech of the shares of GFP Common Stock that
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to Group Tech for transfer, they
shall be cancelled and exchanged for the consideration described in Article
2 hereof.
C. Dissenting Shareholders. To the extent that appraisal rights are
available under the KRS, shares of GFP Common Stock that are issued and
outstanding immediately prior to the Effective Time
A-A-3
<PAGE>
and that have not been voted for adoption of the Merger and with respect to
which appraisal rights have been properly demanded in accordance with the KRS
("Dissenting Shares") shall not be converted into the right to receive the
consideration provided for in Article 2 hereof at or after the Effective Time
unless and until the holder of such shares becomes ineligible for such
appraisal. If a holder of Dissenting Shares becomes ineligible for such
appraisal, then, as of the Effective Time or the occurrence of such event
whichever later occurs, such holder's Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into and represent the right to receive
the consideration provided for in Article 2 hereof. If any holder of GFP Common
Stock shall assert the right to be paid the fair value of such GFP Common Stock
as described above, GFP shall give Group Tech notice thereof and Group Tech
shall have the right to participate in all negotiations and proceedings with
respect to any such demands. GFP shall not, except with the prior written
consent of Group Tech, voluntarily make any payment with respect to, or settle
or offer to settle, any such demand for payment. Payment for Dissenting Shares
shall be made as required by the KRS. To the extent that appraisal rights are
available under the FBCA, shares of Group Tech Common Stock that are issued and
outstanding immediately prior to the Effective Time and that have not been voted
for adoption of the Merger and with respect to which appraisal rights have been
properly demanded in accordance with the FBCA shall receive payment as required
by the FBCA.
D. Articles of Incorporation of Surviving Corporation. The Articles of
Incorporation of Group Tech, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided therein and in accordance with applicable law.
E. By-Laws of Surviving Corporation. The By-Laws of Group Tech in effect
at the Effective Time shall be the By-Laws of the Surviving Corporation and
thereafter may be amended or repealed in accordance with their terms or the
terms of the Articles of Incorporation of the Surviving Corporation and as
provided by applicable law.
F. Directors and Officers of Surviving Corporation. From and after the
Effective Time: (i) the directors of Group Tech immediately prior to the
Effective Time shall be the directors of the Surviving Corporation; and (ii) the
officers of Group Tech immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, in each case, until their respective
successors are duly elected or appointed and qualify in the manner provided in
the Articles of Incorporation and By-Laws of the Surviving Corporation or as
otherwise provided by applicable law.
A-A-4
<PAGE>
G. GFP Conversion Ratio and Adjustment Event.
-----------------------------------------
[1] The "GFP Conversion Ratio" shall be equal to such fraction
as is obtained by dividing the Group Tech Merger Shares (as hereinafter
defined) by the Total GFP Shares (as hereinafter defined). The "Group Tech
Merger Shares" shall be equal to such number of whole shares of Group Tech
Common Stock as is obtained by dividing the Aggregate GFP Consideration (as
hereinafter defined) by the Average Closing Price (hereinafter defined).
The "Total GFP Shares" shall be equal to 315,996. The "Aggregate GFP
Consideration" shall be equal to $55,298,334.
[2] In the event of any change in Group Tech Common Stock or GFP
Common Stock between the date of this Plan and the Effective Time by reason
of any stock dividend, stock split, subdivision, reclassification,
recapitalization, combination, exchange of shares or the like (an
"Adjustment Event"), the GFP Conversion Ratio shall be appropriately
adjusted so that each holder of GFP Common Stock will receive in the Merger
the same proportionate amount of Group Tech Common Stock such holder would
have been entitled to receive if the Effective Time had been immediately
prior to such Adjustment Event.
[3] For purposes of this Plan, the "Average Closing Price" shall
be the greater of (i) $1.50 per share of Group Tech Common Stock, or (ii)
the arithmetic average of the closing price per share of the Group Tech
Common Stock, as reported on The Nasdaq National Market, for each of the
ten (10) consecutive trading days ending with the trading day which occurs
immediately prior to the effective date of the approval of the transactions
contemplated by the Agreement by the holders of shares of Group Tech Common
Stock voted, in person or by proxy, at the stockholders meeting of Group
Tech held to approve such transactions.
H. Fractional Shares. No scrip or fractional shares of Group Tech Common
Stock shall be issued in the Merger. All fractional shares of Group Tech Common
Stock to which a holder of GFP Common Stock immediately prior to the Effective
Time would otherwise be entitled at the Effective Time shall be aggregated. If
a fractional share results from such aggregation, such stockholder shall be
entitled, after the later of (a) the Effective Time or (b) the surrender of such
stockholder's Certificate(s) that represent such shares of GFP Common Stock, to
receive from Group Tech an amount in cash in lieu of such fractional share,
based on the Average Closing Price.
I. Person. For purposes of this Plan, "Person" means any individual,
corporation, general or limited partnership, limited liability company, firm,
joint venture, association, enterprise,
A-A-5
<PAGE>
joint stock company, trust, unincorporated organization or other entity.
ARTICLE 3
---------
TERMINATION
-----------
Anything contained in this Plan notwithstanding, this Plan may be
terminated and the Merger abandoned as provided in the Agreement.
ARTICLE 4
---------
CONDITIONS PRECEDENT
--------------------
The obligations of the parties to effect the Merger as herein provided
shall be subject to satisfaction, unless duly waived, of the conditions set
forth in the Agreement.
ARTICLE 5
---------
GENERAL PROVISIONS
------------------
A. Law and Section Headings. This Plan shall be construed and interpreted
in accordance with the laws of the Commonwealth of Kentucky. Section headings
are used in this Plan for convenience only and are to be ignored in the
construction of the terms of this Plan.
B. Modifications. The parties hereto may amend, modify or supplement this
Plan in such manner as may be agreed by them in writing.
IN WITNESS WHEREOF, the parties hereto have caused this Plan to be
executed by their duly authorized officers as of the date first above written.
"GFP"
GROUP FINANCIAL PARTNERS, INC.
By:________________________________
Title:_____________________________
A-A-6
<PAGE>
"GROUP TECH"
GROUP TECHNOLOGIES CORPORATION
By:________________________________
Title:_____________________________
A-A-7
<PAGE>
EXHIBIT B
PLAN OF MERGER
--------------
THIS PLAN OF MERGER (the "Plan") is made and entered effective as of
the 15th day of January, 1997, by and between TUBE TURNS TECHNOLOGIES, INC., a
Kentucky corporation ("Tube Turns") and NEW TUBE TURNS TECHNOLOGIES, INC., a
Kentucky corporation ("New Tube Turns").
W I T N E S S E T H :
The respective Boards of Directors of Group Financial Partners, Inc.,
a Kentucky corporation ("GFP"), Tube Turns, Group Technologies Corporation
("Group Tech"), and Bell Technologies, Inc., a Florida corporation ("Bell") have
determined that it is desirable to effect an Agreement and Plan of
Reorganization (the "Agreement"), for the general welfare and advantage of their
respective shareholders, under which plan, inter alia, Tube Turns would be
merged with and into New Tube Turns, in accordance with the terms of the
Agreement and this Plan.
New Tube Turns is a wholly owned subsidiary of Group Tech.
The Boards of Directors of Tube Turns and New Tube Turns have approved
and adopted this Plan and have authorized the execution hereof.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and undertakings herein contained, the parties hereby agree as
follows:
ARTICLE 1
---------
THE MERGER
----------
A. The Merger. Upon the terms and subject to the conditions set forth in
the Agreement and this Plan, and in accordance with the Kentucky Revised
Statutes, as amended ("KRS") at the Effective Time (as hereinafter defined),
Tube Turns shall be merged with and into New Tube Turns in accordance with the
KRS (the "Tube Turns Merger"), whereupon the separate existence of Tube Turns
shall cease and New Tube Turns shall continue as the surviving corporation
(sometimes referred to herein as the "Surviving Corporation").
B. Articles of Merger. Upon the terms and conditions set forth in the
Agreement and this Plan, Articles of Merger (the "Articles of Merger") shall be
duly prepared and executed by Tube Turns and New Tube Turns, and thereafter
delivered to the Secretary
A-B-1
<PAGE>
of State of the Commonwealth of Kentucky for filing as provided in the KRS. The
Tube Turns Merger shall become effective upon filing with the Kentucky Secretary
of State or at such time and date thereafter as is provided in the Articles of
Merger (the "Effective Time"). The date on which the Effective Time occurs
shall be the "Effective Date".
C. Effect of Filing. At the Effective Time, the Tube Turns Merger shall
have the effects set forth in the applicable provisions of the KRS. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the properties, rights, privileges, powers, and franchises of Tube
Turns and New Tube Turns, shall vest in the Surviving Corporation without
further act or deed, and all debts, liabilities and duties of Tube Turns and New
Tube Turns shall become the debts, liabilities and duties of the Surviving
Corporation.
ARTICLE 2
---------
CONVERSION OF SHARES
--------------------
A. Conversion of Shares; Adjustments. At the Effective Time, by virtue of
the Tube Turns Merger and without any action on the part of Tube Turns or New
Tube Turns or the stockholders of either of the foregoing entities:
[1] each share of the common stock of Tube Turns, no par value
per share (the "Tube Turns Common Stock"), issued and outstanding
immediately prior to the Effective Time, and held by a Person (as
hereinafter defined) other than Group Tech, shall be cancelled and
extinguished and automatically converted into the right to receive such
shares of common stock, $.01 par value, of Group Tech ("Group Tech Common
Stock") as is equal to the Tube Turns Conversion Ratio (as hereinafter
defined); and
[2] each share of Tube Turns Common Stock issued and outstanding
immediately prior to the Effective Time, and held by Group Tech, shall be
cancelled and extinguished.
B. Exchange of Certificates.
------------------------
[1] On or prior to the Effective Time, Group Tech and New Tube
Turns shall make available to each record holder (other than Group Tech)
who, as of the Effective Time, was a holder of an outstanding certificate
or certificates which immediately prior to the Effective Time represented
shares of Tube Turns Common Stock (for purposes of this Article, the
"Certificate" or "Certificates"), a form of letter of transmittal and
instructions for use in effecting the surrender of the Certificates for
payment therefor and conversion thereof.
A-B-2
<PAGE>
Delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to Group Tech and
the form of letter of transmittal shall so reflect. Upon surrender to Group
Tech of a Certificate, together with such letter of transmittal duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor one or more certificates as requested by the holder
(properly issued, executed and countersigned, as appropriate) representing
that number of whole shares of Group Tech Common Stock to which such holder
of Tube Turns Common Stock shall have become entitled pursuant to the
provisions of Article 2 hereof, and the Certificate so surrendered shall
forthwith be cancelled. No interest will be paid or accrued on any cash
payable upon the surrender of the Certificates. If any portion of the
consideration to be received pursuant to Article 2 hereof, upon exchange of
a Certificate, is to be issued or paid to a Person other than the Person in
whose name the Certificate surrendered in exchange therefor is registered,
it shall be a condition of such issuance and payment that the Certificate
so surrendered shall be properly endorsed or otherwise be in proper form
for transfer. From the Effective Time until surrender in accordance with
the provisions of this Article 2, each Certificate shall represent for all
purposes only the right to receive the consideration provided in Article 2
hereof. All payments in respect of shares of Tube Turns Common Stock that
are made in accordance with the terms hereof shall be deemed to have been
made in full satisfaction of rights pertaining to such securities.
[2] In the case of any lost, mislaid, stolen or destroyed
Certificate, the holder thereof may be required, as a condition precedent
to delivery to such holder of the consideration described in Article 2, to
deliver to Group Tech and New Tube Turns a lost stock certificate affidavit
and satisfactory indemnity agreement as Group Tech and New Tube Turns may
direct as indemnity against any claim that may be made against Group Tech
and/or New Tube Turns with respect to the Certificate alleged to have been
lost, mislaid, stolen or destroyed.
[3] After the Effective Time, there shall be no transfers on the
stock transfer books of New Tube Turns of the shares of Tube Turns Common
Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to Group Tech for
transfer, they shall be cancelled and exchanged for the consideration
described in Article 2 hereof.
C. Dissenting Shareholders. To the extent that appraisal rights are
available under the KRS, shares of Tube Turns Common Stock that are issued and
outstanding immediately prior to the
A-B-3
<PAGE>
Effective Time and that have not been voted for adoption of the Tube Turns
Merger and with respect to which appraisal rights have been properly demanded in
accordance with the KRS ("Dissenting Shares") shall not be converted into the
right to receive the consideration provided for in Article 2 hereof at or after
the Effective Time unless and until the holder of such shares becomes ineligible
for such appraisal. If a holder of Dissenting Shares becomes ineligible for such
appraisal, then, as of the Effective Time or the occurrence of such event
whichever later occurs, such holder's Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into and represent the right to receive
the consideration provided for in Article 2 hereof. If any holder of Tube Turns
Common Stock shall assert the right to be paid the fair value of such Tube Turns
Common Stock as described above, Tube Turns shall give New Tube Turns and Group
Tech notice thereof and New Tube Turns and Group Tech shall have the right to
participate in all negotiations and proceedings with respect to any such
demands. Tube Turns shall not, except with the prior written consent of Group
Tech and New Tube Turns, voluntarily make any payment with respect to, or settle
or offer to settle, any such demand for payment. Payment for Dissenting Shares
shall be made as required by the KRS.
D. Articles of Incorporation of Surviving Corporation. The Articles of
Incorporation of New Tube Turns, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation,
except that Article I of the Articles of Incorporation of New Tube Turns shall
be amended to read in its entirety as follows:
Article I
---------
Name
----
The name of the corporation is Tube Turns Technologies, Inc.
E. By-Laws of Surviving Corporation. The By-Laws of New Tube Turns in
effect at the Effective Time shall be the By-Laws of the Surviving Corporation
and thereafter may be amended or repealed in accordance with their terms or the
terms of the Articles of Incorporation of the Surviving Corporation and as
provided by applicable law.
F. Directors and Officers of Surviving Corporation. From and after the
Effective Time: (i) the directors of New Tube Turns immediately prior to the
Effective Time shall be the directors of the Surviving Corporation; and (ii) the
officers of New Tube Turns immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, in each case, until their respective
successors are duly elected or appointed and qualify in the manner
A-B-4
<PAGE>
provided in the Articles of Incorporation and By-Laws of the Surviving
Corporation or as otherwise provided by applicable law.
G. Tube Turns Conversion Ratio and Adjustment Event.
------------------------------------------------
[1] The "Tube Turns Conversion Ratio" shall be equal to such
fraction as is obtained by dividing the Group Tech Merger Shares (as
hereinafter defined) by the Total Tube Turns Shares (as hereinafter
defined). The "Group Tech Merger Shares" shall be equal to such number of
whole shares of Group Tech Common Stock as is obtained by dividing the
Aggregate Tube Turns Consideration (as hereinafter defined) by the Average
Closing Price. The "Total Tube Turns Shares" shall be equal to 125,030. The
"Aggregate Tube Turns Consideration" shall be equal to $1,875,450.
[2] In the event of any change in Group Tech Common Stock or
Tube Turns Common Stock between the date of this Plan and the Effective
Time by reason of any stock dividend, stock split, subdivision,
reclassification, recapitalization, combination, exchange of shares or the
like (an "Adjustment Event"), the Tube Turns Conversion Ratio shall be
appropriately adjusted so that each holder of Tube Turns Common Stock will
receive in the Tube Turns Merger the same proportionate amount of Group
Tech Common Stock such holder would have been entitled to receive if the
Effective Time had been immediately prior to such Adjustment Event.
[3] For purposes of this Plan, the "Average Closing Price" shall
be the greater of (i) $1.50 per share of Group Tech Common Stock, or (ii)
the arithmetic average of the closing price per share of the Group Tech
Common Stock, as reported on The Nasdaq National Market, for each of the
ten (10) consecutive trading days ending with the trading day which occurs
immediately prior to the effective date of the approval of the transactions
contemplated by the Agreement by the holders of shares of Group Tech Common
Stock voted, in person or by proxy, at the stockholders meeting of Group
Tech held to approve such transactions.
H. New Tube Turns Common Stock. The shares of common stock of New Tube
Turns issued and outstanding immediately prior to the Effective Time shall
remain issued and outstanding at the Effective Time and shall not be effected by
the Tube Turns Merger.
I. Fractional Shares. No scrip or fractional shares of Group Tech Common
Stock shall be issued in the Tube Turns Merger. All fractional shares of Group
Tech Common Stock to which a holder of Tube Turns Common Stock immediately prior
to the Effective Time would otherwise be entitled at the Effective Time shall be
aggregated. If a fractional share results from such aggregation,
A-B-5
<PAGE>
such stockholder shall be entitled, after the later of (a) the Effective Time or
(b) the surrender of such stockholder's Certificate(s) that represent such
shares of Tube Turns Common Stock, to receive from Group Tech an amount in cash
in lieu of such fractional share, based on the Average Closing Price.
J. Person. For purposes of this Plan, "Person" means any individual,
corporation, general or limited partnership, limited liability company, firm,
joint venture, association, enterprise, joint stock company, trust,
unincorporated organization or other entity.
ARTICLE 3
---------
TERMINATION
-----------
Anything contained in this Plan notwithstanding, this Plan may be
terminated and the Tube Turns Merger abandoned as provided in the Agreement.
ARTICLE 4
---------
CONDITIONS PRECEDENT
--------------------
The obligations of the parties to effect the Tube Turns Merger as
herein provided shall be subject to satisfaction, unless duly waived, of the
conditions set forth in the Agreement.
ARTICLE 5
---------
GENERAL PROVISIONS
------------------
A. Law and Section Headings. This Plan shall be construed and interpreted
in accordance with the laws of the Commonwealth of Kentucky. Section headings
are used in this Plan for convenience only and are to be ignored in the
construction of the terms of this Plan.
B. Modifications. The parties hereto may amend, modify or supplement this
Plan in such manner as may be agreed by them in writing.
A-B-6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Plan to be
executed by their duly authorized officers as of the date first above written.
"TUBE TURNS"
TUBE TURNS TECHNOLOGIES, INC.
By:
--------------------------------
Title:
-----------------------------
"NEW TUBE TURNS"
NEW TUBE TURNS TECHNOLOGIES, INC.
By:
--------------------------------
Title:
-----------------------------
A-B-7
<PAGE>
EXHIBIT C
PLAN OF MERGER
--------------
THIS PLAN OF MERGER (the "Plan") is made and entered effective as of
the 15th day of January, 1997, by and between BELL TECHNOLOGIES, INC., a Florida
corporation ("Bell") and BELL ACQUISITION CORPORATION, a Florida corporation
("New Bell").
W I T N E S S E T H :
The respective Boards of Directors of Group Financial Partners, Inc., a
Kentucky corporation ("GFP"), Tube Turns Technologies, Inc., a Kentucky
corporation, Group Technologies Corporation ("Group Tech"), and Bell have
determined that it is desirable to effect an Agreement and Plan of
Reorganization (the "Agreement"), for the general welfare and advantage of their
respective shareholders, under which plan, inter alia, Bell would be merged with
and into New Bell, in accordance with the terms of the Agreement and this Plan.
New Bell is a wholly owned subsidiary of Group Tech.
The Boards of Directors of Bell and New Bell have approved and adopted this
Plan and have authorized the execution hereof.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and undertakings herein contained, the parties hereby agree as
follows:
ARTICLE 1
---------
THE MERGER
----------
A. The Merger. Upon the terms and subject to the conditions set forth in
the Agreement and this Plan, and in accordance with the Florida Business
Corporation Act, as amended ("FBCA") at the Effective Time (as hereinafter
defined), Bell shall be merged with and into New Bell in accordance with the
FBCA (the "Bell Merger"), whereupon the separate existence of Bell shall cease
and New Bell shall continue as the surviving corporation (sometimes referred to
herein as the "Surviving Corporation").
B. Articles of Merger. Upon the terms and conditions set forth in the
Agreement and this Plan, Articles of Merger (the "Articles of Merger") shall be
duly prepared and executed by Bell and New Bell, and thereafter delivered to the
Secretary of State of the State of Florida for filing as provided in the FBCA.
The Bell Merger shall become effective upon filing with the Secretary of
A-C-1
<PAGE>
State of the State of Florida or at such time and date thereafter as is provided
in the Articles of Merger (the "Effective Time"). The date on which the
Effective Time occurs shall be the "Effective Date".
C. Effect of Filing. At the Effective Time, the Bell Merger shall have
the effects set forth in the applicable provisions of the FBCA. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time, all
the properties, rights, privileges, powers, and franchises of Bell and New Bell,
shall vest in the Surviving Corporation without further act or deed, and all
debts, liabilities and duties of Bell and New Bell shall become the debts,
liabilities and duties of the Surviving Corporation.
ARTICLE 2
---------
CONVERSION OF SHARES
--------------------
A. Conversion of Shares; Adjustments. At the Effective Time, by virtue of
the Bell Merger and without any action on the part of Bell or New Bell or the
stockholders of either of the foregoing entities:
[1] each share of the common stock of Bell, no par value per
share (the "Bell Common Stock"), issued and outstanding immediately prior
to the Effective Time, and held by a Person (as hereinafter defined) other
than Group Tech, shall be cancelled and extinguished and automatically
converted into the right to receive such shares of common stock, $.01 par
value, of Group Tech ("Group Tech Common Stock") as is equal to the Bell
Conversion Ratio (as hereinafter defined); and
[2] each share of Bell Common Stock issued and outstanding
immediately prior to the Effective Time, and held by Group Tech, shall be
cancelled and extinguished.
B. Exchange of Certificates.
------------------------
[1] On or prior to the Effective Time, Group Tech and New Bell
shall make available to each record holder (other than Group Tech) who, as
of the Effective Time, was a holder of an outstanding certificate or
certificates which immediately prior to the Effective Time represented
shares of Bell Common Stock (for purposes of this Article, the
"Certificate" or "Certificates"), a form of letter of transmittal and
instructions for use in effecting the surrender of the Certificates for
payment therefor and conversion thereof. Delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to Group Tech and the form of letter of
transmit-
A-C-2
<PAGE>
tal shall so reflect. Upon surrender to Group Tech of a Certificate,
together with such letter of transmittal duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor one or more
certificates as requested by the holder (properly issued, executed and
countersigned, as appropriate) representing that number of whole shares of
Group Tech Common Stock to which such holder of Bell Common Stock shall
have become entitled pursuant to the provisions of Article 2 hereof, and
the Certificate so surrendered shall forthwith be cancelled. No interest
will be paid or accrued on any cash payable upon the surrender of the
Certificates. If any portion of the consideration to be received pursuant
to Article 2 hereof, upon exchange of a Certificate, is to be issued or
paid to a Person other than the Person in whose name the Certificate
surrendered in exchange therefor is registered, it shall be a condition of
such issuance and payment that the Certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer. From the
Effective Time until surrender in accordance with the provisions of this
Article 2, each Certificate shall represent for all purposes only the right
to receive the consideration provided in Article 2 hereof. All payments in
respect of shares of Bell Common Stock that are made in accordance with the
terms hereof shall be deemed to have been made in full satisfaction of
rights pertaining to such securities.
[2] In the case of any lost, mislaid, stolen or destroyed
Certificate, the holder thereof may be required, as a condition precedent
to delivery to such holder of the consideration described in Article 2, to
deliver to Group Tech and New Bell a lost stock certificate affidavit and
satisfactory indemnity agreement as Group Tech and New Bell may direct as
indemnity against any claim that may be made against Group Tech and/or New
Bell with respect to the Certificate alleged to have been lost, mislaid,
stolen or destroyed.
[3] After the Effective Time, there shall be no transfers on the
stock transfer books of New Bell of the shares of Bell Common Stock that
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to Group Tech for transfer, they
shall be cancelled and exchanged for the consideration described in Article
2 hereof.
C. Dissenting Shareholders. To the extent that appraisal rights are
available under the FBCA, shares of Bell Common Stock that are issued and
outstanding immediately prior to the Effective Time and that have not been voted
for adoption of the Bell Merger and with respect to which appraisal rights have
been properly demanded in accordance with the FBCA ("Dissenting Shares") shall
not be converted into the right to receive the consideration
A-C-3
<PAGE>
provided for in Article 2 hereof at or after the Effective Time unless and until
the holder of such shares becomes ineligible for such appraisal. If a holder of
Dissenting Shares becomes ineligible for such appraisal, then, as of the
Effective Time or the occurrence of such event whichever later occurs, such
holder's Dissenting Shares shall cease to be Dissenting Shares and shall be
converted into and represent the right to receive the consideration provided for
in Article 2 hereof. If any holder of Bell Common Stock shall assert the right
to be paid the fair value of such Bell Common Stock as described above, Bell
shall give New Bell and Group Tech notice thereof and New Bell and Group Tech
shall have the right to participate in all negotiations and proceedings with
respect to any such demands. Bell shall not, except with the prior written
consent of Group Tech and New Bell, voluntarily make any payment with respect
to, or settle or offer to settle, any such demand for payment. Payment for
Dissenting Shares shall be made as required by the FBCA.
D. Articles of Incorporation of Surviving Corporation. The Articles of
Incorporation of New Bell, as in effect immediately prior to the Effective Time,
shall be the Articles of Incorporation of the Surviving Corporation, except that
Article I of the Articles of Incorporation of New Bell shall be amended to read
in its entirety as follows:
Article I
---------
Name
----
The name of the corporation is Bell Technologies, Inc.
E. By-Laws of Surviving Corporation. The By-Laws of New Bell in effect at
the Effective Time shall be the By-Laws of the Surviving Corporation and
thereafter may be amended or repealed in accordance with their terms or the
terms of the Articles of Incorporation of the Surviving Corporation and as
provided by applicable law.
F. Directors and Officers of Surviving Corporation. From and after the
Effective Time: (i) the directors of New Bell immediately prior to the Effective
Time shall be the directors of the Surviving Corporation; and (ii) the officers
of New Bell immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, in each case, until their respective successors are duly
elected or appointed and qualify in the manner provided in the Articles of
Incorporation and By-Laws of the Surviving Corporation or as otherwise provided
by applicable law.
A-C-4
<PAGE>
G. Bell Conversion Ratio and Adjustment Event.
------------------------------------------
[1] The "Bell Conversion Ratio" shall be equal to such fraction
as is obtained by dividing the Group Tech Merger Shares (as hereinafter
defined) by the Total Bell Shares (as hereinafter defined). The "Group Tech
Merger Shares" shall be equal to such number of whole shares of Group Tech
Common Stock as is obtained by dividing the Aggregate Bell Consideration
(as hereinafter defined) by the Average Closing Price (as hereinafter
defined). The "Total Bell Shares" shall be equal to 173,789. The "Aggregate
Bell Consideration" shall be equal to $5,908,826.
[2] In the event of any change in Group Tech Common Stock or
Bell Common Stock between the date of this Plan and the Effective Time by
reason of any stock dividend, stock split, subdivision, reclassification,
recapitalization, combination, exchange of shares or the like (an
"Adjustment Event"), the Bell Conversion Ratio shall be appropriately
adjusted so that each holder of Bell Common Stock will receive in the Bell
Merger the same proportionate amount of Group Tech Common Stock such holder
would have been entitled to receive if the Effective Time had been
immediately prior to such Adjustment Event.
[3] For purposes of this Plan, the "Average Closing Price" shall
be the greater of (i) $1.50 per share of Group Tech Common Stock, or (ii)
the arithmetic average of the closing price per share of the Group Tech
Common Stock, as reported on The Nasdaq National Market, for each of the
ten (10) consecutive trading days ending with the trading day which occurs
immediately prior to the effective date of the approval of the transactions
contemplated by the Agreement by the holders of shares of Group Tech Common
Stock voted, in person or by proxy, at the stockholders meeting of Group
Tech held to approve such transactions.
H. New Bell Common Stock. The shares of common stock of New Bell issued
and outstanding immediately prior to the Effective Time shall remain issued and
outstanding at the Effective Time and shall not be effected by the Bell Merger.
I. Fractional Shares. No scrip or fractional shares of Group Tech Common
Stock shall be issued in the Bell Merger. All fractional shares of Group Tech
Common Stock to which a holder of Bell Common Stock immediately prior to the
Effective Time would otherwise be entitled at the Effective Time shall be
aggregated. If a fractional share results from such aggregation, such
stockholder shall be entitled, after the later of (a) the Effective Time or (b)
the surrender of such stockholder's Certificate(s) that represent such shares of
Bell Common Stock, to receive from Group
A-C-5
<PAGE>
Tech an amount in cash in lieu of such fractional share, based on the Average
Closing Price.
J. Person. For purposes of this Plan, "Person" means any individual,
corporation, general or limited partnership, limited liability company, firm,
joint venture, association, enterprise, joint stock company, trust,
unincorporated organization or other entity.
ARTICLE 3
---------
TERMINATION
-----------
Anything contained in this Plan notwithstanding, this Plan may be
terminated and the Bell Merger abandoned as provided in the Agreement.
ARTICLE 4
---------
CONDITIONS PRECEDENT
--------------------
The obligations of the parties to effect the Bell Merger as herein
provided shall be subject to satisfaction, unless duly waived, of the conditions
set forth in the Agreement.
ARTICLE 5
---------
GENERAL PROVISIONS
------------------
A. Law and Section Headings. This Plan shall be construed and interpreted
in accordance with the laws of the Commonwealth of Kentucky. Section headings
are used in this Plan for convenience only and are to be ignored in the
construction of the terms of this Plan.
B. Modifications. The parties hereto may amend, modify or supplement this
Plan in such manner as may be agreed by them in writing.
A-C-6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Plan to be
executed by their duly authorized officers as of the date first above written.
"BELL"
BELL TECHNOLOGIES, INC.
By:
--------------------------------
Title:
-----------------------------
"NEW BELL"
BELL ACQUISITION CORPORATION
By:
--------------------------------
Title:
-----------------------------
A-C-7
<PAGE>
APPENDIX B
KENTUCKY REVISED STATUTES
SUBTITLE 13. DISSENTERS' RIGHTS
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
271B.13-010. DEFINITIONS. As used in this subtitle:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under KRS 271B.13-020 and who exercises that right when and in
the manner required by KRS 271B.13-200 to 271B.13-280.
(3) "Fair Value," with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable. In
any transaction subject to the requirements of KRS 271B.12-210 or exempted by
KRS 271B.12-220(2), "fair value" shall be at least an amount required to be paid
under KRS 271B.12-220(2) in order to be exempt from the requirements of KRS
271B.12-210.
(4) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently paid
by the corporation on its principal bank loans or, if none, at a rate that is
fair and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder. (Enact. Acts 1988, ch. 23, (S)123, effective January 1, 1989.)
271B.13-020. RIGHT TO DISSENT. (1) A shareholder shall be entitled to
dissent from, and obtain payment of the fair value of his shares in the event
of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If shareholder approval is required for the merger by KRS 271B.11-030
or the articles of incorporation and the shareholder is entitled to vote on the
merger; or
2. If the corporation is a subsidiary that is merged with its parent
under KRS 271B.11-040;
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for
B-1
<PAGE>
cash pursuant to a plan by which all or substantially all of the net proceeds of
the sale will be distributed to the shareholders within one (1) year after the
date of sale;
(d) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
1. Alters or abolishes a preferential right of the shares to a distribution
or in dissolution;
2. Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
3. Excludes or limits the right of the shares to vote on any matter other
than a limitation by dilution through issuance of shares or other securities
with similar voting rights; or
4. Reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional share so created is to be acquired for cash under KRS
271B.6-040;
(e) Any transaction subject to the requirements of KRS 271B.12-
210 or exempted by KRS 271B.12-220(2); or
(f) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for his
shares under this chapter shall not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation. (Enact. Acts 1988, ch. 23, (S)124, effective
January 1, 1989.)
271B.13-030. DISSENT BY NOMINEE AND BENEFICIAL OWNERS. (1) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he shall dissent with respect to all shares
beneficially owned by any one (1) person and notify the corporation in writing
of the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection shall be
determined as if the shares as to which he dissents and his other shares were
registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to
shares held on his behalf only if:
(a) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(b) He does so with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct the vote. (Enact.
Acts 1988, ch. 23, (S)125, effective January 1, 1989.)
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
271B.13-200. NOTICE OF DISSENTERS' RIGHTS. (1) If proposed corporate
action creating dissenters' rights under KRS 271B.13-020 is submitted to a vote
at a shareholders' meeting, the meeting notice must state that shareholders are
or may be entitled to assert dissenters' rights under this subtitle and the
corporation shall undertake to provide a copy of this subtitle to any
shareholder entitled to vote at the shareholders' meeting upon request of that
shareholder.
B-2
<PAGE>
(2) If corporate action creating dissenters' rights under KRS 271B.13-
020 is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in KRS 271B.13-220.
(Enact. Acts 1988, ch. 23, (S)126, effective January 1, 1989.)
271B.13-210. NOTICE OF INTENT TO DEMAND PAYMENT. (1) If proposed
corporate action creating dissenters' rights under KRS 271B.13-020 is submitted
to a vote at a shareholders' meeting, a shareholder who wishes to assert
dissenters' rights:
(a) Shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action is
effectuated; and
(b) Shall not vote his shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection
(1) of this section shall not be entitled to payment for his shares under this
chapter. (Enact. Acts 1988, ch. 23, (S)127, effective January 1, 1989.)
271B.13-220. DISSENTERS' NOTICE. (1) If proposed corporate action
creating dissenters' rights under KRS 271B.13-020 is authorized at a
shareholders' meeting, the corporation shall deliver a written dissenters'
notice to all shareholders who satisfied the requirements of KRS 271B.13-210.
(2) The dissenters' notice shall be sent no later than ten (10) days
after the date the proposed corporate action was authorized by the shareholders,
or, if no shareholder authorization was obtained, by the board of directors, and
shall:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is received;
(c) Supply a form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting dissenters'
rights certify whether or not he acquired beneficial ownership of the shares
before that date;
(d) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty (30), nor more than sixty (60)
days after the date the notice provided in subsection (1) of this section is
delivered; and
(e) Be accompanied by a copy of this subtitle. (Enact. Acts 1988,
ch. 23, (S)128, effective January 1, 1989.)
271B.13-230. DUTY TO DEMAND PAYMENT. (1) A shareholder who is sent a
dissenters' notice described in KRS 271B.13-220 shall demand payment, certify
whether he acquired beneficial ownership of the shares before the date required
to be set forth in the dissenters' notice pursuant to subsection (2)(c) of KRS
271B.13-220, and deposit his certificates in accordance with the terms of the
notice.
(2) The shareholder who demands payment and deposits his share
certificates under subsection (1) of this section shall retain all other rights
of a shareholder until these rights are canceled or modified by the taking of
the proposed corporate action.
B-3
<PAGE>
(3) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice,
shall not be entitled to payment for his shares under this subtitle. (Enact.
Acts 1988, ch. 23, (S)129, effective January 1, 1989.)
271B.13-240. SHARE RESTRICTIONS. (1) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is taken or the restrictions
released under KRS 271B.13-260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares shall retain all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(Enact. Acts 1988, ch. 23, (S)130, effective January 1, 1989.)
271B.13-250. PAYMENT. (1) Except as provided in KRS 271B.13-270, as
soon as the proposed corporate action is taken, or upon receipt of a payment
demand, the corporation shall pay each dissenter who complied with KRS 271B.13-
230 the amount the corporation estimates to be the fair value of his shares,
plus accrued interest.
(2) The payment shall be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for that
year, and the latest available interim financial statements, if any;
(b) A statement of the corporation's estimate of the fair value
of the shares;
(c) An explanation of how the interest was calculated; and
(d) A statement of the dissenter's right to demand payment under
KRS 271B.13-280. (Enact. Acts 1988, ch. 23, (S)131, effective January 1, 1989.)
271B.13-260. FAILURE TO TAKE ACTION. (1) If the corporation does not
take the proposed action within sixty (60) days after the date set for demanding
payment and depositing share certificates, the corporation shall return the
deposited certificates and release the transfer restrictions imposed on
uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under KRS 271B.13-220 and repeat the payment demand
procedure. (Enact. Acts 1988, ch. 23, (S)132, effective January 1, 1989.)
271B.13-270. AFTER-ACQUIRED SHARES. (1) A corporation may elect to
withhold payment required by KRS 271B.13-250 from a dissenter unless he was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenter's right to demand payment under KRS
271B.13-280. (Enact. Acts 1988, ch. 23, (S)133, effective January 1, 1989.)
271B.13-280. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER. (1) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate (less any payment under KRS 271B.13-250), or reject
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the corporation's offer under KRS 271B.13-270 and demand payment of the fair
value of his shares and interest due, if:
(a) The dissenter believes that the amount paid under KRS
271B.13-250 or offered under KRS 271B.13-270 is less than the fair value of his
shares or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under KRS 271B.13-250
within sixty (60) days after the date set for demanding payment; or
(c) The corporation, having failed to take the proposed action,
does not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty (60) days after the date set for
demanding payment.
(2) A dissenter waives his right to demand payment under this section
unless he shall notify the corporation of his demand in writing under subsection
(1) of this section within thirty (30) days after the corporation made or
offered payment for his shares. (Enact. Acts 1988, ch. 23, (S)134, effective
January 1, 1989.)
JUDICIAL APPRAISAL OF SHARES
271B.13-300 COURT ACTION. (1) If a demand for payment under KRS
271B.13-280 remains unsettled, the corporation shall commence a proceeding
within sixty (60) days after receiving the payment demand and petition the court
to determine the fair value of the shares and accrued interest. If the
corporation does not commence the proceeding within the sixty (60) day period,
it shall pay each dissenter whose demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the circuit court
of the county where a corporation's principal office (or, if none in this state,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(3) The corporation shall make all dissenters (whether or not
residents of this state) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties shall be served
with a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section shall be plenary and exclusive. The court
may appoint one (1) or more persons as appraisers to receive evidence and
recommend decision on the question of fair value. The appraisers have the powers
described in the order appointing them, or in any amendment to it. The
dissenters shall be entitled to the same discovery rights as parties in other
civil proceedings.
(5) Each dissenter made a party to the proceeding shall be entitled to
judgment:
(a) For the amount, if any, by which the court finds the
fair value of his shares, plus interest, exceeds the amount paid by the
corporation; or
(b) For the fair value, plus accrued interest, of his after-
acquired shares for which the corporation elected to withhold payment under KRS
271B.13-270. (Enact. Acts 1988, ch. 23, (S)135, effective January 1, 1989.)
271B.13-310. COURT COSTS AND COUNSEL FEES. (1) The court in an
appraisal proceeding commenced under KRS 271B.13-300 shall determine all costs
of the proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court. The court shall assess the costs against
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the corporation, except that the court may assess costs against all or some of
the dissenters, in amounts the court finds equitable, to the extent the court
finds the dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under KRS 271B.13-280.
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters, if
the court finds the corporation did not substantially comply with the
requirements of KRS 271B.13-200 to 271B.13-280; or
(b) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this subtitle.
(3) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited. (Enact. Acts 1988, ch. 23, (S)136,
effective January 1, 1989.)
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APPENDIX C
FLORIDA BUSINESS CORPORATION ACT
607.1301 DISSENTERS' RIGHTS; DEFINITIONS. -- The following definitions
apply to ss. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value," with respect to a dissenter's shares, means the value of
the shares as of the close of business on the day prior to the shareholders'
authorization date, excluding any appreciation or depreciation in anticipation
of the corporate action unless exclusion would be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date on which
the corporation received written consents without a meeting from the requisite
number of shareholders in order to authorize the action, or, in the case of a
merger pursuant to s. 607.1104, the day prior to the date on which a copy of the
plan of merger was mailed to each shareholder of record of the subsidiary
corporation.
607.1302 RIGHT OF SHAREHOLDERS TO DISSENT.
(1) Any shareholder of a corporation has the right to dissent from, and
obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a party:
1. If the shareholder is entitled to vote on the merger, or
2. If the corporation is a subsidiary that is merged with its parent
under s. 607.1104, and the shareholders would have been entitled to vote on
action taken, except for the applicability of s. 607.1104;
(b) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation, other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange
pursuant to s. 607.1202, including a sale in dissolution but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to the
shareholders within 1 year after the date of sale;
(c) As provided in s. 607.0902(11), the approval of a control-share
acquisition;
(d) Consummation of a plan of share exchange to which the corporation is a
party as the corporation the shares of which will be acquired, if the
shareholder is entitled to vote on the plan;
(e) Any amendment of the articles of incorporation if the shareholder is
entitled to vote on the amendment and if such amendment would adversely affect
such shareholder by:
1. Altering or abolishing any preemptive rights attached to any of
his shares;
2. Altering or abolishing the voting rights pertaining to any of his
shares, except as such rights may be affected by the voting rights of new shares
then being authorized of any existing or new class or series of shares;
3. Effecting an exchange, cancellation, or reclassification of any
of his shares, when such exchange, cancellation, or reclassification would alter
or abolish his voting rights or alter his percentage
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of equity in the corporation, or effecting a reduction or cancellation of
accrued dividends or other arrearages in respect to such shares;
4. Reducing the stated redemption price of any of his redeemable
shares, altering or abolishing any provision relating to any sinking fund for
the redemption or purchase of any of his shares, or making any of his shares
subject to redemption when they are not otherwise redeemable;
5. Making noncumulative, in whole or in part, dividends of any of
his preferred shares which had theretofore been cumulative;
6. Reducing the stated dividend preference of any of his preferred
shares; or
7. Reducing any stated preferential amount payable on any of his
preferred shares upon voluntary or involuntary liquidation; or
(f) Any corporate action taken, to the extent the articles of incorporation
provide that a voting or nonvoting shareholder is entitled to dissent and obtain
payment for his shares.
(2) A shareholder dissenting from any amendment specified in paragraph
(l)(e) has the right to dissent only as to those of his shares which are
adversely affected by the amendment.
(3) A shareholder may dissent as to less than all the shares registered in
his name. In that event, his rights shall be determined as if the shares as to
which he has dissented and his other shares were registered in the names of
different shareholders.
(4) Unless the articles of incorporation otherwise provide, this section
does not apply with respect to a plan of merger or share exchange or a proposed
sale or exchange of property, to the holders of shares of any class or series
which, on the record date fixed to determine the shareholders entitled to vote
at the meeting of shareholders at which such action is to be acted upon or to
consent to any such action without a meeting, were either registered on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc., or held of record by not fewer than 2,000 shareholders.
(5) A shareholder entitled to dissent and obtain payment for his shares
under this section may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
607.1320 PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS.
(1) (a) If a proposed corporate action creating dissenters' rights under s.
607.1302 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights and be accompanied by a copy of ss. 607.1301, 607.1302, and 607.1320. A
shareholder who wishes to assert dissenters' rights shall:
1. Deliver to the corporation before the vote is taken written notice of
his intent to demand payment for his shares if the proposed action is
effectuated, and
2. Not vote his shares in favor of the proposed action. A proxy or vote
against the proposed action does not constitute such a notice of intent to
demand payment.
(b) If proposed corporate action creating dissenters' rights under s.
607.1302 is effectuated by written consent without a meeting, the corporation
shall deliver a copy of ss. 607.1301, 607.1302, and 607.1320 to each shareholder
simultaneously with any request for his written consent or, if such a request is
not made, within 10 days after the date the corporation received written
consents without a meeting from the requisite number of shareholders necessary
to authorize the action.
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(2) Within 10 days after the shareholders' authorization date, the
corporation shall give written notice of such authorization or consent or
adoption of the plan of merger, as the case may be, to each shareholder who
filed a notice of intent to demand payment for his shares pursuant to paragraph
(1)(a) or, in the case of action authorized by written consent, to each
shareholder, excepting any who voted for, or consented in writing to, the
proposed action.
(3) Within 20 days after the giving of notice to him, any shareholder who
elects to dissent shall file with the corporation a notice of such election,
stating his name and address, the number, classes, and series of shares as to
which he dissents, and a demand for payment of the fair value of his shares. Any
shareholder failing to file such election to dissent within the period set forth
shall be bound by the terms of the proposed corporate action. Any shareholder
filing an election to dissent shall deposit his certificates for certificated
shares with the corporation simultaneously with the filing of the election to
dissent. The corporation may restrict the transfer of uncertificated shares from
the date the shareholder's election to dissent is filed with the corporation.
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and shall not
be entitled to vote or to exercise any other rights of a shareholder. A notice
of election may be withdrawn in writing by the shareholder at any time before an
offer is made by the corporation, as provided in subsection (5), to pay for his
shares. After such offer, no such notice of election may be withdrawn unless the
corporation consents thereto. However, the right of such shareholder to be paid
the fair value of his shares shall cease, and he shall be reinstated to have all
his rights as a shareholder as of the filing of his notice of election,
including any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the corporation, the fair value thereof in cash
as determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim, if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the
shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a
court has been made or filed within the time provided in this section; or
(d) A court of competent jurisdiction determines that such shareholder
is not entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which shareholders
may file their notices of election to dissent, or within 10 days after such
corporate action is effected, whichever is later (but in no case later than 90
days from the shareholders' authorization date), the corporation shall make a
written offer to each dissenting shareholder who has made demand as provided in
this section to pay an amount the corporation estimates to be the fair value for
such shares. If the corporate action has not been consummated before the
expiration of the 90-day period after the shareholders' authorization date, the
offer may be made conditional upon the consummation of such action. Such notice
and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which the
dissenting shareholder holds, as of the latest available date and not more than
12 months prior to the making of such offer; and
(b) A profit and loss statement of such corporation for the 12-month
period ended on the date of such balance sheet or, if the corporation was not in
existence throughout such 12-month period, for the portion thereof during which
it was in existence.
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(6) If within 30 days after the making of such offer any shareholder
accepts the same, payment for his shares shall be made within 90 days after the
making of such offer or the consummation of the proposed action, whichever is
later. Upon payment of the agreed value, the dissenting shareholder shall cease
to have any interest in such shares.
(7) If the corporation fails to make such offer within the period
specified therefor in subsection (5) or if it makes the offer and any dissenting
shareholder or shareholders fail to accept the same within the period of 30 days
thereafter, then the corporation, within 30 days after receipt of written demand
from any dissenting shareholder given within 60 days after the date on which
such corporate action was effected, shall, or at its election at any time within
such period of 60 days may, file an action in any court of competent
jurisdiction in the county in this state where the registered office of the
corporation is located requesting that the fair value of such shares be
determined. The court shall also determine whether each dissenting shareholder,
as to whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation fails to
institute the proceeding as herein provided, any dissenting shareholder may do
so in the name of the corporation. All dissenting shareholders (whether or not
residents of this state), other than shareholders who have agreed with the
corporation as to the value of their shares, shall be made parties to the
proceeding as an action against their shares. The corporation shall serve a copy
of the initial pleading in such proceeding upon each dissenting shareholder who
is a resident of this state in the manner provided by law for the service of a
summons and complaint and upon each nonresident dissenting shareholder either by
registered or certified mail and publication or in such other manner as is
permitted by law. The jurisdiction of the court is plenary and exclusive. All
shareholders who are proper parties to the proceeding are entitled to judgment
against the corporation for the amount of the fair value of their shares. The
court may, if it so elects, appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value. The appraisers
shall have such power and authority as is specified in the order of their
appointment or an amendment thereof. The corporation shall pay each dissenting
shareholder the amount found to be due him within 10 days after final
determination of the proceedings. Upon payment of the judgment, the dissenting
shareholder shall cease to have any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair rate
of interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined by
the court and shall be assessed against the corporation, but all or any part of
such costs and expenses may be apportioned and assessed as the court deems
equitable against any or all of the dissenting shareholders who are parties to
the proceeding, to whom the corporation has made an offer to pay for the shares,
if the court finds that the action of such shareholders in failing to accept
such offer was arbitrary, vexatious, or not in good faith. Such expenses shall
include reasonable compensation for, and reasonable expenses of, the appraisers,
but shall exclude the fees and expenses of counsel for, and experts employed by,
any party. If the fair value of the shares, as determined, materially exceeds
the amount which the corporation offered to pay therefor or if no offer was
made, the court in its discretion may award to any shareholder who is a party to
the proceeding such sum as the court determines to be reasonable compensation to
any attorney or expert employed by the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the agreed
value thereof or pursuant to payment of the judgment entered therefor, as
provided in this section, may be held and disposed of by such corporation as
authorized but unissued shares of the corporation, except that, in the case of a
merger, they may be held and disposed of as the plan of merger otherwise
provides. The shares of the surviving corporation into which the shares of such
dissenting shareholders would have been converted had they assented to the
merger shall have the status of authorized but unissued shares of the surviving
corporation.
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EXHIBIT D
THIRD AMENDMENT TO
THE AMENDED AND RESTATED ARTICLES OF INCORPORATION OF
GROUP TECHNOLOGIES CORPORATION
GROUP TECHNOLOGIES CORPORATION, a corporation organized and existing under
the laws of the State of Florida (the "Corporation"), hereby certifies as
follows:
Pursuant to the unanimous approval of the Board of Directors of the
Corporation and the affirmative vote of the holders of a majority of the
outstanding common stock of the Corporation, in accordance with Section 607.1003
of the Florida Statutes, on __________________, 19___, the following amendments
to the Amended and Restated Articles of Incorporation of the Corporation were
adopted:
I. CHANGE OF CORPORATE NAME. Article I shall be deleted in its entirety
and replaced with the following:
"ARTICLE I
----------
NAME
----
The name of the corporation is Avcor Solutions, Inc."
II. INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
AND AUTHORIZATION OF NONVOTING COMMON STOCK. Article VI shall be
deleted in its entirety and replaced with the following:
"ARTICLE VI
-----------
Capital Stock
-------------
The total number of shares which are authorized to be issued by the
corporation is 60,000,000 shares of common stock having a $.01 par value
("Common Stock"), 10,000,000 shares of nonvoting common stock having a $.01
par value per share ("Nonvoting Common Stock"), and 1,000,000 shares of
preferred stock having $.01 par value ("Preferred Stock").
A description of the foregoing classes of stock of the corporation and
a statement of the voting powers, preferences and relative rights and the
qualifications, limitations or restrictions granted to or imposed upon the
shares of each class is as follows:
Paragraph I
Preferred Stock
A. Authority is hereby vested in the Board of Directors, by
resolution, to divide any or all of the authorized shares of Preferred
Stock into series and, within the limitations imposed by law and these
Articles of Incorporation, to fix and determine as to each such series:
(1) The voting rights and powers, if any, of the holders of shares of
such series;
(2) The number of shares and designation of such series;
(3) The annual dividend rate;
(4) The prices at, and the terms and conditions on which, shares of
such series may be redeemed;
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(5) The amounts payable on shares of such series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the corporation;
(6) The terms, if any, upon which shares of such series may be
convertible into, or exchangeable for, shares of any other class or
classes or of any other series of the same or any other class or
classes, including the price or prices and the rate of conversion or
exchange, any adjustments thereof, and all other terms and conditions;
(7) The sinking fund provisions, if any, for the redemption or
purchase of shares of such series; and
(8) Such other provisions as may be fixed by the Board of Directors of
the corporation pursuant to the Florida Business Corporation Act.
B. All shares of any one series of Preferred Stock shall be identical
with each other in all respects, except that shares of any one series
issued at different times may differ as to the dates from which dividends
thereon shall be cumulative.
C. The corporation may at any time permitted by the resolution
adopted by the Board of Directors providing for the issue of any series of
Preferred Stock and at the redemption price or prices and on the terms and
conditions stated in said resolution, redeem the whole or any part of the
shares of any series of Preferred Stock at the time outstanding.
D. Except when otherwise herein or by statute specifically provided,
or except as provided by the resolution adopted by the Board of Directors
providing for the issue of any series, the holders of shares of Preferred
Stock shall not be entitled to vote at the election of directors or on any
question arising at any meeting of shareholders of the corporation.
E. To the extent permitted by the Florida Business Corporation Act,
the shares of Preferred Stock shall be convertible into other shares of the
capital stock of this corporation upon such terms and conditions and at
such rates of conversion or exchange as may be provided by the resolution
adopted by the Board of Directors providing for the issue of any series.
Paragraph II
------------
Common Stock and Nonvoting Common Stock
---------------------------------------
The Common Stock and Nonvoting Common Stock are identical in all
respects, except as follows:
A. Each share of Common Stock entitles the holder thereof to one
vote on each matter submitted to a shareholders' vote, while no shares of
Nonvoting Common Stock shall have any voting rights, except for those
voting rights required by the Florida Business Corporation Act.
B. Subject to the limitations prescribed herein, holders of the
Common Stock and Nonvoting Common Stock shall participate equally in any
dividends (payable in cash, stock or property) and stock splits, when and
as declared by the Board of Directors, out of assets of the corporation
legally available therefor; provided, however, that, in the event of
a stock split, or a pro rata stock dividend of like shares declared on
outstanding shares, the holders of Common Stock shall receive shares of
Common Stock and the holders of Nonvoting Common Stock shall receive shares
of Nonvoting Common Stock.
C. In the event the corporation is liquidated, dissolved or wound
up, whether voluntarily or involuntarily, the holders of the Common Stock
and Nonvoting Common Stock shall participate equally in any distribution. A
merger or consolidation of the corporation with or into any other
corporation or a sale or conveyance of all or any part of the assets of the
corporation (which shall not in fact result in the liquidation of the
corporation and the distribution of assets to shareholders) shall not be
deemed to be a voluntary or involuntary liquidation or dissolution or
winding up of the corporation within the meaning of this paragraph.
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D. If at any time while there are shares of Common Stock and
Nonvoting Common Stock issued and outstanding, it shall be determined by
the Board of Directors, in its sole discretion, that legislation or
regulations are enacted or any judicial or administrative determination is
made which would prohibit the quotation, listing, or trading of the
corporation's Common Stock or Nonvoting Common Stock on the New York Stock
Exchange, the American Stock Exchange or the National Association of
Securities Dealers Automated Quotation System, or would otherwise have a
material adverse effect on the corporation, in any such case due to the
corporation having more than one class of common shares outstanding, then
the Board of Directors may by reversion convert all outstanding Nonvoting
Common Stock into Common Stock on a share-for-share basis. To the extent
practicable, notice of such conversion of Nonvoting Common Stock specifying
the date fixed for said conversion shall be mailed, postage prepaid, at
least 10 days but not more than 30 days prior to said conversion date to
the holders of record of shares of Common Stock and Nonvoting Common Stock
at their respective addresses as the same shall appear on the books of the
corporation; provided, however, that no failure or inability to provide
such notice shall limit the authority or ability of the Board of Directors
to convert all outstanding Nonvoting Common Stock into Common Stock.
Immediately prior to the close of business on said conversion date (or, if
said conversion date is not a business day, on the next succeeding business
day) each outstanding share of Nonvoting Common Stock shall thereupon
automatically be converted into a share of Common Stock and each
certificate theretofore representing shares of Nonvoting Common Stock shall
thereupon and thereafter represent a like number of shares of Common Stock.
Paragraph III
-------------
General
-------
A. No holder of shares of the corporation of any class, as such,
shall have any preemptive right to subscribe to stock, obligations,
warrants, subscription rights or other securities of the corporation of any
class, regardless of when authorized.
B. For the purposes of this Article VI and of any resolution of the
Board of Directors providing for the issue of any series of Preferred Stock
or of any articles of amendment filed with the Department of State of the
State of Florida (unless otherwise expressly provided in any such
resolution or articles), any class or classes of stock of the corporation
shall be deemed to rank junior to any other class or classes if the rights
of the holders thereof shall be subject or subordinate to the rights of the
holders of shares of such other class or classes in respect of the receipt
of dividends or of amounts distributable upon liquidation, dissolution, or
winding up."
As required pursuant to Florida Statutes '607.1006(1)(f), the undersigned
hereby attest that the number of votes cast for the foregoing amendments by the
shareholders was sufficient for approval.
WHEREUPON, at Tampa, Florida, this _____ day of _______________, 1997,
Group Technologies Corporation hereby certifies accordingly, under its corporate
seal and the hands of its President and Secretary, so that, on the filing
hereof, the Amended and Restated Articles of Incorporation shall be deemed
amended accordingly.
GROUP TECHNOLOGIES
CORPORATION, a Florida corporation
ATTEST:
By: By:
-------------------------- --------------------------------
Michael L. Schuman, Secretary Robert E. Gill, President
(CORPORATE SEAL)
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APPENDIX E
GROUP TECHNOLOGIES CORPORATION
1994 STOCK OPTION PLAN FOR KEY EMPLOYEES
ADOPTED ON OCTOBER 27, 1994
AS AMENDED AND RESTATED ON ____________, 1997
1. Purpose. The purpose of the Group Technologies Corporation
1994 Stock Option Plan for Key Employees is to promote the interests of the
Company by affording an incentive to certain key employees to remain in the
employ of the company and its Subsidiaries and to use their best efforts in its
behalf; and further to aid the Company and its Subsidiaries in attracting,
maintaining, and developing capable personnel of a caliber required to ensure
the continued success of the Company and its Subsidiaries by means of an offer
to such persons of an opportunity to acquire or increase their proprietary
interest in the Company through the granting of incentive stock options and
nonstatutory stock options to purchase the Company's stock pursuant to the terms
of the Plan.
2. Definitions.
A. Board. The word "Board" means the Company's Board of Directors.
B. Code. The word "Code" means the Internal Revenue Code of 1986, as
amended.
C. Common Stock. The term "Common Stock" means the Company's common
stock, $.01 par value, or the common stock or securities of a Successor that
have been substituted theretofore pursuant to Section 9 hereof.
D. Company. The word "Company" means Group Technologies Corporation, a
Florida corporation, with its principal place of business at 10901 Malcolm
McKinley Drive, Tampa, Florida 33612.
E. ISO. The acronym "ISO" means an option to purchase Common Stock
which at the time the option is granted under the Plan qualifies as an incentive
stock option within the meaning of Code Section 422.
F. NSO. The acronym "NSO" means a nonstatutory stock option to
purchase Common Stock which at the time the option is granted under the Plan
does not qualify as an ISO.
G. Option Price. The term "Option Price" means the price to be paid
for Common Stock upon the exercise of an option granted under the Plan, in
accordance with Section 7.B hereof.
H. Optionee. The word "Optionee" means an employee to whom options
have been granted under the Plan.
I. Plan. The word "Plan" means the Group Technologies Corporation
1994 Stock Option Plan for Key Employees, as set forth herein, and as amended
from time to time.
J. Plan Committee. The term "Plan Committee" means the committee
appointed by the Board to administer the Plan, pursuant to Section 4 hereof.
K. Subsidiary. The word "Subsidiary" shall mean any corporation
which at the time an option is granted under the Plan qualifies as a subsidiary
of the Company under the definition of "subsidiary corporation" contained in
Code Section 424(f), or any similar provision thereafter enacted.
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L. Successor. The word "Successor" means the entity surviving a
merger or consolidation with the Company, or the entity that acquires all or a
substantial portion of the Company's assets or outstanding capital stock
(whether by merger, purchase or otherwise).
M. Ten Percent Shareholder. The term "Ten Percent Shareholder" means
an employee who, at the time an option is granted, owns stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or Subsidiary employing the Optionee or of its parent
(within) the meaning of Code Section 424(e)) or subsidiary (within the meaning
of Code Section 424(f)) corporation.
3. Shares Subject to Plan.
A. Authorized Unissued or Treasury Shares. Subject to the provisions
of Section 9 hereof, the shares to be delivered upon exercise of options granted
under the Plan shall be made available, at the discretion of the Board, from the
authorized unissued shares or treasury shares of Common Stock.
B. Aggregate Number of Shares. Subject to adjustments and
substitutions made pursuant to the provisions of Section 9 hereof, the aggregate
number of shares that may be issued upon exercise of all options that may be
granted under the Plan shall not exceed five million (5,000,000) of the
Company's authorized shares of Common Stock.
C. Shares Subject to Expired Options. If any option granted under the
Plan expires or terminates for any reason without having been exercised in full
in accordance with the terms of the Plan, the shares of Common Stock subject to,
but not delivered under, such option shall become available for any lawful
corporate purpose, including for transfer pursuant to other options granted to
the same employee or other employees without decreasing the aggregate number of
shares of Common Stock that may be granted under the Plan.
4. Administration. The Plan shall be administered by the Board or, at the
discretion of the Board, by the Plan Committee, whose membership shall be
determined and reviewed from time to time by the Board. The Plan Committee shall
consist of not less than two (2) members of the Board. Jeffrey T. Gill and
Robert E. Gill shall serve as members of the Plan Committee until delivery of
their written resignation to the Board or until removal by the Board. Both the
Board and the Plan Committee shall have full power and authority to construe,
interpret, and administer the Plan and either the Board or the Plan Committee
may from time to time adopt such rules and regulations for carrying out the Plan
as it may deem proper and in the best interests of the Company.
5. Grant of Options. Subject to the terms, provisions and conditions of
the Plan, either the Board or the Plan Committee shall have full and final
authority in its discretion: (i) to select the employees to whom options shall
be granted; (ii) to authorize the granting of ISO's, NSO's or a combination of
ISO's and NSO's; (iii) to determine the number of shares of Common Stock subject
to each option; (iv) to determine the time or times when options will be
granted, the manner in which each option shall be exercisable, and the duration
of the exercise period; (v) to fix such other provisions of the option agreement
as it may deem necessary or desirable consistent with the terms of the Plan; and
(vi) to determine all other questions relating to the administration of the
Plan. Notwithstanding the foregoing, the aggregate fair market value (determined
as of the date the option is granted) of the Common Stock for which ISOs will
first become exercisable by an Optionee in any calendar year under all ISO plans
of the Company and its Subsidiaries shall not exceed $100,000. The
interpretation of any provisions of the Plan by either the Board or the Plan
Committee shall be final, conclusive, and binding upon all persons and the
officers of the Company shall place into effect and shall cause the Company to
perform its obligations under the Plan in accordance with the determinations of
the Board or the Plan Committee in administering the Plan.
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6. Eligibility. Key employees of the Company and its subsidiaries
including officers and directors, shall be eligible to receive options under the
Plan. No director of the Company who is not also an employee of the Company or a
Subsidiary shall be entitled to receive an option under the Plan. Key employees
to whom options may be granted under the Plan will be those elected by either
the Board or the Plan Committee from time to time who, in the sole discretion of
the Board or the Plan Committee, have contributed in the past or who may be
expected to contribute materially in the future to the successful performance of
the Company and its Subsidiaries.
7. Terms and Conditions of Options. Each option granted under the Plan
shall be evidenced by an option agreement signed by the Optionee and by a member
of the Plan Committee on behalf of the Company. An option agreement shall
constitute a binding contract between the Company and the Optionee, and every
Optionee, upon acceptance of such option agreement, shall be bound by the terms
and restrictions of the Plan and of the option agreement. Such agreement shall
be subject to the following express terms and conditions and to such other terms
and conditions that are not inconsistent with the Plan and that either the Board
or the Plan Committee may deem appropriate.
A. Option Period. Each option agreement shall specify the period for
which the option thereunder is granted and shall provide that the option shall
expire at the end of such period. Either the Plan Committee or the Board, may
extend such period provided that, in the case of an ISO, such extension shall
not in any way disqualify the option as an ISO without the Optionee's consent.
In no case shall such period, including any such extensions, exceed ten (10)
years from the date of grant, provided, however, that in the case of an ISO
granted to a Ten Percent Stockholder, such period, including extensions, shall
not exceed five (5) years from the date of grant.
B. Option Price. The Option Price per share of Common Stock shall be
determined by either the Board or the Plan Committee at the time an option is
granted. The Option Price for ISO's and NSO's shall be not less than: (i) the
fair market value of the Common Stock on the date the option is granted, or (ii)
in the case of an ISO granted to a Ten Percent Shareholder, one hundred ten
percent (110%) of the fair market value of the Common Stock on the date the
option is granted and shall be subject to adjustments in accordance with the
provisions of Section 9 hereof.
C. Fair Market Value. The fair market value of Common Stock on any
given measurement date shall be determined as follows:
(i) if the Common Stock is traded on the over-the-counter market,
the average of the closing bid and asked quotations or the closing
high bid quotation, whichever is available, for the Common Stock in
the over-the-counter market, as reported by the National Association
of Securities Dealers Automated Quotation System, on the business day
immediately preceding the measurement date; or
(ii) if the Common Stock is listed on a national securities
exchange, the average of the closing prices of the Common Stock on the
Composite Tape for the ten (10) consecutive trading days immediately
preceding the measurement date; or
(iii) if the Common Stock is neither traded on the over-the-
counter market nor listed on a national securities exchange, such
value as either the Board or the Plan Committee, in good faith, shall
determine.
D. Payment of Option Price. Each option shall provide that the
purchase price of the shares as to which an option shall be exercised shall be
paid to the Company at the time of exercise either in cash or in such other
consideration as either the Board or the Plan Committee deems acceptable, and
which other consideration in either the Board's or the Plan Committee's sole
discretion may include: (i) Common Stock of the Company already owned by the
Optionee having a total fair market value on the date of exercise, determined in
accordance with Section 7.C hereof, equal to the purchase price, (ii) Common
Stock of the Company issuable upon the exercise of a Plan option and withheld by
the Company
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having a total fair market value on the date of exercise, determined in
accordance with Section 7.C hereof, equal to the purchase price, or (iii) a
combination of cash and Common Stock of the Company (either shares already owned
by the Optionee or shares being withheld upon the exercise of a Plan option)
having a total fair market value on the date of exercise, determined in
accordance with Section 7.C hereof, equal to the amount of the purchase price
not paid in cash.
E. Manner of Exercise. Subject to the terms and conditions of any
applicable option agreement, any option granted under the Plan may be exercised
in whole or in part. To initiate the process for the exercise of an option: (i)
the Optionee shall deliver to the Company, or to a broker-dealer in the Common
Stock with the original copy to the Company a written notice specifying the
number of shares as to which the option is being exercised and, if determined by
counsel for the Company to be necessary, representing that such shares are being
acquired for investment purposes only and not for the purpose of resale or
distribution; and (ii) the Optionee, or the broker-dealer, shall pay for the
exercise price of such shares with cash, or if the Board or the Plan Committee
in its discretion agrees to so accept, by delivery to the Company of Common
Stock of the Company (either shares already owned by the Optionee or shares
being withheld upon the exercise of a Plan option), or in some combination of
cash and such Common Stock acceptable to the Board or the Plan Committee. If
payment of the Option Price is made with Common Stock, the value of the Common
Stock used for such payment shall be the fair market value of the Common Stock
on the date of exercise, determined in accordance with Section 7.C hereof. The
date of exercise of a stock option shall be determined under procedures
established by either the Board or the Plan Committee, but in no event shall the
date of exercise precede the date on which both the written notice of intent to
exercise an option and full payment of the exercise price for the shares as to
which the option is being exercised have been received by the Company. Promptly
after receiving full payment for the shares as to which the option is being
exercised and, provided that all conditions precedent contained in the Plan are
satisfied, the Company shall, without transfer or issuance tax or other
incidental expenses to Optionee, deliver to Optionee a certificate for such
shares of the Common Stock. If Optionee fails to accept delivery of the Common
Stock, his rights to exercise the applicable portion of the option shall
terminate.
F. Exercises Causing Loss of Compensation Deduction. No part of an
option may be exercised to the extent the exercise would cause the Optionee to
have compensation from the Company and its affiliated companies for any year in
excess of $1 million and which is nondeductible by the Company and its
affiliated companies pursuant to Code Section 162(m) and the regulations issued
thereunder. Any option not exercisable because of this limitation shall continue
to be exercisable in any subsequent year in which the exercise would not cause
the loss of the Company's or its affiliated companies compensation tax
deduction, provided such exercise occurs before lapse of the option, and
otherwise complies with the terms and conditions of the Plan and option
agreement.
G. Investment Representation. Each option agreement may provide that,
upon demand by either the Board or the Plan Committee for such a representation,
the Optionee or Optionee's Representative shall deliver to the Board or the Plan
Committee at the time of any exercise of an option or portion thereof a written
representation that the shares to be acquired upon such exercise are to be
acquired for investment and not for resale or with a view to the distribution
thereof. Upon such demand, delivery of such representation before delivery of
Common Stock issued upon exercise of an option and before expiration of the
option period shall be a condition precedent to the right of the Optionee or
Optionee's Representative to purchase Common Stock.
H. ISOs. Each option agreement which provides for the grant of an ISO
to an employee shall contain such terms and provisions as either the Board or
the Plan Committee deems necessary or desirable to qualify such option as an ISO
within the meaning of Code Section 422.
I. Exercise in the Event of Death or Termination of Employment.
Unless the Board, or the Plan Committee, in its sole discretion, has, prior the
date of any of the following events, specifically approved otherwise, these
conditions shall apply to the ability of an Optionee to exercise his or her
options:
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[1] If an Optionee dies (i) while an employee of the Company or
a subsidiary, or (ii) within three (3) months after termination of his or
her employment with the Company or a Subsidiary because of a disability,
his or her options may be exercised by the Optionee's Representative, to
the extent that the Optionee shall have been entitled to do so on the date
of his or her death or such termination of employment, but not later than
the expiration date specified in paragraph A of this Section 7 or one (1)
year after the Optionee's death, whichever date is earlier.
[2] If an Optionee's employment by the Company or a Subsidiary
terminates because of his or her disability and the Optionee has not died
within the following three (3) months, he or she may exercise his or her
options, to the extent that he or she shall have been entitled to do so at
the date of the termination of employment, at any time, or from time to
time, but not later than the expiration date specified in paragraph A of
this Section 7 or one (1) year after termination of employment, whichever
date is earlier.
[3] If an Optionee's employment terminates by reason of his or
her retirement in accordance with the terms of the Company's tax-qualified
retirement plans or with the consent of either the Board or the Plan
Committee, all right to exercise his or her options shall terminate at the
expiration date specified in paragraph A of this Section 7 or three (3)
months after termination of employment, whichever date is earlier.
[4] If an Optionee's employment terminates for any reason other
than death, disability, or retirement, all rights to exercise his or her
options shall terminate on the date of his or her termination of
employment.
J. Leaves of Absence. Either the Plan Committee or the Board may, in
its discretion, treat all or any portion of any period during which an Optionee
is on military or on an approved leave of absence from the Company or a
Subsidiary as a period of employment of such Optionee by the Company or
Subsidiary for purposes of accrual of his rights under the Plan. Notwithstanding
the foregoing, if a leave of absence exceeds ninety (90) days and reemployment
is not guaranteed by contract or statute, the Optionee's employment by the
Company or a Subsidiary for the purposes of the Plan shall be deemed to have
terminated on the 91st day of the leave.
K. Transferability of Options. An option granted under the Plan may
not be transferred by the Optionee otherwise than by will or the laws of descent
and distribution, and during the lifetime of the Optionee to whom granted, may
be exercised only by such Optionee.
L. No Rights as Shareholder. No Optionee or Optionee's
Representative shall have any rights as a shareholder with respect to Common
Stock subject to his option before the date of transfer to him of a certificate
or certificates for such shares.
M. No Rights To Continued Employment. The Plan and any option
granted under the Plan shall not confer upon any Optionee any right with respect
to continuance of employment by the Company or any Subsidiary, nor shall it
interfere in any way with the right of the Company or any Subsidiary by which an
Optionee is employed to terminate his employment at any time.
N. Tax Withholding. To the extent required by applicable federal,
state, local or foreign law, the Optionee shall, on the date of exercise, make
arrangements satisfactory to the Company for the satisfaction of any withholding
tax obligations that arise by reason of an option exercise or any sale of
shares. Either the Board or the Plan Committee, in its sole discretion, may
permit these obligations to be satisfied in whole or in part with: (i) cash paid
by the Optionee or by a broker-dealer on behalf of the Optionee, (ii) shares of
Common Stock that otherwise would be issued to the Optionee upon exercise of the
option, and/or (iii) shares of Common Stock already owned by the Optionee. The
Company shall not be required to issue shares for the exercise of an option
until such tax obligations are satisfied and the
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Company may, to the extent permitted by law, deduct any such tax
obligations from any payment of any kind otherwise due to the Optionee.
8. Compliance With Other Laws and Regulations. The Plan, the grant and
exercise of options thereunder, and the obligation of the Company to sell and
deliver Common Stock under such options, shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
government or regulatory agency as may be required. The Company shall not be
required to issue or deliver any certificates for Common Stock before: (i) the
listing of the Common Stock on any stock exchange or over-the-counter market on
which the Common Stock may then be listed and (ii) the completion of any
registration or qualification of any governmental body which the Company shall,
in its sole discretion, determine to be necessary or advisable. To the extent
the Company meets the then applicable requirements for the use thereof and to
the extent the Company may do so without undue cost or expense, and subject to
the determination by the Board of Directors of the Company that such action is
in the best interest of the Company, the Company intends to register the
issuance and sale of such Common Stock by the Company under federal and
applicable state securities laws using a Form S-8 registration statement under
the Securities Act of 1933, as amended, or such successor Form as shall then be
available.
9. Capital Adjustments Affecting Stock, Mergers and Consolidations.
A. Capital Adjustments. In the event of a capital adjustment in the
Common Stock resulting from a stock dividend, stock split, reorganization,
merger, consolidation, or a combination or exchange of shares, the number of
shares of Common Stock subject to the Plan and the number of shares under option
shall be automatically adjusted to take into account such capital adjustment. By
virtue of such a capital adjustment, the price of any share under option shall
be adjusted so that there will be no change in the aggregate purchase price
payable upon exercise of any such option.
B. Mergers and Consolidations. In the event the Company merges or
consolidates with another entity, or all or a substantial portion of the
Company's assets or outstanding capital stock are acquired (whether by merger,
purchase or otherwise) by a Successor, the kind of shares of Common Stock that
shall be subject to the Plan and to each outstanding option shall, automatically
by virtue of such merger, consolidation or acquisition, be converted into and
replaced by shares of common stock, or such other class of securities having
rights and preferences no less favorable than the Common Stock, of the
Successor, and the number of shares subject to the option and the purchase price
per share upon exercise of the option shall be correspondingly adjusted, so
that, by virtue of such merger, consolidation or acquisition, each Optionee
shall have the right to purchase (a) that number of shares of common stock of
the Successor that have a book value equal, as of the date of such merger,
conversion or acquisition, to the book value, as of the date of such merger,
conversion or acquisition, of the shares of Common Stock of the Company
theretofore subject to the Optionee's option, (b) for a purchase price per share
that, when multiplied by the number of shares of common stock of the Successor
subject to the option, shall equal the aggregate exercise price at which the
Optionee could have acquired all of the shares of Common Stock of the Company
theretofore optioned to the Optionee.
C. No Effect on Company's Rights. The granting of an option pursuant
to the Plan shall not effect in any way the right and power of the Company to
make adjustments, reorganizations, reclassifications, or changes of its capital
or business structure or to merge, consolidate, dissolve, liquidate, sell or
transfer all or any part of its business or assets.
10. Amendment, Suspension, or Termination. The Board shall have the
right, at any time, to amend, suspend or terminate the Plan in any respect that
it may deem to be in the best interests of the Company, except that, without
approval by shareholders of the Company holding not less than a majority of the
votes represented and entitled to be voted at a duly held meeting of the
Company's shareholders, no amendment shall be made that would:
A. increase the maximum number of shares of Common Stock which may be
delivered
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under the Plan, except as provided in Section 9 hereof;
B. change the Option Price for an ISO, except as provided in Section 9
hereof;
C. extend the period during which an ISO may be exercised beyond the
period provided in Section 7.A hereof;
D. make any changes in any outstanding option, without the consent of
the Optionee, which would adversely affect the rights of the Optionee; or
E. extend the termination date of the Plan.
11. Effective Date, Term and Approval. The effective date of the Plan
shall be October 27, 1994 (the date of Board adoption of the Plan), subject to
approval by stockholders of the Company holding not less than a majority of the
shares present and voting at its 1995 annual meeting on April 21, 1995. The Plan
shall terminate ten (10) years after the effective date of the Plan and no
options may be granted under the Plan after such time, but any option granted
prior thereto may be exercised in accordance with its terms.
12. Governing Law; Severability. The Plan shall be governed by the laws of
the State of Florida. The invalidity or unenforceability of any provision of the
Plan or any option granted pursuant to the Plan shall not affect the validity
and enforceability of the remaining provisions of the Plan and the options
granted hereunder, and such invalid or unenforceable provision shall be stricken
to the extent necessary to preserve the validity and enforceability of the Plan
and the options granted hereunder.
Dated this ____ day of _________, 1997.
GROUP TECHNOLOGIES CORPORATION
By: ___________________________________________
Jeffrey T. Gill
Chairman of the Board
ATTEST:
___________________________
Secretary
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APPENDIX F
GROUP TECHNOLOGIES CORPORATION
INDEPENDENT DIRECTORS' STOCK OPTION PLAN
ADOPTED ON OCTOBER 27, 1994
AS AMENDED AND RESTATED ON __________, 1997
1. Purpose. The purpose of the Group Technologies Corporation
Independent Directors' Stock Option Plan is to promote the interests of the
Company by affording an incentive to certain persons not affiliated with the
Company and its Subsidiaries to serve as a director of the Company in order to
bring additional expertise and business judgment to the Company through the
opportunity for stock ownership offered under this Plan.
2. Definitions.
A. Board. The word "Board" means the Company's Board of
Directors.
B. Code. The word "Code" means the Internal Revenue Code of
1986, as amended.
C. Common Stock. The term "Common Stock" means the Company's common
stock, $.01 par value, or the common stock or securities of a Successor that
have been substituted theretofore pursuant to Section 9 hereof.
D. Company. The word "Company" means Group Technologies
Corporation, a Florida corporation, with its principal place of business at
10901 Malcolm McKinley Drive, Tampa, Florida 33612.
E. Independent Director. The term "Independent Director" means an
individual serving as a director on the Company's Board of Directors and who is
not otherwise employed by the Company or its Subsidiaries or an affiliate
thereof.
F. Option Price. The term "Option Price" means the price to
be paid for Common Stock upon the exercise of an option granted under the Plan,
in accordance with Section 7.B hereof.
G. Optionee. The word "Optionee" means an Independent Director to
whom options have been granted under the Plan.
H. Optionee Representative. The term "Optionee Representative" means
the Optionee's estate or the person or persons entitled thereto by will or by
applicable laws of descent and distribution.
I. Plan. The word "Plan" means the Group Technologies Corporation
Independent Directors' Stock Option Plan, as set forth herein, and as amended
from time to time.
J. Plan Committee. The term "Plan Committee" means the committee
appointed by the Board to administer the Plan, pursuant to Section 4 hereof.
K. Subsidiary. The word "Subsidiary" shall mean any corporation
which at the time an option is granted under the Plan qualifies as a subsidiary
of the Company under the definition of "subsidiary corporation" contained in
Code Section 424(f), or any similar provision thereafter enacted.
L. Successor. The word "Successor" means the entity surviving a
merger or consolidation with the Company, or the entity that acquires all or a
substantial portion of the Company's
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assets or outstanding capital stock (whether by merger, purchase or otherwise).
3. Shares Subject to Plan.
A. Authorized Unissued or Treasury Shares. Subject to the provisions
of Section 9 hereof, the shares to be delivered upon exercise of options granted
under the Plan shall be made available, at the discretion of the Board, from the
authorized unissued shares or treasury shares of Common Stock.
B. Aggregate Number of Shares. Subject to adjustments and
substitutions made pursuant to the provisions of Section 9 hereof, the aggregate
number of shares that may be issued upon exercise of all options that may be
granted under the Plan shall not exceed one million (1,000,000) of the Company's
authorized shares of Common Stock.
C. Shares Subject to Expired Options. If any option granted under
the Plan expires or terminates for any reason without having been exercised in
full in accordance with the terms of the Plan, the shares of Common Stock
subject to, but not delivered under, such option shall become available for any
lawful corporate purpose, including for transfer pursuant to other options
granted to the same employee or other employees without decreasing the aggregate
number of shares of Common Stock that may be granted under the Plan.
4. Administration. The Plan shall be administered by the Board or, at
the discretion of the Board, by the Plan Committee, whose membership shall be
determined and reviewed from time to time by the Board. The Plan Committee shall
consist of not less than two (2) members of the Board. Jeffrey T. Gill and
Robert E. Gill shall serve as members of the Plan Committee until delivery of
their written resignation to the Board or until removal by the Board. Both the
Board and the Plan Committee shall have full power and authority to construe,
interpret, and administer the Plan and either the Board or the Plan Committee
may from time to time adopt such rules and regulations for carrying out the Plan
as it may deem proper and in the best interests of the Company.
5. Grant of Options. Subject to the terms, provisions and conditions of
the Plan, either the Board or the Plan Committee shall have full and final
authority in its discretion: (i) to select the Independent Directors to whom
options shall be granted; (ii) to determine the number of shares of Common Stock
subject to each option; (iii) to determine the time or times when options will
be granted, the manner in which each option shall be exercisable, and the
duration of the exercise period; (iv) to fix such other provisions of the option
agreement as it may deem necessary or desirable consistent with the terms of the
Plan; and (v) to determine all other questions relating to the administration of
the Plan. The interpretation of any provisions of the Plan by either the Board
or the Plan Committee shall be final, conclusive, and binding upon all persons
and the officers of the Company shall place into effect and shall cause the
Company to perform its obligations under the Plan in accordance with the
determinations of the Board or the Plan Committee in administering the Plan.
6. Eligibility. Independent Directors of the Company shall be eligible
to receive options under the Plan. No director of the Company who is also an
employee of the Company or a Subsidiary shall be entitled to receive an option
under the Plan. Independent Directors to whom options may be granted under the
Plan will be those elected by either the Board or the Plan Committee from time
to time who, in the sole discretion of the Board or the Plan Committee, have
contributed in the past or who may be expected to contribute materially in the
future to the successful performance of the Company and its Subsidiaries.
7. Terms and Conditions of Options. Each option granted under the Plan
shall be evidenced by an option agreement signed by the Optionee and by a member
of the Plan Committee on behalf of the Company. An option agreement shall
constitute a binding contract between the Company and the Optionee, and every
Optionee, upon acceptance of such option agreement, shall be bound by the terms
and restrictions of the Plan and of the option agreement. Such agreement shall
be subject to the following
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express terms and conditions and to such other terms and conditions that are not
inconsistent with the Plan and that either the Board or the Plan Committee may
deem appropriate.
A. Option Period. Options granted under the Plan shall be
exercisable immediately and, if not exercised, shall lapse at the earliest of
the following times:
(i) ten (10) years from the date of grant; or
(ii) the date set by the grant and specified in the applicable
option agreement.
B. Option Price. The Option Price per share of Common Stock shall be
determined by either the Board or the Plan Committee at the time an option is
granted. The Option Price shall be not less than fair market value of the Common
Stock on the date the option is granted and shall be subject to adjustments in
accordance with the provisions of Section 9 hereof.
C. Fair Market Value. The fair market value of the Common Stock on
any given measurement date shall be determined as follows:
(i) if the Common Stock is traded on the over-the-counter market,
the average of the closing bid and asked quotations or the closing
high bid quotation, whichever is available, for the Common Stock in
the over-the-counter market, as reported by the National Association
of Securities Dealers Automated Quotation System on the business day
immediately preceding the measurement date; or
(ii) if the Common Stock is listed on a national securities
exchange, the average of the closing prices of the Common Stock on the
Composite Tape for the ten (10) consecutive trading days immediately
preceding the measurement date; or
(iii) if the Common Stock is neither traded on the over-the-
counter market nor listed on a national securities exchange, such
value as the Board or the Plan Committee, in good faith, shall
determine.
D. Payment of Option Price. Each option shall provide that the
purchase price of the shares as to which an option shall be exercised shall be
paid to the Company at the time of exercise either in cash or in such other
consideration as either the Board or the Plan Committee deems acceptable, and
which other consideration in either the Board's or the Plan Committee's sole
discretion may include: (i) Common Stock of the Company already owned by the
Optionee having a total fair market value on the date of exercise, determined in
accordance with Section 7.C hereof, equal to the purchase price, (ii) Common
Stock of the Company issuable upon the exercise of a Plan option and withheld by
the Company having a total fair market value on the date of exercise, determined
in accordance with Section 7.C hereof, equal to the purchase price, or (iii) a
combination of cash and Common Stock of the Company (either shares already owned
by the Optionee or shares being withheld upon the exercise of a Plan option)
having a total fair market value on the date of exercise, determined in
accordance with Section 7.C hereof, equal to the amount of the purchase price
not paid in cash.
E. Manner of Exercise. Subject to the terms and conditions of any
applicable option agreement, any option granted under the Plan may be exercised
in whole or in part. To initiate the process for the exercise of an option: (i)
the Optionee shall deliver to the Company, or to a broker-dealer in the Common
Stock with the original copy to the Company, a written notice of intent to
exercise an option specifying the number of shares as to which the option is
being exercised and, if determined by counsel for the Company to be necessary,
representing that such shares are being acquired for investment purposes only
and not for the purpose of resale or distribution; and (ii) the Optionee, or the
broker-dealer, shall pay for the exercise price of such shares with cash, or if
the Board or the Plan Committee in its discretion agrees to so accept, by
delivery to the Company of Common Stock of the
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Company (either shares already owned by the Optionee or shares being withheld
upon the exercise of a Plan option), or in some combination of cash and such
Common Stock acceptable to the Board or the Plan Committee. If payment of the
Option Price is made with Common Stock, the value of the Common Stock used for
such payment shall be the fair market value of the Common Stock on the date of
exercise as determined in accordance with Section 7.C hereof. The date of
exercise of a stock option shall be determined under procedures established by
either the Board or the Plan Committee, but in no event shall the date of
exercise precede the date on which both the written notice of intent to exercise
an option and full payment of the exercise price for the shares as to which the
option is being exercised have been received by the Company. Promptly after
receiving full payment for the shares as to which the option is being exercised
and, provided that all conditions precedent contained in the Plan are satisfied,
the Company shall, without transfer or issuance tax or other incidental expenses
to Optionee, deliver to Optionee a certificate for such shares of the Common
Stock. If Optionee fails to accept delivery of the Common Stock, his rights to
exercise the applicable portion of the option shall terminate.
F. Investment Representation. Each option agreement may provide
that, upon demand by either the Board or the Plan Committee for such a
representation, the Optionee or Optionee's Representative shall deliver to the
Board or the Plan Committee at the time of any exercise of an option or portion
thereof a written representation that the shares to be acquired upon such
exercise are to be acquired for investment and not for resale or with a view to
the distribution thereof. Upon such demand, delivery of such representation
before delivery of Common Stock issued upon exercise of an option and before
expiration of the option period shall be a condition precedent to the right of
the Optionee or Optionee's Representative to purchase Common Stock.
G. Exercise in the Event of Death or Termination of Service.
Upon termination of service as an Independent Director, for whatever reason, any
and all stock options held by the Optionee shall remain effective and may be
exercised by the Optionee or the Optionee's Representative until the expiration
of the applicable option term.
H. Transferability of Options. An option granted under the Plan may
not be transferable and may be exercised only by the Optionee during Optionee's
lifetime, or by the Optionee's Representative in the event of Optionee's death,
to the extent the option was exercisable by Optionee at the date of his death.
I. No Rights as Shareholder. No Optionee or Optionee's
Representative shall have any rights as a shareholder with respect to Common
Stock subject to his option before the date of transfer to him of a certificate
or certificates for such shares.
J. Tax Withholding. To the extent required by applicable federal,
state, local or foreign law, the Optionee shall, on the date of exercise, make
arrangements satisfactory to the Company for the satisfaction of any withholding
tax obligations that arise by reason of an option exercise or any sale of
shares. Either the Board or the Plan Committee, in its sole discretion, may
permit these obligations to be satisfied in whole or in part with: (i) cash paid
by the Optionee or by a broker-dealer on behalf of the Optionee, (ii) shares of
Common Stock that otherwise would be issued to the Optionee upon exercise of the
option, and/or (iii) shares of Common Stock previously acquired. The Company
shall not be required to issue shares for the exercise of an option until such
tax obligations are satisfied and the Company may, to the extent permitted by
law, deduct any such tax obligations from any payment of any kind otherwise due
to the Optionee.
8. Compliance With Other Laws and Regulations. The Plan, the grant and
exercise of options thereunder, and the obligation of the Company to sell and
deliver Common Stock under such options, shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
government or regulatory agency as may be required. The Company shall not be
required to issue or deliver any certificates for Common Stock before: (i) the
listing of the Common Stock on any stock exchange or over-the-counter market on
which the Common Stock may then be listed and (ii) the completion of any
registration or qualification of any governmental body which the Company shall,
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in its sole discretion, determine to be necessary or advisable. To the extent
the Company meets the then applicable requirements for the use thereof and to
the extent the Company may do so without undue cost or expense, and subject to
the determination by the Board of Directors of the Company that such action is
in the best interest of the Company, the Company intends to register the
issuance and sale of such Common Stock by the Company under federal and
applicable state securities laws using a Form S-8 registration statement under
the Securities Act of 1933, as amended, or such successor Form as shall then be
available.
9. Capital Adjustments Affecting Stock, Mergers and Consolidations.
A. Capital Adjustments. In the event of a capital adjustment in the
Common Stock resulting from a stock dividend, stock split, reorganization,
merger, consolidation, or a combination or exchange of shares, the number of
shares of Common Stock subject to the Plan and the number of shares under option
shall be automatically adjusted to take into account such capital adjustment. By
virtue of such a capital adjustment, the price of any share under option shall
be adjusted so that there will be no change in the aggregate purchase price
payable upon exercise of any such option.
B. Mergers and Consolidations. In the event the Company merges or
consolidates with another entity, or all or a substantial portion of the
Company's assets or outstanding capital stock are acquired (whether by merger,
purchase or otherwise) by a Successor, the kind of shares of Common Stock that
shall be subject to the Plan and to each outstanding option shall, automatically
by virtue of such merger, consolidation or acquisition, be converted into and
replaced by shares of common stock, or such other class of securities having
rights and preferences no less favorable than the Common Stock of the Successor,
and the number of shares subject to the option and the purchase price per share
upon exercise of the option shall be correspondingly adjusted, so that, by
virtue of such merger, consolidation or acquisition, each Optionee shall have
the right to purchase: (i) that number of shares of common stock of the
Successor that have a book value equal, as of the date of such merger,
conversion or acquisition, to the book value, as of the date of such merger,
conversion or acquisition, of the shares of Common Stock of the Company
theretofore subject to the Optionee's option, (ii) for a purchase price per
share that, when multiplied by the number of shares of common stock of the
Successor subject to the option, shall equal the aggregate exercise price at
which the Optionee could have acquired all of the shares of Common Stock of the
Company theretofore optioned to the Optionee.
C. No Effect on Company's Rights. The granting of an option pursuant
to the Plan shall not effect in any way the right and power of the Company to
make adjustments, reorganizations, reclassifications, or changes of its capital
or business structure or to merge, consolidate, dissolve, liquidate, sell or
transfer all or any part of its business or assets.
10. Amendment, Suspension, or Termination. The Board shall have the
right, at any time, to amend, suspend or terminate the Plan. Notwithstanding the
foregoing, without the consent of the Optionee, no amendment shall make any
changes in an outstanding option which would adversely affect the rights of the
Optionee.
11. Effective Date, Term and Approval. The effective date of the Plan
shall be October 27, 1994 (the date of Board adoption of the Plan), subject to
approval by stockholders of the Company holding not less than a majority of the
shares present and voting at its 1995 annual meeting on April 21, 1995. The Plan
shall terminate ten (10) years after the effective date of the Plan and no
options may be granted under the Plan after such time, but any option granted
prior thereto may be exercised in accordance with its terms.
12. Governing Law; Severability. The Plan shall be governed by the laws
of the State of Florida. The invalidity or unenforceability of any provision of
the Plan or any option granted pursuant to the Plan shall not affect the
validity and enforceability of the remaining provisions of the Plan and the
options granted hereunder, and such invalid or unenforceable provision shall be
stricken to the extent necessary to preserve the validity and enforceability of
the Plan and the options granted hereunder.
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Dated this ___ day of ____________, 1997.
GROUP TECHNOLOGIES CORPORATION
ATTEST:
___________________ By: _____________________________
Secretary Jeffrey T. Gill
Chairman of the Board
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APPENDIX G
J.C. Bradford & Co., LLC
Corporate Finance
330 Commerce Street
Nashville, TN 37201
615-748-9671
1-800-522-4750
December 17, 1996
Special Committee of the Board of Directors
Group Technologies Corporation
10901 Malcolm McKinley Drive
Tampa, FL 33612
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the outstanding Common Stock, par value $.01 per
share (the "Common Stock"), of Group Technologies Corporation (the "Company"),
other than Group Financial Partners, Inc. ("GFP") (such shareholders being
collectively referred to herein as the "Unaffiliated Shareholders"), of the
series of transactions, contemplated by the proposed Agreement and Plan of
Reorganization (the "Agreement") by and among GFP; Bell Technologies, Inc., a
subsidiary of GFP ("Bell"); Tube Turns Technologies, Inc., a subsidiary of GFP
("Tube Turns"); and the Company. For purposes of this opinion, we have assumed
that the draft Agreement in the form previously provided to us will not vary in
any material respect from the Agreement to be signed by the parties thereto and
that the terms of the exchanges will be as set forth in the Merger Review Term
Sheet, October 8, 1996, prepared by the Company's management and as subsequently
modified in the letter from GFP dated December 16, 1996.
The Agreement provides for, among other things, the merger of GFP with and
into the Company (the "GFP Merger"); the merger of Tube Turns with and into a
wholly-owned subsidiary of the Company (the "Tube Turns Merger"); and the merger
of Bell with and into a wholly-owned subsidiary of the Company (the "Bell
Merger"; the GFP Merger, the Tube Turns Merger, and the Bell Merger are
collectively referred to herein as the "Merger Transactions"). In the Merger
Transactions, the Company will issue shares of Common Stock to the shareholders
(other than the Company) of GFP, Tube Turns, and Bell. The terms and conditions
of the Merger Transactions are more fully set forth in the Agreement.
Capitalized terms used but not defined herein have the meanings ascribed to such
terms in the Agreement.
J. C. Bradford & Co., LLC, as part of its investment banking business,
engages in the valuation of businesses and securities in connection with mergers
and acquisitions, negotiated underwritings, secondary distributions of listed
and unlisted securities, private placements, and valuations for estate,
corporate, and other purposes. We have acted as financial advisor to the Special
Committee of the Board of Directors of the Company in connection with the
proposed Merger Transactions and will receive a fee from the Company for our
services. In addition, the Company has agreed to indemnify us for certain
liabilities arising out of the rendering of this opinion.
In conducting our analyses and arriving at our opinion, we have considered
such financial and other information as we deemed appropriate including, among
other things, the following: (i) the proposed Agreement, draft dated December 5,
1996; (ii) the historical and current financial position and results of
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operations of the Company as set forth in its periodic reports and proxy
materials filed with the Securities and Exchange Commission and the historical
and current financial position and results of operations of each of GFP, Tube
Turns, and Bell as set forth in its audited and unaudited financial statements,
(iii) certain internal operating data and financial analyses and forecasts of
each of the Company, GFP, Bell, and Tube Turns for the years beginning January
1, 1996 and ending December 31, 2000, prepared by its respective senior
management; (iv) certain financial and securities trading data of certain other
companies, the securities of which are publicly traded, that we believed to be
comparable to the Company, Tube Turns, and Bell or relevant to the transaction;
(v) the financial terms of certain other transactions that we believed to be
relevant; (vi) reported price and trading activity for the shares of Common
Stock; and (vii) such other financial studies, analyses, and investigations as
we deemed appropriate for purposes of our opinion. We also have held discussions
with members of the senior management of the Company, GFP, Bell, and Tube Turns
regarding the past and current business operations, financial condition, and
future prospects of the Company, GFP, Bell, and Tube Turns.
We have taken into account our assessment of general economic, market, and
financial and other conditions and our experience in other transactions, as well
as our experience in securities valuation and our knowledge of the industries in
which the Company, GFP, Bell, and Tube Turns operate generally. Our opinion is
necessarily based upon the information made available to us and conditions as
they exist and can be evaluated as of the date hereof.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us for purposes of our opinion and have not
assumed any responsibility for, nor undertaken an independent verification of,
such information. With respect to the internal operating data and financial
analyses and forecasts supplied to us, we have assumed that such data, analyses,
and forecasts were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the Company's, GFP's, Bell's, and Tube
Turns' respective senior management as to the recent and likely future
performance of their respective company. Accordingly, we express no opinion with
respect to such analyses or forecasts or the assumptions on which they are
based. With the explicit consent of the Company's Board of Directors and senior
management, we have not considered and our opinion does not address the
Company's exploration of strategic alternatives, including the potential sale of
one or more of its three principal operating facilities. Furthermore, we were
not asked to consider and our opinion does not address the relative merits of
the proposed Merger Transactions as compared to any other transactions in which
the Company might engage, including the disposition of one or more of its
operating facilities. Furthermore, we have not conducted a physical inspection
of all of the properties and facilities of GFP, Bell, or Tube Turns, and we have
not made an independent evaluation or appraisal of the assets and liabilities of
the Company, GFP, Bell, or Tube Turns or any of their respective subsidiaries or
affiliates and have not been furnished with any such evaluation or appraisal.
The Company is entitled to reproduce this opinion, in whole or in part, in
any proxy statement circulated in connection with the Group Tech Stockholder
Approval as required by applicable law or as appropriate; provided, that any
excerpt from or reference to this opinion (including any summary thereof) in
such document must be approved by us in advance in writing. Notwithstanding the
foregoing, this opinion does not constitute a recommendation to any holder of
shares of Common Stock to vote in favor of the Merger Transactions. We were
engaged by the Special Committee of the Board of Directors of the Company to
render this opinion, upon the Special Committee's request, in connection with
the discharge of its fiduciary obligations. We have advised the Special
Committee of the Board of Directors that we do not believe that any person
(including a stockholder of the Company) other than the Special Committee of the
Board of Directors has the legal right to rely upon this opinion for any claim
arising under state law and that, should any such claim be brought against us,
this assertion will be raised as a defense. In the absence of governing
authority, this assertion will be resolved by the final adjudication of such
issue by a court of competent jurisdiction. Resolution of this matter under
state law, however, will have no effect on the rights and responsibilities of
any person under the federal securities laws or on the rights and
responsibilities of the Company's Board of Directors under applicable state law.
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Based upon and subject to the foregoing, and based upon such other matters
as we consider relevant, it is our opinion that, as of the date hereof, the
Merger Transactions are fair to the Unaffiliated Shareholders from a financial
point of view.
Sincerely,
J.C. BRADFORD & CO., LLC
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article X of the Registrant's Amended and Restated Articles of
Incorporation limits the liability of directors of the Registrant pursuant to
the Florida Business Corporation Act (the "FBCA"). Under this Article, directors
generally will be personally liable to the Registrant or it shareholders for
monetary damages only for acts or omissions not in good faith or which involve
intentional misconduct or are known to the director to be a violation of the
law, for distributions made in violation of the FBCA, or for any transaction
from which a director derives an improper personal benefit.
Article XII of the Registrants Amended and Restated Articles of
Incorporation and the Bylaws of the Registrant require the Registrant to
indemnify each person against liability, and the reasonable cost or expense
incurred by such person in such persons capacity as a director, officer,
employee or agent of the Registrant, or in such persons like capacity with
another entity at the request of the Registrant; provided, however, that no such
person shall be indemnified against any such liability in connection with a
proceeding in which such person has been adjudged liable on the basis that
personal benefit was improperly received or if such indemnification would be
prohibited by law. The Amended and Restated Articles of Incorporation and Bylaws
of the Registrant further provide that the advancement of expenses incurred by
such person and reimbursable thereunder prior to the final disposition of a
proceeding may be made only upon delivery to the Registrant of an undertaking,
by or on behalf of such person, to repay all amounts advanced if it is
ultimately determined that such person is not entitled to indemnification.
If a claim is not paid in full by the Registrant within ninety days after a
written claim has been received, the person making the claim may bring suit
against the Registrant to recover any unpaid amount. If the officer or director
is successful, in whole or in part, he or she will be entitled to be paid the
expense of prosecuting such claim.
The circumstances under which Florida law requires or permits a corporation
to indemnify its directors, officers, employees and/or agents are set forth at
Section 607.0850 of the FBCA.
Generally, under Section 607.0850 of the FBCA, a corporation may indemnify
any person made a party to a proceeding because he or she is or was a director,
officer, employee or agent of the corporation, or is or was serving in one of
those capacities at another entity at the request of the Corporation, against
liability incurred in the proceeding if:
(a) He or she acted in good faith; and
(b) He or she reasonably believed that his or her conduct was in, or not
opposed to, the best interests of the corporation; and
(c) In the case of any criminal proceeding, he or she had no reasonable
cause to believe such conduct was unlawful.
Indemnification or advancement of expenses shall not be made if a judgment
or other final adjudication establishes that his or her actions or omissions to
act were material to the cause of action and constitute:
(a) A violation of the criminal law, unless such person had reasonable
cause to believe his or her conduct was lawful or had no reasonable
cause to believe it was unlawful;
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<PAGE>
(b) A transaction from which such person derived an improper personal
benefit;
(c) In the case of a director, a director's approval of an unlawful
distribution; or
(d) Willful misconduct or a conscious disregard for the best interests of
the Corporation in a proceeding by or in the right of the Corporation
to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder.
Florida law requires corporations to indemnify officers, directors,
employees or agents to the extent they are successful on the merits or otherwise
in defense of any proceeding brought against such officer, director, employee or
agent by reason of the fact that such person is or was an officer, director,
employee or agent.
In addition, the Registrant maintains directors' and officers' liability
insurance covering certain liabilities which may be incurred by the directors
and officers of the Registrant in connection with the performance of their
duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
Exhibit
Number Note Description
- ------ ---- -----------
2 Agreement and Plan of Reorganization (attached as Appendix A to
the Joint Proxy Statement/Prospectus forming a part of the
Registration Statement).
2.1 (1) Purchase and Sale Agreement among Honeywell Inc., Defense
Communication Products Corporation (prior name of Registrant),
and Group Financial Partners, Inc. dated May 21, 1989.
2.2 (1) Purchase and Sale Agreement among Alliant Techsystems Inc., MAC
Acquisition I, Inc. and the Registrant dated December 31, 1992.
2.3 (1) Purchase and Sale Agreement between Philips Electronic North
America Corporation and the Registrant dated June 25, 1993.
2.4 (4) Purchase Agreement among IBM-Brasil-Industria, Maquinas e
Servicos, Ltda. and Group Technologies Suporte de Informatica
Industria e Comercio Ltda. dated April 28, 1995.
2.4.1 (5) Amendment dated July 18, 1995 to the Purchase Agreement among
IBM-Brasil-Industria, Maquinas e Servicos, Ltda. and Group
Technologies Suporte de Informatica Industria e Comerco Ltda.
dated April 28, 1995.
2.5 (4) Purchase and Sale Agreement among Metrum, Inc. and MountainGate
Data Systems Inc. dated May 3, 1995.
2.6 (4) Purchase and Sale Agreement among Metrum, Inc. and Sienna
Imaging, Inc. dated June 6, 1995.
2.7 (6) Asset Purchase Agreement among Metrum, Inc., Registrant and F.W.
Bell, Inc. dated February 9, 1996.
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<PAGE>
2.8 (7) Asset Purchase Agreement among Registrant, Teklogix Enterprises,
Inc. and Teklogix International, Inc. dated March 22, 1996.
3.1 (1) Amended and Restated Articles of Incorporation of the
Registrant.
3.2 (1) Amended and Restated Bylaws of the Registrant.
3.3 (1) Articles of Amendment to the Amended and Restated Articles of
Incorporation of the Registrant.
3.4 (1) Second Amendment to the Amended and Restated Articles of
Incorporation of the Registrant.
5 Opinion of Fowler, White, Gillen, Boggs, Villareal and Banker,
P.A. regarding legality.
8 Opinion of Wyatt, Tarrant & Combs.
10.1 (2) Revolving Credit and Security Agreement between the Registrant
and First Union Credit Corporation
dated November 22, 1994.
10.2 (3) First Amendment to Revolving Credit and Security Agreement
between Registrant and First Union
Commercial Corporation dated March 29, 1995.
10.3 (5) Forbearance Agreement between the Registrant and First Union
Commercial Corporation dated
November 7, 1995.
10.4 (7) Amended and Restated Credit and Security Agreement between the
Registrant and First Union
Commercial Corporation dated March 29, 1996.
10.4.1 (9) First Amendment to Amended and Restated Credit and Security
Agreement, dated May 13, 1996.
10.4.2 (9) Second Amendment to Amended and Restated Credit and Security
Agreement, dated September 5, 1996.
10.4.3 (9) Letter Agreement dated November 7, 1996 Pertaining to Amended
and Restated Credit and Security
Agreement.
10.5 (1) Joint Development and Marketing Agreement between Loral
Fairchild Corporation, Loral Data Systems Division and Metrum
Information Storage, a business of Alliant Techsystems, Inc.
effective April 1, 1992.
10.6 (1) Form of U.S. Government Award/Contract.
10.7 (1) Preferred Supplier Purchase Agreement for Circuit Card Assembly
between the Registrant and Honeywell, Inc. dated July 1, 1990.
10.8 (1) IBM Project S Equipment Rental Agreement between Philips
Electronic Instruments Company, a division of Philips
Electronics North America Corporation, and the Registrant
dated July 30, 1993.
10.9 (1) Transponder Pricing Working Agreement between Philips Circuit
Assemblies and
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<PAGE>
Distribution Control Systems, Inc. dated October 10, 1991.
10.10 (1) Manufacturing Agreement among BMC Industries, Inc., Integrated
Microcircuits, Inc. and Chance Loan Management Systems dated
October 28, 1986, and related consent of Chance Loan Management
Systems dated February 6, 1987 to assignment of the above
referenced agreement from BMC Industries, Inc. and Integrated
Microcircuits, Inc. to North American Philips Corporation and
its wholly-owned subsidiary Interconics and consent to
assignment from North American Philips Corporation to Philips
Circuit Assemblies.
10.11 (1) Purchase Order between the Registrant and Martin Marietta.
10.12 (1) Standard OEM Purchase Agreement between Kulicke and Soffa
Industries, Inc. and Registrant effective March 16, 1993.
10.13 (1) Purchase/Supply Agreement between Philips Circuit Assemblies
and International Game Technology dated July 31, 1992.
10.14 (1) Purchase Order between the Registrant and Lockheed Martin
Corporation dated September 21, 1995.
10.15 (1) Cooperation and Licensing Agreement between Dauphin Technology
Incorporated and the Registrant dated August 11, 1993.
10.16 (1) Master Lease Agreement between General Electric Capital
Corporation and the Registrant dated April 1, 1993.
10.17 (1) Lease between Copelco Leasing Corporation and the Registrant
dated April 20, 1993.
10.18 (1) Master Rental Agreement and related documents between
Hewlett-Packard Company and the Registrant.
10.19 (1) Master Equipment Lease Agreement between Ellco Leasing
Corporation and the Registrant dated November 9, 1990.
10.20 (1) Master Lease Agreement between General Electric Capital
Corporation and the Registrant dated March 9, 1993.
10.21 (1) Industrial Lease between Alliant Techsystems, Inc. and Metrum,
Inc. dated March 19, 1993, as amended.
10.22 (1) Lease between John Hancock Mutual Life Insurance Company and
Honeywell, Inc. dated April 27, 1979; related Notice of
Assignment from John Hancock Mutual Life Insurance Company to
Sweetwell Industrial Associated, L.P., dated July 10, 1986;
related Assignment and Assumption of Lease between Honeywell,
Inc. and Defense Communications Products Corporation (prior
name of Registrant) dated May 21, 1989; and related Amendment
I to Lease Agreement between Sweetwell Industrial Associated,
L.P. and the Registrant dated October 25, 1991, regarding
Tampa Industrial park property.
10.23 (1) Lease between the Registrant and TMC Properties, Inc. dated
August 24, 1994 regarding North 46th Street Property.
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10.23.1 (4) Amendment No. 1 to Lease between Registrant and TMC Properties,
Inc. dated August 24, 1994 regarding North 46th Street Property.
10.24 (1) Agreements between the Registrant and International Brotherhood
of Teamsters, Chauffeurs, Warehousemen, and Helpers of America
Local Union No. 930 dated September 25, 1993.
10.25 (1) Agreements between the Registrant and the International
Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers
of America Local Union No. 930 dated November 22, 1994.
10.26 (1) Metrum Inc. Stock Option Plan dated March 1, 1993.
10.27 (1) Metrum, Inc. Executive Staff Incentive Compensation Plan dated
March 1, 1993.
10.28 (1) Group Technologies Corporation Stock Option Plan dated January
22, 1990.
10.29 (1) Group Technologies Corporation Executive Staff Incentive
Compensation Plan, as amended.
10.30 (4) Group Technologies Corporate Management Deferred Compensation
Plan Restated effective January 1, 1994 dated May 5, 1995.
10.31 (5) Group Technologies Corporate management Deferred Compensation
Plan Restated effective October 1, 1995 dated August 29, 1995.
10.32 (4) Group Technologies Corporation's Independent Directors' Stock
Option Plan dated October 27, 1994, as approved and ratified at
Annual Shareholder Meeting dated April 21, 1995.
10.32.1 (8) Group Technologies Corporation Independent Directors' Stock
Option Plan Restated effective on February 21, 1996, dated
October 27, 1994.
10.32.2 (9) Group Technologies Corporation Independent Directors' Stock
Option Plan restated effective October 29, 1996, dated October
27, 1994.
10.33 (4) Group Technologies 1994 Stock Option Plan for Key Employees
dated October 27, 1994, as approved and ratified at annual
shareholder meeting dated April 21, 1995 .
10.33.1 (8) Group Technologies Corporation 1994 Stock Option Plan for Key
Employees Restated effective on February 21, 1996, dated October
27, 1994.
10.33.2 (9) Group Technologies Corporation 1994 Stock Option Plan for Key
Employees restated effective October 29, 1996, dated October 27,
1994.
10.34 (1) Group Technologies Corporation Employee Incentive Compensation
Plan, as amended.
10.35 (1) Group Technologies Corporation Employee Stock Purchase Plan, as
amended.
10.36 (8) Group Technologies Corporation Independent Directors
Compensation Program Restated effective on February 21, 1996,
dated September 1, 1995.
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10.37 (8) Group Technologies Corporation 1996 Special Recovery Bonus Plan
for Vice Presidents effective as of January 2, 1996.
10.38 (8) Sublease between Group Technologies Supr. Informatica Ind. e
Com. Ltda. and Ceccato S/A Comercio de Utilidades Domesticas
dated March 20, 1996 regarding the Campinas, Brazil property.
10.39 Separation letter agreement dated December 10, 1996 between the
Registrant and Carl P. McCormick.
18 (3) Letter from Ernst & Young LLP, regarding change in accounting
principles.
21 (7) Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP, independent auditors for the
Registrant.
23.2 Consent of Ernst & Young LLP, independent auditors for Group
Financial Partners Inc.
23.3 Consent of Fowler, White, Gillen, Boggs, Villareal and Banker,
P.A. (included in Exhibit 5).
23.4 Consent of Wyatt, Tarrant & Combs (included in Exhibit 8)
(1) Incorporated by reference to the Registrant's Registration
Statement on Form S-1 filed May 18, 1994 (Registration No
33-76326).
(2) Incorporated by reference to the Registrant's Form 10-K for the
fiscal year ended December 31, 1994 filed on March 31, 1995.
(3) Incorporated by reference to the Registrant's Form 10-Q for the
Quarterly Period ended April 2, 1995 filed on May 17, 1995.
(4) Incorporated by reference to the Registrant's Form 10-Q for the
Quarterly Period ended July 2, 1995 filed on August 16, 1995.
(5) Incorporated by reference to the Registrant's Form 10-Q for the
Quarterly Period ended October 2, 1995 filed on November 15,
1995.
(6) Incorporated by reference to the Registrant's Form 8-K filed on
February 23, 1995.
(7) Incorporated by reference to the Registrant's Form 10-K for the
fiscal year ended December 31, 1995 filed on April 1, 1996.
(8) Incorporated by reference to the Registrant's Form 10-Q for the
Quarterly Period ended March 31, 1996 filed on May 14, 1996.
(9) Incorporated by reference to the Registrant's Form 10-Q for the
Quarterly Period ended September 29, 1996 filed on November 13,
1996.
II-6
<PAGE>
(b) Financial Statement Schedules:
Schedule II (a) Valuation and Qualifying Accounts; Group Technologies
Corporation
Schedule II (b) Valuation and Qualifying Accounts; Group Financial
Partners, Inc. and Subsidiaries
All other consolidated financial statement schedules have been omitted
because the required information is shown in the consolidated
financial statements or notes thereto or they are not applicable.
(c) The opinions of J.C. Bradford, advisor to the Special Committee to the
GTC Board, are appendices to the prospectus included in this
registration statement.
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(d) The Registrant undertakes that every prospectus (i) that is filed pursuant
to paragraph (d) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-7
<PAGE>
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy Statement-
Prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the Registration Statement when it became effective.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, hereunto duly authorized, in the City of Tampa,
State of Florida, on January 24, 1997.
GROUP TECHNOLOGIES CORPORATION
By: /s/ Robert E. Gill
----------------------------------
Robert E. Gill
Title: President and Chief Executive
Officer
II-9
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below
hereby severally constitutes and appoints Jeffrey T. Gill and David D. Johnson
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) to this Registration Statement and all documents
relating thereto and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission
and each state securities regulatory authority, granting unto said attorneys-
in-fact and agents full power and authority to do and perform each and every
act and thing necessary or advisable to be done in and about the premises as
fully to all intents and purposes as he might or could do in person hereby
ratifying and confirming all that said attorneys-in-fact and agents or his
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Capacity Date
--------- -------- ----
/s/ Jeffrey T. Gill January 24, 1997
- ---------------------- -------------------------- ----------------
Jeffrey T. Gill Chairman and Director
/s/ Robert E. Gill January 24, 1997
- ---------------------- -------------------------- ----------------
Robert E. Gill President, Chief Executive
Officer and Director
/s/ David D. Johnson January 24, 1997
- ---------------------- -------------------------- ----------------
David D. Johnson Vice President and Chief
Financial Officer
/s/ Henry F. Frigon January 24, 1997
- ---------------------- -------------------------- ----------------
Henry F. Frigon Director
/s/ Sidney R. Petersen January 24, 1997
- ---------------------- -------------------------- ----------------
Sidney R. Petersen Director
/s/ Roger W. Johnson January 24, 1997
- ---------------------- -------------------------- ----------------
Roger W. Johnson Director
II-10
<PAGE>
SCHEDULE II(a)
VALUATION AND QUALIFYING ACCOUNTS
GROUP TECHNOLOGIES CORPORATION
<TABLE>
<CAPTION>
Additions
------------------------
Balance at Charged to Charged Balance at
Beginning Costs and to Other End of
of Period Expenses Accounts Deductions Period
---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1995............................... $ 538,000 $1,293,000 $ - $1,048,000(1) $ 783,000
========== ========== ========== ========== ==========
Year ended December 31, 1994............................... $1,144,000 $ 571,000 $ - $1,177,000(1) $ 538,000
========== ========== ========== ========== ==========
Year ended December 31, 1993............................... $ 151,000 $1,005,000 $ - $ 12,000(1) $1,144,000
========== ========== ========== ========== ==========
Reserve for inactive, obsolete and unsalable inventories:
Year ended December 31, 1995............................... $2,230,000 $6,939,000 $ - $ 563,000(3) $8,606,000
========== ========== ========== ========== ==========
Year ended December 31, 1994............................... $2,139,000 $ 540,000 $ - $ 449,000(3) $2,230,000
========== ========== ========== ========== ==========
Year ended December 31, 1993............................... $1,356,000 $ 216,000 $ 567,000(2) $ - $2,139,000
========== ========== ========== ========== ==========
</TABLE>
- ---------------
(1) Uncollectible accounts written off, net of reserves.
(2) Reserve upon acquisition of Philips Circuit Assemblies.
(3) Inactive, obsolete and unsalable inventories written off.
<PAGE>
SCHEDULE II(b)
VALUATION AND QUALIFYING ACCOUNTS
GROUP FINANCIAL PARTNERS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Additions
----------------------
Balance at Charged to Charged Balance at
Beginning Costs and to Other End of
of Period Expenses Accounts Deductions Period
---------- ---------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1995............................... $ 697,000 $1,523,000 $ - $1,130,000(1) $1,090,000
========== ========== =========== ========== ==========
Year ended December 31, 1994............................... $1,262,000 $ 650,000 $ - $1,215,000(1) $ 697,000
========== ========== =========== ========== ==========
Year ended December 31, 1993............................... $ 177,000 $1,117,000 $ - $ 32,000(1) $1,262,000
========== ========== =========== ========== ==========
Reserve for inactive, obsolete and unsalable inventories:
Year ended December 31, 1995............................... $2,473,000 $6,990,000 $ - $ 857,000(3) $8,606,000
========== ========== =========== ========== ==========
Year ended December 31, 1994............................... $2,221,000 $ 573,000 $ - $ 321,000(3) $2,473,000
========== ========== =========== ========== ==========
Year ended December 31, 1993............................... $1,490,000 $ 264,000 $ 567,000(2) $ 100,000(3) $2,221,000
========== ========== =========== ========== ==========
- --------------
</TABLE>
(1) Uncollectible accounts written off, net of reserves.
(2) Reserve upon acquisition of Philips Circuit Assemblies.
(3) Inactive, obsolete and unsalable inventories written off.
<PAGE>
EXHIBIT 5
January 22, 1997
Group Technologies Corporation
10901 Malcolm McKinley Drive
Tampa, Florida 33612
Gentlemen:
We have acted as counsel for Group Technologies Corporation, a Florida
corporation (the "Company"), in the preparation of a Registration Statement on
Form S-4 (the "Registration Statement"), which the Company has filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act"), relating to the proposed issuance of up to 38,819,673
shares of the Company's Common Stock, $.01 par value (the "Common Stock"), to
shareholders of Group Financial Partners, Inc., Tube Turns Technologies, Inc.
and Bell Technologies, Inc. in connection with a proposed Reorganization.
In this connection we have examined the originals or copies of such
corporate records, documents and other instruments relating to the authorization
and issuance of such shares of Common Stock as we have deemed relevant under the
circumstances. Based upon the foregoing, and in reliance upon information from
time to time furnished to us by the Company's officers, directors and agents, we
are of the opinion that:
1. The Company is duly organized and incorporated and is validly existing
under the laws of the State of Florida, with an authorized capitalization
consisting of 40,000,000 shares of Common Stock, $.01 par value per share, and
1,000,000 shares of Preferred Stock, $.01 par value per share.
2. The issuance of the shares of Common Stock pursuant to the terms and
provisions of the Agreement and Plan of Reorganization described in the
Registration Statement has been duly authorized by the Board of Directors of the
Company and, when such shares are issued in accordance with the provisions
thereof after satisfaction of the conditions contained therein, will be legally
and validly issued, fully paid and non-assessable.
We understand that this opinion letter is to be used in connection with the
Registration Statement, as finally amended, and hereby consent to the filing of
this opinion letter with and as a part of the Registration Statement as so
amended, and further consent to the use of our name under the heading "Legal
Matters" in the Registration Statement and the Joint Proxy Statement/Prospectus
which is a part thereof.
Very truly yours,
FOWLER, WHITE, GILLEN, BOGGS,
VILLAREAL AND BANKER, P.A.
<PAGE>
EXHIBIT 8
---------
January 17, 1997
Board of Directors
Group Technologies Corporation
10901 Malcolm McKinley Drive
Tampa, Florida 33612
Board of Directors
Group Financial Partners, Inc.
455 Fourth Avenue
Louisville, Kentucky 40202
Board of Directors
Bell Technologies, Inc.
6120 Hanging Moss Road
Orlando, Florida 32807
Board of Directors
Tube Turns Technologies, Inc.
2900 West Broadway
Louisville, Kentucky 40232
Gentlemen:
We have acted as special tax counsel in connection with (i) certain federal
income tax consequences resulting from the transactions to be effected pursuant
to the terms of the Agreement and Plan of Reorganization (in the aggregate, the
"Reorganization") by and among Group Technologies Corporation, a Florida
corporation ("GTC"), Group Financial Partners, Inc., a Kentucky corporation
("GFP"), Tube Turns Technologies, Inc., a Kentucky corporation ("Tube Turns"),
and Bell Technologies, Inc., a Florida corporation ("Bell") (the "Plan of
Reorganization"), and (ii) the filing of the registration statement by GTC on
Form S-4 (together with all amendments and exhibits thereto through the date
hereof, the "Registration Statement"), under the Securities Act of 1933, as
amended (the "Act"), covering the shares of GTC Common Stock to be issued
pursuant to the Plan of Reorganization. Capitalized terms used but not defined
herein shall have the meanings assigned to them in the Registration Statement.
<PAGE>
Board of Directors
Group Technologies Corporation, et al.
January 17, 1997
Page 2.
In rendering this opinion we have examined such documents as we have deemed
relevant or necessary, including without limitation, the Plan of Reorganization
and the Registration Statement. In our examination, we have assumed the
genuineness of all signatures, the due execution and delivery of all documents,
the legal capacity of all natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or copies, and the
authenticity of the originals of such copies.
As to factual matters, in rendering this opinion, we have relied solely on
and have assumed the present and continuing truth and accuracy of (i) the
description of the facts relating to the Reorganization contained in the Plan of
Reorganization and Registration Statement, (ii) the factual representations and
warranties contained in the Plan of Reorganization and Registration Statement
and related documents and agreements, and (iii) the factual matters addressed by
representations from certain executive officers of GTC, New GTC, GFP, Tube
Turns, New Tube Turns, Bell and New Bell contained in letters to us dated
January 17, 1997 (the "Representation Letters"). The Representation Letters
address various factual matters relevant to the qualification of certain of the
transactions as either tax-deferred reorganizations under Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code") or tax-deferred
contributions under Section 351 of the Code. The initial and continuing truth
and accuracy of all such factual matters constitutes an integral basis for, and
a material condition to, this opinion.
The scope of this opinion is limited strictly to the matters set forth
below and no other opinion may be implied or inferred beyond such matters.
Without limiting the foregoing sentence, we express no opinion as to (i) any of
the local, state, foreign or other federal tax consequences resulting from the
Reorganization, (ii) the federal income tax consequences to shareholders of GTC,
GFP, Tube Turns and Bell subject to special rules under the Code, such as
foreign persons, tax-exempt organizations, insurance companies, financial
institutions, dealers in stocks and securities, and persons who do not own such
stock as a capital asset, (iii) the federal income tax consequences affecting
shares of GTC Common Stock acquired upon exercise of stock options, stock
purchase plan rights or otherwise as compensation, or holders of warrants,
options or other rights to acquire shares of GTC Common Stock, Tube Turns Common
Stock and Bell Common Stock, and (iv) the federal income tax consequences to any
party of the Spin-Off (herein defined).
The following description of the Reorganization is intended only as a
summary and is qualified in its entirety by that set forth in the Plan of
Reorganization and Registration Statement. Pursuant to the Plan of
Reorganization, the following will occur in chronological order: (i) the Spin-
Off; (ii) the Merger; (iii) the Tube Turns Merger; (iv) the Bell Merger; and (v)
the GTC Contribution.
The Spin-Off. At the applicable Effective Time as defined in the Plan of
Reorganization, GFP shall distribute the shares of GFP Partners-V, Inc.,
Unison Commercial Group, Inc., and BW Riverport, Inc., pro-rata to the
shareholders of GFP (the "Spin-Off").
The Merger. At the applicable Effective Time as defined in the Plan of
Reorganization, GFP will be merged with and into GTC in accordance with the
Kentucky Revised Statutes, as amended, and the Florida Business Corporation Act,
as amended, whereupon the
<PAGE>
Board of Directors
Group Technologies Corporation, et al.
January 17, 1997
Page 3.
separate existence of GFP will cease and GTC will continue as the surviving
corporation (the "Merger"). Shareholders of GFP (other than GTC, those electing
dissenter's rights and those entitled to receive cash in lieu of a fractional
share of GTC Common Stock) will be issued solely shares of GTC Common Stock.
The Tube Turns Merger. At the applicable Effective Time as defined in the
Plan of Reorganization, Tube Turns will merge with and into New Tube Turns
Technologies, Inc., a Kentucky corporation and a wholly-owned subsidiary of GTC
("New Tube Turns") pursuant to the laws of the Commonwealth of Kentucky and the
holders of outstanding Tube Turns Common Stock (other than GTC, those electing
dissenter's rights and those entitled to receive cash in lieu of a fractional
share of GTC Common Stock) will be issued solely shares of GTC Common Stock (the
"Tube Turns Merger").
The Bell Merger. At the applicable Effective Time as defined in the Plan
of Reorganization, Bell will merge with and into Bell Acquisition Corporation, a
Florida corporation and a wholly-owned subsidiary of GTC ("New Bell") pursuant
to the laws of the State of Florida and the holders of outstanding Bell Common
Stock (other than GTC, those electing dissenter's rights and those entitled to
receive cash in lieu of a fractional share of GTC Common Stock) will be issued
solely shares of GTC Common Stock (the "Bell Merger").
The GTC Contribution. Immediately after the Spin-Off, the Merger, the Tube
Turns Merger and the Bell Merger, GTC will contribute all of its assets (other
than the shares of New Tube Turns and New Bell) into GTC Acquisition
Corporation, a Florida corporation and a newly formed wholly owned subsidiary of
GTC ("New GTC").
Subject to the qualifications, assumptions and conditions provided herein,
we are of the opinion that:
I. The Merger
A. The Merger of GFP with and into GTC will constitute a reorganization
within the meaning of Section 368(a)(1)(A) of the Code.
B. GFP and GTC will each be "a party to a reorganization" within the
meaning of Section 368(b) of the Code.
C. No gain or loss will be recognized by GFP as a result of the Merger.
<PAGE>
Board of Directors
Group Technologies Corporation, et al.
January 17, 1997
Page 4.
D. No gain or loss will be recognized by GTC as a result of the Merger.
E. The tax basis of the assets received by GTC will be the same as the tax
basis of such assets of GFP immediately prior to the Merger.
F. The holding period of the assets of GFP received by GTC will in each
instance include the period for which such assets were held by GFP.
G. No gain or loss will be recognized by the shareholders of GFP as a
result of the exchange of GFP Common Stock for GTC Common Stock pursuant to the
Merger, except that a gain or loss will be recognized on the receipt of any cash
in lieu of a fractional share. Assuming that the GFP Common Stock is a capital
asset in the hands of the respective GFP shareholders, any gain or loss
recognized as a result of the receipt of cash in lieu of a fractional share will
be a capital gain or loss equal to the difference between the cash received and
that portion of the holder's tax basis in the GFP shares allocable to the
fractional share.
H. The tax basis of GTC Common Stock to be received by the shareholders of
GFP will be the same as the tax basis of the GFP Common Stock surrendered in
exchange therefor (reduced by any amount allocable to a fractional share
interest for which cash is received).
I. The holding period of the GTC Common Stock to be received by the
shareholders of GFP will include the holding period of the GFP Common Stock
surrendered in exchange therefor, provided the GFP shares were held as a capital
asset by the shareholders of GFP on the date of the exchange.
J. A shareholder of GFP who perfects his dissenter's rights and who
receives payment of the fair market value of his shares of GFP Common Stock will
be treated as having received such payment in redemption of such stock. Such
redemption will be subject to the conditions and limitations of Section 302 of
the Code.
II. The Tube Turns Merger
A. The acquisition by New Tube Turns of substantially all of the assets of
Tube Turns in exchange for shares of GTC Common Stock and the assumption of
liabilities of Tube Turns pursuant to the Tube Turns Merger will constitute a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Code.
<PAGE>
Board of Directors
Group Technologies Corporation, et al.
January 17, 1997
Page 5.
B. Tube Turns, GTC, and New Tube Turns will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code.
C. No gain or loss will be recognized by Tube Turns as a result of the
Tube Turns Merger.
D. No gain or loss will be recognized by New Tube Turns or GTC as a result
of the Tube Turns Merger.
E. The tax basis of the assets received by New Tube Turns will be the same
as the tax basis of such assets of Tube Turns immediately prior to the Tube
Turns Merger.
F. The holding period of the assets of Tube Turns received by New Tube
Turns will in each instance include the period for which such assets were held
by Tube Turns.
G. No gain or loss will be recognized by the shareholders of Tube Turns as
a result of the exchange of Tube Turns Common Stock for GTC Common Stock
pursuant to the Tube Turns Merger, except that a gain or loss will be recognized
on the receipt of any cash in lieu of a fractional share. Assuming that the Tube
Turns Common Stock is a capital asset in the hands of the respective Tube Turns
shareholders, any gain or loss recognized as a result of the receipt of cash in
lieu of a fractional share will be a capital gain or loss equal to the
difference between the cash received and that portion of the holder's tax basis
in the Tube Turns Common Stock allocable to the fractional share.
H. The tax basis of GTC Common Stock to be received by the shareholders of
Tube Turns will be the same as the tax basis of the Tube Turns Common Stock
surrendered in exchange therefor (reduced by any amount allocable to a
fractional share interest for which cash is received).
I. The holding period of the GTC Common Stock to be received by
shareholders of Tube Turns will include the holding period of the Tube Turns
Common Stock surrendered in exchange therefor, provided the Tube Turns shares
were held as a capital asset by the shareholders of Tube Turns on the date of
the exchange.
J. A shareholder of Tube Turns who perfects his dissenter's rights and who
receives payment of the fair market value of his shares of Tube Turns Common
Stock will be treated as having received such payment in redemption of such
stock. Such redemption will be subject to the conditions and limitations of
Section 302 of the Code.
<PAGE>
Board of Directors
Group Technologies Corporation, et al.
January 17, 1997
Page 6.
III. The Bell Merger
A. The acquisition by New Bell of substantially all of the assets of Bell
in exchange for shares of GTC Common Stock and the assumption of liabilities of
Bell pursuant to the Bell Merger will constitute a reorganization within the
meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
B. Bell, GTC, and New Bell will each be "a party to a reorganization"
within the meaning of Section 368(b) of the Code.
C. No gain or loss will be recognized by Bell as a result of the Bell
Merger.
D. No gain or loss will be recognized by New Bell or GTC as a result of
the Bell Merger.
E. The tax basis of the assets received by New Bell will be the same as
the tax basis of such assets of Bell immediately prior to the Bell Merger.
F. The holding period of the assets of Bell received by New Bell will in
each instance include the period for which such assets were held by Bell.
G. No gain or loss will be recognized by the shareholders of Bell as a
result of the exchange of Bell shares for GTC Common Stock pursuant to the Bell
Merger, except that a gain or loss will be recognized on the receipt of any cash
in lieu of a fractional share. Assuming that the Bell Common Stock is a capital
asset in the hands of the respective Bell shareholders, any gain or loss
recognized as a result of the receipt of cash in lieu of a fractional share
will be a capital gain or loss equal to the difference between the cash received
and that portion of the holder's tax basis in the Bell Common Stock allocable to
the fractional share.
H. The tax basis of GTC Common Stock to be received by the shareholders of
Bell will be the same as the tax basis of the Bell Common Stock surrendered in
exchange therefor (reduced by any amount allocable to a fractional share
interest for which cash is received).
I. The holding period of the GTC Common Stock to be received by the
shareholders of Bell will include the holding period of the Bell Common Stock
surrendered in exchange therefor, provided the Bell shares were held as a
capital asset by the shareholders of Bell on the date of the exchange.
<PAGE>
Board of Directors
Group Technologies Corporation, et al.
January 17, 1997
Page 7.
J. A shareholder of Bell who perfects his dissenter's rights and who
receives payment of the fair market value of his shares of Bell Common Stock
will be treated as having received such payment in redemption of such stock.
Such redemption will be subject to the conditions and limitations of Section 302
of the Code.
IV. The GTC Contribution
A. No gain or loss will be recognized by GTC on its transfer of assets to
New GTC in exchange for New GTC stock and the assumption by New GTC of certain
liabilities of GTC.
B. No gain or loss will be recognized by New GTC upon the issuance of New
GTC stock in consideration for the assets transferred to it by GTC.
C. The basis of each asset received by New GTC will be the same as the
basis of that asset of GTC immediately before its transfer.
D. The holding period of each asset received by New GTC will include the
period during which that asset was held by GTC.
E. The basis of the New GTC stock received by GTC will be the same as the
basis of the assets transferred by GTC to New GTC, decreased by the sum of the
liabilities of GTC assumed by New GTC plus the amount of liabilities to which
the transferred assets are subject.
F. The holding period of the New GTC stock received by GTC will include
the period during which GTC held the transferred assets, provided the
transferred assets are capital assets in the hands of GTC on the date of
transfer.
G. New GTC will not succeed to any tax attributes, including the earnings
and profits of GTC.
This opinion is based on the Code, the Treasury Regulations promulgated
thereunder, judicial decisions and administrative pronouncements of the Internal
Revenue Service ("IRS"), all existing and in effect on the date of this opinion
and all of which are subject to change at any time, possibly retroactively. Any
such change could materially alter the conclusions reached in this opinion. We
undertake no obligation to you or any other person to give notice of any such
change. As noted above, this opinion is limited to the issues expressly
addressed herein and we specifically note that we render no opinion with respect
to either (i) the state, local or foreign tax consequences of the
Reorganization, (ii) the federal income tax consequences to shareholders of GTC,
GFP, Tube Turns and Bell subject to special rules under the Code, such as
foreign persons, tax-exempt organizations, insurance companies, financial
institutions, dealers in stocks and securities, and persons who do not own such
stock as a capital asset, (iii) the federal income tax consequences affecting
shares of GTC Common Stock acquired upon exercise of stock options, stock
purchase plan rights or otherwise as compensation, or holders of warrants,
options or other rights to acquire shares of GTC Common Stock, Tube Turns Common
Stock and Bell Common Stock, or (iv) the federal income tax consequences to any
<PAGE>
Board of Directors
Group Technologies Corporation, et al.
January 17, 1997
Page 8.
party of the Spin-Off. You should realize that this opinion is not binding on
the IRS or the courts.
This opinion is provided to you solely for purposes of complying with the
requirements of Item 21(a) of Form S-4 under the Act. We hereby consent to the
use of this opinion as an exhibit to the Registration Statement and to the
reference to this Firm in the Registration Statement under the caption "Legal
Matters." In giving this consent we do not thereby admit that we come within the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder. Without our prior written consent, this opinion may not otherwise be
quoted or referred to in whole or in part in any report or document or furnished
to any other person or entity other than your counsel, your accountants or your
employees, except in response to a valid subpoena or other lawful process.
Very truly yours,
WYATT, TARRANT & COMBS
/s/ Wyatt, Tarrant & Combs
<PAGE>
EXHIBIT 10.39
Group Technologies Corporation
10901 Malcolm McKinley Drive
Tampa, Florida 33612
December 10, 1996
Mr. Carl P. McCormick
7802 Hidden Island Lane
Tampa, Florida 33617
Dear Carl:
This letter serves to confirm the terms of our agreement regarding your
separation from employment with Group Technologies Corporation (the "Company)
and supersedes all previous discussions and understandings with regard to your
separation from the Company.
Your resignation as President, Chief Executive Officer and Director of the
Company will be effective on Thursday, October 31, 1996; however, you will
continue to be employed by the Company through December 31, 1996. Effective
January 1, 1997, you will be placed on layoff status until December 31, 1998.
You will receive your final paycheck for the period ending December 31, 1996 on
your last day of employment. For the remainder of 1996, you will be expected to
assist in the transition of your duties and to assist with the ongoing efforts
to improve the operations and performance of the Company. Your salary and
benefits will remain at their current level through December 31, 1996. The
Company will also continue to pay you a car allowance and for any previously
approved club memberships or similar benefits through December 31, 1996. You
will be reimbursed for professional executive outplacement services, up to a
maximum of $5,000, upon receipt of invoices for such services. Furthermore,
this severance agreement is offered to you in return for the following specific
considerations:
1. You will not now, nor at any time while you are receiving payments pursuant
to the terms of this agreement, solicit or recruit any customers or
employees of the Company, or otherwise engage in any activity that would be
deemed to be detrimental to or competitive with the business of the Company
as it exists as of the date of this agreement.
The provisions of the foregoing notwithstanding, you may request the
written consent of the Company to become employed by a business that would
otherwise be viewed as being in competition with the Company. At the time
of such request, you must provide satisfactory assurance to the Company (in
its sole opinion) that you will not be engaged in that aspect of the
prospective employer's business which would otherwise be detrimental to the
Company and that the balance of the terms and conditions of this Agreement
will remain in full force and affect. In the case of any such request, the
Company will not unreasonably withhold its consent to your becoming so
employed.
2. You will be a goodwill spokesperson for the Company.
3. You will provide positive customer interface for a successful transition of
your responsibilities.
<PAGE>
Mr. Carl P. McCormick
December 10, 1996
Page Two
In consideration for tendering your resignation as President, Chief Executive
Officer and Director of the Company and for previous services rendered, the
Company will agree to provide you with pay continuance from January 1, 1997
through December 31, 1998, subject to your compliance with the terms and
conditions stated herein. Pay continuance will be calculated based upon an
annual rate of $175,000, less applicable federal and state taxes, and will be
dispersed in accordance with the standard payroll practices of the Company for
salaried personnel. Medical and dental benefits will continue, at employee
cost, through your pay continuance. You acknowledge that this severance is
above and beyond any moneys owed to you as a result of your employment with the
Company and serves as pay in lieu of notice.
The Company and the Board will take steps prior to your last day of employment
in order to amend the Company's stock option plans and any stock option
agreements so that all stock options granted to and held by you that will have
vested by December 31, 1998 will remain valid and effective for the stated term
of each option. Such options will be exercisable by you during the stated term
of each option in accordance with the terms and conditions of the applicable
stock option agreements entered into between you and the Company, as such terms
and conditions may be amended from time to time. Any options that are not
scheduled to vest on or before December 31, 1998 will become null and void as of
December 31, 1996. Other modifications may be necessary in order accommodate
your status as a non-employee option holder; however, those issues will also be
addressed prior to the last date of your employment. You expressly agree that
any breach of your obligations under this agreement will result in an immediate
cancellation and forfeiture of any and all unexercised stock options held by you
at the time of such breach.
You may elect to continue to make contributions to the Company sponsored 401(k)
plan through December 31, 1996, after which time you will no longer be eligible
to participate. Any funds that you have contributed to the Company's management
deferred compensation plan may be withdrawn in accordance with the terms and
conditions of that plan.
In exchange for the above severance pay, you agree to release and forever
discharge the Company, its affiliates, predecessors and successors, and their
directors, officers, employees and agents from any and all claims whatsoever
based on or arising in any way from or related to your employment with or
termination of your employment from the Company existing prior to this
agreement, including but not limited to, claims under any federal, state and
local employment laws such as the Age Discrimination in Employment Act (ADEA),
as amended, Title VII of the Civil Rights Act of 1964, as amended, and all other
laws, regulations and ordinances. Both parties agree that this release of
claims is an essential and material term of this agreement.
You acknowledge that through your employment as an officer of the Company, you
have obtained proprietary and highly confidential information regarding the
Company including, but not limited to, its accounts, customers, clients and
others with whom it may due business, as well as pricing, costs, strategies,
methods, forms, contracts and trade secrets. You agree that you will return to
the Company
<PAGE>
Mr. Carl P. McCormick
December 10, 1996
Page Three
any and all proprietary information in written form within your control prior to
your last day of employment. You agree that any breach of this paragraph will
result in a termination of the obligation of the Company to provide pay
continuance or any other benefits to you under the terms and conditions of this
agreement.
You also acknowledge that through your employment as an officer of the Company,
you have obtained proprietary and highly confidential information regarding the
Company including, but not limited to, its accounts, customers, clients and
others with whom it may do business, as well as knowledge of pricing, costs,
strategies, methods, forms, contracts and trade secrets used by the Company.
You agree that you will not, subsequent to the execution of this agreement,
disclose such confidential information or any part thereof to any person, firm,
corporation, association, or other entity for any reason or purpose whatsoever,
and that you will not use this information to the future detriment of the
Company. You agree that any breach of this paragraph will result in a
termination of the obligation of the Company to provide pay continuance or any
other benefits to you under the terms and conditions of this agreement.
You further acknowledge that through your employment as an officer of the
Company, you have maintained in your possession (at your personal residence or
otherwise) certain property that is owned by the Company and that you hold a
certain number of shares of common stock in other publicly traded companies that
were purchased by the Company in your name. You agree to return all Company
owned property and to transfer all shares of stock purchased by you for the
benefit of the Company (and for which expense you have been reimbursed) to David
D. Johnson by no later than December 31, 1996. You agree that any breach of
this paragraph will result in a termination of the obligation of the Company to
provide pay continuance or any other benefits to you under the terms and
conditions of this agreement.
The Company will not terminate this agreement as a result of an alleged breach
of its terms and conditions without first having notified you in writing with
regard to the specific nature of the breach. You will then have twenty (20)
days from receipt of said notice to notify the Company in writing of your
disagreement with the notice. If you are in disagreement with the notice and
are unable to resolve the dispute with the Company within twenty (20) days
following the delivery of your response to the Company, then the parties will
agree upon the selection of an arbitrator who will render a binding ruling
within twenty (20) days. The cost of any such arbitration will be borne by the
party who failed to prevail.
The parties agree that the formation and interpretation of this agreement will
be governed by the laws of the State of Florida and that any action to enforce
this agreement will be taken in a Florida court of competent jurisdiction.
Additionally, the parties agree that the execution of this agreement will not be
interpreted as an admission of any wrongdoing by either party.
You acknowledge that you have had in excess of thirty-five (35) days to confer
with an attorney regarding the basic terms of this agreement. You also
acknowledge that you have been informed that you have ten (10) days after
signing this agreement to revoke it.
<PAGE>
Mr. Carl P. McCormick
December 10, 1996
Page Four
It is our understanding that the above accurately reflects all of the terms
discussed regarding your separation from the Company. As such, this agreement
constitutes the entire understanding between you and the Company (with regard to
your separation from the Company) and any modification to this agreement must be
in writing and signed by both parties. Both parties are in agreement with the
stated terms of this agreement and acknowledge that they have freely and
voluntarily signed this agreement.
If you understand and agree with the terms and conditions contained in this
letter, please sign and date below on the appropriate lines. If you have any
questions or concerns, please do not hesitate to contact me or the Human
Resources department. We would like to do everything possible to ensure you a
smooth and successful transition from the Company.
Sincerely,
Jeffrey T. Gill
Chairman of the Board
Acknowledged and agreed to:
- ---------------------- ----------------------
Carl. P. McCormick Date
<PAGE>
EXHIBIT 23.1
Consent of Independent Certified Public Accountants
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 29, 1996 (except for Note 10, as to which the date
is January 16, 1997) in the Registration Statement (Form S-4) and the related
Prospectus of Group Technologies Corporation dated January 23, 1997.
Ernst & Young LLP
Tampa, Florida
January 16, 1997
<PAGE>
EXHIBIT 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated May 31, 1996 (except Note 20, as to which the date is
January 16, 1997), in the Registration Statement (Form S-4) and the related
Prospectus of Group Technologies Corporation dated January 23, 1997.
Ernst & Young LLP
Louisville, Kentucky
January 17, 1997
