<PAGE>
As filed with the Securities and Exchange Commission on September 24, 1997.
Registration No. 333-20299
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GROUP TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
FLORIDA 3672 59-2948116
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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)
Thomas W. Lovelock, 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:
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
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:
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==========================================================================================================================
Proposed
Maximum Proposed Maximum
Title of Each Class of Securities Amount To Be Offering Price Aggregate Offering
To Be Registered Registered Per Unit (1) Price Amount of Registration Fee
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 49,651,648 $0.55 $27,315,738.00 $9,419.22
==========================================================================================================================
</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 previously paid a fee of $8,376.21 based on the registration of
38,819,673 shares at a proposed maximum offering price per share of $0.63, and
the balance of the registration fee, $1,043.01, is tendered with this filing.
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>
(Letterhead of Group Technologies Corporation)
_____ __, 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 Tuesday, November 25, 1997, at 10:00 a.m. local
time (the "GTC Special Meeting").
At the GTC Special Meeting, you will be asked to approve: (i) the
Amended and Restated Agreement and Plan of Reorganization, dated as of September
22, 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; (ii) amendments to GTC's Articles of Incorporation to increase the
authorized shares of voting common stock and to effect a 1-for-4 reverse stock
split (the "Reverse Stock Split"); and (iii) the reincorporation of GTC in
Delaware through the merger of GTC into a newly formed Delaware corporation
wholly-owned by GTC (the "Reincorporation"). 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 and the shares of BT Holdings, Inc., a former wholly-
owned subsidiary of GFP) 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.
Immediately after consummation of the Reorganization, GTC will effect the
Reverse Stock Split and the Reincorporation.
Because, under the Reorganization Agreement, the shares of GTC Common
Stock will be valued at no less than $1.50 per share, the shareholders of GFP,
Tube Turns and Bell (other than GTC as successor by merger to GFP) will bear the
risk of market fluctuations below $1.50 per share inasmuch as they will receive
no more than 49,619,962, 1,184,107 and 2,946,357 shares, respectively, in the
aggregate, regardless of the actual trading price of shares of GTC Common Stock.
The total aggregate consideration to be received by the shareholders of GFP,
Tube Turns and Bell (other than GTC as successor by merger to GFP) is
$93,095,918, $1,776,160 and $4,419,536, respectively. The aggregate
consideration to be received by shareholders of GFP is calculated as the sum of
$51,833,006 plus the product of 15,064,625 shares multiplied by the "GTC Average
Closing Price" of $2.74. The "GTC Average Closing Price" is 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 valuations used
in determining the total aggregate consideration were determined by or under the
direction of certain affiliates of GTC who have conflicts of interest in this
transaction.
The accompanying Joint Proxy Statement/Prospectus and the appendices
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
<PAGE>
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.
A Special Committee of your Board of Directors consisting of the
independent directors has recommended the Reorganization for the reasons set
forth in the accompanying Joint Proxy Statement/Prospectus. 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 and the merger of Tube Turns and Bell with and into the New Tube Turns
and the New Bell, respectively, 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. Certain members of the Board of Directors of GTC have
conflicts of interests in this transaction, but these persons were not members
of the Special Committee of your Board of Directors. See "The Reorganization--
Conflicts of Interest" in the accompanying Joint Proxy Statement/Prospectus.
The Board of Directors also recommends that you vote to approve the
amendment to the GTC Articles of Incorporation to increase the authorized shares
of voting common stock, the Reverse Stock Split and the Reincorporation.
Sincerely,
Thomas W. Lovelock
President and Chief Executive Officer
<PAGE>
GROUP TECHNOLOGIES CORPORATION
--------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 25, 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 Tuesday,
November 25, 1997 at 10:00 a.m. local time, for the following purposes:
1. To consider and vote upon a proposal to approve the Amended and
Restated Agreement and Plan of Reorganization dated as of September 22, 1997
(the "Reorganization Agreement"), by and among GTC, Group Financial Partners,
Inc., Tube Turns Technologies, Inc. and Bell Technologies, Inc. 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 increase the authorized shares of GTC Common Stock from
40,000,000 shares to 60,000,000 shares;
3. To consider and vote upon a proposal to amend the Articles of
Incorporation of GTC to effect a 1-for-4 reverse stock split;
4. To consider and vote upon a proposal to reincorporate GTC in
Delaware through the merger of GTC with and into a newly formed Delaware
corporation wholly-owned by GTC; and
5. To transact other business incidental to the conduct of the
Special Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on October 15,
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 related matters and other proposals to be considered at the
Special Meeting 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. WRITTEN
REVOCATIONS OF A PROXY OR SUBSEQUENT DATED PROXIES MAY BE DELIVERED BY FACSIMILE
TO THE ATTENTION OF THE UNDERSIGNED, FACSIMILE NUMBER (813) 972-6715, AND WILL
BE ACCEPTED ON THE DAY OF THE SPECIAL MEETING UP UNTIL VOTING IS CLOSED ON ANY
SPECIFIC MATTER AS TO WHICH SUCH PROXY RELATES.
By Order of the Board of Directors,
Michael L. Schuman
Secretary
Tampa, Florida
_____ __, 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 NOVEMBER 25, 1997)
The undersigned hereby appoints Roger W. Johnson, Henry F. Frigon and
Sidney R. Petersen, and any of them, with full power of substitution, as
attorneys and proxies for the undersigned, to represent and vote shares of
common stock of Group Technologies Corporation, a Florida corporation ("GTC")
standing in my name on the books and records of GTC at the close of business on
October 15, 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 Tuesday, November 25, 1997 at 10:00 a.m. local time, and at any and
all adjournments or postponements, as follows:
1. To approve the Amended and Restated Agreement and Plan of
Reorganization dated as of September 22, 1997 (the "Reorganization Agreement")
by and 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
increase the authorized shares of GTC Common Stock from 40,000,000 shares to
60,000,000 shares.
[_] FOR [_] AGAINST [_] ABSTAIN
3. To approve an amendment to GTC's Articles of Incorporation to
effect a 1-for-4 reverse stock split.
[_] FOR [_] AGAINST [_] ABSTAIN
4. To approve the reincorporation of GTC in Delaware through the
merger of GTC with and into a newly formed Delaware corporation wholly-owned by
GTC.
[_] 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 other matters incidental to the
conduct of 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 25th day of November, 1997 and the Joint Proxy
Statement/Prospectus dated the ___ day of _____, 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.)
_____ __, 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 Wednesday, November 26, 1997 at the hour of
3:00 p.m. local time (the "GFP Special Meeting").
At the GFP Special Meeting, you will be asked to approve the Amended
and Restated Agreement and Plan of Reorganization dated as of September 22, 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
and the shares of BT Holdings, Inc., a former wholly-owned subsidiary of GFP)
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.
Because, under the Reorganization Agreement, the shares of GTC voting
common stock, par value $.01 per share ("GTC Common Stock") will be valued at no
less than $1.50 per share, the shareholders of GFP, Tube Turns and Bell (other
than GTC as successor by merger to GFP) will bear the risk of market
fluctuations below $1.50 per share inasmuch as they will receive no more than
49,619,962, 1,184,107 and 2,946,357 shares, respectively, in the aggregate,
regardless of the actual trading price of shares of GTC Common Stock. The total
aggregate consideration to be received by the shareholders of GFP is
$93,095,918. The aggregate consideration to be received by shareholders of GFP
is calculated as the sum of $51,833,006 plus the product of 15,064,625 shares
multiplied by the "GTC Average Closing Price" of $2.74. The "GTC Average Closing
Price" is 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 valuations used in determining this aggregate consideration were
determined by or under the direction of certain affiliates of GTC who have
conflicts of interest in this transaction.
The accompanying Joint Proxy Statement/Prospectus and the appendices
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.
<PAGE>
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. Members of the Board of
Directors of GFP have conflicts of interest in this transaction. See "The
Reorganization--Conflicts of Interest" in the accompanying Joint Proxy
Statement/Prospectus.
Please note that immediately after the Reorganization, GTC proposes to
engage in two additional transactions: (i) a 1-for-4 reverse stock split (the
"Reverse Stock Split") and (ii) the reincorporation of GTC in Delaware through
the merger of GTC into a newly formed Delaware corporation wholly-owned by GTC
(the "Reincorporation"). While you will not have the right to vote on either of
these transactions, your rights as a post-Reorganization shareholder of GTC will
be affected by these transactions. Accordingly, you are urged to review the
information on the Reverse Stock Split and the Reincorporation contained in the
accompanying Joint Proxy Statement/Prospectus.
Sincerely,
Jeffrey T. Gill
President and Chief Executive Officer
<PAGE>
GROUP FINANCIAL PARTNERS, INC.
________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 26, 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 Wednesday, November 26, 1997 at the hour of 3:00 p.m.
local time, for the following purposes:
1. To consider and vote upon a proposal to approve the Amended and
Restated Agreement and Plan of Reorganization dated as of September 22, 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 incidental to the conduct of the
Special Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on October 15, 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. WRITTEN REVOCATIONS OF A PROXY OR
SUBSEQUENT DATED PROXIES MAY BE DELIVERED BY FACSIMILE TO THE ATTENTION OF THE
UNDERSIGNED, FACSIMILE NUMBER (502) 585-1602, AND WILL BE ACCEPTED ON THE DAY OF
THE SPECIAL MEETING UP UNTIL VOTING IS CLOSED ON ANY SPECIFIC MATTER AS TO WHICH
SUCH PROXY RELATES.
By Order of the Board of Directors,
R. Scott Gill
Secretary
Louisville, Kentucky
_____ __, 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 NOVEMBER 26, 1997)
The undersigned hereby appoints Anthony C. Allen and Richard L. Davis,
and either 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 October 15, 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 Wednesday,
November 26, 1997 at the hour of 3:00 p.m. local time, and at any and all
adjournments or postponements, as follows:
1. To approve the Amended and Restated Agreement and Plan of
Reorganization dated as of September 22, 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 other matters incidental to the
conduct of 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 26th day of November, 1997 and the Joint Proxy
Statement/Prospectus dated the __ day of _____, 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.)
_____ __, 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 2820 West
Broadway, Louisville, Kentucky, on Wednesday, November 26, 1997 at the hour of
11:30 a.m. local time (the "Tube Turns Special Meeting").
At the Tube Turns Special Meeting, you will be asked to approve the
Amended and Restated Agreement and Plan of Reorganization dated as of September
22, 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 and the shares of BT Holdings, Inc., a former wholly-owned subsidiary
of GFP) 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.
Because, under the Reorganization Agreement, the shares of GTC voting
common stock, par value $.01 per share ("GTC Common Stock") will be valued at no
less than $1.50 per share, the shareholders of GFP, Tube Turns and Bell (other
than GTC as successor by merger to GFP) will bear the risk of market
fluctuations below $1.50 per share inasmuch as they will receive no more than
49,619,962, 1,184,107 and 2,946,357 shares, respectively, in the aggregate,
regardless of the actual trading price of shares of GTC Common Stock. The total
aggregate consideration to be received by the shareholders of Tube Turns (other
than GTC as successor by merger to GFP) is $1,776,160. The valuation used in
determining this aggregate consideration was determined by or under the
direction of certain affiliates of Tube Turns who have conflicts of interest in
this transaction.
The accompanying Joint Proxy Statement/Prospectus and the appendices
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
<PAGE>
Agreement and unanimously recommends that you vote to approve the Reorganization
Agreement. Certain members of the Board of Directors of Tube Turns have
conflicts of interest in this transaction. See "The Reorganization--Conflicts of
Interest" in the accompanying Joint Proxy Statement/Prospectus.
Please note that immediately after the Reorganization, GTC proposes to
engage in two additional transactions: (i) a 1-for-4 reverse stock split (the
"Reverse Stock Split") and (ii) the reincorporation of GTC in Delaware through
the merger of GTC into a newly formed Delaware corporation wholly-owned by GTC
(the "Reincorporation"). While you will not have the right to vote on either of
these transactions, your rights as a post-Reorganization shareholder of GTC will
be affected by these transactions. Accordingly, you are urged to review the
information on the Reverse Stock Split and the Reincorporation contained in the
accompanying Joint Proxy Statement/Prospectus.
Sincerely,
John M. Kramer
President and Chief Executive Officer
<PAGE>
TUBE TURNS TECHNOLOGIES, INC.
________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 26, 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 2820 West Broadway, Louisville,
Kentucky on Wednesday, November 26, 1997 at the hour of 11:30 a.m. local time,
for the following purposes:
1. To consider and vote upon a proposal to approve the Amended and
Restated Agreement and Plan of Reorganization dated as of September 22, 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 incidental to the conduct of the
Special Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on October 15,
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. WRITTEN REVOCATIONS OF A PROXY OR
SUBSEQUENT DATED PROXIES MAY BE DELIVERED BY FACSIMILE, TO THE ATTENTION OF THE
UNDERSIGNED, FACSIMILE NUMBER (502) 774-6336, AND WILL BE ACCEPTED ON THE DAY OF
THE SPECIAL MEETING UP UNTIL VOTING IS CLOSED ON ANY SPECIFIC MATTER AS TO WHICH
SUCH PROXY RELATES.
By Order of the Board of Directors,
Norman E. Zelesky
Secretary
Louisville, Kentucky
_____ __, 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 NOVEMBER 26, 1997)
The undersigned hereby appoints John M. Kramer and Russell H. Johnson,
and either 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 October 15,
1997, which the undersigned is entitled to cast at the Special Meeting of
Shareholders to be held at 2820 West Broadway, Louisville, Kentucky, on
Wednesday, November 26, 1997 at the hour of 11:30 a.m. local time, and at any
and all adjournments or postponements, as follows:
1. To approve the Amended and Restated Agreement and Plan of
Reorganization dated as of September 22, 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 other matters incidental to the
conduct of 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 26th day of November, 1997 and the Joint Proxy
Statement/Prospectus dated the __ day of _____, 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.)
_____ __, 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 Tuesday, November 25, 1997 at the hour of 3:00 p.m. local
time (the "Bell Special Meeting").
At the Bell Special Meeting, you will be asked to approve the Amended
and Restated Agreement and Plan of Reorganization dated as of September 22, 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 and the shares of BT
Holdings, Inc., a former wholly-owned subsidiary of GFP) 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.
Because, under the Reorganization Agreement, the shares of GTC voting
common stock, par value $.01 per share ("GTC Common Stock") will be valued at no
less than $1.50 per share, the shareholders of GFP, Tube Turns and Bell (other
than GTC as successor by merger to GFP) will bear the risk of market
fluctuations below $1.50 per share inasmuch as they will receive no more than
49,619,962, 1,184,107 and 2,946,357 shares, respectively, in the aggregate,
regardless of the actual trading price of shares of GTC Common Stock. The total
aggregate consideration to be received by the shareholders of Bell (other than
GTC as successor by merger to GFP) is $4,419,536. The valuation used in
determining this aggregate consideration was determined by or under the
direction of certain affiliates of Bell who have conflicts of interest in this
transaction.
The accompanying Joint Proxy Statement/Prospectus and the appendices
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. Certain members of the
<PAGE>
Board of Directors of Bell have conflicts of interest in this transaction. See
"The Reorganization--Conflicts of Interest" in the accompanying Joint Proxy
Statement/Prospectus.
Please note that immediately after the Reorganization, GTC proposes to
engage in two additional transactions: (i) a 1-for-4 reverse stock split (the
"Reverse Stock Split") and (ii) the reincorporation of GTC in Delaware through
the merger of GTC into a newly formed Delaware corporation wholly-owned by GTC
(the "Reincorporation"). While you will not have the right to vote on either of
these transactions, your rights as a post-Reorganization shareholder of GTC will
be affected by these transactions. Accordingly, you are urged to review the
information on the Reverse Stock Split and the Reincorporation contained in the
accompanying Joint Proxy Statement/Prospectus.
Sincerely,
Robert E. Gill
President and Chief Executive Officer
<PAGE>
BELL TECHNOLOGIES, INC.
________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 25, 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
Tuesday, November 25, 1997 at the hour of 3:00 p.m. local time, for the
following purposes:
1. To consider and vote upon a proposal to approve the Amended and
Restated Agreement and Plan of Reorganization dated as of September 22, 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 incidental to the conduct of the
Special Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on October 15,
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. WRITTEN REVOCATION OF A PROXY OR
SUBSEQUENT DATED PROXIES MAY BE DELIVERED BY FACSIMILE, TO THE ATTENTION OF THE
UNDERSIGNED, FACSIMILE NUMBER (407) 678-0578, AND WILL BE ACCEPTED ON THE DAY OF
THE SPECIAL MEETING UP UNTIL VOTING IS CLOSED ON ANY SPECIFIC MATTER AS TO WHICH
SUCH PROXY RELATES.
By Order of the Board of Directors,
Thomas C. Jamieson
Secretary
Orlando, Florida
_____ __, 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 NOVEMBER 25, 1997)
The undersigned hereby appoints Rick A. Affolter and Thomas C.
Jamieson, and either 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 October 15, 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 Tuesday, November 25,
1997 at the hour of 3:00 p.m. local time, and at any and all adjournments or
postponements, as follows:
1. To approve the Amended and Restated Agreement and Plan of
Reorganization dated as of September 22, 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 other matters incidental to the
conduct of 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 25th day of November, 1997 and the Joint Proxy
Statement/Prospectus dated the __ day of _____, 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 _____ __, 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 cards
will commence on or about _____ __, 1997.
At the Special Meetings, shareholders of GTC, GFP, Tube Turns and Bell
will, among other things, be asked to approve an Amended and Restated Agreement
and Plan of Reorganization (the "Reorganization Agreement"), dated as of
September 22, 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 a newly formed,
wholly-owned subsidiary of GTC ("New Tube Turns") (the "Tube Turns Merger");
(iv) the merger of Bell with and into a newly formed, wholly-owned subsidiary of
GTC ("New Bell") (the "Bell Merger"); and (v) the contribution by GTC of all of
the assets of GTC (other than the shares of New Tube Turns and New Bell, and the
shares of BT Holdings, Inc., a former wholly-owned subsidiary of GFP) into a
newly formed, wholly-owned subsidiary of GTC (the "GTC Contribution"), and the
assumption by this subsidiary of all of the liabilities of GTC, all in
accordance with the Florida Business Corporation Act, as amended (the "FBCA"),
and the Kentucky Revised Statutes, as amended (the "KRS") ( 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. The transactions contemplated by the Reorganization
Agreement are expected to be closed within ten (10) days after shareholder
approval of the Reorganization Agreement.
Immediately after the Reorganization, GTC proposes to engage in two
additional transactions: (i) a 1-for-4 reverse stock split (the "Reverse Stock
Split") and (ii) the reincorporation of GTC in Delaware through the merger of
GTC into a newly formed Delaware corporation wholly-owned by GTC (the
"Reincorporation").
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 adjustment for any stock
dividend, stock split or similar matters between the date of the Reorganization
Agreement and the effective time of such merger 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 the Tube Turns Merger is equal to the number of
shares of GTC Common Stock determined by multiplying the Tube
i
<PAGE>
Turns Conversion Ratio (as defined in the Reorganization Agreement) by the
number of shares of Tube Turns held by such shareholders, subject to adjustment
for any stock dividend, stock split or similar matters between the date of the
Reorganization Agreement and the effective time of such merger 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 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 adjustment for any stock
dividend, stock split or similar matters between the date of the Reorganization
Agreement and the effective time of such merger as provided in the
Reorganization Agreement (the "Bell Merger Shares"). Each 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.
Because, under the Reorganization Agreement, the shares of GTC Common Stock
will be valued at no less than $1.50 per share, the shareholders of GFP, Tube
Turns and Bell (other than GTC as successor by merger to GFP) will bear the risk
of market fluctuations below $1.50 per share inasmuch as they will receive no
more than 49,619,962, 1,184,107 and 2,946,357 shares, respectively, in the
aggregate, regardless of the actual trading price of shares of GTC Common Stock.
The total aggregate consideration to be received by the shareholders of GFP,
Tube Turns and Bell (other than GTC as successor by merger to GFP) is
$93,095,918, $1,776,160 and $4,419,536, respectively. The aggregate
consideration to be received by shareholders of GFP is further calculated as the
sum of $51,833,006 plus the product of 15,064,625 shares multiplied by the GTC
Average Closing Price of $2.74. The valuations used in determining the total
aggregate consideration were determined by or under the direction of certain
affiliates of GTC who have conflicts of interest in this transaction. The
methodology used to calculate the valuations is discussed in the section
"Summary" under the subsection "Comparative Market Prices of Common Stock."
GTC Common Stock is quoted on the Nasdaq Stock Market under the symbol
"GRTK." On September 15, 1997, the closing price for GTC Common Stock as
reported by Nasdaq was $2.891 per share. Had the Reorganization occurred on such
date, the GTC Average Closing Price would have been $2.74, the GFP Conversion
Ratio would have been 105.3727 and GTC would have issued approximately
33,988,273 shares of GTC Common Stock to shareholders of GFP in connection with
the Merger, the Tube Turns Conversion Ratio would have been 7.3018, and GTC
would have issued approximately 648,456 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 16.0639 and GTC would have issued approximately 1,613,523 shares of GTC
Common Stock to shareholders of Bell, other than GTC (as successor by merger to
GFP), in connection with the Bell Merger. The methodology used to calculate the
conversion ratios is discussed in the section "The Reorganization--The
Reorganization Transaction; The Merger; The Tube Turns Merger; The Bell Merger."
The closing share price for GTC Common Stock, as reported on the Nasdaq
Stock Market, over the ninety (90) day period extending from June 16, 1997 to
September 15, 1997, has ranged from a low of $1.125 per share to a high of
$3.438 per share, with an average price during the period of $1.544. The average
daily volume of shares traded during the same period has ranged from a low of
200 shares to a high of 389,500 shares, with an average daily volume of 30,380
shares.
FOR CERTAIN FACTORS WHICH SHOULD BE CONSIDERED IN
EVALUATING THE REORGANIZATION, SEE "RISK FACTORS"
ii
<PAGE>
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 49,651,648 shares of GTC Common Stock, is _____ __,
1997.
iii
<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," "Management's
Discussion and Analysis of Financial Condition and Results of Operation of GTC,"
"Business of GFP," "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, GFP's, Bell's and Tube Turn'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; 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. While
the statements contained herein or incorporated herein by reference concerning
the provision of documents include all material elements of such documents, they
are nonetheless summaries of such documents and each such 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.
iv
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Forward Looking Statements.......................................................................................................iv
Available Information............................................................................................................iv
Summary.......................................................................................................................... 1
Selected Historical Consolidated Financial Data of GTC...........................................................................13
Selected Historical Consolidated Financial Data of GFP...........................................................................15
Selected Historical Consolidated Financial Data of Tube Turns....................................................................17
Selected Historical Consolidated Financial Data of Bell..........................................................................18
Selected Unaudited Pro Forma Combined Financial Data.............................................................................19
Risk Factors.....................................................................................................................20
The Reorganization Parties.......................................................................................................29
The GFP Special Meeting..........................................................................................................30
The Tube Turns Special Meeting...................................................................................................33
The Bell Special Meeting.........................................................................................................36
The GTC Special Meeting..........................................................................................................38
THE REORGANIZATION...............................................................................................................51
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS......................................................................73
RECENT DEVELOPMENTS..............................................................................................................79
DESCRIPTION OF GTC'S CAPITAL STOCK...............................................................................................79
EFFECT OF THE REORGANIZATION ON RIGHTS OF SHAREHOLDERS...........................................................................81
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................................................................................91
GTC EXECUTIVE COMPENSATION.......................................................................................................93
OWNERSHIP OF GTC COMMON STOCK....................................................................................................99
OWNERSHIP OF GTC PREFERRED STOCK................................................................................................100
BUSINESS OF GTC.................................................................................................................101
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF GTC....................................109
OWNERSHIP OF GFP COMMON STOCK...................................................................................................119
OWNERSHIP OF TUBE TURNS COMMON STOCK............................................................................................120
OWNERSHIP OF BELL COMMON STOCK..................................................................................................121
BUSINESS OF GFP.................................................................................................................122
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF GFP....................................126
LEGAL MATTERS...................................................................................................................133
Experts.........................................................................................................................133
</TABLE>
APPENDIX A Amended and Restated 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 Amendment to Articles of Incorporation of GTC
APPENDIX E Opinion of J. C. Bradford & Co., LLC
APPENDIX F Text of Amendment to Articles of Incorporation of GTC to Effect
the Reverse Stock Split
APPENDIX G Reincorporation Agreement
APPENDIX H Certificate of Incorporation of Sypris Solutions, Inc.
APPENDIX I Bylaws of Sypris Solutions, Inc.
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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. Whenever any reference is made in this Joint
Proxy Statement/Prospectus to shares of GTC Common Stock to be received by
shareholders of GFP, Tube Turns and Bell in the Reorganization, such reference
also includes shares to be received by persons holding options to acquire shares
of GFP, Tube Turns and Bell.
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 (collectively called "The
Reorganization Transactions"). Immediately after the Reorganization, GTC
proposes to engage in two additional transactions: (i) a 1-for-4 reverse stock
split (the "Reverse Stock Split") and (ii) the reincorporation of GTC in
Delaware through the merger of GTC into a newly formed Delaware corporation
wholly-owned by GTC (the "Reincorporation").
The Spin Off. At the effective time specified in the Reorganization
Agreement for the Spin Off (the "Spin Off 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. Partners-V, Unison and BW are wholly-
owned subsidiaries of GFP which do not currently have any material assets.
The Merger. At the effective time specified in the Reorganization
Agreement for the Merger (the "Merger 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 adjustment for any stock dividend, stock split or similar matters
between the date of the Reorganization Agreement and the effective time of such
merger as provided in the Reorganization Agreement (the "Merger Shares"). Each
share of GTC Common Stock issued and outstanding immediately prior to the Merger
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, at the effective time specified in
the Reorganization Agreement for the Tube Turns Merger (the "Tube Turns Merger
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 adjustment for any stock dividend, stock split or
similar matters between the date of the Reorganization Agreement and the
effective time of such merger 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
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outstanding immediately prior to the Tube Turns Merger 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, at the effective time specified in the
Reorganization Agreement for the Bell Merger (the "Bell Merger 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 adjustment for any stock
dividend, stock split or similar matters between the date of the Reorganization
Agreement and the effective time of such merger as provided in the
Reorganization Agreement (the "Bell Merger Shares"). Each share of Bell common
stock, par value $.01 per share (the "Bell Common Stock"), issued and
outstanding immediately prior to the Bell Merger 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 and the shares of BT
Holdings, Inc., a former wholly-owned subsidiary of GFP) into a newly formed,
wholly-owned subsidiary of GTC (which will thereafter change its name to Group
Technologies Corporation) and this subsidiary will assume all of the liabilities
of GTC. GTC will immediately thereafter merge with and into Sypris Solutions,
Inc., a newly formed Delaware corporation, wholly-owned by GTC ("Sypris"), which
will leave Sypris as the holding company for GTC, Tube Turns, Bell and BT
Holdings, Inc.
Parties to the Reorganization
GTC
GTC, a Florida corporation, is a subsidiary of GFP and provides
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 2820 West
Broadway, Louisville, Kentucky 40232, and its telephone number is
(502) 774-6300.
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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 and the
shares of BT Holdings, Inc., a former wholly-owned subsidiary of GFP) into a
newly formed, wholly-owned subsidiary of GTC (which will thereafter change its
name to Group Technologies Corporation) 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. Immediately after the Reorganization, GTC will amend its
Articles of Incorporation to effect the Reverse Stock Split and will then effect
the Reincorporation, which will leave Sypris as the holding company for GTC,
Tube Turns, Bell and BT Holdings, Inc. See "The GTC Special Meeting--Proposal to
Amend the GTC Articles to Effect the Reverse Stock Split" and "Proposal to
Approve the Reincorporation."
Special Meetings
Time, Place and Date
The Special Meeting of GTC shareholders will be held at 10901 Malcolm
McKinley Drive, Tampa, Florida, on Tuesday, November 25, 1997, at 10:00 a.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 Wednesday, November 26, 1997, at
3:00 p.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 2820
West Broadway, Louisville, Kentucky, on Wednesday, November 26, 1997, at 11:30
a.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 Tuesday, November 25, 1997, at 3:00 p.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 Common Stock
contemplated thereby, (ii) 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, (iii) a proposal to amend the Articles
of Incorporation of GTC to effect the Reverse Stock Split, (iv) a proposal to
approve the Reincorporation, and (v) any other business incidental to the
conduct of 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 business incidental
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to the conduct of 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 business incidental to
the conduct of 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 business incidental to the conduct
of the Bell Special Meeting. See "The Bell Special Meeting--Purposes of the Bell
Special Meeting."
Votes Required; Record Date; Revocability of Proxies
GTC. The affirmative vote of the holders of a majority of the shares
of GTC Common Stock and the shares of preferred stock, par value $.01 per share
("GTC Preferred Stock"), each voting as a group, 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 increase the
number of authorized shares of GTC Common Stock and to effect the Reverse Stock
Split, requires that more votes be cast for the proposal than votes cast against
the proposal by the holders of GTC Common Stock and GTC Preferred Stock, each
voting as a group. The affirmative vote of a majority of the outstanding shares
of GTC Common Stock and GTC Preferred Stock, each voting as a group, entitled to
vote thereon at the GTC Special Meeting is required to approve the
Reincorporation. Abstentions will be counted as "no" votes on the vote to
approve the Reorganization Agreement and the vote to approve the
Reincorporation. Holders of GTC Common Stock are entitled to one vote per share.
Holders of GTC Preferred Stock are entitled to 8.1 votes per share. Only holders
of GTC Common Stock and GTC Preferred Stock at the close of business on October
15, 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 13,186,601 shares of GTC Common Stock
entitled to vote at the GTC Special Meeting, representing approximately 81.3% of
the total number of shares of GTC Common Stock entitled to vote at the GTC
Special Meeting. In addition, such persons are also the beneficial owners of
250,000 shares of GTC Preferred Stock which they are entitled to vote at the GTC
Special Meeting, based on 8.1 votes per share, giving such persons 83.4% of the
total votes of shares of GTC stock which they are entitled to vote at the GTC
Special Meeting. The affirmative votes by the holders of these shares will
affect the outcome of the vote and such holders are expected to vote in favor of
all of the proposals. Accordingly, if such shares are voted in favor, approval
of the Reorganization, the Reverse Split and the Reincorporation is assured. 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 October 15, 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 and such holders are expected to vote in favor of
the proposal. Accordingly, if such shares are voted in favor, approval of the
Reorganization is
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assured. 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 Meeting 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 October 15, 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 1,292,981 shares of Tube
Turns Common Stock representing approximately 98.9% 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 and such holders are expected to vote in
favor of the proposal. Accordingly, if such shares are voted in favor, approval
of the Reorganization is assured. 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 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 October 15, 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 848,096 shares
of Bell Common Stock representing approximately 97.5% of the outstanding shares
of Bell Common Stock. The affirmative votes by the holders of these shares will
affect the outcome of the vote and such holders are expected to vote in favor of
the proposal. Accordingly, if such shares are voted in favor, approval of the
Reorganization is assured. 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 managements of each of GTC, GFP, Tube Turns and Bell
considered a number of factors, including: (i) the recent poor financial
performance of GTC; (ii) the need to obtain long-term capital for operating
activities within GTC; (iii) the potential to realize certain administrative
operating synergies; (iv) the increased liquidity for and more efficient pricing
of the shares of GFP, Tube Turns and Bell; (v) the potential to increase the
efficiency of and access to debt and equity capital; and (vi) the potential to
expand the range of career opportunities available to employees. See "The
Reorganization--Reasons for the Reorganization; Recommendation of the Special
Committee and 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 Special Committee and the GTC Board
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 directors of GTC who are not
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employees of GTC or any affiliate of GTC (the "Independent Directors") (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 of GTC"), 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 of GTC 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 Special Committee and the GTC Board." Certain members of
the GTC Board have conflicts of interest in this transaction, but these persons
were not members of the Special Committee. See "The Reorganization--Conflicts of
Interest."
The GTC Board has approved the proposed amendments to the GTC Articles
of Incorporation including the Reverse Stock Split, and the Reincorporation 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." Certain members of the GFP
Board have conflicts of interest in this transaction. See "The Reorganization--
Conflicts of Interest."
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." Certain members of the Tube Turns Board have conflicts of interest in
this transaction. See "The Reorganization--Conflicts of Interest."
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." Certain members of the Bell
Board have conflicts of interest in this transaction. See "The Reorganization--
Conflicts of Interest."
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 of GTC. The Special Committee selected Bradford as its
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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 management of GTC, GFP, Tube Turns and Bell and performed
extensive analyses relating to the proposed transactions. On December 16, 1996
and again on September 12, 1997, 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 of GTC. 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 E hereto and
should be read in its entirety.
Conflicts of Interest
In considering the recommendations 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 actual or 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 Bell, and director of GTC and Tube Turns.
Jeffrey T. Gill serves as President, Chief Executive Officer and director of GFP
and Chairman of GTC, Bell and Tube Turns. In addition, as of September 15, 1997,
Robert E. Gill, Virginia G. Gill, Jeffrey T. Gill, R. Scott Gill and Patricia G.
Gill (collectively, the "Gill Family") own approximately 99.4% of the GFP Common
Stock, and GFP in turn owns approximately 80.4% of the GTC Common Stock, 100% of
the GTC Preferred Stock, approximately 98.6% of the Tube Turns Common Stock and
approximately 96.9% of the Bell Common Stock. Should the Reorganization be
completed, the Gill Family ownership of GTC (including the conversion of GTC
Preferred Stock) will increase from approximately 82.6% to approximately 89.4%
assuming that 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 $2.74. 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. The President of Tube Turns, who currently serves as a
director of Tube Turns, will have rights to a substantial number of shares of
stock under option in GTC should the Reorganization be completed as planned. 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, Mr. Davis and
Mr. Allen 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. See "The Reorganization--Conflicts of
Interest."
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: (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, at or prior to the
Closing Date, concerning certain federal income tax consequences of the
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Reorganization (other than the Spin Off), which condition has been satisfied as
of the date hereof. 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, including
obtaining requisite shareholder approvals, 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 December 5, 1997. The Reverse
Stock Split and the Reincorporation are anticipated to occur within five (5)
business days after the Closing Date.
Exchange Procedures
On or prior to the applicable effective time for each of the Merger
Transactions (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 shares of 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 shares 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.
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: (i) with the mutual
consent of GTC, GFP, Tube Turns and Bell; (ii) if the Reorganization is not
consummated on or prior to December 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--
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, the shareholders of GFP, Tube Turns and Bell, 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." In
addition, after the Reincorporation, the shareholders of GTC will become
8
<PAGE>
shareholders of Sypris and their rights as shareholders will be determined by
the Delaware General Corporation Law (the "DGCL"). The rights of shareholders of
GTC differ from the rights of shareholders of Sypris, as a result of differences
between (i) Florida and Delaware law, and (ii) differences between the
respective governing instruments of the corporations. See "The GTC Special
Meeting--Proposal to Approve the Reincorporation."
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 procedures 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 at or prior to 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 Tax Consequences." No
ruling from the Internal Revenue Service (the "IRS") has been or will be
requested regarding the federal income tax consequences of the Reorganization.
See "Risk Factors--Tax Risks." For a discussion of the tax consequences of the
Reverse Stock Split and the Reincorporation, see "The GTC Special Meeting--
Proposal to Amend the GTC Articles to Effect the Reverse Stock Split" and
"Proposal to Approve the Reincorporation."
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
allocated to the assets and liabilities of Tube Turns and Bell based upon the
fair values thereof and any excess to goodwill. A final determination of the
fair values of the assets and liabilities of Tube Turns and Bell has not yet
been made.
9
<PAGE>
Accordingly, the purchase accounting adjustments made in connection with the
development of the unaudited pro forma financial information appearing elsewhere
in this Joint Proxy Statement/Prospectus are preliminary and have been made
solely for the purposes of developing such pro forma financial information to
comply with disclosure requirements of the Commission. Although the final
purchase allocation is likely to differ, the pro forma financial information
reflects management's best estimate based upon currently available information.
After the Reorganization, the historical financial statements of GTC will be
those of GFP since GFP is the acquirer for accounting purposes. After the
Reincorporation, the historical financial statements of Sypris will in turn be
those of GTC. No material accounting adjustments are expected in accounting for
the Reincorporation. The Reverse Stock Split will be accounted for
retrospectively with effect from the date of the Reverse Stock Split and will be
presented in all statements of operations and in all other financial statements
and notes to financial statements in which earnings per share are reported.
Resale Restrictions
Shares of GTC Common Stock to be issued to certain shareholders of
GFP, Tube Turns and Bell in connection with the Reorganization and shares of
Sypris common stock to be issued in exchange therefor pursuant to the
Reincorporation (the "Sypris Common Stock") 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 and Sypris 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 Merger 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. Sypris may place similar legends
on certificates representing shares of Sypris Common Stock issued in exchange
therefor in the Reincorporation.
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 September 15, 1997, the closing sale price per share of
the GTC Common Stock as reported on the Nasdaq Stock Market was $2.891 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 October 9, 1996 and $20.00 and $44.00, respectively, on
September 15, 1997. The equivalent per share prices of the GFP Common Stock on
October 9, 1996 and September 15, 1997 were $195.63 and $288.62, respectively.
The aggregate consideration in the Reorganization and the related
equivalent price per share for the Tube Turns Common Stock were determined in
the following manner: (i) a list of comparable public companies was identified
for purposes of gathering comparable valuation measures; (ii) the median was
calculated for each of the following five (5) valuation measures, (a) 1997
estimated net income, (b) 1998 estimated net income, (c) earnings before
interest, taxes, depreciation and amortization for the previous twelve (12)
months, (d) earnings before interest and taxes for the previous twelve (12)
months, and (e) net income for the previous twelve (12) months; (iii) the median
for each of these measures was reduced by a factor of 30 percent (30%) to
reflect the general lack of liquidity of the shares of stock; (iv) two (2)
additional valuation measures (book value and revenue for the past twelve (12)
months) were added to the group without discount; (v) each of these seven (7)
valuation measures were applied to the
10
<PAGE>
appropriate financial results of Tube Turns to determine the range of corporate
values; (vi) the high and low values were discarded and the resulting five (5)
values were averaged to determine the aggregate consideration; and (vii) the
aggregate consideration was divided by the number of shares outstanding and/or
reserved for issuance under options, which, when rounded to the nearest dollar,
resulted in a stock price of $12.00 per share. The current stock price in effect
at Tube Turns under its employee stock plans is $14.03 per share, however, which
would have resulted in a loss in value of $2.03 per share for each of the
employee shareholders of Tube Turns. GFP, therefore, decided to reduce the
aggregate consideration otherwise attributable to the shares of Tube Turns
Common Stock held by it by an amount sufficient to increase the equivalent stock
price for employee shareholders to $20.00 per share. The price for each share of
Tube Turns Common Stock held by GFP after this reallocation approximated $11.45
per share.
The aggregate consideration in the Reorganization and the related
equivalent price per share for the Bell Common Stock were determined in the
following manner: (i) a list of comparable public companies was identified for
purposes of gathering comparable valuation measures; (ii) the median was
calculated for each of the following five (5) valuation measures, (a) 1997
estimated net income, (b) 1998 estimated net income, (c) earnings before
interest, taxes, depreciation and amortization for the previous twelve (12)
months, (d) earnings before interest and taxes for the previous twelve (12)
months, and (e) net income for the previous twelve (12) months; (iii) the median
for each of these measures was reduced by a factor of 30 percent (30%) to
reflect the general lack of liquidity of the shares of stock; (iv) two (2)
additional valuation measures (book value and revenue for the past twelve (12)
months) were added to the group without discount; (v) each of these seven (7)
valuation measures were applied to the appropriate financial results of Bell to
determine the range of corporate values; (vi) the high and low values were
discarded and the resulting five (5) values were averaged to determine the
aggregate consideration; and (vii) the aggregate consideration was divided by
the number of shares outstanding and/or reserved for issuance under options,
which, when rounded to the nearest dollar, resulted in a stock price of $44.00
per share. No reallocation of consideration was made between the employee
shareholders of Bell and GFP.
The aggregate consideration in the Reorganization and the related
equivalent price per share for the GFP Common Stock were determined by taking
the sum of the consideration attributable to (i) the 1,288,600 shares of Tube
Turns Common Stock held by GFP, (ii) the 842,694 shares of Bell Common Stock
held by GFP, (iii) the 13,039,625 shares of GTC Common Stock held by GFP, and
(iv) the 2,025,000 shares of GTC Common Stock to be issued to GFP upon
conversion of the shares of GTC Preferred Stock held by it immediately prior to
the Reorganization. The resulting value was divided by the number of shares
outstanding and/or reserved for issuance under options, which resulted in an
exchange rate of 105.3727 shares of GTC Common Stock to be issued in exchange
for each share of GFP Common Stock, assuming a GTC Average Closing Price of
$2.74 per share.
11
<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 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 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
Year ended December 31, 1997
First Quarter (January 1, 1997 - March 31, 1997)...... $ 1.875 $ 1.000
Second Quarter (April 1, 1997 - June 30, 1997)........ $ 1.500 $ 0.813
Third Quarter (July 1, 1997 - September 15, 1997)..... $ 3.438 $ 1.125
</TABLE>
As of September 15, 1997, there were approximately 637 holders of
record of GTC Common Stock. As of September 15, 1997, there were approximately
9, 145 and 270 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, GFP Common
Stock, Tube Turns Common Stock or 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 facility of Tube Turns and Bell prohibit each
company from declaring or paying any dividends or other distributions, without
the lenders' prior written consent (see "Risk Factors--Dividend Restrictions").
GTC does not currently have a credit agreement in place and, therefore, is not
currently restricted from declaring or paying dividends or other distributions;
however, it is probable that any source of financing which GTC may obtain in the
future would contain such a restriction. Prior to the Merger Effective Time, GFP
intends to disburse an amount that is not yet determined but which will be equal
to all of GFP's cash.
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 for 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
$130.00 per share for the GFP Common Stock, approximately $14.00 per share for
the Tube Turns Common Stock and approximately $22.00 per share for the Bell
Common Stock.
12
<PAGE>
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.
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,
1994, 1995 and 1996 and the balance sheet data at December 31, 1995 and 1996 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, 1992 and 1993
and the balance sheet data at December 31, 1992, 1993 and 1994 are derived from
audited financial statements of GTC not included herein. For 1997, the actual
ending date for the first fiscal six month period of GTC was June 29 as
indicated in the tables below; however, for ease of presentation, the date June
30, 1997 will be used in this Joint Proxy Statement/Prospectus where GTC is
consolidated into GFP. The statement of operations data for the six months ended
June 30, 1996 and June 29 1997, and the balance sheet data at June 29, 1997, 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 six months ended June 29, 1997, are not necessarily
indicative of results expected for the full year.
<TABLE>
<CAPTION>
Six Months Ended
Years Ended December 31, ---------------------
------------------------------------------------------ June 30, June 29,
1992 1993(1) 1994 1995(2) 1996(3) 1996(3) 1997
-------- -------- -------- -------- -------- -------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue...................................... $116,572 $243,856 $274,147 $273,647 $224,661 $132,190 $62,897
Cost of operations........................... 103,471 200,408 237,867 269,150 217,890 123,173 63,075
-------- -------- -------- -------- -------- -------- -------
Gross profit (loss).......................... 13,101 43,448 36,280 4,497 6,771 9,017 (178)
Selling, general and administrative expense.. 5,947 21,808 20,561 19,683 11,453 6,204 3,249
Research and development..................... 1,190 4,138 5,170 3,041 299 294 99
-------- -------- -------- -------- -------- -------- -------
Operating income (loss)...................... 5,964 17,502 10,549 (18,227) (4,981) 2,519 (3,526)
Interest expense............................. 1,169 1,647 2,048 2,907 2,858 1,926 1,193
Other expense (income)....................... -- -- 504 521 (59) 73 (255)
-------- -------- -------- -------- -------- -------- -------
Income (loss) before income taxes............ 4,795 15,855 7,997 (21,655) (7,780) 520 (4,464)
Income taxes................................. 1,588 5,882 3,297 (3,982) (799) 457 152
-------- -------- -------- -------- -------- -------- -------
Net income (loss)............................ $ 3,207 $ 9,973 $ 4,700 $(17,673) $ (8,579) $ 63 $(4,616)
======== ======== ======== ======== ======== ======== =======
Net income (loss) per share:
Primary.................................... $ 0.24 $ 0.71 $ 0.30 $ (1.13) $ (0.53) $ 0.00 $ (0.28)
Fully diluted.............................. $ 0.24 $ 0.69 $ 0.30 $ (1.13) $ (0.53) $ 0.00 $ (0.28)
Shares used in computing per share amounts:
Primary.................................... 13,551 14,066 15,644 15,695 16,157 17,012 16,221
Fully diluted.............................. 13,551 14,554 15,789 15,695 16,157 17,012 16,221
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------ June 29,
1992(4) 1993(5) 1994 1995(6) 1996(7) 1997
------ ------- ---- ------- ------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital (deficit)............................ $ 24,066 $ 37,305 $ 56,622 $ 23,922 $ 7,839 $ (1,443)
Total assets......................................... 67,030 111,925 122,566 113,106 67,465 61,844
Current portion of long-term debt.................... 3,000 4,271 2,080 8,171 3,513 12,259
Long-term debt, less current portion................. 21,469 30,362 30,392 23,050 10,119 226
Redeemable Common Stock and
related additional paid-in capital................. 1,971 2,508 -- -- -- --
Total shareholders' equity........................... 6,926 17,340 42,799 25,840 19,403 15,258
</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.
14
<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,
1994, 1995 and 1996 and the balance sheet data at December 31, 1995 and 1996 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, 1992 and 1993 and the balance sheet data at December 31,
1992, 1993 and 1994 are derived from audited financial statements of GFP not
included herein. The statement of operations data for the six months ended June
30, 1996 and 1997, and the balance sheet data at June 30, 1997, 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 six months ended June 30, 1997, are not necessarily
indicative of results expected for the full year.
<TABLE>
<CAPTION>
Six Months Ended
Years Ended December 31, June 30,
---------------------------------------------------------- --------------------
1992 1993(1) 1994 1995(2)(3) 1996 1996 1997
--------- ----------- --------- ------------ --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue.......................................... $155,663 $296,880 $326,327 $328,977 $308,598 $171,275 $111,484
Cost of operations............................... 135,758 242,909 279,609 312,712 278,678 151,732 96,777
-------- -------- -------- -------- -------- -------- --------
Gross profit..................................... 19,905 53,971 46,718 16,265 29,920 19,543 14,707
Selling, general and administrative expense...... 12,629 33,247 33,148 31,081 29,407 13,922 13,381
-------- -------- -------- -------- -------- -------- --------
Operating income (loss).......................... 7,276 20,724 13,570 (14,816) 513 5,621 1,326
Interest expense................................. 1,905 2,358 2,558 3,397 3,979 2,485 1,652
Other expense (income), net...................... -- 319 (199) 196 (828) 99 251
-------- -------- -------- -------- -------- -------- --------
Income (loss) before gain on issuance of stock
by subsidiary, income taxes, minority interests
and discontinued operations..................... 5,371 18,047 11,211 (18,409) (2,638) 3,037 (577)
Gain on issuance of stock by subsidiary.......... -- -- 13,307 -- -- -- --
-------- -------- -------- ------- -------- -------- --------
Income (loss) before income taxes, minority
interests and discontinued operations........... 5,371 18,047 24,518 (18,409) (2,638) 3,037 (577)
Income taxes..................................... 1,199 3,803 9,845 (3,109) 1,614 1,674 168
-------- -------- -------- -------- -------- -------- --------
Income (loss) before minority interests and
discontinued operations......................... 4,172 14,244 14,673 (15,300) (4,252) 1,363 (745)
Minority interests in (earnings) losses of
consolidated subsidiaries....................... (331) 3,535 1,716 (14) 923
-------- -------- -------- -------- -------- -------- --------
Income (loss) from continuing operations......... 4,172 14,244 14,342 (11,765) (2,536) 1,349 178
Loss from discontinued operations, net of tax.... (1,374) (216) (437) (905) (609) (209) (276)
Gain on disposal of discontinued operations, net
of tax.......................................... -- -- -- 4,637 4,066 1,210 4,192
-------- -------- -------- -------- -------- -------- --------
Net income (loss)................................ $ 2,798 $ 14,028 $ 13,905 $ (8,033) $ 921 $ 2,350 $ 4,094
======== ======== ======== ======== ======== ======== ========
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
Years Ended December 31, June 30,
----------------------------------------------------- -------------------
1992 1993(1) 1994 1995(2)(3) 1996 1996 1997
-------- -------- -------- ---------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings per share:
Income (loss) from continuing operations... $ 13.11 $ 44.59 $ 44.62 $ (36.64) $ (7.92) $ 4.21 $ 0.55
Net income (loss).......................... $ 8.79 $ 43.92 $ 43.26 $ (25.02) $ 2.88 $ 7.34 $ 12.74
Shares used in computing per share amounts.. 318,219 319,426 321,424 321,084 320,128 320,138 321,456
December 31,
----------------------------------------------------- June 30,
1992(4) 1993(5) 1994 1995(6)(7) 1996 1997
-------- -------- -------- ---------- -------- -----------
(Unaudited)
Balance Sheet Data:
Working capital............................. $ 35,014 $ 47,711 $ 61,783 $ 26,159 $ 6,337 $ 24,077
Total assets................................ 131,677 178,533 188,300 173,028 132,960 114,996
Notes payable............................... -- 1,705 6,457 5,920 -- --
Current portion of long-term debt........... 6,992 7,292 4,357 10,946 25,009 12,424
Long-term debt, less current portion........ 78,282 81,122 73,018 52,868 21,588 18,879
Total shareholders' equity.................. 1,826 15,840 29,496 21,463 22,384 26,478
</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.
16
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF TUBE TURNS
(in thousands, except for per share data)
The following selected historical financial data for Tube Turns 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 and
balance sheet data set forth below, 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 six months ended
June 30, 1997, are not necessarily indicative of results expected for the full
year.
<TABLE>
<CAPTION>
Years Ended December 31, June 30,
--------------------------------------------------------------- ----------------------
1992 1993 1994 1995 1996(3) 1996 1997
---- ---- ---- ---- ------- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue........................... $ 26,213 $ 22,641 $ 23,148 $ 23,858 $ 24,683 $ 11,871 $ 14,883
Cost of operations................ 23,662 20,133 20,063 20,730 21,656 10,496 12,282
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit...................... 2,551 2,508 3,085 3,128 3,027 1,375 2,601
Selling, general and administrative
expense......................... 1,611 1,767 1,683 1,848 1,741 857 1,272
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income.................. 940 741 1,402 1,280 1,286 518 1,329
Interest expense.................. 397 279 224 70 22 13 16
Other (income) expense............ -- -- (703) (446) (832) 26 (188)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes........ 543 462 1,881 1,656 2,096 479 1,501
Income taxes...................... 143 193 855 601 432 24 507
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........................ $ 400 $ 269 $ 1,026 $ 1,055 $ 1,664 $ 455 $ 994
========== ========== ========== ========== ========== ========== ==========
Net income per share.............. $0.30 $0.20 $0.77 $0.76 $1.23 $0.34 $0.73
Shares used in computing per
share amounts:.................. 1,313,905 1,318,868 1,326,492 1,395,633 1,349,245 1,348,912 1,355,263
</TABLE>
<TABLE>
December 31,
-------------------------------------------------------------- June 30,
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital................... $ 5,925 $ 5,348 $ 5,283 $ 4,785 $ 4,997 $ 4,534
Total assets...................... 17,371 15,546 15,714 15,674 18,721 18,811
Current portion of long-term debt. 600 700 -- -- -- --
Long-term debt, less current
portion......................... 4,700 2,900 1,704 143 -- 45
Redeemable common stock........... -- 361 416 419 535 267
Total shareholders' equity........ 4,026 4,229 5,303 6,437 8,087 9,006
</TABLE>
17
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF BELL
(in thousands, except for per share data)
The following selected historical financial data for Bell 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
for the years ended December 31, 1993, 1994, 1995 and 1996 and the balance sheet
data at December 31, 1993, 1994, 1995, 1996 are derived from audited financial
statements of Bell not included herein. The statement of operations data for the
1992 and for the six months ended June 30, 1996 and 1997, and the balance sheet
data at December 31, 1992 and June 30, 1997, 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 six months
ended June 30, 1997, are not necessarily indicative of results expected for the
full year.
<TABLE>
<CAPTION>
Years Ended December 31, June 30,
---------------------------------------------------------- ------------------
1992 1993 1994 1995 1996(1) 1996 1997
----------- -------- ------------ -------- ----------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue...................................... $ 8,041 $ 31,164 $ 30,264 $ 33,499 $ 59,254 $ 27,236 $ 33,704
Cost of operations........................... 4,319 23,013 22,911 24,859 39,132 18,085 21,420
-------- -------- -------- -------- -------- -------- --------
Gross profit................................. 3,722 8,151 7,353 8,640 20,122 9,151 12,284
Selling, general and administrative expense.. 2,384 5,476 5,179 6,119 14,242 6,137 8,028
Research and development..................... -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Operating income............................. 1,338 2,675 2,174 2,521 5,880 3,014 4,256
Interest expense............................. 168 485 479 658 1,210 613 517
Other expense................................ -- 319 -- 121 63 -- 723
-------- -------- -------- -------- -------- -------- --------
Income before income taxes................... 1,170 1,871 1,695 1,742 4,607 2,401 3,016
Income taxes................................. 511 707 642 682 1,840 928 1,221
-------- -------- -------- -------- -------- -------- --------
Net income................................... $ 659 $ 1,164 $ 1,053 $ 1,060 $ 2,767 $ 1,473 $ 1,795
======== ======== ======== ======== ======== ======== ========
Net income per share......................... $ 0.76 $ 1.32 $ 1.17 $ 1.15 $ 2.98 $ 1.59 $ 1.92
Shares used in computing per share........... 869,507 882,754 903,606 919,800 927,914 928,914 934,325
</TABLE>
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------- June 30,
1992 1993 1994 1995 1996(1) 1997
-------- -------- -------- -------- -------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital.............................. $ 4,197 $ 3,503 $ 3,658 $ 4,007 $ 10,815 $ 16,161
Total assets................................. 13,315 13,279 13,691 16,224 29,695 31,219
Current portion of long-term debt............ 2,105 2,710 1,116 1,748 2,798 165
Long-term debt, less current portion......... 6,563 4,426 4,649 5,049 11,469 15,251
Redeemable common stock...................... -- 374 595 1,059 1,056 599
Total shareholders' equity................... 1,789 2,953 4,072 4,960 7,008 8,705
</TABLE>
_______________
(1) Reflects the acquisition of Metrum on February 9, 1996.
18
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(in thousands)
The following selected unaudited pro forma combined financial data as
of June 30, 1997 and for the six months ended June 30, 1997 and for the year
ended December 31, 1996 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 sale of GTC's Latin American operations and the
Reorganization on GFP's historical cost balance sheet as of June 30, 1997 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.
The unaudited pro forma combined financial data is not necessarily
indicative of the results of operations or financial position that would have
been achieved had the Reorganization and the sale of GTC's Latin American
operations 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>
Year Ended Six Months Ended
December 31, 1996 June 30, 1997
------------------ ----------------
<S> <C> <C>
Statement of Operations Data:
Revenue................................... $250,141 $94,553
Operating income.......................... 1,025 3,574
(Loss) income from continuing operations.. (1,083) 2,372
June 30, 1997
----------------
Balance Sheet Data:
Working capital........................... $ 33,211
Total assets.............................. 100,024
Current portion of long-term debt......... 703
Long-term debt, less current portion...... 18,653
Total shareholders' equity................ 36,273
</TABLE>
19
<PAGE>
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 discontinued operations per common share and the
historical book value per common share of GFP Common Stock, and (iii) the
unaudited pro forma combined income from continuing operations 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 the sale of GTC's Latin American operations.
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."
<TABLE>
<CAPTION>
Historical
--------------------
GTC GFP Pro Forma
------- ----------- ----------
<S> <C> <C> <C>
Net income (loss) from continuing operations per common share:
Year ended December 31, 1996.................................. $(0.53) $(7.92) $(0.12)
Six months ended June 30, 1997................................ (0.28) 0.55 0.26
Book value per common share as of June 30, 1997................. 0.94 84.27 3.92
</TABLE>
RISK FACTORS
Shareholders of GTC, GFP, Tube Turns and Bell should carefully consider the
following factors before voting on the matters described herein and in
evaluating GTC and its business, in addition to the other information in this
Joint Proxy Statement/Prospectus.
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 their shares 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 Transactions,
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.
20
<PAGE>
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 Bell, and
director of GTC and Tube Turns. Jeffrey T. Gill serves as President, Chief
Executive Officer and director of GFP and Chairman of GTC, Bell and Tube Turns.
In addition, as of September 15, 1997, the Gill Family controlled approximately
99.4% of the GFP Common Stock, and GFP in turn controlled approximately 80.4% of
the GTC Common Stock, 100% of the GTC Preferred Stock, approximately 98.6% of
the Tube Turns Common Stock, and approximately 96.9% of the Bell Common Stock.
Should the Reorganization be completed, the Gill Family ownership of GTC
(including the conversion of GTC Preferred Stock) will increase from
approximately 82.6% to approximately 89.4% and ownership of GTC by the
Unaffiliated Shareholders will decrease from approximately 17.4% to
approximately 8.6%, assuming a GTC Average Closing Price of $2.74. 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. The President of Tube Turns, who currently
serves as a director of Tube Turns, will have rights to a substantial number of
shares of stock under option in GTC should the merger be completed as planned.
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. See "The Reorganization--Conflicts of Interest."
Control by Principal Shareholders and Increased Voting Power of the Gill
Family
As of September 15, 1997, the Gill Family controlled approximately 99.4% of
GFP Common Stock, and GFP in turn controlled approximately 80.4% of the GTC
Common Stock, 100% of the GTC Preferred Stock, approximately 98.6% of the Tube
Turns Common Stock and approximately 96.9% of the Bell Common Stock. Should the
Reorganization be completed, the Gill Family will own approximately 89.4% of the
outstanding shares of GTC Common Stock assuming a GTC Average Closing Price of
$2.74 and assuming the conversion of all shares of GTC Preferred Stock into
shares of GTC Common Stock immediately prior to the Reorganization. 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 Until Closing and Volatility of Stock Price
The market price of the GTC Common Stock at the Merger 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 a number of factors, including: (i) changes
in the business, operations and prospects of GTC; (ii) market assessments of the
likelihood that the Reorganization will be consummated and the timing thereof;
(iii) general market and economic conditions; and (iv) other factors affecting
the perceived value of the GTC Common Stock from time-to-time. See "The
Reorganization--The Reorganization Transaction." During the three month period
ending September 15, 1997, the price of GTC stock has fluctuated from a low of
$1.125 to a high of $3.438. See "Comparative Market Prices of Common Stock."
21
<PAGE>
Dividend Restrictions
Tube Turns and Bell are currently parties to a loan agreement with a bank
which prohibits Tube Turns and Bell from declaring or paying dividends upon any
class of their capital stock or distributing any of their property or assets
without the bank's prior written consent. GTC does not currently have a credit
agreement in place and, therefore, is not currently restricted from declaring or
paying dividends or other distributions; however, it is probable that any source
of financing which GTC may obtain in the future would contain such a
restriction.
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 at or prior to such closing 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, GTC Contribution will qualify as a tax-free
transfer of property to a controlled corporation under Section 351 of the Code
and the Reincorporation will qualify as a tax-free reorganization under Section
368 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 or the Reverse Stock Split. During the first quarter of
1997, GFP Partners-IV, Ltd. (the limited partnership in which Partners-V is the
99% general partner) sold substantially all of its assets resulting in a tax
liability of approximately $1.0 million which is a liability of the consolidated
group which includes GTC. The proceeds of that transaction will be disbursed by
GFP prior to the Merger.
Dependence on Key Personnel and Recent Resignations
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. GFP, Tube
Turns and Bell generally do not have employment agreements or noncompetition
agreements with their key employees. Effective January 4, 1996 Jack Calderon
resigned his positions as GTC's Vice President and General Manager of
International Operations. Effective January 8, 1996, Gregory A. Tymn resigned
his positions as GTC's Vice President of Finance and Chief Financial Officer.
Effective October 31, 1996, Carl P. McCormick resigned his positions as GTC's
President and Chief Executive Officer. Effective January 31, 1997, J. Hardie
Harris resigned his positions as GTC's Vice President and General Manager of
U.S. EMS Operations. Effective April 4, 1997, Aviram Margalith resigned his
positions as GTC's Vice President and General Manager of International EMS
Operations and Engineering Services. Robert E. Gill replaced Mr. McCormick as
President and Chief Executive Officer of GTC for an interim period and on
February 28, 1997, Thomas W. Lovelock was elected President and Chief Executive
Officer of GTC. GTC instituted a series of employment agreements with key
personnel during the time leading up to the sale of the GTC's international
operations. The agreements with key personnel terminate on May 31, 1998. GTC has
also entered into employment agreements with two current officers of GTC, Thomas
W. Lovelock, President and Chief Executive Officer and James G. Cocke, Vice
President. GTC had an employment agreement with one of its key employees working
in a foreign location. This agreement was assumed by SCI Systems, Inc. in
connection with the sale of the international operations of GTC on June 30,
1997. See "GTC Executive Compensation--Employment Contracts."
22
<PAGE>
Environmental Compliance and Existing Contamination
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. 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, and after consummation of the Reincorporation, will be governed by the
DGCL and the Sypris Articles and Sypris 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 "Effect of the Reorganization on
Rights of Shareholders." Such differences also exist between the rights of
shareholders of GTC and the rights of shareholders of Sypris. See "The GTC
Special Meeting--Proposal to Approve the Reincorporation."
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 (if the Reincorporation
is not approved) or in the state of Delaware (if the Reincorporation is
approved); (ii) certain provisions of GTC's Articles (if the Reincorporation is
not approved) or of Sypris' Articles (if the Reincorporation is approved) 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 GTC's Capital
Stock." Similar factors exist concerning Sypris. See "The GTC Special Meeting--
Proposal to Approve the Reincorporation."
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. Similar considerations exist for Sypris Common Stock. See "The GTC
Special Meeting--Proposal to Approve the Reincorporation."
23
<PAGE>
Immediate and Substantial Dilution
The Reorganization would 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 $2.74 per share and the number of shares outstanding as of the
respective record dates for the Special Meetings, 33,866,183 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 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,
and assuming conversion of the GTC Preferred Stock held by GFP into GTC Common
Stock prior to the effectiveness of the Reorganization, the number of shares
beneficially owned by the Gill Family will represent approximately 89.4% of the
37,047,187 shares of GTC Common Stock to be outstanding after the Reorganization
as compared to approximately 82.6% of the 18,245,629 shares of GTC Common Stock
outstanding prior to the Reorganization, assuming conversion of the GTC
Preferred Stock. Accordingly, the aggregate percentage voting power of the
Unaffiliated Shareholders of GTC will also be reduced. See "Risk Factors--
Control by Principal Shareholders and Increased Voting Power of the Gill
Family." 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.
24
<PAGE>
Minimum Criteria for Inclusion in the Nasdaq Stock Market
The National Association of Securities Dealers ("NASD") recently updated
rules which 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 adopted rules, companies will be required to meet higher financial
standards and maintain a stated minimum bid of at least $1.00 per share, or else
face termination of their designation for inclusion in either the Nasdaq Stock
Market or Small Cap Market. Additionally, the updated 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 and the market value of
publicly held shares (those held by persons other than officers, directors and
10% shareholders) must be at least $5.0 million and the company's net tangible
assets must be at least $4.0 million. On December 31, 1996, GTC received a
letter from the Nasdaq Stock Market concerning GTC's failure to meet the then
applicable 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 $2.1 million. Accordingly, on that date the GTC
Common Stock did not meet the Nasdaq listing requirements. The closing price of
the GTC Common Stock on September 15, 1997 was $2.891, with a corresponding
market float of $9.2 million. 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 GTC is not able to meet the updated
NASD rules. 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 delisting occurs prior to the Merger Effective Time,
the existing shareholders of GTC Common Stock will have dissenters' rights under
the FBCA.
Possible Application of SEC Rules Governing Sale of Penny Stock to GTC
Common Stock
Pursuant to the criteria established by the Commission, a security that
fails to meet certain requirements, including having a market price of $5.00 or
more and being a reported security, is deemed to be "penny stock" and broker
transactions in such stock are subject to extensive disclosure requirements
regarding, among other things, pricing and trading activity information on such
stock. The penny stock rules require the delivery, prior to any transaction in
such stock, of a disclosure schedule explaining the penny stock market and the
risks associated therewith, and impose various sales practice requirements on
broker-dealers who sell penny stock to persons other than established customers
and accredited investors. For these types of transactions, the broker-dealers
must make a special suitability determination for the purchaser and must have
received the purchaser's written consent to the transaction prior to the sale.
If GTC Common Stock is ever deemed to be penny stock, the application of such
rules could have the effect of discouraging trading in such stock.
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
25
<PAGE>
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 factors causing the revision become
known. 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."
Recent Losses
GTC reported an operating loss of $18.2 million and a net loss of $17.7
million 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 $11.1 million 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 $2.2 million 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. GTC
reported an operating loss of $5.0 million and a net loss of $8.6 million during
the year ended December 31, 1996. These losses were the result of several
factors, including: (i) the reduction of revenue to $224.7 million in 1996 from
$273.6 million in 1995; (ii) the recognition of $3.6 million in charges related
to contract terminations and inventory adjustments; (iii) the recognition of
$1.8 million of charges related to the adjustment of certain contract estimates;
and (iv) the recognition of $1.6 million in charges associated with asset
disposals and deferred rent payments for capital equipment. For the six months
ended June 30, 1997, GTC's revenue has continued to decrease and, accordingly,
GTC reported an operating loss of $3.5 million and a net loss of $4.6 million.
On June 30, 1997, GTC divested its Latin American operations and repaid its
existing bank debt. At this date, it is uncertain whether this divestiture will
have a positive or negative impact on the business. See "Recent Developments."
There is no assurance that the business will return to profitability at any time
during the foreseeable future. See "Selected Historical Consolidated Financial
Data of GTC" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations of GTC."
Availability of Credit to Fund Operations
GTC repaid all outstanding balances existing under its revolving credit
facility on June 30, 1997, with a portion of the proceeds from the sale of its
Latin American operations to SCI Systems, Inc., and subsequently terminated its
credit agreement with the lender. GTC is currently funding its operations from
internally generated cash flow and existing cash balances. There can be no
assurances, however, that GTC will be able to continue to fund its operations
from internally generated cash flow, nor that it will be able to secure
alternative sources of financing to fund its future working capital
requirements.
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 19%, 20% and 17% of GTC's revenue in 1994, 1995 and 1996,
respectively, and 20% for the six months ended June 29, 1997. 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 11%, 9% and
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12% of GTC's revenue in 1994, 1995 and 1996, respectively, and 16% for the six
months ended June 29, 1997. 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 1996 was
IBM, which represented approximately 16% of GTC's revenue. In the six months
ended June 29, 1997 IBM accounted for 11% 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,
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 Demand and Exposure Due to Significant Customer
Receivables
The level and timing of orders placed by 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. At June 29,
1997 GTC's backlog of customer orders was $73.2 million, which included $2.5
million related to the international operations which were divested on June 30,
1997. 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."
Cost, Limited Availability of Components and Reliance on Single Sources for
Certain 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
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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.
Rapid 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.
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.
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. In connection with GTC's Metrum subsidiary, GTC has been notified that
a claim of up to $4.0 million may be asserted against GTC related to contracts
acquired by Metrum, Inc. from Alliant Techsystems, Inc. There is no assurance
that GTC will not be found liable on such claim, which would have a material
adverse effect on GTC.
Competitive Pressures
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 operations
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
Pending Litigation
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 $100.0 million. 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. There is no
assurance 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 could materially
and adversely affect Tube Turns'
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financial performance. Neither Tube Turns nor GTC are indemnified for this
potential liability above the insurance policy limits.
Environmental Contamination
The 383,000 square foot office and manufacturing facility which comprise
Tube Turns headquarters in Louisville, Kentucky are located on a site which was
subject to environmental contamination by the predecessor owner. While Tube
Turns has obtained an indemnity from Sumitomo Metal Industries, Ltd., Sumitomo
Corporation and Sumitomo Corporation of America for these matters, there is no
assurance that the costs associated with environmental cleanup and compliance
with applicable environmental laws and regulations will not exceed the amounts
covered by such indemnity.
GFP Risk Factors
Real Estate Holdings
GFP has historically owned real estate investments which as of the Merger
Effective Time will have been divested. While GFP knows of no material liability
resulting from the ownership of such real estate under current law, it may, in
the future, be subject to claims for environmental liabilities by reason of its
previous ownership of such properties. It is impossible to estimate the
probability that claims, if any, will be asserted or the expense, if any, which
might be incurred by GFP as a result of such claims. Any such liabilities will
be assumed by GTC in the Reorganization.
THE REORGANIZATION PARTIES
Group Technologies Corporation. GTC provides advanced manufacturing,
engineering and testing services to OEMs of electronic products. GFP owns
approximately 80.4% of the issued and outstanding shares of GTC Common Stock and
100% of the issued and outstanding shares of GTC Preferred 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 98.6% 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 2820 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
96.9% 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
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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," AND "THE REORGANIZATION--
REASONS FOR THE REORGANIZATION; RECOMMENDATION OF THE GFP BOARD." MEMBERS OF THE
BOARD OF DIRECTORS OF GFP HAVE CONFLICTS OF INTEREST IN THIS TRANSACTION. SEE
"THE REORGANIZATION--CONFLICTS OF INTEREST."
Other Matters. GFP's shareholders will also consider and vote upon such
other matters that may be incidental to the conduct of the GFP Special Meeting.
Record Date; Voting Rights; Proxies
The GFP Board has fixed the close of business on October 15, 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 315,953 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. With respect to matters incidental to the conduct of
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.
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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 Merger Effective Time, 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 at
the place specified in the Dissenters' Notice. 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
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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, which
summary includes all material elements of such rights, 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.
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 determine the outcome of the vote and such
holders are expected to vote in favor of the proposal.
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.
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 APPENDICES THERETO, AND TO COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
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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," AND "THE REORGANIZATION-
- -REASONS FOR THE REORGANIZATION; RECOMMENDATION OF THE TUBE TURNS BOARD."
CERTAIN MEMBERS OF THE BOARD OF DIRECTORS OF TUBE TURNS HAVE CONFLICTS OF
INTEREST IN THIS TRANSACTION. SEE "THE REORGANIZATION--CONFLICTS OF INTEREST."
Other Matters. Tube Turns' shareholders will also consider and vote upon
such other matters that may be incidental to the conduct of the Tube Turns
Special Meeting.
Record Date; Voting Rights; Proxies
The Tube Turns Board has fixed the close of business on October 15, 1997 as
the Tube Turns Record Date for determining holders entitled to notice of and to
vote at the Tube Turns Special Meeting.
As of the Tube Turns Record Date, there were 1,307,408 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. With respect to matters incidental to the conduct of 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
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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 Tube Turns Merger Effective Time, 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 at the place specified in the Dissenters' Notice. 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
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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, which
summary includes all material elements of such rights, 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.
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 1,292,981 shares of Tube Turns Common
Stock, representing approximately 98.9% 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 determine the outcome of
the vote and such holders are expected to vote in favor of the proposal.
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.
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 APPENDICES THERETO, AND TO COMPLETE, DATE,
SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
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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," AND "THE REORGANIZATION--
REASONS FOR THE REORGANIZATION; RECOMMENDATION OF THE BELL BOARD." CERTAIN
MEMBERS OF THE BOARD OF DIRECTORS OF BELL HAVE CONFLICTS OF INTEREST IN THIS
TRANSACTION. SEE "THE REORGANIZATION--CONFLICTS OF INTEREST."
Other Matters. Bell's shareholders will also consider and vote upon such
other matters that may be incidental to the conduct of the Bell Special Meeting.
Record Date; Voting Rights; Proxies
The Bell Board has fixed the close of business on October 15, 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 869,838 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. With respect to matters incidental to the
conduct of 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
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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) 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 Bell Merger Effective Time, the surviving 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 Bell Merger Effective Time, 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
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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 summary of the rights of dissenting shareholders, which
summary includes material elements of such rights, is qualified in its entirety
by reference to the Florida Dissent Provisions which are set forth as Appendix C
to this Joint Proxy Statement/Prospectus.
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 Record Date, directors and
executive officers and their affiliates, and persons and entities related to the
foregoing, were beneficial holders of 848,096 shares of Bell Common Stock,
representing approximately 97.5% 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 determine the outcome of the vote and such
holders are expected to vote in favor of the proposal.
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 APPENDICES 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 increase the number of
authorized shares of GTC Common Stock from 40,000,000 shares to 60,000,000
shares;
(III) a proposed amendment to the GTC Articles to effect the Reverse Stock
Split;
(IV) a proposal to approve the Reincorporation; and
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(v) any other business incidental to the conduct of the GTC Special
Meeting.
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 the GTC Preferred Stock) is not adequate to
cover the sum of (i) number of shares necessary for issuance if the
Reorganization is approved, and (ii) the number of shares reserved for issuance
under the stock option plans of GTC. Assuming the GTC Preferred Stock is
converted into GTC Common Stock prior to the Reorganization and assuming a GTC
Average Closing Price of $2.74, 33,866,183 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 of GTC, would
almost equal 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 GFP, Tube Turns and Bell in accordance with
the Reorganization Agreement, assuming the GTC Average Closing Price is $2.74,
there would be 37,047,187 shares of GTC Common Stock outstanding and 22,952,813
shares of GTC Common Stock would remain authorized but unissued, of which
2,384,068 shares under option will be assumed by GTC as a result of the
Reorganization, 6,450,000 shares would be reserved for issuance under the stock
option plans of GTC and 325,000 shares would be reserved for outstanding
warrants of GTC. The complete text of the Amendment is set forth on Appendix D
hereto; however, such text is subject to change as may be required by the
Florida Secretary of State.
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 Effect the Reverse Stock Split
General
On September 12, 1997, the GTC Board adopted a resolution proposing that
the GTC Articles be amended to effect the Reverse Stock Split. If the Reverse
Stock Split is approved by the requisite vote of GTC's shareholders, upon the
filing of an amendment to the GTC Articles with the Florida Secretary of State
(the "Amendment"), the Reverse Stock Split will be deemed effective, and each
certificate representing shares of GTC Common Stock outstanding immediately
prior to the Reverse Stock Split (the "Old Shares") will be deemed
automatically, without any action on the part of the shareholders, to represent
1/4 of the number of shares of GTC Common Stock after the Reverse Stock Split
(the "New Shares"); provided, however, that no fractional New Shares will be
issued as a result of the Reverse Stock Split. In lieu thereof, each shareholder
of Old Shares who would otherwise be entitled to receive a fractional share of
New Shares will receive one additional new share for the fractional new share
that such shareholder would otherwise be entitled to receive as a result of the
Reverse Stock Split. After the Reverse Stock Split becomes effective,
shareholders will be asked to surrender certificates representing Old Shares in
accordance with the procedures set forth in a letter of transmittal to be sent
by GTC. Upon such surrender, certificates representing the New Shares will be
issued and forwarded to the shareholders. However, each certificate representing
Old Shares will continue to be valid and represent New Shares equal to 1/4 the
number of Old Shares. The complete text of the Amendment is set forth on
Appendix F hereto; however, such text is subject to change as may be required by
the Florida Secretary of State.
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The number of shares of GTC Common Stock authorized by the GTC Articles
will be reduced from 60,000,000 (the number which will be authorized upon filing
Articles of Amendment as contemplated by the Proposal discussed immediately
above) to 15,000,000 as a result of the proposed Reverse Stock Split. The GTC
Common Stock issued pursuant to the Reverse Stock Split will be fully paid and
nonassessable. The voting and other rights that presently characterize the GTC
Common Stock will not be altered by the Reverse Stock Split.
Purposes of the Proposed Reverse Stock Split
The GTC Board believes the Reverse Stock Split is desirable for several
reasons. The Reverse Stock Split should enhance the acceptability and
marketability of the GTC Common Stock by the financial community and investing
public. The reduction in the number of issued and outstanding shares of GTC
Common Stock caused by the Reverse Stock Split is expected to result in a
broader market for the GTC Common Stock than that which currently exists. A
variety of brokerage house policies and practices tend to discourage individual
brokers within those firms from dealing with lower priced stocks. Some of those
policies and practices pertain to the payment of broker's commissions and to
time consuming procedures that function to make the handling of lower priced
stocks economically unattractive to brokers. In addition, the structure of
trading commissions also tends to have an adverse impact upon holders of lower
priced stock because the brokerage commission on a sale of lower priced stock
generally represents a higher percentage of the sales price than the commission
on a relatively higher priced issue. The GTC Board believes that the proposed
Reverse Stock Split should result in a price level for the GTC Common Stock that
will reduce, to some extent, the effect of the above-referenced policies and
practices of brokerage firms and diminish the adverse impact of trading
commissions on the market for the GTC Common Stock. (Any reduction in brokerage
commissions resulting from a Reverse Stock Split may be offset, however, in
whole or in part, by increased brokerage commissions required to be paid by
shareholders selling "odd lots" created by the Reverse Stock Split.) The
expected increased price level may also encourage interest and trading in the
GTC Common Stock and possibly promote greater liquidity for GTC's shareholders,
although such liquidity could be adversely affected by the reduced number of
shares of GTC Common Stock outstanding after the Reverse Stock Split. Finally,
the GTC Board expects the Reverse Stock Split to help GTC meet the minimum
maintenance standards established by the Nasdaq Stock Market and applicable to
all Nasdaq Stock Market companies.
However, no assurance can be given that the Reverse Stock Split will have
any or all of these effects; including, without limitation, that the market
price per New Share of GTC Common Stock after the Reverse Stock Split will be 4
times the market price per Old Share of GTC Common Stock before the Reverse
Stock Split, or that such price will either exceed or remain in excess of the
current market price. Further, no assurance can be given that the market for the
GTC Common Stock will be improved. Shareholders should note that the GTC Board
cannot predict what effect the Reverse Stock Split will have on the market price
of the GTC Common Stock.
Changes Affecting Capital Stock
The par value of the GTC Common Stock will remain at $.01 per share
following the Reverse Stock Split, and the number of shares of GTC Common Stock
authorized and outstanding will be reduced from 60,000,000 to 15,000,000 and
from 37,047,187 to 9,261,797 respectively assuming, in the Reorganization, a GTC
Average Closing Price of $2.74.
The GTC Common Stock is currently registered under Section 12(g) of the
Exchange Act, and, as a result, GTC is subject to the periodic reporting and
other requirements of the Exchange Act. The Reverse Stock Split will not affect
the registration of the GTC Common Stock under the Exchange Act.
Implementation of Reverse Stock Split
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The Reverse Stock Split will be effected by filing the Amendment to the GTC
Articles with the Florida Secretary of State. Assuming approval of the Reverse
Stock Split by the requisite vote of the shareholders of GTC, the Amendment to
the GTC Articles will thereafter be filed with the Florida Secretary of State as
promptly as practicable and the Reverse Stock Split will become effective on the
date of such filing (the "Reverse Stock Split Effective Date"). Without any
further action on the part of GTC or the shareholders, after the Reverse Stock
Split Effective Date, the certificates representing Old Shares will be deemed to
represent 1/4 of the number of New Shares.
As soon as practicable after the Reverse Stock Split Effective Date, GTC
will send a letter of transmittal to each holder of record of Old Shares of GTC
Common Stock outstanding on the Reverse Stock Split Effective Date. The letter
of transmittal will contain instructions for the surrender of certificate(s)
representing such Old Shares to First Union National Bank of North Carolina,
GTC's exchange agent (the "Exchange Agent"). Upon proper completion and
execution of the letter of transmittal and return thereof to the Exchange Agent,
together with the certificate(s) representing Old Shares, a shareholder will be
entitled to receive a certificate representing the number of New Shares of GTC
Common Stock into which his Old Shares have been reclassified and changed as a
result of the Reverse Stock Split plus any payment for fractional shares.
Shareholders should not submit any certificates until requested to do so.
No new certificate will be issued to a shareholder and no payment will be made
for fractional shares until he has surrendered his outstanding certificate(s)
together with the properly completed and executed letter of transmittal to the
Exchange Agent.
Certain Federal Income Tax Consequences
GTC has not sought and will not seek an opinion of counsel or a ruling from
the IRS regarding the federal income tax consequences of the Reverse Stock
Split. GTC, however, believes that because the Reverse Stock Split is not part
of a plan to periodically increase shareholder's proportionate interest in the
assets or earnings and profits of GTC, the Reverse Stock Split will have the
following federal income tax effects:
(i) the Reverse Stock Split will constitute a reorganization within the
meaning of the Code, and GTC will not recognize any gain or loss as a result of
the Reverse Stock Split;
(ii) a shareholder will not recognize gain or loss on the exchange, except
that a gain or loss will be recognized on the receipt of any cash in lieu of a
fractional share. In the aggregate, the shareholder's basis in the New Shares
will equal his basis in the Old Shares (reduced by any amount allocable to a
fractional share interest for which cash is received); and
(iii) a shareholder's holding period for the New Shares will be the same
as the holding period for the Old Shares exchanged therefor provided that the
Old Shares are held as a capital asset on the effective date of the Reverse
Stock Split.
Miscellaneous
The GTC Board may abandon the proposed Reverse Stock Split at any time
prior to the Reverse Stock Split Effective Date if for any reason the GTC Board
deems it advisable to abandon the proposal. The GTC Board may consider
abandoning the proposed Reverse Stock Split if it determines, in its sole
discretion, that the Reverse Stock Split would adversely affect the ability of
GTC to raise capital or the liquidity of the GTC Common Stock, among other
things. The GTC Board may make any and all changes to the Amendment to the GTC
Articles that it deems necessary to file the Amendment to the GTC Articles with
the Florida Secretary of State and give effect to the Reverse Stock Split.
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THE GTC BOARD BELIEVES THAT THE REVERSE STOCK SPLIT IS ADVISABLE AND IN THE
BEST INTERESTS OF GTC AND RECOMMENDS A VOTE FOR THE APPROVAL OF THE REVERSE
STOCK SPLIT.
Proposal to Approve the Reincorporation
General
The GTC Board has unanimously approved, and recommends for shareholder
approval, the change of GTC's state of incorporation from Florida to Delaware.
The reincorporation transaction will not result in any change in the business,
management, assets, liabilities or net worth of GTC. Upon consummation of the
Reorganization, GTC will function as a holding company with no business
operations in the state of Florida. Reincorporation in Delaware will allow GTC
to take advantage of certain provisions of the corporate laws of Delaware. The
purposes and effects of the proposed transaction are summarized below.
In order to effect GTC's reincorporation in Delaware, GTC will be merged
into a newly formed, wholly-owned subsidiary incorporated in Delaware. The
Delaware subsidiary, named Sypris Solutions, Inc., has not engaged in any
activities except in connection with the proposed transaction. The mailing
address of its principal executive offices and its telephone number are 455
South Fourth Street, Louisville, Kentucky 40202, telephone (502) 585-5544. It is
anticipated that after the merger is approved, the offices of the surviving
company will be located at this address. As part of its approval and
recommendations of GTC's reincorporation in Delaware, the GTC Board has
approved, and recommends to the shareholders for their adoption and approval, an
Agreement and Plan of Merger (the "Reincorporation Agreement") pursuant to which
GTC will be merged with and into Sypris Solutions, Inc. The full texts of the
Reincorporation Agreement and the Certificate of Incorporation and Bylaws of the
successor Delaware corporation under which GTC's business would be conducted
after the merger are set forth as Appendix G, Appendix H and Appendix I,
respectively, hereto. The discussion contained in this Joint Proxy
Statement/Prospectus is qualified in its entirety by reference to such
Appendices.
The reincorporation of GTC in Delaware through the Reincorporation requires
approval of GTC's shareholders by the affirmative vote of a majority of the
votes entitled to vote the GTC Common Stock at the GTC Special Meeting.
In the following discussion of the proposed Reincorporation, the term "GTC"
refers to GTC as currently organized as a Florida corporation, the term "Sypris"
refers to the new wholly-owned Delaware subsidiary of GTC that will be the
surviving corporation after the completion of the transaction.
Upon shareholder approval of the Reincorporation, and upon approval of
appropriate articles and certificates of merger by the Secretaries of State of
the States of Florida and Delaware, GTC will be merged with and into Sypris
pursuant to the Reincorporation Agreement, resulting in a change in GTC's state
of incorporation. GTC will then be subject to the DGCL and the Certificate of
Incorporation and Bylaws set forth in Appendix H and Appendix I, respectively.
Upon the effective time of the Reincorporation, each outstanding share of GTC
Common Stock automatically will be converted into one share of Sypris Common
Stock. Outstanding options to purchase shares of common stock of GTC will be
converted into options to purchase the same number of shares of Sypris Common
Stock. Each employee stock plan and any other employee benefit plan to which GTC
is a party, whether or not such plan relates to the GTC Common Stock, will be
assumed by Sypris and, to the extent any such plan provides for the issuance or
purchase of GTC Common Stock, will be deemed to provide for the issuance or
purchase of shares of Sypris Common Stock.
IT WILL NOT BE NECESSARY FOR SHAREHOLDERS OF GTC TO EXCHANGE THEIR EXISTING
STOCK CERTIFICATES FOR CERTIFICATES OF SYPRIS; OUTSTANDING STOCK CERTIFICATES OF
GTC SHOULD NOT BE DESTROYED OR SENT TO GTC. The GTC Common Stock
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will continue to be traded on the Nasdaq Stock Market, and Nasdaq will consider
the existing stock certificates as constituting "good delivery" in transactions
subsequent to the Reincorporation.
Principal Reasons for Changing GTC's State of Incorporation
Upon consummation of the Reorganization, GTC will no longer have business
operations in the State of Florida. The GTC Board therefore considered whether
it would be advantageous to incorporate in another jurisdiction. The GTC Board
believes that the Reincorporation will provide flexibility for both the
management and business of GTC.
Delaware is a favorable legal and regulatory environment in which to
operate. For many years, Delaware has followed a policy of encouraging
incorporation in that state and, in furtherance of that policy, has adopted
comprehensive, modern and flexible corporate laws which are periodically updated
and revised to meet changing business needs. As a result, many major
corporations have initially chosen Delaware for their domicile or have
subsequently reincorporated in Delaware. The Delaware courts have developed
considerable expertise in dealing with corporate issues, and a substantial body
of case law has developed construing Delaware law and establishing public
policies with respect to Delaware corporations, which provide greater
predictability with respect to corporate legal affairs.
The GTC Board believes that the DGCL affords desirable flexibility and
predictability in the exercise of corporate powers to an extent not available to
corporations organized under the FBCA. In addition, the GTC Board believes that
the fact that a large number of major corporations has maintained domicile in
Delaware over many years and the resultant creation of a judiciary particularly
familiar with corporate matters and the substantial body of Delaware judicial
decisions construing and clarifying its corporate law and establishing public
policy concerning corporations is also advantageous.
For the foregoing reasons, the GTC Board believes that the activities of
GTC can be carried on better if GTC is able to operate as a corporation
organized under and governed by the DGCL. In some instances, however,
shareholders have fewer rights and therefore less protection under the DGCL than
under the FBCA.
The Delaware Business Combinations Statute
Section 203 of the DGCL (the "Delaware Business Combinations Statute")
prohibits certain transactions between a Delaware corporation and an "interested
stockholder," which is defined as a person that is directly or indirectly a
beneficial owner of 15% or more of the voting power of the outstanding voting
stock of a Delaware corporation and such person's affiliates and associates.
This provision prohibits certain business combinations (defined broadly to
include mergers, consolidations, sales or other dispositions of assets having an
aggregate value in excess of 10% of the consolidated assets of a company, and
certain transactions that would increase the interested stockholder's
proportionate share ownership in a company) between an interested stockholder
and a company for a period of three years after the date the interested
stockholder acquired its stock, unless (i) the business combination is approved
by such company's Board of Directors prior to the time the interested
stockholder acquired its shares, (ii) the interested stockholder acquired at
least 85% of the voting stock of such company in the transaction in which it
became an interested stockholder, or (iii) the business combination is approved
by a majority of the Board of Directors and the affirmative vote of two-thirds
of the votes entitled to be cast by disinterested stockholders at an annual or
special meeting.
If the Reincorporation is consummated, the Delaware Business Combinations
Statute will apply to Sypris. The effect of the application of the Delaware
Business Combinations Statute would be to reduce the likelihood of situations in
which Sypris may be forced to accept a proposal for the takeover of Sypris
without ample time to evaluate the proposal and appropriate alternatives and to
encourage anyone contemplating a transaction with Sypris to negotiate directly
with Sypris on a fair and equitable basis. The application of the
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Delaware Business Combinations Statute could adversely affect the ability of
shareholders to benefit from certain transactions which are opposed by the
Sypris Board or by shareholders owning 15% of Sypris Common Stock, even if the
price offered in such transactions represents a premium over the then-current
market price of Sypris Common Stock. To the extent that the Sypris Board
disapproves of a proposed transaction and therefore discourages establishment of
a controlling stock interest, the position of the Sypris Board and current
management may be strengthened, thereby assisting those persons in retaining
their positions.
However, the GTC Board believes on balance that GTC's becoming subject to
the provisions of the Delaware Business Combinations Statute will be in the best
interests of GTC and its shareholders. The protections afforded by the Delaware
Business Combinations Statute will increase the likelihood that anyone
contemplating a transaction with GTC would negotiate directly with GTC in
advance. Although the FBCA contains a somewhat similar statute that regulates
such transactions (see "Effect of the Reorganization on Rights of Shareholders--
Business Combinations Statute (Affiliated Transactions)"), and while the
Reincorporation is not being recommended in response to any specific effort of
which GTC is aware to accumulate GTC's shares or to obtain control of GTC, the
GTC Board believes that the provisions of the Delaware Business Combinations
Statute will enhance the GTC Board's ability to assure more equitable treatment
of GTC's shareholders in the event of a possible takeover attempt.
Comparison of Certain Provisions of the Certificate of Incorporation and
Bylaws of Sypris, Delaware Corporate Law, the Articles of Incorporation and
Bylaws of GTC, and Florida Corporate Law
Upon consummation of the Reincorporation, the Certificate of Incorporation
and Bylaws of Sypris will become GTC's Certificate of Incorporation and Bylaws.
The following is a summary of certain significant differences between the
provisions of the Certificate of Incorporation and Bylaws of Sypris and those of
the Articles of Incorporation and Bylaws of GTC. This summary does not purport
to be complete, and reference is made to the Certificate of Incorporation and
Bylaws of Sypris, which are attached hereto as Appendix H and Appendix I,
respectively. Copies of the Articles of Incorporation and Bylaws of GTC are
available for inspection at the principal executive offices of GTC and will be
sent to shareholders of GTC upon written request. Also summarized below are
certain differences between the FBCA and the DGCL which may affect the interests
of shareholders. The summary does not purport to be a complete statement of the
differences between the FBCA and the DGCL and related laws affecting
shareholders' rights, and the summary is qualified in its entirety by reference
to the provisions of those laws.
Capitalization
The Certificate of Incorporation of Sypris authorizes the issuance of
20,000,000 shares of common stock, par value $.01 per share, 10,000,000 shares
of nonvoting common stock, par value $.01 per share, and 1,000,000 shares of
preferred stock, par value $.01 per share ("Sypris Preferred Stock"). Sypris
Preferred Stock may be issued in series, each series being composed of such
number of shares and having such dividend, liquidation, voting, conversion,
redemption and other rights, if any, as the Sypris Board may determine.
Currently GTC is authorized to issue 40,000,000 shares of GTC Common Stock
(which is proposed to be increased to 60,000,000 shares as discussed above),
16,220,629 shares of which were outstanding as of September 15, 1997; and
1,000,000 shares of GTC Preferred Stock, of which 250,000 shares are issued and
outstanding, but will be converted into GTC Common Stock immediately prior to
the Reorganization. Under the Reverse Stock Split, the number of authorized
shares of GTC Common Stock will be reduced to 15,000,000 shares (assuming the
prior increase in authorized shares to 60,000,000) and the outstanding shares
will be reduced to 9,261,797. In the Reincorporation, assuming the Reverse Stock
Split has been effected, one share of Sypris Common Stock will be issued for
each outstanding share of GTC Common Stock.
The GTC Board believes that it is desirable to have preferred stock
available for future financings,
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acquisitions, stock splits or dividends, employee benefit plans or other
corporate purposes. GTC has no definitive plans, arrangements, commitments, or
understandings with respect to the issuance of any shares of preferred stock
which would be authorized by the Certificate of Incorporation of Sypris. The
Sypris Board (subject to applicable law, rules of regulatory agencies and
requirements of Nasdaq) has the power to issue shares of preferred stock without
further shareholder approval. One of the effects of the ability of Sypris to
issue preferred stock may be to enable the Sypris Board to render more difficult
or discourage an attempt to obtain control of Sypris. The Sypris Board would
have the ability to issue shares of preferred stock with terms which would make
a takeover substantially more expensive. In addition, any issuance of preferred
stock could have the effect of diluting the earnings per share and book value
per share of existing shares of common stock.
Upon consummation of the Merger Transactions and the Reincorporation and
issuance of the new shares of Sypris Common Stock to the shareholders of Bell,
Tube Turns and GFP in accordance with the Reorganization Agreement and the
Reincorporation, assuming the GTC Average Closing Price is $2.74, and assuming
implementation of the Reverse Stock Split, there would be 9,261,797 shares of
Sypris Common Stock outstanding and 10,738,203 shares of Sypris Common Stock
would remain authorized but unissued. 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 Sypris 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 and Sypris 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 immediate
plans, arrangements, commitments, or understandings with respect to the issuance
of any of the additional shares of Sypris Common Stock which will be authorized
by the Delaware Certificate of Incorporation (the "Delaware Certificate").
The holders of any of the additional shares of Sypris 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 Delaware Certificate authorizes 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 Sypris identical
to the rights of Sypris Common Stock. The Nonvoting Common Stock will not have
voting rights except for those voting rights required by the DGCL.
The Nonvoting Common Stock will enable Sypris 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 Sypris 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 82.6% of the total votes of GTC Common Stock which
will increase to approximately 89.4% upon completion of the Reorganization,
assuming the conversion of GTC Preferred Stock and a GTC Average Closing Price
of $2.74 per share. Accordingly, Sypris 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 Sypris to effect acquisitions or
raise capital without materially altering the current voting control of the
holders of Sypris Common Stock. Issuance of additional equity securities could
significantly dilute the voting power of holders of Sypris Common Stock.
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GTC 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 Sypris Common Stock
may be prohibited and the issuance of shares of Sypris 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, Sypris
may seek advice from the NASD to clarify application of the Rule to any proposed
transaction. Sypris has no present plan or intention to issue any shares of
Nonvoting Common Stock.
No further action or authorization by Sypris' shareholders would be
necessary prior to the issuance of 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 Sypris do not have any preemptive rights to subscribe for
any shares of Sypris Common Stock, Sypris Preferred Stock or Nonvoting Common
Stock that may be issued.
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 Sypris
Common Stock, Sypris Preferred Stock or Nonvoting Common Stock. However, the
increased authorized shares contained in the Delaware Certificate could be used
to make a takeover attempt more difficult such as by using the shares to make a
counteroffer for the shares of the bidder or by selling shares of authorized but
unissued Sypris 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.
The Delaware Certificate also authorizes 1,000,000 shares of Sypris
Preferred Stock. The Sypris 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 Sypris Preferred Stock without further
shareholder approval, with such rights as the Sypris Board deems advisable,
including conversion rights, redemption rights, and liquidation rights. The
Sypris Preferred Stock could be issued to deter a takeover by establishing the
terms of the Sypris Preferred Stock so as to make the takeover substantially
more expensive.
Description of Voting Common Stock and Nonvoting Common Stock
The Sypris Common Stock and Nonvoting Common Stock are identical in all
respects, except as follows:
Each share of Sypris Common Stock entitles the holder thereof to one vote
on each matter submitted to a shareholders' vote, while shares of Nonvoting
Common Stock have no voting rights, except for those voting rights required by
the DGCL.
Subject to the limitations described in the Delaware Certificate, holders
of the Sypris Common Stock
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and Nonvoting Common Stock participate equally in any dividends (payable in
cash, stock or property) and stock splits, when and as declared by the Sypris
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 Sypris Common Stock will receive
shares of Sypris Common Stock and the holders of Nonvoting Common Stock will
receive shares of Nonvoting Common Stock.
In the event Sypris is liquidated, dissolved or wound up, whether
voluntarily or involuntarily, the holders of the Sypris Common Stock and
Nonvoting Common Stock participate equally in any distribution.
If at any time while there are shares of Sypris Common Stock and Nonvoting
Common Stock issued and outstanding, the Sypris 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 Sypris 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 Sypris, due to Sypris
having more than one class of common shares outstanding, then the Sypris Board
may by reversion convert all outstanding shares of Nonvoting Common Stock into
Sypris 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 Sypris 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 Sypris Board to convert all outstanding
shares of Nonvoting Common Stock into Sypris Common Stock.
Removal of Directors
Under Delaware law, any director or the entire board of directors generally
may be removed, with or without cause, by the holders of a majority of the
shares entitled to vote at an election of directors. 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.
Limitation on Directors' Liability
The Delaware Certificate provides that, to the fullest extent allowed by
the laws of Delaware, a director will not be personally liable for monetary
damages to Sypris or its shareholders for any breach of fiduciary duty as a
director. See "Purposes and Effects of Certain Provisions of the Certificate of
Incorporation and Bylaws of Sypris--Limitation of Directors' Liability." For a
discussion of limitation of liability under the GTC Articles of Incorporation
and the FBCA, see "Effect of the Reorganization on Rights of Shareholders--
Liability of Directors."
Amendment of the Certificate of Incorporation
Under Delaware law, unless the certificate of incorporation otherwise
provides, amendments of the certificate of incorporation generally require the
approval of the holders of a majority of the outstanding stock entitled to vote
thereon, and if the amendment would increase or decrease the number of
authorized shares of any class or series or the par value of such shares or
would adversely affect the rights, powers or preferences of such class or
series, a majority of the outstanding stock of such class or series also would
have to approve the amendment. For a discussion of Florida law, see "Effect of
the Reorganization on Rights of Shareholders--Amendment of Articles of
Incorporation."
Vote Required for Mergers
Delaware law permits a merger without approval of the shareholders of the
surviving corporation if,
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among other things, no charter amendment is involved, each outstanding share of
common stock is to be an identical share of the surviving corporation after the
merger, and the merger results in no more than a 20% increase in outstanding
shares of common stock of such corporation.
Dividends and Other Distributions
Under Delaware law, a corporation may generally pay dividends out of
surplus. In addition, Delaware law permits a corporation, under certain
circumstances, to pay dividends if there is no surplus out of its net profits
for the fiscal year in which the dividend is declared and/or the preceding
fiscal year. Under Delaware law a corporation may purchase or redeem shares of
any class except when its capital is impaired or such purchase would cause
impairment of capital, except that a corporation may purchase or redeem out of
capital any of its preferred shares if such shares will be retired upon the
acquisition and the capital of the corporation will be thereby reduced. For a
discussion of Florida law, see "Effect of the Reorganization on Rights of
Shareholders--Dividends and Other Distributions."
Dissenters' Rights
Delaware law provides appraisal rights in the case of a shareholder
objecting to certain mergers or consolidations. Such appraisal rights do not
apply (i) to shareholders of the surviving corporation in a merger if
shareholder approval of the merger is not required or (ii) to any class of stock
which is either listed on a national securities exchange or held of record by
more than 2,000 holders unless shareholders are required to accept for their
shares in the merger or consolidation anything other than stock of the surviving
or resulting corporation or stock of another corporation that is so listed or
held (and cash in lieu of fractional shares). For a description of Florida Law,
see "Effect of the Reorganization on Rights of Shareholders--Dissenters'
Rights."
Purposes and Effects of Certain Provisions of the Certificate of
Incorporation and Bylaws of Sypris
The Delaware Certificate contains several provisions that may have an anti-
takeover impact and may make tender offers, proxy contests and certain mergers
more difficult. These include provisions (i) providing that only a majority of
the Sypris Board or the holders of not less than 50% of all shares entitled to
cast votes at the meeting may call a special meeting of shareholders and (ii)
restricting the procedures by which shareholders may nominate persons for
election to the Board of Directors and the procedures by which shareholders may
properly bring business before annual meetings of shareholders. In addition, the
ability of Sypris to issue preferred stock and Nonvoting Common Stock, with such
rights, preferences, privileges and limitations as the Sypris Board may
determine, could have the effect of impeding the acquisition of control of
Sypris.
Limitation of Directors' Liability
The Delaware Certificate contains a provision that eliminates a director's
liability for monetary damage for breaches of fiduciary duty of care, subject to
certain exceptions described below (the "Liability Provision").
The Delaware legislature enacted an amendment to the DGCL in 1985 allowing
provisions such as the Liability Provision as a response to changes in the
market for directors' liability insurance. The proliferation of shareholder
derivative and class action suits for breaches of directors' fiduciary duties
has in large part made it difficult to obtain liability insurance. Thus, the
Delaware legislature amended the DGCL in order to maintain qualified and able
directors to govern corporations.
The Liability Provision does not relieve a director of monetary liability
for breaches of the duty of loyalty, acts or omissions not in good faith or
involving intentional misconduct or knowing violations of law, the
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unlawful repurchase or redemption of stock or payment of unlawful dividends or
any transaction from which a director derives an improper personal benefit.
Thus, liability for monetary damages will still exist under the Liability
Provision if liability is based upon one of these grounds. The Liability
Provision will have no effect on the availability of equitable remedies, such as
an injunction or rescission for the breach of a director's fiduciary duty, and
will in no way limit or otherwise affect liability for violation of the federal
securities laws.
The Liability Provision's coverage extends only so far as is legally
permitted. If the courts or the Delaware legislature narrow or expand the
coverage of the amendment to the DGCL, the Liability Provision will likewise be
narrowed or expanded without further shareholder action. Under present law,
however, any subsequent change to the actual wording of the Liability Provision
will require a shareholder vote, notwithstanding new legislation or
interpretations.
In the event that a shareholder desires to commence a derivative or class
action suit against a director for violation of his or her fiduciary duty of
care, the Liability Provision of the Delaware Certificate provides that monetary
damages will not be payable by the director, subject to the exceptions set forth
above, even if such violation is proved. This means that directors will not be
liable for monetary damages for grossly negligent business decisions, including
decisions taken in connection with merger proposals, negotiations and other
substantive matters affecting Sypris and its shareholders, unless one of the
exceptions set forth in the statute applies.
Certain Federal Income Tax Consequences
The parties to the Reincorporation have not and do not intend to seek a
ruling from the IRS as to the federal income tax consequences of the
Reincorporation. Instead, such parties have obtained the opinion of Wyatt,
Tarrant & Combs (the "Opinion") as to certain of the expected federal income tax
consequences of the Reincorporation, a copy of which is attached as an exhibit
to the Registration Statement. For a summary of the Opinion see "The
Reorganization--Certain Federal Income Tax Consequences."
Right to Dissent and Appraisal
Under the FBCA, shareholders of GTC will not be entitled to dissenter's
rights if the Reincorporation Agreement is approved and the Reincorporation is
consummated.
Amendment
The Reincorporation Agreement may be amended, modified or supplemented
prior to the effective time of the Reincorporation upon the approval of the GTC
Board and the Sypris Board. However, no amendment, modification or supplement
may be made after the adoption of the Reincorporation Agreement by the
shareholders of GTC which changes the Reincorporation Agreement in a way which,
in the judgment of the GTC Board would have a material adverse effect on the
shareholders of GTC, unless such amendment, modification or supplement is
approved by such shareholders.
Termination
The Reincorporation Agreement provides that the GTC Board may terminate the
Reincorporation Agreement and abandon the merger contemplated thereby at any
time prior to its effective time, whether before or after approval by the
shareholders of GTC, if (i) the Reincorporation shall not have received the
requisite approval of the shareholders of GTC or (ii) the GTC Board determines
for any reason in its sole judgment that the consummation of the transaction
would be inadvisable or not in the best interests of GTC and its shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL
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Record Date; Voting Rights; Proxies
The GTC Board has fixed the close of business on October 15, 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,
and 250,000 shares of GTC Preferred Stock issued and outstanding, each of which
entitles the holder thereof to 8.1 votes. 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 AND IN
FAVOR OF THE REINCORPORATION. 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. With respect to matters incidental to the conduct of
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 communications with, shareholders or
their representatives.
Dissenters' Rights
Under the FBCA, shareholders of GTC will not be entitled to dissenter's
rights if the Reorganization Agreement is approved and the Reorganization is
consummated. See "Effect of the Reorganization on Rights of Shareholders--
Dissenters' Rights." In addition, such shareholders will not be entitled to
dissenter's rights under Florida law or any other statute if the Reverse Stock
Split and the Reincorporation are effected. See "The GTC Special Meeting--
Proposal to Amend the GTC Articles to Effect the Reverse Stock Split" and
"Proposal to Approve the Reincorporation."
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.
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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 and GTC Preferred 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 the GTC Articles 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 by the holders of GTC
Common Stock and GTC Preferred Stock, each voting as a group.
The approval of the proposed Reincorporation requires the affirmative vote
of the holders of a majority of the outstanding shares of GTC Common Stock and
GTC Preferred Stock entitled to vote thereon at the GTC Special Meeting.
Only holders of GTC Common Stock and GTC Preferred 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 13,186,601 shares of GTC Common Stock and 250,000 shares of
GTC Preferred Stock entitled to vote at the GTC Special Meeting, representing
approximately 81.3% of the total number of shares of GTC Common Stock and 100%
of the total number of shares of GTC Preferred Stock entitled to vote at the GTC
Special Meeting. The affirmative votes by the holders of such shares will
determine the outcome of the vote and such holders are expected to vote in favor
of the proposals.
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 APPENDICES 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 REINCORPORATION AND RECOMMENDS THAT GTC'S SHAREHOLDERS VOTE FOR
APPROVAL OF THE REINCORPORATION. SEE "THE REORGANIZATION--BACKGROUND OF THE
REORGANIZATION," "THE REORGANIZATION--REASONS FOR THE REORGANIZATION;
RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE GTC BOARD," AND "THE GTC SPECIAL
MEETING--PROPOSAL TO AMEND THE GTC ARTICLES TO INCREASE THE AUTHORIZED COMMON
STOCK FROM 40,000,000 SHARES TO 60,000,000 SHARES; PROPOSAL TO AMEND THE GTC
ARTICLES TO EFFECT THE REVERSE STOCK SPLIT; PROPOSAL TO APPROVE THE
REINCORPORATION." CERTAIN MEMBERS OF THE BOARD OF DIRECTORS OF GTC HAVE
CONFLICTS OF INTEREST IN THESE TRANSACTIONS. SEE "THE REORGANIZATION--CONFLICTS
OF INTEREST."
THE REORGANIZATION
This section of the Joint Proxy Statement/Prospectus describes certain
aspects of the Reorganization and the Reorganization Agreement. While this
description describes all material 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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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. Immediately after the Reorganization, GTC
proposes to engage in two additional transactions: (i) the Reverse Stock Split
and (ii) the Reincorporation.
The Spin Off. At the Spin Off 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 Merger 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 adjustment
for any stock dividend, stock split or similar matters between the date of the
Reorganization Agreement and the effective time of such merger 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
322,553. The "Aggregate GFP Consideration" is equal to $93,095,918, assuming a
GTC Average Closing Price of $2.74 per share. For purposes of computing the
Aggregate GFP Consideration, the shares of Tube Turns Common Stock held by GFP
were valued at $11.45 per share, while the shares held by employees of Tube
Turns were valued at $20.00 per share. GFP proposed the differential because the
total consideration of $16,530,630 for the Tube Turns Common Stock approximated
$12.00 per share, which was below the $14.03 price per share that is currently
in effect at Tube Turns under its employee stock plans.
Each share of GTC Common Stock issued and outstanding immediately prior to
the Merger 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 Merger
Effective Time would otherwise be entitled at the Merger Effective Time will be
aggregated. If a fractional share results from such aggregation, such
shareholder will be entitled, after the later of (i) the Merger 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
Merger 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 Merger 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, at the Tube Turns Merger 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
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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
adjustment for any stock dividend, stock split or similar matters between the
date of the Reorganization Agreement and the effective time of such merger 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 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 88,808. The
"Aggregate Tube Turns Consideration" is equal to $1,776,160. For purposes of
computing the Aggregate Tube Turns Consideration, the shares of Tube Turns
Common Stock held by shareholders of Tube Turns other than GFP were valued at
$20.00 per share.
Each share of Tube Turns Common Stock issued and outstanding immediately
prior to the Tube Turns Merger 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 Tube Turns Merger Effective
Time would otherwise be entitled at the Tube Turns Merger Effective Time shall
be aggregated. If a fractional share results from such aggregation, such
shareholder shall be entitled, after the later of (i) the Tube Turns Merger
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 Tube Turns Merger 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 Tube Turns Merger 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, at the Bell Merger 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 adjustment for any stock dividend, stock split or
similar matters between the date of the Reorganization Agreement and the
effective time of such merger 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 100,444. The
"Aggregate Bell Consideration" is equal to $4,419,536.
Each share of Bell Common Stock issued and outstanding immediately prior to
the Bell Merger 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 Bell Merger Effective Time would otherwise
be entitled at the Bell Merger Effective Time shall be aggregated. If a
fractional share results from such aggregation, such shareholder shall be
entitled, after the later of (i) the Bell Merger 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.
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The New Bell Articles and the New Bell Bylaws as in effect immediately
prior to the Bell Merger 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 Bell Merger
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 and the shares of BT
Holdings, Inc., a former wholly-owned subsidiary of GFP) into a newly formed,
wholly-owned subsidiary of GTC, and this subsidiary will assume all of the
liabilities of GTC.
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 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 discussed further with the GFP Board. Soon
thereafter, the independent directors of Bell were informed of the planning
process that was underway. From early October through the first part of
December, 1996, 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, determination of the transaction values for each of GFP, Bell and
Tube Turns, determination of 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 of GTC 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 of GTC 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, recommended that such
proposals be submitted to the shareholders of GTC for their approval, and
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authorized the issuance of shares of GTC Common Stock in connection with the
Reorganization.
Thereafter, the GTC Board concluded that it would be necessary to further
restructure GTC in order to insure its longer term viability and delayed the
consummation of the Reorganization. On June 30, 1997, GTC completed the
restructuring program with the sale of its Latin American operations to SCI
Systems, Inc.
Beginning in February, 1997 and continuing each month thereafter, the
members of the Special Committee received monthly operating and financial
reports from the management of each of Tube Turns and Bell. In addition, the
management of each of Tube Turns and Bell conducted detailed financial and
business reviews of their operations at the GTC Board meetings in February,
April, June and August of 1997. On September 3, 1997, Bradford conducted a
series of comprehensive business discussions with the management of each of GTC,
Tube Turns and Bell to review current and prospective financial performance. The
Special Committee then met on September 12, 1997, for purposes of considering
and voting on the approval of the Reorganization. Extensive discussions took
place and included outside counsel and Bradford. On September 12, 1997, Bradford
delivered its opinion to the Special Committee that the terms of the Merger
Transactions were fair to the Unaffiliated Shareholders of GTC 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 held a meeting
on September 12, 1997, and approved the Reorganization. The Board of Directors
of each of Tube Turns, Bell and GFP held meetings on September 12, 1997, and
approved the Reorganization. See "The Reorganization--Opinion of Financial
Advisor." During the September 12, 1997 meeting of the GTC Board, Robert E. Gill
and Jeffrey T. Gill again 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.
The Board of Directors of each of GFP, Tube Turns and Bell concluded that
it was not necessary to retain a financial advisor for purposes of advising them
on, among other things, the fairness of the Merger Transactions to the
shareholders of each of GFP, Tube Turns and Bell, from a financial point of
view, for a number of reasons, including: (i) the Gill Family owns approximately
99.4% of the GFP Common Stock and management of GFP owns substantially all of
the remaining shares; (ii) GFP owns approximately 98.6% of the Tube Turns Common
Stock and 96.9% of the Bell Common Stock, the balance of which is substantially
owned or controlled by management of each of Tube Turns and Bell; (iii) the Gill
Family and the management of GFP, Tube Turns and Bell believe they have the
requisite knowledge and experience in business and financial matters to
adequately assess the value of GTC, GFP, Tube Turns and Bell; and (iv) the
shareholders of each of GFP, Tube Turns and Bell will have the right under
applicable state law to dissent from the Reorganization if the Reorganization
Agreement is approved and the Reorganization is consummated.
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. Certain members of the GTC Board have conflicts of interest in this
transaction. See "The Reorganization--Conflicts of Interest."
In reaching their conclusions, the Special Committee and the GTC Board
considered a number of factors, including: (i) the recent poor financial
performance of GTC; (ii) the expected benefits to be derived
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by GTC from the increase in the number of customers and markets served as a
result of the Reorganization; (iii) the need to obtain long-term capital for
operating activities within GTC; (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 potential for operating efficiencies in certain administrative areas
include: (i) the potential to consolidate pension plan assets and management;
(ii) the potential to consolidate the management of healthcare and other
employee benefit plans; (iii) the potential to consolidate treasury and other
cash management activities; (iv) the potential to standardize on a single
information systems platform and database; and (v) the potential to consolidate
legal and contracts functions. GTC does not anticipate that there will be any
material reductions in work force as a result of the Reorganization.
The recommendation of the Special Committee was determined without the
participation of either Robert E. Gill or Jeffrey T. Gill, who through the
controlling interest of the Gill Family in 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 of
GTC.
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, all of which factors are
disclosed under the section "Risk Factors" 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. The members of the GFP Board have conflicts of
interest in this transaction. See "The Reorganization--Conflicts of Interest."
In making its determination with respect to the Reorganization, the GFP
Board considered the following factors: (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: (i) the poor operating
performance of GTC in 1995, 1996 and 1997 year-to-date; (ii) the lack of
historic market liquidity for the shareholders of GTC; (iii) the potential
competitive disadvantage of public disclosure of business information; and (iv)
the Risk Factors disclosed in this Joint Proxy Statement/Prospectus, all of
which factors constitute the material negative factors considered by the GFP
Board.
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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 operating efficiencies in certain
administrative areas. Tube Turns does not anticipate that there will be any
material reductions in work force as a result of the Reorganization. Certain
members of the Tube Turns Board have conflicts of interest in this transaction.
See "The Reorganization--Conflicts of Interest."
In making its determination with respect to the Reorganization, the
Tube Turns Board considered the following factors: (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: (i) the
poor operating performance of GTC in 1995, 1996 and 1997 year-to-date; (ii) the
lack of historic market liquidity for the shareholders of GTC; (iii) the
potential competitive disadvantage of public disclosure of business information;
and (iv) the Risk Factors disclosed in this Joint Proxy Statement/Prospectus,
all of which factors constitute the material negative factors considered by the
Tube Turns Board.
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
operating efficiencies in certain administrative areas. Bell does not anticipate
that there will be any material reductions in work force as a result of the
Reorganization. Certain members of the Board of Directors of Bell have conflicts
of interest in this transaction. See "The Reorganization--Conflicts of
Interest."
In making its determination with respect to the Reorganization, the
Bell Board considered the following factors: (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: (i) the poor
operating performance of GTC in 1995, 1996 and 1997 year-to-date; (ii) the lack
of historic market liquidity for the shareholders of GTC; (iii) the potential
competitive disadvantage of public disclosure of business information; and (iv)
the Risk Factors disclosed in this Joint Proxy
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Statement/Prospectus, all of which factors constitute the material negative
factors considered by the Bell Board.
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 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 of GTC. 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. Following the delay surrounding the further
restructuring of GTC, Bradford resumed its role as financial advisor to the
Special Committee. On September 12, 1997, Bradford attended the meeting of the
Special Committee and delivered to the Special Committee an updated opinion that
the Merger Transactions were fair to the Unaffiliated Shareholders of GTC from a
financial point of view. 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 E 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 the following items that Bradford
considers to be material to its opinion: (i) draft 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, 2001, 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. 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.
Material differences between Bradford's analysis in December 1996 and
Bradford's analysis in September 1997 include differences resulting from (i)
revisions to Tube Turns' forecasted financial results, (ii) revisions to GTC's
forecasted financial results, (iii) the 1997 restructuring of GTC including the
sale of its Latin American operations, (iv) changes in valuation multiples of
publicly-traded comparable companies due to changing market conditions, and (v)
changing economic, market and other conditions, 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
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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. 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.
Also, Bradford was not asked to consider, and its opinion does not address or
incorporate, GFP's proposed acquisition of certain assets of Datatape (see
"Recent Developments"). 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 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 financial and comparative analyses which were
performed by Bradford, and which Bradford considers to be material, 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 years ending December 31, 1998 and 1999. 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, 1997,
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
0.4% and 1.3%, respectively, of GTC after the
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Reorganization, assuming an average stock price at the time the
Bradford opinion was rendered of $2.21. Such analysis indicated that
for the year ended December 31, 1997, Bell would contribute 32.1% of
revenue, 82.5% of EBITDA (before corporate overhead), and 90.2% of
pretax income (before corporate overhead) of GTC after the
Reorganization. Such analysis also indicated that for the year ended
December 31, 1997, Tube Turns would contribute 13.7% of revenue, 28.9%
of EBITDA (before corporate overhead), and 39.8% of pretax income
(before corporate overhead) of GTC after the Reorganization. The sum
of the contributions of Tube Turns and Bell for EBITDA and pretax
income exceed 100% due to the losses incurred at GTC.
(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. Based on the above described analysis,
the implied value per share of Bell ranged from $43.06 to $65.02 as
compared to the value per share for Bell of $44.00 in the Merger
Transactions. Based on the above-described analysis, the implied value
per share for Tube Turns ranged from $16.43 to $23.90 as compared to
the weighted average value per share for Tube Turns of $12.00.
(d) Leveraged Buyout Valuation Analysis. Bradford utilized management's
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%. The derived
values for Bell and Tube Turns resulting from this analysis and based
on the foregoing assumptions were $51.95 per share and $23.23 per
share, respectively, as compared to the values for Bell and Tube Turns
in the Merger Transactions of $40.00 per share and $12.00 per share,
respectively.
(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 businesses similar to Bell's including the
digital and analog recording equipment manufacturing, electronic
measurement device manufacturing and technical contracting services
industries. These companies include Aeroflex, Inc., Ampex Corporation,
CDI Corp., DSP Technology, Inc., Failure Group, Inc., Fluke Corp.,
Lecroy Corp., Thermospectra Corp., Transmation Inc., and X-Rite, Inc.
(the "Bell Comparable Group"). Bradford calculated current market
price as a multiple of estimated 1997 earnings (which ranged from
10.4x to 27.5x with a median multiple of 15.7x); current market price
as multiple of estimated 1998 earnings (which
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ranged from 7.7x to 22.4x with a median multiple of 13.1x); total firm
value (defined as equity market value plus net debt) as a multiple of
last twelve months ("LTM") revenues (which ranged from 0.5x to 4.6x
with a median multiple of 0.5x); and total firm value as a multiple of
LTM EBITDA (which ranged from 5.5x to 19.3x with a median multiple of
9.8x). Bradford then compared the Bell Comparable Group multiples to
the corresponding multiples in the Bell Merger including 9.5x
estimated 1997 Bell Earnings, 8.1x estimated 1998 Bell earnings, 0.9x
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 businesses similar to Tube Turns including
the steel processing, automotive component manufacturing and
piping/valve manufacturing industries. These companies include Amcast
Industrial Corp., Atchison Casting Corp., Citation Corp., Cummins
Engine, Dana Corp., Daniel Industries, Eaton Corp., Gibraltar Steel
Corp., Kentucky Electric Steel, Inc., Maverick Tube Corp., Northwest
Pipe Co., Park-Ohio Industries, Precision Castparts Corp., Steel
Technologies, Synalloy Corp., and Worthington Industries (the "Tube
Turns Comparable Group"). Bradford calculated current market price as
a multiple of estimated 1997 earnings (which ranged from 11.3x to
39.2x with a median multiple of 15.6x); current market price as
multiple of estimated 1998 earnings (which ranged from 9.5x to 27.2x
with a median multiple of 12.5x); total firm value (defined as equity
market value plus net debt) as a multiple of LTM revenues (which
ranged from 0.6x to 2.34x with a median multiple of 1.0x); and total
firm value as a multiple of LTM EBITDA (which ranged from 5.7x to
29.0x with a median multiple of 9.8x). Bradford then compared the Tube
Turns Comparable Group multiples to the corresponding multiples in the
Tube Turns Merger including 8.0x estimated 1997 Tube Turns earnings,
5.7x estimated 1998 Tube Turns earnings, 0.8x LTM Tube Turns revenues
and 6.8x 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 businesses similar to GTC including the
electronics contract manufacturing industry. These companies include
ACT Manufacturing, Inc., Altron Inc., Benchmark Electronics, Inc. CMC
Industries Inc., DII Group, Inc., EFTC Corp., Flextronics
International, IEC Electronics Corp., Jabil Circuit, Inc., Nam Tai
Electronics, Plexus Corp., Sanmina Corp., SCI Systems, Inc., Solectron
Corp., and Xetel Corp. (the "GTC Comparable Group"). Bradford
calculated current market price as a multiple of estimated 1997
earnings (which ranged from 10.0x to 40.7x with a median multiple of
25.0x); current market price as a multiple of estimated 1998 earnings
(which ranged from 13.1x to 28.6x with a median multiple of 18.4x);
total firm value (defined as equity market value plus net debt) as a
multiple of LTM revenues (which ranged from 0.2x to 4.0x with a median
multiple of 1.0x); and total firm value as a multiple of LTM EBITDA
(which ranged from 6.3x to 26.8x with a median multiple of 9.8x).
Bradford then compared the GTC Comparable Group multiples to the
corresponding multiples for GTC. Bradford also noted that the market
price to estimated 1997 earnings multiple for GTC could not be
calculated as GTC is projected to incur a net operating loss for the
year ended December 31, 1997.
Bradford has advised the Special Committee and GTC that Bradford, on
the basis of general contract and other legal principals, does not believe that
any person (including a shareholder of GTC) other than the Special Committee has
the legal right to rely on its fairness opinion for any claim arising under
state law. Furthermore, if any such state law claim is brought against Bradford,
in light of the absence of binding precedent, Bradford will raise this assertion
as a defense. Resolution of this matter under state law, however, should have no
effect on the rights and responsibilities of any person under the federal
securities laws or on the rights and responsibilities of the Special Committee
or the Board under
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applicable state law." Nothing in the fairness opinions should be deemed to
constitute a recommendation by Bradford to any GTC shareholder to vote in favor
of the Reorganization. Bradford has consented to the attachment of the Opinion
to this Proxy Statement/Prospectus and to the descriptions thereof in this Proxy
Statement/Prospectus.
Pursuant to an engagement letter dated November 13, 1996, Bradford has
earned fees totaling $110,000 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.
Bradford has issued GTC with a consent to use their opinion in this
Joint Proxy Statement/Prospectus, a copy of which is included herewith as
Appendix E.
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 Bell, and
director of GTC and Tube Turns. Jeffrey T. Gill serves as President, Chief
Executive Officer and director of GFP and Chairman of GTC, Bell and Tube Turns.
In addition, as of September 15, 1997, the Gill Family controlled approximately
99.4% of the GFP Common Stock, and GFP in turn controlled approximately 80.4% of
the GTC Common Stock, 100% of the GTC Preferred Stock, approximately 98.6% of
the Tube Turns Common Stock, and approximately 96.9% of the Bell Common Stock.
Should the Reorganization be completed, the Gill Family ownership of GTC
(including the conversion of GTC Preferred Stock) will increase from
approximately 82.6% to approximately 89.4% and ownership of GTC by the
Unaffiliated Shareholders will decrease from approximately 17.4% to
approximately 8.6%, assuming a GTC Average Closing Price of $2.74. 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. The President of Tube Turns, who currently
serves as a director of Tube Turns, will have rights to a substantial number of
shares of stock under option in GTC should the merger be completed as planned.
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.
Stock Options
At the applicable Effective Times, 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, nonqualified options to be granted, as applicable, under the GTC 1994
Stock Option Plan for Key Employees and the GTC Independent Directors' Stock
Option 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
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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 applicable Effective Time, by
(ii) the GFP Conversion Ratio, the Tube Turns Conversion Ratio, or the Bell
Conversion Ratio, as appropriate. Under the Reincorporation, the option plans of
GTC will be assumed by Sypris.
As a result of the Reorganization, GTC will assume options to acquire
up to 2,384,068 shares of GTC Common Stock at an average exercise price of $0.81
with vesting dates ranging until 2006. Included in this amount are 1,824,386
shares which are currently excercisable at an average exercise price of $0.72.
The effect of the exercise of such options is reflected in the calculation of
dilution experienced by the current shareholders of GTC. See "The
Reorganization--Dilution."
At least ten (10) days prior to the applicable Effective Times, 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 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.
Under the Reincorporation, these obligations of GTC will be assumed by Sypris.
Approval of the Reorganization Agreement by the shareholders of each
of GFP, Tube Turns and Bell 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 June 30, 1997 was $17,365,000 or
$0.95 per share, assuming conversion of the GTC Preferred Stock into shares of
GTC Common Stock. Net tangible book value per share is equal to GTC's total
assets (excluding intangible assets) less its total liabilities divided by the
sum of the total number of outstanding shares of GTC Common Stock plus the
number of shares of GTC Common Stock issuable upon conversion of the GTC
Preferred Stock. After giving effect to (i) the pro forma adjustments to net
tangible book value for the Reorganization and the sale of GTC's Latin American
operations; (ii) the issuance of 33,866,183 shares of GTC Common Stock to the
shareholders of GFP, Tube Turns and Bell (assuming a GTC Average Closing Price
of $2.74); 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 $28,148,000 or $0.76 per share. This represents an immediate
decrease in such net tangible book value of $0.19 per share to the existing
shareholders and an immediate dilution of $1.98 per share to new shareholders
receiving shares in the Reorganization. The following table illustrates this per
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share dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed conversion price per share............................................. $ 2.74
Net tangible book value per share as of June 30, 1997.......................... $ 0.95
Decrease per share attributable to new shareholders............................ (0.19)
------
Pro forma combined net tangible book value per share after the Reorganization.. 0.76
------
Dilution per share to new shareholders......................................... $ 1.98
======
</TABLE>
In addition, as of September 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 applicable Effective Times, 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 $2.74 per share, the
number of shares of GTC Common Stock issuable under such options would be
2,384,038 and the average exercise price per share would be $0.81. If these
options were assumed to be exercised in full as of June 30, 1997, pro forma
combined net tangible book value per share would be $0.76 per share,
representing dilution to new shareholders of $1.98 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 applicable Effective Times, 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 will terminate at the applicable Effective Times, the
shares of GTC Common Stock issued for such shares in the Reorganization will
continue to be subject to such vesting requirements as will the shares of Sypris
Common Stock exchanged for such shares, pursuant to the Reincorporation.
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
allocated to the assets and liabilities of Tube Turns and Bell based upon the
fair values thereof and any excess to goodwill. A final determination of the
fair values of the assets and liabilities of Tube Turns and Bell has not yet
been made. Accordingly, the purchase accounting adjustments made in connection
with the development of the unaudited pro forma financial information appearing
elsewhere in this Joint Proxy Statement/Prospectus are preliminary and have been
made solely for the purposes of developing such pro forma financial information
to comply with disclosure requirements of the Commission. Although the final
purchase allocation is likely to differ, the pro forma financial information
reflects management's best estimate based upon currently available information.
After the Reorganization, the historical financial statements of GTC will be
those of GFP since GFP is the acquirer for accounting purposes. After the
Reincorporation, the historical financial statements of
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Sypris will in turn be those of GTC. No material accounting adjustments are
expected in accounting for the Reincorporation. The Reverse Stock Split will be
accounted for retrospectively with effect from the date of the Reverse Stock
Split and will be presented in all statements of operations and in all other
financial statements and notes to financial statements in which earnings per
share are reported.
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 or the Reincorporation. Instead, GTC, GFP, Tube Turns and Bell
have obtained the Opinion as to certain of the expected federal income tax
consequences of the Reorganization and the Reincorporation, 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 or the
Reincorporation 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 conversion of the shares of GTC Preferred Stock (the "Conversion"), the Spin
Off and the Reverse Stock Split 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:
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.
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(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.
(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
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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 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
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<PAGE>
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
the liabilities of GTC assumed by New GTC plus 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 of GTC on the date of transfer.
(vii) New GTC will not succeed to any tax attributes, including the
earnings and profits, of GTC.
The Reincorporation
(i) The merger of GTC with and into Sypris will constitute a
reorganization within the meaning of Section 368(a) of the Code.
(ii) GTC and Sypris 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 GTC or Sypris as a result of
the Reincorporation.
(iv) No gain or loss will be recognized by shareholders who exchange
their GTC shares solely for Sypris shares.
(v) Shareholders of GTC will have the same tax basis in the shares of
Sypris received in the Reincorporation as the basis in the shares of GTC
exchanged therefor.
(vi) The holding period of the shares of Sypris will include the period
during which the shares of GTC were held, provided such shares of GTC were held
as capital assets on the effective date of the Reincorporation.
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 the Opinion 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 the Reincorporation and is not
binding on the IRS or the courts. The IRS may challenge the conclusions
stated
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<PAGE>
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
and the Reincorporation. A successful challenge by the IRS could have material
adverse consequences to the parties to the Reorganization and Reincorporation,
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 and the Reincorporation contained in the Reorganization
Agreement, the Reincorporation Agreement and Registration Statement, (ii) the
factual representations and warranties contained in the Reorganization
Agreement, the Reincorporation Agreement and Registration Statement and related
documents and agreements, and (iii) certain factual matters addressed by
representations made by certain executive officers of GTC, New GTC, Sypris, GFP,
Tube Turns, New Tube Turns, Bell and New Bell, as further described in the
Opinion. 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 expiration of
the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act"). GTC, GFP, Tube Turns and Bell believe that no other
such regulatory or other approvals are required.
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 applicable 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. Under the
Reincorporation, shares of Sypris Common Stock received by such persons in
exchange for such shares of GTC Common Stock will be subject to the same
restrictions.
Nasdaq Stock Market Listing
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
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<PAGE>
float and net tangible asset requirement. See "Risk Factors--Minimum Criteria
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
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 $1.0 million in the case of Tube Turns, $0.5 million in
the case of Bell, and $2.0 million in the case of GTC, and to limit the sum of
all capital expenditures to $2.0 million in the case of Tube Turns, $2.5 million
in the case of Bell and $5.0 million in the case of GTC; (xii) not to enter
into, modify or extend in any manner
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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 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
applicable 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) (which condition has been
satisfied); 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.
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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 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
December 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. GTC, Tube Turns and Bell are subsidiaries of GFP
and are included in the consolidated financial statements of GFP. After the
Reorganization, GFP will be the reporting entity from an accounting point of
view and therefore, the following unaudited pro forma condensed combined
financial statements are prepared to show the potential impact of the sale of
GTC's Latin American operations and the Reorganization on the historical
consolidated financial statements of GFP as if the transactions had been
consummated as of the beginning of the indicated period for the results of
operations or as of June 30, 1997 for the balance sheet.
The pro forma consolidated financial data are based upon certain
assumptions and estimates and are not necessarily indicative of the results
which would actually have been attained if the transactions had been consummated
at the beginning of the indicated periods or as of the date specific, or which
may be attained in the future.
The sale of GTC's Latin American operations to SCI Systems, Inc. occurred
on the day after the close of GTC's second quarter and is therefore not
reflected in GFP's consolidated results of operations for the six months ended
June 30, 1997. GTC utilized a portion of the sale proceeds to fully extinguish
its debt payable to its primary lender and has terminated its credit agreement
with that lender effective June 30, 1997.
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, 1996 and January 1
1997, 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 "Selected Unaudited Pro Forma Combined Financial Data."
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1996
-------------------------------------------------------
Pro Forma Adjustments
--------------------------------
For the
sale of GTC's
GFP Latin American For the
Actual operations (1) Reorganization Pro Forma
--------- --------------- --------------- ----------
<S> <C> <C> <C> <C>
Revenue................................................................... $308,598 $ (58,457) $ -- $250,141
Cost of operations........................................................ 278,678 (57,079) -- 221,599
-------- ----------- ----------- --------
Gross profit.............................................................. 29,920 (1,378) -- 28,542
Selling, general and administrative expense............................... 29,407 (2,204) 314 (2) 27,517
-------- ----------- ----------- --------
Operating income.......................................................... 513 826 (314) 1,025
Interest expense, net..................................................... 3,979 (1,920) (3) -- 2,059
Other income, net......................................................... (828) (140) -- (968)
-------- ----------- ----------- --------
Loss before income taxes, minority interests and discontinued operations.. (2,638) 2,886 (314) (66)
Income taxes.............................................................. 1,614 (481) (4) (116) (5) 1,017
-------- ----------- ----------- --------
Loss before minority interests and discontinued operations................ (4,252) 3,367 (198) (1,083)
Minority interests........................................................ 1,716 (673) (6) (1,043) (6) --
-------- ----------- ----------- --------
Loss from continuing operations........................................... $ (2,536) $ 2,694 $ (1,241) $ (1,083)
======== =========== =========== ========
Loss per share from continuing operations................................. $(7.92) $(0.12)
Weighted average shares outstanding....................................... 320 9,262
</TABLE>
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1997
------------------------------------------------------
Pro Forma Adjustments
---------------------
For the
sale of GTC's
GFP Latin American For the
Actual operations (7) Reorganization Pro Forma
-------- -------------- -------------- ---------
<S> <C> <C> <C> <C>
Revenue..................................................................... $111,484 $ (16,931) $ -- $94,553
Cost of operations.......................................................... 96,777 (17,776) -- 79,001
-------- ------- -------- -------
Gross profit................................................................ 14,707 845 -- 15,552
Selling, general and administrative expense................................. 13,381 (880) (523) (2) 11,978
-------- ------- ------- -------
Operating income............................................................ 1,326 1,725 523 3,574
Interest expense, net....................................................... 1,652 (915) (3) -- 737
Other expense, net.......................................................... 251 5 -- 256
-------- ------- ------- -------
(Loss) income before income taxes, minority interest and discontinued
operations................................................................. (577) 2,635 523 2,581
Income taxes................................................................ 168 (152) (4) 194 (5) 210
-------- ------- ------- -------
(Loss) income before minority interests and discontinued operations......... (745) 2,787 330 2,372
Minority interests.......................................................... 923 (557) (6) (366) (6) --
-------- ------- ------- -------
Income from continuing operations........................................... $ 178 $ 2,230 $ (36) $ 2,372
======== ======= ========= =======
Income per share from continuing operations................................. $ 0.55 $ 0.26
Weighted average shares outstanding......................................... 321 9,262
</TABLE>
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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
As of June 30, 1997
-----------------------------------------------------
Pro Forma Adjustments
-------------------------------
For the
sale of GTC's
GFP Latin American For the
Actual operations (8) Reorganization Pro Forma
-------- -------------- -------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents............. $ 5,173 $ 4,065 $(4,650) (9) $ 4,588
Accounts receivable................... 34,053 (4,369) -- 29,684
Inventories........................... 37,455 (4,084) -- 33,371
Other current assets.................. 2,307 (718) -- 1,589
-------- -------- ------- --------
Total current assets.................. 78,988 (5,106) (4,650) 69,232
Property, plant and equipment, net.... 31,959 (10,155) -- 21,804
Other assets.......................... 4,049 (280) 5,219 (10) 8,988
-------- -------- ------- --------
$114,996 $(15,541) $ 569 $100,024
======== ======== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable...................... $ 21,726 $ (6,142) $ -- $ 15,584
Accrued liabilities................... 20,761 (1,292) 265 (11) 19,734
Current portion of long-term debt..... 12,424 (11,721) -- 703
-------- -------- ------- --------
Total current liabilities............. 54,911 (19,155) 265 36,021
Long-term debt........................ 18,879 (226) -- 18,653
Other noncurrent liabilities.......... 10,639 (3) (1,559) (12) 9,077
-------- -------- ------- --------
Total noncurrent liabilities.......... 29,518 (229) (1,559) 27,730
Minority interests in subsidiaries.... 2,809 -- (2,809) (13) --
Redeemable common stock............... 1,280 -- (1,280) (11) --
Common stock.......................... 7,892 -- (7,799) (14) 93
Additional paid-in capital............ -- -- 23,409 23,409
Retained earnings..................... 18,586 3,843 (9,658) 12,771
-------- -------- ------- --------
Total shareholders' equity............ 26,478 3,843 5,952 36,273
-------- -------- ------- --------
$114,996 $(15,541) $ 569 $100,024
======== ======== ======= ========
</TABLE>
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) Reflects the results of operations for GTC's Latin American operations for
the year ended December 31, 1996 assuming the disposition of the operations
occurred on January 1, 1996.
(2) Reflects an increase in selling, general and administrative expense for
amortization expense ($348,000 and $174,000 in 1996 and 1997, respectively)
of intangible assets recorded for the step-up in basis on the acquisition
of minority interests by GFP in the Reorganization, net of a reduction in
selling, general and administrative expense ($34,000 and $697,000 in 1996
and 1997, respectively) for accretion recognized for the change in
redemption value on redeemable common stock.
(3) Reflects the reduction in interest expense incurred by GTC's Latin American
operations ($372,000 and $239,000 in 1996 and 1997, respectively) and the
reduction resulting from the repayment of indebtedness with the proceeds of
the disposition ($1,548,000 and $676,000 in 1996 and 1997, respectively).
(4) Reflects a reduction in income tax expense for foreign income tax recorded
by GTC's Latin American operations.
(5) Reflects income taxes on pro forma adjustments to selling, general and
administrative expense for the Reorganization at an assumed effective
income tax rate of 37%.
(6) Reflects a reduction in minority shareholders' 20% proportionate share of
the loss from continuing operations of GTC's Latin American operations, and
the elimination of the remaining balance of minority shareholders' 20%
proportionate share of the loss of GTC.
(7) Reflects the results of operations for GTC's Latin American Operations for
the six months ended June 30, 1997 assuming the disposition of the
operations occurred on January 1, 1997. The sale transaction closed on the
day after the close of GTC's second quarter and is therefore not reflected
in the results of operations for the six months ended June 30, 1997.
(8) Reflects the disposition of GTC's Latin American operations and the use of
proceeds, net of estimated costs of the disposition and net of book value
related adjustments required by the purchase and sale agreement, to fully
extinguish GTC's debt payable to its principal lender. GTC's deferred
income tax assets are fully reserved, including those relative to tax
operating loss carryforwards. Since such tax operating loss carryforwards
exceed the potential taxable gain on the sale of the Latin American
Operations, no net tax expense is recognized for the disposition.
(9) Reflects the distribution of GFP's cash to its shareholders prior to the
Reorganization. The assets of GFP which are included in the determination
of the total aggregate consideration to be received by the shareholders of
GFP in the Reorganization consist only of its shares in GTC, Tube Turns,
and Bell. The other assets of GFP which will transfer to GTC in connection
with the Reorganization consist principally of office equipment.
(10) Reflects the intangible asset recorded as a result of the step-up in basis
to occur for the acquisition of minority interests by GFP in the
Reorganization. The step-up in basis is anticipated to be allocated to the
assets and liabilities of Bell and Tube Turns in accordance with the rules
of purchase accounting. The final allocation of the step-up in basis is
dependent on certain valuations that have not progressed sufficiently to
enable Sypris to make a final allocation in the accompanying pro forma
financial statements. Accordingly, the cost allocation adjustments have not
been made and the entire amount is preliminarily classified as other
assets.
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(11) Reflects the reclassification of redeemable common stock to shareholders'
equity, since the redemption obligation associated therewith will terminate
upon completion of the Reorganization, and the elimination of deferred
taxes on the cumulative accretion recognized for the change in redemption
value on redeemable common stock.
(12) Reflects the net effect of a $3,492,000 deferred tax liability recorded on
the step-up in basis for acquisition of minority interests by GFP in the
Reorganization and the elimination of a $5,051,000 deferred tax liability
in the consolidated financial statements of GFP associated with the gain on
sale of unissued shares in the initial public offering of GTC Common Stock.
Since the shares of GTC Common Stock held by GFP prior to the
Reorganization will be converted to shares of GTC Common Stock which will
be issued to the individual shareholders of GFP in the Reorganization, the
difference between GFP's tax basis and its financial reporting basis which
gave rise to the $5,051,000 deferred tax liability is not expected to
result in a taxable temporary difference to GFP.
(13) Reflects the reclassification of minority interests to shareholders' equity
for the GTC minority shareholders' proportionate share of GTC's
shareholders' equity.
(14) Reflects the reclassification of paid-in capital for the conversion of GFP
Common Stock, no par value, to GTC Common Stock, $.01 par value, based upon
the total shares assumed to be outstanding after the Reorganization and the
Reverse Split.
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RECENT DEVELOPMENTS
On June 30, 1997, GTC sold its wholly-owned foreign operations to SCI
Systems, Inc. These foreign operations consisted of Group Technologies S.A. de
C.V. ("GTC Mexico") located in Mexico City, Mexico, Group Technologies
Suprimentos de Informatica Industria e Comercio Ltda. and Group Technologies
Integracoes em Eletcronica Ltda. (collectively, "GTC Brazil"), both of which are
located in Campinas, Brazil. In the third quarter, GTC recorded a gain on the
sale, net of costs, amounting to approximately $3.2 million.
A portion of the $18,000,000 proceeds received from the June 30, 1997,
divestiture of GTC Mexico and GTC Brazil was used to repay all of GTC's bank
borrowings. GTC also expects to utilize approximately $2.9 million of the
proceeds, subject to final adjustment, to repay SCI Systems, Inc., for changes
in the net book value of GTC Mexico and GTC Brazil in accordance with the
purchase and sale agreement.
As reflected in GTC's second quarter financial statements at June 29, 1997,
GTC had a financing agreement (the "Credit Agreement") with its bank which
provided GTC with a line of credit facility (the "Revolver") and a term note
(the "Term Note"). As amended on March 28, 1997, the Credit Agreement provided
credit availability on the Revolver equal to the lesser of $13,500,000 or the
applicable amount of its eligible accounts receivable and inventories. In
connection with the March 28, 1997 amendment to the Credit Agreement, GFP
invested $2,500,000 in GTC in exchange for 250,000 shares of GTC Preferred
Stock.
In connection with an amendment of the Credit Agreement in 1996, GTC issued
warrants to purchase 1,200,000 shares of GTC Common Stock at a price of $0.01
per share to the lender. Of the 1,200,000 shares under warrant, 200,000 shares
became exercisable immediately and 125,000 shares became exercisable on March
31, 1997. As a result of the early repayment and termination of the Credit
Agreement, the remaining 875,000 unvested shares under warrant were forfeited by
the lender.
During the third quarter of 1997, GTC evaluated the status of certain loss
contracts and determined that additional costs at completion would be incurred
totaling $846,000. These costs arose during the third quarter relative to
shortages of materials, delays in attaining certain contract milestones and
increased warranty estimates based on returned product. GTC also recorded, in
the third quarter of 1997, a provision for excess and obsolete inventories
totaling $1,013,000. This provision was recorded to reflect the aging of the
underlying inventory and GTC's unsuccessful efforts to fully recover certain
costs from its customers.
On September 24, 1997, GFP entered into a non-binding letter of intent with
Datatape, Incorporated and Delta Tango, Inc. (collectively, "Datatape") to
acquire certain assets of Datatape for approximately $14.0 million in cash, plus
the assumption of certain liabilities. As of August 24, 1997, the net book value
of these assets and liabilities was approximately $13.2 million. The transaction
is subject to a number of material contingencies, certain of which involve
actions by independent third parties. As of the date of this Joint Proxy
Statement/Prospectus, GFP is conducting due diligence activities with respect to
the transaction and GFP and Datatape are reviewing possible resolutions to the
contingencies. Should the contingencies be satisfactorily resolved and an
agreement acceptable to both parties be executed, a newly-formed, wholly-owned
subsidiary of GFP would acquire the assets of Datatape, which subsidiary will be
engaged in the manufacture and sale of data acquisition and storage products.
The financial projections supplied by management of GFP and GTC for Bradford's
review and consideration in connection with rendering the fairness opinion to
the Special Committee did not include the impact of the potential Datatape
transaction. Should the due diligence be satisfactorily completed and the
contingencies to closing be satisfied prior to the Reorganization, the
consummation of the Datatape transaction will be reflected by Bradford in an
update to its fairness opinion to be delivered to the Special Committee at the
time of closing.
DESCRIPTION OF GTC'S CAPITAL STOCK
GTC Common Stock
GTC is a Florida corporation subject to the provisions of the FBCA. The
following description of GTC Common Stock and certain provisions of the GTC
Articles and GTC Bylaws is a summary and, while it describes all relevant
material aspects, 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
September 15, 1997, there were 16,220,629 shares of GTC Common Stock outstanding
which were held by 637 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. See "The GTC Special Meeting--Proposal to Amend the GTC
Articles of Incorporation to Increase the Authorized Common Stock from
40,000,000 Shares to 60,000,000 Shares." At the GTC Special Meeting, the
shareholders of GTC will also be requested to approve the Reverse Stock Split,
which will thereafter reduce the authorized shares of GTC Common Stock to
15,000,000 shares. See "The GTC
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Special Meeting--Proposal to Amend the GTC Articles to Effect the Reverse Stock
Split."
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 GTC 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 the GTC 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 GTC Preferred Stock. The GTC
Board has the authority to issue the GTC 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 GTC 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 GTC 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. In connection with the March 28, 1997
amendment to the Credit Agreement, GFP invested $2,500,000 in GTC in exchange
for 250,000 shares of GTC Preferred Stock. The GTC Preferred Stock is redeemable
and pays a quarterly dividend of 8.5% per annum. The GTC Preferred Stock is
redeemable at the option of the holder upon repayment by GTC of all of its
outstanding Credit Agreement indebtedness. The GTC Preferred Stock is also
convertible and each share may be exchanged for 8.1 shares of GTC Common Stock.
GFP will convert the shares of GTC Preferred Stock held by it to GTC Common
Stock immediately prior to the Reorganization. The conversion rate of 8.1 was
derived from the average closing price for GTC Common Stock on the three days
immediately preceding the investment by GFP.
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 GTC 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 GTC 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.
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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 and 100% of the GTC Preferred Stock as of September
15, 1997) and by GTC's officers and directors (including the share ownership of
GFP, 81.3% of the issued and outstanding shares of Common Stock and 100% of the
GTC Preferred Stock as of September 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.
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
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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 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
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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.
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.
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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 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
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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.
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.
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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 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
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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 fees) 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 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
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(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. This statute is not
applicable to the Reorganization.
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 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. This statute is not applicable to the
Reorganization.
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.
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Control Share Acquisition Act
The FBCA also contains a control share acquisition statute which provides
that, except with respect to certain acquisitions, 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. The acquisition of shares of an issuing public
corporation does not constitute a control-share acquisition if, among other
exceptions, the acquisition is pursuant to a merger or share exchange if the
issuing public corporation is a party to the agreement or plan of merger, or if
the acquisition was approved by the board of directors of such issuing public
corporation. 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. This statute
would not be applicable to the Reorganization.
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 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
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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 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.
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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 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 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
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.
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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.
In connection with the restructuring of GTC's Credit Agreement on March 28,
1997, GFP invested $2,500,000 in GTC in exchange for 250,000 shares of GTC
Preferred Stock with a cumulative annual dividend rate of 8.5% convertible into
GTC Common Stock. The conversion ratio of 8.1 shares of GTC Common Stock for
each share of GTC Preferred Stock was determined based on the average closing
price of GTC Common Stock over the three day period immediately preceding the
investment by GFP.
GTC previously engaged 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 were the same as
those which would be determined on an arms-length basis and were not material to
the financial performance of GTC. In 1995, the amount received by GTC from
transactions with Bell was not material.
On February 9, 1996, the assets of the instrumentation products business
unit of 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 of GTC. 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.
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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 persons serving as GTC's Chief
Executive Officer at any time during 1996 and GTC's other three highest paid
executive officers (collectively, the "Named Officers").
<TABLE>
<CAPTION>
Long-Term
Annual Compensation (1) Compensation Awards
--------------------- ----------------------
Restricted Options/ All
Stock SARs Other
Name and Principal Position Year Salary Bonus Awards (# ) Compensation
- --------------------------- ---- ------------ ------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Carl P. McCormick (2)......... 1996 $199,529 (3) $ -- $ -- $124,066 $365,916 (4)
President & Chief Executive 1995 280,299 -- -- -- 13,868
Officer 1994 269,135 -- -- -- 11,216
Robert E. Gill (5)............ 1996 -- -- -- -- --
President & Chief Executive
Officer
Aviram Margalith (6).......... 1996 152,885 10,000 (7) -- 10,000 (7) 8,389 (8)
Vice President & General 1995 149,151 -- -- -- 7,187
Manager of International 1994 129,206 -- -- -- 6,689
EMS Operations
J. Hardie Harris (9).......... 1996 136,154 -- -- 80,000 6,286 (10)
Vice President & General 1995 99,380 20,000 -- 30,000 4,987
Manager of U.S. EMS
Operations
David D. Johnson.............. 1996 119,849 50,000 (11) -- 120,000 2,319 (12)
Vice President &
Chief Financial Officer
- -------------
</TABLE>
(1) Includes amounts deferred, at the election of the Named Officers, 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 paid to each of the Named Officers.
(2) Carl P. McCormick resigned from his positions as President and Chief
Executive Officer of GTC on October 31, 1996. However, he assumed other
duties and, therefore, remained on active status on GTC's payroll through
December 31, 1996.
(3) From March 11, 1996 through December 31, 1996, Mr. McCormick received a
portion of his salary in the form of nonstatutory stock options in lieu of
cash. The dollar amount shown in the Salary column is the cash portion of
his salary. The total number of shares represented by stock options
received by Mr. McCormick in lieu of his salary is shown in the
Options/SARs column. Each of the options for the purchase of these shares
has an exercise price that is equal to the fair market value (calculated as
the average of the closing bid and ask quotations on the business day
immediately preceding the date of grant) of GTC Common Stock on the date
the option was granted and, accordingly, Mr. McCormick did not realize any
additional compensation at the time the options were granted. The
expiration date of each option is seven years after the date of grant.
(4) The amount shown includes $355,000 payable to Mr. McCormick pursuant to the
terms of a separation agreement signed in December 1996, plus $9,716 for
Matching and Profit Sharing
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Contributions made by GTC pursuant to its 401(k) Plan and $1,200 of
premiums paid by GTC for term life insurance for the benefit of Mr.
McCormick during 1996.
(5) Robert E. Gill replaced Mr. McCormick as President and Chief Executive
Officer of GTC on October 31, 1996. Mr. Gill served GTC in these positions,
without compensation of any kind from GTC or any third party, until he
resigned and was replaced by Thomas W. Lovelock on February 28, 1997.
(6) Dr. Margalith resigned from his position as Vice President and General
Manager of International EMS Operations and Engineering Services on April
4, 1997.
(7) The amount shown is the cash portion of a bonus paid to Dr. Margalith in
February 1996. The balance of the bonus was paid to him in the form of a
nonstatutory stock option to purchase 10,000 shares of GTC Common Stock.
The total number of shares for the stock option portion of the bonus is
shown in the Options/SARs column. The option for the purchase of these
shares has an exercise price that is equal to the fair market value of GTC
Common Stock on the date the option was granted and, accordingly, Dr.
Margalith did not realize any additional compensation at the time the
option was granted. The option was to become exercisable in annual
increments of 5,000 shares each, beginning one year from the date of grant.
Dr. Margalith resigned from his position as Vice President and General
Manager of International EMS Operations and Engineering Services on April
4, 1997 and all of his options were canceled as of that date.
(8) The amount shown is for Matching and Profit Sharing Contributions made by
GTC pursuant to its 401(k) Plan.
(9) J. Hardie Harris was hired as Vice President and General Manager of U.S.
EMS Operations on April 3, 1995. He resigned from this position on February
6, 1997.
(10) The amount shown is for Matching and Profit Sharing Contributions made by
GTC pursuant to its 401(k) Plan.
(11) David D. Johnson received a hiring bonus from GTC in the amount of $50,000
on March 22, 1996.
(12) The amount shown is for Matching and Profit Sharing Contributions made by
GTC pursuant to its 401(k) Plan.
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Option Grants in Last Fiscal Year
Set forth below is information on stock options granted during the fiscal
year ended December 31, 1996 to the Named Officers of GTC.
<TABLE>
<CAPTION>
Individual Grants(1) Potential Realizable
------------------------------------------------ Value at Assumed
No. of % of Total Rates of Stock Price
Securities Options Exercise Appreciation for
Underlying Granted to or Base Option Term (2)
Options Employees in Price Expiration -------------------
Name Granted Fiscal Year ($/Share) Date 5% 10%
- ----------------------- ---------- ------------ -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Carl P. McCormick (3).. 8,417 1.5% $3.00 04/10/03 $10,280 $23,956
9,182 1.7% 2.75 05/10/03 10,280 23,956
6,733 1.2% 3.75 06/10/03 10,280 23,956
9,619 1.7% 2.625 07/10/03 10,280 23,956
11,222 2.0% 2.25 08/10/03 10,280 23,956
14,429 2.6% 1.75 09/10/03 10,280 23,956
10,632 1.9% 2.375 10/10/03 10,280 23,956
16,160 2.9% 1.5625 11/10/03 10,280 23,956
18,364 3.3% 1.375 12/10/03 10,280 23,956
19,308 3.5% 0.84375 12/30/03 6,632 15,457
Robert E. Gill (4)..... -- -- -- -- -- --
Aviram Margalith (5)... 5,000 0.9% 3.00 02/19/01 3,799 8,395
5,000 0.9% 3.00 02/19/01 3,799 8,395
J. Hardie Harris (6)... 10,000 1.8% 2.75 02/01/06 17,295 43,828
10,000 1.8% 2.75 02/01/06 17,295 43,828
10,000 1.8% 2.75 02/01/06 17,295 43,828
10,000 1.8% 2.75 02/01/06 17,295 43,828
10,000 1.8% 2.75 02/01/06 17,295 43,828
10,000 1.8% 2.75 02/01/06 17,295 43,828
10,000 1.8% 2.75 02/01/06 17,295 43,828
10,000 1.8% 2.75 02/01/06 17,295 43,828
David D. Johnson (7)... 15,000 2.7% 2.25 03/21/06 21,225 53,789
15,000 2.7% 2.25 03/21/06 21,225 53,789
15,000 2.7% 2.25 03/21/06 21,225 53,789
15,000 2.7% 2.25 03/21/06 21,225 53,789
15,000 2.7% 2.25 03/21/06 21,225 53,789
15,000 2.7% 2.25 03/21/06 21,225 53,789
15,000 2.7% 2.25 03/21/06 21,225 53,789
15,000 2.7% 2.25 03/21/06 21,225 53,789
</TABLE>
(1) Each grant was made pursuant to GTC's 1994 Stock Option Plan for Key
Employees.
(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.
(3) GTC granted stock options to Mr. McCormick on a monthly basis from April
11, 1996 through December 11, 1996. Mr. McCormick also received a stock
option from GTC on December 31, 1996. These options each have an exercise
price that is equal to the fair market value (calculated as the average of
the closing bid and ask quotations on the business day immediately
preceding the date of grant) of the GTC Common Stock on the date the option
was granted. Each of the options becomes exercisable two years from the
date of grant.
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<PAGE>
(4) Mr. Gill served as President and Chief Executive Officer from October 31,
1996 until February 28, 1997 and did not receive any options or other
compensation for his services.
(5) GTC granted Dr. Margalith a stock option for the purchase of 10,000 shares
of GTC Common Stock as part of a bonus paid to him on February 20, 1996.
The option has an exercise price that is equal to the fair market value of
GTC Common Stock on the date the option was granted. The option was to
become exercisable in annual increments of 5,000 shares each, beginning one
year from the date of grant. Dr. Margalith resigned from his position as
Vice President and General Manager of International EMS Operations and
Engineering Services on April 4, 1997. All options held by Dr. Margalith
were canceled as of that date.
(6) GTC granted Mr. Harris a stock option for the purchase of 80,000 shares of
GTC Common Stock on February 2, 1996. The option was to become exercisable
in annual increments of 10,000 shares each, beginning one year from the
date of grant. Mr. Harris resigned from his position as Vice President and
General Manager of U.S. EMS Operations on February 6, 1997. All options
held by Mr. Harris were canceled as of that date.
(7) GTC granted Mr. Johnson a stock option for the purchase of 120,000 shares
of GTC Common Stock on March 22, 1996. The option becomes exercisable in
annual increments of 15,000 shares each, beginning one year from the date
of grant.
Fiscal Year End Option Values
Set forth below is information on each exercise of stock options during the
fiscal year ended December 31, 1996, and the value as of December 31, 1996, of
unexercised stock options held by the Named Officers of GTC.
<TABLE>
<CAPTION>
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 (1) Realized (1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ----------- ----------- ------------- ----------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carl P. McCormick (3).. -- $ -- 300,000 124,066 $ -- $ 3,017
Robert E. Gill (4)..... -- -- -- -- -- --
Aviram Margalith (5)... -- -- 180,000 10,000 -- --
J. Hardie Harris (6)... -- -- -- 110,000 -- --
David D. Johnson....... -- -- -- 120,000 -- --
</TABLE>
- -------------
(1) No options were exercised.
(2) Based on a market value equal to the reported closing price of GTC Common
Stock on The Nasdaq Stock Market at December 31, 1996 of $1.00, the
indicated options were not in-the-money as of that date, except for an
option held by Carl P. McCormick to purchase 19,308 shares.
(3) Carl P. McCormick resigned from his positions as President and Chief
Executive Officer of GTC on October 31, 1996. All options held by Mr.
McCormick which are or will become exercisable on or before December 31,
1998 will remain valid and effective per the terms and conditions of each
such option, as amended. All other options held by Mr. McCormick were
canceled as of December 31, 1996.
(4) Robert E. Gill replaced Mr. McCormick as President and Chief Executive
Officer of GTC on October 31, 1996. Mr. Gill served GTC in these positions,
without compensation of any kind from GTC or any third party, until he
resigned and was replaced by Thomas W. Lovelock on February 28, 1997.
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<PAGE>
(5) Aviram Margalith resigned from his position as Vice President and General
Manager of International EMS Operations and Engineering Services on April
4, 1997. All options held by Dr. Margalith were canceled as of that date.
(6) J. Hardie Harris resigned from his position as Vice President and General
Manager of U.S. EMS Operations on February 6, 1997. All options held by Mr.
Harris were canceled as of that date.
Compensation of Directors
Directors who are employees of GTC or any affiliate of GTC are not eligible
to receive any compensation for services rendered as a director, but they are
reimbursed for travel and related expenses they incur in order to attend GTC
Board meetings. The Independent Directors are compensated pursuant to the terms
and conditions of GTC's Independent Directors' Compensation Program (the
"Program") which was adopted by the GTC Board on September 1, 1995. As amended
by the GTC Board on June 25, 1997, the Program provides that each Independent
Director shall be granted a stock option for the purchase of 10,000 shares of
GTC Common Stock each time he or she is elected and reelected to serve for a
full term on the GTC Board. If an Independent Director is elected to the GTC
Board after the beginning of a term, the Program states that the number of
underlying shares for the option shall be prorated accordingly.
In addition to the aforementioned stock options, each of the Independent
Directors is paid an annual retainer of $15,000 and an attendance fee of $1,000
for each GTC Board meeting the director attends in person, or alternatively, a
fee of $300 for each meeting the director participates in by telephone.
Independent Directors are entitled to compensation for attending or
participating in meetings of committees of the GTC Board only if such meetings
are held on dates other than the dates of meetings of the full GTC Board. In the
event that committee meetings are held on dates other than the dates of meetings
of the full GTC Board, each Independent Director who attends a committee meeting
in person and serves as the chairperson of the meeting shall receive the sum of
$1,250 per meeting, and each of the other Independent Directors who attend such
a committee meeting in person shall receive the sum of $1,000 per meeting.
Alternatively, each Independent Director who, as the chairperson or as a
committee member, participates by telephone in committee meetings of the GTC
Board which are held on dates other than the dates of meetings of the full GTC
Board, shall receive the sum of $300 per meeting. Each of the Independent
Directors is also reimbursed for travel and related expenses he or she incurs in
order to attend GTC Board and/or committee meetings.
An Independent Director may elect to receive his or her annual retainer and
attendance fees either in cash or in the form of stock options granted to him or
her by GTC pursuant to the GTC Independent Directors' Stock Option Plan. Those
Independent Directors who elect to receive cash compensation may elect to defer
any of their compensation by participating in GTC's Management Deferred
Compensation Plan. During 1996, Roger W. Johnson elected to receive his annual
retainer and attendance fees in cash, without any deferral. Mr. Johnson received
an option to purchase 7,000 shares of GTC Common Stock upon his election to the
GTC Board in 1996 and he received a total of $10,500 from GTC as compensation
for services rendered during 1996. Mr. Frigon and Mr. Petersen were also each
granted options to purchase 7,000 shares of GTC Common Stock upon being
reelected to the GTC Board in 1996 and each of them elected to receive their
annual retainers and meeting fees in the form of stock options during 1996. GTC
granted additional options for the purchase of 28,012 shares and 29,359 shares
to Mr. Frigon and Mr. Petersen, respectively, for services rendered in 1996.
None of the Independent Directors exercised GTC stock options in 1996.
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
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<PAGE>
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 entered into an employment agreement in June, 1997, with Thomas W.
Lovelock, GTC's President and Chief Executive Officer. Subject to certain
conditions, the term of the employment agreement extends from July 1, 1997
through June 30, 1999. During the term of the agreement, Mr. Lovelock is to
receive a base salary of $200,000, which amount may be adjusted by GTC at its
sole discretion. Additionally, upon meeting certain conditions, Mr. Lovelock is
also eligible to receive a one-time, lump sum cash bonus in the amount of
$75,000. The agreement also provides that, if GTC terminates Mr. Lovelock
without cause or for other than certain specified reasons, Mr. Lovelock shall
receive pay continuance for a period of two years from the date of termination,
along with customary medical and dental benefits and life insurance coverage for
a period of one year from the date of termination, and GTC shall take the
necessary actions to permit all stock options held by Mr. Lovelock to remain
valid beyond the date of such termination. Mr. Lovelock agreed to certain
nonsolicitation, noncompetition and confidentiality provisions which shall
remain in force beyond the term of the agreement and shall, accordingly, survive
any termination thereof.
GTC also entered into an employment agreement in June, 1997, with James G.
Cocke, GTC's Vice President and Manager of the Federal Systems Division. Subject
to certain conditions, the term of the employment agreement extends from July 1,
1997 through June 30, 1998. During the term of the agreement, Mr. Cocke is to
receive a base salary of $140,000, which amount may be adjusted by GTC at its
sole discretion. Additionally, upon meeting certain conditions, Mr. Cocke is
also eligible to receive a one-time, lump sum cash bonus in the amount of
$50,000. The agreement also provides that, if GTC terminates Mr. Cocke without
cause or for other than certain specified reasons, Mr. Cocke shall receive pay
continuance, along with customary medical and dental benefits and life insurance
coverage, for a period of one year from the date of termination. Mr. Cocke
agreed to certain confidentiality provisions, which shall remain in force beyond
the term of the agreement and shall, accordingly, survive any termination
thereof.
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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 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
September 15, 1997 Reorganization
------------------------ --------------------
Name Number Percent(1) Number(2) Percent
---- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Group Financial Partners, Inc. (3)............... 15,064,625 82.6% 33,292,813 89.9%
455 South Fourth Avenue
Louisville, Kentucky 40202
Carl P. McCormick................................ 432,486(4) 2.6% 432,486 1.2
Thomas W. Lovelock............................... 100,790(5) * 100,790 *
David D. Johnson................................. 16,525(6) * 16,525 *
Avarim Margalith (7)............................. -- * -- *
J. Hardie Harris (8)............................. -- * -- *
Henry F. Frigon.................................. 109,655(9) * 109,655 *
Sidney R. Petersen............................... 107,975(10) * 107,975 *
Roger W. Johnson................................. 29,389(11) * 29,389 *
Robert E. Gill................................... 4,000(12) * 4,000 *
Jeffrey T. Gill.................................. 675(13) * 675 *
All directors and executive officers as a group.. 15,766,120 83.9% 34,094,308 90.4%
</TABLE>
___________
* less than 1%
(1) The percentages shown were calculated based upon 16,220,629 shares of GTC
Common Stock which were outstanding as of September 15, 1997, plus the
respective number of additional shares for each person which are deemed
outstanding pursuant to Rule 13d-3(d)(1) under the Exchange Act.
(2) This assumes a GTC Average Closing Price of $2.74.
(3) GFP directly owns shares of GTC Common Stock and GTC Preferred Stock.
Robert E. Gill, Jeffrey T. Gill, R. Scott Gill, Virginia G. Gill and
Patricia G. Gill own 19.3%, 32.3%, 28.0%, 19.7% 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 GTC
Common Stock and GTC Preferred Stock owned by GFP. Robert E. Gill is also a
director of GTC and Jeffrey T. Gill is a director and an executive officer
of GTC. The shares indicated as owned by GFP after the Reorganization will
be owned directly by the former shareholders of GFP. The GFP shares
beneficially owned amounts. Includes 250,000 shares of GTC Preferred Stock
convertible into GTC Common Stock at a rate of 8.1 shares of GTC Common
Stock for each share of GTC Preferred Stock.
(4) Includes 300,000 shares issuable under currently exercisable options.
(5) Includes 100,000 shares issuable under a one-time right and option to
purchase shares of GTC Common Stock (the "Stock Purchase Right") pursuant
to a Stock Purchase Right Agreement dated April 7, 1997 entered into by and
between GTC and Mr. Lovelock (the "Agreement"). Upon exercise of the Stock
Purchase Right, Mr. Lovelock is also entitled to receive a certain number
of shares of GTC Common Stock at no cost to Mr. Lovelock (the "Bonus
Shares"). The number of Bonus Shares issuable to Mr. Lovelock is to be
determined using a formula specified in the Agreement and which is based
upon the fair market value of GTC Common Stock on the date the Stock
Purchase Right is exercised.
(6) Includes 15,000 shares issuable under currently exercisable options.
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<PAGE>
(7) Dr. Margalith resigned from his position as Vice President and General
Manager of International EMS Operations and Engineering Services on April
4, 1997. All options held by Dr. Margalith were canceled as of that date.
(8) Mr. Harris resigned from his position as Vice President and General Manager
of U.S. EMS Operations on February 6, 1997. All options held by Mr. Harris
were canceled as of that date.
(9) Includes 104,655 shares issuable under currently exercisable options.
(10) Includes 105,475 shares issuable under currently exercisable options.
(11) Includes 29,389 shares issuable under currently exercisable options.
(12) Includes shares owned by Robert E. Gill and his spouse, but none of the
shares that could be attributed to them because of their ownership interest
in GFP.
(13) Includes shares owned by Jeffrey T. Gill, but none of the shares that could
be attributed to him or his spouse because of their ownership interest in
GFP.
OWNERSHIP OF GTC PREFERRED STOCK
The following table sets forth certain information with respect to
beneficial ownership of GTC Preferred Stock, including beneficial ownership (i)
of each person (or group of affiliated persons) who is known by GTC to own
beneficially more than 5% of the shares of GTC Preferred 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
Preferred Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
Shares Beneficially Owned
---------------------------------------
After the
September 15, 1997 Reorganization
------------------ ----------------
Name Number Percent Number Percent
---- ------- ------- ------ -------
<S> <C> <C> <C> <C>
Group Financial Partners, Inc. (1)............... 250,000 100.0% -- --
455 South Fourth Avenue
Louisville, Kentucky 40202
Carl P. McCormick................................ -- -- -- --
Thomas W. Lovelock............................... -- -- -- --
David D. Johnson................................. -- -- -- --
Avarim Margalith................................. -- -- -- --
J. Hardie Harris................................. -- -- -- --
Henry F. Frigon.................................. -- -- -- --
Sidney R. Petersen............................... -- -- -- --
Roger W. Johnson................................. -- -- -- --
Robert E. Gill................................... -- -- -- --
Jeffrey T. Gill.................................. -- -- -- --
All directors and executive officers as a group.. 250,000 100.0% -- --
</TABLE>
___________
(1) GFP directly owns shares of GTC Common Stock and GTC Preferred Stock.
Robert E. Gill, Jeffrey T. Gill, R. Scott Gill, Virginia G. Gill and
Patricia G. Gill own 19.3%, 32.3%, 28.0%, 19.7% 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 GTC
Common Stock and GTC Preferred Stock owned by GFP. Robert E. Gill is also a
director of GTC and Jeffrey T. Gill is a director and an executive officer
of GTC. GFP will convert the shares of GTC Preferred Stock held
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<PAGE>
by it into GTC Common Stock immediately prior to the Reorganization based
upon the conversion rate of 8.1 shares of GTC Common Stock for each share
of GTC Preferred Stock.
Compliance with Section 16(a) of the 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 1996 and the preceding year, its officers, directors, and greater than
10% beneficial owners were in compliance with all applicable filing
requirements.
BUSINESS OF GTC
General
GTC provides 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 custom manufactures complex circuit card assemblies, subsystems and
end-user products for use in a wide variety of markets, including automotive,
commercial avionics, computer, government systems, industrial electronics,
networking, space, and telecommunications. 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 also
provides high-level engineering services, such as design services, software
development and product redesign. GTC believes that its ability to offer its
customers a broad range of sophisticated engineering services, which complement
its basic manufacturing services, gives it a competitive advantage.
On June 30, 1997, GTC sold its wholly-owned foreign operations to SCI
Systems, Inc. These foreign operations consisted of GTC Mexico and GTC Brazil.
Substantially all of the assets of Metrum, Inc. ("Metrum"), a wholly-owned
subsidiary of GTC, were divested to Bell during the first quarter of 1996, and
GTC immediately ceased all operations at its Littleton, Colorado facility. Also
during the first quarter of 1996, GTC sold substantially all of the assets
related to its Badger line of name brand products.
For a discussion of GTC recent developments see "Recent Developments."
Strategic Initiatives
GTC initiated several highly focused programs during 1995, 1996 and 1997 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, 1996 and 1997.
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While GTC recorded certain expenses in 1995, 1996 and 1997 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.
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. 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.
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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. 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.
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.
Focused Manufacturing and Service Capability
GTC intends to increase its focus on the federal systems electronic
assembly market, which represents an area of significant experience for GTC. GTC
intends to service the niche market of commercial electronic assembly customers
with characteristics similar to the federal systems business. These
characteristics include customers with low-to-medium volume requirements, high
complexity, frequent changes and numerous board styles.
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. GTC
employs a multi-disciplined engineering team which
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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 manufacturing capabilities are enhanced by up-to-date manufacturing
techniques. Among these techniques are just-in-time procurement and continuous
flow manufacturing (where practical), statistical process control, total quality
management, stringent and real-time engineering change control routines, and
total cycle time reduction techniques. GTC has also 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 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 utilizes 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, design services, prototype development, product re-engineering,
feature enhancement, product ruggedization, cost reduction, product
miniaturization, and EMI interference and 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 has pursued the diversification of its market segments and customer
base and has 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, and market specialists. Supported by the executive staff,
market specialists 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 sales efforts are further supported by advertising in numerous trade
media and sales literature and by 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 program is communicated and acted upon in an expedient
fashion. This requires that program managers maintain close contact with GTC
employees and with the customers that they support, communicating project status
in addition to resolving specific issues which arise. GTC believes that this
dedicated relationship is critical to meeting the dynamic needs of its
customers.
During the last three years, GTC's largest individual commercial customer
was IBM, which accounted for approximately 14%, 16%, and 16%, of GTC's revenue
in 1994, 1995 and 1996, respectively, and 11% for the six months ended June 29,
1997. Sales to International Game Technology represented approximately 10% of
GTC's revenue in 1996. GTC's sales of products and services to United States
government agencies represented approximately 19%, 20% and 17% of GTC's revenue
in 1994, 1995 and 1996, respectively, and 20% for the six months ended June 29,
1997. GTC's sales of products and services to a variety of prime contractors
under contract with the federal government, in the aggregate, represented
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approximately 11%, 9% and 12% of GTC's revenue in 1994, 1995 and 1996,
respectively, and 16% for the six months ended June 29, 1997.
Competition
GTC operates in a highly competitive environment and competes against
numerous domestic and foreign manufacturers. GTC's competitors include AVEX
Electronics, Benchmark Electronics, DII Group, IEC Electronics, Jabil Circuit,
Plexus, SCI Systems, Sanmina, and Solectron. 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 value 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 of approximately $124 million.
Order backlog at June 29, 1997 was $73.2 million, which included $2.5 million
related to the international operations that were sold on June 30, 1997. Backlog
consists of firm purchase orders and commitments, substantially all of which is
expected to be filled within 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. Also, certain 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 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, especially memory
and logic devices. While GTC has not experienced significant material shortages
in the recent past, such shortages could produce significant short-term
interruptions of GTC's future operations.
GTC believes it fosters 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 responding to the
suppliers' requirements. In return, suppliers are expected to provide
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.
Research and Development
GTC invested $5.2 million, $3.0 million and $0.3 million, in research and
development in 1994, 1995 and 1996, respectively, and $0.1 million for the six
months ended June 29, 1997. The investments made prior
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to 1996 were made primarily in support of GTC's name brand products line of
business, substantially all of which was divested by GTC 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 perform a limited amount of research and development in the future. GTC
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 licensers. Generally,
the agreements governing such technology grant 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's Tampa facility is certified to ISO 9001, the international standard
for quality assurance in design, development, production, installation and
service. GTC also meets the National Aeronautics and Space Administration's
NHB5300.4 specification for space programs and numerous military specifications
including MIL-Q-9858A (quality program), MIL-STD-2000A (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 Federal Aviation Administration. GTC will continue to
utilize these certifications to provide service to these and other niche
markets.
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 prior to GTC's lease of the facility. Through a series of evaluations,
it was determined that ground water contamination is also present off site. In
December 1986, Honeywell, Inc. ("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
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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 leased 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 these solvents have contaminated the ground water. In December
1995, a remediation system approved by the state of Colorado was put in place
and 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 on February 9, 1996. Metrum and GTC agreed to indemnify and hold Bell
harmless with respect to such matters.
Employees
As of June 30, 1997, after the divestiture of the international operations,
GTC employed approximately 700 employees, all of which were employed in the
United States. GTC employed approximately 80 people in finance, sales or
administration, 520 people in manufacturing operations and 100 people in various
engineering functions. Approximately 350 of GTC's 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 1994, 1995 and 1996 and for the six months
ended June 29, 1997 were located in the United States, Mexico and Brazil.
Following the sale of the international operations on June 30, 1997, GTC's
operations are located only in the United States.
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.............. 41 Director; President and Chief Executive Officer of GFP
Robert E. Gill............... 72 Director; Chairman of the Board of GFP and President
and Chief Executive Officer of Bell
Sidney R. Petersen........... 67 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............. 63 Director; Former Administrator of U.S. General Services
Administration
Thomas W. Lovelock........... 54 Director, President and Chief Executive Officer
David D. Johnson............. 41 Vice President of Finance and Chief Financial Officer
James G. Cocke............... 50 Vice President and Manager of Federal Systems Division
</TABLE>
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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 d since its inception
in 1983. Mr. Gill also serves as a director and officer of several other
privately-held companies which are either direct or indirect subsidiaries 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. Mr. Gill served as President and Chief
Executive Officer of GTC from October 1996 to February 1997, at which time he
was elected to serve as the President and Chief Executive Officer of Bell. 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 and officer of several other privately-
held companies which are either direct or indirect subsidiaries of GFP. 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 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, a disk drive and electronics
manufacturing company, from 1982 through 1993. Mr. Johnson currently serves as a
director of Array Microsystems, AST Computer, Elexys International, Inc.,
Insulectro, JTS Corporation and Needham Funds, Inc.
Thomas W. Lovelock has served as a director of GTC since March 1997 and as
President and Chief Executive Officer of GTC since February 1997. He was also
Vice President of Operations of GTC from 1989 until 1993. From 1995 to 1997, Mr.
Lovelock served as President and Chief Executive Officer of Bell. From 1993
until 1995, Mr. Lovelock served as Executive Vice President and Chief Operating
Officer of Bell.
David D. Johnson has served as Vice President and Chief Financial Officer
of GTC since March 1996. From 1993 to 1996, Mr. Johnson served as Financial
Director, Far East South for Molex Incorporated, which manufactures electronic
components and tooling used by OEMs. He served Molex in various other management
positions since 1984. Prior to 1984, Mr. Johnson was a senior manager for KPMG
Peat Marwick in San Francisco, California.
James G. Cocke has served as Vice President and Manager of Federal Systems
Division of GTC since March 1997. From 1995 to 1997, Mr. Cocke was Division
Manager of the Services Division of Bell. Prior to 1995, he was employed as Vice
President of Finance for Science Applications International Corporation, which
designs and produces ruggedized computer equipment, CAE Link Corporation, which
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designs and produces military flight simulators, and for Smiths Industries,
which designs and manufactures a wide range of electronic equipment.
Should the Reorganization be completed, the GTC Board is expected to
consist of Henry F. Frigon, Jeffrey T. Gill, Robert E. Gill, R. Scott Gill,
William L. Healey, Roger W. Johnson, Sidney R. Petersen and Robert Sroka. The
executive officers of GTC are expected to be as follows:
Robert E. Gill.......... Chairman
Jeffrey T. Gill......... President and Chief Executive Officer
Richard L. Davis........ Senior Vice President
R. Scott Gill........... Senior Vice President and Secretary
David D. Johnson........ Vice President, Chief Financial Officer and
Treasurer
Anthony C. Allen........ Vice President and Controller
Thomas W. Lovelock currently serves as President and Chief Executive
Officer of GTC, James G. Cocke currently serves a Vice President and Manager of
Federal Systems Division of GTC, and Michael L. Schuman currently serves as
Secretary of GTC. Mr. Lovelock and Mr. Schuman will serve in similar capacities
after the Reorganization is completed in the new wholly-owned subsidiary that
will contain the operations of GTC, while Mr. Cocke will serve as Vice President
and Chief Financial Officer of this new subsidiary. No other key personnel
changes are currently anticipated.
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).
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF GTC
Overview
GTC provides advanced manufacturing, engineering and testing services to
OEMs of electronic products and also to certain end users such as United States
government agencies. These services include the manufacture of circuit card
assemblies, subsystems and end-user products for use in a wide variety of
markets. In providing these services, GTC is affected by a number of internal
and external factors including, but not limited to, materials management and
availability, working capital needs, variability of customer requirements,
production start-up costs, industry trends and competition.
GTC's operating results are also dependent upon the efforts and abilities
of key managerial and technical employees and upon its ability to attract and
retain qualified employees. During 1996 and during the first quarter of 1997,
GTC experienced turnover of certain key employees, including its President and
Chief Executive Officer and other executive officers of GTC. See "Business of
GTC--Executive Officers" for additional information regarding the executive
officers of GTC.
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Three and Six months ended June 30, 1996 and June 29, 1997
Results of Operations
The following tables set forth certain data, expressed as a percentage of
revenue, from GTC's Consolidated Statement of Operations for the three and six-
month periods ended June 29, 1997 and June 30, 1996.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ -------------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
------- ------- ------- --------
<S> <C> <C> <C> <C>
Revenue...................................... 100.0% 100.0% 100.0% 100.0%
Cost of operations........................... 96.8 92.5 100.3 93.2
----- ----- ----- -----
Gross profit (loss).......................... 3.2 7.5 (0.3) 6.8
Selling, general and administrative expense.. 4.8 5.4 5.2 4.7
Research and development..................... 0.2 0.0 0.1 0.2
----- ----- ----- -----
Operating (loss) income...................... (1.8) 2.1 (5.6) 1.9
Interest expense............................. 1.9 1.5 1.9 1.5
Other (income) expense, net.................. (0.7) 0.0 (0.4) 0.1
----- ----- ----- -----
(Loss) income before income taxes............ (3.0) 0.6 (7.1) 0.3
Income tax expense........................... 0.4 0.5 0.2 0.3
----- ----- ----- -----
Net (loss) income............................ (3.4)% 0.1% (7.3)% 0.0%
===== ===== ===== =====
</TABLE>
Revenue for the three months ended June 29, 1997 was $36.5 million, a
decrease of $27.5 million or 43.0% from $64.0 million for the three months ended
June 30, 1996. Revenue for the first six months of 1997 was $62.9 million, a
decrease of $69.3 million or 52.4% from $132.2 million for the first six months
of 1996. During the first six months of 1997 as compared to the comparable
period in 1996, GTC's domestic manufacturing and engineering operations
decreased by $52.4 million. This decline in revenue is associated with decreased
customer demand and the termination or completion of certain contracts. This
change in demand and termination of contracts is principally reflective of the
change in out-sourcing strategies of three customers which resulted in a $38.8
million reduction of revenue during the first six months of 1997 as compared to
the first six months of 1996. The fact that GTC completed the disposition of its
name brand products business units during the first quarter of 1996 and the
recognition of $4.1 million of revenue for a favorable claim settlement during
the second quarter of 1996 accounted for an additional $5.7 million of the $52.4
million decline in domestic revenue during 1997. Changes in customer demand on
other less significant contracts collectively accounted for the remaining $7.9
million of the decreased revenue in 1997 as compared to 1996.
GTC's Latin American operations contributed $16.9 million and $33.8 million
to revenue in the first six months of 1997 and 1996 respectively. Revenue from
GTC's Latin American operations in the first six months of 1997 as compared to
the comparable period in 1996 decreased $16.9 million, principally associated
with the completion or curtailment of certain contracts during the first quarter
of 1997 and the second half of 1996. GTC divested all of its Latin American
operations effective June 30, 1997, as more fully described in Note 7 to GTC's
Unaudited Condensed Consolidated Financial Statements as of and for the period
ended June 29, 1997.
Gross profit for the three months ended June 29, 1997 decreased to $1.2
million or 3.2% of revenue from $4.8 million or 7.5% of revenue during the three
months ended June 30, 1996. Gross loss for the first six months of 1997 was $0.2
million or 0.3% of revenue compared to gross profit of $9.0 million
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or 6.8% of revenue in the first six months of 1996. The net decrease in gross
profit during the first six months of 1997 was principally related to a $1.1
million decrease in gross profit from GTC's domestic manufacturing and
engineering services (excluding the name brand products business), a $3.3
million decrease in gross profit from GTC's Latin American operations and a $4.8
million decrease from the name brand products business. The primary cause for
the decline in gross profit (excluding the name brand products business decline)
was the fact that decreased revenue levels experienced by GTC, as discussed
above, caused GTC to underutilize its manufacturing capacity. Additionally,
included in the second quarter gross margin in 1996 was a favorable name brand
products business claim settlement of $4.1 million. Finally, the reduced gross
profits in 1997 are also caused by low margin contracts and cost overruns on
certain contracts. GTC has modified its marketing strategies to focus on
obtaining more profitable contractual agreements to mitigate the effects of the
low margin contracts.
Selling, general and administrative expense for the three months ended June
29, 1997 decreased to $1.8 million or 4.8% of revenue from $3.4 million or 5.4%
of revenue for the three months ended June 30, 1996. Selling, general and
administrative expenses for the six months ended June 29, 1997 decreased to $3.2
million or 5.2% of revenue from $6.2 million or 4.7% of revenue for the six
months ended June 30, 1996. Included in selling, general and administrative
expense in the second quarter of 1996 are approximately $1.4 million of charges
principally related to increases in accounts receivable reserves and estimated
costs associated with the relocation of warehouse facilities. With regard to
warehouse relocation costs, in the second quarter of 1996, GTC implemented a
cost saving strategy to integrate the materials warehousing function into its
main Tampa facility. The provision for doubtful accounts in 1996 represents a
change in estimate of collectibility following extensive communications with the
respective customers regarding non-payment of invoices and conclusions or
settlements reached during the period regarding ultimate collectibility.
Additional reductions in selling, general and administrative costs are
associated with the decreased business volume and cost saving initiatives
implemented in 1996 and 1997, including workforce reductions.
During the third quarter of 1997, GTC evaluated the status of certain loss
contracts and determined that additional costs at completion would be incurred
totaling $0.8 million. These costs arose during the third quarter relative to
shortages of materials, delays in attaining certain contract milestones and
increased warranty estimates based on returned product. GTC also recorded, in
the third quarter of 1997, a provision for excess and obsolete inventories
totaling $1.0 million. This provision was recorded to reflect the aging of the
underlying inventory and GTC's unsuccessful efforts to fully recover certain
costs from its customers.
Research and development expense for the three and six month periods ended
June 29, 1997 was $0.1 million. GTC's manufacturing and engineering services
businesses currently require low levels of research and development.
Interest expense for the three and six month periods ended June 29, 1997
decreased $0.3 million and $0.7 million, respectively, from the comparable prior
year periods. GTC's reduced level of operations has required a lower level of
working capital and, therefore, reduced debt requirements.
Income tax expense for the three and six month periods ended June 29, 1997
and June 30, 1996, consists primarily of income taxes on earnings in foreign
countries.
Liquidity and Capital Resources
Net cash used in operating activities was $1.7 million for the first six
months of 1997. GTC's accounts receivable decreased by $4.7 million during the
first six months of 1997 principally attributable to the lower level of revenue.
While revenue declined during the first six months of 1997, GTC's inventory
increased $1.7 million in anticipation of fulfilling certain contractual
requirements. GTC utilized the proceeds of the accounts receivable collections,
in part, to reduce its accounts payable and accrued liabilities by $2.8 million.
While GTC continues to maintain extended payment terms with its suppliers,
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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 used in investing activities was $0.4 million for the first six
months of 1997, comprised of capital expenditures. Current commitments for
capital expenditures for the remainder of 1997 are approximately $0.5 million.
Net cash provided by financing activities was $1.5 million for the first
six months of 1997. The financing activities were comprised of proceeds from the
issuance of GTC's Preferred Stock of $2.5 million partially off-set by
repayments of debt of $1.0 million. On June 30, 1997, GTC utilized the $18.0
million proceeds from the sale of its Latin American operations to repay all
amounts outstanding under the Credit Agreement with its primary lender and
terminated the Credit Agreement. GTC also expects to utilize approximately $2.9
million of the proceeds to repay SCI Systems, Inc., for changes in the net book
value of GTC Mexico and GTC Brazil, in accordance with the purchase and sales
agreement. In the third quarter, GTC recorded a gain on the sale, net of costs,
amounting to approximately $3.2 million.
In connection with execution of an amendment of the Credit Agreement in the
first quarter of 1996, GFP invested $1.0 million in GTC in exchange for 374,531
shares of GTC Common Stock. GTC also issued warrants to the bank for purchase of
1.2 million shares of GTC Common Stock for $.01 per share. Of the 1.2 million
warrants, 200,000 became exercisable at closing and 125,000 became exercisable
on March 31, 1997. As a result of GTC repaying all amounts payable under the
Credit Agreement on June 30, 1997, the bank forfeited the remaining 875,000
warrants.
In connection with a March 28, 1997 amendment to the Credit Agreement, GFP
invested $2.5 million in GTC in exchange for 250,000 shares of GTC Preferred
Stock. The GTC Preferred Stock pays quarterly dividends of 8.5% per annum and is
redeemable at the option of the holder upon repayment by GTC of all of its
outstanding Credit Agreement indebtedness. The GTC Preferred Stock is also
convertible and each share may be exchanged for 8.1 shares of GTC Common Stock.
GTC believes that sufficient resources, including resources provided by the
sale of its Latin American operations, will be available to meet its cash
requirements through the next twelve months. If such resources otherwise prove
insufficient to provide GTC with adequate funding for its working capital,
management will undertake actions to mitigate the effect of such deficiencies.
Such actions could consist of financing initiatives, potential asset sales, and
other actions relative to maximizing the liquidity of GTC's financial resources.
Cash requirements for periods beyond the next twelve months depend on GTC's
profitability, its ability to manage working capital requirements and its growth
rate.
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<PAGE>
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Results of Operations
The following table sets forth certain data from GTC's Consolidated
Statements of Operations for the years ended December 31, 1994, 1995 and 1996
expressed as a percentage of revenue:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1994 1995 1996
------- ----- ------
<S> <C> <C> <C>
Revenue...................................... 100.0% 100.0% 100.0%
Cost of operations........................... 86.8 98.4 97.0
----- ----- -----
Gross profit................................. 13.2 1.6 3.0
Selling, general and administrative expense.. 7.5 7.2 5.1
Research and development..................... 1.9 1.1 0.1
----- ----- -----
Operating income (loss)...................... 3.8 (6.7) (2.2)
Interest expense............................. 0.7 1.1 1.3
Other expense................................ 0.2 0.2 0.0
----- ----- -----
Income (loss) before income taxes............ 2.9 (8.0) (3.5)
Income taxes (benefit)....................... 1.2 (1.5) 0.3
----- ----- -----
Net income (loss)............................ 1.7% (6.5)% (3.8)%
===== ===== =====
</TABLE>
Revenue
Revenue decreased by 17.9% to $224.7 million for 1996, as compared to
$273.6 million for 1995. The net decrease in revenue of $48.9 million is related
to the decrease in GTC's name brand product line revenue of $31.2 million (net
of contract claim revenue recognized in 1996 of $4.1 million) and a decrease in
the Tampa-based manufacturing and engineering services operations of $36.1
million, partially offset by an increase in sales by GTC's international EMS
operations of $18.4 million.
The decrease in name brand product line revenue results from the
disposition of substantially all of the assets of Metrum and GTC's Badger
business. These dispositions, which occurred during 1995 and 1996, are more
fully discussed under the caption "Disposition of Assets" included herein below.
The decrease in the name brand products revenues was partially offset by the
successful settlement of a $4.1 million name brand product contract claim during
the second quarter of 1996.
The Tampa manufacturing services business continued to suffer from
underutilized capacity. A large government contract was completed late in 1994
and orders on two commercial contracts were reduced during 1995 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. During 1996,
GTC's domestic operations also experienced the impact of reduced demand from
certain semiconductor industry customers and also suffered from increased
facility underutilization related to certain contract terminations. In an effort
to mitigate the impact of these reduced contract requirements, management
implemented cost reduction strategies and increased its Tampa marketing efforts
on high mix/low volume and advanced packaging services.
GTC's Latin American manufacturing services business grew significantly
during 1995 and 1996. GTC entered into a manufacturing services agreement in
July 1995 to provide contract manufacturing services in Brazil to GTC's largest
commercial customer, IBM. The Brazilian operation began contributing to revenue
and operating profit during the third quarter of 1995. During 1996, GTC's
presence in Brazil
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<PAGE>
expanded as a result of the start-up of a second Brazilian facility. While GTC
also fostered growth at its Mexican facility during 1995, certain Mexican-based
contracts were terminated during 1996, creating underutilized capacity at that
facility. In response to this underutilized capacity, GTC retained new marketing
management and has increased its high volume manufacturing marketing efforts.
To enhance GTC's prospects for achieving an adequate revenue load in future
periods, management structured the marketing and sales function to optimize
GTC's capabilities at each of its manufacturing facilities. The marketing
efforts for GTC's domestic, Mexican and Brazilian manufacturing services
operations were focused on high mix/low volume and advanced packaging, high
volume manufacturing, and box build services, respectively.
Gross Profit
Gross profit increased to $6.8 million for 1996, compared to $4.5 million
for 1995. The gross margin increased to 3.0% in 1996 as compared to 1.6% in
1995. The net increase of $2.3 million represents an increase in gross profit in
the Tampa-based manufacturing and engineering services operations of $9.0
million and an increase from increased sales by GTC's Latin American operations
of $1.4 million, partially offset by a decrease associated with GTC's
divestiture of name brand product lines of $8.1 million. The name brand product
line claim referred to above contributed $4.1 million to 1996 gross profit.
Therefore, adjusting for the effect of this claim, the gross margin percentage
in 1996 remained relatively consistent with the 1995 percentage. Included in the
costs of operations in 1996 are costs amounting to $7.4 million which are more
fully discussed below.
GTC's ability to generate the expected level of profitability on contracts
is highly dependent on its ability to effectively manage materials. GTC
recognized inventory adjustments of $3.6 million, including $1.7 million related
to two contract terminations during the year and $1.9 million related to
excessive domestic and foreign scrap and related physical inventory adjustments.
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.
Management also evaluated the profitability on certain long-term contracts and
recorded costs associated with changes in contract estimates of loss contracts
of $1.0 million during the second quarter of 1996 and $0.8 million in the fourth
quarter. Other estimate changes on long-term contracts were also recognized
during 1996. These estimate changes principally resulted from GTC's inability to
achieve expected labor costs or material costs during the year. Costs associated
with asset disposals and deferred rent payments for capital equipment amounted
to $1.6 million. Severance costs also negatively impacted gross margin by $0.4
million in 1996.
During 1995, GTC also recognized significant charges to its operations,
which are more fully discussed under the caption "Year ended December 31, 1995
compared to year ended December 31, 1994" included herein below.
Selling, General and Administrative Expense
Selling, general and administrative expense was $11.5 million or 5.1% of
revenue in 1996, as compared to $19.7 million or 7.2% of revenue for 1995. This
decrease principally represented a $6.2 million reduction of costs associated
with the sale of substantially all of the assets of Metrum. Decreased
administrative expenses also resulted from continued cost reduction initiatives
including work force reductions during 1996. Cost reduction activities
implemented at various times during 1995 contributed to the significant cost
reductions realized in 1996 as compared to the full year ended December 31,
1995. These reductions offset the impact of $1.4 million of costs in 1996,
including severance costs of $0.5 million and costs incurred for the expected
closure of a Tampa warehouse of $0.9 million.
With regard to warehouse costs, in the second quarter of 1996 GTC
implemented a cost saving strategy to integrate the materials warehousing
function into its main Tampa facility. The total cost of the
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<PAGE>
move was originally estimated to be $0.4 million, but an increased cost of $0.5
million was recorded in the fourth quarter based on actual costs incurred and
the review of additional information regarding sublease strategies.
Selling, general and administrative expense also included $1.0 million of
provisions for doubtful accounts receivable, as compared to $1.3 million
recognized in 1995. The provision for doubtful accounts in both 1995 and 1996
represented a change in estimate of collectibility following extensive
communications with the respective customers regarding non-payment of invoices
and conclusions or settlements reached during the year regarding ultimate
collectibility.
Research and Development
Research and development expense was $0.3 million or 0.1% of revenue in
1996, as compared to $3.0 million or 1.1% of revenue for 1995. The decrease
reflects the fact that GTC's research and development efforts have historically
been concentrated on the divested name brand products business units. GTC's
manufacturing and engineering services businesses are expected to continue to
require limited levels of research and development in the future.
Interest Expense
Interest expense was $2.9 million or 1.3% of revenue in 1996, as compared
to $2.9 million or 1.1% of revenue in 1995. Interest expense remained relatively
constant with 1995 levels despite a significant reduction in outstanding debt
during 1996. The increased interest rate is partly attributable to the
amortization of warrants issued in the first quarter of 1996 in connection with
an amended and restated credit facility. The increased interest rate also
results from a higher weighted average interest rate incurred in the second half
of 1995 and throughout 1996 on GTC's principal credit facility.
Income Tax Expense
Income tax expense of $0.8 million in 1996 is primarily attributable to
GTC's international operations and Metrum state taxes payable. While an income
tax benefit of $4.0 million was recognized in 1995, as of December 31, 1995, GTC
had substantially exhausted the benefits of any income tax loss carrybacks. Also
as of December 31, 1996, GTC has recorded a valuation allowance for all
temporary differences and income tax loss carryforwards.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Revenue
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 Latin American operations offset by a decrease in sales
related to the divestiture of certain of GTC's name brand product lines during
the second quarter of 1995, a decline in sales from the balance of the name
brand product lines and a decrease in sales to commercial customers of GTC's
domestic manufacturing services business.
Gross Profit
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 during 1995
totaling $11.6 million related to inventories, estimated losses on terminated
contracts, asset disposals, operating lease liabilities and severance costs. 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
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<PAGE>
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.
Charges recognized by GTC during the second and fourth quarters of 1995
were the result of evaluations conducted by management in the respective
quarters of its reserves for excess and obsolete inventory. GTC charged $2.0
million and $3.2 million to cost of operations during the second and fourth
quarters of 1995, 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.
Concurrent with its review of inventory levels during the second quarter of
1995, 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 certain unprofitable contracts. GTC charged $1.8
million and $0.5 million to cost of operations during the second and fourth
quarters of 1995, respectively, to recognize estimated losses on terminated or
unprofitable contracts.
During the fourth quarter of 1995, 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 of 1995, 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 of 1995 to recognize the net present value of future
costs associated with this lease.
GTC conducted its annual 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 and an
additional inventory adjustment for an accounts payable reconciliation performed
contemporaneously with the physical inventory of $0.8 million. The significant
difference between the perpetual and physical amounts was not anticipated by
management. GTC also recognized certain other charges during the fourth quarter
totaling $0.5 million related to the disposal of idle manufacturing equipment.
Selling, General and Administrative Expense
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 $1.3 million provision for
uncollectible accounts during 1995 (including $0.8 million recorded in the
second quarter following extensive communications with the respective customers
regarding non-payment of invoices and conclusions or settlements reached
regarding ultimate collectibility) and increased costs associated with GTC's
Latin American operations. GTC also recognized certain other charges during the
second quarter totaling $0.6 million related to employee severance costs and
costs associated with an uncompleted business acquisition. GTC also recognized a
charge during the fourth quarter totaling $0.5 million related to the write-off
of terminated financing agreement costs.
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<PAGE>
Research and Development
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 Metrum divestitures resulted in further reductions.
Interest Expense
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 Tax Expense
Income taxes include current and deferred tax benefits and expense in 1995
and 1994. 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.
Dispositions of Assets
Beginning in 1995, management focused its attention 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 non-compliance with its credit
agreement. These divestitures were completed during the first quarter of 1996.
GTC's product offerings historically included a line of name brand
products. All sales of GTC's Metrum subsidiary were considered name brand
products, namely computer peripheral products, digital color imaging products
and instrumentation recording products. GTC also marketed a line of ruggedized
computers under the Badger tradename. Management successfully completed sale
transactions for substantially all of the assets of the peripherals products and
imaging products businesses during the second quarter of 1995 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 was paid with $16.4 million in cash and a
note receivable of $1.6 million. GTC retained approximately $2.4 million in
liabilities associated with the Metrum business, which liabilities related
primarily to certain employee benefits, accrued income taxes and commissions.
GTC retained certain warranty obligations of the Badger product in addition to
performance obligations under a contract with a customer who is 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 of 1995 related to the Metrum divestitures and a $2.2 million charge to
cost of operations during the fourth quarter of 1995 to write down its Badger
inventories to the negotiated sale price. GTC recorded a $0.6 million increase
in capital related to the first quarter 1996 instrumentation products
divestiture.
Revenue from GTC's name brand products line, in the aggregate, typically
generated higher gross profit margins than 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.
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<PAGE>
Foreign Currency
In addition to its domestic operations, GTC provides manufacturing services
in Brazil and Mexico. GTC recognized 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. Foreign currency transaction gains and
losses in Latin America have generally not been significant.
Liquidity and Capital Resources
Net cash provided by operating activities was $7.7 million and $9.4 million
in 1996 and 1995, respectively. The principal contributors to the positive
operating cash flow in 1996 include recognition and collection of a name brand
products claim, collection of income tax refunds, collection of accounts
receivable and reduced inventory levels. Significant cash payments reducing
accounts payable served to partially off-set the positive contributing items. At
the end of 1995, GTC was substantially beyond its payment terms with its
suppliers. While GTC continued to extend its payments beyond normal terms, a
significant effort was made during 1996 to reduce the days accounts payable were
outstanding, contributing to the overall reduction in accounts payable. 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 provided by investing activities was $8.2 million as compared to
net cash used in investing activities of $2.8 million in 1995. Capital
expenditures in 1996 and 1995 were $3.4 million and $8.0 million, respectively.
GTC's investments in manufacturing equipment in both 1996 and 1995 were required
to expand its Latin American capacity, maintain its competitive position and
respond to technological changes. GTC expects its capital expenditures in 1997
to be comparable to or less than 1996 levels. The divestiture of GTC's name
brand product lines during 1996 and 1995 generated net proceeds of approximately
$11.6 million and $5.2 million, respectively.
Net cash used in financing activities was $17.4 million and $5.8 million
during 1996 and 1995, respectively. During both 1996 and 1995, GTC significantly
reduced debt outstanding on its primary credit agreement and other debt. The
1996 reductions were principally provided for by the divestiture of GTC's name
brand products line in the first quarter of 1996, settlement of a name brand
products claim, and by income tax refunds received during the year. GFP also
invested $0.3 million in 1995 to provide funding for the start-up of GTC's
Brazilian operation.
GTC had a credit agreement in place at the beginning of 1996 with its bank
and thereafter entered into an amendment on March 29, 1996 (the "Credit
Agreement") and a further amendment on March 28, 1997. As more fully discussed
below, the March 27, 1997 amendment (the "Amendment") resulted in, among other
matters, reduced credit availability, an investment from GFP, and more lenient
financial covenants. A revolving credit facility issued under the Credit
Agreement provided credit availability up to $27.5 million through December 1996
and, as amended, provides $13.5 million through March 1998, subject to a
borrowing base consisting of eligible accounts receivable and inventories.
During 1996, GTC fully repaid a $5.0 million note and reduced the principal
outstanding on a $3.3 million term note by $0.6 million. Both of the notes
payable were issued under the Credit Agreement.
In connection with execution of the Credit Agreement in 1996, GFP invested
$1.0 million in GTC in exchange for 374,531 shares of GTC Common Stock. 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 became vested at closing. As amended,
the Credit Agreement provided for the balance of the warrants to become
exercisable as follows: 125,000 on March 31, 1997; 375,000 on June 30, 1997;
250,000 on September 30, 1997; and 250,000 on December 31, 1997. Vesting of
these warrants was also subject to an acceleration clause included in the Credit
Agreement. The bank forfeited all remaining unvested warrants when GTC repaid
all debt outstanding on June 30, 1997.
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<PAGE>
OWNERSHIP OF GFP COMMON STOCK
The authorized capital stock of GFP consists of 1,000,000 shares of
GFP Common Stock. As of September 15, 1997, there were 315,953 shares
outstanding which were held by 9 shareholders. The holders of GFP Common Stock
are entitled to one vote per share on all matters to be voted upon by the
shareholders except for the election of directors in which case shareholders may
vote cumulatively.
The following table sets forth certain information with respect to
beneficial ownership of the GFP Common Stock as of September 15, 1997, 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).............................. 102,943 32.3%
455 South Fourth Avenue
Louisville, Kentucky 40202
R. Scott Gill.................................... 88,565 28.0
455 South Fourth Avenue
Louisville, Kentucky 40202
Virginia G. Gill (2)............................. 62,234 19.7
455 South Fourth Avenue
Louisville, Kentucky 40202
Robert E. Gill (3)............................... 61,104 19.3
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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<PAGE>
OWNERSHIP OF TUBE TURNS COMMON STOCK
The authorized capital stock of Tube Turns consists of 2,000,000
shares of no par value common stock. As of September 15, 1997, there were
1,307,408 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 except for the election of directors in which
case shareholders may vote cumulatively.
The following table sets forth certain information with respect to
beneficial owners of the Tube Turns Common Stock as of September 15, 1997,
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 98.6%
455 South Fourth Avenue
Louisville, Kentucky 40202
John M. Kramer (2)................................... 32,068 2.4
Russell H. Johnson, Jr. (3).......................... 16,195 1.2
Norman E. Zelesky (4)................................ 6,043 *
Kevin H. Kramer...................................... 75 *
All directors and executive officers as a group (5).. 1,342,981 98.9
</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 19.3%, 32.3%, 28.0%, 19.7% 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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<PAGE>
OWNERSHIP OF BELL COMMON STOCK
The authorized capital stock of Bell consists of 1,500,000 shares of
$.01 par value common stock. As of September 15, 1997, there were 869,838 shares
outstanding which were held by 270 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 September 15, 1997, 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 96.9%
455 South Fourth Avenue
Louisville, Kentucky 40202
Edmund J. Laveck (2)................................. 35,832 4.0
Thomas C. Jamieson (3)............................... 5,360 *
Rick A. Affolter (4)................................. 4,000 *
John B. Krauss....................................... 1,010 *
Robert Sroka (5)..................................... 2,000 *
All directors and executive officers as a group (6).. 890,896 97.6
</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
19.3%, 32.3%, 28.0%, 19.7% 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 5,300 shares issuable under currently exercisable options.
(4) Includes 4,000 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 September 15, 1997, GFP owned 80% or more of the common
stock of each of Bell, GTC and Tube Turns. The material operating assets of GFP
consist of its investments in these operating companies.
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. On February 28, 1997, GFP
completed the sale of its sole remaining commercial property.
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
measure 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 provides electronic products and services to the high
technology segment of the electronics industry. Bell manufactures and
distributes a line of data acquisition and storage products (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). The President and Chief Executive Officer of Bell is Robert
E. Gill. Mr. Gill will serve in this position until a new Chief Executive
Officer
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is identified. Rick A. Affolter is Bell's Vice President and Chief Financial
Officer and John B. Krauss is Vice President and General Manager of Metrum.
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 539 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,
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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, 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.
Legal Proceedings
Bell is, from time to time, a party to litigation which arises in the
normal course of business. There is no litigation pending or, to Bell's
knowledge, threatened which, if determined adversely, would have a material
adverse effect upon the business or financial condition of Bell.
Group Technologies Corporation
The Company
See "Business of GTC."
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 participant 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 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. The President and Chief Executive Officer of
Tube Turns is John M. Kramer, the Executive Vice President and Chief Operating
Officer is Russell H. Johnson, Jr. and the Controller is Norman E. Zelesky.
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,
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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 13.5% and 14.0% of total revenue, respectively, during 1996. 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 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
Tube Turns employs approximately 174 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 approximately 128 union workers represented by
three unions. The United Steelworkers of America has 114 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.
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Properties
The headquarters of Tube Turns are located in a 383,000 square foot
office and manufacturing facility at 2820 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 involving underground storage tanks by a predecessor owner. Tube
Turns has obtained a $1.0 million indemnity from Sumitomo Metal Industries,
Ltd., Sumitomo Corporation and Sumitomo Corporation of America for these
matters, substantially all of which has been expended. Tube Turns believes,
however, that such contamination has been substantially remediated and that any
further costs of remediation, if any, will not be material.
Legal Proceedings
Tube Turns is, from time to time, a party to litigation which arises
in the normal course of its business. Other than as discussed below, there is no
litigation pending, or to Tube Turns' knowledge, threatened which, if determined
adversely, would have a material adverse effect upon the business or financial
condition of Tube Turns. Tube Turns is a co-defendant in two lawsuits described
under the heading "Risk Factors" in this Joint Proxy Statement/Prospectus which,
if determined adversely, could have a material adverse effect on Tube Turns
business and financial condition. However, Tube Turns believes that it has valid
defenses in such litigation.
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.
Prior to the reorganization, GFP divested its ownership in all of its
real estate operations and, accordingly, these operations have been accounted
for as discontinued operations in the Consolidated Financial Statements of GFP
for all periods presented. For the years ended December 31, 1994, 1995 and 1996
and for the six months ended June 30, 1997, the real estate operations accounted
for $9.1 million (2.8%), $8.1 million (2.5%), $5.9 million (1.9%) and $0.9
million (0.8%), respectively, of GFP's consolidated revenue. For the years ended
December 31, 1994, 1995 and 1996 and for the six months ended June 30, 1997, the
total income (loss) from discontinued operations, net of taxes, including the
gain on disposal of discontinued operations, net of taxes, was $(0.4) million,
$3.7 million, $3.5 million and $3.9 million, respectively. As of December 31,
1995 and 1996 and as of June 30, 1997 the real estate operations accounted for
$26.5 million (15.3%), $15.5 million (11.7%) and $0.2 million (0.0%),
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, 1994, 1995 and 1996 and for the six months ended June
30, 1997, GTC accounted for $274.1 million (84.0%), $273.6 million (83.2%),
$224.6 million (72.7%) and $62.9 million (56.4%), respectively, of GFP's
consolidated revenue. For the year ended December 31, 1994, GTC accounted for
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$10.5 million (77.2%) of GFP's consolidated operating income (defined as income
before interest expense, other income and expense, gain on issuance of stock by
subsidiary, income taxes, minority interests and discontinued operations). For
the year ended December 31, 1995 GTC's operating loss of $18.2 million is
compared to GFP's consolidated operating loss of $14.8 million. For the year
ended December 31, 1996, GTC's operating loss of $5.0 million is compared to
GFP's consolidated operating income of $0.5 million. For the six months ended
June 30, 1997 GTC's operating loss of $3.5 million is compared with GFP's
consolidated operating income of $1.3 million. As of December 31, 1995 and 1996
and as of June 30, 1997, GTC accounted for $113.1 million (65.4%), $67.5 (50.8%)
and $61.8 million (53.7%), respectively, of GFP's consolidated total assets.
Financial information with respect to GTC, Tube Turns and Bell as of and
for the years ended December 31, 1994, 1995 and 1996 and for the six months
ended June 30, 1997 is as follows (in thousands):
<TABLE>
<CAPTION>
Years Ended or as of Six Months Ended
December 31, or as of June 30,
--------------------------- -------------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
GTC
Revenue.................. $274,147 $273,647 $224,661 $132,190 $62,897
Operating income (loss).. 10,549 (18,227) (4,981) 2,519 (3,526)
Net income (loss)........ 4,700 (17,673) (8,579) 63 (4,616)
Working capital.......... 56,622 23,922 7,839 23,181 (1,443)
Total assets............. 122,566 113,106 67,465 93,191 61,844
Bell
Revenue.................. $ 30,264 $ 33,499 $ 59,254 $ 27,236 $33,704
Operating income......... 2,174 2,521 5,880 3,014 4,256
Net income............... 1,053 1,060 2,767 1,473 1,795
Working capital.......... 3,658 3,923 10,776 10,637 16,139
Total assets............. 13,691 16,224 29,695 28,637 31,219
Tube Turns (unaudited)
Revenue.................. $ 23,148 $ 23,858 $ 24,683 $ 11,871 $14,883
Operating income......... 1,402 1,280 1,286 518 1,329
Net income............... 1,026 1,055 1,664 455 994
Working capital.......... 5,283 4,749 4,966 4,976 4,496
Total assets............. 15,714 15,674 18,721 16,458 18,811
</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.
Six months ended June 30, 1996 and 1997
Revenue for the first six months of 1997 was $111.5 million, a decrease of
$59.8 million or 34.9% from $171.3 million for the first six months of 1996. The
decrease in revenue is due to a $69.3 million decline in revenue at GTC. This
decline in revenue is associated with decreased customer demand and termination
or completion of certain contracts. The decline is further effected by the
completion of the disposition of GTC's name brand products business units during
the first quarter of 1996 and the recognition of $4.1 million of revenue for a
favorable claim settlement during the second quarter of 1996. Revenue from GTC's
Latin American operations in the first six months of 1997 as compared to the
year earlier period decreased $16.9 million, principally associated with the
completion or curtailment of certain contracts during the first quarter of 1997
and the second half of 1996. GTC divested all of its Latin American operations
effective June 30, 1997,
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as more fully described in Note 7 to GTC's Unaudited Condensed Consolidated
Financial Statements as of and for the period ended June 29, 1997. GTC's
percentage of GFP's consolidated revenue for the six months ended June 30, 1997
decreased to 56.4% from 77.2% for the comparable prior year period. The
consolidated revenue of GFP, exclusive of GTC, increased by $9.5 million or
24.3% in the first six months of 1997 as compared to the year earlier period due
to increases at both Bell and Tube Turns. Bell's increase was due in part to the
full period effect of owning Metrum, which was acquired from GTC in the first
quarter of 1996.
The operating income was $2.5 million for the six months ended June 30,
1997 as compared to an operating profit of $5.6 million for comparable prior
year period. The $3.1 million decrease in operating income resulted primarily
from the significant reduction in revenue at GTC and from the recognition of
$4.1 million of operating profit at GTC in the second quarter of 1996 related to
a favorable claim settlement. Operating margins for both Bell and Tube Turns
improved in the six months ended June 30, 1996 as compared to the year earlier
period. Bell's margins improved primarily as a result of the increase in revenue
against a fixed cost base that didn't change significantly as compared to the
prior period. Tube Turns margins improved as a result of obtaining additional
business in the forging operations at improved margins as well as reducing
operating costs in their business.
A decrease in consolidated selling, general and administrative expenses of
$0.7 million contributed to the improvement in GFP's operating profit. GTC's
selling, general and administrative expenses decreased while Bell and Tube Turns
recognized increases in selling, general and administrative expenses in relation
to the increasing volume in both businesses. GTC's selling, general and
administrative expenses for the six months ended June 30, 1997 decreased to $3.2
million or 5.2% of revenue from $6.5 million or 4.9% of revenue for the six
months ended June 30, 1996. This decrease is associated with the decreased
business volume, cost savings initiatives implemented in 1996 and 1997,
including workforce reductions, and approximately $1.4 million of charges taken
in the second quarter of 1996 principally related to increases in accounts
receivable reserves and estimated costs associated with the relocation of
warehouse facilities.
Interest expense for the first six months of 1997 decreased to $1.7 million
from $2.5 million for the comparable prior year period (excluding interest
expense related to the real estate operations which have been accounted for as
discontinued operations). GTC's reduced level of operations has required a lower
level of working capital and, therefore, reduced debt requirements.
Income tax expense for the six months ended June 30, 1997 consists
principally of currently payable state income taxes on the stand-alone taxable
income of Tube Turns and Bell and foreign income taxes on taxable income of
GTC's Latin American operations. The reduction in tax expense from the
comparable prior year period results from the decrease in consolidated income
from continuing operations for the year-to-year periods.
GFP recorded the minority shareholders' proportionate share of the net
earnings or loss of GTC for the six month periods as a reduction in the
consolidated income before discontinued operations.
Liquidity and Capital Resources
Net cash used in operating activities was $2.9 million for the six months
ended June 30, 1997. Accounts receivable decreased by $3.3 million while
inventories increased by $3.3 million. GFP also reduced accounts payable by $2.7
million, primarily attributable to better cash availability and a corresponding
reduction in balances with suppliers.
Net cash provided by investing activities was $18.6 million for the six
months ended June 30, 1997. GFP made capital expenditures of $2.7 million in the
six months ended June 30, 1997 as compared to $3.4 million in the year earlier
period. The reduction in capital expenditure is related to efforts to minimize
capital expenditures at GTC due to their over capacity situation. Included in
net cash provided by investing activities is $21.6 million of proceeds from the
disposal of assets. This primarily relates to the disposition of the
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remaining real estate asset owned by GFP. The disposition has been accounted for
in the statement of operations as discontinued operations.
Net cash used in financing activities was $16.5 million for the six months
ended June 30, 1997. This is due primarily to the $18.7 million reduction in
debt in connection with the real estate disposal explained in the previous
paragraph. Net proceeds under the new revolving credit were $5.5 million which
included borrowings required for GFP to make the GTC Preferred Stock investment
in GTC. Both the new credit agreement and the GTC Preferred Stock investment are
more fully described in the following two paragraphs. On the day after the close
of GTC's second quarter for 1997, GTC utilized the proceeds from the sale of its
Latin American operations to repay all amounts outstanding under the credit
agreement with its primarily lender and terminated that credit agreement.
On March 21, 1997 GFP, through a newly formed subsidiary, BT Holdings,
entered into a loan agreement with a bank to provide a credit facility to Bell
and Tube Turns. The credit facility, which totals $30 million, includes a $20
million revolving credit loan and a $10 million term loan. The revolving credit
loan matures on March 20, 2002. The term loan matures in quarterly installments
of $500,000, commencing on September 20, 1997 and occurring thereafter on each
December 20, March 20 and June 20 through and including March 20, 2002. The loan
proceeds were used to repay the existing debt obligations of Bell and Tube
Turns. Revolving credit availability may be used for the general corporate
purposes of Bell and Tube Turns and for ordinary operating expenses of GFP.
GTC entered into a credit agreement with its primary bank on March 29,
1996. In connection with GTC's March 28, 1997 amendment to the credit agreement,
GFP invested $2.5 million in GTC in exchange for 250,000 shares of GTC Preferred
Stock. The GTC Preferred Stock pays quarterly dividends of 8.5% per annum and is
redeemable at the option of the holder upon repayment by GTC of all of its
outstanding credit agreement indebtedness. The GTC Preferred Stock is also
convertible and each share may be exchanged for 8.1 shares of the Company's
Common Stock.
GFP believes that sufficient resources, including resources provided by the
sale of GTC's Latin American operations, will be available to meet its cash
requirements through the next twelve months. 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.
Year ended December 31, 1995 and 1996
Revenue for 1996 was $308.7 million, a decrease of $20.3 million or 6.2%
from $329.0 million for 1995. The overall decrease in revenue reflects several
changes in GFP's business which occurred during 1995 and 1996. The primary
components of the change in revenue are an increase in foreign operations of
$18.4 million offset by a reduction in Tampa based operations of $36.1 million
and a $31.2 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 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 1995. Revenue for 1996 also includes $4.1 million of revenue derived from
a favorable contract claim settlement. GTC's percentage of GFP's consolidated
revenue in 1996 decreased to 72.8% from 83.2% in 1995.
The operating income in 1996 improved to $0.5 million from an operating
loss of $14.8 million for 1995. The $15.3 million improvement resulted from
better profitability for each business unit. The largest component of the
improved profitability was GTC's reduction in operating loss from $18.2 million
in 1995 to $5.0 million in 1996. Gross margins from the contract manufacturing
business improved significantly as provisions for obsolete inventories, contract
estimate changes and severance costs charged to operations
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during 1996 were lower than those provisions made in 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 1996. Bell's operating
income for 1996 increased by $3.4 million from the prior year due primarily to
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 in 1996 increased to $4.0 million from $3.4 million for
the comparable prior year period (excluding interest expense related to the real
estate operations which have been accounted for as discontinued operations).
Interest increased despite the reduction in debt due primarily to an increased
interest rate at GTC and due to the amortization of warrants issued in the first
quarter of 1996 in connection with the GTC credit agreement.
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 in 1996 consists of currently payable income tax of $0.7
million for state income taxes on the stand-alone taxable income of Tube Turns
and Bell and foreign income taxes on taxable income of GTC's Latin American
operations. Additionally, approximately $0.9 million of deferred federal income
tax expense was recognized during 1996 as a result of taxable temporary
differences. Income tax expense in 1995 included the recognition of a valuation
allowance of $4.4 million against the consolidated deferred tax assets of GFP
and a current tax benefit for federal and state income taxes refundable which
were generated by GTC's operating loss.
GFP recorded the minority shareholders' proportionate share of the net loss
of GTC for both years as a reduction in the consolidated loss before
extraordinary items.
Liquidity and Capital Resources
Net cash provided by operating activities was $14.1 million for 1996.
Accounts receivable and inventories decreased by $2.2 million and $15.2 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 $17.8 million, primarily attributable to the
decline in volume and a reduction in balances with suppliers.
Net cash provided by investing activities was $4.7 million for 1996. GFP
made capital expenditures of $7.4 million in 1996 as compared to $10.2 million
in 1995. GFP received proceeds of $10.1 million on the sale of a real estate
property. In addition, 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 $18.4 million for 1996. The
reduction in debt related to the real estate sale described in the preceding
paragraph was approximately $10.4 million In addition, GTC reduced their
outstanding borrowings by $17.6 million during the year. However, 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.
GFP's real estate entities decreased borrowings in 1994 and 1995 through
the scheduled payments
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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. At
December 31, 1996 there was one outstanding mortgage note on GFP's remaining
commercial real estate property, which was classified in current liabilities in
GFP's balance sheet. GFP divested this property in the first quarter of 1997.
Years ended December 31, 1994 and 1995
Revenue was $326.3 million and $329.0 million for 1994 and 1995,
respectively, representing an increase of $2.7 million or 0.8% 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 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 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 $13.6 million for 1994 as compared to an operating
loss of $14.8 million for 1995. The decline in profitability at GTC has
dominated the year-to-year changes in profitability of the consolidated GFP
operations. On a combined basis, the consolidated GFP operations, excluding GTC,
increased operating income by $0.3 million from 1994 to 1995.
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 $2.6 million and $3.4 million in 1994 and 1995,
respectively (excluding interest expense related to the real estate operations
which have been accounted for as discontinued operations).
131
<PAGE>
The increase 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 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 consist primarily of current and deferred tax expense in 1994
and current tax benefits in 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.
Liquidity and Capital Resources
Cash at December 31, 1994 and 1995 was $6.4 million and $5.7 million,
respectively. Net cash used by operating activities was $4.4 million in 1994
while net cash provided by operating activities was $14.9 million in 1995.
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 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 $10.2 million and $7.0 million in
1994 and 1995, respectively. GFP invested $11.9 million and $10.2 million in
capital assets during 1994 and 1995, respectively, to improve its technological
capabilities and increase production capacity. GFP sold various excess and idle
real property and equipment during 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 1994 and 1995. GTC acquired
a contract manufacturing operation in Mexico City, Mexico in July 1994 for $1.2
million which was 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 $10.0 million in 1994 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 1994 and 1995 as a result of refinancings, acquisitions, and, in the case
of GTC, technical defaults occurring during 1995 under certain terms and
conditions of its revolving credit agreement. In 1994, Bell had a net reduction
in total borrowings and in 1995 Bell had a net increase, 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 1994 and 1995.
132
<PAGE>
During 1994, the completion of the initial public offering of GTC 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 their primary 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 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.
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," and in
"The GTC Special Meeting--Proposal to Approve the Reincorporation" 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 and relevant to GTC
shareholders receiving Sypris Common Stock pursuant to the Reincorporation.
EXPERTS
The consolidated financial statements and schedule of Group Technologies
Corporation at December 31, 1995 and 1996 and for each of the three years in the
period ended December 31, 1996, appearing in this Joint Proxy
Statement/Prospectus, have been audited by Ernst & Young LLP, independent
certified public accountants, as set forth in their report thereon 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 Group Financial
Partners, Inc. and subsidiaries at December 31, 1995 and 1996, and for each of
the three years in the period ended December 31, 1996, appearing in this Joint
Proxy Statement/Prospectus, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon 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 Notices of Special Meetings accompanying this Joint Proxy
Statement/Prospectus. If any other matter does properly come before the Special
Meetings, the appointees named in the proxies will vote their proxies in
accordance with their best judgment.
133
<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, 1994, 1995 and 1996)
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, 1996 and June 29, 1997)......... F-23
Consolidated Statements of Operations (Three months and six months ended
June 30, 1996 and June 29, 1997)........................................ F-24
Consolidated Statements of Cash Flows (Six months ended June 30, 1996 and
June 29, 1997).......................................................... F-25
Notes to Condensed Consolidated Financial Statements...................... F-26
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Years ended December 31, 1994,
1995 and 1996)
Report of Independent Public Accountants.................................. F-29
Consolidated Balance Sheets............................................... F-30
Consolidated Statements of Operations..................................... F-31
Consolidated Statements of Shareholders' Equity........................... F-32
Consolidated Statements of Cash Flows..................................... F-33
Notes to Consolidated Financial Statements................................ F-34
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets (December 31, 1996 and June 30, 1997)......... F-56
Consolidated Statements of Operations (Six months ended June 30, 1996
and 1997)............................................................... F-57
Consolidated Statements of Cash Flows (Six months ended June 30, 1996
and 1997)............................................................... F-58
Notes to Condensed Consolidated Financial Statements...................... F-59
</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, 1995 and 1996, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule listed in the index. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Group Technologies Corporation at December 31, 1995 and 1996, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996, 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 28, 1997
F-2
<PAGE>
GROUP TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)
<TABLE>
<CAPTION>
December 31,
------------------
1995 1996
-------- -------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................. $ 2,143 $ 661
Accounts receivable, net................................... 31,167 22,754
Inventories, net........................................... 46,499 20,220
Other current assets....................................... 7,965 2,102
-------- -------
Total current assets.................................... 87,774 45,737
Property and equipment, net................................. 24,090 21,206
Other assets................................................ 1,242 522
------- -------
$113,106 $67,465
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................... $ 37,789 $17,969
Accrued liabilities........................................ 17,892 16,416
Current portion of long-term debt.......................... 8,171 3,513
-------- -------
Total current liabilities............................... 63,852 37,898
Long-term debt.............................................. 23,050 10,119
Other liabilities........................................... 364 45
-------- -------
Total liabilities....................................... 87,266 48,062
Commitments and contingencies
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 (deficit)................................ 3,145 (5,434)
-------- -------
Total shareholders' equity.............................. 25,840 19,403
-------- -------
$113,106 $67,465
======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
GROUP TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
1994 1995 1996
-------- ---------- ---------
<S> <C> <C> <C>
Revenue..................................................... $274,147 $273,647 $224,661
Cost of operations.......................................... 237,867 269,150 217,890
-------- -------- --------
Gross profit.............................................. 36,280 4,497 6,771
Selling, general and administrative expense................. 20,561 19,683 11,453
Research and development.................................... 5,170 3,041 299
-------- -------- --------
Operating income (loss).................................. 10,549 (18,227) (4,981)
Interest expense............................................ 2,048 2,907 2,858
Other expense............................................... 504 521 (59)
-------- -------- --------
Income (loss) before income taxes......................... 7,997 (21,655) (7,780)
Income taxes................................................ 3,297 (3,982) 799
-------- -------- --------
Net income (loss)......................................... $ 4,700 $(17,673) $ (8,579)
======== ======== ========
Net income (loss) per share:
Primary................................................... $ 0.30 $ (1.13) $ (0.53)
Fully diluted............................................. $ 0.30 $ (1.13) $ (0.53)
Shares used in computing per share amounts:
Primary................................................... 15,644 15,695 16,157
Fully diluted............................................. 15,789 15,695 16,157
</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 Shareholders'
Shares Amount Capital Earnings Compensation Equity
------------ ------ ------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
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
Common stock issued..................................... 391,922 4 1,045 -- -- 1,049
Warrants issued......................................... 480 480
Capital contribution.................................... 613 613
Net loss................................................ -- -- -- (8,579) -- (8,579)
---------- ------ ------- -------- ------------ -------------
Balance at December 31, 1996............................ 16,220,629 $ 162 $24,675 $ (5,434) $ -- $ 19,403
========== ====== ======= ======== ============ =============
</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,
---------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................................. $ 4,700 $(17,673) $ (8,579)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization................................................... 5,402 5,596 5,214
Compensation paid with redeemable common stock.................................. 429 -- --
Deferred income taxes........................................................... 2,499 741 251
Provision for inactive, obsolete and unsalable inventories...................... 540 6,939 3,567
Provision for doubtful accounts................................................. 571 1,293 961
Provision for idle leased equipment............................................. -- 1,104 --
Other........................................................................... 273 778 1,134
Changes in operating assets and liabilities, net of acquisitions and
dispositions:
Accounts receivable............................................................ (2,856) 1,875 4,195
Inventories.................................................................... (7,172) 3,287 15,497
Other current and non-current assets........................................... (4,403) (3,752) 4,737
Accounts payable............................................................... (3,829) 8,043 (18,872)
Accrued and other liabilities.................................................. (9,052) 1,183 (389)
-------- -------- --------
Net cash provided by (used in) operating activities........................... (12,898) 9,414 7,716
Cash flows from investing activities:
Capital expenditures.............................................................. (7,271) (8,042) (3,408)
Purchase of the net assets of acquired entities................................... -- -- --
Proceeds from disposal of assets.................................................. -- 5,214 11,561
-------- -------- --------
Net cash provided by (used in) investing activities........................... (7,271) (2,828) 8,153
Cash flows from financing activities:
Net (repayments) proceeds under line of credit agreement.......................... 19,212 (4,667) (10,418)
Proceeds from long-term debt...................................................... -- -- --
Repayments of long-term debt...................................................... (22,573) (1,505) (7,933)
Net proceeds from issuance of common stock........................................ 17,801 401 1,000
-------- -------- --------
Net cash provided by (used in) financing activities........................... 14,440 (5,771) (17,351)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents............................... (5,729) 815 (1,482)
Cash and cash equivalents at beginning of year..................................... 7,057 1,328 2,143
-------- -------- --------
Cash and cash equivalents at end of year........................................... $ 1,328 $ 2,143 $ 661
======== ======== ========
</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. The Parent owns approximately 80% of the outstanding
Common Stock of the Company.
The Company provides 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 automotive,
commercial avionics, computer, government systems, industrial electronics,
networking, space, and telecommunications.
(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 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 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 their estimated economic
lives (three to ten 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
F-7
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
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, 1995
was $261,000. Accumulated amortization of negative goodwill at December 31, 1995
was $396,000. 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. As a result of the disposition of substantially all of Metrum's remaining
assets during 1996, there was no negative goodwill remaining at December 31,
1996.
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 $60,500,000, $57,945,000 and $54,397,000 in 1994, 1995 and 1996,
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 approximately $210,000 remained in inventory at
December 31, 1995 and 1996). 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 profit 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
F-8
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
loss is charged to operations in the period the loss first becomes known.
Provisions for losses on firm fixed-price contracts amounted to $1,226,000,
$700,000 and $2,327,000 in 1994, 1995 and 1996, respectively.
The Company recognized income 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. While contract claim reserves
were initially established in response to customer assertions regarding product
failures, tests regarding the alleged failures ultimately were determined to be
inconclusive, requiring a change in estimate. 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.
During the second quarter of 1996, the Company successfully settled a name brand
products contract claim and recognized revenue and income before income taxes of
approximately $4,100,000 associated with that settlement.
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 separately
filed its initial consolidated federal income tax return for the period March
23, 1995 through December 31, 1995. Effective March 29, 1996, as a result of an
increase in the Parent's ownership percentage of the Company, the Company again
met the 80-percent-voting power and value requirements defined by the Internal
Revenue Code for affiliated group membership and expects to be an includable
member of the Parent's affiliated group beginning March 29, 1996.
For financial reporting purposes during the tax periods in which the
Company is or expects to be included in the Parent's consolidated federal income
tax return, income taxes are accounted for on a separate return basis, including
deferred income taxes. For those tax periods, liabilities for, or refunds of,
federal income taxes were calculated on a stand-alone basis and were payable to,
or receivable 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 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, 1996.
F-9
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
The Company earned revenue from the United States government and its
agencies of approximately $51,200,000 (19% of revenue), $53,643,000 (20% of
revenue) and $38,635,000 (17% of revenue) during 1994, 1995 and 1996,
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 11%, 9% and 12% of the Company's revenue in 1994, 1995
and 1996, respectively. The Company's largest commercial customer was IBM which
represented approximately 14%, 16% and 16% of the Company's revenue in 1994,
1995 and 1996, respectively. Sales to International Game Technology represented
approximately 10% of the Company's revenue in 1996. No other single customer
accounted for more than 10% of the Company's revenue in 1994, 1995 or 1996.
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 years ended
December 31, 1995 and 1996; 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 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 effect of the implementation of Statement No. 121 in 1996 was not
significant.
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
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
F-10
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
earlier. The Company evaluated the effects of applying Statement 123's fair
value method to the Company's stock-based awards and determined that the results
in pro forma net income and earnings per share were not materially different
from the actual amounts reported and therefore no separate pro forma results are
being included.
(3) Acquisitions
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 five 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.
These acquisitions did not have a significant effect on the Company's
results of operations in 1994 and 1995.
(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 Bell
Technologies, Inc. ("Bell"), also a subsidiary of the Parent, 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, 2000. The sales price for
each 1995 transaction approximated the net book value of the respective business
units on the date of sale. The sales price for the February 9, 1996 transaction
exceeded the net book value of assets and liabilities transferred by $613,000.
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 of $613,000 was recorded by the Company as a
contribution to its capital.
F-11
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
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 Badger
inventory to the sale price.
(5) Accounts Receivable
<TABLE>
<CAPTION>
Accounts receivable consist of the following:
December 31,
-----------------
1995 1996
------- -------
(in thousands)
<S> <C> <C>
Commercial customers.................................. $28,088 $20,237
United States Government.............................. 3,862 3,763
------- -------
31,950 24,000
Allowance for doubtful accounts....................... (783) (1,246)
------- -------
$31,167 $22,754
======= =======
</TABLE>
Accounts receivable from the United States Government includes amounts due
under long-term contracts, which are all billed, at December 31, 1995 and 1996
of $2,568,000 and $2,463,000, respectively. The provision for doubtful accounts
was $571,000, $1,293,000 and $961,000 for the years ended December 31, 1994,
1995 and 1996, respectively.
(6) Inventories
<TABLE>
<CAPTION>
Inventories consist of the following:
December 31,
------------------
1995 1996
-------- -------
(in thousands)
<S> <C> <C>
Raw materials........................................................ $ 34,469 $ 12,538
Work in process...................................................... 6,840 4,100
Finished goods....................................................... 330 107
Costs relating to long-term contracts and programs, net
of amounts attributed to revenue recognized to date................ 25,766 11,655
Progress payments related to long-term contracts and
programs........................................................... (12,300) (3,292)
Reserve for inactive, obsolete and unsalable inventory............... (8,606) (4,888)
-------- -------
$ 46,499 $20,220
======== =======
</TABLE>
The above amounts include inventory valued under the last-in, first-out
("LIFO") method totaling $5,318,000 at December 31, 1995, which approximates
replacement cost at that date. Provisions for inactive, obsolete and unsalable
inventories were $540,000, $6,939,000 and $3,567,000 for the years ended
December 31, 1994, 1995 and 1996, respectively.
F-12
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(7) Other Current Assets
Other current assets consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1996
------ ------
(in thousands)
<S> <C> <C>
Net deferred tax assets............................................... $ 589 $ --
Refundable income taxes............................................... 5,000 744
Other................................................................. 2,376 1,358
------ ------
$7,965 $2,102
====== ======
</TABLE>
(8) Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1996
--------- ---------
(in thousands)
<S> <C> <C>
Leasehold improvements................................................ $ 6,954 $ 6,426
Machinery, equipment, furniture and fixtures.......................... 39,780 38,594
-------- --------
46,734 45,020
Less accumulated depreciation......................................... (22,644) (23,814)
-------- --------
$ 24,090 $ 21,206
======== ========
</TABLE>
Depreciation expense was $5,350,000, $5,073,000 and $4,848,000 for the
years ended December 31, 1994, 1995 and 1996, respectively.
(9) Accrued Liabilities
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1995 1996
------- -------
(in thousands)
<S> <C> <C>
Payments received from customers in excess of contract costs.......... $ 5,340 $ 3,657
Employee benefit plan accruals........................................ 4,045 2,423
Other................................................................. 8,507 10,336
------- -------
$17,892 $16,416
======= =======
</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.
F-13
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
<TABLE>
<CAPTION>
(10) Long-Term Debt
Long-term debt consists of the following:
<S> <C> <C>
December 31,
-----------------
1995 1996
------- -------
(in thousands)
Revolving credit (a).......................... $25,583 $ 6,934
Term note (a)................................. -- 2,690
Other (b)..................................... 5,638 4,128
------- -------
Total long-term debt.......................... 31,221 13,752
Less unamortized original issue discount (a).. -- (120)
Less current portion of long-term debt........ (8,171) (3,513)
------- -------
$23,050 $10,119
======= =======
</TABLE>
(a) On March 29, 1996, the Company entered into a financing agreement (the
"Credit Agreement") with its bank to replace a prior debt instrument. The
Credit Agreement provided 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"). Borrowings under
the Credit Agreement are secured by substantially all of the assets of the
Company. Under the terms of the Credit Agreement, the Company pays interest
monthly on outstanding borrowings at the prime rate (8.25% at December 31,
1996) plus 1.25%. The Company was 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.
Available borrowings on the Revolver at December 31, 1996 were
approximately $6,800,000. As amended, the Credit Agreement provides credit
availability on the Revolver equal to the lesser of $13,500,000 or the
applicable amount of its eligible accounts receivable and inventories
through March 1998. Principal payments are due monthly on the Term Note.
The 1996 Note was repaid in full during 1996.
The Company, in connection with the execution of the 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. Upon execution of the Credit
Agreement, 200,000 of the warrants became exercisable. As amended, the
Credit Agreement provides for the balance of the warrants to become
exercisable as follows; 125,000 on March 31, 1997; 375,000 on June 30,
1997, 250,000 on September 30, 1997; and, 250,000 on December 31, 1997.
The warrants will expire five years following the issue date. The lender
will forfeit any unvested warrants in the event the Company repays all debt
outstanding under the Credit Agreement prior to any vesting date. On March
29, 1996, the Company believed that it was probable that the Credit
Agreement would be refinanced prior to the remaining warrants becoming
exercisable. Therefore, only the 200,000 warrants were considered in
determining the fair value of the transaction. Unamortized original issue
discount related to the issuance of the vested warrants is $120,000 at
December 31, 1996.
In connection with an amendment to the Credit Agreement on March 28, 1997,
the Parent invested $2,500,000 in GTC in exchange for 250,000 shares of GTC
Preferred Stock (the "Preferred Stock"). The Preferred Stock is redeemable
and pays quarterly dividends of 8.5% per annum. The Company agreed to
utilize $500,000 of the proceeds of the Preferred Stock to partially repay
the Term Note. The Preferred Stock is redeemable at the option of the
holder upon repayment by the Company of all
F-14
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
of its outstanding Credit Agreement indebtedness. The Preferred Stock is
also convertible and each share may be exchanged for 8.1 shares of the
Company's Common Stock.
(b) In connection with two business acquisitions, 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 believed the maximum future payments were probable and recorded
debt equal to the net present value of the maximum future payments on the
date of acquisition. At December 31, 1996, $587,000 was payable to the
sellers.
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 three 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 1996 was not significant. At
December 31, 1996, $2,928,000 was payable to the seller.
During 1996, the Company purchased approximately $1,100,000 of equipment
which was financed by the manufacturer. At December 31, 1996, $613,000 was
payable to the manufacturer.
The annual maturities of long-term debt for each year ended December 31 are
presented below. Maturities of debt incurred under the 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.
(in thousands)
1997..................................................... $ 3,513
1998..................................................... 10,119
Interest paid during 1994, 1995 and 1996 was $2,161,000, $3,427,000 and
$2,974,000, 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 the
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 1994, 1995 and 1996 were
$2,271,000, $1,783,000 and $902,000, 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
F-15
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
a portion of the premiums. During 1994, 1995 and 1996, the Company charged
$5,287,000, $4,526,000 and $3,732,000, respectively, to operations related to
reinsurance premiums, medical claims incurred and estimated, and administrative
costs for its employee medical plans. Claims paid during 1994, 1995 and 1996 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 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 $247,000 was recorded in 1994 on
shares purchased between December 31, 1993 and April 3, 1994 for the excess of
the fair market value over the purchase price.
During 1994, 20,520 shares valued at $295,000 were issued under the Stock
Purchase Plan.
Stock Option Plans
In October 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"). Options remain outstanding and
exercisable under the terminated 1990 Plan; however, no further grants will be
made under the 1990 Plan. During 1994, no options were granted under the 1990
Plan prior to its termination on May 18, 1994.
Under the 1994 Plan, as amended, options may be granted to employees to
purchase a maximum of 800,000 shares of Common Stock. Options to purchase
179,000 and 553,066 shares were granted under the 1994 Plan during 1995 and
1996, respectively.
Under the Directors Plan, as amended, 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 300,000 shares of Common Stock. Options to
purchase 10,000, 25,951 and 78,371 shares were granted under the Directors Plan
during 1994, 1995 and 1996, respectively.
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
F-16
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
reserved 1,000,000 shares of Common Stock for issuance under the Purchase Plan.
No shares have been issued under this 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. Until October 1996, the Option Plan
Committee had the sole authority to select the individuals who were granted
options and determine the number of shares subject to each option, fix the
period during which each option may be exercised and fix the price at which
shares subject to options may be purchased. Beginning in October 1996, both the
full Board of Directors and the Option Plan Committee have authority to
administer the stock option plans.
The following table summarizes option activity for the three years ended
December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding
----------------------
Option
price
Shares per share
---------- ----------
<S> <C> <C>
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
Granted...................... 631,437 0.84-3.00
Terminated/forfeited......... (401,700) 2.35-6.00
--------- ----------
Balance at December 31, 1996.. 1,249,688 $0.84-7.75
========= ==========
</TABLE>
At December 31, 1996, options to purchase 594,322 shares were exercisable
under the Company's stock option plans with a weighted-average share price of
$2.07.
At December 31, 1995 and 1996, the weighted-average share price for options
outstanding was $2.33 and $2.30, respectively. The weighted-average share price
for options granted during 1996 was $2.46. During 1996, 251,700 and 150,000
options were forfeited and expired, respectively. Forfeited and expired options
in 1996 had weighted-average share prices of $2.79 and $2.35, respectively. The
weighted-average remaining contractual life of options outstanding at December
31, 1996, was approximately five years.
(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.
F-17
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
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 split and the change to $.01 par value Common Stock have been
retroactively reflected in the accompanying consolidated financial statements.
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.
Also during 1995 and 1996, certain transactions were executed with related
parties (see Note 17).
(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 up 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>
1997....................................................... $3,638
1998....................................................... 3,553
1999....................................................... 2,449
2000....................................................... 1,151
2001....................................................... 1,187
Thereafter................................................. 593
</TABLE>
Rent expense for the years ended December 31, 1994, 1995 and 1996, was
$3,354,000, $5,194,000 and $3,660,000, 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.
F-18
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
<TABLE>
<CAPTION>
(16) Income Taxes
The components of income tax expense (benefit) are:
Years ended December 31,
--------------------------
1994 1995 1996
------ ------- ------
(in thousands)
<S> <C> <C> <C>
Income taxes currently payable (refundable):
Federal...................................... $ 528 $(5,263) $(333)
State........................................ 270 112 62
Foreign...................................... -- 428 481
------ ------- -----
798 (4,723) 210
Deferred income taxes:
Federal...................................... 2,301 668 589
State........................................ 198 73 --
------ ------- -----
2,499 741 589
------ ------- -----
$3,297 $(3,982) $ 799
====== ======= =====
</TABLE>
Income taxes paid during 1994 and 1996 were $6,421,000 and $762,000,
respectively, including federal income taxes paid to the Parent of $5,628,000 in
1994. Income tax refunds received during 1995 and 1996 were $2,350,000 and
$4,928,000, respectively, all of which was received from the Parent. At December
31, 1995 and 1996, federal income taxes receivable from the Parent of $5,073,000
and $330,000, respectively, were included in other current assets.
The following is a reconciliation of income tax expense recognized to that
computed by applying the federal statutory rate of 34% in 1994, 1995 and 1996 to
income before income taxes:
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
1994 1995 1996
------ -------- --------
(in thousands)
<S> <C> <C> <C>
Federal tax at the statutory rate..................... $2,719 $(7,363) $(2,645)
State income taxes net of federal tax benefit......... 305 (76) 46
State tax net operating loss carry forward............ -- (1,080) (617)
Change in valuation allowance for deferred tax asset.. -- 4,367 3,175
Other................................................. 273 170 840
------ ------- -------
$3,297 $(3,982) $ 799
====== ======= =======
</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. Due to the uncertain nature of the ultimate realization of deferred
tax assets based upon the Company's financial performance during 1995 and 1996
and the potential expiration of the net operating loss carryforward, the Company
has established a valuation allowance against its deferred tax assets. 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.
F-19
<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,
------------------
1995 1996
-------- --------
(in thousands)
<S> <C> <C>
Deferred tax assets:
Compensation and benefit accruals.. $ 920 $ 773
Inventory valuation................ 2,279 1,550
Net operating loss carryforward.... 1,080 4,442
Other.............................. 1,037 1,409
------- -------
5,316 8,174
Valuation allowance................. (4,367) (7,542)
Deferred tax liabilities:
Depreciation....................... -- (458)
Contract provisions................ (360) (130)
Other.............................. -- (44)
------- -------
Net deferred tax asset.............. $ 589 $ --
======= =======
</TABLE>
During the years ended December 31, 1995 and 1996, the Company recorded a
valuation allowance of $4,367,000 and $3,175,000, respectively, 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, 1996, for federal income tax purposes, the Company had a
net operating loss carryforward of approximately $7,920,000, which will expire
in 2011. At December 31, 1996, for state income tax purposes, the Company had a
net operating loss carryforward of approximately $31,830,000, which will expire
beginning in 2010.
(17) Related Party Transactions
The Company paid a corporate allocation (0.2% of revenue) to the Parent of
$548,000 during 1994. The Company's corporate allocation for 1995, charged to
operations, consisted of $274,000 in cash and 69,813 shares of Common Stock
valued at $300,000, based on the fair market value of the shares during the
related period. All shares issuable as of December 31, 1995 were issued during
1996. During 1996, the corporate allocation consisted of the issuance of 17,391
shares of Common Stock valued at approximately $50,000. 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 is includable in the
Parent's consolidated federal income tax return.
The Company issued 374,531 shares of its Common Stock to the Parent in a
private placement transaction in March 1996. The shares were sold to the Parent
in exchange for $1,000,000 in cash. The per share price of the transaction was
equal to an average of the prices for the last sale transactions of the Common
Stock on each of the last three business days immediately preceding the date of
sale.
On February 9, 1996, the Company sold substantially all of the assets of
its Metrum subsidiary to a related party, which resulted in the recognition of
additional paid-in capital of $613,000 (see Note 4).
F-20
<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 year ended December 31, 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 years ended December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
December 31,
-------------------
1995 1996
--------- --------
(in thousands)
<S> <C> <C>
Revenue:
United States.................................... $233,515 $166,204
Latin America.................................... 40,132 58,457
-------- --------
$273,647 $224,661
======== ========
Operating Loss:
United States.................................... $(16,172) $ (3,665)
Latin America.................................... (2,055) (1,316)
-------- --------
$(18,227) $ (4,981)
======== ========
Identifiable Assets:
United States.................................... $ 87,049 47,311
Latin America.................................... 26,057 20,154
-------- --------
$113,106 $ 67,465
======== ========
</TABLE>
Identifiable assets of foreign subsidiaries are those assets related to the
operations of those subsidiaries. The Company's domestic assets consist of all
other operating assets of the Company.
(19) Fourth Quarter Adjustments
The Company recognized charges during the fourth quarter of 1995 totaling
approximately $8,300,000, which increased cost of operations by $7,300,000,
selling, general and administrative expense by $800,000 and other expense by
$200,000. The charges to cost of operations were primarily related to an
inventory adjustment for the discontinued Badger line of name brand products of
$2,200,000, inventory adjustments required based upon the October physical
inventory count of $1,700,000, inventory adjustments for an accounts payable
reconciliation performed contemporaneously with the physical inventory of
$800,000, the idle status of specialized manufacturing equipment under lease
amounting to $1,100,000, an increase to the excess and obsolete inventory
reserve of $1,000,000 and the recognition of estimated losses on terminated or
unprofitable contracts of $500,000. The Company believes the inventory
adjustments, including the effect of account reconciliations, arose principally
from excessive scrap and shrinkage rates and were not determinable prior to a
physical count of the inventory. The Company believes that the implementation of
system software contributed to this inventory adjustment. 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
losses on the sale of equipment.
The Company recognized charges during the fourth quarter of 1996 totaling
approximately $5,100,000, which increased cost of operations by $3,800,000 and
selling, general and administrative expense by $1,300,000. The charges to cost
of operations were primarily related to a December domestic operations physical
inventory
F-21
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
adjustment of $300,000, a December foreign operations physical inventory
adjustment of $700,000, estimate revisions for costs of sales related to long-
term contracts of $800,000, increased reserves for excess inventories of
$600,000, and costs associated with asset disposals and deferred rent payments
of $1,400,000. The fourth quarter charges to selling, general and administrative
expense include severance costs of $500,000, warehouse move costs of $500,000
and an increase in the reserve for uncollectible accounts receivable of
$300,000. With regard to the warehouse costs, in the second quarter of 1996 GTC
implemented a cost saving strategy to integrate the materials warehousing
function into its main Tampa facility. The total cost of the move was originally
estimated to be $400,000, but an increased cost of $500,000 was recorded in the
fourth quarter based on actual costs incurred and the review of additional
information regarding sublease strategies.
F-22
<PAGE>
GROUP TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)
<TABLE>
<CAPTION>
December 31, June 29,
1996 1997
------- -------
(Unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents............................... $ 661 $ 41
Accounts receivable, net................................ 22,754 18,095
Inventories, net........................................ 20,220 22,120
Other current assets.................................... 2,102 2,115
------- -------
Total current assets................................... 45,737 42,371
Property and equipment, net.............................. 21,206 18,992
Other assets............................................. 522 481
------- -------
$67,465 $61,844
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $17,969 $17,616
Accrued liabilities..................................... 16,416 13,939
Current portion of long-term debt....................... 3,513 12,259
------- -------
Total current liabilities.............................. 37,898 43,814
Long-term debt........................................... 10,119 226
Other liabilities........................................ 45 46
------- -------
Total liabilities..................................... 48,062 44,086
Redeemable preferred stock, $.01 par value, 1,000,000
shares authorized; 250,000 shares issued and
outstanding in 1997.................................... -- 3
Additional paid-in capital - preferred stock............ -- 2,497
Shareholders' equity:
Common stock, $.01 par value, 40,000,000 shares
authorized; 16,220,629 shares issued and outstanding
in 1996 and 1997....................................... 162 162
Additional paid-in capital.............................. 24,675 25,146
Retained earnings....................................... (5,434) (10,050)
------- --------
Total shareholders' equity............................ 19,403 15,258
------- --------
$67,465 $ 61,844
======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-23
<PAGE>
GROUP TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------- -------------------
June 30, June 29, June 30, June 29,
1996 1997 1996 1997
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue...................................... $63,990 $36,459 $132,190 $62,897
Cost of operations........................... 59,173 35,278 123,173 63,075
------- ------- -------- -------
Gross profit (loss)........................ 4,817 1,181 9,017 (178)
Selling, general and administrative expense.. 3,431 1,750 6,204 3,249
Research and development..................... 8 99 294 99
------- ------- -------- -------
Operating income (loss).................... 1,378 (668) 2,519 (3,526)
Interest expense............................. 977 680 1,926 1,193
Other (income) expense, net.................. (11) (242) 73 (255)
------- ------- -------- -------
Income (loss) before income taxes.......... 412 (1,106) 520 (4,464)
Income tax expense........................... 354 131 457 152
------- ------- -------- -------
Net Income (loss)............................ $ 58 $(1,237) $ 63 $(4,616)
======= ======= ======== =======
Net Income (loss) per share:
Primary.................................... $0.00 $ (0.08) $ 0.00 $ (0.28)
Fully diluted.............................. $0.00 $ (0.08) $ 0.00 $ (0.28)
Shares used in computing per share amounts:
Primary.................................... 17,760 16,221 17,012 16,221
Fully diluted.............................. 17,760 16,221 17,012 16,221
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-24
<PAGE>
GROUP TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six months ended
------------------------------
June 30, June 29,
1996 1997
-------------- --------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)..................................................................... $ 63 $(4,616)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization....................................................... 2,609 2,756
Other............................................................................... 230 354
Changes in operating assets and liabilities, net of dispositions:
Accounts receivable................................................................ 1,388 4,659
Inventories........................................................................ 4,065 (1,900)
Other current and non-current assets............................................... (1,996) (85)
Accounts payable................................................................... (10,323) (353)
Accrued and other liabilities...................................................... (2,162) (2,477)
-------- -------
Net cash used in operating activities............................................. (6,126) (1,662)
Cash flows from investing activities:
Capital expenditures.................................................................. (1,525) (428)
Proceeds from disposal of assets...................................................... 11,561 --
-------- -------
Net cash provided by (used in) investing activities............................... 10,036 (428)
Cash flows from financing activities:
Net (repayments) proceeds under revolving credit agreement............................ (3,214) 949
Repayments of notes payable and long-term debt........................................ (2,702) (1,979)
Net proceeds from issuance of common stock............................................ 1,000 --
Net proceeds from issuance of redeemable preferred stock.............................. -- 2,500
-------- -------
Net cash (used in) provided by financing activities............................... (4,916) 1,470
-------- -------
Net decrease in cash and cash equivalents.............................................. (1,006) (620)
Cash and cash equivalents at beginning of period....................................... 2,143 661
-------- -------
Cash and cash equivalents at end of period............................................. $ 1,137 $ 41
======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-25
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Organizational Structure
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. The Parent owns approximately 80% of the outstanding
Common Stock of the Company.
The Company provides 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 automotive,
commercial avionics, computer, government systems, industrial electronics,
networking, space, and telecommunications.
(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 six month
periods ended June 29, 1997 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1997. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements, and notes thereto, for the year ended December 31, 1996 as
presented in the Company's annual report on Form 10-K.
During the first quarter of 1997, Statement of Financial Accounting
Standard No. 128, "Earnings per Share," was issued which revises the manner in
which earnings per share are calculated. In accordance with the effective date
of Statement No. 128, the Company will implement the new standard during the
fourth quarter of 1997. The Company does not expect that the provisions of
Statement No. 128 will have a material impact upon the Company's reported
earnings per share for the year ending December 31, 1997.
(3) Net (Loss) Income 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. Common equivalent
shares consist of stock options and warrants (vested and unvested) and are
computed using the treasury stock method. The computation includes those common
shares and common equivalent shares as prescribed by the Securities and Exchange
Commission Staff Accounting Bulletins. Common equivalent shares have not been
included since the effect of their inclusion would be anti-dilutive.
F-26
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
<TABLE>
<CAPTION>
(4) Inventories
Inventories consist of the following:
December 31, June 29,
1996 1997
------------ --------
<S> <C> <C>
(in thousands)
Raw materials......................................................... $12,538 $13,290
Work in process....................................................... 4,100 5,018
Finished goods........................................................ 107 --
Costs relating to long-term contracts and programs, net of amounts
attributed to revenue recognized to date............................ 11,655 12,831
Progress payments related to long-term contracts and programs......... (3,292) (4,233)
Reserve for inactive, obsolete and unsalable inventories.............. (4,888) (4,786)
---------- --------
$20,220 $22,120
========== ========
</TABLE>
The Company recognized revenue and income before income taxes during the
second quarter of 1996 of $4,083,000 upon the favorable settlement of a
contractual claim.
(5) Note Payable and Long-Term Debt
As of June 29, 1997, the Company had a financing agreement (the "Credit
Agreement") with its bank which provided the Company with a revolving line of
credit facility (the "Revolver") and a term note (the "Term Note"). As amended
on March 28, 1997, the Credit Agreement provided credit availability on the
Revolver equal to the lesser of $13,500,000 or the applicable amount of its
eligible accounts receivable and inventories. On June 30, 1997, the Company
utilized the proceeds from the sale of its Latin American operations (see Note
7) to repay all of its outstanding borrowings under the Credit Agreement and
terminated the Credit Agreement. Such transaction has not been reflected in the
financial statements as of June 29, 1997.
The Company, in connection with the initial execution of the Credit
Agreement during 1996, issued warrants to purchase 1,200,000 shares of Common
Stock at $0.01 per share to the lender. Upon execution of the Credit Agreement,
200,000 of the warrants became exercisable and, on March 31, 1997, an additional
125,000 of the warrants became exercisable. As a result of the early repayment
and termination of the Credit Agreement, the remaining 875,000 unvested warrants
were forfeited by the lender.
In connection with the March 28, 1997 amendment to the Credit Agreement,
the Parent invested $2,500,000 in the Company in exchange for 250,000 shares of
the Company's Preferred Stock (the "Preferred Stock").
F-27
<PAGE>
GROUP TECHNOLOGIES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
<TABLE>
<CAPTION>
Long-term debt consists of the following:
December 31, June 29,
1996 1997
------------ --------
(in thousands)
<S> <C> <C>
Revolver...................................... $ 6,934 $ 7,883
Term Note..................................... 2,690 1,860
Other......................................... 4,128 2,979
------- --------
Total long-term debt.......................... 13,752 12,722
Unamortized original issue discount related
to issuance of warrants exercisable on date
of issuance.................................. (120) (237)
Current portion of long-term debt............. (3,513) (12,259)
------- --------
$10,119 $ 226
======= ========
</TABLE>
Available borrowings on the Revolver at June 29, 1997 were approximately
$2,860,000. The interest rate on all debt outstanding under the Credit Agreement
at June 29, 1997 was 9.75%.
(6) Preferred Stock
Each share of Preferred Stock outstanding may be exchanged for 8.1 shares
of the Company's Common Stock. The Preferred Stock outstanding is also
redeemable at the option of the holder (the Parent), subject to certain
restrictions, and pays quarterly dividends of 8.5% per annum. The shares of
Preferred Stock outstanding have voting rights equal to the voting rights of the
Company's Common Stock, except that the holder of each share of Preferred Stock
is entitled to the number of votes equal to the number of shares of Common Stock
that would be receivable upon conversion. The rates and preferences of Preferred
Stock authorized but not issued have not been determined.
(7) Subsequent Event
On June 30, 1997, the Company sold to SCI Systems, Inc., SCI Systems De
Mexico S.A. de C.V. and SCI Holdings, Inc. (collectively, "SCI"), all of the
Company's investment in the capital stock and/or equity interests of three of
its wholly-owned subsidiaries, Group Technologies S.A. de C.V., Group
Technologies Suprimentos de Informatica Industria E Comercio Ltda., and Group
Technologies Integracoes em Electronica Ltda. These three subsidiaries comprised
all of the Company's Latin American operations. The Company also sold or
assigned to SCI certain assets principally used in or useful to the operations
being sold, including accounts receivable, inventory, equipment, accounts
payable and equipment leases.
The initial sales price of the aforementioned assets amounted to
$18,000,000 in cash and the assumption by SCI of certain liabilities. The price
is subject to subsequent adjustment, upward or downward, based upon, among other
things, the value of the net assets of the Company's Latin American operations
at June 29, 1997. This adjustment is expected to be a reduction in purchase
price of approximately $2,900,000, subject to final determination in accordance
with the purchase and sale agreement. GTC will record a gain on the sale in the
third quarter, net of costs, amounting to approximately $3,200,000.
F-28
<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, 1996 and 1995, and
the related consolidated statements of operations, shareholders' equity, and
cash flows and schedule for each of the three years in the period ended December
31, 1996. These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 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, 1996 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, 1996, 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
September 10, 1997
F-29
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)
December 31,
------------------
1995 1996
-------- --------
ASSETS
<TABLE>
<CAPTION>
Current assets:
<S> <C> <C>
Cash and cash equivalents.................................. $ 5,696 $ 6,012
Accounts receivable, net......................,,........... 39,531 37,254
Inventories, net........................................... 54,970 34,288
Other current assets....................................... 7,869 2,307
-------- --------
Total current assets...................................... 108,066 79,861
Property, plant and equipment, net.......................... 59,832 48,602
Other assets................................................ 5,130 4,497
-------- --------
$173,028 $132,960
======== ========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Current liabilities:
<S> <C> <C>
Accounts payable........................................... $ 41,543 $ 23,920
Accrued liabilities........................................ 23,498 24,595
Notes payable.............................................. 5,920 --
Current portion of long-term debt.......................... 10,946 25,009
-------- --------
Total current liabilities................................. 81,907 73,524
Noncurrent liabilities:
Long-term debt............................................. 52,868 21,588
Other noncurrent liabilities............................... 10,459 10,381
-------- ------
Total noncurrent liabilities.............................. 63,327 31,969
Minority interests in subsidiaries.......................... 4,525 3,262
Redeemable common stock..................................... 1,806 1,821
Shareholders' equity:
Common stock, no par value, 1,000,000 shares authorized;
314,196 shares issued and outstanding in 1995
and 1996, respectively.................................... 7,892 7,892
Retained earnings.......................................... 13,571 14,492
-------- --------
Total shareholders' equity............................... 21,463 22,384
-------- --------
$173,028 $132,960
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-30
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for share and per share data)
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Revenue........................................................................... $326,327 $328,977 $308,598
Cost and expenses:
Cost of services rendered and products sold...................................... 279,609 312,712 278,678
Selling, general and administrative expense...................................... 33,148 31,081 29,407
Interest expense, net............................................................ 2,558 3,397 3,979
Other (income) expense, net...................................................... (199) 196 (828)
-------- -------- --------
Total cost and expenses........................................................... 315,116 347,386 311,236
-------- -------- --------
Income (loss) before gain on issuance of stock by subsidiary, income taxes,
minority interests and discontinued operations.................................. 11,211 (18,409) (2,638)
Gain on issuance of stock by subsidiary........................................... 13,307 -- --
-------- -------- --------
Income (loss) before income taxes, minority interests and discontinued operations. 24,518 (18,409) (2,638)
Income taxes...................................................................... 9,845 (3,109) 1,614
-------- -------- --------
Income (loss) before minority interests and discontinued operations............... 14,673 (15,300) (4,252)
Minority interests in (earnings) losses of consolidated subsidiaries.............. (331) 3,535 1,716
-------- -------- --------
Income (loss) from continuing operations.......................................... 14,342 (11,765) (2,536)
Loss from discontinued operations (net of applicable tax of $166, $406 and $205
in 1994, 1995 and 1996, respectively)........................................... (437) (905) (609)
Gain on disposal of discontinued operations (net of applicable tax of $2,389 and
$2,932 in 1995 and 1996, respectively).......................................... -- 4,637 4,066
-------- -------- --------
Net income (loss)................................................................. $ 13,905 $ (8,033) $ 921
======== ======== ========
Earnings per share:
Income (loss) from continuing operations......................................... $44.62 $(36.64) $(7.92)
Net income (loss)................................................................ $43.26 $(25.02) $2.88
Shares used in computing per share amounts........................................ 321,424 321,084 320,128
</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 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, 1994.... 314,196 $7,892 $ 7,699 $15,591
Net income.................... -- -- 13,905 13,905
------- ------ ------- -------
Balance at December 31, 1994.. 314,196 7,892 21,604 29,496
Net loss...................... -- -- (8,033) (8,033)
------- ------ ------- -------
Balance at December 31, 1995.. 314,196 7,892 13,571 21,463
Net income.................... -- -- 921 921
------- ------ ------- -------
Balance at December 31, 1996.. 314,196 $7,892 $14,492 $22,384
======= ====== ======= =======
</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 CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................................. $ 13,905 $ (8,033) $ 921
Adjustments to reconcile net income (loss) to net cash (used in) provided by
operating activities:
Depreciation and amortization..................................................... 10,076 10,244 9,897
Deferred income taxes............................................................. 7,079 (142) 563
Minority interests in earnings (losses) of consolidated subsidiaries.............. 331 (3,535) (1,716)
Provision for excess and obsolete inventories..................................... 573 6,990 4,106
Provision for doubtful accounts................................................... 650 1,523 1,208
Gain on disposal of discontinued operations, net of tax........................... -- (4,637) (4,066)
Gain on issuance of stock by subsidiary........................................... (13,307) -- --
Other noncash charges............................................................. 1,075 1,930 1,011
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable............................................................... (1,862) 1,027 2,047
Inventories....................................................................... (6,838) 2,950 15,164
Other current and noncurrent assets............................................... (4,652) (2,144) 3,921
Accounts payable.................................................................. (4,480) 8,801 (17,774)
Accrued and other liabilities..................................................... (6,985) (36) (1,221)
-------- -------- --------
Net cash (used in) provided by operating activities................................. (4,435) 14,938 14,061
Cash flows from investing activities:
Capital expenditures............................................................... (11,871) (10,201) (7,366)
Proceeds from disposal of assets................................................... 1,344 5,928 6,399
Purchase of the net assets of acquired entities.................................... -- (2,245) --
Changes in nonoperating assets and liabilities..................................... 300 (509) (548)
-------- -------- --------
Net cash used in investing activities............................................... (10,227) (7,027) (1,515)
Cash flows from financing activities:
Net proceeds (repayments) under revolving credit agreements........................ 19,068 (6,573) 216
Proceeds from long-term debt....................................................... 1,085 2,240 10,000
Principal payments on long-term debt............................................... (27,950) (4,151) (22,321)
Proceeds from GTC initial public offering.......................................... 17,813 -- --
Payments for redemption of common stock in subsidiaries, net....................... (17) (112) (125)
-------- -------- --------
Net cash provided by (used in) financing activities................................. 9,999 (8,596) (12,230)
-------- -------- --------
Net (decrease) increase in cash and cash equivalents................................ (4,663) (685) 316
Cash and cash equivalents at beginning of year...................................... 11,044 6,381 5,696
-------- -------- --------
Cash and cash equivalents at end of year............................................ $ 6,381 $ 5,696 $ 6,012
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-33
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
(1) Organization and Significant Accounting Policies
Organization and Consolidation Policy
Group Financial Partners Inc. ("GFP"), located in Louisville, Kentucky, is
a privately-held 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, 1996, 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 and digital and analog
recording products, 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. On February 9, 1996, Bell acquired substantially
all of the assets of Metrum, Inc. ("Metrum") from GTC (see Note 15).
Group Technologies Corporation ("GTC"), headquartered in Tampa, Florida,
provides 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 automotive, commercial avionics, computer,
government systems, industrial electronics, networking, space and
telecommunications. GTC is the parent for Group Technologies, S.A. de C.V. ("GTC
Mexico") located in Mexico City, Mexico and Group Technologies Suprimentos de
Informatica Industria e Comercio Ltda. ("GTC Brazil") located in Hortolandia,
Brazil. Substantially all of the assets of Metrum, which remains a wholly owned
subsidiary of GTC, were sold during 1995 and 1996 (see Notes 3 and 15).
The Real Estate Companies' assets were primarily comprised of land,
commercial office and industrial buildings owned or under capitalized lease by
the respective limited partnerships. Unison Commercial Group, Inc. ("Unison")
provided management and other services for these assets as well as other third-
party owned properties. During 1995, 1996 and the first quarter of 1997, the
Company completed a series of transactions which resulted in the sale or
transfer of ownership interest in substantially all of the assets of each
limited partnership (see Note 17).
F-34
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
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 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
inventories of Metrum, while a subsidiary of GTC in 1994 and 1995, 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. Leasehold
improvements are amortized over the lease term using the straight-line method.
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
Goodwill, patents, non-compete agreements, product drawings, and similar
intangible assets are amortized over their estimated economic lives of five to
fifteen years, 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, 1995
and 1996 was $1,809,000 and $1,798,000, 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. Negative goodwill included in
other noncurrent liabilities at December 31, 1995 was $261,000. Accumulated
amortization of negative goodwill at December 31, 1995 was $396,000. In
connection with
F-35
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
GTC's 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. As a result of GTC's
disposition of substantially all of Metrum's remaining assets during 1996, there
was no negative goodwill remaining at December 31, 1996.
Minority Interests in Subsidiaries
Minority interests in subsidiaries represents 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 Note 1--
Contract Accounting).
Revenue recognized under the percentage of completion method of accounting
amounted to $60,500,000, $57,945,000 and $54,397,000 in 1994, 1995 and 1996,
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 or when services are rendered.
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 approximately $210,000 remained in inventories at
December 31, 1995 and 1996). 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 profit 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 $1,226,000, $700,000 and $2,327,000
in 1994, 1995 and 1996, respectively.
The Company recognized income 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. While contract claim reserves
were initially established in response to customer assertions regarding product
failures, tests regarding the alleged failures
F-36
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS-CONTINUED
ultimately were determined to be inconclusive, requiring a change in estimate.
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. During the second quarter of 1996, the Company successfully
settled a name brand products contract claim and recognized revenue and income
before income taxes of approximately $4,100,000 associated with that settlement.
Research and Development
Company sponsored research and development costs are expensed as incurred.
Research and development expense was $5,799,000, $3,893,000 and $3,049,000 in
1994, 1995 and 1996, 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.
Subsidiaries prepare income tax provisions on a stand-alone basis.
Effective March 23, 1995, as a result of a decrease in GFP's ownership
percentage of GTC, 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 separately filed its initial consolidated federal income tax return
for the period beginning March 23, 1995 through December 31, 1995. Effective
March 29, 1996, as a result of an increase in GFP's ownership percentage of GTC,
GTC again met the 80% voting power and value requirements defined by the
Internal Revenue Code for affiliated group membership, and therefore has filed
an election for reaffiliation and expects to be an includable member of GFP's
affiliated group beginning March 29, 1996.
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, 1996. 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 $51,352,000, $53,643,000 and $38,725,000 during 1994,
1995 and 1996, 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 12%, 11% and 12% of the Company's revenue in 1994,
1995 and 1996, respectively. The Company's largest commercial customer was IBM
which represented approximately 12%, 13% and 12% of the Company's revenue in
1994, 1995 and 1996, respectively. No other single customer accounted for more
than 10% of the Company's revenue in 1994, 1995 or 1996.
F-37
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
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.
Stock Based Compensation
Stock options are granted under Stock Option Plans to employees and
independent directors of subsidiaries (see Note 13). The Company accounts for
stock option grants in accordance with APB Opinion No. 25, "Accounting for Stock
Issued to Employees".
Earnings Per Share
Earnings per share are computed using the weighted average number of common
and common equivalent shares outstanding during each period. Shares of common
stock issuable under the Company's stock plans are treated as common stock
equivalents when dilutive. Primary and fully diluted earnings per share are the
same.
Impact of Recently Issued Accounting Standards
In March 1995, 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," 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 asset's underlying carrying amount. SFAS No. 121 also addresses
the accounting for long-lived assets that are expected to be disposed. The
effect of the implementation of Statement No. 121 in 1996 was not significant.
In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation,"
was issued 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. The Company evaluated the effects of
applying SFAS No. 123's fair value method to the Company's stock-based awards
and determined that the results in pro forma net income and earnings per share
were not materially different from the actual amounts reported and, therefore,
no separate pro forma amounts are being included.
Reclassifications
Certain amounts in the Company's 1994 and 1995 consolidated financial
statements have been reclassified to conform with the 1996 presentation.
(2) Acquisitions
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
F-38
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
$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. GTC sold its investment in
the capital stock of GTC Mexico in June 1997 (see Note 18).
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. GTC sold its investment in the equity interests of GTC Brazil in June
1997 (see Note 18).
(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 cash. On February 9, 1996, the assets of the
instrumentation products business unit of Metrum were sold to Bell (see Note
15). 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.
<TABLE>
<CAPTION>
(4) Accounts Receivable
Accounts receivable consist of the following:
December 31,
----------------
1995 1996
------ ------
<S> <C> <C>
(in thousands)
Commercial........................................ $36,205 $33,641
U.S. Government................................... 4,416 5,624
------- -------
40,621 39,265
Allowance for doubtful accounts................... (1,090) (2,011)
------- -------
$39,531 $37,254
======= =======
</TABLE>
Accounts receivable from the U.S. Government includes amounts due under
long-term contracts, all of which are billed at December 31, 1995 and 1996 of
$2,904,000 and $2,463,000, respectively. The provision for doubtful accounts was
$650,000, $1,523,000 and $1,208,000 for the years ended December 31, 1994, 1995
and 1996, respectively.
F-39
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(5) Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------------
1995 1996
----------- --------
<S> <C> <C>
(in thousands)
Raw materials.......................................................................................... $ 37,363 $20,360
Work-in process........................................................................................ 12,139 11,993
Finished goods......................................................................................... 1,274 847
Costs relating to long-term contracts and programs, net of
amounts attributed to revenue recognized to date...................................................... 25,766 11,655
Progress payments related to long-term contracts and programs.......................................... (12,300) (3,292)
LIFO reserve........................................................................................... (709) (744)
Reserve for excess and obsolete inventories............................................................ (8,563) (6,531)
-------- -------
$ 54,970 $34,288
======== =======
</TABLE>
The preceding amounts include inventories valued under the last-in, first-
out ("LIFO") method totaling $10,798,000 and $6,512,000 at December 31, 1995 and
1996, respectively, which approximates replacement cost. Provisions for
obsolete, inactive and unsalable inventories were $573,000, $6,990,000 and
$4,106,000 for the years ended December 31, 1994, 1995 and 1996, respectively.
(6) Property, Plant and Equipment
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1996
--------- ---------
(in thousands)
<S> <C> <C>
Land and land improvements.................... $ 5,753 $ 4,656
Buildings and building improvements........... 49,054 35,990
Machinery, equipment, furniture and fixtures.. 56,604 59,356
Facilities in progress........................ 333 943
-------- --------
111,744 100,945
Accumulated depreciation...................... (51,912) (52,343)
-------- --------
$ 59,832 $ 48,602
======== ========
</TABLE>
Depreciation expense was $9,641,000, $9,350,000 and $9,218,000 for the
years ended December 31, 1994, 1995 and 1996, respectively.
F-40
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
<TABLE>
<CAPTION>
(7) Accrued Liabilities
Accrued liabilities consist of the following:
December 31,
----------------
<S> <C> <C>
1995 1996
----- ------
(in thousands)
Payments received from customers in excess of contract costs.. $ 5,340 $ 3,657
Employee benefit plan accruals................................ 5,470 6,241
Other......................................................... 12,688 14,697
------- -------
$23,498 $24,595
======= =======
</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.
(8) Notes Payable
Notes payable at December 31, 1995 consisted of the following:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Bell Line of Credit Note........................ $ 112
P-III Mortgage Note............................. 5,808
------
$5,920
======
</TABLE>
The Bell Line Of Credit Note was refinanced on March 21, 1997 (see Note 9).
No amounts were outstanding on the Bell Line Of Credit Note at December 31,
1996.
The Company was released from its obligation on the P-III Mortgage Note in
connection with the transfer of title for the mortgaged property to the lender
on April 1, 1996 (see Note 17).
F-41
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(9) Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1995 1996
-------- --------
(in thousands)
<S> <C> <C>
TTT Revolving Credit Agreement................... $ 143 $ --
Bell Term Note................................... 2,000 --
Bell Mortgage Note............................... 2,146 1,993
Bell Equipment Term Note......................... 325 --
Bell 1995 Note................................... 2,010 --
Bell Reducing Revolver Note...................... -- 11,850
GTC Revolver..................................... 25,583 6,934
GTC Term Note.................................... -- 2,690
P-IV Mortgage Note............................... 17,775 17,398
P-IV Second Mortgage Note........................ 1,650 1,300
P-VI Industrial Revenue Bonds.................... 6,228 --
Other............................................ 5,954 4,552
-------- --------
63,814 46,717
Less unamortized original issue discount......... -- (120)
Less current portion............................. (10,946) (25,009)
-------- --------
$ 52,868 $ 21,588
======== ========
</TABLE>
On March 21, 1997, Bell and TTT entered into a financing agreement (the "BT
Credit Agreement", under the terms of which a bank committed a maximum of
$30,000,000 to Bell and TTT for cash borrowings and letters of credit. The BT
Credit Agreement provides for a term loan which permits borrowings up to
$10,000,000 and a revolving credit loan which permits borrowings and letters of
credit up to a maximum of $20,000,000, subject to a $5,000,000 limit for letters
of credit. Under the terms of the BT Credit Agreement, interest rates are
determined at the time of borrowing and are based on the prime rate, the London
Interbank Offered Rates plus a spread, or certain alternative rates. The
commitment fee on the unused portion of the revolving credit loan is 0.15% to
0.375% per annum. Principal payments on the term loan of $500,000 are due
quarterly beginning September 1997. All borrowings under the BT Credit Agreement
are secured by substantially all of the assets of Bell and TTT and a pledge of
all shares of common stock of Bell and TTT owned by GFP. The proceeds from the
BT Credit Agreement were used to repay all debt outstanding under the credit
agreements of Bell and TTT.
GTC's financing agreement with its bank (the "Credit Agreement") was
entered into on March 29, 1996 and amended on March 28, 1997. The Credit
Agreement provided 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"). The 1996 Note was repaid in full during
1996. The Revolver and the Term Note were repaid in full on June 30, 1997 with
proceeds from the sale of GTC's Latin American operations (see Note 18), and the
Credit Agreement was terminated.
GTC, in conjunction with the 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. Upon execution of the Credit Agreement, 200,000 of the warrants
became exercisable and, on March 31, 1997, an additional 125,000 of the warrants
became exercisable. The exercise period for the 325,000 warrants expires on
F-42
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
March 29, 2001. As a result of the early repayment and termination of the Credit
Agreement, the remaining 875,000 unvested warrants were forfeited by the lender.
The P-IV mortgage notes were repaid on February 28, 1997 in connection with
the sale of assets by P-IV (see Note 17).
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. 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, as adjusted for the effects of the
refinancing of the Bell and TTT debt and the repayment of the GTC debt with the
proceeds from the sale of its Latin American operations, are presented below.
Maturities of debt under the Bell and TTT revolving credit notes issued pursuant
to the March 1997 financing 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>
<CAPTION>
(in thousands)
<S> <C>
1997...................................................... $1,330
1998...................................................... 2,332
1999...................................................... 2,067
2000...................................................... 2,000
2001...................................................... 2,000
Thereafter................................................ 4,843
------
14,572
Reduction in debt outstanding at December 31, 1996 due to
the repayment of P-IV mortgage note and second mortgage
note on February 26, 1997............................... 18,698
Reduction in debt outstanding at December 31, 1996 due to
the repayment of the GTC term note and revolving credit
agreement and the assumption by the buyer of debt carried
by GTC's Latin American operations on June 30, 1997..... 13,447
-------
$46,717
=======
</TABLE>
Interest paid during 1994, 1995 and 1996 was $6,179,000, $7,381,000 and
$6,082,000, respectively.
(10) 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 the
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.
F-43
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
(11) 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 1994, 1995 and 1996 was $476,000,
$708,000 and $825,000, respectively. The net pension cost of the TTT Pension
Plans included the following components:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------
1994 1995 1996
-------- -------- -------
(in thousands)
<S> <C> <C> <C>
Service cost benefits earned during the period.......... $ 149 $ 147 $ 183
Interest cost of projected benefit obligation........... 1,047 1,175 1,266
Net amortizations and deferrals......................... (879) 1,323 32
Actual return on plan assets............................ 159 (1,937) (656)
------ ------- ------
$ 476 $ 708 $ 825
====== ======= ======
</TABLE>
The significant assumptions used in accounting for the TTT Pension Plans
are as follows:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Discount rate used in determining present values.............. 8.00% 8.75%
Annual increase in future compensation levels................. 4.00% 4.75%
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 are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------
1995 1996
------- -------
(in thousands)
<S> <C> <C>
Accumulated benefit obligation, including vested benefits of
1995 - $13,768,000; 1996 - $14,576,000................................... $14,828 $15,337
======= =======
Projected benefit obligation for service rendered to date.................. $15,074 $15,637
Plan assets at fair value (primarily debentures, stocks and cash).......... 9,300 10,303
------- -------
Projected benefit obligation in excess of plan assets...................... 5,774 5,334
Unrecognized prior service cost............................................ (1,217) (1,075)
Unrecognized net gain...................................................... 1,423 837
Additional pension liability............................................... -- 790
Accrued pension cost....................................................... $ 5,980 $ 5,886
Included in:
Current liabilities...................................................... $ 1,252 $ 1,263
Noncurrent liabilities................................................... $ 4,728 $ 4,623
</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
F-44
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
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 1994, 1995
and 1996 were $3,280,000, $3,079,000 and $2,676,000, respectively.
The Company has partially self-insured medical plans (the "Medical Plans")
for the employees of GTC. The Medical Plans limit the Company's annual
obligations to fund claims to specified amounts per participant and in the
aggregate. The Company is adequately insured for amounts in excess of these
limits. Employees are responsible, in some instances, for payment of a portion
of the premiums. During 1994, 1995 and 1996, the Company charged $5,287,000,
$4,526,000 and $3,732,000, respectively, to operations related to reinsurance
premiums, medical claims incurred and estimated, and administrative costs for
the Medical Plans. Claims paid during 1994, 1995 and 1996 did not exceed the
aggregate limits.
(12) 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>
1997............................................... $ 5,052
1998............................................... 4,328
1999............................................... 3,040
2000............................................... 1,680
2001............................................... 1,632
2002 and thereafter................................ 903
-------
$16,635
=======
</TABLE>
Rent expense for the years ended December 31, 1994, 1995 and 1996 was
$4,393,000, $6,104,000 and $4,892,000, 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 and caused unspecified damages to surrounding property owners. The
suits are being defended for TTT 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 TTT 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 TTT, the contractor and
the fabricator in this action. TTT intends to vigorously defend its case and
believes that a settlement or related judgement 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 on 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.
F-45
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
(13) 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. Effective March 31, 1996,
Unison terminated its existing stock plans and repurchased all outstanding
shares from its employees.
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 as of December 31, 1996. The remaining shares of common
stock of GFP are held by four employees not related to the Gill family.
Shares of common stock issued to employees of GFP, Bell and Tube Turns are
subject to restriction agreements (the "Stock Restriction Agreements"), under
which the Company is required to redeem all shares offered for redemption at the
option of the employee. The Stock Restriction Agreements also require the
redemption of all shares held by an employee upon the termination, retirement,
disability or death of the employee. Such redeemable common stock is shown
separately in the accompanying consolidated balance sheet separately from
shareholders' equity and is carried at its redemption value at December 31, 1995
and 1996. Common stock held by the principal shareholders of GFP is shown in the
accompanying consolidated balance sheet in shareholders' equity and is carried
at its historical basis.
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 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.
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
F-46
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
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.
During the year ended December 31, 1995, no GFP options were granted,
exercised, terminated, forfeited or otherwise expired. During the year ended
December 31, 1996, the exercise periods on certain of the GFP options were
extended. The Company recognized compensation expense of $535,000 in its 1996
consolidated statement of operations for the excess of the fair market value of
the GFP common stock on the date of extension over the stated exercise price
related to the change in terms of the GFP options. The following table
summarizes GFP option activity for the year ended December 31, 1996:
<TABLE>
<CAPTION>
Weighted
Exercise Price Average
Shares Range Exercise Price
------------- --------------- --------------
<S> <C> <C> <C>
Outstanding at January 1, 1996............... 6,880 $45.99-$73.40 $48.89
Exercised.................................... (280) 73.40 73.40
------ ------------- ------
Outstanding at December 31, 1996............. 6,600 $ 45.99-73.40 $48.90
====== ============= ======
Exercisable at December 31, 1996............. 6,250 $ 45.99-73.40 $47.52
====== ============= ======
</TABLE>
The weighted average remaining contractual life of GFP options outstanding
at December 31, 1996 is 3.7 years.
(14) Income Taxes
The components of income tax expense are:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1994 1995 1996
------ ------------ ------
(in thousands)
<S> <C> <C> <C>
Current:
Federal.............................. $2,341 $ (4,123) $ (189)
State................................ 402 507 407
Foreign and other.................... -- 449 495
------ ------------ ------
2,743 (3,167) 713
Deferred:
Federal.............................. 6,359 22 931
State................................ 743 36 (30)
------ ------------ ------
7,102 58 901
------ ------------ ------
$9,845 $ (3,109) $1,614
====== ============ ======
</TABLE>
Income taxes paid during 1994, 1995 and 1996 were $8,851,000, $954,000 and
$3,708,000, respectively. Income tax refunds received during 1995 and 1996 were
$2,377,000 and $4,518,000, respectively.
F-47
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
The following is a reconciliation of income tax expense to that computed by
applying the federal statutory rate of 34% in 1994, 1995 and 1996 to income
before income taxes, minority interest and discontinued operations:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
1994 1995 1996
------ ------- -------
(in thousands)
<S> <C> <C> <C>
Federal tax at the statutory rate............................. $8,336 $(6,259) $ (897)
State income taxes, net of federal tax benefit................ 739 215 372
Foreign income taxes.......................................... -- 428 481
State tax net operating loss carryforward..................... -- (1,080) (671)
Change in valuation allowance for deferred tax asset.......... -- 4,367 1,144
Other......................................................... 770 (780) 1,185
------ ------- -------
$9,845 $(3,109) $ 1,614
====== ======= =======
Deferred income tax assets and liabilities are as follows:
December 31,
--------------------
1995 1996
------- -------
(in thousands)
Deferred tax assets:
Compensation and benefit accruals..................................... $ 1,283 $ 1,356
Inventory valuation................................................... 1,837 1,168
Net operating loss carryforward....................................... 1,080 1,908
Accounts receivable allowance......................................... 173 603
Depreciation.......................................................... 430 27
Defined benefit pension plan.......................................... 1,607 1,476
Other................................................................. 1,084 1,075
------- -------
7,494 7,613
Valuation allowance................................................... (5,367) (6,511)
------- -------
2,137 1,102
Deferred tax liabilities:
Stock issuance by subsidiary.......................................... (5,051) (5,051)
Contract provisions................................................... (360) (130)
Other................................................................. -- (54)
------- -------
(5,411) (5,235)
------- -------
Net deferred tax liability............................................. $(3,274) $(4,133)
======= =======
</TABLE>
During the years ended December 31, 1995 and 1996, the Company
recorded a valuation allowance of $4,367,000 and $1,144,000 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, 1996, for state income tax purposes, GTC and Bell had net
operating loss carryforwards of approximately $31,830,000 and $2,486,000,
respectively. The GTC and Bell state tax net operating loss carryforwards will
expire beginning in 2010 and 2001, respectively.
F-48
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(15) Related Party Transaction
On February 9, 1996, Bell purchased the assets of the instrumentation
products business unit of Metrum from GTC for $10,000,000 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.
(16) Segment Information
Business Segments
The Company operates in two distinct industry segments: manufacturing
support services and real estate. Information about the Company's operations in
business segments for the three years ended December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------
1994 1995 1996
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Revenue:
Manufacturing Support Services.. $326,327 $328,977 $308,598
Real Estate..................... 8,558 7,612 5,539
-------- -------- --------
$334,885 $336,589 $314,137
======== ======== ========
Operating Profit (Loss):
Manufacturing Support Services.. $ 13,570 $(14,816) $ 513
Real Estate..................... 2,830 2,179 1,266
-------- -------- --------
$ 16,400 $(12,637) $ 1,779
======== ======== ========
Identifiable Assets:
Manufacturing Support Services.. $146,489 $138,973 $112,674
Real Estate..................... 32,624 26,503 15,495
General Corporate............... 9,187 7,552 4,791
-------- -------- --------
$188,300 $173,028 $132,960
======== ======== ========
Depreciation and Amortization:
Manufacturing Support Services.. $ 7,036 $ 7,353 $ 7,718
Real Estate..................... 3,040 2,891 2,179
-------- -------- --------
$ 10,076 $ 10,244 $ 9,897
======== ======== ========
Capital Expenditures:
Manufacturing Support Services.. $ 10,862 $ 9,291 $ 6,909
Real Estate..................... 1,009 910 457
-------- -------- --------
$ 11,871 $ 10,201 $ 7,366
======== ======== ========
</TABLE>
F-49
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
The Company's Real Estate segment has been accounted for as discontinued
operations as presented on the statement of operations and more fully disclosed
in Note 17. All of the real estate operations were located in the United States.
Geographic Segments:
The Company is a multinational corporation with operations in the United
States, Mexico and Brazil. For the year ended December 31, 1994, revenue,
operating profit and identifiable assets of the Company's foreign operations
were not significant. Revenue and operating profit information presented below
for the Company's geographic segments relates to the Company's continuing
operations. Information about the Company's operations in geographic areas for
the years ended December 31, 1995 and 1996 is as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1995 1996
-------- --------
(in thousands)
<S> <C> <C>
Revenue:
United States.......................... $288,845 $250,141
Latin America.......................... 40,132 58,457
-------- --------
$328,977 $308,598
======== ========
Operating Profit (Loss):
United States.......................... $(12,761) $ 1,829
Latin America.......................... (2,055) (1,316)
-------- --------
$(14,816) $ 513
======== ========
Identifiable Assets:
United States.......................... $146,971 $112,806
Latin America.......................... 26,057 20,154
-------- --------
$173,028 $132,960
======== ========
</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.
(17) Discontinued Operations
The Company's real estate operations were divested at various times
beginning in October 1995 and ending in February 1997. The real estate segment
is accounted for as discontinued operations and, accordingly, the results of
operations and related gain on the disposal of the properties are segregated in
the accompanying consolidated statements of operations.
On October 1, 1995, GFP Partners-II, Ltd. ("P-II") and its lender, which
held a promissory note secured by a mortgage on a commercial office building and
land located at 515 West Market Street in Louisville, Kentucky (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-50
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
On April 1, 1996, GFP Partners-III, Ltd. ("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 $2,182,000, net of applicable income taxes of
$915,000, in its 1996 consolidated statement of operations.
On November 19, 1996, GFP Partners-VI, Ltd. ("P-VI") completed a
transaction in which it sold to BSRT Riverport Corp. substantially all of the
assets associated with the industrial warehouse and land located at 6310 Cane
Run Road in Louisville, Kentucky. Assets sold included the leasehold interest in
the real property and improvements thereon, related personal property and
leases. The proceeds from the sale, net of related disposition expenses was
approximately $3,900,000. The Company recognized a gain on the sale of
$4,816,000, net of applicable income taxes of $2,017,000, in its 1996
consolidated statement of operations.
On February 28, 1997, GFP Partners-IV, Ltd. ("P-IV") completed a
transaction in which it sold to Empire State Collateral Corporation
substantially all of the assets associated with the commercial office building
and land located at 455 Fourth Avenue in Louisville, Kentucky and the parking
garage and land located at 430 South Third Street in Louisville, Kentucky.
Assets sold included the real property and improvements thereon, related
personal property and leases. The proceeds from the sale, net of related
disposition expenses was approximately $21,200,000, a portion of which was used
to repay the mortgage note and second mortgage note secured by the real
property. The Company recognized a gain on the sale of $6,352,000, net of
applicable income taxes of $2,160,000, in its 1997 consolidated statement of
operations.
The components of net assets related to discontinued operations included in
the consolidated balance sheets as of December 31, 1995 and 1996 were as
follows:
<TABLE>
<CAPTION>
December 31,
-------------------
1995 1996
------- -------
(in thousands)
<S> <C> <C>
Current assets...................................... $ 205 $ 156
Property, plant and equipment, net.................. 25,986 15,248
Accounts payable and accrued liabilities............ 1,351 232
Long-term debt, including current portion........... 31,461 18,698
Total assets........................................ 26,503 15,495
</TABLE>
(18) Subsequent Event
On June 30, 1997, GTC sold to SCI Systems, Inc., SCI Systems De Mexico S.A.
de C.V. and SCI Holdings, Inc. (collectively, "SCI"), all of GTC's investment in
the capital stock and/or equity interests of three of its wholly-owned
subsidiaries, GTC Mexico, GTC Brazil and Group Technologies Integracoes em
Electronica Ltda. These three subsidiaries comprised all of the Company's Latin
American operations. GTC also sold or assigned to SCI certain assets principally
used in or useful to the operations being sold, including accounts receivable,
inventories, equipment, accounts payable and equipment leases.
The initial sales price of the aforementioned assets amounted to
$18,000,000 in cash and the assumption by SCI of certain liabilities. The price
is subject to subsequent adjustment, upward or downward, based upon, among other
things, the value of the net assets of the GTC's Latin American
F-51
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
operations at June 29, 1997. This adjustment is expected to be a reduction in
purchase price of approximately $2,900,000, subject to final determination in
accordance with the purchase and sale agreement. GTC will record a gain on the
sale in the third quarter, net of costs, amounting to approximately $3,200,000.
GFP has entered into an Agreement and Plan of Reorganization with TTT, Bell
and GTC (the "Reorganization"), which will result in, among other things, the
merger of GFP with and into GTC and the conversion of all outstanding shares of
common stock of GFP, TTT and Bell into shares of common stock of GTC. On January
24, 1997, GTC filed a registration statement on Form S-4 with the Securities and
Exchange Commission which includes the Joint Proxy Statement/Prospectus relating
to the Reorganization. GTC will file an amendment to Form S-4 during the third
quarter of 1997 and expects the Reorganization will become effective prior to
December 31, 1997.
F-52
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(19) Supplementary Information on Certain Subsidiaries (Unaudited)
Unaudited condensed financial data as of December 31, 1995 and 1996, and
for each of the three years in the period ended December 31, 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>
TTT Bell
---------------- -----------------
December 31, December 31,
---------------- -----------------
1995 1996 1995 1996
------- ------- -------- -------
(in thousands)
Balance Sheet Data:
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents................... $ 119 $ 992 $ 127 $ 700
Accounts receivable, net.................... 3,038 2,882 5,189 11,516
Inventories, net............................ 5,480 6,512 2,991 7,556
Other current assets........................ 95 87 549 723
------- ------- ------- -------
Total current assets........................ 8,732 10,473 8,856 20,495
Property and equipment, net................. 3,471 4,355 6,122 7,657
Other assets................................ 3,471 3,893 1,246 1,543
------- ------- ------- -------
Total assets................................ $15,674 $18,721 $16,224 $29,695
======= ======= ======= =======
Current liabilities:
Accounts payable............................ $ 1,818 $ 3,724 $ 1,847 $ 2,211
Accrued liabilities......................... 2,129 1,752 1,142 4,671
Note payable................................ -- -- 112 --
Current portion of long-term debt........... -- -- 1,748 2,798
------- ------- ------- -------
Total current liabilities................... 3,947 5,476 4,849 9,680
Long-term debt.............................. 143 -- 5,049 11,469
Other liabilities........................... 4,728 4,623 307 482
------- ------- ------- -------
Total noncurrent liabilities................ 4,871 4,623 5,356 11,951
Redeemable common stock..................... 419 535 1,059 1,056
Shareholders' equity:
Common stock................................ 1,860 1,860 9 9
Additional paid-in capital.................. -- -- 4,999 4,999
Retained earnings........................... 4,577 6,227 (48) 2,000
------- ------- ------- -------
Total shareholders' equity.................. 6,437 8,087 4,960 7,008
------- ------- ------- -------
Total liabilities and shareholders' equity.. $15,674 $18,721 $16,224 $29,695
======= ======= ======= =======
</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,
---------------------------- -------------------------
1994 1995 1996 1994 1995 1996
-------- -------- -------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue....................................... $23,148 $23,858 $24,683 $30,264 $33,499 $59,254
Cost and expenses:
Cost of services rendered and products sold.. 20,063 20,730 21,656 22,911 24,859 39,132
Selling, general and administrative expense.. 1,683 1,848 1,741 5,179 6,119 14,242
Interest expense, net........................ 224 70 22 479 658 1,210
Other (income) expense, net.................. (703) (446) (832) -- 121 63
------- ------- ------- ------- ------- -------
Total cost and expenses....................... 21,267 22,202 22,587 28,569 31,757 54,647
------- ------- ------- ------- ------- -------
Income before income taxes.................... 1,881 1,656 2,096 1,695 1,742 4,607
Income taxes.................................. 855 601 432 642 682 1,840
------- ------- ------- ------- ------- -------
Net income.................................... $ 1,026 $ 1,055 $ 1,664 $ 1,053 $ 1,060 $ 2,767
======= ======= ======= ======= ======= =======
</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,
------------------------------------ -----------------------------------
1994 1995 1996 1994 1995 1996
------------ ------------ -------- ------------ ------------ --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Statement of Cash Flows Data:
Cash flows from operating activities:
Net income............................................. $ 1,026 $ 1,055 $ 1,664 $ 1,053 $ 1,060 $ 2,767
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization......................... 667 581 629 905 1,117 1,819
Other................................................. (683) (197) (717) 410 340 584
Changes in operating assets and liabilities........... 1,032 (117) 656 613 83 221
------- ------- ------- ------- ------- --------
Net cash provided by operating activities.............. 2,042 1,322 2,232 2,981 2,600 5,391
Cash flows from investing activities:
Capital expenditures................................... (1,436) (369) (1,614) (2,091) (802) (1,858)
Proceeds from sale of assets........................... 1,344 708 953 -- -- --
Purchase of the net assets of acquired entities........ -- -- -- -- (2,245) (10,000)
Changes in nonoperating assets and liabilities......... 259 (485) (551)
------- ------- ------- ------- ------- --------
Net cash provided by (used in) investing activities.... 167 (146) (1,212) (2,091) (3,047) (11,858)
Cash flows from financing activities:
Net proceeds (repayments) under line of credit
agreement............................................. 1,104 (1,561) (143) (1,248) (345) 10,777
Proceeds from long-term debt........................... -- -- -- 1,085 2,240 10,000
Repayments of long-term debt........................... (3,000) -- -- (1,061) (1,361) (13,661)
Net proceeds from issuance of common stock............. (7) (74) (4) 63 38 (76)
------- ------- ------- ------- ------- --------
Net cash (used in) provided by financing activities.... (1,903) (1,635) (147) (1,161) 572 7,040
------- ------- ------- ------- ------- --------
Net increase (decrease) in cash and cash equivalents.... 306 (459) 873 (271) 125 573
Cash and cash equivalents at beginning of year.......... 272 578 119 273 2 127
------- ------- ------- ------- ------- --------
Cash and cash equivalents at end of year................ $ 578 $ 119 $ 992 $ 2 $ 127 $ 700
======= ======= ======= ======= ======= ========
</TABLE>
F-55
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
------------ -----------
(Unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents........................................................... $ 6,012 $ 5,173
Accounts receivable, net............................................................ 37,254 34,053
Inventories, net.................................................................... 34,288 37,455
Other current assets................................................................ 2,307 2,307
-------- --------
Total current assets.............................................................. 79,861 78,988
Property, plant and equipment, net.................................................... 48,602 31,959
Other assets.......................................................................... 4,497 4,049
-------- --------
$132,960 $114,996
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................... $ 23,920 $ 21,726
Accrued liabilities................................................................. 24,595 20,761
Current portion of long-term debt................................................... 25,009 12,424
-------- --------
Total current liabilities......................................................... 73,524 54,911
Noncurrent liabilities:
Long-term debt...................................................................... 21,588 18,879
Other noncurrent liabilities........................................................ 10,381 10,639
-------- --------
Total noncurrent liabilities...................................................... 31,969 29,518
Commitments and contingencies
Minority interests in subsidiaries.................................................... 3,262 2,809
Redeemable common stock............................................................... 1,821 1,280
Shareholders' equity:
Common stock, no par value, 1,000,000 shares authorized;
314,196 shares issued and outstanding in 1996 and 1997............................ 7,892 7,892
Retained earnings................................................................... 14,492 18,586
-------- --------
Total shareholders' equity...................................................... 22,384 26,478
-------- --------
$132,960 $114,996
======== ========
</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>
Six months ended June 30,
---------------------------
1996 1997
-------------- -----------
(Unaudited)
<S> <C> <C>
Revenue............................................................................................... $171,275 $111,484
Cost and expenses:
Cost of services rendered and products sold.......................................................... 151,732 96,777
Selling, general and administrative expense.......................................................... 13,922 13,381
Interest expense, net................................................................................ 2,485 1,652
Other expense, net................................................................................... 99 251
-------- --------
Total cost and expenses............................................................................... 168,238 112,061
-------- --------
Income (loss) before income taxes, minority interests and discontinued operations..................... 3,037 (577)
Income taxes.......................................................................................... 1,674 168
-------- --------
Income (loss) before minority interests and discontinued operations................................... 1,363 (745)
Minority interests in (earnings) losses of consolidated subsidiaries.................................. (14) 923
-------- --------
Income from continuing operations..................................................................... 1,349 178
Loss from discontinued operations (net of applicable tax of $86 and $138 in 1996 and 1997,
respectively)........................................................................................ (209) (276)
Gain on disposal of discontinued operations (net of applicable tax of $805 and $2,160 in 1996 and
1997, respectively).................................................................................. 1,210 4,192
-------- --------
Net income............................................................................................ $ 2,350 $ 4,094
======== ========
Earnings per share:
Income from continuing operations.................................................................... $ 4.21 $ 0.55
Net income........................................................................................... $ 7.34 $ 12.74
Shares used in computing per share amounts............................................................ 320,138 321,456
</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>
Six months ended June 30,
---------------------------
1996 1997
------------- ------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................................... $ 2,350 $ 4,094
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization..................................... 4,942 4,757
Deferred income taxes............................................. (6) (236)
Minority interests in earnings (losses) of consolidated
subsidiaries.................................................... 14 (923)
Gain on disposal of discontinued operations, net of tax........... (1,210) (4,192)
Other noncash charges............................................. 253 799
Changes in operating assets and liabilities, net of acquisitions
and disposals:
Accounts receivable............................................. (1,256) 3,346
Inventories..................................................... 4,010 (3,335)
Other current and non-current assets............................ (1,088) (192)
Accounts payable................................................ (10,719) (2,725)
Accrued and other liabilities................................... (531) (4,306)
-------- --------
Net cash used in operating activities.......................... (3,241) (2,913)
Cash flows from investing activities:
Capital expenditures................................................ (3,350) (2,748)
Proceeds from disposal of assets.................................... 1,457 21,586
Changes in nonoperating assets and liabilities...................... 515 --
Other............................................................... -- (272)
-------- --------
Net cash (used in) provided by investing activities............ (1,378) 18,566
Cash flows from financing activities:
Net (repayments) proceeds under revolving credit agreement.......... (3,381) 5,498
Proceeds from long-term debt........................................ 10,000 --
Principal payments on long-term debt................................ (4,359) (20,677)
Payments for retirement of common stock, net........................ (148) (1,313)
-------- --------
Net cash provided by (used in) financing activities............ 2,112 (16,492)
-------- --------
Net decrease in cash and cash equivalents............................ (2,507) (839)
Cash and cash equivalents at beginning of period..................... 5,696 6,012
-------- --------
Cash and cash equivalents at end of period........................... $ 3,189 $ 5,173
======== ========
</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
June 30, 1997
(Unaudited)
(1) Basis Of Presentation
The accompanying consolidated balance sheet of Group Financial Partners
Inc. and Subsidiaries (the "Company") as of June 30, 1997, and the related
consolidated statements of operations and cash flows for the six months ended
June 30, 1996 and 1997, 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 six months ended June 30, 1997 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, 1996.
(2) Dispositions
On February 28, 1997, GFP Partners-IV, Ltd. ("P-IV") completed a
transaction in which it sold substantially all of the assets associated with the
commercial office building and land located at 455 Fourth Avenue in Louisville,
Kentucky and the parking garage and land located at 430 South Third Street in
Louisville, Kentucky. Assets sold included the real property and improvements
thereon, related personal property and leases.
On June 30, 1997, GTC sold to SCI Systems, Inc., SCI Systems De Mexico S.A
de C.V. and SCI Holdings, Inc. (collectively, "SCI"), all of GTC's investment in
the capital stock and/or equity interests of three of its wholly-owned
subsidiaries, Group Technologies S.A. de C.V., Group Technologies Suprimentos de
Informatica Industria E Comercio Ltda., and Group Technologies Integracoes em
Electronica Ltda. These three subsidiaries comprised all of the Company's Latin
American operations. GTC also sold or assigned to SCI certain assets principally
used in or useful to the operations being sold, including accounts receivable,
inventory, equipment, accounts payable and equipment leases. The fiscal period
for the first six months of 1997 for GTC ended on June 29, 1997, therefore, the
transaction is not reflected in the Company's accompanying consolidated
financial statements.
The initial sales price of the aforementioned assets amounted to
$18,000,000 in cash and the assumption by SCI of certain liabilities. The
price is subject to subsequent adjustment, upward or downward, based upon,
among other things, the value of the net assets of the GTC's Latin American
operations at June 29, 1997. This adjustment is expected to be a reduction in
purchase price of approximately $2,900,000, subject to final determination in
accordance with the purchase and sale agreement. GTC will record a gain on
the sale in the third quarter, net of costs, amounting to approximately
$3,200,000.
F-59
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(3) Inventories
<TABLE>
<CAPTION>
Inventories consist of the following:
December 31, June 30,
1996 1997
------------ ---------
(in thousands)
<S> <C> <C>
Raw materials............................................................... $ 20,360 $ 20,147
Work in process............................................................. 11,993 14,261
Finished goods.............................................................. 847 1,667
Costs relating to long-term contracts and programs,
net of amounts attributed to revenue recognized to date.................... 11,655 12,831
Progress payments related to long-term contracts and programs............... (3,292) (4,233)
LIFO reserve................................................................ (744) (744)
Reserve for inactive, obsolete and unsalable inventory...................... (6,531) (6,474)
------------ ---------
$ 34,288 $ 37,455
============ =========
</TABLE>
The Company recognized revenue and income before income taxes during the
second quarter of 1996 of $4,083,000 upon the favorable settlement of a
contractual claim.
(4) Long-Term Debt
On February 28, 1997, the first and second mortgage notes of P-IV were
repaid in connection with the sale of assets by P-IV (see Note 17). The total
amount repaid on February 28, 1997 was $18,781,000, including accrued interest
and repayment penalty of $98,000 and $100,000, respectively.
On March 21, 1997, Bell and TTT entered into a financing agreement, under
the terms of which a bank committed a maximum of $30,000,000 to Bell and TTT for
cash borrowings and letters of credit. The financing agreement provides for a
term loan which permits borrowings up to $10,000,000 and a revolving credit loan
which permits borrowings and letters of credit up to a maximum of $20,000,000,
subject to a $5,000,000 limit for letters of credit. Under the terms of the
financing agreement, interest rates are determined at the time of borrowing and
are based on the prime rate, the London Interbank Offered Rates plus a spread,
or certain alternative rates. The commitment fee on the unused portion of the
revolving credit loan is 0.15% to 0.375% per annum. Principal payments on the
term loan of $500,000 are due quarterly beginning September 1997. The proceeds
from the 1997 financing agreement were used to repay all debt outstanding under
the credit agreements of Bell and TTT.
As of June 29, 1997, GTC had a financing agreement (the "Credit Agreement")
with its bank which provided GTC with a revolving line of credit facility (the
"Revolver") and a term note (the "Term Note"). As amended on March 28, 1997, the
Credit Agreement provided credit availability on the Revolver equal to the
lesser of $13,500,000 or the applicable amount of its eligible accounts
receivable and inventories. On June 30, 1997, GTC utilized the proceeds from the
sale of its Latin American operations (see Note 18) to repay all of its
outstanding borrowings under the Credit Agreement and terminated the Credit
Agreement. Since GTC's fiscal six month period ended on June 29, 1997, the
transactions for the disposal of the Latin American operations and the related
repayment of borrowings under the Credit Agreement are not reflected in the
accompanying consolidated balance sheet as of June 30, 1997, and the related
consolidated statements of operations and cash flows for the six months ended
June 30, 1997.
F-60
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
GTC, in connection with the initial execution of the Credit Agreement
during 1996, issued warrants to purchase 1,200,000 shares of Common Stock at
$0.01 per share to the lender. Upon execution of the Credit Agreement, 200,000
of the warrants became exercisable and, on March 31, 1997, an additional 125,000
of the warrants became exercisable. As a result of the early repayment and
termination of the Credit Agreement, the remaining 875,000 unvested warrants
were forfeited by the lender.
In connection with the March 28, 1997 amendment to the Credit Agreement,
GFP invested $2,500,000 in GTC in exchange for 250,000 shares of GTC's Preferred
Stock (the "Preferred Stock").
<TABLE>
<CAPTION>
Long-term debt consists of the following:
December 31, June 30,
1996 1997
------------ --------
(in thousands)
<S> <C> <C>
Bell Mortgage Note........................ $ 1,993 $ --
Bell Reducing Revolver Note............... 11,850 --
Bell and TTT Term Loan.................... -- 10,000
Bell and TTT Revolver Loans............... -- 8,495
GTC Revolving Credit Agreement............ 6,934 7,883
GTC Term Note............................. 2,690 1,860
P-IV Mortgage Note........................ 17,398 --
P-IV Second Mortgage Note................. 1,300 --
Other..................................... 4,552 3,302
------------ --------
28,019 31,540
Less unamortized original issue discount.. (120) (237)
Less current portion...................... (6,311) (12,424)
------------ --------
$ 21,588 $ 18,879
============ ========
</TABLE>
F-61
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(6) Supplementary Information on Certain Subsidiaries
Condensed financial data as of June 30, 1997, and for the six month periods
ended June 30, 1996 and 1997, for the Company's TTT and Bell subsidiaries,
respectively, are presented below. The condensed financial data for these
subsidiaries excludes intercompany eliminations.
<TABLE>
<CAPTION>
June 30, 1997
-----------------
TTT Bell
-------- -------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Current assets:
Cash and cash equivalents.................................. $ (645) $ 577
Accounts receivable, net................................... 3,925 11,750
Inventories, net........................................... 6,098 9,237
Other current assets....................................... 26 836
------- -------
Total current assets........................................ 9,404 22,400
Property and equipment, net................................. 5,457 7,361
Other assets................................................ 3,950 1,458
------- -------
Total assets................................................ $18,811 $31,219
======= =======
Current liabilities:
Accounts payable........................................... $ 2,291 $ 2,056
Accrued liabilities........................................ 2,579 4,018
Current portion of long-term debt.......................... -- 165
------- -------
Total current liabilities................................... 4,870 6,239
Long-term debt.............................................. 45 15,251
Other liabilities........................................... 4,623 425
------- -------
Total noncurrent liabilities................................ 4,668 15,676
Redeemable common stock..................................... 267 599
Shareholders' equity:
Common stock............................................... 1,860 9
Additional paid-in capital................................. -- 4,999
Retained earnings.......................................... 7,146 3,697
------- -------
Total shareholders' equity.................................. 9,006 8,705
------- -------
Total liabilities and shareholders' equity.................. $18,811 $31,219
======= =======
</TABLE>
F-62
<PAGE>
GROUP FINANCIAL PARTNERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
<TABLE>
<CAPTION>
TTT Bell
------------------- --------------------
Six Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
1996 1997 1996 1997
--------- -------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenue......................................................................... $11,871 $14,883 $ 27,236 $33,704
Cost and expenses:
Cost of services rendered and products sold.................................... 10,496 12,282 18,085 21,420
Selling, general and administrative expense.................................... 857 1,272 6,137 8,028
Interest expense............................................................... 13 16 613 517
Other expense.................................................................. 26 (188) -- 723
------- ------- -------- -------
Total cost and expenses......................................................... 11,392 13,382 24,835 30,688
------- ------- -------- -------
Income before income taxes...................................................... 479 1,501 2,401 3,016
Income taxes.................................................................... 24 507 928 1,221
------- ------- -------- -------
Net income...................................................................... $ 455 $ 994 $ 1,473 $ 1,795
======= ======= ======== =======
TTT Bell
------------------- --------------------
Six Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
1996 1997 1996 1997
--------- -------- --------- ---------
(in thousands)
Statement of Cash Flows Data:
Cash flows from operating activities:
Net income..................................................................... $ 455 $ 994 $ 1,473 $ 1,795
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization................................................. 297 401 836 1,183
Other......................................................................... 13 (93) 20 186
Changes in operating assets and liabilities................................... (346) (1,167) (20) (2,820)
------- ------- -------- -------
Net cash provided by operating activities...................................... 419 135 2,309 344
Cash flows from investing activities:
Capital expenditures........................................................... (467) (1,462) (1,077) (796)
Proceeds from sale of assets................................................... -- 241 -- --
Purchase of the net assets of acquired entities................................ -- -- (10,104) --
Changes in nonoperating assets and liabilities................................. 5 (99) 509 (7)
------- ------- -------- -------
Net cash provided by (used in) in investing activities......................... (462) (1,320) (10,672) (803)
Cash flows from financing activities:
Net (repayments) proceeds under line of credit agreement....................... (55) 45 (112) 1,148
Proceeds from long-term debt................................................... -- -- 10,000 --
Repayments of long-term debt................................................... -- -- (1,297) --
Payments for retirement of common stock........................................ (21) (497) (82) (812)
------- ------- -------- -------
Net cash (used in) provided by financing activities............................ (76) (452) 8,509 336
------- ------- -------- -------
Net (decrease) increase in cash and cash equivalents............................ (119) (1,637) 146 (123)
Cash and cash equivalents at beginning of year.................................. 119 992 127 700
------- ------- -------- -------
Cash and cash equivalents at end of year........................................ $ -- $ (645) $ 273 $ 577
======== ======= ======== =======
</TABLE>
F-63
<PAGE>
APPENDIX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION, dated as of
September 22, 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 and the shares of BT Holdings, Inc., a former wholly
owned subsidiary of GFP) 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
<PAGE>
property to a controlled corporation under Section 351 of the Code;
WHEREAS, GFP, Bell, Tube Turns and Group Tech previously entered into an
Agreement and Plan of Reorganization dated January 15, 1997 and desire to amend
and restate such agreement as set forth herein.
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
(hereinafter defined) and, if necessary, Group Tech Preferred Stock voted, in
person or by proxy, at the stockholders meetings 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
A-2
<PAGE>
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.
(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.
A-3
<PAGE>
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
immediately prior to the Effective Time as defined in Article III, 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.
Section 2.02. Distribution of Shares. Immediately prior to the Effective
Time as defined in Article III, 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
A-4
<PAGE>
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.
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
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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 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
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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.
(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
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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.
(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
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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 315,953. The
"Aggregate GFP Consideration" shall be equal to the sum of $51,833,006 plus the
product of 15,064,625 multiplied by the Average Closing Price.
(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 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.
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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 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
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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 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 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
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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-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
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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 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."
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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.
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 88,808 The "Aggregate Tube Turns Consideration" shall
be equal to ONE MILLION SEVEN HUNDRED SEVENTY SIX THOUSAND ONE HUNDRED SIXTY
DOLLARS ($1,776,160).
(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
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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.
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 the 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 the
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.
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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
(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.
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(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 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.
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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 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 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 (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,
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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.
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 100,444. The "Aggregate Bell Consideration" shall be equal to FOUR MILLION
FOUR HUNDRED NINETEEN THOUSAND FIVE HUNDRED THIRTY SIX DOLLARS ($4,419,536).
(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 Ratio 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,
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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 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 June 30, 1997, there
were (i) 315,953 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 June 30, 1997, 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
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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 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, 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 thereun-
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der ("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 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 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
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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 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.
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(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 GFP, 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 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, 1996, 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 June 30, 1997 and the related
unaudited consolidated statement of income and stockholders' equity for the six-
month period ended June 30, 1997. All of the foregoing financial statements are
hereinafter collectively referred to as the "GFP Financial Statements" and the
balance sheet as of June 30, 1997 is hereinafter referred to, for purposes of
this Article, as the "1997 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 June 30, 1997, 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 1997
Balance Sheet.
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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 of 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 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.
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(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 June 30, 1997 GFP 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 GFP;
(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 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
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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 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.
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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.
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 June 30, 1997, 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)
1,452,785 shares of unissued Group Tech Common Stock issuable upon exercise of
outstanding options under the Group Technologies Corporation Stock Option Plan,
adopted 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)
250,000 shares of Group Tech Preferred Stock issued and outstanding. Except as
set forth in the Group Tech Disclosure Letter, since June 30, 1997, 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
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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
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,
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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 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 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 consummation of, the Merger or any of the other
Transactions and would not have a Material Adverse Effect on Group Tech.
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,
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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.
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
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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 June
30, 1997, 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 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 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
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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 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 June 30, 1997 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;
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(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 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
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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, 1996,
including all exhibits thereto and items incorporated therein by reference, (ii)
Group Tech's quarterly report on Form 10-Q for the quarter ended June 30, 1997,
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, 1996, 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 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,
1996, 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, 1995 and December 31, 1996 and the related statements of
operations, changes in shareholders' equity and cash flows for the years ended
December 31, 1995 and December 31, 1996, together with the notes thereto, are
included in Group Tech's annual reports on Form 10-K for the fiscal years ended
December 31, 1995 and December 31, 1996, respectively, as filed with the SEC,
and the unaudited consolidated balance sheets of Group Tech and Group Tech
Subsidiaries as of March 31, 1997 and June 30, 1997, 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, 1997 and June 30, 1997, 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
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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 June 30, 1997, 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 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, proper ties 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.
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Section 8.02. Capitalization. The authorized capital stock of Tube Turns
consists of 2,000,000 shares of Tube Turns Common Stock. As of June 30, 1997,
there were (i) 1,307,408 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) 70,000
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 June 30, 1997, 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 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 capital 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).
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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 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, conflict with or violate
any Laws applicable to Tube Turns or by which any of their respective properties
are bound or affected, or (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.
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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.
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,
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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 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, 1996, 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 June 30, 1997 and the related
unaudited statement of income and stockholders' equity for the nine-month period
ended June 30, 1997. All of the foregoing financial statements are hereinafter
collectively referred to as the "Tube Turns Financial Statements" and the
balance sheet as of June 30, 1997 is hereinafter referred to, for purposes of
this Article, as the "1997 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 June 30, 1997, 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 1997 Balance Sheet or acquired since the date of the 1997 Balance Sheet,
free and clear of all Liens, except for (i) Liens and imperfections of title
that do not materially interfere with the
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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 1997 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 of 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 Contract 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
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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 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 June 30, 1997 Tube Turns 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 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;
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(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 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.
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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.
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 June 30, 1997, there
were (i) 869,838 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) 73,300 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 June
30, 1997, 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
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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.
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
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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 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
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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
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.
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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, 1994, 1995 and 1996, 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 June 30, 1997 and the related unaudited statement of
income and stockholders' equity for the six-month period ended June 30, 1997.
All of the foregoing financial statements are hereinafter collectively referred
to as the "Bell Financial Statements" and the balance sheet as of June 30, 1997
is hereinafter referred to, for purposes of this Article, as the "1997 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 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 June 30, 1997, 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 1997 Balance
Sheet or acquired since the date of the 1997 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 other wise 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 1997 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 of 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
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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 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 June 30, 1997 Bell
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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 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 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
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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 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
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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:
(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;
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(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
$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
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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 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 Proxy Statement, the Stock Market Additional Shares Notification
(hereinafter defined), 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
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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 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 two (2) 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 two (2) 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.
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(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 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.
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(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.
(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
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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.
(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
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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.
(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 December 31, 1997 unless such failure to
close shall be due to the failure of the party seeking such termination to
perform or observe in
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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.
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) business 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
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use such information in competition with the other shall continue in perpetuity
and none of such information shall be used by any party, 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:
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:
Robert E. Gill 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
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If to Group Tech, to: Copy to:
Thomas W. Lovelock Fowler, White, Gillen, Boggs,
President Villareal and Banker, P.A.
Group Technologies Corporation Suite 1700
10901 Malcolm McKinley Drive 401 East Kennedy Boulevard
Tampa, Florida 33612 Tampa, Florida 33602
Facsimile No.: (813) 972-6978 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 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
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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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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 Chief Executive Officer
-------------------------------------
"Tube Turns"
TUBE TURNS TECHNOLOGIES, INC.
By: /s/ John M. Kramer
----------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
"Bell"
BELL TECHNOLOGIES, INC.
By: /s/ Robert E. Gill
----------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
"Group Tech"
GROUP TECHNOLOGIES CORPORATION
By: /s/ Thomas W. Lovelock
----------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
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EXHIBIT A
PLAN OF MERGER
--------------
THIS PLAN OF MERGER (the "Plan") is made and entered effective as of the
22nd day of September, 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 Amended
and Restated 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
<PAGE>
and the Florida 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 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
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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 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
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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 ("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.
AA-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 315,953. The
"Aggregate GFP Consideration" shall be equal to the sum of $51,833,066 plus
the product of 15,064,625 multiplied by the Average Closing Price.
[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
AA-5
<PAGE>
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 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.
AA-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.
"GFP"
GROUP FINANCIAL PARTNERS, INC.
By: \s\ Jeffrey T. Gill
-------------------------------
Title: President and Chief Executive
-----------------------------
Officer
-----------------------------
"GROUP TECH"
GROUP TECHNOLOGIES CORPORATION
By: \s\ Thomas W. Lovelock
-------------------------------
Title: President and Chief Executive
-----------------------------
Officer
-----------------------------
AA-7
<PAGE>
EXHIBIT B
PLAN OF MERGER
--------------
THIS PLAN OF MERGER (the "Plan") is made and entered effective as of the
22nd day of September, 1997, by and between TUBE TURNS TECHNOLOGIES, INC., a
Kentucky corporation ("Tube Turns") and NEW TUBE TURNS TECHNOLOGIES, INC., a
Kentucky corpora tion ("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 Amended and Restated 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 corpora tion
(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
<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 provi sions of the KRS. Without
limiting the generality of the forego ing, and subject thereto, at the Effective
Time, all the proper ties, 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 trans mittal and
instructions for use in effecting the surrender of the Certificates for
payment therefor and conversion thereof.
AB-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
AB-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
AB-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 88,808. The
"Aggregate Tube Turns Consideration" shall be equal to $1,776,160.
[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,
AB-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.
AB-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: /s/ John M. Kramer
--------------------------------
Title: President and Chief Executive
-------------------------------
Officer
-------------------------------
"NEW TUBE TURNS"
NEW TUBE TURNS TECHNOLOGIES, INC.
By: /s/ John M. Kramer
--------------------------------
Title: President and Chief Executive
-------------------------------
Officer
-------------------------------
AB-7
<PAGE>
EXHIBIT C
PLAN OF MERGER
--------------
THIS PLAN OF MERGER (the "Plan") is made and entered effective as of the
22nd day of September, 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 Amended and Restated 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
<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 provi sions of the FBCA. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the proper ties, 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 out standing 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 out standing
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-
AC-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
AC-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 immediate 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.
AC-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 Consid eration
(as hereinafter defined) by the Average Closing Price (as hereinafter
defined). The "Total Bell Shares" shall be equal to 100,444. The "Aggregate
Bell Consideration" shall be equal to $4,419,536.
[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 stock
holder 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
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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.
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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: /s/ Robert E. Gill
----------------------------------
Title: President and Chief Executive
-------------------------------
Officer
-----------------------------
"NEW BELL"
BELL ACQUISITION CORPORATION
By: /s/ Robert E. Gill
----------------------------------
Title: President and Chief Executive
-------------------------------
Officer
-----------------------------
AC-7
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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
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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.
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(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.
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(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.
C-4
<PAGE>
APPENDIX D
FOURTH AMENDMENT TO
THE AMENDED AND RESTATED ARTICLES OF INCORPORATION OF
GROUP TECHNOLOGIES CORPORATION
GROUP TECHNOLOGIES CORPORATION, a corporation organized and operating under
the laws of the State of Florida (the "Corporation"), hereby certifies as
follows:
Pursuant to a meeting of the Board of Directors of the Corporation, duly
and regularly held on September 12, 1997, and pursuant to the action taken by a
majority of the holders of the outstanding common stock of the Corporation at a
special shareholder's meeting duly held on _____________________, 1997, a fourth
amendment to the Amended and Restated Articles of Incorporation of the
Corporation was adopted which deletes Article IV in its entirety and substitutes
the following in lieu thereof:
"ARTICLE IV
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"), and 1,000,000 shares of preferred stock having $.01 par
value ("Preferred Stock").
A description of the foregoing class 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;
(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;
<PAGE>
(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 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
------------
A. Subject to the preferential rights of Preferred Stock, such dividends
(either in cash, stock or otherwise) as may be determined by the Board of
Directors may be declared and paid on the Common Stock from time to time in
accordance with the Florida Business Corporation Act.
B. Except when otherwise by statute specifically provided, and except to
the extent qualified or limited by the preferential voting rights of any shares
of Preferred Stock, the holders of the Common Stock shall be entitled to one
vote for each share of Common Stock standing in their names on the books of the
corporation at the election of directors and on any question arising at any
meeting of shareholders of the corporation.
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
2.
<PAGE>
rights of the holders or 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 Statues (S)607.1006(1)(f), the undersigned
hereby attest that the number of votes cast for the amendment by the
shareholders was sufficient for approval.
WHEREUPON, at Tampa, Florida this ______th day of ______________, 1997, the
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:
------------------------- ------------------------------
, Secretary , President
3.
<PAGE>
APPENDIX E
September 12, 1997
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 Ammended and Restated
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.
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
September 10, 1997; (ii) the historical and current financial position and
results of operations of the Company as set forth in its periodic reports and
proxy
<PAGE>
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, 1997 and ending December 31, 2001, 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. In addition, 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. 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 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
E-2
<PAGE>
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.
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
E-3
<PAGE>
APPENDIX F
FIFTH AMENDMENT TO
THE AMENDED AND RESTATED ARTICLES OF INCORPORATION OF
GROUP TECHNOLOGIES CORPORATION
GROUP TECHNOLOGIES CORPORATION, a corporation organized and operating under
the laws of the State of Florida (the "Corporation"), hereby certifies as
follows:
Pursuant to a meeting of the Board of Directors of the Corporation, duly
and regularly held on September 12, 1997, and pursuant to the action taken by a
majority of the holders of the outstanding common stock of the Corporation at a
special shareholder's meeting duly held on ______________________, 1997, a fifth
amendment to the Amended and Restated Articles of Incorporation of the
Corporation was adopted which deletes Article IV in its entirety and substitutes
the following in lieu thereof:
"ARTICLE IV
Capital Stock
-------------
The total number of shares which are authorized to be issued by the
corporation is 15,000,000 shares of common stock having a $.01 par value
("Common Stock"), and 1,000,000 shares of preferred stock having $.01 par
value ("Preferred Stock").
A description of the foregoing class 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;
(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
<PAGE>
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
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
------------
A. Subject to the preferential rights of Preferred Stock, such
dividends (either in cash, stock or otherwise) as may be determined by the
Board of Directors may be declared and paid on the Common Stock from time
to time in accordance with the Florida Business Corporation Act.
B. Except when otherwise by statute specifically provided, and
except to the extent qualified or limited by the preferential voting rights
of any shares of Preferred Stock, the holders of the Common Stock shall be
entitled to one vote for each share of Common Stock standing in their names
on the books of the corporation at the election of directors and on any
question arising at any meeting of shareholders of the corporation.
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.
2.
<PAGE>
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 or shares of such other class or classes in respect of the receipt
of dividends or of amounts distributable upon liquidation, dissolution, or
winding up.
C. Upon this Amendment to the Articles of Incorporation of Group
Technologies Corporation becoming effective pursuant to the Florida
Business Corporation Act, (the "Effective Time"), each outstanding share of
Common Stock, par value $0.01 per share ("Existing Stock"), shall thereupon
be reclassified and changed into one-fourth (1/4) of one share of Common
Stock, par value $0.01 per share ("New Stock"). Upon such Effective Time,
each holder of Existing Stock shall thereupon automatically be and become
the holder of one-fourth of one share of New Stock for every share of
Existing Stock then held by such holder. Upon such Effective Time, each
certificate formerly representing a stated number of shares of Existing
Stock shall thereupon be a certificate for and shall represent one-fourth
of the number of shares of New Stock as is stated in such certificate. As
soon as practicable after such Effective Time, shareholders as of the date
of the reclassification will be notified thereof, and, upon delivery of
their certificates for Existing Stock to the Corporation, will be sent
stock certificates representing their shares of New Stock, rounded up to
the nearest whole number. No fractional shares for Existing Stock will be
issued in connection with the stock split. In addition, appropriate entries
shall be made in the accounting records of the Corporation."
As required pursuant to Florida Statues (S)607.1006(1)(f), the undersigned
hereby attest that the number of votes cast for the amendment by the
shareholders was sufficient for approval. Further, the undersigned acknowledge
that the amendment provides for a reclassification of issued shares. As required
pursuant to Florida Statues (S)607.1025(7), the undersigned hereby attest that
this Amendment does not adversely affect the rights or preferences of the
holders of outstanding shares of any class or series and does not result in the
percentage of authorized shares that remain unissued after the combination
exceeding the percentage of authorized shares that were unissued before the
combination.
WHEREUPON, at Tampa, Florida this ______th day of ______________, 1997, the
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:
--------------------------- ------------------------------
, Secretary , President
3.
<PAGE>
APPENDIX G
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Plan of Merger") made this 22nd day of
September, 1997 between GROUP TECHNOLOGIES CORPORATION, a Florida corporation
having an address of 10901 Malcolm McKinley Drive, Tampa, Florida 33612 ("GTC"),
and SYPRIS SOLUTIONS, INC., a Delaware corporation having an address of 455
South Fourth Street, Louisville, Kentucky 40202 ("Sypris").
WHEREAS, GTC has authorized capital stock consisting of 40,000,000 shares
of common stock, par value $.01 per share, which is proposed to be increased to
60,000,000 shares, and then proposed to be reduced by a 1 for 4 reverse stock
split (the "Reverse Stock Split") to 15,000,000 shares, of which 16,220,629
shares have been duly issued and are now outstanding; and 1,000,000 shares of
preferred stock, par value $.01 per share, of which 250,000 shares are issued
and outstanding and which will be converted into common stock, par value $.01
per share, of GTC prior to the effectiveness of this merger; and
WHEREAS, Sypris has an authorized capital stock consisting of 20,000,000
shares of common stock, par value $.01 per share, of which 1,000 shares have
been duly issued and are now outstanding and owned by GTC; 10,000,000 shares of
nonvoting common stock, par value $.01 per share, of which no shares are issued
and outstanding; and 1,000,000 shares of preferred stock, par value $.01 per
share, of which no shares are issued and outstanding; and
WHEREAS, the Board of Directors of GTC and Sypris, respectively, deem it
advisable and generally to the advantage and welfare of the two corporate
parties and their respective shareholders to effect this Plan of Merger, for the
general welfare and advantage of their respective shareholders, under which plan
GTC would be merged with and into Sypris, in accordance with the terms of this
Plan of Merger, and pursuant to the provisions of the Florida Business
Corporation Act (the "FBCA") and of the General Corporation Law of the State of
Delaware (the "GCL").
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and of the mutual benefits hereby provided, it is
agreed by and between the parties hereto as follows:
1. THE MERGER. Upon the terms and conditions set forth in this Plan of
Merger, at the Effective Time, as hereinafter defined, GTC shall be merged with
and into Sypris (the "Merger") in accordance with the provisions of and with the
effect provided in the FBCA and the GCL. The terms of the Merger shall be as set
forth in this Plan.
2. EFFECTIVE TIME OF MERGER. Upon the terms and conditions set forth in
this Plan, Articles of Merger (the "Articles of Merger") shall be duly prepared
and executed by GTC and Sypris, and thereafter delivered to the Secretary of
State of the State of Florida and the Secretary of State of the State of
Delaware for filing. The Merger shall become effective upon the filing with the
<PAGE>
Florida Secretary of State and the Delaware Secretary of State (the "Effective
Time").
3. SURVIVING CORPORATION. Sypris (sometimes referred to herein as the
"Surviving Corporation") shall survive the Merger and shall continue to be
governed by the laws of the State of Delaware, but the separate corporate
existence of GTC shall cease forthwith upon the Effective Time.
4. SYPRIS CAPITAL STOCK. At the Effective Time, the common stock of
Sypris presently issued and outstanding shall be cancelled and extinguished.
5. CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Sypris, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation following the
Effective Time unless and until the same shall be amended or repealed in
accordance with the provisions thereof.
6. BYLAWS. The Bylaws of Sypris as they exist on the Effective Time shall
be the Bylaws of the Surviving Corporation following the Effective Time unless
and until the same shall be amended or repealed in accordance with the
provisions thereof.
7. BOARD OF DIRECTORS AND OFFICERS. The members of the Board of Directors
and the officers of the Surviving Corporation immediately after the Effective
Time of the Merger shall be those persons who were the members of the Board of
Directors and the officers, respectively, of Sypris immediately prior to the
Effective Time of the Merger, and such persons shall serve in such offices,
respectively, for the terms provided by law or in the Bylaws, or until their
respective successors are elected and qualified.
8. CONVERSION OF SHARES OF GTC. Each of the shares of GTC common stock
(the "Shares") issued and outstanding immediately prior to the Effective Time,
and assuming the prior effectiveness of the Reverse Stock Split, shall,
automatically, by virtue of the Merger and at the Effective Time, be exchanged
for and converted into, without any further notice to or on the part of the
holder thereof, one share of the common stock, $.01 par value per share, of
Sypris. At and after the Effective Time, the former holders of Shares shall be
entitled only to the consideration provided for in this Section 8. From and
after the Effective Time, certificates previously representing the Shares shall
represent shares of common stock, $.01 par value, of Sypris.
9. RIGHTS AND LIABILITIES OF SURVIVING CORPORATION. At and after the
Effective Time of the Merger, the Surviving Corporation shall succeed to and
possess, without further act or deed, all of the estate, rights, privileges,
powers, and franchises, both public and private and all of the property, real,
personal, and mixed of each of the parties hereto; all debts due to GTC on
whatever account shall be vested in the Surviving Corporation; all claims,
G-2
<PAGE>
demands, property, rights, privileges, powers and franchises and every other
interest of either of the parties hereto shall be as effectively the property of
the Surviving Corporation as they were of the respective parties hereto; the
title to any real estate vested by deed or otherwise in the Surviving
Corporation shall not revert or be in any way impaired by reason of the Merger,
but shall be vested in the Surviving Corporation; all rights of creditors and
all liens upon any property of either of the parties hereto shall be preserved
unimpaired, limited in lien to the property affected by such lien at the
effective time of the Merger; and all debts, liabilities, and duties of the
respective parties hereto shall thenceforth attach to the Surviving Corporation
and may be enforced against it to the same extent as if such debts, liabilities,
and duties had been incurred or contracted by it.
10. LAW AND SECTION HEADINGS. This Plan of Merger shall be construed and
interpreted in accordance with the laws of the State of Delaware. Section
headings are used in this Plan of Merger for convenience only and are to be
ignored in the construction of the terms of this Plan of Merger.
11. TERMINATION. Anything contained in this Plan notwithstanding and
notwithstanding adoption hereof by the stockholders of GTC, this Plan may be
terminated and the Merger abandoned by mutual agreement of the parties.
12. MODIFICATIONS. The parties hereto may amend, modify or supplement this
Plan, before or after approval thereof by the stockholders of GTC, in such
manner as may be agreed by them in writing.
IN WITNESS WHEREOF each of the parties hereto, pursuant to authority duly
granted by the Board of Directors, has caused this Plan of Merger to be executed
by its authorized officer.
GROUP TECHNOLOGIES CORPORATION
By: /s/ Thomas W. Lovelock
--------------------------------------
Title: President and Chief Executive
-----------------------------------
Officer
-----------------------------------
SYPRIS SOLUTIONS, INC.
By: /s/ Thomas W. Lovelock
--------------------------------------
Title: President and Chief Executive
-----------------------------------
Officer
-----------------------------------
G-3
<PAGE>
APPENDIX H
CERTIFICATE OF INCORPORATION
OF
SYPRIS SOLUTIONS, INC.
The undersigned Incorporator, for the purpose of forming a corporation
under the General Corporation Law of the State of Delaware, does hereby certify
as follows:
FIRST: Name. The name of the Corporation is Sypris Solutions, Inc.
SECOND: Registered Office and Registered Agent. The registered office of
the Corporation in the State of Delaware is 1209 Orange Street, New Castle
County, Wilmington, Delaware 19801. The Registered Agent at the same address is
The Corporation Trust Company.
THIRD: Purposes. The purposes of the Corporation are to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: Incorporator. The name and mailing address of the incorporator is
Dana M. Dembkowski, 1209 Orange Street, Wilmington, Delaware 19801.
FIFTH: Capital Stock.
I. Authorized Capital Stock. The total number of shares which are
authorized to be issued by the Corporation is 20,000,000 shares of common stock
having a $.01 par value per share ("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 a $.01 par value per
share ("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:
II. 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 this Certificate 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;
<PAGE>
[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;
[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 Delaware General Corporation Law.
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 stockholders of the Corporation.
E. To the extent permitted by the Delaware General Corporation Law,
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.
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<PAGE>
III. 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 stockholders' vote, while no shares of Nonvoting
Common Stock shall have any voting rights, except for those voting rights
required by the Delaware General Corporation Law.
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 stockholders) 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.
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
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<PAGE>
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.
IV. General.
A. 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.
B. For the purposes of this Article FIFTH and of any resolution of the
Board of Directors providing for the issue of any series of Preferred Stock or
of any certificate of amendment filed with the Secretary of State of the State
of Delaware (unless otherwise expressly provided in any such resolution or
certificate), 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.
SIXTH: Directors. 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 bylaws. The
Board of Directors shall have the power to increase or decrease the number of
directors on the Board of Directors last approved by the stockholders pursuant
to and in accordance with the limitations provided by Delaware 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 this Article. Any additional
director or directors elected to fill a vacancy shall be elected by the vote of
a majority of the directors then in office, although less than a quorum, and any
director so chosen shall hold office for a term that shall expire at the time of
the next annual meeting of stockholders at which directors are elected. In no
case will a decrease in the number of directors shorten the term of any
incumbent director.
SEVENTH: Stockholder Nomination of Director Candidates. Subject to the
rights of holders of any class or series of stock having a preference over the
Common Stock as to dividends or upon liquidation, nominations for the election
of directors may be made
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<PAGE>
by the Board of Directors or a committee appointed by the Board of Directors or
by any stockholder entitled to vote in the election of directors generally.
However, any stockholder entitled to vote in the election of directors generally
may nominate one or more persons for election as directors at a meeting only if
timely written notice of such nomination or nominations has been given to the
Secretary of the Corporation. To be timely, such notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation not
later than the close of business on the 10th day following the day on which
notice of the date of the meeting was mailed or public disclosure of the date of
the meeting was made, whichever first occurs. Each such notice to the
Secretary shall set forth: (a) the name, age and address of the stockholder who
intends to make the nomination; (b) a representation that the stockholder is a
holder of record of stock of the Corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) the name, age, business and
residence addresses, and principal occupation or employment of each nominee; (d)
a description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (e) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had the
nominee been nominated, or intended to be nominated by the Board of Directors;
and (f) the consent of each nominee to serve as a director of the Corporation if
so elected. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as a director of the
Corporation. The presiding officer at the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedures.
EIGHTH: Call of Special Meetings of Stockholders. Special meetings of
stockholders of the Corporation may be called only by the Board of Directors
pursuant to a resolution adopted by a majority of the Directors in writing, or
by the holders of not less than fifty percent (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.
NINTH: Elimination of Director Liability. A director of the Corporation
shall not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for
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<PAGE>
any transaction from which the director derived an improper personal benefit.
If the Delaware General Corporation Law is amended after the filing of the
Certificate of Incorporation of which this Article is a part 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 Delaware General
Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders 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.
TENTH: Bylaws. The bylaws for the Corporation may be adopted, amended and
repealed by the Board of Directors, subject to repeal or change by action of the
stockholders.
ELEVENTH: Right to Indemnification.
A. Indemnification. The Corporation shall indemnify and hold
harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person who was or is made or is
threatened to be made a party, or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding"), by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another Corporation or of a partnership,
joint venture, trust, enterprise or non-profit entity, including service with
respect to employee benefit plans, against all liability and loss suffered and
expenses reasonably incurred by such person. The Corporation shall be required
to indemnify a person in connection with a proceeding initiated by such person
only if the proceeding was authorized by the Board of Directors of the
Corporation.
B. Prepayment of Expenses. The Corporation shall pay the expenses
of directors and executive officers of the Corporation, and may pay the
expenses of all other officers, employees or agents of the Corporation, incurred
in defending any proceeding, in advance of its final disposition, provided,
however, that the payment of expenses incurred by a director, officer, employee
or agent in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the director, officer, employee or agent
to repay all amounts advanced if it should be ultimately determined that the
director, officer, employee or agent is not entitled to be indemnified under
this Article ELEVENTH or otherwise.
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<PAGE>
C. Claims. If a claim for indemnification or payment of expenses
under this Article is not paid in full within sixty days after a written claim
therefor has been received by the Corporation, the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification or payment of expenses under
applicable law.
D. Non-Exclusivity of Rights. The rights conferred on any person by
this Article ELEVENTH shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision of the
certificate of incorporation, bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.
E. Other Indemnification. The Corporation's obligation, if any,
to indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or non-profit entity, shall be reduced by any amount such
person may collect as indemnification from such other corporation, partnership,
joint venture, trust, enterprise or non-profit enterprise.
F. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article ELEVENTH shall not adversely affect any
right or protection hereunder of any person in respect of any act or omission
occurring prior to the time of such repeal or modification.
TWELFTH: Election of Directors. Unless and except to the extent that the
bylaws of the Corporation shall so require, the election of directors of the
Corporation need not be by written ballot.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation under the laws of the State of Delaware, does make,
file and record this Certificate of Incorporation, hereby declaring and
certifying that this is my act and deed and the facts herein stated are true,
and accordingly have hereunto set my hand this ___ day of September, 1997.
By:
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E:\CMP\SYPRIS.ART
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<PAGE>
APPENDIX I
BYLAWS OF
SYPRIS SOLUTIONS, INC.
ARTICLE I
---------
OFFICES
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The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The principal office of the
corporation shall be located in Louisville, Kentucky. The corporation may have
such other offices as the business of the corporation may require from time to
time.
ARTICLE II
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STOCKHOLDERS
------------
SECTION 1. ANNUAL MEETING. The annual meeting of the stockholders shall be
held between January 1st and December 31st of each year, beginning with the year
1998, on such date and at such hour as may be specified in the Notice of Meeting
or in a duly executed Waiver of Notice thereof, for the purpose of electing
directors and for the transaction of such other business as may come before the
meeting. If the day fixed for the annual meeting shall be a legal holiday, such
meeting shall be held on the next business day which is not a legal holiday. If
the election of directors shall not be held on the day designated for any annual
meeting, or at any adjournment thereof, the Board of Directors shall cause the
election to be held at a special meeting of the stockholders to be held as soon
thereafter as may be convenient.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders of the
corporation may be called in accordance with the corporation's certificate of
incorporation.
SECTION 3. PLACE OF MEETING. The Board of Directors may designate any
place within or without the State of Delaware as the place of meeting for any
annual meeting, or any place either within or without the State of Delaware as
the place of meeting for any special meeting called by the Board of Directors.
If no designation is made, or if a special meeting be called by other than
the Board of Directors, the place of meeting shall be the principal office of
the corporation in the State of Kentucky, except as provided in Section 5 of
this Article.
SECTION 4. NOTICE OF MEETINGS. Written or printed notice stating the
place, day and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally
<PAGE>
or by telegraph, teletype or other form of wire or wireless communication, or by
mail or private carrier, by or at the direction of the president, or the
secretary, or the officer or persons calling the meeting, to each stockholder of
record entitled to vote at such meeting, except when a longer period of time is
required by statute. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail in a sealed envelope addressed to the
stockholder at his address as it appears on the records of the corporation, with
first class postage thereon prepaid.
SECTION 5. MEETING OF ALL STOCKHOLDERS. If all of the stockholders shall
meet at any time and place, either within or without the State of Delaware, and
consent to the holding of a meeting, such meeting shall be valid without call or
notice, and at such meeting any corporate action may be taken.
SECTION 6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. If no
record date is fixed for the determination of stockholders entitled to notice
of or to vote at a meeting of stockholders, or stockholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of stockholders.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided herein, such determination shall apply to
any adjournment thereof unless the meeting is adjourned to a date more than one
hundred twenty (120) days after the date fixed for the original meeting, in
which case the Board of Directors shall fix a new record date.
SECTION 7. VOTING LISTS AND SHARE LEDGER. The secretary shall prepare and
make, at least ten days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof and may be
inspected by any stockholder who is present. The stock ledger shall be the only
evidence as to who are the stockholders entitled to examine the stock ledger,
the list of stockholders or the books of the corporation, or to vote in person
or by proxy at any meeting of stockholders.
SECTION 8. QUORUM. A majority of the outstanding shares entitled to vote,
represented in person or by proxy, shall
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constitute a quorum at any meeting of stockholders. The stockholders present at
a duly organized meeting can continue to do business for the remainder of the
meeting and for any adjournment thereof until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum, unless a new
record date is or must be set for that adjourned meeting.
SECTION 9. PROXIES. At all meetings of stockholders, a stockholder may
vote by proxy executed in writing by the stockholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. A stockholder may revoke his
proxy at any time prior to the establishment of a quorum at any meeting of
stockholders. Such revocation shall be in writing and delivered to the
secretary of the corporation prior to the time the presence of a quorum has been
determined and declared.
SECTION 10. ACTION BY CONSENT OF STOCKHOLDERS. Any action required or
permitted to be taken at any annual or special meeting of the stockholders 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, shall be 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) shall be delivered to the corporation by delivery to its
principal office in Kentucky, 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 stockholders are recorded. Prompt
notice must be given to those stockholders who have not consented in writing or
who are not entitled to vote on the action.
ARTICLE III
-----------
DIRECTORS
---------
SECTION 1. GENERAL POWERS. The business and affairs of the corporation
shall be managed under the direction of a Board of Directors.
SECTION 2. NUMBER AND TENURE. The number of directors of the corporation
shall be not less than three (3) nor more than twelve (12). The Board of
Directors may from time to time designate the number of directors which shall
constitute the whole Board. The number of directors shall initially be eight
(8). Each director elected by the stockholders shall hold office for the term
for which he is elected or until his successor shall have been elected and
qualifies for the office, whichever period is longer.
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SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without notice other than this bylaw, immediately after, and at
the same place as, the annual meeting of stockholders. The Board of Directors
may provide, by resolution, the time and place, either within or without the
State of Delaware, for the holding of additional regular meetings without other
notice than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the chairman of the board or a majority of
the directors. The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the State of
Delaware, as the place for holding any special meeting of the Board of Directors
called by them.
SECTION 5. NOTICE. Notice of any special meeting shall be given at least
two (2) days prior thereto by telephone, by written notices delivered personally
or mailed to each director at his address on file with the corporation, or by
telegram or other form of electronic communication. If mailed, such notice shall
be deemed to be delivered when deposited in the United States mail in a sealed
envelope so addressed, with postage thereon prepaid. If notice be given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. Any director may waive notice of any
meeting. The attendance of a director at any meeting shall constitute a waiver
of notice of such meeting, unless the director at the beginning of the meeting
(or promptly upon his arrival) objects to the transaction of any business at the
meeting and does not thereafter vote for or assent to action taken at the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
SECTION 6. QUORUM. A majority of the Board of Directors shall constitute a
quorum for the transaction of business at any meeting of the Board of Directors,
provided that if less than a majority of the directors are present at said
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice.
SECTION 7. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors; provided, however, that the Board of Directors, by resolution
adopted by a majority of the full Board of Directors, may designate from among
its members an executive and one or more other committees, including, without
limitation, an audit committee and a compensation committee, each of which, to
the extent provided in such resolution, shall have and may exercise all the
authority of the Board of Directors to the extent permitted by the Delaware
General Corporation Law, but no
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such committee shall have the authority of the Board of Directors to [a] approve
or recommend to stockholders actions or proposals required by Delaware law to be
approved by the stockholders; [b] fill vacancies on the Board of Directors or on
any of its committees; [c] adopt, amend or repeal bylaws; [d] authorize or
approve reacquisition of shares unless pursuant to a general formula or method
specified by the Board of Directors; or [e] authorize or approve the issuance or
sale or contract for sale of shares or determine the designation and relative
rights, preferences and limitations of a voting group, except that the Board of
Directors may authorize a committee (or senior executive officer of the
corporation) to do so within limits specifically prescribed by the Board of
Directors.
SECTION 8. VACANCIES. Any vacancy occurring in the Board of Directors may
be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall serve until the next stockholders' meeting at which directors
are elected.
SECTION 9. COMPENSATION. The Board of Directors shall have authority to
fix the compensation of directors.
SECTION 10. ACTION BY CONSENT OF DIRECTORS. 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 action 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.
ARTICLE IV
----------
OFFICERS
--------
SECTION 1. DESIGNATION OF OFFICERS. The officers of the corporation shall
be a president, one or more vice presidents, a treasurer, a secretary, and such
other officers, including, without limitation, a chairman of the board, a chief
executive officer, one or more assistant treasurers and one or more assistant
secretaries, as may be provided by the Board of Directors and elected in
accordance with the provisions of this article.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of stockholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as convenient. Vacancies may be filled or new offices
created and filled at any meeting of the Board of Directors. Each officer shall
hold office until his or her successor shall have been duly
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elected and shall have qualified or until his or her death or until he or she
shall resign or shall have been removed from office in the manner hereinafter
provided.
SECTION 3. REMOVAL. Any officer elected by the Board of Directors may be
removed by the Board of Directors, with or without cause, whenever in its
judgment the best interest of the corporation would be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Election or appointment of an officer or agent shall not of itself
create contract rights.
SECTION 4. CHAIRMAN OF THE BOARD. The Board of Directors shall appoint one
of its members to be chairman of the board to serve at the pleasure of the
Board. He shall preside at all meetings of the Board of Directors and at all
meetings of the stockholders. The chairman of the board shall supervise the
carrying out of the policies adopted or approved by the Board. He shall have
general executive powers, as well as the specific powers conferred by these
bylaws. He shall also have and may exercise such further powers and duties as
from time to time may be conferred upon, or assigned to him by the Board of
Directors.
SECTION 5. PRESIDENT. The Board of Directors shall appoint the president
of the corporation. The president may sign, with the secretary, or any other
proper officer of the corporation thereunto authorized by the Board of
Directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the Board of Directors has
authorized to be executed except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
bylaws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; he shall have authority to vote all
shares of stock in other corporations owned by the corporation, unless the Board
of Directors designates and appoints another person as proxy for the
corporation; and in general shall perform all duties incident to the office of
president and such other duties as may be prescribed by the Board of Directors
from time to time. In the event the Board does not appoint a chief executive
officer or in his absence or in the event of his inability or refusal to act,
the president shall perform the duties of chief executive officer. The Board in
its discretion may appoint the same member to the office of chairman of the
board and president. When the member of the Board holds the office of chairman
of the board and president, a vice chairman of the board shall be appointed to
preside at any meeting of the Board at which the chairman is not present.
SECTION 6. CHIEF EXECUTIVE OFFICER. The chief executive officer shall be
the principal executive officer of the corporation and shall in general
supervise and control all of the business affairs of the corporation and in
general shall perform all duties
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incident to the office of chief executive officer and such other duties as may
be prescribed by the Board of Directors from time to time. The Board in its
discretion may appoint the same member to the office of chief executive officer
and chairman of the board and/or president.
SECTION 7. VICE PRESIDENT. The Board shall appoint as many vice presidents
as it deems necessary and may designate one or more vice presidents as senior
vice president of the corporation. Such senior vice president (or in the event
no senior vice president is appointed, the vice president in the order
designated at the time of their election or, in the absence of any designation,
then in the order of their appointment) shall, in the absence of the president
and chief executive officer or in the event of his or their inability or refusal
to act, perform the duties of such office(s) and, when so acting, shall have all
the powers of and be subject to all the restrictions upon such office(s). Any
vice president may sign, with the secretary or an assistant secretary,
certificates for shares of the corporation and shall perform such other duties
as from time to time may be assigned to them by the president or by the Board of
Directors.
SECTION 8. TREASURER. If required by the Board of Directors, the treasurer
shall give a bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the Board of Directors shall determine. He shall: [a]
have charge and custody of and be responsible for all funds and securities of
the corporation; receive and give receipts for moneys due and payable to the
corporation from any source whatsoever, and deposit all such moneys in the name
of the corporation in such banks, trust companies or other depositories as shall
be selected in accordance with the provisions of these bylaws; [b] in general,
perform all the duties incident to the office of treasurer and such other duties
as from time to time may be assigned to him by the president or the Board of
Directors.
SECTION 9. SECRETARY. The secretary shall: [a] keep the minutes of the
stockholders' and of the Board of Directors' meetings in one or more books
provided for that purpose; [b] see that all notices are duly given in accordance
with the provisions of these bylaws or as required by law; [c] be custodian of
the corporate records and of the seal of the corporation and see that the seal
of the corporation is affixed to all certificates for shares prior to the issue
thereof and to all documents, the execution of which on behalf of the
corporation under its seal is duly authorized in accordance with the provisions
of these bylaws; [d] keep a register of the post office address of each
stockholder which shall be furnished to the secretary by such stockholder; [e]
in general, perform all duties incident to the office of secretary and such
other duties as from time to time may be assigned to him by the president or by
the Board of Directors. The secretary may also be designated as registrar of the
corporation. Both the
I-7
<PAGE>
secretary and the registrar of the corporation shall have authority to sign with
the president, or vice president, certificates for shares of the corporation,
the issue of which shall have been authorized by resolution of the Board of
Directors, have general charge of the stock transfer books of the corporation
and take all actions necessary for transfer of shares on the books of the
corporation.
SECTION 10. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The assistant
treasurers shall respectively, if required by the Board of Directors, give bonds
for the faithful discharge of their duties in such sums and with such sureties
as the Board of Directors shall determine. The assistant secretaries, as and if
authorized by the Board of Directors, may sign with the president or vice
president certificates for shares of the corporation, the issue of which shall
have been authorized by a resolution of the Board of Directors. The assistant
treasurers and assistant secretaries in general shall perform such duties as
shall be assigned to them by the treasurer or the secretary, respectively, or by
the president or the Board of Directors.
ARTICLE V
---------
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
SECTION 1. CONTRACTS. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instruments in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
corporation, and no evidences of indebtedness shall be issued in its name unless
authorized in advance or by ratification, by a resolution of the Board of
Directors. Such authority may be general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ORDERS, ETC. All checks, drafts, or other
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the corporation shall be signed by such officer or officers,
agent or agents, of the corporation and in such manner as shall from time to
time be determined by resolution of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies, or other depositories as the Board of Directors may
select.
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<PAGE>
ARTICLE VI
----------
CERTIFICATES FOR SHARES AND THEIR TRANSFER
------------------------------------------
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of
the corporation shall be in such form as may be determined by the Board of
Directors. Such certificates shall be signed by the president or vice president
and by the secretary or an assistant secretary (including by facsimile
signature) and may be sealed with the seal of the corporation or a facsimile
thereof. All certificates surrendered to the corporation for transfer shall be
cancelled, and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and cancelled, except
that in case of a lost, destroyed or mutilated certificate, a new one may be
issued therefor upon such terms and indemnity to the corporation as the Board of
Directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the corporation shall
be made only on the books of the corporation by the registered holder thereof or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the secretary of the corporation, and on surrender for cancellation
of the certificate for such shares. The person in whose name shares stand on the
books of the corporation shall be deemed the owner thereof for all purposes as
regards the corporation.
ARTICLE VII
-----------
FISCAL YEAR
-----------
The fiscal year of the corporation shall begin on the first day of January
and end on the last day of December of each calendar year.
ARTICLE VIII
------------
WAIVER OF NOTICE
----------------
Whenever any notice whatever is required to be given under the provisions
of these bylaws, or under the provisions of the Certificate of Incorporation, or
under the provisions of the corporation laws of the State of Delaware, waiver
thereof in writing, signed by the person, or persons, entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
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<PAGE>
ARTICLE IX
----------
AMENDMENT OF BYLAWS
-------------------
The Board of Directors may alter, amend or rescind the bylaws, subject
to the rights of stockholders to replace or modify such actions.
ARTICLE X
---------
AUDITORS
--------
The corporation's books of account shall be examined annually by an
independent firm of public accountants whose selection shall be made by the
Board of Directors after recommendation by management. Upon completion of the
examination by the auditors, a report shall be prepared and submitted to the
Board of Directors.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
GTC
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.
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<PAGE>
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;
(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.
Sypris
Pursuant to Article Ninth of the Delaware Certificate ("Article IX"), a
director shall not be personally liable to Sypris or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to Sypris or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, or (iv) for any transaction from which the director derived an
improper personal benefit. If the DGCL is hereafter amended to permit further
elimination or limitation of the personal liability of directors, then the
liability of a director of Sypris shall be eliminated or limited to the fullest
extent permitted by the DGCL, as so amended. Any repeal or modification of
Article IX shall not adversely affect any right or protection of a director of
Sypris existing at the time of such repeal or modification.
Under Article Eleventh of the Delaware Certificate ("Article XI"), each
person who was or is made a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that such person, or a person for whom such person is the legal
representative, is or was a director, officer, employee or agent of Sypris or is
or was serving at the request of Sypris as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, shall be
indemnified and held harmless by Sypris to the fullest extent authorized by the
DGCL, as the same exists or may hereafter be amended, against all liability and
loss suffered and expenses reasonably incurred by such person.
Expenses incurred by a director or executive officer of Sypris in defending
any proceeding shall be paid by Sypris in advance of the final disposition of
such proceeding (and in the case of all other officers, employees or agents of
Sypris, Sypris may advance such expenses) only upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay all amounts so
advanced in the event that it shall ultimately be determined that such director,
officer, employee or agent is not entitled to be indemnified by the employee or
agent as authorized in Article XI or otherwise.
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<PAGE>
If a claim under Article XI is not paid in full by Sypris within 60 days
after a written claim has been received by Sypris, the claimant may file suit to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid the expense of prosecuting such claim.
Sypris shall have the burden of proving that the claimant was not entitled to
the requested indemnification or payment of expenses under applicable law.
The indemnification and advancement of expenses provided by Article XI
shall not be deemed exclusive of any other rights to which a claimant may be
entitled under any statute, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Generally, under Section 145(a) of the DGCL, a corporation may indemnify
any person made a party to a proceeding (other than an action by or in the right
of the corporation) by reason of the fact that such person 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 expenses reasonably incurred if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, such person had no reasonable cause to believe such person's conduct
was unlawful. Under Section 145(b) of the DGCL, a corporation may indemnify any
person made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that such person 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 expenses reasonably incurred
in connection with the defense or settlement of such action if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation, and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all circumstances, such person is
fairly and reasonably entitled to indemnification deemed proper by the court.
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits of any proceeding referred to in
subsection (a) and (b) of Section 145 of the DGCL, or in defense of any claim,
issue or matter therein, such person shall be indemnified against expenses
actually and reasonably incurred in connection therewith.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Note Description
- ------- ---- -----------
<S> <C> <C>
2 Amended and Restated 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
Communications 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 among Philips Electronic North America
Corporation and the Registrant dated June 25, 1993.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
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 Comercio 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.
2.8 (7) Asset Purchase Agreement among Registrant, Teklogix Enterprises, Inc.
and Teklogix International, Inc. dated March 22, 1996.
2.10 (14) Stock and Asset Purchase and Sale Agreement among Registrant,
Group Technologies Mexican Holding Company, SCI Systems, Inc., SCI
Systems de Mexico S.A. de C.V. and SCI Holdings, Inc. dated June 30,
1997.
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.
3.5 (11) Third 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.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
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.
10.4.4 (11) Third Amendment to Amended and Restated Credit and Security Agreement,
dated March 28, 1997.
10.5 (1) Form of U.S. Government Award/Contract.
10.6 (1) Preferred Supplier Purchase Agreement for Circuit Card Assembly
between the Registrant and Honeywell, Inc. dated July 1, 1990.
10.7 (1) Purchase Order between the Registrant and Martin Marietta.
10.8 (1) Standard OEM Purchase Agreement between Kulicke and Soffa Industries,
Inc. and Registrant dated March 16, 1993.
10.9 (1) Purchase/Supply Agreement between Philips Circuit Assemblies and
International Game Technology dated July 31, 1992.
10.10 (5) Purchase Order between the Registrant and Lockheed Martin Corporation
dated September 21, 1995.
10.11 (11) OEM Purchase Agreement between Instruments SA, Inc. and Registrant
dated December 11, 1996.
10.12 (1) Cooperation and Licensing Agreement between Dauphin Technology
Incorporated and the Registrant dated August 11, 1993.
10.13 (1) Master Lease Agreement between General Electric Capital Corporation
and the Registrant dated April 1, 1993.
10.14 (1) Lease between Copelco Leasing Corporation and the Registrant dated
April 20, 1993.
10.15 (1) Master Rental Agreement and related documents between Hewlett-Packard
Company and the Registrant.
10.16 (1) Master Equipment Lease Agreement between Ellco Leasing Corporation
and the Registrant dated November 9, 1990.
10.17 (1) Master Lease Agreement between General Electric Capital Corporation
and the Registrant dated March 9, 1993.
10.18 (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 Associates, 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;
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
and related Amendment I to Lease Agreement between Sweetwell
Industries Associates, L.P. and the Registrant dated October
25, 1991, regarding Tampa Industrial park property.
10.19 (1) Lease between the Registrant and TMC Properties, Inc. dated
August 24, 1994, regarding North 46th Street Property.
10.19.1 (4) Amendment No.1 to Lease between Registrant and TMC Properties, Inc.
dated August 24, 1994 regarding North 46th Street Property.
10.20 (1) Agreements between the Registrant and International Brotherhood
of Teamsters, Chauffeurs, Warehousemen, and Helpers of America Local
Union No. 930 dated September 25, 1993.
10.21 (1) Agreements between the Registrant and International Brotherhood of
Teamsters, Chauffeurs, Warehousemen, and Helpers of America Local
Union No. 930 dated November 22, 1994.
10.22 (1) Group Technologies Corporation Stock Option Plan, as amended.
10.22.1 (10) Group Technologies Corporation Stock Option Plan, Restated effective
June 28, 1996, dated January 22, 1990.
10.22.2 (11) Group Technologies Corporation Stock Option Plan, Restated effective
December 17, 1996.
10.23 (1) Group Technologies Corporation Executive Staff Incentive Compensation
Plan, as amended.
10.24 (4) Group Technologies Corporate Management Deferred Compensation Plan
Restated effective January 1, 1994 dated May 5, 1995.
10.25 (5) Group Technologies Corporate Management Deferred Compensation Plan
Restated effective October 1, 1995 dated August 29, 1995.
10.26 (4) Group Technologies Corporation Independent Directors' Stock Option
Plan dated October 27, 1994, as approved and ratified at Annual
Shareholder Meeting dated April 21, 1995.
10.26.1 (8) Group Technologies Corporation Independent Directors' Stock Option
Plan Restated effective February 21, 1996, dated October 27, 1994.
10.26.2 (9) Group Technologies Corporation Independent Directors' Stock Option
Plan Restated effective October 29, 1996, dated October 27, 1994.
10.26.3 (13) Group Technologies Corporation Independent Directors' Stock Option
Plan Restated effective June 25, 1997, dated October 27, 1994.
10.27 (4) Group Technologies Corporation 1994 Stock Option Plan for Key
Employees dated October 27, 1994, as approved and ratified at annual
shareholder meeting dated April 21, 1995.
10.27.1 (8) Group Technologies Corporation 1994 Stock Option Plan for Key
Employees Restated
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
effective on February 21, 1996, dated October 27, 1994.
10.27.2 (9) Group Technologies Corporation 1994 Stock Option Plan for Key
Employees Restated effective on October 29, 1996, dated October 27,
1994.
10.27.3 (11) Group Technologies Corporation 1994 Stock Option Plan for Key
Employees Restated effective December 17, 1996, dated October 27,
1994.
10.27.4 (13) Group Technologies Corporation 1994 Stock Option Plan for Key
Employees Restated effective June 25, 1997, dated October 27, 1994.
10.28 (8) Group Technologies Corporation Independent Directors' Compensation
Program Restated effective February 21, 1996, dated September 1,
1995.
10.28.1 (13) Group Technologies Corporation Independent Directors Compensation
Program Restated effective June 25, 1997, dated September 1, 1995.
10.29 (8) Group Technologies Corporation 1996 Special Recovery Bonus Plan for
Vice Presidents effective as of January 2, 1996.
10.30 (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.
10.31 (15) Separation letter agreement dated December 10, 1996 between the
Registrant and Carl P. McCormick.
10.32 (11) Stock Purchase Agreement and Registration Rights Agreement between
Registrant and Group Financial Partners, Inc. dated March 28, 1997.
10.33 (12) Stock Purchase Right Agreement dated April 7, 1997 between the
Registrant and Thomas W. Lovelock.
10.34 (13) Employment Agreement by and between the Registrant and Thomas W.
Lovelock dated June 23, 1997.
10.35 (13) Employment Agreement by and between the Registrant and James G.
Cocke dated June 23, 1997.
10.36 (13) Special Bonus Agreement by and between the Registrant and David D.
Johnson dated June 25, 1997.
18 (3) Letter from Ernst & Young LLP, regarding change in accounting
principles.
21 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.
23.3 Consent of Fowler, White, Gillen, Boggs, Villareal and Banker, P.A.
(included in Exhibit 5)
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
23.4 Consent of Wyatt, Tarrant & Combs (included in Exhibit 8)
23.5 Consent of J.C. Bradford & Co., LLC
- -------------
(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 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, 1996.
(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.
(10) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 filed on June 28, 1996 (Registration No. 333-07111).
(11) Incorporated by reference to the Registrant's Form 10-K for the fiscal
year ended December 31, 1996 filed on March 31, 1997.
(12) Incorporated by referenced to the Registrant's Form 10-Q for the
Quarterly Period ended March 30, 1997 filed on May 14, 1997.
(13) Incorporated by reference to the Registrant's Form 10-Q for the
Quarterly Period ended June 29, 1997 filed on August 13, 1997.
(14) Incorporated by reference to the Registrant's Form 8-K filed on July 15,
1997.
(15) Previously filed with Registrant's Form S-4 (No. 333-20299) filed on
January 24, 1997.
</TABLE>
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<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 (c) 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.
(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
II-9
<PAGE>
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-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Tampa, State of Florida, on September 24, 1997.
GROUP TECHNOLOGIES CORPORATION
By: /s/ Thomas W. Lovelock
------------------------
Thomas W. Lovelock
Title: President and Chief Executive Officer
II-11
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Capacity Date
--------- -------- ----
* September 24, 1997
- ------------------------ -----------------------
Jeffrey T. Gill Chairman and Director
/s/ Thomas W. Lovelock September 24, 1997
- ------------------------ -----------------------
Thomas W. Lovelock President, Chief Executive
Officer and Director
/s/ David D. Johnson September 24, 1997
- ------------------------ -----------------------
David D. Johnson Vice President of Finance,
Chief Financial Officer and
Principal Accounting
Officer
* September 24, 1997
- ------------------------ -----------------------
Robert E. Gill Director
* September 24, 1997
- ------------------------ -----------------------
Henry F. Frigon Director
* September 24, 1997
- ------------------------ -----------------------
Sidney R. Petersen Director
* September 24, 1997
- ------------------------ -----------------------
Roger W. Johnson Director
* By /s/ Jeffrey T. Gill
---------------------------------
Jeffrey T. Gill, Attorney-In-Fact
II-12
<PAGE>
SCHEDULE II (a)
VALUATION AND QUALIFYING ACCOUNTS
GROUP TECHNOLOGIES CORPORATION
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning Costs and End of
of Period Expenses Deductions Period
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1996.......... $ 783,000 $ 961,000 $ 498,000/(1)/ $1,246,000
========== ========== ========== ==========
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
========== ========== ========== ==========
Reserve for inactive, obsolete and
unsalable inventories:
Year ended December 31, 1996.......... $8,606,000 $3,567,000 $7,285,000/(2)/ $4,888,000
========== ========== ========== ==========
Year ended December 31, 1995.......... $2,230,000 $6,939,000 $ 563,000/(2)/ $8,606,000
========== ========== ========== ==========
Year ended December 31, 1994.......... $2,139,000 $ 540,000 $ 449,000/(2)/ $2,230,000
========== ========== ========== ==========
</TABLE>
- ---------------------
(1) Uncollectible accounts written off, net of reserves.
(2) 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, 1996............................... $1,090,000 $1,208,000 $ - $ 287,000 (1) $2,011,000
========== ========== ======== ========== ==========
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
========== ========== ======== ========== ==========
Reserve for inactive, obsolete and unsalable inventories:
Year ended December 31, 1996............................... $8,563,000 $4,106,000 $ - $6,138,000 (1) $6,531,000
========== ========== ======== ========== ==========
Year ended December 31, 1995............................... $2,473,000 $6,990,000 $ - $ 900,000 (2) $8,563,000
========== ========== ======== ========== ==========
Year ended December 31, 1994............................... $2,221,000 $ 573,000 $ - $ 321,000 (2) $2,473,000
========== ========== ======== ========== ==========
</TABLE>
- -----------------
(1) Uncollectible accounts written off, net of reserves.
(2) Inactive, obsolete and unsalable inventories written off.
<PAGE>
EXHIBIT 5
September 23, 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 49,651,648
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. Our lawyers are licensed to practice only in the State of Florida
and, accordingly, any opinion provided herein is given only with regard to the
laws of the State of Florida. 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, including the exchange of share certificates as provided 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
September 22, 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 (x) the transactions to be effected
pursuant to the terms of the Amended and Restated 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"), (y) the merger of GTC with and into Sypris Solutions,
Inc., a newly formed wholly-owned subsidiary of GTC ("Sypris") pursuant to the
Agreement and Plan of Merger by and among GTC and Sypris (the "Reincorporation")
(collectively, 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
<PAGE>
Board of Directors
Group Technologies Corporation, et al.
September 22, 1997
Page 2.
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.
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 and Reincorporation
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 (hereinafter defined), Sypris, GFP, Tube Turns, New Tube Turns,
Bell and New Bell contained in letters to us dated September 22, 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 or Reincorporation, (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 GFP Common Stock, GTC Common Stock,
Tube Turns
<PAGE>
Board of Directors
Group Technologies Corporation, et al.
September 22, 1997
Page 3.
Common Stock and Bell Common Stock, and (iv) the federal income tax consequences
to any party of the Conversion, Spin-Off, and Reverse Stock Split (all herein
defined).
The following description of the Reorganization and Reincorporation 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
Conversion; (ii) the Spin-Off; (iii) the Merger; (iv) the Tube Turns Merger; (v)
the Bell Merger; (vi) the GTC Contribution; (vii) the Reverse Stock Split; and
(viii) the Reincorporation.
The Conversion. Immediately prior to the Reorganization, the holders of
Group Technologies Corporation 8 1/2% Cumulative Convertible Preferred Stock
(the "Preferred Stock") will convert each share of Preferred Stock into 8.1
shares of GTC Common Stock.
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 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
<PAGE>
Board of Directors
Group Technologies Corporation, et al.
September 22, 1997
Page 4.
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 and the shares of BT Holdings,
Inc.) into GTC Acquisition Corporation, a Florida corporation and a newly formed
wholly owned subsidiary of GTC ("New GTC").
The Reverse Stock Split. Immediately after shareholder approval and upon
the filing of an amendment to the GTC Articles with the Florida Secretary of
State, the Reverse Stock Split will be deemed effective, and each certificate
representing shares of GTC Common Stock outstanding immediately prior to the
Reverse Stock Split (the "Old Shares") will be deemed automatically, without any
action on the part of the shareholders, to represent 1/4 of the number of shares
of GTC Common Stock after the Reverse Stock Split (the "New Shares"); provided,
however, that no fractional New Shares will be issued as a result of the Reverse
Stock Split. In lieu thereof, each shareholder of Old Shares who would otherwise
be entitled to receive a fractional share of New Shares will be paid cash by GTC
in lieu of such fractional shares (the "Reverse Stock Split").
The Reincorporation. At the applicable Effective Time as defined in the
Reincorporation Agreement, GTC will merge with and into Sypris, a Delaware
corporation and a newly formed wholly-owned subsidiary of GTC, pursuant to the
laws of Florida and Delaware, whereupon the separate existence of GTC will cease
and Sypris will continue as the surviving corporation. Shareholders of GTC
(other than those entitled to receive cash in lieu of a fractional share of
Sypris common stock) will be issued solely shares of Sypris common stock.
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.
<PAGE>
Board of Directors
Group Technologies Corporation, et al.
September 22, 1997
Page 5.
C. No gain or loss will be recognized by GFP as a result of the Merger.
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 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.
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 Common Stock was 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
<PAGE>
Board of Directors
Group Technologies Corporation, et al.
September 22, 1997
Page 6.
Tube Turns Merger will constitute a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
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 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.
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 Common
Stock was 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
<PAGE>
Board of Directors
Group Technologies Corporation, et al.
September 22, 1997
Page 7.
will be subject to the conditions and limitations of Section 302 of the Code.
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 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 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
<PAGE>
Board of Directors
Group Technologies Corporation, et al.
September 22, 1997
Page 8.
Bell Common Stock was held as a capital asset by the shareholders of Bell on the
date of the exchange.
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 trans ferred 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 of GTC on the date of transfer.
G. New GTC will not succeed to any tax attributes, including the earnings
and profits of GTC.
V. The Reincorporation.
-------------------
A. The merger of GTC with and into Sypris will constitute a
reorganization within the meaning of Section 368(a) of the Code.
B. GTC and Sypris will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code.
<PAGE>
Board of Directors
Group Technologies Corporation, et al.
September 22, 1997
Page 9.
C. No gain or loss will be recognized by GTC or Sypris as a result of the
Reincorporation.
D. No gain or loss will be recognized by shareholders who exchange their
GTC shares solely for Sypris shares.
E. Shareholders of GTC will have the same tax basis in the shares of
Sypris received in the Reincorporation as the basis in the shares of GTC
exchanged therefor.
F. The holding period of the shares of Sypris will include the period
during which the shares of GTC were held, provided such shares of GTC were held
as capital assets on the effective date of the Reincorporation.
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
or Reincorporation, (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 GFP Common Stock, GTC Common Stock,
Tube Turns Common Stock and Bell Common Stock, or (iv) the federal income tax
consequences to any party of the Conversion, Spin-Off and Reverse Stock Split.
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
<PAGE>
Board of Directors
Group Technologies Corporation, et al.
September 22, 1997
Page 10.
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/
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
The Registrant's subsidiaries are:
(1) Group Technologies Mexican Holding Company, a Florida Corporation which is
a wholly-owned subsidiary of the Registrant.
(2) Metrum, Inc., a Colorado corporation which is a wholly-owned subsidiary of
the Registrant.
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 28, 1997, included in the Proxy Statement of Group
Technologies Corporation that is made a part of the Registration Statement (Form
S-4 No. 333-20299) and Prospectus of Group Technologies Corporation for the
registration of 49,651,648 shares of its common stock.
/s/ Ernst & Young LLP
Tampa, Florida
September 22, 1997
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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 September 10, 1997, with respect to the consolidated
financial statements and schedule of Group Financial Partners Inc. and
Subsidiaries included in Amendment No. 1 to the Registration Statement (Form S-4
No. 333-20299) and related Prospectus of Group Technologies Corporation.
/s/ Ernst & Young LLP
Louisville, Kentucky
September 22, 1997
<PAGE>
EXHIBIT 23.5
We hereby consent to the use of the opinion letter, dated September 12,
1997, to the Special Committee of the Board of Directors of Group Technologies
Corporation included as Appendix G to the Proxy Statement/Prospectus, which
forms a part of Amendment No. 1 to Registration Statement of Form S-4 (No. 333-
20299), and to references to such opinion in such Proxy Statement/Prospectus. In
giving such consent, we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder, nor do we admit that we are experts with respect to any part of such
Registration Statement within the meaning of the term "experts" as used in the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
J.C. BRADFORD & CO., L.L.C.
September 12, 1997
