-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BhuGZRDWnRZFNpFq+z9utUFejFAW2pTupm/+oUcAfypcSmfUb0Ox3uE3x1Nt2Dfn pkpVAFSyp7k4CB/J8OIJZA== 0000912057-96-018778.txt : 19960826 0000912057-96-018778.hdr.sgml : 19960826 ACCESSION NUMBER: 0000912057-96-018778 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 24 FILED AS OF DATE: 19960823 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIUMPH GROUP INC / CENTRAL INDEX KEY: 0001021162 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 510347963 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-10777 FILM NUMBER: 96620178 BUSINESS ADDRESS: STREET 1: FOUR GLENHARDIE CORPORATE CENTER STREET 2: 1255 DRUMMERS LANE SUITE 200 CITY: WAYNE STATE: PA ZIP: 19087 MAIL ADDRESS: STREET 1: FOUR GLENHARDIE CORPORATE CENTER STREET 2: 1255 DRUMMERS LANE SUITE 200 CITY: WAYNE STATE: PA ZIP: 19087 S-1 1 S-1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 1996 REGISTRATION STATEMENT NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 -------------------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ TRIUMPH GROUP, INC. (Exact name of registrant as specified in its charter) DELAWARE 51-0347963 (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization)
FOUR GLENHARDIE CORPORATE CENTER 1255 DRUMMERS LANE, SUITE 200 WAYNE, PENNSYLVANIA 19087 (610) 975-0420 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) RICHARD C. ILL PRESIDENT AND CHIEF EXECUTIVE OFFICER TRIUMPH GROUP, INC. FOUR GLENHARDIE CORPORATE CENTER 1255 DRUMMERS LANE, SUITE 200 WAYNE, PENNSYLVANIA 19087 (610) 975-0420 (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------------------- COPIES TO: Edward D. Slevin, Esquire George P. Stamas, Esquire Gerald J. Guarcini, Esquire Joanne F. Catanese, Esquire Ballard Spahr Andrews & Ingersoll Wilmer, Cutler & Pickering 1735 Market Street, 51st Floor 100 Light Street Philadelphia, Pennsylvania 19103 Baltimore, Maryland 21202 (215) 665-8500 (410) 986-2800
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM AGGREGATE TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING AMOUNT OF SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE Common Stock, par value $.001 per share................................ 2,856,250 shares $18.00 $51,412,500 $17,728.45
(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457 under the Securities Act of 1933, as amended. 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 SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION AUGUST 23, 1996 2,375,000 SHARES [LOGO] TRIUMPH GROUP, INC. COMMON STOCK --------- All of the 2,375,000 shares of Common Stock offered hereby are being offered by Triumph Group, Inc. (the "Company"). Prior to this offering, there has been no public market for the Common Stock of the Company. It is currently estimated that the initial public offering price of the Common Stock will be between $16.00 and $18.00 per share. See "Underwriting" for a discussion of the factors to be considered in determining the initial public offering price. The Company also has a class of Class D Common Stock. Application has been made to list the Common Stock for trading on The New York Stock Exchange. Certain executive officers and directors of the Company and certain employees of Citicorp Venture Capital, Ltd. ("CVC") have agreed to purchase directly from the Company 125,000 shares of Common Stock at the Price to Public less Underwriting Discounts and Commissions (the "Direct Sale"). See "Certain Transactions," "Principal Stockholders" and "Direct Sale." -------------- SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. ------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRICE UNDERWRITING PROCEEDS TO DISCOUNTS AND TO PUBLIC COMMISSIONS COMPANY(1) Per Share................................ $ $ $ Total(2)................................. $ $ $
(1) Before deducting expenses of this offering estimated at $1,000,000. (2) The Company has granted the Underwriters a 30-day option to purchase up to 356,250 additional shares of Common Stock solely to cover over-allotments, if any. To the extent that the option is exercised, the Underwriters will offer the additional shares at the Price to Public as shown above. If the option is exercised in full, the total Price to Public, Underwriting Discounts and Commissions and Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting." -------------- The shares of Common Stock are offered by the several Underwriters, subject to prior sale, when, as and if delivered to and accepted by them, and subject to the right of the Underwriters to reject any order in whole or in part. It is expected that delivery of the shares of Common Stock will be made at the offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about , 1996. ALEX. BROWN & SONS DILLON, READ & CO. INC. INCORPORATED THE DATE OF THIS PROSPECTUS IS , 1996 [PHOTOS TO BE SUBMITTED BY AMENDMENT] -------------- IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. -------------- AS USED IN THIS PROSPECTUS, REFERENCES TO "THE COMPANY" SHALL INCLUDE TRIUMPH GROUP, INC. AND ITS DIRECT AND INDIRECT SUBSIDIARIES AND THE OPERATING DIVISIONS OF SUCH SUBSIDIARIES. THE COMPANY CONDUCTS ITS OPERATIONS THROUGH ITS WHOLLY OWNED SUBSIDIARY, TRIUMPH GROUP HOLDINGS, INC. AND ITS DIRECT AND INDIRECT SUBSIDIARIES. ON AUGUST 21, 1996, THE REGISTRANT'S NAME WAS CHANGED FROM "THE TRIUMPH GROUP HOLDINGS, INC." TO "TRIUMPH GROUP, INC." 2 PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT (I) THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED, AND (II) THE TRANSACTIONS DESCRIBED UNDER "RECAPITALIZATION" HAVE OCCURRED. THE COMPANY The Company designs, engineers, manufactures or repairs and overhauls aircraft components such as mechanical and electromechanical control systems, aircraft and engine accessories, auxiliary power units ("APUs"), avionics and aircraft instruments. The Company serves a broad spectrum of the aviation industry, including commercial airlines and air cargo carriers, as well as original equipment manufacturers of aircraft and aircraft components ("OEMs"), on a worldwide basis. According to current U.S. Department of Commerce statistics, the annual worldwide market for the design, engineering, manufacture, repair and overhaul of aircraft components is approximately $45 billion. The aircraft component production and repair industry is highly fragmented, consisting of both a limited number of well-capitalized companies, which offer a broad range of products and services, and a large number of smaller, specialized companies. The Company believes that this market structure and industry trends will result in continued industry consolidation. The Company believes that there are a number of significant trends affecting the demand for its products and services. Boeing's 1996 Market Outlook projects that global air travel will increase by 70% and that the number of passenger and cargo delivery aircraft in service will increase by 47% through the year 2005. This continued growth in air transit and aircraft production will increase the demand for aircraft component purchases and repairs. In addition to increased air transit and aircraft in service, these trends include increased outsourcing of the manufacture and maintenance of aircraft components, assemblies and subassemblies by aircraft operators and OEMs, reductions by customers in the number of approved suppliers and vendors of aviation products and services, aging aircraft that require increased repair and maintenance, reduced supply of surplus aircraft, increased emphasis on component traceability and more stringent maintenance and safety requirements. COMPETITIVE ADVANTAGES The Company believes that it is well positioned to take advantage of these trends due to: BROAD ARRAY OF PRODUCT AND SERVICES. The Company offers the aviation industry a consolidated point of purchase for a broad array of aviation products and services. The Company designs, engineers and manufactures aircraft components to fulfill the particular needs and requirements of its customers. In certain cases, the Company retains the proprietary right to these designs and, accordingly, the customer will rely on the Company to provide service on such aircraft components at every stage of their useful lives, including the repair and overhaul or replacement of such components. The Company also manufactures aircraft components according to customer specifications. In addition, the Company performs repair and overhaul services for customers on various aircraft components manufactured by third parties. GOVERNMENT CERTIFICATIONS. The Company operates nine repair stations certified by the United States Federal Aviation Administration (the "FAA") and has been granted licenses from the FAA and foreign regulatory counterparts to perform repair and overhaul services on broad classifications of aircraft instruments and accessories. Without such broad certifications and licenses, other companies may not offer these products and services, thereby constituting a significant barrier to entry. In addition, the Company holds two exclusive licenses issued by the FAA that permit the Company to design, engineer and repair products to its own specifications for certain aircraft components and therefore to compete 3 directly with OEMs with respect to such components. These exclusive licenses enable the Company to offer, on a proprietary basis, certain repaired parts to its customers at a lower cost than other companies that must purchase replacement parts from third parties. EMPHASIS ON QUALITY CONTROL. The Company incurs significant expenses to maintain stringent quality control of its products and services. In addition to domestic and foreign governmental regulations, OEMs and other customers require that the Company satisfy certain requirements relating to the quality of its products and services. The Company performs testing and certification procedures on all of the products that it designs, engineers, manufactures, repairs and overhauls, and maintains detailed records to ensure traceability of the production of and service on each aircraft component. The expense required to institute and maintain comparable quality control procedures represents a barrier to entry. BROAD CUSTOMER BASE. Due to the Company's broad array of products and services and its emphasis on quality control and timely delivery, the Company's customers include virtually all of the world's major commercial airlines and an increasing number of the most widely recognized air cargo carriers and OEMs. The Company expects that its customer base will continue to strengthen and broaden with increased cross-selling efforts by the Company of its various products and services. ESTABLISHED INDUSTRY PRESENCE. The operating divisions and subsidiaries in the Company's aviation group have been involved in the aviation industry for an average of over 30 years. These entities are characterized by experienced management and highly-skilled employees. Due in large part to its established industry presence, the Company enjoys strong customer relations, name recognition and repeat business. COMPANY STRATEGY The Company intends to grow its aviation business through: EXPANSION OF PRODUCTS AND SERVICES. The Company will continue to introduce new aviation products and services to take advantage of the growing aviation industry and the increasing demand for aviation products and services. In an effort to expand its existing array of products and services and to capture additional repair and overhaul business, the Company plans to expand, as appropriate, its program for the distribution and inventory management of third party aircraft components. The Company will also expand its assembly and subassembly capabilities on certain aircraft components. By broadening its products and services, the Company intends to further augment its position as a consolidated point of purchase to the aviation industry, capitalizing on the trend toward outsourcing and the reduction by aircraft operators and OEMs of the number of approved suppliers and vendors. INCREASED INTERNATIONAL MARKETING. The Company will continue to take advantage of the expanding international market for aviation products and services, as worldwide air travel escalates and foreign nations, particularly China and other countries in Asia, purchase used aircraft that require more frequent repair and maintenance. The Company currently supplies products and services to virtually every major commercial airline in the world and retains independent sales representatives in a number of foreign countries. The Company intends to build on its existing international presence through foreign acquisitions and continued market penetration. CAPITALIZING ON AVIATION GROUP AFFILIATION. Utilizing the group affiliation of the Company's operating divisions and subsidiaries, the Company plans to increase cross-selling of its various capabilities to its customers. The Company's operating divisions and subsidiaries will continue to share independent sales representatives and jointly bid on projects where appropriate, while still maintaining their individual identities. EXPANDED OPERATING CAPACITY. The Company plans to increase its operating capacity to meet the expected increased growth and demand in the aviation industry. The Company will increase its capital expenditures, including expenditures for additional equipment and skilled labor, to support this increased capacity. The Company intends to continue to invest in state of the art machinery to increase its operating efficiencies and improve operating margins. 4 GROWTH THROUGH ACQUISITIONS. The Company expects to continue its growth through acquisitions of other companies, assets or product lines that add to or complement the Company's existing aviation products and services. The Company has successfully completed three acquisitions in the last 12 months. Because of the fragmented nature of much of the market for aircraft products and services, the Company believes that many additional acquisition opportunities exist in the aviation industry. ADDITIONAL BUSINESSES In addition to the aviation group, the Company also operates a metals group that, through its operating divisions and subsidiaries, processes, fabricates or distributes metal products to manufacturers and other customers in the computer, construction, container, farm equipment and office furniture industries, primarily within North America. The metals group processes and distributes carbon flat-rolled steel products and performs a variety of processes on these products, including electrogalvanizing, slitting and blanking. The Company also manufactures fuel tanks and hydraulic reservoirs and erects structural steel frameworks. The metals group is a significant contributor to the Company's financial strength and has consistently generated profits and positive cash flows for the Company. The Company believes that it competes successfully in the metals markets on the basis of price, quality and reliability of service. COMPANY ORGANIZATION The Company was incorporated in 1993 to purchase the aviation and metals businesses of Alco Standard Corporation ("Alco") in a management buyout (the "Acquisition") organized by 19 members of management and CVC. See "Historical Background." The Company's executive offices are located at Four Glenhardie Corporate Center, 1255 Drummers Lane, Suite 200, Wayne, Pennsylvania 19087-1565, and its telephone number is (610) 975-0420. RECAPITALIZATION Immediately prior to the closing of this offering, the Company will consummate a series of transactions to recapitalize. All of the outstanding shares of Class A Common Stock, Class B Common Stock and Class C Common Stock, each having par value $.001 per share, of the Company will be split 65-for-one (the "Stock Split"). In addition, (i) all outstanding shares of Class A Common Stock and Class C Common Stock of the Company and shares of Class B Common Stock held by persons other than CVC and certain investors currently or previously affiliated with CVC ("CVC Investors") will be exchanged (the "Common Stock Conversion") for shares of the Company's Common Stock, par value $.001 per share, (the "Common Stock"), (ii) all outstanding shares of Class A Common Stock, par value $.001 per share, of Triumph Controls, Inc. ("TCI"), a subsidiary of the Company, will be converted into shares of Common Stock (the "TCI Conversion"), (iii) all outstanding shares of the Company's preferred stock, par value $.01 per share, (the "Preferred Stock"), held by persons other than CVC Investors, with an aggregate liquidation value plus accumulated dividends to the date of this Prospectus will be exchanged at an estimated exchange ratio of one-to-10.7 (the "Preferred Stock Exchange Ratio") and all outstanding 14% junior subordinated promissory notes (the "14% JSDs"), held by persons other than CVC Investors with an aggregate principal amount plus accrued interest to the date of this Prospectus will be exchanged at an estimated exchange ratio of one share of Common Stock for every $14.48 of principal and accrued interest on the 14% JSD ("14% JSD Exchange Ratio") for shares of Common Stock (the "Preferred Stock Conversion" and the "14% JSD Conversion," respectively), and (iv) the sale of 125,000 shares pursuant to the Direct Sale. All shares of Class B Common Stock, Preferred Stock (at the Preferred Stock Exchange Ratio) and 14% JSDs (at the 14% JSD Exchange Ratio) held by CVC Investors will be exchanged for 1,023,570 shares of Common Stock and 4,255,293 shares of Class D Common Stock, par value $.001 per share ("Class D Common Stock") of the Company (the "CVC Exchange"). The exchange ratios for the Preferred Stock and the 14% JSDs will be adjusted to give effect to the accumulation of dividends on the Preferred Stock and the accrual of interest on the 14% JSDs, respectively, to the date of the exchange and to give effect to the actual initial public offering price of the Common Stock. The outstanding shares of 5 Common Stock and Class D Common Stock are collectively referred to herein as the "Shares." The Common Stock Conversion, the Preferred Stock Conversion, the 14% JSD Conversion and the TCI Conversion are collectively referred to herein as the "Conversions." THE OFFERING Common Stock offered by the Company..................... 2,375,000 shares Shares to be outstanding after this offering............ 9,334,200 shares(1)(2)(3) Use of Proceeds......................................... To repay certain indebtedness of the Company and for working capital and general corporate purposes. See "Use of Proceeds." Proposed New York Stock Exchange ("NYSE") symbol........ TGI
- -------------- (1) Excludes 650,000 shares of Common Stock issuable upon exercise of an outstanding warrant held by an affiliate of CVC (the "Warrant") and 43,958 shares of Common Stock issuable upon exercise of purchase options held by members of management of certain subsidiaries of the Company outstanding at August 20, 1996. See "Historical Background" and "Certain Transactions." (2) Includes 125,000 shares to be sold pursuant to the Direct Sale and 4,255,293 shares of Class D Common Stock held by CVC Investors and convertible at its option into an equal number of shares of Common Stock. (3) Shares outstanding after this offering will be subject to adjustment to the actual date of consummation of the Preferred Stock Conversion, the 14% JSD Conversion and the CVC Exchange to give effect to changes to the exchange ratio of the Preferred Stock for accumulation of dividends on the Preferred Stock and the exchange ratio of the 14% JSDs for accrual of interest to the date of the exchanges and the actual initial public offering price. See "Principal Stockholders." 6 SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEARS ENDED MARCH 31, THREE MONTHS ENDED JUNE 30, TEN MONTHS ------------------------------------- ------------------------------------- ENDED MARCH 31, PRO FORMA PRO FORMA 1994 1995 1996(1) 1996(2) 1995 1996(1) 1996(2) --------------- ----------- ----------- ----------- ----------- ----------- ----------- OPERATING DATA: AVIATION GROUP Net sales.................... $ 57,257 $ 70,714 $ 100,166 $ 143,560 $ 21,301 $ 35,535 $ 41,750 Group operating income, before corporate expense(3).................. 9,138 8,778 14,095 23,329 2,765 5,948 7,394 METALS GROUP Net sales.................... 72,738 93,451 86,608 86,608 21,073 19,649 19,649 Group operating income, before corporate expense(3).................. 5,376 6,379 4,638 4,638 1,140 516 516 Combined operating income, before corporate expense...... 14,514 15,157 18,733 27,967 3,905 6,464 7,910 Corporate expense(4)........... 1,573 1,606 2,522 2,522 604 1,117 1,117 --------------- ----------- ----------- ----------- ----------- ----------- ----------- Operating income............... 12,941 13,551 16,211 25,445 3,301 5,347 6,793 Interest expense............... 4,908 6,589 7,318 8,124 1,600 2,286 1,808 --------------- ----------- ----------- ----------- ----------- ----------- ----------- Income from continuing operations, before income taxes......................... 8,033 6,962 8,893 17,321 1,701 3,061 4,985 --------------- ----------- ----------- ----------- ----------- ----------- ----------- --------------- ----------- ----------- ----------- ----------- ----------- ----------- Income from continuing operations.................... 4,908 4,364 5,194 10,277 1,014 1,809 2,974 Income (loss) from discontinued operations(5)................. (462) (2,852) 4,496 4,496 109 -- -- --------------- ----------- ----------- ----------- ----------- ----------- ----------- Net income..................... $ 4,446 $ 1,512 $ 9,690 $ 14,773 $ 1,123 $ 1,809 $ 2,974 --------------- ----------- ----------- ----------- ----------- ----------- ----------- --------------- ----------- ----------- ----------- ----------- ----------- ----------- Earnings per share: Income from continuing operations.................. $ 0.72(6) $ 0.67(6) $ 0.78(6) $ 1.37(7) $ 0.16(6) $ 0.26(6) $ 0.40(7) --------------- ----------- ----------- ----------- ----------- ----------- ----------- --------------- ----------- ----------- ----------- ----------- ----------- ----------- Shares used in computing income from continuing operations.................. 7,291(6) 7,387(6) 7,516(6) 7,516(7) 7,424(6) 7,499(6) 7,499(7) --------------- ----------- ----------- ----------- ----------- ----------- ----------- --------------- ----------- ----------- ----------- ----------- ----------- ----------- Pro forma income from continuing operations, as adjusted(8)................. $ 1.19 $ 0.34 ----------- ----------- ----------- ----------- Pro forma shares used in computing income from continuing operations, as adjusted(8)................. 10,016 9,999 ----------- ----------- ----------- -----------
JUNE 30, 1996 -------------------------------------------- PRO FORMA ACTUAL PRO FORMA(9) AS ADJUSTED(9)(10) --------- ------------- ------------------ BALANCE SHEET DATA: Working capital....................................................... $ 49,608 $ 54,534 $ 54,534 Total assets.......................................................... 142,297 163,054 163,054 Long-term debt, including current portion............................. 81,467 88,214 52,014 Total stockholders' equity............................................ 16,667 28,297 64,497
- ------------------ (1) The fiscal year ended March 31, 1996 includes the operating results of TCI and Air Lab, Inc. ("Air Lab") since the dates of acquisition, January 1, 1996 and October 2, 1995, respectively. Additionally, these entities are included in the results of operations for the three months ended June 30, 1996. The combined operations of TCI and Air Lab contributed $11.0 million and $12.2 million, respectively, to the aviation group's net sales and $2.3 million and $3.2 million, respectively, to the aviation group's operating income, before corporate expense, for the fiscal year ended March 31, 1996 and the three months ended June 30, 1996, respectively. 7 (2) Represents historical data adjusted to reflect (i) the acquisitions of TCI (acquired on January 1, 1996), Advanced Materials Technologies Inc. ("AMTI") (acquired on July 31, 1996) and Air Lab (acquired on October 2, 1995) (the "Acquisitions"), (ii) the refinancing of a portion of the Company's long-term debt (consummated on July 19, 1996), (iii) the Conversions, and (iv) the CVC Exchange as if they occurred on April 1, 1995. See Notes to the Unaudited Condensed Consolidated Pro Forma Financial Statements for information concerning the adjustments to arrive at the pro forma amounts presented herein. (3) Operating income, before corporate expense, is presented by group to assist the investor in evaluating each of the group's results of operations before financing and corporate expenses. (4) Corporate expenses primarily consist of compensation, rent and general costs related to the operation of the Company's corporate office and other general expenses of the Company including professional fees. (5) Represents the results of operations of Quality Park Products, Inc. which was sold by the Company on March 31, 1996. See Note 4 of the Company's Consolidated Financial Statements. (6) Earnings per share information represents the Company's per share data and weighted average shares of Common Stock outstanding restated to give effect to the 65-for-one stock split to be effected immediately prior to this offering, the dilutive effects of the Warrant and stock issued during the period commencing 12 months prior to the initial filing of the proposed initial public offering at prices below the anticipated public offering price, the Conversions, the CVC Exchange and an adjustment for the interest on the 14% JSDs net of tax expense. Income from continuing operations represents the amounts reflected in the Company's Consolidated Financial Statements. Primary and fully diluted earnings per share are the same. See Note 2 to the Company's Consolidated Financial Statements. (7) Pro forma earnings per share represents the Company's pro forma income from continuing operations and historical weighted average shares outstanding restated to give effect to the 65-for-one stock split to be effected immediately prior to this offering, the dilutive effects of the Warrant and stock issued during the period commencing 12 months prior to the initial filing of the proposed initial public offering at prices below the anticipated public offering price, the Conversions and the CVC Exchange. See Notes to the Unaudited Condensed Consolidated Pro Forma Financial Statements. (8) Pro forma earnings per share, as adjusted, represents the Company's pro forma earnings per share adjusted to give effect to the sale of shares of Common Stock offered by the Company pursuant to this offering and the application of the net proceeds therefrom (at an assumed initial public offering price of $16.00 per share, less underwriting discounts and commissions and estimated offering expenses payable by the Company) and pursuant to the Direct Sale and the application of the proceeds therefrom to reduce the Company's long-term borrowings. See Note 12 to the Unaudited Condensed Consolidated Pro Forma Financial Statements for information concerning the computation of pro forma as adjusted earnings per share. See also "Use of Proceeds," "Capitalization" and "Dividend Policy." (9) Adjusted to give effect to the acquisition of AMTI, the refinancing of a portion of the Company's long-term debt, the Conversions and the CVC Exchange as if they occurred on June 30, 1996. See Notes to the Unaudited Condensed Consolidated Pro Forma Financial Statements for information concerning the adjustments to arrive at the pro forma amounts presented herein. (10) Adjusted to give effect to the sale of shares of Common Stock offered by the Company pursuant to this offering and the application of the net proceeds thereof (at an assumed initial public offering price of $16.00 per share, less underwriting discounts and commissions and estimated offering expenses payable by the Company) and pursuant to the Direct Sale and the application of the proceeds therefrom as set forth in "Use of Proceeds" and "Capitalization." 8 RISK FACTORS IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS. DEPENDENCE ON AVIATION INDUSTRY. A substantial percentage of the Company's gross profit and operating income is derived from its aviation group. The Company's aviation operations are focused on designing, engineering and manufacturing aircraft components on new aircraft and performing repair and overhaul services on existing aircraft and aircraft components. Therefore, the Company's business is directly affected by economic factors and other trends that affect its customers in the aviation industry, including a possible decrease in outsourcing by aircraft operators and OEMs or projected market growth that may not materialize or be sustainable. When such economic and other factors adversely affect the aviation industry, they tend to reduce the overall customer demand for the Company's products and services, thereby decreasing the Company's operating income. There can be no assurance that economic and other factors that might affect the aviation industry will not have an adverse impact on the Company's results of operations. See "Business -- Industry Overview and Trends." CAPITAL REQUIREMENTS AND INTEGRATION OF ACQUIRED BUSINESSES. A key element of the Company's strategy has been, and continues to be, internal growth and growth through the acquisition of additional companies engaged in the aviation industry. In order to grow internally, the Company will be required to make significant capital expenditures. The Company's ability to grow by acquisition is dependent upon, and may be limited by, the availability of suitable acquisition candidates and capital, and by restrictions contained in the Company's revolving and term credit facility (the "Credit Facility") and its other financing arrangements. In addition, growth by acquisition involves risks that could adversely affect the Company's operating results, including difficulties in integrating the operations and personnel of acquired companies, the potential amortization of acquired intangible assets and the potential loss of key employees of acquired companies. There can be no assurance that the Company will be able to obtain the capital necessary to pursue its internal growth and acquisition strategy, consummate acquisitions on satisfactory terms or, if any such acquisitions are consummated, satisfactorily integrate such acquired businesses into the Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and "Business -- Company Strategy." FLUCTUATIONS IN OPERATING RESULTS. The Company's overall operating results are affected by many factors, including the timing of orders from large customers and the timing of expenditures to manufacture parts and purchase inventory in anticipation of future sales of products and services. A large portion of the Company's operating expenses are fixed. Because several operating divisions and subsidiaries of the Company typically do not obtain long-term purchase orders or commitments from their customers, they must anticipate the future volume of orders based upon the historic purchasing patterns of their customers and upon their discussions with customers as to their future requirements. Cancellations, reductions or delays in orders by a customer or group of customers could have a material adverse effect on the Company's business, financial condition and results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." GOVERNMENT REGULATION AND INDUSTRY OVERSIGHT. The aviation industry is highly regulated in the United States by the FAA and in other countries by similar agencies. The Company must be certified by the FAA and, in some cases, by individual OEMs in order to engineer and service parts and components used in specific aircraft models. If material authorizations or approvals were revoked or suspended, the operations of the Company would be adversely affected. New and more stringent government regulations may be adopted, or industry oversight heightened, in the future and such new regulations, if enacted, or any industry oversight, if heightened, may have an adverse impact on the Company. See "Business -- Government Regulation." COMPETITION. There are numerous competitors of the Company in both the aviation services and metals processing and distribution industries. Competition in the aviation industry comes from three primary sources: major commercial airlines, many of which operate their own maintenance and overhaul units; OEMs, which manufacture, repair and overhaul their own components; and other independent 9 service companies. The Company's principal competitors in the metals industry include national and regional steel mills, other steel service centers, steel erection companies and pre-engineered building manufacturers. Certain of the Company's competitors in both aviation and metals have substantially greater financial and other resources than the Company. There can be no assurance that competitive pressures in either industry will not materially and adversely affect the Company's business, financial condition or results of operations. See "Business -- Competition." TECHNOLOGICAL DEVELOPMENTS. The aviation industry is constantly undergoing development and change, and accordingly, it is likely that new products, equipment and methods of repair and overhaul service will be introduced in the future. In order to keep pace with any new developments, the Company may need to expend significant capital to purchase new equipment and machines or to train its employees in the new methods of production and service. There can be no assurance that the Company will be successful in developing new products or that such capital expenditures will not have a material adverse effect on the Company. PRODUCT LIABILITY; CLAIMS EXPOSURE. The Company's overall operations expose it to potential liabilities for personal injury or death as a result of the failure of an aircraft component that has been serviced by the Company, the failure of an aircraft component designed or manufactured by the Company or the irregularity of metal products processed or distributed by the Company. While the Company believes that its liability insurance is adequate to protect it from such liabilities and while no material claims have been made against the Company, no assurance can be given that claims will not arise in the future or that such insurance coverage will be adequate. Additionally, there can be no assurance that insurance coverage can be maintained in the future at an acceptable cost. Any such liability not covered by insurance or for which third party indemnification is not available could have a material adverse effect on the financial condition of the Company. See "Business -- Legal Proceedings." POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES. The Company's business operations and facilities are subject to a number of federal, state and local environmental laws and regulations. Although management believes that the Company's operations and facilities are in material compliance with such laws and regulations, there can be no assurance that future changes in such laws, regulations or interpretations thereof or the nature of the Company's operations will not require the Company to make significant additional capital expenditures to ensure compliance in the future. Certain Company facilities are currently the subject of environmental remediation activities, the cost of which is subject to indemnification provided by Alco. One of these facilities is connected with a site included on the National Priorities List of Superfund sites maintained by the Environmental Protection Agency (the "EPA"). Another of these facilities is located on a site included in EPA's database of potential Superfund sites. The Alco indemnification covers both (i) the costs and claims associated with all of these environmental remediation activities and liabilities, and (ii) the costs of unidentified environmental liabilities that arise from conditions or activities existing at facilities acquired from Alco prior to their acquisition from Alco and that are identified before July 22, 2000. Another of the Company's facilities leased from Teleflex Incorporated ("Teleflex") is located on a site placed on the EPA's National Priorities List prior to its acquisition by the Company, and is subject to indemnification provided by Teleflex for environmental liabilities arising from activities or conditions existing at this facility prior to the Company's acquisition. The Company does not maintain environmental liability insurance, and if the Company were required to pay the expenses related to these environmental liabilities, such expenses could have a material adverse effect on the Company. See "Business -- Environmental Matters." RISKS REGARDING THE COMPANY'S INVENTORY. Certain of the Company's customers require the Company to maintain and manage a supply of certain aircraft components and other products in inventory. If this inventory is not used by the Company, because the Company ceases to supply such customers with the related products or services or because such components or other products becomes obsolete, the Company will not realize any income to offset the expenses incurred by the Company to acquire and maintain such inventory. 10 LABOR RELATIONS. Several of the Company's subsidiaries are parties to collective bargaining agreements with labor unions, of which one agreement will expire in the next six months and the remaining agreements will expire over the next several years. In the aggregate, under those agreements the Company currently employs approximately 200 full-time employees, and from time to time employs up to an additional 150 temporary employees for its steel erection business, all of whom are members of labor unions. The Company's inability to negotiate acceptable contracts with these unions could result in strikes by the affected workers and increased operating costs as a result of higher wages or benefits paid to union members. If the unionized workers were to engage in a strike or other work stoppage, or other employees were to become unionized, the Company could experience a significant disruption of its operations and higher ongoing labor costs, which could have an adverse effect on the Company's business and results of operations. See "Business -- Employees." DEPENDENCE OF CERTAIN BUSINESSES ON KEY CUSTOMERS. Although no individual customer directly accounted for more than 5% of the Company's combined net sales during the last three years, certain of the Company's operating divisions and subsidiaries have significant customers, the loss of whom could have a material adverse effect on their businesses. CONTROL BY PRINCIPAL STOCKHOLDERS. Upon completion of this offering, CVC, through the exercise of the Warrant held by an affiliate of CVC and the conversion of shares of Class D Common Stock, will own or have the right to acquire 54.1% of the outstanding Common Stock. The Company's executive officers will own an aggregate of 6.7% of the outstanding Common Stock. After this offering, if CVC and the Company's executive officers act together, they will be able to control the election of a majority of the members of the Company's Board of Directors and, therefore, to control the business, policies and affairs of the Company. See "Principal Stockholders." RELIANCE ON SKILLED PERSONNEL. From time to time certain of the Company's operating divisions and subsidiaries have experienced difficulties in attracting and retaining skilled personnel to design, engineer, manufacture or repair and overhaul sophisticated aircraft components. The ability of the Company to operate successfully could be jeopardized if the Company is unable to attract and retain a sufficient number of skilled personnel. CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL. The Company's Certificate of Incorporation, as amended, and Bylaws contain provisions, including cumulative voting, that may have the effect of discouraging certain transactions involving an actual or threatened change of control of the Company. In addition, the Board of Directors of the Company has the authority to issue up to 250,000 shares of Preferred Stock in one or more series in connection with the purchase by the Company of the assets or stock of another corporation or the merger of the Company with or into another corporation, and to fix the preferences, rights and limitations of any such series without stockholder approval. See "Description of Capital Stock" for a description of these provisions. Cumulative voting and the ability to issue Preferred Stock could have the effect of discouraging unsolicited acquisition proposals or making it more difficult for a third party to gain control of the Company, or otherwise could adversely affect the market price of the Common Stock. DILUTION. Investors in this offering will experience immediate and substantial dilution in the net tangible book value of the shares of Common Stock purchased in this offering. At an assumed initial public offering price of $16.00 per share, new investors will experience dilution in net tangible book value per share of $11.75. See "Dilution." NO PRIOR PUBLIC MARKET; DETERMINATION OF OFFERING PRICE. Prior to this offering, there has been no public market for the Common Stock of the Company. The initial public offering price of the Common Stock was determined in negotiations among the Company and the representatives of the Underwriters (the "Representatives"). See "Underwriting" for a discussion of the factors to be considered in determining the initial public offering price. There can be no assurance that an active trading market will develop or be sustained following this offering. The stock market has experienced from time to time significant price and volume fluctuations. 11 SHARES ELIGIBLE FOR FUTURE SALE. As of the date of this Prospectus, in addition to the 2,375,000 shares of Common Stock offered pursuant to this offering and the 125,000 shares to be sold pursuant to the Direct Sale, 2,578,907 restricted shares of Common Stock held by current stockholders will be eligible for sale pursuant to Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"), beginning 90 days after the date of this offering. Sales of a substantial number of shares of Common Stock in the public market following this offering could adversely affect the market price for the Common Stock. The Company's officers, directors and certain stockholders, who hold an aggregate of 1,608,215 shares of Common Stock, have agreed that, for a period of 180 days from the date of this Prospectus, they will not, without the prior written consent of Alex. Brown & Sons Incorporated, offer, sell, contract to sell, or otherwise dispose of, any shares of Common Stock. The Company also has granted the Warrant. Shares issued upon exercise of the Warrant will be restricted stock. The Company has also granted purchase options for up to 43,958 shares of Common Stock to members of management of certain subsidiaries of the Company. Shares issued upon exercise of the Warrant and purchase options will be subject to the 180-day lock-up agreements. Additionally, CVC and its affiliates ("CVC Affiliates") owning an aggregate of 970,692 shares of Common Stock, all of whom are subject to the 180-day lock-up agreements, have the right to demand two registrations of their shares of Common Stock under the Securities Act on Form S-1 at the Company's expense and an unlimited number of registrations at the expense of the CVC Affiliates. The holder of the Warrant has the right to demand one registration at the Company's expense. Both the CVC Affiliates and the holder of the Warrant have the right to demand an unlimited number of registrations on Form S-3 at the Company's expense. In addition, the CVC Affiliates, the holder of the Warrant and certain members of management of the Company have the right, subject to certain limitations, to have their shares of Common Stock included in future registered public offerings of securities of the Company at its expense. See "Shares Eligible for Future Sale." 12 HISTORICAL BACKGROUND The Company was formed in 1993 by members of management and CVC to acquire certain businesses and assets from Alco in the Acquisition. In connection with the Acquisition, 19 members of management contributed capital in the aggregate amount of approximately $1.1 million and CVC, an institutional investor, contributed capital in the aggregate amount of approximately $6.9 million. The businesses acquired from Alco as part of the Acquisition included a major portion of the Company's aviation operations and its entire metals operations, as well as Quality Park Products, Inc. ("Quality Park"), a paper converting business. Following the Acquisition, the Company determined to focus its efforts on its core businesses and, after restructuring, sold Quality Park in March 1996 to Mail-Well I Corporation ("Mail-Well") for approximately $27.4 million in cash, and the assumption by Mail-Well of certain liabilities. As part of the Company's strategy to grow its aviation businesses, the Company has completed three acquisitions in the last 12 months: In October 1995, the Company acquired substantially all of the assets, including the name, and assumed certain liabilities of, Air Lab, Inc. ("Air Lab"), for an aggregate purchase price of approximately $2.2 million, plus additional amounts to be paid through the year 2000, as consideration for a non- competition agreement entered into by the seller and certain of its stockholders and as consideration for a consulting agreement entered into by the seller to provide marketing and advisory services. Air Lab services instruments and avionics for the commercial aviation industry. In January 1996, the Company acquired all of the assets and assumed certain of the liabilities of TCI, formerly a division of Teleflex, for an aggregate purchase price of approximately $36.5 million, including a 10.5% subordinated promissory note in the principal amount of $5.5 million (the "Teleflex Note"). The Company also assumed liabilities and incurred transaction related costs totalling $3.6 million. TCI also sold shares of Class A Common Stock of TCI, representing a 10% minority interest in TCI (convertible to the Company's Common Stock at the Company's option), and 10.5% junior subordinated promissory notes in an aggregate principal amount of $800,000 to an affiliate of Teleflex in payment of a financing fee and to certain members of management of TCI in consideration for cash and confidentiality and non-competition agreements. As part of the acquisition, the Company also granted a purchase option for 21,270 shares of Common Stock to the president of TCI. TCI manufactures and services mechanical and electromechanical controls for various end users, primarily in the aviation industry. In July 1996, the Company purchased all of the outstanding capital stock of Advanced Materials Technologies Inc. ("AMTI"). The aggregate consideration for the AMTI acquisition was approximately $7.5 million in cash paid at closing plus a total of approximately $3.7 million to be paid through the year 2002 as consideration for a confidentiality and non-competition agreement entered into by one of the former owners of AMTI. In addition, the Company assumed certain liabilities and incurred transaction related costs totalling $9.6 million. The Company also purchased for approximately $0.5 million certain real estate leased to AMTI by its principal stockholder and granted to such stockholder the right to purchase 14,180 shares of Common Stock. As part of the acquisition, the Company also acquired AMTI's wholly owned subsidiary, Special Processes of Arizona, Inc. ("SPOA"). AMTI engages in the repair and manufacture of components for APUs and gas turbine engines. SPOA engages in the production and application of plasma coating used primarily by the aviation industry. For additional information regarding the Company's acquisitions, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 3 and Note 17 to the Company's Consolidated Financial Statements. 13 USE OF PROCEEDS The net proceeds from the sale of the 2,375,000 shares of Common Stock offered pursuant to this offering and the 125,000 shares to be sold pursuant to the Direct Sale are estimated to be approximately $36.2 million ($41.8 million if the Underwriters exercise their over-allotment option in full), assuming an initial public offering price per share of $16.00 (less underwriting discounts and commissions and estimated offering expenses payable by the Company). The Company intends to use a portion of the net proceeds of this offering to repay the Teleflex Note, plus accrued interest, in full. The face amount of the Teleflex Note is $5.5 million and accrued interest was approximately $0.4 million as of August 16, 1996. The Teleflex Note matures in equal installments on December 31, 2002 and 2003, bears interest at 10.5% per annum and may be prepaid in full at any time without penalty. The remaining proceeds will be used to repay the revolving credit facility, which matures on July 19, 2001, and bears interest, at the option of the Company, at the fluctuating prime rate or LIBOR plus applicable basis points. On August 16, 1996, an aggregate of approximately $30.0 million was outstanding under the revolving credit facility, $22.0 of which was accruing interest at the LIBOR rate (plus applicable basis points) of 6.81% per annum and $8.0 million of which was accruing interest at the prime rate of 8.25% per annum. Amounts repaid on the revolving credit facility may be reborrowed. The remainder of the net proceeds, if any, will be used for working capital and other general corporate purposes. Pending such uses, the net proceeds will be invested in short-term, interest-bearing investments. DIVIDEND POLICY The Company has paid no dividends on its Common Stock. The Board of Directors of the Company does not intend to declare any dividends on its Common Stock in the foreseeable future. Rather, the Company intends, after consummation of this offering, to retain its earnings, if any, for use in the operation of its business. The Common Stock and the Class D Common Stock will be treated the same with respect to any dividends declared by the Board of Directors. Furthermore, the Company's ability to declare or pay dividends on its Common Stock is limited by the terms of the Credit Facility and other financing arrangements. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." 14 CAPITALIZATION The following table sets forth the long-term debt and stockholders' equity of the Company and its subsidiaries as of June 30, 1996: (i) on an actual basis, giving effect to the Stock Split; (ii) on a pro forma basis; and (iii) on a pro forma as adjusted basis. Pro forma amounts give effect to: (a) the acquisition of AMTI which occurred on July 31, 1996; (b) the refinancing of the Company's debt by the Credit Facility which occured on July 19, 1996; (c) the Conversions; and (d) the CVC Exchange. The pro forma amounts as adjusted give effect to the pro forma adjustments described herein and the sale by the Company of 2,375,000 shares of Common Stock in this offering (at an assumed initial public offering price of $16.00, less underwriting discounts and commissions and estimated offering expenses payable by the Company) and the sale of 125,000 shares of Common Stock pursuant to the Direct Sale (at the Price to Public less Underwriting Discounts and Commissions) and the application of the net proceeds therefrom as described under "Use of Proceeds." This table should be read in conjunction with the Company's Unaudited Condensed Consolidated Pro Forma Financial Statements and the Notes thereto and the Company's Consolidated Financial Statements and the Notes thereto included elsewhere in this Prospectus.
JUNE 30, 1996 -------------------------------------- PRO FORMA ACTUAL PRO FORMA AS ADJUSTED ----------- ----------- ------------ (IN THOUSANDS) Long-term debt (including current portion): Revolving credit facility............................................... $ 9,109 $ 31,291 $ 884 Senior term loans....................................................... 27,598 35,000 35,000 11% senior subordinated note............................................ 14,900 -- -- 10.5% subordinated note................................................. 5,793 5,793 -- 10% subordinated note................................................... 13,500 13,500 13,500 10.5% junior subordinated promissory notes.............................. 835 835 835 14% junior subordinated promissory notes................................ 9,055 -- -- Other debt.............................................................. 677 1,795 1,795 ----------- ----------- ------------ Total debt............................................................ 81,467 88,214 52,014 Stockholders' equity: Preferred Stock, 14% cumulative, $.01 par value, 30,575 shares authorized and outstanding; none pro forma and pro forma as adjusted............................................................. 2,854 -- -- Preferred Stock, $100 par value, 250,000 shares authorized, no shares outstanding.......................................................... -- -- -- Common stock, $.001 par value: Class A: 6,500,455 shares authorized; 1,300,000 shares issued; none pro forma and pro forma as adjusted.......................................... 1 -- -- Class B: 4,550,000 shares authorized and issued; none pro forma and pro forma as adjusted........................................................ 5 -- -- Class C: 455 shares authorized and issued; none pro forma and pro forma as adjusted........................................................... -- -- -- Common Stock, $.001 par value, 15,000,000 shares authorized, 2,578,907 shares pro forma, 5,078,907 shares pro forma as adjusted(1)............ -- 3 5 Class D Common Stock, $.001 par value, 6,000,000 shares authorized, 4,255,293 shares pro forma, 4,255,293 shares pro forma as adjusted..... -- 4 4 Additional paid-in capital................................................ 1,086 15,913 52,111 Cost of Class A Common Stock in treasury.................................. (85) -- -- Retained earnings......................................................... 15,660 12,377 12,377 ----------- ----------- ------------ Total stockholders' equity............................................ 16,667 28,297 64,497 ----------- ----------- ------------ Total capitalization................................................ $ 100,988 $ 116,511 $ 116,511 ----------- ----------- ------------ ----------- ----------- ------------
- ------------------ (1) Excludes 650,000 shares of Common Stock issuable upon exercise of the Warrant and 43,931 shares of Common Stock issuable upon exercise of purchase options held by members of management of certain subsidiaries of the Company outstanding at June 30, 1996. 15 DILUTION The pro forma net tangible book value of the Company's Common Stock as of June 30, 1996 was $3,397,000 or approximately $0.50 per share. Pro forma net tangible book value per share represents the amount of the tangible assets of the Company less intangible assets, divided by 6,823,090 shares of Common Stock outstanding. For purposes hereof, pro forma net tangible book value and the number of shares of Common Stock outstanding assume the consummation of the Acquisitions, the Refinancing, the Conversions, the CVC Exchange and the conversion by CVC of all shares of Class D Common Stock into shares of Common Stock on June 30, 1996. See also Unaudited Condensed Consolidated Pro Forma Financial Statements. Pro forma net tangible book value dilution per share represents the difference between the amount per share paid by purchasers of Common Stock in this offering and the pro forma net tangible book value per share of Common Stock immediately after completion of this offering. After giving effect to the sale of 2,375,000 shares of Common Stock in this offering (at an assumed initial public offering price of $16.00 per share, less underwriting discounts and commissions and estimated offering expenses payable by the Company) and the sale of 125,000 shares of Common Stock in the Direct Sale (at the Price to Public less Underwriting Discounts and Commissions) and application of the net proceeds therefrom, the pro forma net tangible book value of the Company at June 30, 1996 would have been $39,597,000 or $4.25 per share. This represents an immediate increase in pro forma net tangible book value of $3.75 per share to existing stockholders and an immediate dilution in pro forma net tangible book value of $11.75 per share to purchasers of Common Stock in this offering. The following table illustrates the dilution in pro forma net tangible book value per share: Assumed public offering price per share..................................... $ 16.00 Pro forma net tangible book value per share at June 30, 1996.............. $ 0.50 Increase per share attributable to new investors.......................... 3.75 --------- Pro forma net tangible book value per share after this offering............. 4.25 --------- Pro forma net tangible book value dilution per share to new investors....... $ 11.75 --------- ---------
The following table sets forth on a pro forma basis as of June 30, 1996, assuming the consummation of the Conversions, the CVC Exchange and the conversion by CVC of all shares of Class D Common Stock into shares of Common Stock, the difference between the existing stockholders and new investors in this offering (at an assumed initial public offering price of $16.00 per share) with respect to the number of shares of Common Stock purchased from the Company, the total consideration paid and the average price per share:
SHARES PURCHASED TOTAL CONSIDERATION ----------------------- -------------------------- AVERAGE PRICE NUMBER PERCENT AMOUNT PERCENT PER SHARE ----------- ---------- -------------- ---------- ------------- Existing stockholders......................... 6,823,090 73.2% $ 14,762,000 27.0% $ 2.16 Direct Sale Investors......................... 125,000 1.3 1,860,000 3.4 14.88 New investors................................. 2,375,000 25.5 38,000,000 69.6 16.00 ----------- -------------- Total..................................... 9,323,090 100.0% $ 54,622,000 100.0% ----------- -------------- ----------- --------------
The foregoing computations do not assume exercise of the Warrant (for 650,000 shares at an aggregate exercise price of $100.00) or the exercise of purchase options outstanding at June 30, 1996 to acquire an aggregate of 43,931 shares of Common Stock at a weighted average price of $2.91 per share. To the extent that shares of Common Stock are issued upon exercise of the Warrant and the purchase options, the effect would be to increase the pro forma dilution to new investors to $12.03 per share from $11.75 per share. These computations assume that the grant of purchase options to members of management of certain subsidiaries of the Company for 43,931 shares of Common Stock took place on June 30, 1996. 16 SELECTED HISTORICAL FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) The following selected historical financial data for the ten months ended March 31, 1994 and each of the two years in the period ended March 31, 1996 are derived from the audited consolidated financial statements of Triumph Group, Inc. and should be read in conjunction with the Consolidated Financial Statements and related Notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Prospectus. The selected financial data for each of the three month periods ended June 30, 1995 and 1996 are derived from the unaudited interim financial statements included elsewhere herein. The unaudited interim financial statements include all adjustments, consisting of normal recurring accruals, which the Company considers necessary for a fair presentation of the financial position and results of operations for these periods. Operating results for the three months ended June 30, 1996 are not necessarily indicative of the results that may be expected for the entire year ended March 31, 1997.
PREDECESSOR COMPANY TRIUMPH GROUP, INC. --------------------------------- ------------------------------------------------------- EIGHT MONTHS TEN MONTHS YEARS ENDED ENDED ENDED YEARS ENDED MARCH THREE MONTHS ENDED SEPTEMBER 30, MAY 31, MARCH 31, 31, JUNE 30, -------------------- ----------- ----------- -------------------- -------------------- 1991(1) 1992(1) 1993(1) 1994 1995 1996(2) 1995 1996(2) --------- --------- ----------- ----------- --------- --------- --------- --------- HISTORICAL OPERATING DATA: AVIATION GROUP Net sales...................... $ 87,304 $ 76,346 $ 46,517 $ 57,257 $ 70,714 $ 100,166 $ 21,301 $ 35,535 Cost of products sold.......... 60,116 55,254 34,568 39,941 51,395 70,643 15,494 23,286 --------- --------- ----------- ----------- --------- --------- --------- --------- Gross profit................... 27,188 21,092 11,949 17,316 19,319 29,523 5,807 12,249 Selling, general and administrative................ 9,541 9,161 5,830 6,799 8,761 12,915 2,554 5,276 Depreciation and amortization.................. 2,114 2,060 1,413 1,379 1,780 2,513 488 1,025 --------- --------- ----------- ----------- --------- --------- --------- --------- Operating income, before corporate expense(3).......... 15,533 9,871 4,706 9,138 8,778 14,095 2,765 5,948 METALS GROUP Net sales...................... 78,020 78,258 57,216 72,738 93,451 86,608 21,073 19,649 Cost of products sold.......... 60,813 60,178 45,293 57,154 74,441 69,097 16,584 15,860 --------- --------- ----------- ----------- --------- --------- --------- --------- Gross profit................... 17,207 18,080 11,923 15,584 19,010 17,511 4,489 3,789 Selling, general and administrative................ 10,990 10,741 7,704 9,614 11,715 11,874 3,122 3,046 Depreciation and amortization.................. 738 832 658 594 916 999 227 227 --------- --------- ----------- ----------- --------- --------- --------- --------- Operating income, before corporate expense(3).......... 5,479 6,507 3,561 5,376 6,379 4,638 1,140 516 --------- --------- ----------- ----------- --------- --------- --------- --------- Combined operating income, before corporate expense...... $ 21,012 $ 16,378 $ 8,267 14,514 15,157 18,733 3,905 6,464 --------- --------- ----------- --------- --------- ----------- Corporate expense(4)........... 1,573 1,606 2,522 604 1,117 Interest expense............... 4,908 6,589 7,318 1,600 2,286 ----------- --------- --------- --------- --------- Income from continuing operations, before income taxes......................... 8,033 6,962 8,893 1,701 3,061 Income tax expense............. 3,125 2,598 3,699 687 1,252 ----------- --------- --------- --------- --------- Income from continuing operations.................... 4,908 4,364 5,194 1,014 1,809 Income (loss) from discontinued operations.................... (462) (2,852) 4,496 109 -- ----------- --------- --------- --------- --------- Net income..................... $ 4,446 $ 1,512 $ 9,690 $ 1,123 $ 1,809 ----------- --------- --------- --------- --------- ----------- --------- --------- --------- --------- Earning per share(5): Income from continuing operations(5)................. $ 0.72 $ 0.67 $ 0.78 $ 0.16 $ 0.26 Shares used in computing earnings per share(5)......... 7,291 7,387 7,516 7,424 7,499 SEPTEMBER 30, MAY 31, MARCH 31, JUNE 30, -------------------- ----------- --------------------------------- -------------------- 1991 1992 1993 1994 1995 1996 1995 1996 --------- --------- ----------- ----------- --------- --------- --------- --------- BALANCE SHEET DATA: Working capital................ $ 30,766 $ 32,360 $ 33,296 $ 49,152 $ 39,609 $ 60,379 $ 38,055 $ 49,608 Total assets................... 152,153 154,343 152,761 104,905 111,386 161,406 95,548 142,297 Long-term debt, including current portion............... 64,690 64,477 69,013 74,403 71,738 98,769 82,202 81,467 Total stockholders' equity..... 61,037 69,283 63,398 5,080 6,094 15,065 7,093 16,667
17 - ------------------ (1) Financial information related to the years ended September 30, 1991 and 1992 and the eight month period ended May 31, 1993 is unaudited and represents operating results for the divisions and subsidiaries of the predecessor company which were purchased by the Company on June 1, 1993. Information is provided through operating income to assist the investor in evaluating the Company's historical operating trends. Financial information after operating income is excluded as the information is not comparable to subsequent periods because of the significantly changed corporate organization and capital structure which resulted from the Acquisition. (2) The fiscal year ended March 31, 1996 includes the operating results of TCI and Air Lab since the dates of acquisition, January 1, 1996 and October 2, 1995, respectively. Additionally, these entities are included in the results of operations for the three months ended June 30, 1996. The combined operations of TCI and Air Lab contributed $11.0 million and $12.2 million to the aviation group's net sales and $2.3 million and $3.2 million to the aviation group's operating income, before corporate expense, for the fiscal year ended March 31, 1996 and the three months ended June 30, 1996, respectively. (3) Operating income, before corporate expense, is presented by group to assist the investor in evaluating each of the group's results of operations before financing and corporate expenses. (4) Corporate expenses primarily consist of compensation, rent and general costs related to the operation of the Company's corporate office and other general expenses of the Company including professional fees. (5) Earnings per share information represents the Company's per share data and weighted average Common Stock outstanding restated to give effect to the 65-for-one stock split to be effected immediately prior to this offering, the dilutive effects of the Warrant and stock issued during the period commencing 12 months prior to the initial filing of the proposed initial public offering at prices below the anticipated public offering price, the Conversions and an adjustment for the interest on the 14% JSDs net of tax expense. Income from continuing operations represents the amounts reflected in the Company's Consolidated Financial Statements. Primary and fully diluted earnings per share are the same. See Note 2 to the Company's Consolidated Financial Statements. 18 SELECTED UNAUDITED PRO FORMA FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) The unaudited pro forma operating data for the fiscal year ended March 31, 1996 and for the three months ended June 30, 1996 set forth herein give effect to the Acquisitions, the Refinancing, the Conversions and the CVC Exchange. The unaudited pro forma balance sheet data gives effect to the transactions described above, except for the acquisitions of Air Lab and TCI (which are included in the historical balances) as if such transactions had occurred on June 30, 1996. The pro forma as adjusted amounts also give effect to the offering. The selected unaudited pro forma financial data should be read in conjunction with the Unaudited Condensed Consolidated Pro Forma Financial Statements and the related Notes thereto and the Consolidated Financial Statements and the related Notes thereto appearing elsewhere herein. The unaudited pro forma financial data are provided for informational purposes only and do not purport to represent what the Company's financial position or results of operations actually would have been had the transactions described therein been completed as of the date or at the beginning of the periods indicated, or to project the Company's financial position or results of operations at any future date or for any future period.
YEAR ENDED THREE MONTHS ENDED MARCH 31, 1996 JUNE 30, 1996 --------------------------- -------------------------- HISTORICAL PRO FORMA(1) HISTORICAL PRO FORMA(1) ----------- -------------- ----------- ------------- OPERATING DATA: AVIATION GROUP Net sales.............................................. $ 100,166 $ 143,560 $ 35,535 $ 41,750 Cost of products sold.................................. 70,643 94,936 23,286 26,890 ----------- -------------- ----------- ------------- Gross profit........................................... 29,523 48,624 12,249 14,860 Selling, general, and administrative................... 12,915 19,972(2) 5,276 6,032 Depreciation and amortization.......................... 2,513 5,323(3) 1,025 1,434(3) ----------- -------------- ----------- ------------- Operating income, before corporate expense............. 14,095 23,329 5,948 7,394 METALS GROUP Net sales.............................................. 86,608 86,608 19,649 19,649 Cost of products sold.................................. 69,097 69,097 15,860 15,860 ----------- -------------- ----------- ------------- Gross profit........................................... 17,511 17,511 3,789 3,789 Selling, general, and administrative................... 11,874 11,874 3,046 3,046 Depreciation and amortization.......................... 999 999 227 227 ----------- -------------- ----------- ------------- Operating income, before corporate expense............. 4,638 4,638 516 516 ----------- -------------- ----------- ------------- Combined operating income, before corporate expense...... 18,733 27,967 6,464 7,910 Corporate expense(2)..................................... 2,522 2,522 1,117 1,117 Interest expense......................................... 7,318 8,124(4) 2,286 1,808(4) ----------- -------------- ----------- ------------- Income from continuing operations before income taxes.... 8,893 17,321 3,061 4,985 Income tax expense(5).................................... 3,699 7,044 1,252 2,011 ----------- -------------- ----------- ------------- Income (loss) from continuing operations................. $ 5,194 $ 10,277 $ 1,809 $ 2,974 ----------- -------------- ----------- ------------- ----------- -------------- ----------- ------------- Income from continuing operations, per share(6).......... $ 0.78 $ 1.37 $ 0.26 $ 0.40 ----------- -------------- ----------- ------------- ----------- -------------- ----------- ------------- Shares used in computing earnings per share(6)........... 7,516 7,516 7,499 7,499 ----------- -------------- ----------- ------------- ----------- -------------- ----------- -------------
JUNE 30, 1996 --------------------------------------------- PRO FORMA HISTORICAL PRO FORMA(7) AS ADJUSTED(7)(8) ----------- ------------- ----------------- BALANCE SHEET DATA: Working capital.................................................... $ 49,608 $ 54,534 $ 54,534 Total assets....................................................... 142,297 163,054 163,054 Long term debt, including current portion.......................... 81,467 88,214 52,014 Total stockholders' equity......................................... 16,667 28,297 64,497
19 (1) Adjustments to arrive at pro forma amounts relate to the following transactions: (a) The Company made the following acquisitions during the past 12 months:
AGGREGATE BUSINESS DATE OF PURCHASE PURCHASE PRICE - ---------------------------------------------------------- ----------------- --------------- Air Lab................................................... 10/2/95 $ 3.4 million TCI....................................................... 1/1/96 40.1 million AMTI...................................................... 7/31/96 21.3 million SPOA...................................................... (acquired by AMTI on 1/31/96)
The pro forma results of operations adjustments are those necessary to reflect the Company's income from continuing operations as if each acquisition took place at the beginning of the period presented. The results of operations of SPOA are included in the pro forma adjustments for periods subsequent to the date of acquisition by AMTI only. (b) On July 19, 1996, the Company entered into an unsecured five year credit agreement for a $50.0 million revolving credit facility and a $35.0 million term loan. Proceeds from the new credit agreement were used to retire the Company's existing revolving credit facility, senior term loans and senior subordinated notes. The refinancing resulted in interest savings which are reflected herein. (c) In conjunction with this offering, the Company has elected to exchange the common stock of TCI held by minority shareholders (10% of the total outstanding) for 72,450 shares of Common Stock of the Company. In addition, the Company intends to exchange its 14% JSDs plus accrued interest, and Preferred Stock at liquidation value plus accumulated dividends, for shares of Common Stock at an assumed initial public offering price of $16.00 per share (less underwriting discounts and commissions and estimated offering expenses payable by the Company). As a result of these exchanges 945,595 shares (as of June 30, 1996) of the Company's stock will be issued to holders of the 14% JSDs and the Preferred Stock. (2) Certain amounts, aggregating $3.5 million, were excluded from selling, general and administrative expenses for the year ended March 31, 1996 as they related to expenses incurred prior to the acquisitions which are neither recurring nor indicative of future operations. Corporate expenses primarily consist of compensation, rent and general costs related to the operation of the Company's corporate office and other general expenses of the Company including professional fees. (3) Adjustments to depreciation and amortization expense reflect the following: (i) additional depreciation expense in excess of historical amounts of $0.9 million and $0.1 million for the year ended March 31, 1996 and the three months ended June 30, 1996, respectively, due to the write-up of property, plant and equipment to estimated fair market value and (ii) amortization of excess cost over net assets acquired (amortized over 25 years) and amortization of other intangible assets acquired (amortized over a period of six to 25 years) of $0.4 million and $0.8 million for the year ended March 31, 1996 and $18 thousand and $0.2 million, for the three months ended June 30, 1996. (4) Adjustments to interest expense for the year ended March 31, 1996 and the three months ended June 30, 1996 consist of increases of: (i) $3.2 million and $0.3 million, respectively, for interest incurred under the Company's revolving credit facilities used to finance the purchases and fund operations of the acquired companies and amounts incurred pertaining to actual borrowings under the senior term loans used to purchase the companies at historical interest rates; (ii) $0.5 million for the fiscal year ended March 31, 1996 for interest incurred related to the subordinated promissory note and junior subordinated promissory notes arising as a result of the Acquisitions (acquisition amounts are included in the historical results for the quarter ended June 30, 1996); (iii) $0.1 million for fiscal year ended March 31, 1996 for amortization of deferred financing costs, classified as interest, pertaining to the Company's increase in senior term loans outstanding as a result of the Acquisitions (acquisition amounts are included in the historical results for the quarter ended June 30, 1996); and (iv) $0.2 million and $0.1 million for the fiscal year ended March 31, 1996 and the three months ended June 30, 1996, respectively, incurred relating to the interest cost associated with long-term covenants not-to-compete with the previous owners of certain acquired companies, partially offset by reductions in interest expense of $2.0 million and $0.5 million relating to the refinancing described in (1)(b) above and $1.1 million and $0.3 million relating to the elimination of interest as a result of the 14% JSD Conversion for the year ended March 31, 1996 and the three months ended June 30, 1996, respectively. (5) The tax provision arising from the pro forma adjustments (excluding the portion of the Company's income attributable to the minority interest's investment in TCI) is based on the Company's estimated tax rate of 40.0%. (6) The calculation of shares used in computing income from continuing operations per share include adjustments for the outstanding Warrant, stock issued during the period commencing 12 months prior to the initial filing of the proposed initial public offering at prices below the anticipated public offering price, the Conversions and the CVC Exchange. The pro forma as adjusted shares also include the issuance of 2,375,000 shares in connection with this offering and 125,000 shares in connection with the Direct Sale. See also Notes to the Unaudited Condensed Consolidated Pro Forma Financial Statements and Note 2 to the Consolidated Financial Statements. 20 (7) Adjustments to the pro forma balance sheet include adjustments to record the purchase of AMTI as though it occurred on June 30, 1996, including the write-up of fixed assets to estimated fair value and the recording of excess of cost over net assets acquired and intangible assets acquired, as well as the assumption of liabilities and debt used to finance the purchase. In addition, adjustments are made to reflect the extraordinary loss of $1.5 million, net of a tax benefit of $1.0 million related to prepayment penalties incurred and the write-off of deferred financing fees related to the existing debt and the additional long-term debt assumed under the refinancing. Adjustments also give effect to the Conversions and the CVC Exchange. See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements. (8) Adjustments give effect to the sale of 2,375,000 shares of Common Stock at an assumed initial public offering price of $16.00 per share (less underwriting discounts and commissions and estimated offering expenses payable by the Company) and the application of the net proceeds therefrom and the sale of 125,000 shares of Common Stock in the Direct Sale and the application of the proceeds therefrom to reduce long-term debt by $36.2 million. 21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company's aviation group designs, engineers, manufactures or repairs and overhauls aircraft components for commercial airlines and air cargo carriers, as well as OEMs, on a worldwide basis. The Company's metals group manufactures, machines, forges, processes and distributes metal products to customers in the computer, construction, container, farm equipment and office furniture industries, primarily within North America. Net sales consist of sales of aircraft components and metal products, as well as revenues derived from repairing and overhauling aircraft components. Net sales are recorded when services are performed or when products are shipped, except for long-term construction contracts entered into by the Company's metals group, which are recorded on the percentage-of-completion method based on the relationship between actual costs incurred and total estimated costs at completion. Net sales from long-term construction contracts which are recorded on the percentage-of-completion method approximated 12% and 11% of total net sales in 1996 and 1995, respectively. The Company closed its metals fabrication operations during the first quarter of fiscal 1997. Operating costs consist primarily of cost of products sold, selling, general and administrative expenses and depreciation and amortization. Selling, general and administrative expenses consist primarily of compensation and related benefits to certain administrative employees, marketing, communications and professional fees. The Company focuses its acquisition activities on companies engaged in the aviation products and services industry. This group has historically provided, and the Company believes that it will continue to provide, higher operating margins than the metals group. Within the past 12 months, the Company has completed three acquisitions of aviation companies and has sold one of its subsidiaries not engaged in the aviation or metals business. The acquisition of TCI has been accounted for under the purchase method of accounting and, accordingly, the operating results of TCI have been included for the three months ended March 31, 1996. The acquisition of Air Lab has been accounted for under the purchase method of accounting and, accordingly, the operating results of Air Lab have been included in consolidated operating results since October 2, 1995. In July 1996, the Company acquired AMTI. The acquisition was accounted for under the purchase method of accounting. The operating results of AMTI will be included in consolidated operating results from July 31, 1996. In March 1996, the Company sold substantially all of the assets of its paper converting subsidiary, Quality Park, for approximately $27.4 million in cash, and the assumption by the purchaser of certain liabilities. 22 RESULTS OF OPERATIONS The following table sets forth the percentage relationships of expense items to net sales.
THREE MONTHS ENDED FISCAL YEAR ENDED TEN MONTHS -------------------------- ---------------------- ENDED MARCH MARCH 31, MARCH 31, JUNE 30, JUNE 30, 31, 1994 1995 1996 1995 1996 ------------- ------------ ------------ ---------- ---------- Aviation Group Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0% Operating costs: Cost of products sold............................ 69.8% 72.7% 70.5% 72.7% 65.6% Selling, general and administrative.............. 11.8% 12.4% 12.9% 12.0% 14.8% Depreciation and amortization.................... 2.4% 2.5% 2.5% 2.3% 2.9% ----- ----- ----- ----- ----- Operating income, before corporate expenses........ 16.0% 12.4% 14.1% 13.0% 16.7% Metals Group Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0% Operating costs: Cost of products sold............................ 78.6% 79.7% 79.8% 78.7% 80.7% Selling, general and administrative.............. 13.2% 12.5% 13.7% 14.8% 15.5% Depreciation and amortization.................... 0.8% 1.0% 1.1% 1.1% 1.2% ----- ----- ----- ----- ----- Operating income, before corporate expenses........ 7.4% 6.8% 5.4% 5.4% 2.6%
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995 AVIATION GROUP NET SALES. Net sales for the aviation group increased by $14.2 million, or 66.8%, to $35.5 million for the three months ended June 30, 1996 from $21.3 million for the three months ended June 30, 1995. This increase was primarily due to the additional net sales generated by TCI and Air Lab, acquired in January 1996 and October 1995, respectively, accounting for an aggregate of $12.2 million of such increase. Net sales from the remaining operating divisions and subsidiaries in the aviation group experienced a 9.5% increase due to higher activity in the repair and overhaul markets and increased orders from OEMs. COSTS OF PRODUCTS SOLD. Costs of products sold for the aviation group increased by $7.8 million, or 50.3%, to $23.3 million for the three months ended June 30, 1996 from $15.5 million for the three months ended June 30, 1995. Of this increase, $7.1 million was associated with net sales generated by TCI and Air Lab. The remaining operating divisions and subsidiaries experienced a 4.6% increase in costs of products sold relating to increased sales volume. GROSS PROFIT. Gross profit for the aviation group increased by $6.4 million, or 110.9%, to $12.2 million for the three months ended June 30, 1996 from $5.8 million for the three months ended June 30, 1995. Of this increase, $5.1 million was a direct result of the net sales of TCI and Air Lab, while the remaining operating divisions and subsidiaries experienced a $1.3 million increase in gross profit on the higher sales volume. As a percentage of net sales, gross profit for the aviation group was 34.5% and 27.3% of net sales for the three months ended June 30, 1996 and June 30, 1995, respectively. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses for the aviation group increased by $2.7 million, or 106.6%, to $5.3 million for the three months ended June 30, 1996 from $2.6 million for the three months ended June 30, 1995. Of this increase, $2.0 million of the increase was associated with the selling, general and administrative costs (including costs for engineering personnel) of the acquired businesses, TCI and Air Lab. 23 DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the aviation group increased by $0.5 million, or 110.0%, to $1.0 million for the three months ended June 30, 1996 from $0.5 million for the three months ended June 30, 1995. This increase was primarily due to the assets acquired in connection with the TCI and Air Lab acquisitions. OPERATING INCOME. Operating income for the aviation group increased by $3.2 million, or 115.1%, to $5.9 million for the three months ended June 30, 1996 from $2.8 million for the three months ended June 30, 1995. This increase was primarily due to the operating income generated by TCI and Air Lab, accounting for $3.2 million of the increase. The balance of the increase is related to incremental sales volume at the remaining operating divisions and subsidiaries. As a percentage of net sales, operating income for the aviation group was 16.7% and 13.0% of net sales for the three months ended June 30, 1996 and June 30, 1995, respectively. METALS GROUP NET SALES. Net sales for the metals group decreased by $1.4 million, or 6.8%, to $19.6 million for the three months ended June 30, 1996 from $21.1 million for the three months ended June 30, 1995. This decrease was primarily due to weakened demand and lower selling prices for flat-rolled steel products processed by the Company. In addition, the Company's electrogalvanized products experienced greater competition from hot-dipped rolled steel products, primarily for use in the container market. COSTS OF PRODUCTS SOLD. Costs of products sold for the metals group decreased by $0.7 million, or 4.4%, to $15.9 million for the three months ended June 30, 1996 from $16.6 million for the three months ended June 30, 1995. This decrease was primarily due to the decline in the cost of the primary raw material used by the metals group, flat-rolled steel, and lower costs associated with lower sales volume. GROSS PROFIT. Gross profit for the metals group decreased by $0.7 million, or 15.6%, to $3.8 million for the three months ended June 30, 1996 from $4.5 million for the three months ended June 30, 1995, due to the reasons discussed above. As a percentage of net sales, gross profit for the metals group was 19.3% and 21.3% of net sales for the three months ended June 30, 1996 and June 30, 1995, respectively. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses for the metals group decreased by $0.1 million, or 2.4%, to $3.0 million for the three months ended June 30, 1996 from $3.1 million for the three months ended June 30, 1995. DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the metals group was approximately $0.2 million for each of the three months ended June 30, 1996 and 1995, respectively. OPERATING INCOME. Operating income for the metals group decreased by $0.6 million, or 54.7%, to $0.5 million for the three months ended June 30, 1996 from $1.1 million for the three months ended June 30, 1995. Costs associated with the permanent closure of the Company's fabrication operations during the quarter ended June 30, 1996 also contributed to the decline in operating income. As a percentage of net sales, operating income for the metals group was 2.6% and 5.4% of net sales for the three months ended June 30, 1996 and June 30, 1995, respectively. OVERALL RESULTS CORPORATE EXPENSES. Corporate expenses, consisting primarily of salaries to corporate officers and employees, travel and professional fees and expenses, increased by $0.5 million, or 84.9%, to $1.1 million for the three months ended June 30, 1996 from $0.6 million for the three months ended June 30, 1995. This increase was primarily due to increased professional fees and expenses. INTEREST EXPENSE. Interest expense increased by $0.7 million, or 42.9%, to $2.3 million for the three months ended June 30, 1996 from $1.6 million for the three months ended June 30, 1995. This increase was primarily due to increased debt levels associated with the acquisitions of TCI and Air Lab, the cash portions of which were financed by borrowings under the Company's credit agreement. INCOME TAX EXPENSE. The effective tax rate was 40.9% for the three months ended June 30, 1996 and 40.4% for the three months ended June 30, 1995. 24 INCOME FROM CONTINUING OPERATIONS. Income from continuing operations increased by $0.8 million, or 78.4%, to $1.8 million for the three months ended June 30, 1996 from $1.0 million for the three months ended June 30, 1995. This increase was primarily due to the acquisitions of TCI and Air Lab and the overall sales volume increases in the aviation group, partially offset by reduced net sales in the metals group. INCOME FROM DISCONTINUED OPERATIONS. Income from discontinued operations associated with the Quality Park disposition was $0.1 million for the three months ended June 30, 1995. NET INCOME. Net income increased by $0.7 million, or 61.1%, to $1.8 million for the three months ended June 30, 1996 from $1.1 million for the three months ended June 30, 1995. This increase was primarily due to the acquisitions of TCI and Air Lab and the overall sales volume increases in the aviation group, partially offset by reduced net sales in the metals group. As a percentage of net sales, net income was 3.3% and 2.7% of net sales for the three months ended June 30, 1996 and June 30, 1995, respectively. FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1995 AVIATION GROUP NET SALES. Net sales for the aviation group increased by $29.5 million, or 41.6%, to $100.2 million for fiscal 1996 from $70.7 million for fiscal 1995. This increase was primarily due to an $18.4 million increase in net sales for the operating divisions and subsidiaries in the aviation group, representing a 26.0% increase in net sales over fiscal 1995, and the inclusion of an aggregate of $11.0 million in net sales for TCI and Air Lab. Increased demand for overhaul and repair services from the commercial airlines and cargo carriers, as well as increased orders of aircraft components from OEMs, accounted for the increase in net sales in the aviation group. COSTS OF PRODUCTS SOLD. Costs of products sold for the aviation group increased by $19.2 million, or 37.5%, to $70.6 million for fiscal 1996 from $51.4 million for fiscal 1995. This increase was primarily due to $6.4 million of increased costs of products sold associated with net sales generated by TCI and Air Lab. The remaining increase is associated with the increase in net sales of the remaining operating divisions and subsidiaries in the aviation group. GROSS PROFIT. Gross profit for the aviation group increased by $10.2 million, or 52.8%, to $29.5 million for fiscal 1996 from $19.3 million for fiscal 1995. Of this increase, $5.6 million was a direct result of the increased sales volume at the operating divisions and subsidiaries in the aviation group at slightly higher margins. This increase was also attributable to the inclusion of $4.6 million of gross profit on the net sales generated by TCI and Air Lab. As a percentage of net sales, gross profit for the aviation group was 29.5% and 27.3% of net sales for fiscal 1996 and fiscal 1995, respectively. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses for the aviation group increased by $4.2 million, or 47.4%, to $12.9 million for fiscal 1996 from $8.8 million for fiscal 1995, due to increased sales volume and the TCI and Air Lab acquisitions. DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the aviation group increased by $0.7 million, or 41.2%, to $2.5 million for fiscal 1996 from $1.8 million for fiscal 1995, primarily due to the assets acquired in connection with the TCI and Air Lab acquisitions. OPERATING INCOME. Operating income for the aviation group increased by $5.3 million, or 60.6%, to $14.1 million for fiscal 1996 from $8.8 million for fiscal 1995. This increase was assisted by the growth in aircraft production and the increased outsourcing of repair and overhaul services by commercial aircraft operators. This increase was also due to the addition of net sales and profits generated by TCI and Air Lab, as well as the incremental operating income resulting from increased sales volume. As a percentage of net sales, operating income for the aviation group was 14.1% and 12.4% of net sales for fiscal 1996 and fiscal 1995, respectively. 25 METALS GROUP NET SALES. Net sales for the metals group decreased by $6.8 million, or 7.3%, to $86.6 million for fiscal 1996 from $93.5 million for fiscal 1995. This decrease was primarily due to weakened demand and lower selling prices for flat-rolled steel products processed by the Company. In addition, the Company's electrogalvanized products experienced greater competition from hot-dipped rolled steel products. COSTS OF PRODUCTS SOLD. Costs of products sold for the metals group decreased by $5.3 million, or 7.2%, to $69.1 million for fiscal 1996 from $74.4 million for fiscal 1995. This decrease was primarily due to the reduced sales volume and lower costs of raw materials. GROSS PROFIT. Gross profit for the metals group decreased by $1.5 million, or 7.9%, to $17.5 million for fiscal 1996 from $19.0 million for fiscal 1995, due to the reasons discussed above. As a percentage of net sales, gross profit for the metals group was 20.2% and 20.3% of net sales for fiscal 1996 and fiscal 1995, respectively. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses for the metals group increased by $0.2 million, or 1.4%, to $11.9 million for fiscal 1996 from $11.7 million for fiscal 1995. DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the metals group increased by $0.1 million, or 9.1%, to $1.0 million for fiscal 1996 from $0.9 million for fiscal 1995. This increase was primarily due to depreciation of certain assets recently placed into service. OPERATING INCOME. Operating income for the metals group decreased by $1.7 million, or 27.3%, to $4.6 million for fiscal 1996 from $6.4 million for fiscal 1995, due to the reasons discussed above. As a percentage of net sales, operating income for the metals group was 5.4% and 6.8% of net sales for fiscal 1996 and fiscal 1995, respectively. OVERALL RESULTS CORPORATE EXPENSES. Corporate expenses increased by $0.9 million, or 57.0%, to $2.5 million for fiscal 1996 from $1.6 million for fiscal 1995. This increase was primarily due to additional incentive compensation, staffing and professional fees. INTEREST EXPENSE. Interest expense increased by $0.7 million, or 11.1%, to $7.3 million for fiscal 1996 from $6.6 million for fiscal 1995. This increase was primarily due to increased debt levels associated with the acquisitions of TCI and Air Lab, the cash portions of which were financed by borrowings under the Company's credit agreement. INCOME TAX EXPENSE. The effective tax rate was 41.6% for fiscal 1996 and 37.3% for fiscal 1995. INCOME FROM CONTINUING OPERATIONS. Income from continuing operations increased by $0.8 million, or 19.0%, to $5.2 million for fiscal 1996 from $4.4 million for fiscal 1995. This increase was primarily due to the net sales generated by TCI and Air Lab and the overall favorable conditions in the aviation industry resulting in increased net sales of the Company's products and services. INCOME (LOSS) FROM DISCONTINUED OPERATIONS. The Company had income from discontinued operations of $4.5 million in fiscal 1996, principally as a result of the sale of Quality Park, which resulted in an after-tax gain of $2.5 million, and improved operating results at Quality Park due to the favorable effects of restructuring efforts. The Company had a loss from discontinued operations of $2.9 million in fiscal 1995 due to $2.0 million in operating losses at Quality Park and a $0.9 million loss on the sale of certain assets of Quality Park. NET INCOME. Net income increased by $8.2 million, or 540.9%, to $9.7 million for fiscal 1996 from $1.5 million for fiscal 1995. Of this increase, $7.3 million was attributable to the income from the discontinued Quality Park operations in fiscal 1996 as compared to the loss at these operations during fiscal 1995. The increase in fiscal 1996 net income was also attributable to the strong results of the aviation group, partially offset by a decline in profitability in the metals group. As a percentage of net sales, net income was 5.2% and 0.9% of net sales for fiscal 1996 and fiscal 1995, respectively. 26 FISCAL YEAR ENDED MARCH 31, 1995 COMPARED TO TEN MONTHS ENDED MARCH 31, 1994 AVIATION GROUP NET SALES. Net sales for the aviation group increased by $13.4 million, or 23.5%, to $70.7 million for fiscal 1995 from $57.3 million for the ten months ended March 31, 1994 (the "1994 period"). This increase was primarily due to the comparison of 12 months to 10 months. On an annualized basis, the increase in net sales was $2.0 million, or 2.9%, due to increased sales of products and services to commercial airlines, partially offset by the loss of a significant customer at one of the Company's operating divisions. COSTS OF PRODUCTS SOLD. Costs of products sold for the aviation group increased by $11.5 million, or 28.7%, to $51.4 million for fiscal 1995 from $39.9 million for the 1994 period. This increase was primarily due to the 12 month to 10 month comparison. On an annualized basis, the increase was $3.5 million, or 7.2%, resulting from higher sales volume. GROSS PROFIT. Gross profit for the aviation group increased by $2.0 million, or 11.6%, to $19.3 million for fiscal 1995 from $17.3 million for the 1994 period. This increase was primarily due to the 12 month to 10 month comparison. On an annualized basis, gross profit decreased by $1.5 million, or 7.0%. On an annualized basis, as a percentage of net sales, gross profit for the aviation group was 27.3% and 30.2% of net sales for fiscal 1995 and fiscal 1994, respectively. The decrease in gross profit margin on increased net sales was primarily the result of the loss of a customer at one of the Company's higher margin operations. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses for the aviation group increased by $2.0 million, or 28.9%, to $8.8 million for fiscal 1995 from $6.8 million for the 1994 period. The increase was primarily due to the 12 month to 10 month comparison. On an annualized basis, such expenses increased by $0.6 million, or 7.4%. DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the aviation group increased by $0.4 million, or 29.1%, to $1.8 million for fiscal 1995 from $1.4 million for the 1994 period. This increase was primarily due to the 12 month to 10 month comparison. On an annualized basis, the depreciation and amortization increased $0.1 million, or 7.6%, resulting from depreciation recorded on certain assets recently placed into service. OPERATING INCOME. Operating income for the aviation group was $8.8 million and $9.1 million for fiscal 1995 and the 1994 period, respectively. On an annualized basis, there was a decrease in operating income of $2.2 million, or 19.9% for fical 1995, primarily as a result of the loss of a significant customer at one of the Company's operating divisions. As a percentage of net sales, annualized operating income for the aviation group was 12.4% and 16.0% of net sales for fiscal 1995 and fiscal 1994, respectively. METALS GROUP NET SALES. Net sales for the metals group increased by $20.7 million, or 28.5%, to $93.5 million for fiscal 1995 from $72.7 million for the 1994 period. This increase was primarily due to the 12 month to 10 month comparison. On an annualized basis, the increase in net sales was $6.2 million, or 7.1%. This increase was due to several factors, including increases in net sales of containers for the agricultural industry and steel products for the housing market and additional structural steel fabrication and erection business. COSTS OF PRODUCTS SOLD. Costs of products sold for the metals group increased by $17.3 million, or 30.2%, to $74.4 million for fiscal 1995 from $57.2 million for the 1994 period. This increase was primarily due to the 12 month to 10 month comparison. On an annualized basis, costs of products sold increased by $5.9 million, or 8.5%, due to price increases for flat-rolled steel. GROSS PROFIT. Gross profit for the metals group increased by $3.4 million, or 22.0%, to $19.0 million for fiscal 1995 from $15.6 million for the 1994 period. This increase was primarily due to the 12 month to 27 10 month comparison. On an annualized basis, gross profit increased by $0.3 million, or 1.7%. On an annualized basis, as a percentage of net sales, gross profit for the metals group was 20.3% and 21.4% of net sales for fiscal 1995 and fiscal 1994, respectively. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses for the metals group increased by $2.1 million, or 21.9%, to $11.7 million for fiscal 1995 from $9.6 million for the 1994 period. On an annualized basis, the increase was only $0.2 million, or 1.5%. DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the metals group increased $0.3 million, or 54.2%, to $0.9 million for fiscal 1995 from $0.6 million for the 1994 period. This increase was partially due to the 12 month to 10 month comparison. On an annualized basis, the increase was $0.2 million, due to new assets placed into service. OPERATING INCOME. Operating income for the metals group increased by $1.0 million, or 18.7%, to $6.4 million for fiscal 1995 from $5.4 million for the 1994 period. This increase was primarily due to the 12 month to 10 month comparison. On an annualized basis, there was a decrease in operating income of $0.1 million, or 1.1%. On an annualized basis, as a percentage of net sales, operating income for the metals group was 6.8% and 7.4% of net sales for fiscal 1995 and fiscal 1994, respectively. OVERALL RESULTS CORPORATE EXPENSES. Corporate expenses were $1.6 million for each of fiscal 1995 and the 1994 period, respectively. INTEREST EXPENSE. Interest expense increased by $1.7 million, or 34.3%, to $6.6 million for fiscal 1995 from $4.9 million for the 1994 period. This increase was primarily due to the 12 month to 10 month comparison. On an annualized basis, interest expense increased by $0.7 million due to an increase in the prime rate. INCOME TAX EXPENSE. The effective tax rate was 37.3% for fiscal 1995 and 38.9% for fiscal 1994. INCOME FROM CONTINUING OPERATIONS. Income from continuing operations decreased by $0.5 million, or 11.1%, to $4.4 million for fiscal 1995 from $4.9 million for the 1994 period. This decrease was primarily due to the decrease in profitability in the aviation group resulting from increased competition in the repair market, loss of a significant customer at one of the Company's operating divisions and decreases in aircraft production rates. LOSS FROM DISCONTINUED OPERATIONS. Loss from discontinued operations was $2.9 million in fiscal 1995 and $0.5 million for the 1994 period due to losses at Quality Park. The losses in fiscal 1995 were primarily due to the closure and sale of a product line within Quality Park's operations and operating losses at Quality Park. NET INCOME. Net income decreased by $2.9 million, or 66.0%, to $1.5 million for fiscal 1995 from $4.4 million for the 1994 period. This decrease was primarily due to the above factors. On an annualized basis, as a percentage of net sales, net income was 0.9% and 3.4% of net sales for fiscal 1995 and fiscal 1994, respectively. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital needs are generally funded through cash flows from operations and the Credit Facility. The Company used approximately $6.8 million of cash flows from operating activities, principally for working capital requirements, for the three months ended June 30, 1996. The Company generated cash flows of approximately $16.1 million from operating activities for the year ended March 31, 1996. On July 19, 1996, the direct and indirect subsidiaries of the Company entered into the Credit Facility, an unsecured five year credit facility for a $50.0 million revolving credit line and a $35.0 million term loan. The Company guarantees repayment of the loans under the Credit Facility. Both loans bear interest at either LIBOR plus an applicable margin or the prime rate plus an applicable margin, at the option of the borrowers. The margin applicable to LIBOR varies between 0.63% and 1.88% and the margin 28 applicable to the prime rate varies between 0% and 0.38%, in each case based upon the borrowers' ratio of total indebtedness to earnings before interest, taxes and depreciation and amortization. In addition, the borrowers are required to pay a commitment fee of between 0.2% and 0.45% on the unused portion of the Credit Facility based upon the ratio described above. Principal payments on the term loan of approximately $1.3 million are made quarterly with a final lump sum payment of approximately $11.3 million due on July 1, 2001. The borrowers may repay amounts owed under the Credit Facility or reduce the revolving credit facility commitment without penalty. Additionally, the borrowers may allocate up to $5.0 million of the available revolving credit facility for the issuance of letters of credit. The Credit Facility contains restrictions and covenants applicable to the borrowers and the Company which include limitations on the ability to incur additional indebtedness, issue stock options or warrants, make certain restricted payments and acquisitions, create liens, enter into transactions with affiliates, sell substantial portions of its assets and make capital expenditures. The Credit Facility restricts the payment of cash dividends by the Company. Under the terms of the Credit Facility, upon completion of this offering, the Company is required to make a capital contribution to the borrowers, in the amount of, and the borrowers are required to make a principal payment of $15.0 million, which will be applied first to any balance outstanding on the revolving credit facility and then to the term loan. Amounts applied to repay the revolving credit facility may be reborrowed. Should the Company fail to receive at least $30.0 million in proceeds from this offering by December 31, 1996, the Credit Facility will become secured as the Company is required to grant the lender a first priority lien and security interest in all real and personal property owned by the Company at that time. The proceeds of borrowings under the Credit Facility and the proceeds from the sale of Quality Park were used to extinguish the outstanding balances of the revolving credit facility, the senior term loans and the senior subordinated notes existing at March 31, 1996. The extinguishment of this debt resulted in an extraordinary loss of approximately $1.5 million, net of an income tax benefit of approximately $1.0 million. The Company's outstanding subordinated promissory notes consist of two notes, a $13.5 million principal amount payable by the Company to Alco, bearing interest at 10%, and due in equal installments on June 1, 2002 and June 1, 2003 and the Teleflex Note. The Teleflex Note will be repaid with the proceeds of this offering. The 14% JSDs are unsecured obligations of the Company which were issued to CVC Affiliates and certain members of management of the Company. The 14% JSDs will aggregate approximately $9.5 million, including principal and accrued interest, on October 15, 1996, and will be converted into Common Stock immediately prior to the consummation of this offering. During 1996, junior subordinated promissory notes of TCI (the "10.5% JSDs") were issued in the amount of $0.8 million and are contractually subordinated to all liabilities of TCI and its subsidiaries, and bear interest at 10.5%. The 10.5% JSDs were issued to TFX Equities, Inc. and certain members of management of TCI. The 10.5% JSDs are due in equal installments on December 31, 2005 and 2006, although the holders of the 10.5% JSDs have no right to demand payment of principal until all superior debt, as defined, has been paid in full. Capital expenditures were approximately $0.9 million and $1.9 million for the three months ended June 30, 1996 and the year ended March 31, 1996, respectively, primarily for manufacturing machinery and equipment for the aviation group. The Company funded these expenditures through cash generated by operations and borrowings under its credit arrangements. The Company expects capital expenditures to be approximately $6.0 million for fiscal year ending March 31, 1997. Of this amount, approximately $3.0 million is expected to be used to expand capacity at the Company's stretch forming operations and the remainder will be used for upgrades of information systems, machinery and equipment, primarily for the aviation group. The Company believes that the cash proceeds from this offering, together with cash generated by operations and borrowings under the Credit Facility, will be sufficient to meet anticipated cash requirements for the next 12 months. There can be no assurance that additional capital will not be required or that any such additional capital will be available on reasonable terms, if at all, at such times as may be required by the Company. 29 BUSINESS GENERAL OVERVIEW The Company designs, engineers, manufactures or repairs and overhauls aircraft components such as mechanical and electromechanical control systems, aircraft and engine accessories, APUs, avionics and aircraft instruments. The Company serves a broad spectrum of the aviation industry, including commercial airlines and air cargo carriers, as well as OEMs, on a worldwide basis. The Company was incorporated in 1993 to purchase the aviation and metals businesses from Alco. See "Historical Background." INDUSTRY OVERVIEW AND TRENDS According to U.S. Department of Commerce statistics, the annual worldwide market for the design, engineering, manufacture, repair and overhaul of aircraft components is approximately $45 billion. This market is expected to grow at an annual rate of 5% to 6% over the next four years. The aircraft component production and repair industry is highly fragmented, consisting of both a limited number of well-capitalized companies, which offer a broad range of products and services, and a large number of smaller, specialized companies. The aviation industry has been consolidating at an increasing pace in recent years, and it is expected that such consolidation will continue for the foreseeable future. A number of significant trends are currently affecting the market for the design, engineering, manufacture, repair and overhaul of aircraft components. These trends include the following: INCREASES IN AIR TRANSIT AND AIRCRAFT PRODUCTION. Boeing's 1996 Market Outlook projects that global air travel will increase by 70% and that the number of passenger and cargo delivery aircraft in service will increase by 47% through the year 2005. This trend will be driven, in part, by the anticipated continued growth of established carriers engaged in the air freight and package delivery businesses. Average passenger seat miles flown is also expected to increase significantly over the next few years. Further, many new airlines are expected to commence operations in the United States and abroad, especially in China and other countries in Asia, where only a small percentage of the population has ever flown. Because start-up airlines generally do not invest in the infrastructure necessary to service their aircraft, such airlines outsource all or most of their repair and overhaul services. To meet their needs, certain foreign and many start-up airlines have turned to older aircraft which generally require more frequent servicing. Further, as aging aircraft are retired, new aircraft production is increasing. It is estimated that the number of surplus aircraft is expected to significantly decline while new aircraft production is expected to increase over the next several years. The continued growth in air transit and aircraft production will increase the demand for aircraft component purchases and repairs. INCREASED OUTSOURCING BY AIRCRAFT OPERATORS AND OEMS. Aircraft operators have come under increasing pressure to reduce both operating and capital costs associated with providing aviation services. While several of the expenditures incurred by aircraft operators are beyond their direct control, such as fuel prices and labor costs, aircraft operators seeking cost reductions have increased purchases of certain components from third parties and have outsourced repair and overhaul functions. Aircraft components sold by third party suppliers and aircraft components that have been repaired and overhauled are generally less expensive than new aircraft components sold by OEMs. In addition, OEMs are increasingly becoming "assemblers" of aviation products by outsourcing more manufacturing and repair functions to third parties. In this regard, the Company supplies many OEMs with aircraft components and subassemblies, in addition to performing repair and overhaul services. The Company believes that its broad array of aviation products and services and its reputation for quality and timely and reliable delivery will position the Company to continue to capitalize on the outsourcing trend. The Company anticipates that increased reliance on outsourcing will continue to cause consolidation in the industry since only those suppliers with extensive capacities and adequate capital will secure such agreements with OEMs and aircraft operators. REDUCTION IN THE NUMBER OF APPROVED SUPPLIERS AND VENDORS. In order to reduce purchasing costs, streamline purchasing decisions and have greater control over quality, purchasing departments of OEMs and aircraft operators have been reducing the number of approved suppliers and vendors. Recently, 30 several OEMs and aircraft operators have reduced their supplier and vendor lists from as many as 50 to a core group of five to ten "mega-suppliers" or "mega-vendors" who have the size and capacity to meet their needs. The Company has secured a position on such lists of a number of OEMs and airlines. The Company believes that this trend will continue in the future and that, due to its established market presence and reputation for quality, the Company will continue to be selected as an approved supplier and vendor. INCREASED MAINTENANCE AND SAFETY REQUIREMENTS. Under regulations promulgated by the FAA and similar agencies in other countries, including the Joint Aviation Authority (the "JAA") and the Civil Aviation Administration of China (the "CAAC"), as well as guidelines established by OEMs and aircraft operators, when an aircraft component fails to perform within certain prescribed limits or after logging a prescribed number of flight hours, the aircraft component must be brought to a repair facility certified by the FAA or similar agency of a foreign nation for various types of designated service or replacement. The FAA has changed the nature of the licenses that it grants, from the grant of broad licenses for aircraft accessories or instruments within broad classifications to more limited licenses covering specific parts within more narrow classifications. The Company holds many perpetual broad licenses that will continue unless abandoned, suspended or revoked. In addition, aircraft components require regular maintenance and inspection and replacement of "life-limited" components. The trend toward more stringent maintenance requirements and more frequent maintenance and overhaul has increased the size of the market for the repair of such components, because the use of new components is not always cost effective. In addition, a potential change in FAA regulations would require aircraft repair stations and others to implement and follow internal maintenance and safety requirements in addition to FAA regulations. The Company believes that, because of its broad licenses and long-standing emphasis on quality control, it will benefit from the evolving maintenance and safety standards. INCREASED EMPHASIS ON COMPONENT TRACEABILITY. Because of concerns regarding the use of unapproved aircraft spare parts, regulatory authorities have increased the level of documentation that must be maintained on spare parts. This requirement has been extended by OEMs and aircraft operators to the vendors of spare parts. The high cost of required technology to compete effectively in the redistribution market has made entry into and survival in the aircraft spare parts redistribution market increasingly difficult and expensive. The Company has implemented technology to enable it to meet these more stringent traceability requirements and intends to continue to do so in the future. COMPETITIVE ADVANTAGES The Company believes that it is well positioned to take advantage of trends affecting the market for the design, engineering, manufacture, repair and overhaul of aircraft components due to: BROAD ARRAY OF PRODUCT AND SERVICES. The Company offers the aviation industry a consolidated point of purchase for a broad array of aviation products and services. The Company designs, engineers and manufactures aircraft components to fulfill the particular needs and requirements of its customers, including electromechanical controls for McDonnell Douglas and the fuselage for the 777 model aircraft for Boeing. In certain cases, the Company retains the proprietary rights to these designs and, accordingly, the customer will rely on the Company to provide service on such aircraft components at every stage of their useful lives, including the repair and overhaul or replacement of such components. The Company also manufactures aviation components according to its customers' specifications. In addition, the Company performs repair and overhaul services for customers on various aviation components manufactured by third parties such as AlliedSignal. GOVERNMENT CERTIFICATIONS. The Company operates nine FAA-certified repair stations and has been granted licenses from the FAA and foreign regulatory counterparts, including the JAA and the CAAC, to perform repair and overhaul services on broad classifications of aircraft instruments and accessories. Without such broad certifications and licenses, other companies may not offer these products and services, thereby constituting a significant barrier to entry. In addition, the Company holds two exclusive licenses issued by the FAA which permit the Company to design, engineer, repair, test and release into service without FAA approval certain products to its own specifications for certain aircraft components 31 and therefore to compete directly with OEMs with respect to such components. These exclusive licenses, known as SFAR 36 certifications, enable the Company to offer, on a proprietary basis, certain repaired parts relating to various aircraft accessories such as APUs and constant speed drives to its customers at a lower cost than other companies that must purchase replacement parts from third parties. EMPHASIS ON QUALITY CONTROL. The Company incurs significant expenses to maintain the most stringent quality control of its products and services. In addition to domestic and foreign governmental regulations, OEMs, commercial airlines and other customers require that the Company satisfy certain requirements relating to the quality of its products and services. The Company has continually met or exceeded these requirements, and has successfully completed many audits by the Coordinating Agency for Supplier Evaluation ("C.A.S.E."), a consortium of United States airlines. The Company performs testing and certification procedures on all of the products that it designs, engineers, manufactures, repairs and overhauls, and maintains detailed records to ensure traceability of the production of and service on each aircraft component. The expense required to institute and maintain the Company's quality control procedures represents a barrier to entry. BROAD CUSTOMER BASE. Due to the Company's broad array of products and services and its emphasis on quality control and timely delivery, the Company's customers include virtually all of the world's major commercial airlines and an increasing number of the most widely recognized air cargo carriers including Federal Express and United Parcel Service, and OEMs such as Boeing, McDonnell Douglas, AirBus and AlliedSignal. The Company expects that its customer base will continue to strengthen and broaden with increased cross-selling efforts by the Company of its various products and services. ESTABLISHED INDUSTRY PRESENCE. The operating divisions and subsidiaries in the Company's aviation group have been involved in the aviation industry for an average of over 30 years. These entities are characterized by experienced management and highly-skilled employees. Due in large part to its established industry presence, the Company enjoys strong customer relations, name recognition and repeat business. COMPANY STRATEGY The Company intends to grow its aviation business through: EXPANSION OF PRODUCTS AND SERVICES. The Company will continue to introduce new aviation products and services, to take advantage of the growing aviation industry and the increasing demand for aviation products and services. In an effort to expand its existing array of products and services and to capture additional repair and overhaul business, the Company plans to expand, as appropriate, its program for the distribution and inventory management of third party aircraft components. The Company will also expand its assembly and subassembly capabilities on certain aircraft components. By broadening its products and services, the Company intends to further expand its position as a consolidated point of purchase to the aviation industry, capitalizing on the increasing trend toward outsourcing and the reduction by aircraft operators and OEMs of the number of approved suppliers and vendors. INCREASED INTERNATIONAL MARKETING. The Company will continue to take advantage of the expanding international market for aviation products and services as worldwide air travel escalates and foreign nations, particularly China and other countries in Asia, purchase used aircraft that require more frequent repair and maintenance. The Company currently supplies products and services to virtually every major commercial airline in the world and retains independent sales representatives in a number of foreign countries. In addition, the Company participates each year in several international trade shows, including the Paris Air Show and the Singapore Air Show. The Company intends to build on its existing international presence through foreign acquisitions and continued market penetration. CAPITALIZING ON AVIATION GROUP AFFILIATION. Utilizing the group affiliation of the Company's operating divisions and subsidiaries, the Company plans to increase cross-selling of its various capabilities to its customers. For example, one of the Company's operating divisions has recently begun distributing 32 certain electromechanical controls manufactured by a subsidiary of the Company. The Company's operating divisions and subsidiaries will continue to share independent sales representatives and jointly bid on projects where appropriate, while still maintaining their individual identities. EXPANDED OPERATING CAPACITY. The Company plans to increase its operating capacity to meet the expected increased growth and demand in the aviation industry. The Company will increase its capital expenditures, including expenditures for additional equipment and skilled labor, to support this increased capacity. The Company intends to continue to invest in state of the art machinery to increase its operating efficiencies and improve operating margins. GROWTH THROUGH ACQUISITIONS. The Company expects to continue its growth through acquisitions of other companies, assets or product lines that add to or complement the Company's existing aviation products and services. The Company has successfully completed three acquisitions in the last 12 months. The acquisition of TCI is an example of the Company seeking to add to its existing product offering (in this case, mechanical and electromechanical controls) through the acquisition of an established company in the industry. AMTI and Air Lab represent acquisitions that expand both the Company's existing aviation products and services and its customer base. Because of the fragmented nature of much of the market for aircraft products and services, the Company believes that many additional acquisition opportunities exist in the aviation industry. PRODUCTS AND SERVICES The Company's aviation products and services may generally be divided into three categories: structural components, instrument and flight controls and operational components. The following is a description of some of the products and services offered by the Company in each of these three categories: STRUCTURAL COMPONENTS. The Company performs stretch forming, bending, die forming, machining, welding, assembly and other fabrication on aircraft wings, fuselages and skins for aircraft produced by OEMs such as McDonnell Douglas and Boeing. The Company also manufactures metallic and composite bonded honeycomb assemblies for fuselage, wings and flight control surface parts for commercial airlines and other aircraft operators. INSTRUMENT AND FLIGHT CONTROLS. The Company designs and engineers mechanical and electromechanical controls such as remote valve operators and push/pull controls ranging from simple vent controls to sophisticated flight-critical engine controls for OEMs and commercial airlines. The Company's designs and engineering for such controls are proprietary. The Company also performs repair and overhaul services, and supplies spare parts, for various types of cockpit instruments and gauges for a broad range of commercial airlines on a worldwide basis. OPERATIONAL COMPONENTS. The Company performs complete repair and overhaul services on APUs for both commercial airlines and OEMs. APUs are used to provide power for all non-propulsion aircraft functions such as air conditioning, lights and other electrical functions. The Company also repairs and overhauls aircraft accessories, including constant speed drives, pneumatic or electrically actuated valves, cabin compressors, starters and generators and manufactures refueling booms. Certain of these components, like the APUs, are repaired pursuant to SFAR 36 certifications. Finally, the Company provides precision machining services for other operational components manufactured from refractory and other metals for the aviation and aerospace industry. 33 OPERATING DIVISIONS AND SUBSIDIARIES The Company operates through several operating divisions and subsidiaries which are divided into two groups: the aviation group and the metals group. The following chart describes the operations, customer base and certain other information with respect to the Company's operating divisions and subsidiaries:
OPERATING DIVISION/SUBSIDIARY NUMBER OF (YEAR ESTABLISHED) LOCATION BUSINESS TYPE OF CUSTOMERS EMPLOYEES - ---------------------------------------- -------------- ----------------------- ----------------------- --------------- AVIATION GROUP A. Biederman, Inc.(1) Glendale, CA Sells and services Commercial airlines, 79 (1933) aircraft and industrial U.S. military and cargo instruments. carriers. Advanced Materials Technologies Inc.(1) Phoenix, AZ Repairs and Aviation OEMs and 172 (1987) manufactures components aircraft operators. for APUs and gas turbine engines. Aerospace Technologies, Inc.(1) Fort Worth, TX Manufactures metallic/ Commercial airlines, 87 (1969) composite bonded U.S. military and honeycomb assemblies component supplier and repairs fuselage, industry. wing, flight control surface parts and other flight critical components. Air Lab, Inc.(1) Seattle, WA Repairs and overhauls Commercial airlines, 34 (1974) aviation aircraft manufacturers, instrumentation and avionics and instrument controls. manufacturers, major freight carriers, corporate aircraft operators and aviation parts suppliers. K-T Corporation Shelbyville, Performs stretch Aviation OEMs, U.S. 156 (1963) IN forming, bending, die military and aerospace, forming, machining, mass transportation, welding, assembly and energy and heavy other fabrication on trucking industries. aircraft wings, fuselages and skins. L.A. Gauge Co., Inc. Sun Valley, CA Machines, bonds and Defense, aerospace, 40 (1954) fabricates medical, automotive and ultra-precision parts. computer industries. Lamar Electro-Air Corporation(1)(2) Wellington, KS Repairs and overhauls U.S. government, 92 (1965) aircraft and engine commercial airlines and accessories, general aviation manufactures pneumatic aircraft operators. and electrically actuated valves for aircraft and assembles axles and aluminum wheels for automobiles. Northwest Industries, Inc. Albany, OR Machines and fabricates Aerospace, nuclear, 29 (1960) refractory, reactive, medical, electronic and heat and chemical industries. corrosion-resistant precision products. Special Processes of Arizona, Inc.(1) Phoenix, AZ Produces and applies Aviation OEMs and 19 (1987) plasma coating. aircraft operators. Triumph Air Repairs, Inc.(1)(2) Phoenix, AZ Repairs and overhauls Worldwide commercial 112 (1979) APUs and supplemental airlines. equipment. Triumph Controls, Inc.(1) North Wales, Designs and Aviation OEMs, 253 (1943) PA manufactures mechanical shipyards, repair and and electromechanical overhaul facilities, control systems. airlines and U.S. and NATO military forces.
34
OPERATING DIVISION/SUBSIDIARY NUMBER OF (YEAR ESTABLISHED) LOCATION BUSINESS TYPE OF CUSTOMERS EMPLOYEES - ---------------------------------------- -------------- ----------------------- ----------------------- --------------- METALS GROUP Deluxe Specialties Mfg Co. Hutchinson, KS Manufactures fuel tanks U.S. manufacturers of 102 (1961) and hydraulic mobile, material reservoirs. handling, agricultural, construction and power generation equipment. Great Western Steel Co. Chicago, IL Produces steel Manufacturers, 43 (1918) products, specializing primarily in the home in flat rolled and office products products. industries. Kilroy Structural Steel Co. Cleveland, OH Erects structural steel General contractors, 14 (1918) frameworks. engineers and architects of commercial buildings and bridges. Triumph Industries Bridgeview, IL Produces and Computer and electronic 59 (1960) distributes specialty industries. electrogalvanized products
- ------------------ (1) Designates FAA-certified repair station. (2) Designates SFAR 36 certification. METALS PROCESSING AND DISTRIBUTION The Company's metals group consists of four divisions with industry experience averaging 56 years in operation. These businesses include a leading producer of electrogalvanized steel products, a steel service center specializing in flat rolled steel products and a leading manufacturer of fuel tanks and hydraulic reservoirs. These entities supply products to several hundred manufacturers and other customers in the computer, electronics and agricultural industries on a regional and national basis. In addition, the Company operates a business engaged in the erection of structural frameworks for buildings and bridges in the midwestern United States. The Company's metals group processes, converts and distributes steel and steel products on a national basis. The Company produces and distributes electrogalvanized steel, which can be stamped, formed, welded and painted and coated steel (including Tribrite-Registered Trademark-, Triclear-Registered Trademark- and Trichrome-Registered Trademark-) for the electronic and computer industries. The Company also operates a steel service center specializing in flat rolled products and their processing, including hot or cold rolled sheet and coil and galvanized sheet and coil used primarily by the home and office products and appliance industry. The Company also manufactures fuel tanks and hydraulic reservoirs for off-highway mobile equipment units, which are sold primarily to the agricultural industry. The Company also operates a business engaged in the erection of structural framework, including steel members and allied materials, for buildings and bridges, with a specialty in commercial and industrial buildings. The Company erected the structural framework of Jacobs' Field, the Cleveland Indians' new baseball stadium, and the Rock and Roll Hall of Fame in Cleveland, Ohio. These structural erection services are provided on a project-by-project basis primarily in the midwestern United States. These projects are generally awarded on a fixed fee, competitive bid basis. SALES AND MARKETING Each of the Company's operating divisions and subsidiaries independently conducts sales and marketing efforts directed at their respective customers and industries and, in some cases, collaborate with other operating divisions and subsidiaries within its group for cross-marketing efforts. Each sales force and the respective officers of the operating divisions and subsidiaries are responsible for obtaining new customers and maintaining relationships with existing customers. Sales and marketing efforts are conducted primarily by independent regional manufacturer's representatives and in-house personnel. 35 The Company has approximately 72 independent manufacturer's representatives, including many representatives in foreign countries, and approximately 56 in-house sales employees. Generally, manufacturer's representatives receive a commission on sales and the in-house sales personnel receive a base salary plus commission. Engaging independent sales representatives at the local level facilitates responsiveness to each customer's changing needs and current trends in each marketplace in which the Company operates. The Company's Aviation Council, which is comprised of the presidents of each of the Company's operating divisions and subsidiaries in the aviation group, meets periodically to discuss ways to improve sales and cross-marketing opportunities. The Company has also engaged in innovative marketing efforts including participation in research groups. The management of each operating division and subsidiary of the Company also maintains close business relationships with many customers, thereby furthering the sales and marketing efforts of their businesses. A significant portion of the Company's government and defense contracts are awarded on a competitive bidding basis. The Company generally does not bid or act as the primary contractor, but will typically bid and contract as a subcontractor on contracts on a fixed fee basis. The Company generally sells to its other customers on a fixed fee, negotiated contract or purchase order basis. BACKLOG As of June 30, 1996, the Company's aviation group had outstanding purchase orders representing an aggregate invoice price of approximately $69.4 million, $17.4 million of which will not be shipped by the Company by fiscal year end. As of June 30, 1996, the Company's metals group had outstanding purchase orders representing an aggregate invoice price of approximately $21.3 million, $0.4 million of which will not be shipped by the Company's fiscal year end. COMPETITION The aircraft components production and repair industry is highly fragmented, consisting of both a limited number of well-capitalized companies which offer a broad range of products and services and a large number of smaller, specialized companies. The Company believes that the principal competitive factors in the aviation products and services industry are quality, turnaround time, overall customer service and price. See "-- Competitive Advantages." The Company believes that it competes favorably on the basis of the foregoing factors. The Company does not believe that the location of its repair facilities is a significant factor to its customers in selecting the Company, as substantially all of the components serviced by the Company are transported by common carrier to the Company's facilities for service. The Company competes with third party manufacturers, some of which are divisions or subsidiaries of OEMs or other large companies in the manufacture of aircraft components and subassemblies. Competition for the repair and overhaul of aviation components comes from three primary sources, some with greater financial and other resources than the Company: OEMs, major commercial airlines and other independent service companies. Certain major commercial airlines own and operate their own service centers. Some major airlines have begun to sell their repair and overhaul services to other aircraft operators. The repair and overhaul services provided by domestic airlines are primarily for their own components, although these airlines may outsource a limited amount of repair and overhaul services to third parties. Foreign airlines that provide repair and overhaul services typically provide these services for their own components and for third parties. OEMs also maintain service centers that provide repair and overhaul services for the components they manufacture. Other independent service organizations also compete for the repair and overhaul business of other users of aircraft components. The Company's principal competitors in the metals industry include national and regional steel mills, other steel service centers, steel erection companies and pre-engineered building manufacturers. Some of these competitors have greater financial and other resources than the Company. GOVERNMENT REGULATION The aviation industry is highly regulated in the United States by the FAA and in other countries by similar agencies. The Company must be certified by the FAA and, in some cases, by individual OEMs in 36 order to engineer and service parts and components used in specific aircraft models. If material authorizations or approvals were revoked or suspended, the operations of the Company would be adversely affected. New and more stringent government regulations may be adopted, or industry oversight heightened, in the future and such new regulations, if enacted, or any industry oversight, if heightened, may have an adverse impact on the Company. The Company must also satisfy the requirements of its customers, including OEMs, that are subject to FAA regulations, and provide these customers with products and services that comply with the government regulations applicable to aircraft components used in commercial flight operations. The FAA regulates commercial flight operations and requires that aircraft components meet its stringent standards. In addition, the FAA requires that various maintenance routines be performed on aircraft components, and the Company currently satisfies these maintenance standards in its repair and overhaul services. Several of the Company's operating divisions are FAA-approved repair stations. The Company's aviation and metals operations are also subject to a variety of worker and community safety laws. The Occupational Safety and Health Act of 1970 ("OSHA") mandates general requirements for safe workplaces for all employees. In addition, OSHA provides special procedures and measures for the handling of certain hazardous and toxic substances. Specific safety standards have been promulgated for workplaces engaged in the treatment, disposal or storage of hazardous waste. The Company believes that its operations are in material compliance with OSHA's health and safety requirements. ENVIRONMENTAL MATTERS The Company's operations are subject to federal, state and local environmental laws and regulation by government agencies, including the EPA. Among other matters, these regulatory authorities impose requirements that regulate the emission, discharge, generation, management, transportation and disposal of hazardous materials, pollutants and contaminants, govern public and private response actions to hazardous or regulated substances which may be or have been released to the environment, and require the Company to obtain and maintain licenses and permits in connection with its operations. This extensive regulatory framework imposes significant compliance burdens and risks on the Company. Although management believes that the Company's operations and its facilities are in material compliance with such laws and regulations, there can be no assurance that future changes in such laws, regulations or interpretations thereof or the nature of the Company's operations will not require the Company to make significant additional capital expenditures to ensure compliance in the future. Certain Company facilities are currently the subject of environmental remediation activities, the cost of which is subject to indemnification provided by Alco. One of these facilities is connected with a site included on the National Priorities List of Superfund sites maintained by the EPA. Another of these facilities is located on a site included in the EPA's database of potential Superfund sites. The Alco indemnification covers both (i) the costs and claims associated with all of these environmental remediation activities and liabilities, and (ii) the costs of unidentified environmental liabilities that arise from conditions or activities existing at facilities required from Alco prior to their acquisition from Alco and that are identified before July 22, 2000. Another of the Company's facilities leased from Teleflex is located on a site placed on EPA's National Priorities List prior to its acquisition by the Company, and is subject to indemnification provided by Teleflex for environmental liabilities arising from activities or conditions existing at this facility prior to the Company's acquisition. EMPLOYEES As of July 31, 1996, the Company employed approximately 1,300 persons, of whom 113 were management employees, 56 were sales and marketing personnel, 155 were technical personnel, 147 were administrative personnel and 829 were production workers. As of July 31, 1996, approximately 200 employees were subject to collective bargaining agreements, one of which will expire in February 1997. There can be no assurance that the Company will be able to renegotiate successfully its collective 37 bargaining agreements without any labor disruptions or that such agreements will be renegotiated on terms favorable to the Company. The Company has not experienced any material labor-related work stoppage and considers its relations with its employees to be good. PROPERTIES The Company's executive offices are located in Wayne, Pennsylvania, where the Company leases 5,100 square feet of space. This lease expires in September 2000. In addition, the Company owns or leases the following facilities in which its operating divisions and subsidiaries are located.
SQUARE OWNED/LEASE LOCATION DESCRIPTION FOOTAGE EXPIRATION - ------------------ ----------------------------------------------------- --------- ------------- Chandler, AZ Thermal processing facility and office 7,000 2017 Phoenix, AZ Plasma spray facility and office 13,500 2000 Phoenix, AZ Repair and overhaul shop and office 50,000 1998 Tempe, AZ Manufacturing facility and office 13,500 Owned Tempe, AZ Machine Shop 9,300 Owned Glendale, CA Instrument shop, warehouse and office 28,000 2005 Milpitas, CA Warehouse, repair shop and office 3,700 1997 Sun Valley, CA Machine shop and office 30,000 Owned Bridgeview, IL Steel processing facility and office 135,700 2006 Chicago, IL Steel distribution facility and office 140,000 Owned Shelbyville, IN Manufacturing facility and office 192,300 Owned Hutchinson, KS Manufacturing facility and office 75,000 Owned Wellington, KS Repair and overhaul and office 90,000 1997 Cleveland, OH Steel fabrication facility and office 163,000 Owned Plain City, OH Office 2,000 1997 Albany, OR Machine shop and office 25,000 Owned North Wales, PA Manufacturing facility and office 111,400 2002 Fort Worth, TX Manufacturing facility and office 114,100 Owned Seattle, WA Instrument shop, warehouse and office 10,000 1998
The Company believes that its properties are adequate to support its operations for the foreseeable future. LEGAL PROCEEDINGS The Company is not presently involved in any material legal proceedings outside of the ordinary course of business. The Company may in the future be named as a defendant in lawsuits involving product defects, breach of warranty or other actions relating to products that it manufactures or products that it distributes that are manufactured by others. The Company believes that its potential exposure is adequately covered by its aviation product and general liability insurance. 38 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The executive officers and directors of the Company are as follows:
NAME AGE POSITION - ------------------------------ ----------- --------------------------------------------------------------------- Richard C. Ill................ 53 President, Chief Executive Officer and Director John R. Bartholdson........... 52 Senior Vice President, Chief Financial Officer, Treasurer and Director Paul T. Stimmler.............. 57 Vice President and Secretary Kevin E. Kindig............... 39 Controller Richard C. Gozon(1)(2)........ 57 Director Claude F. Kronk(1)(2)......... 64 Director Joseph M. Silvestri(1)........ 35 Director Michael A. Delaney(2)......... 42 Director
- ------------------ (1) Member of the Compensation Committee. (2) Member of the Audit Committee. Richard C. Ill has been President and Chief Executive Officer and a director of the Company since 1993. Mr. Ill joined Alco in 1968 and became Group Vice President of Metalsource, a steel distribution business, in 1973. In 1975, Mr. Ill became President of Triumph Industries and, in 1983, became President of Metalsource. In 1988, Mr. Ill became President of Alco Diversified Services, a division of Alco. He was named Vice President of Alco in 1989. Mr. Ill is a member of the Advisory Board of Outward Bound, USA and the Board of Directors, Chairman's Council and Policy and Planning Committees of the Steel Service Center Institute. John R. Bartholdson has been Senior Vice President, Chief Financial Officer and Treasurer and a director of the Company since 1993. Mr. Bartholdson joined Alco Diversified Services in the fall of 1992. Prior to joining Alco Diversified Services, Mr. Bartholdson was employed for 14 years by Lukens, Inc., the last five years in the position of Senior Vice President and Chief Financial Officer. Mr. Bartholdson serves on the Board of Directors of PBHG Funds, Inc. Paul T. Stimmler has been Vice President and Secretary of the Company since 1993. From 1989 to 1993, Mr. Stimmler was Group Vice President of Alco Diversified Services. Kevin E. Kindig has been Controller of the Company since 1993. From 1985 to 1993, Mr. Kindig was employed by Lukens, Inc. in various positions, most recently as Manufacturing Accounting Manager. Prior thereto, Mr. Kindig was in public accounting. Richard C. Gozon has been a director of the Company since 1993. Mr. Gozon has been Executive Vice President of Weyerhaeuser Company since 1994. From 1960 to 1993, Mr. Gozon held various executive positions at Alco, was elected to the Board of Directors in 1984 and served as President and Chief Operating Officer from 1988 to 1993. Mr. Gozon serves on the Board of Directors of U.G.I. Corporation and AmeriSource Health Corporation. Claude F. Kronk has been a director of the Company since 1993. Mr. Kronk is currently Vice Chairman and Chief Executive Officer and a director of J&L Specialty Steel, Inc. Mr. Kronk held various positions with Jones & Laughlin Steel Corporation from 1957 to 1986. Mr. Kronk serves on the Board of Directors of Cold Metal Products, Co. Joseph M. Silvestri has been a director of the Company since his appointment by CVC in 1994. Mr. Silvestri has been employed by CVC since 1990 and has been a Vice President since 1995. Mr. Silvestri serves on the Board of Directors of International Media Group, Polyfibron Technologies, Inc., Frozen Specialties, Inc., Glenoit Mills and Euramax International, Inc. 39 Michael A. Delaney has been a director of the Company since his appointment by CVC in January 1996. Mr. Delaney has been a Vice President of CVC since 1989. From 1986 through 1989 Mr. Delaney was Vice President of Citicorp Mergers and Acquisitions. Mr. Delaney serves on the Board of Directors of Sybron Chemicals, Inc., GVC Holdings, JAC Holdings, Delco Remy International, Enterprise Media, Inc., Southern Coil Processing, Inc., Aetna Industries, CORT Business Services, Inc., Palomar Technologies, Inc., Farm Fresh, Inc. and AmeriSource Health Corporation. After the closing of this offering, all directors will be elected by the stockholders pursuant to cumulative voting. All directors hold office until the next annual meeting of stockholders or until their successors are duly elected and qualified. Executive officers of the Company are elected by the Board of Directors on an annual basis and serve at the discretion of the Board of Directors. Pursuant to the terms of a Stockholders' Agreement dated July 22, 1993, the Board of Directors is comprised of the Chief Executive Officer of the Company, three directors of the Company designated by CVC and three directors to be elected by CVC, as proxy for the majority of stockholders of the Company, one of whom must be John Bartholdson, until his resignation or the termination of his employment by the Company. There is currently a vacancy on the Board of Directors to be filled at CVC's designation. This right of designation and proxy will terminate simultaneously with the closing of this offering. The Board of Directors has a Compensation and an Audit Committee. The Compensation Committee periodically reviews and evaluates the compensation of the Company's officers, administers the Company's stock option plans and establishes guidelines for compensation of other personnel. The Compensation Committee is currently comprised of Messrs. Gozon, Kronk and Silvestri. The Audit Committee communicates and receives information directly from the Company's independent accountants. The Audit Committee is currently comprised of Messrs. Gozon, Kronk and Delaney. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS COMPENSATION OF DIRECTORS. Directors who are also employees of the Company, or one of its operating divisions or subsidiaries or CVC do not receive additional compensation for serving as directors. Each director who is not an employee of the Company, or one of its operating divisions or subsidiaries or CVC receives an annual fee of $7,500 and a fee of $1,000 for attendance at each Board of Directors' meeting and $500 for each committee meeting (unless held on the same day as a Board of Directors' meeting). Directors are also reimbursed for out-of-pocket expenses incurred in attending meetings of the Board of Directors or committees thereof. The Company is contemplating adopting a stock option plan for its non-employee directors. 40 COMPENSATION OF EXECUTIVE OFFICERS. The following table summarizes the compensation paid to the President and Chief Executive Officer and to each of the three most highly compensated executive officers of the Company and its subsidiaries, other than the President and Chief Executive Officer, for the fiscal years ended March 31, 1996, 1995 and 1994. The Company has four officers that perform managerial functions for the Company and are elected and qualify as its executive officers. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION ------------------------------------------- OTHER ANNUAL ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) COMPENSATION(3) - ------------------------------------- ------------ ----------- ----------- ----------------- ----------------- Richard C. Ill 1996 $ 280,000 $ 308,000 $ 3,080 $ 5,472 President and Chief Executive 1995 255,000 89,250 3,080 6,653 Officer 1994(4) 235,600 159,375 3,080 5,547 John R. Bartholdson 1996 $ 240,000 $ 264,000 $ 3,080 $ 4,320 Senior Vice President, Chief 1995 205,000 71,750 3,080 4,792 Financial Officer and Treasurer 1994(4) 150,000 128,125 -- 2,071 Paul T. Stimmler 1996 $ 98,500 $ 50,000 $ 1,970 $ 4,950 Vice President and Secretary 1995 92,900 23,000 1,858 3,150 1994(4) 84,500 40,000 1,690 2,826 Kevin E. Kindig 1996 $ 73,000 $ 30,000 $ 1,460 $ 462 Controller 1995 65,000 10,000 1,300 304 1994(4) 60,000 10,800 1,200 275
- ------------------ (1) The amounts shown consist of cash bonuses earned in the fiscal year identified, of which only a portion was paid in that year. (2) "Other Annual Compensation" reflects amounts contributed by the Company to its 401(k) Plan. (3) The amounts shown consist of group term life insurance premiums. (4) Compensation for fiscal year 1994 is presented on an annualized basis for the 12 months ended March 31, 1994. STOCK OPTION PLANS The Company intends to adopt a 1996 Stock Option Plan (the "1996 Plan") which will become effective upon closing of this offering. The 1996 Plan provides for grants of stock options to officers and key employees of the Company, or any of its operating divisions or subsidiaries, including a director who is also a key employee. Non-employee directors of the Company are not entitled to participate in the 1996 Plan. By encouraging stock ownership, the Company seeks to attract, retain and motivate participants and to encourage such participants to devote their best efforts to the business and financial success of the Company. Subject to adjustments in certain circumstances described below, the 1996 Plan authorizes up to 500,000 shares of Common Stock, subject to increase of such number of shares equal to five (5%) percent of any and all Common Stock sold pursuant to the over-allotment option granted to the Underwriters, for issuance pursuant to the terms thereof. If and to the extent that options granted under the 1996 Plan expire or are terminated for any reason without being exercised, or the shares subject to the option are forfeited, the shares of Common Stock subject to such option again would be available for grant under the 1996 Plan. The 1996 Plan is administered and interpreted by the Compensation Committee. The Compensation Committee has the sole authority to administer and determine the 1996 Plan including the determination of (i) persons to whom options may be made under the 1996 Plan, (ii) the type, size and other terms and conditions of each option, (iii) the time when the options will be granted and the duration of any applicable exercise or restrictions, including the criteria for vesting and acceleration, and (iv) other matters as set forth in the 1996 Plan. 41 Options granted under the 1996 Plan may consist of (i) options intended to qualify as incentive stock options ("ISOs") within the meaning of Section 422 of the Code and (ii) "non-qualified stock options" that are not intended to so qualify ("NQSOs"). Options may be granted to any officer or key employee of the Company or its operating divisions and subsidiaries. The option price of any ISO granted under the 1996 Plan may not be less than the fair market value of the underlying share of the Common Stock on the date of grant. The option price of an NQSO may be greater than, equal to or less than the fair market value of the underlying shares of Common Stock on the date of grant. The Compensation Committee will determine the term of each option; provided, however, that the exercise period may not exceed ten years from the date of grant. The participants may pay the option price under the 1996 Plan (i) in cash, (ii) with the approval of the Compensation Committee, by delivering shares of Common Stock owned by the participant for six months and having a fair market value on the date of exercise equal to the option price or (iii) by a combination of the foregoing. The Board of Directors may amend or terminate the 1996 Plan at any time; provided however, that the Board of Directors may not amend the plan, without stockholder approval, to (i) increase (except for increases due to adjustments upon changes in capitalization of the Company) the aggregate number of shares of Common Stock for which options may be granted, (ii) change the effective date, termination or amendment provisions of the 1996 Plan or (iii) make any other change for which stockholder approval is required under the rules and regulations promulgated under Section 16 of the Securities Exchange Act of 1934 or the Code. The 1996 Plan will terminate upon the earlier of the tenth anniversary of its effective date or the date it is terminated by the Board of Directors. EMPLOYMENT AGREEMENTS The Company intends to enter into employment agreements with Mr. Ill, the Company's President and Chief Executive Officer, and Mr. Bartholdson, the Company's Senior Vice President and Chief Financial Officer. 42 CERTAIN TRANSACTIONS Pursuant to an Executive Stock Agreement, dated July 22, 1993, between the Company and Richard C. Ill, the Company's President and Chief Executive Officer, Mr. Ill purchased 3,700 shares of Class A Common Stock for $10.00 per share and 2,080 shares of Preferred Stock for $34.57 per share. In addition, Mr. Ill purchased seven shares of Class C Common Stock for $10.00 per share. Each share of Class C Common Stock entitled Mr. Ill to 4,000 votes. Assuming consummation of the Stock Split and the Conversions, Mr. Ill will hold 263,211 shares of Common Stock. Pursuant to an Executive Stock Agreement, dated July 22, 1993, between the Company and John R. Bartholdson, the Company's Senior Vice President and Chief Financial Officer, Mr. Bartholdson purchased 3,500 shares of Class A Common Stock for $10.00 per share and 1,970 shares of Preferred Stock for $34.57 per share. Assuming consummation of the Stock Split and the Conversions, Mr. Bartholdson will hold 248,579 shares of Common Stock. Pursuant to an Executive Stock Agreement dated July 22, 1993, between the Company and Paul T. Stimmler, the Company's Vice President and Secretary, Mr. Stimmler purchased 900 shares of Class A Common Stock for $10.00 per share and 14% JSDs in a principal amount equal to $50,625, which mature on December 31, 2003 and bear interest at the rate of 14% per annum (the "14% JSD Terms"). Assuming consummation of the Stock Split and the Conversions, Mr. Stimmler will hold 63,809 shares of Common Stock. Pursuant to an Executive Stock Agreement, dated July 22, 1993, between the Company and Kevin E. Kindig, the Company's Controller, Mr. Kindig purchased 400 shares of Class A Common Stock at $10.00 per share and 14% JSDs in a principal amount of $22,500 on the 14% JSD Terms. Assuming consummation of the Stock Split and the Conversions, Mr. Kindig will hold 28,360 shares of Common Stock. Pursuant to a Purchase Agreement, dated July 22, 1993, between the Company and CVC, the Company's majority stockholder, CVC purchased 70,000 shares of Class B Common Stock for $10.00 per share and 26,525 shares of Preferred Stock for $34.57 per share. Each share of Class B Common Stock entitled CVC to 6/10ths of a vote. On September 17, 1993, CVC transferred approximately 303 shares and 277 shares, respectively, of its Class B Common Stock to Joseph M. Silvestri and Michael A. Delaney, both directors of the Company. On December 30, 1993 and February 17, 1995, respectively, CVC transferred approximately 750 shares of its Class B Common Stock to each of Richard C. Gozon and Claude F. Kronk, both directors of the Company. On September 17, 1993, CVC transferred approximately 115 and 105 shares, respectively, of Preferred Stock to each of Mr. Silvestri and Mr. Delaney. On December 30, 1993 and February 17, 1995, respectively, CVC transferred approximately 284 shares of Preferred Stock to each of Mr. Gozon and Mr. Kronk. In addition, pursuant to the Purchase Agreement, CVC purchased 14% JSDs in the principal amount of approximately $5.3 million on the 14% JSD Terms. On September 17, 1993, CVC transferred 14% JSDs to Mr. Silvestri and Mr. Delaney in the principal amounts of approximately $23,000 and $21,100, respectively. On December 30, 1993 and February 17, 1995, respectively, CVC transferred 14% JSDs to Mr. Gozon and Mr. Kronk, each in the principal amount of approximately $57,000. Assuming the Stock Split and the CVC Exchange, CVC will hold 920,782 shares of Common Stock and 3,827,971 shares of Class D Common Stock. Assuming consummation of the Stock Split and the Conversions, Messrs. Silvestri and Delaney will hold 23,309 and 21,367 shares of Common Stock, respectively. Assuming consummation of the Stock Split and the Conversions, Messrs. Gozon and Kronk will hold 57,220 and 55,909, respectively. On July 22, 1993, in connection with the issuance of certain financing the Company issued the Warrant to World Equity Partners, L.P. ("WEP"), an affiliate of CVC. The Warrant may be exercised through July 31, 2003 to purchase 650,000 shares of Common Stock for an aggregate purchase price of $100.00. Certain of the Company's directors and executive officers and certain employees of CVC have agreed to purchase from the Company, and the Company has agreed to sell to such individuals, an aggregate maximum of 125,000 shares of Common Stock at the Price to Public less Underwriting Discounts and Commissions. See "Direct Sale." 43 PRINCIPAL STOCKHOLDERS The following table sets forth certain information regarding the beneficial ownership of the Common Stock of the Company, as of August 20, 1996, by: (i) each person known to the Company to beneficially own more than 5% of the outstanding shares of Common Stock; (ii) each director and executive officer of the Company; and (iii) all directors and executive officers of the Company as a group. The address of all officers and directors listed is the Company's principal executive offices.
SHARES BENEFICIALLY OWNED PRIOR TO THIS OFFERING(1) SHARES BENEFICIALLY OWNED ---------------------- AFTER THIS OFFERING PERCENT OF ------------------------------ TOTAL PERCENT OF SHARES TOTAL SHARES NAME NUMBER(2) OUTSTANDING(3) NUMBER(2) OUTSTANDING(3) - --------------------------------------------- --------- ----------- ------------ -------------- Richard C. Ill............................... 263,211 3.9% 273,211(4) 2.9% John R. Bartholdson.......................... 248,579 3.6 258,579(4) 2.8 Paul T. Stimmler............................. 63,809 * 63,809 * Kevin E. Kindig.............................. 28,360 * 30,860(5) * Richard C. Gozon............................. 57,220 * 67,220(4) * Claude F. Kronk.............................. 55,909 * 65,909(4) * Joseph M. Silvestri.......................... 23,309(6) * 24,309(7) * Michael A. Delaney........................... 21,367(8) * 21,367 * Citicorp Venture Capital, Ltd................ 5,398,753(9) 72.1 5,398,753(10) 54.1 399 Park Avenue New York, NY 10043 All executive officers and directors as a group (8 persons)........................... 761,764 11.1% 805,264 8.6%
- ------------------ * Less than one percent. (1) A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from the date of this Prospectus upon the exercise of options and warrants. Each beneficial owner's percentage ownership is determined by assuming that options and warrants that are held by such person (but not those held by any other person) and that are exercisable within 60 days from the date of this Prospectus have been exercised. Unless otherwise noted, the Company believes that all persons named in the table have sole voting and investment power with respect to all shares of Common Stock beneficially owned by them. (2) For each $14.48 of aggregate accrued interest on the 14% JSDs and accumulated dividends on the Preferred Stock after August 20, 1996, immediately prior to the closing of this offering, each holder will be entitled to receive upon the 14% JSD Conversion and the Preferred Stock Conversion one additional share of Common Stock or, at CVC's election, Class D Common Stock, at an assumed initial public offering price of $16.00 per share (less underwriting discounts and commissions and estimated offering expenses payable by the Company). (3) Based upon outstanding shares of Common Stock and Class D Common Stock. (4) Increase represents 10,000 shares to be purchased pursuant to the Direct Sale. (5) Increase represents 2,500 to be purchased pursuant to the Direct Sale. (6) Includes 4,520 shares of Common Stock and 18,789 shares of Class D Common Stock. Mr. Silvestri disclaims beneficial ownership relating to shares of Common Stock and Class D Common Stock held by CVC and CVC Affiliates. (7) Increase represents 1,000 shares to be purchased pursuant to the Direct Sale. (8) Includes 4,143 shares of Common Stock and 17,224 shares of Class D Common Stock. Mr. Delaney disclaims beneficial ownership relating to shares of Common Stock and Class D Common Stock held by CVC and CVC Affiliates. (9) Includes 920,782 shares of Common Stock and 3,827,971 shares of Class D Common Stock. Includes 650,000 shares of Common Stock which may be acquired upon exercise by WEP, an affiliate of CVC, of the Warrant. Excludes an aggregate of 257,400 shares of Common Stock held by CVC Affiliates, including Messrs. Silvestri and Delaney, as to which CVC disclaims beneficial ownership. (10) Does not include approximately 80,000 shares of Common Stock to be purchased by certain employees of CVC pursuant to the Direct Sale, as to which CVC disclaims beneficial ownership. 44 DESCRIPTION OF CAPITAL STOCK GENERAL The Company's authorized capital stock consists of 15,000,000 shares of Common Stock, par value $.001 per share, 6,000,000 shares of Class D Common Stock, par value $.001 per share, and 250,000 shares of Preferred Stock, par value $100.00 per share. Upon completion of this offering, the Company will have outstanding 5,078,907 shares of Common Stock (5,435,157 if the Underwriters' over-allotment option is exercised in full), 4,255,293 shares of Class D Common Stock and no shares of Preferred Stock. COMMON STOCK The holders of Common Stock are generally entitled to one vote for each share held on all matters voted upon by stockholders. Subject to the rights of any then outstanding shares of Preferred Stock, the holders of the Common Stock are entitled to such dividends as may be declared at the discretion of the Board of Directors out of funds legally available therefor. Holders of Common Stock are entitled to share ratably in the net assets of the Company upon liquidation after payment or provision for all liabilities and any preferential liquidation rights of any Preferred Stock then outstanding. The holders of Common Stock have no preemptive rights to purchase securities of the Company. Shares of Common Stock are not subject to any redemption provisions and are not convertible into any other securities of the Company. All outstanding shares of Common Stock are, and the shares of Common Stock to be issued pursuant to this offering will be upon payment therefor, fully paid and non-assessable. The directors of the Company are elected by the holders of Common Stock pursuant to cumulative voting, which gives a stockholder the right to cast as many votes in the aggregate as he is entitled to vote under the Certificate of Incorporation, multiplied by the number of directors to be elected. A stockholder may cast all his votes for one director candidate or distribute such votes among two or more director candidates, as he sees fit. Therefore, cumulative voting may make it more difficult to change the composition of the Board of Directors and thereby may discourage or make more difficult an attempt by a person or group to obtain control of the Company. Any director, or the entire Board of Directors, may be removed by the stockholders at any time, with or without cause, by the affirmative vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote for the election of directors, except that, if less than the entire board is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him then cumulatively voted at an election of the entire board of directors. Application has been made to list the Common Stock for trading on the NYSE. CLASS D COMMON STOCK The rights of holders of Class D Common Stock are identical and entitle the holders thereof to the same rights, privileges, benefits and notices as the holders of Common Stock, except that the holders of such shares are not entitled to vote in the election of directors of the Company. On all other matters voted upon by the stockholders, the holders of Common Stock and the Class D Common Stock vote together as a class, except as provided by law. Under Section 242(b)(2) of the Delaware General Corporation Law, the holders of the Class D Common Stock shall be entitled to vote as a class upon any proposed amendment to the Company's Certificate of Incorporation if such amendment would increase or decrease the number of shares or the par value of the shares of such class, or alter or change the powers, preferences or special rights of the shares of such class so as to affect them adversely. The Class D Common Stock is subject to substantial restrictions on transfer. A share of Class D Common Stock will automatically be converted into a share of Common Stock at any time at the sole option of the holder. Once a share of Class D Common Stock has been converted into Common Stock, it will no longer be subject to any restrictions on transfer. PREFERRED STOCK Preferred Stock may be issued from time to time by the Board of Directors in one or more series in connection with one or more acquisitions of the stock or assets of another corporation or in connection with a merger of the Company with or into another corporation. Subject to the provisions of the 45 Company's Certificate of Incorporation, as amended, and limitations prescribed by law, the Board of Directors is expressly authorized to adopt resolutions to issue the shares, to fix the number of shares and to change the number of shares constituting any series of Preferred Stock and to provide for or change the voting powers, designations, preferences and relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof, including dividend rights (including whether dividends are cumulative), dividend rates, terms of redemption (including sinking fund provisions), redemption prices, conversion rights and liquidation preferences of the shares constituting any series of Preferred Stock, in each case without any further action or vote by the stockholders. The Company has no current plans to issue any series of Preferred Stock. One of the effects of undesignated Preferred Stock may be to enable the Board of Directors to render more difficult or to discourage an attempt to obtain control of the Company by means of a tender offer, proxy contest, merger or otherwise, and thereby to protect the continuity of the Company's management. The issuance of shares of Preferred Stock pursuant to the Board of Directors' authority described above may adversely affect the rights of the holders of Common Stock. For example, Preferred Stock issued by the Company may rank prior to the Common Stock as to dividend rights, liquidation preference or both, may have full or limited voting rights and may be convertible into shares of Common Stock. Accordingly, the issuance of shares of Preferred Stock may discourage bids for the Common Stock or may otherwise adversely affect the market price of the Common Stock. LIMITATION ON DIRECTORS' LIABILITIES Pursuant to the Company's Certificate of Incorporation, as amended, and as permitted by Delaware law, directors of the Company are not liable to the Company or its stockholders for monetary damages for breach of fiduciary duty, except for liability in connection with a breach of duty of loyalty, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, for dividend payments or stock repurchases illegal under Delaware law or any transaction in which a director has derived an improper personal benefit. WARRANT On July 22, 1993, the Company issued the Warrant to purchase an aggregate of 650,000 shares of Common Stock to WEP for an aggregate exercise price of $100.00. The Warrant is currently exercisable for cash. The exercise price and number of shares of Common Stock issuable upon exercise of the Warrant are subject to adjustment under certain circumstances, including stock splits or the issuance of stock dividends on the Common Stock, or issuance of shares of Common Stock or securities convertible into Common Stock for a purchase price per share less than the per share exercise price of the Warrant. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar for the Common Stock is Chase Mellon Shareholder Services. DIRECT SALE Pursuant to the terms of subscription agreements with the Company, certain of the Company's directors and executive officers and certain employees of CVC have agreed to purchase from the Company, and the Company has agreed to sell to such individuals, an aggregate maximum of 125,000 shares of Common Stock at the Price to Public less Underwriting Discounts and Commissions. The purchasers in the Direct Sale will represent to the Company that they are acquiring such shares for their own account and not with a view to distribution. The Company's obligations to sell such shares, and such individuals' obligations to purchase such shares, are subject to the purchase by the Underwriters of the Common Stock to be purchased by them as set forth under "Underwriting." CVC is the Company's largest stockholder. See "Principal Stockholders." 46 SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this offering, the Company will have outstanding 5,078,907 shares of Common Stock (5,435,157 shares if the Underwriters' over-allotment option is exercised in full). All of the shares sold in this offering will be freely tradeable without restriction unless acquired by affiliates of the Company. None of the remaining 2,578,907 outstanding shares of Common Stock have been registered under the Securities Act, which means that they are "Restricted Securities" within the meaning of Rule 144 under the Securities Act and may be resold publicly only upon registration under the Securities Act or in compliance with an exemption from the registration requirements of the Securities Act, including the exemption provided by Rule 144. All of the Restricted Securities will become eligible for sale pursuant to Rule 144 beginning 90 days after the date of this Prospectus if the conditions of Rule 144 are met. In general, under Rule 144 as currently in effect, if two years have elapsed since the later of the date of the acquisition of the Restricted Securities from either the Company or an affiliate of the Company, the acquiror or subsequent holder (or persons whose shares are aggregated) thereof may sell, within any three month period commencing 90 days after the date of this Prospectus, a number of shares that does not exceed the greater of (i) 1% of the then outstanding shares of Common Stock (50,789 shares upon completion of this offering), or (ii) the average weekly trading volume of the Common Stock on the NYSE during the four calendar weeks preceding the date on which notice of the proposed sale is filed with the Securities and Exchange Commission (the "Commission"). Sales under Rule 144 are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about the Company. If three years have elapsed since the later of the date of the acquisition the Restricted Securities from the Company or any affiliate of the Company, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of the Company at any time for 90 days preceding a sale would be entitled to sell such shares under Rule 144(k) without regard to the volume limitations, manner of sale provisions or notice requirements. The Company and its executive officers, directors and certain stockholders who beneficially own 1,608,215 shares in the aggregate have agreed not to offer, sell, contract to sell, or otherwise dispose of, any shares of Common Stock or any securities convertible into, or exercisable or exchangeable for, shares of Common Stock, for a period of 180 days after the date of this Prospectus without the prior written consent of Alex. Brown & Sons Incorporated. In addition, the purchase options granted to certain members of management of certain of the Company's subsidiaries to acquire 43,958 shares of Common Stock and the Warrant to acquire 650,000 shares of Common Stock will be subject to the 180-day lock-up. After the expiration of the 180-day lock-up, all shares issued pursuant to exercise of the purchase options will be eligible for sale under, and subject to, the limitations of Rule 144. Shares issued upon exercise of the Warrant will be Restricted Securities within the meaning of Rule 144. See "Principal Stockholders." Additionally, the CVC Affiliates, all of whom are subject to the 180-day lock-up agreements, have the right to demand two registrations of their shares of Common Stock under the Securities Act on Form S-1 at the Company's expense and an unlimited number of registrations at the expense of the CVC Affiliates. The holder of the Warrant has the right to demand one registration at the Company's expense. Both the CVC Affiliates and the holder of the Warrant have the right to demand an unlimited number of registrations on Form S-3 at the Company's expense. In addition, the CVC Affiliates, the holder of the Warrant and certain members of management of the Company have the right, subject to certain limitations, to have their shares of Common Stock included in future registered public offerings of securities by the Company at its expense. Prior to this offering, there has been no public market for the Common Stock, and no prediction can be made as to the effect, if any, that the sale of shares or the availability of shares for sale will have on the market price for the Common Stock prevailing from time to time. Nevertheless, sales, or the availability for sale of, substantial amounts of the Common Stock in the public market could adversely affect prevailing market prices and the ability of the Company to raise equity capital in the future. No earlier than 120 days after the date of this Prospectus, the Company intends to file a registration statement under the Securities Act to register shares of Common Stock under the 1996 Plan, thus permitting the resale of such shares by non-affiliates in the public market without restriction under the Securities Act. Such registration statement would become effective on filing. 47 UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement, the Underwriters named below, through their Representatives, Alex. Brown & Sons Incorporated and Dillon, Read & Co. Inc., have severally agreed to purchase from the Company the following respective numbers of shares of Common Stock at an assumed initial public offering price less the underwriting discounts and commissions set forth on the cover page of this Prospectus.
NUMBER OF UNDERWRITER SHARES - ----------------------------------------------------------------------------------------------------- ----------- Alex. Brown & Sons Incorporated...................................................................... Dillon, Read & Co. Inc............................................................................... ----------- Total................................................................................................ 2,375,000 ----------- -----------
The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters will purchase the total number of shares of Common Stock offered hereby if any of such shares are purchased. The Company has been advised by the Representatives that the Underwriters propose to offer the shares of Common Stock directly to the public at the initial public offering price set forth on the cover page of this Prospectus and to certain dealers at such price less a concession not in excess of $ per share. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to certain other dealers. After the initial public offering, the offering price and other selling terms may be changed by the Representatives. The Company has granted to the Underwriters an option, exercisable not later than 30 days after the date of this Prospectus, to purchase up to 356,250 additional shares of Common Stock at the initial public offering price less the underwriting discounts and commissions set forth on the cover page of this Prospectus. To the extent that the Underwriters exercise such option, each of the Underwriters will have a firm commitment to purchase approximately the same percentage thereof that the number of shares of Common Stock to be purchased by it shown in the above table bears to 2,375,000, and the Company will be obligated, pursuant to the option, to sell such shares to the Underwriters. The Underwriters may exercise such option only to cover over-allotments made in connection with the sale of Common Stock offered hereby. If purchased, the Underwriters will offer such additional shares on the same terms as those on which the 2,375,000 shares are being offered. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act. The Company and its executive officers, directors and certain stockholders, holding an aggregate of 1,608,215 shares of Common Stock have agreed not to offer, sell or otherwise dispose of any Common Stock for a period of 180 days after the date of this Prospectus without the prior written consent of Alex. Brown & Sons Incorporated. 48 The Representatives have advised the Company that the Underwriters do not intend to confirm sales to any account over which they exercise discretionary authority. Prior to this offering, there has been no public market for the Common Stock. Consequently, the initial public offering price for the Common Stock was determined by negotiation between the Company and the Representatives. Among the factors to be considered in such negotiations are prevailing market conditions, the price-earning ratios and stages of development of other companies which the Company and the Representatives believed to be comparable to the Company, the results of operations of the Company in recent periods, estimates of the business potential of the Company, the present state of the Company's development and other factors deemed relevant. Application has been made to list the Common Stock for trading on the NYSE. LEGAL MATTERS The validity of the issuance of the shares of Common Stock offered by this Prospectus will be passed upon for the Company by Ballard Spahr Andrews & Ingersoll, Philadelphia, Pennsylvania. Certain legal matters related to this offering will be passed upon for the Underwriters by Wilmer, Cutler & Pickering, Baltimore, Maryland. EXPERTS The consolidated financial statements of the Company at March 31, 1996 and 1995 and for each of the years in the periods ended March 31, 1996 and 1995 and for the ten months ended March 31, 1994, and the financial statements of Advanced Materials Technologies, Inc. at March 31, 1996 and for the year then ended, appearing in the Registration Statement of which this Prospectus forms a part, have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon appearing elsewhere herein and in the Registration Statement. Such financial statements are included herein in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. The financial statements of North Wales Controls and Quadrants Group, a division of Teleflex Incorporated, for each of the three years in the period ended December 31, 1995 included in this Prospectus have been so included in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. ADDITIONAL INFORMATION The Company has filed with the Securities and Exchange Commission, Washington, D.C., a Registration Statement on Form S-1 with respect to the shares of Common Stock offered hereby. This Prospectus does not contain all the information set forth in the Registration Statement and the exhibits and schedules thereto. For further information pertaining to the Company and the shares of Common Stock offered hereby, reference is made to such Registration Statement, including the exhibits, financial statements and schedules filed therewith. Statements contained in this Prospectus as to the contents of any contract or any other document are not necessarily complete and, in each instance, reference is made to the copy of such contract or document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. The Registration Statement, including the exhibits and schedules thereto, may be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and its regional offices located at 7 World Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can be obtained from the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Company intends to furnish its stockholders with annual reports containing financial statements audited by independent certified public accountants and with quarterly reports containing unaudited summary financial information for each of the first three quarters of each fiscal year. 49 INDEX TO FINANCIAL STATEMENTS THE TRIUMPH GROUP HOLDINGS, INC.(1): PRO FORMA FINANCIAL STATEMENTS (UNAUDITED) Introduction to Unaudited Condensed Consolidated Pro Forma Financial Statements....... F-2 Unaudited Condensed Consolidated Pro Forma Statement of Income for the year ended March 31, 1996....................................................................... F-3 Unaudited Condensed Consolidated Pro Forma Statement of Income for the three months ended June 30, 1996.................................................................. F-4 Unaudited Condensed Consolidated Pro Forma Statement of Income for the three months ended June 30, 1995.................................................................. F-5 Unaudited Condensed Consolidated Pro Forma Balance Sheet as of June 30, 1996.......... F-6 Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.............. F-7 THE TRIUMPH GROUP HOLDINGS, INC.(1): HISTORICAL FINANCIAL STATEMENTS Report of Ernst & Young LLP, Independent Auditors..................................... F-12 Consolidated Balance Sheets as of March 31, 1995 and 1996 and June 30, 1996 (Unaudited).......................................................................... F-13 Consolidated Statements of Income for the ten months ended March 31, 1994, the fiscal years ended March 31, 1995 and 1996, and for the three months ended June 30, 1995 and 1996 (Unaudited)..................................................................... F-14 Consolidated Statements of Common Stockholders' Equity for the ten months ended March 31, 1994, the fiscal years ended March 31, 1995 and 1996, and for the three months ended June 30, 1995 and 1996 (Unaudited)............................................. F-15 Consolidated Statements of Cash Flows for the ten months ended March 31, 1994, the fiscal years ended March 31, 1995 and 1996 and for the three months ended June 30, 1995 and 1996 (Unaudited)............................................................ F-16 Notes to Consolidated Financial Statements............................................ F-17 NORTH WALES CONTROLS AND QUADRANTS GROUP(2): HISTORICAL FINANCIAL STATEMENTS Report of Price Waterhouse LLP, Independent Accountants............................... F-29 Statement of Income for the years ended December 26, 1993, December 25, 1994 and December 31, 1995.................................................................... F-30 Statement of Cash Flows for the years ended December 26, 1993, December 25, 1994 and December 31, 1995.................................................................... F-31 Notes to Financial Statements......................................................... F-32 ADVANCED MATERIALS TECHNOLOGIES, INC.: HISTORICAL FINANCIAL STATEMENTS Report of Ernst & Young LLP, Independent Auditors..................................... F-37 Consolidated Balance Sheets as of March 31, 1996 and June 30, 1996 (Unaudited)........ F-38 Consolidated Statements of Income for the year ended March 31, 1996 and for the three months ended June 30, 1996 (Unaudited)............................................... F-39 Consolidated Statements of Shareholders' Equity for the year ended March 31, 1996 and for the three months ended June 30, 1996 (Unaudited)................................. F-40 Consolidated Statements of Cash Flows for the year ended March 31, 1996 and for the three months ended June 30, 1996 (Unaudited)......................................... F-41 Notes to Consolidated Financial Statements............................................ F-42
- -------------- (1) On August 21, 1996, The Triumph Group Holdings, Inc. amended its certificate of incorporation to change its corporate name to Triumph Group, Inc. (2) Triumph Controls, Inc., a subsidiary of Triumph Group Holdings, Inc., was formed to acquire substantially all of the assets and certain liabilities of North Wales Controls and Quadrants Group, a division of Teleflex Incorporated, on January 1, 1996. F-1 THE TRIUMPH GROUP HOLDINGS, INC. UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The unaudited pro forma statements of income for the fiscal year ended March 31, 1996 and for the three months ended June 30, 1996 and 1995 set forth herein give effect to the acquisitions of Air Lab, Inc., Triumph Controls, Inc. and Advanced Materials Technologies, Inc. ("AMTI") (the "Acquisitions"), the refinancing of a portion of the Company's long-term debt (the "Refinancing"), the conversion of the 14% Junior Subordinated Promissory Notes, the Preferred Stock and the minority interest in Triumph Controls, Inc. to Common Stock ("the Conversions") and the use of the assumed net proceeds of $36,200 from the offering and the Direct Sale as if such transactions had occurred as of the beginning of each of the periods presented. The Unaudited Condensed Consolidated Pro Forma Financial Statements assume the term "offering" includes both the offering of Common Stock pursuant to this Prospectus and the Direct Sale. See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements for further explanation of these transactions. The unaudited condensed consolidated pro forma balance sheet as of June 30, 1996 set forth gives effect to the acquisition of AMTI, the Refinancing, the Conversions and the offering as if such transactions had occurred on June 30, 1996. The unaudited condensed consolidated pro forma financial statements are not necessarily indicative of what the Company's results of operations and balance sheet would have been had the Acquisitions, the Refinancing, the Conversions and the offering been consummated at the indicated dates, nor are they necessarily indicative of the Company's results of operations and balance sheet for any future period. The Unaudited Condensed Consolidated Pro Forma Financial Statements should be read in conjunction with the Consolidated Financial Statements and Related Notes thereto and "Use of Proceeds" included elsewhere in this Prospectus. F-2 THE TRIUMPH GROUP HOLDINGS, INC. UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) FISCAL YEAR ENDED MARCH 31, 1996
PRO FORMA ADJUSTMENTS ------------------------------------------------ OTHER EQUITY PRO FORMA HISTORICAL ACQUISITIONS(1) REFINANCING TRANSACTIONS PRO FORMA OFFERING AS ADJUSTED ----------- ---------------- -------------- -------------- ----------- ------------ ----------- Revenues............... $ 186,774 $ 43,394 $ -- $ -- $ 230,168 $ -- $ 230,168 Cost of products sold.................. 139,740 24,293 -- -- 164,033 -- 164,033 Selling, general and administrative expenses.............. 27,288 7,145(2) -- (65)(7) 34,368 -- 34,368 Depreciation and amortization.......... 3,535 2,751(3) -- 36(8) 6,322 -- 6,322 ----------- -------- ------- ------- ----------- ------------ ----------- Operating income....... 16,211 9,205 -- 29 25,445 -- 25,445 Interest expense....... 7,318 4,000(4) (2,048)(6) (1,146)(9) 8,124 (2,804)(10) 5,320 ----------- -------- ------- ------- ----------- ------------ ----------- Income from continuing operations before income tax............ 8,893 5,205 2,048 1,175 17,321 2,804 20,125 Income tax expense..... 3,699 2,082(5) 819(5) 444(5) 7,044 1,122(5) 8,166 ----------- -------- ------- ------- ----------- ------------ ----------- Income from continuing operations............ $ 5,194 $ 3,123 $ 1,229 $ 731 $ 10,277 $ 1,682 $ 11,959 ----------- -------- ------- ------- ----------- ------------ ----------- ----------- -------- ------- ------- ----------- ------------ ----------- Income from continuing operations per share(11)............. $ 0.78 ----------- ----------- Weighted average common shares outstanding (in thousands)(11)........ 7,516 ----------- ----------- Pro forma income from continuing operations per share, as adjusted(12).......... $ 1.37 $ 1.19 ----------- ----------- ----------- ----------- Pro forma weighted average common shares outstanding, as adjusted (in thousands)(12)........ 7,516 10,016 ----------- ----------- ----------- -----------
See accompanying notes to unaudited condensed consolidated pro forma financial statements. F-3 THE TRIUMPH GROUP HOLDINGS, INC. UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) THREE MONTHS ENDED JUNE 30, 1996
PRO FORMA ADJUSTMENTS --------------------------------------------------- OTHER EQUITY PRO FORMA HISTORICAL ACQUISITIONS(1) REFINANCING TRANSACTIONS PRO FORMA OFFERING AS ADJUSTED ----------- ----------------- --------------- --------------- ----------- ------------ ----------- Revenues................. $ 55,184 $ 6,215 $ -- $ -- $ 61,399 $ -- $ 61,399 Cost of products sold.... 39,146 3,604 -- -- 42,750 -- 42,750 Selling, general and administrative expenses................ 9,433 790 -- (28)(7) 10,195 -- 10,195 Depreciation and amortization............ 1,258 394(13) -- 9(8) 1,661 -- 1,661 ----------- ------- ------ ------ ----------- ------ ----------- Operating income......... 5,347 1,427 -- 19 6,793 -- 6,793 Interest expense......... 2,286 348(14) (513)(15) (313)(9) 1,808 (701)(10) 1,107 ----------- ------- ------ ------ ----------- ------ ----------- Income from continuing operations before income tax..................... 3,061 1,079 513 332 4,985 701 5,686 Income tax expense....... 1,252 432(5) 205(5) 122(5) 2,011 280(5) 2,291 ----------- ------- ------ ------ ----------- ------ ----------- Income from continuing operations.............. 1,809 647 308 210 2,974 421 3,395 ----------- ------- ------ ------ ----------- ------ ----------- ----------- ------- ------ ------ ----------- ------ ----------- Income from continuing operations per share(11)............... $ 0.26 ----------- ----------- Weighted average common shares outstanding (in thousands)(11).......... 7,499 ----------- ----------- Pro forma income from continuing operations per share, as adjusted(12)............ $ 0.40 $ 0.34 ----------- ----------- ----------- ----------- Pro forma weighted average common shares outstanding, as adjusted (in thousands)(12)...... 7,499 9,999 ----------- ----------- ----------- -----------
See accompanying notes to unaudited condensed consolidated pro forma financial statements. F-4 THE TRIUMPH GROUP HOLDINGS, INC. UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) THREE MONTHS ENDED JUNE 30, 1995
PRO FORMA ADJUSTMENTS ------------------------------------------------- OTHER EQUITY PRO FORMA HISTORICAL ACQUISITIONS(1) REFINANCING TRANSACTIONS PRO FORMA OFFERING AS ADJUSTED ----------- --------------- --------------- --------------- ----------- ------------ ----------- Revenues................. $ 42,374 $ 12,225 $ -- $ -- $ 54,599 $ -- $ 54,599 Cost of products sold.... 32,078 6,709 -- -- 38,787 -- 38,787 Selling, general and administrative expenses................ 6,274 2,469 -- (23)(7) 8,720 -- 8,720 Depreciation and amortization............ 721 806(16) -- 9(8) 1,536 -- 1,536 ----------- --------------- ------ ------ ----------- ------ ----------- Operating income......... 3,301 2,241 -- 14 5,556 -- 5,556 Interest expense......... 1,600 1,189(17) (868)(18) (271)(9) 1,650 (701)(10) 949 ----------- --------------- ------ ------ ----------- ------ ----------- Income from continuing operations before income tax..................... 1,701 1,052 868 285 3,906 701 4,607 Income tax expense....... 687 421(5) 347(5) 105(5) 1,560 280(5) 1,840 ----------- --------------- ------ ------ ----------- ------ ----------- Income from continuing operations.............. 1,014 631 521 180 2,346 421 2,767 ----------- --------------- ------ ------ ----------- ------ ----------- ----------- --------------- ------ ------ ----------- ------ ----------- Income from continuing operations per share(11)............... $ 0.16 ----------- ----------- Weighted average common shares outstanding (in thousands)(11).......... 7,424 ----------- ----------- Pro forma income from continuing operations per share, as adjusted(12)............ $ 0.32 $ 0.28 ----------- ----------- ----------- ----------- Pro forma weighted average common shares outstanding, as adjusted (in thousands)(12)...... 7,424 9,924 ----------- ----------- ----------- -----------
See accompanying notes to unaudited condensed consolidated pro forma financial statements. F-5 THE TRIUMPH GROUP HOLDINGS, INC. UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) JUNE 30, 1996 ASSETS
PRO FORMA ADJUSTMENTS --------------------------------------------------------- OTHER EQUITY HISTORICAL ACQUISITIONS(19) REFINANCING(20) TRANSACTIONS(21) PRO FORMA OFFERING(22) ----------- ------------------ ----------------- ------------------ ------------ --------------- Current assets: Cash...................... $ 430 $ -- $ -- $ -- $ 430 $ -- Accounts Receivable....... 32,086 4,547 -- -- 36,633 -- Inventories............... 48,295 1,451 -- -- 49,746 -- Prepaid expenses and other.................... 2,490 15 -- -- 2,505 -- Deferred income taxes..... 3,345 -- -- (1,000) 2,345 -- ----------- -------- ----------------- -------- ------------ --------------- Total current assets........ 86,646 6,013 -- (1,000) 91,659 -- Property and equipment, net........................ 36,441 8,000 -- -- 44,441 -- Excess of cost over net assets acquired............ 10,234 2,706 -- 890 13,830 -- Intangible assets........... 6,516 4,554 -- -- 11,070 -- Other assets................ 2,460 23 (429) -- 2,054 -- ----------- -------- ----------------- -------- ------------ --------------- Total assets................ $ 142,297 $ 21,296 $ (429) $ (110) $ 163,054 $ -- ----------- -------- ----------------- -------- ------------ --------------- ----------- -------- ----------------- -------- ------------ --------------- LIABILITIES AND STOCKHOLDERS' EQUITY PRO FORMA ADJUSTMENTS --------------------------------------------------------- OTHER EQUITY HISTORICAL ACQUISITIONS REFINANCING TRANSACTIONS PRO FORMA OFFERING ----------- ------------------ ----------------- ------------------ ------------ --------------- Current liabilities: Accounts payable.......... $ 14,213 $ 478 $ -- $ -- $ 14,691 $ -- Accrued expenses.......... 14,161 272 (975) -- 13,458 -- Income taxes payable...... 3,458 1,226 (996) (1,000) 2,688 -- Deferred income taxes..... -- 813 -- -- 813 -- Current portion of long-term debt........... 5,206 316 (47) -- 5,475 -- ----------- -------- ----------------- -------- ------------ --------------- Total current liabilities... 37,038 3,105 (2,018) (1,000) 37,125 -- Long-term debt, less current portion.................... 76,261 12,451 3,082 (9,055) 82,739 (36,200) Other liabilities........... 2,426 3,888 -- (160) 6,154 -- Deferred income taxes....... 7,051 1,688 -- -- 8,739 -- Redeemable preferred stock...................... 2,854 -- -- (2,854) -- -- Common stock................ 6 -- -- 1 7 2 Capital in excess of par value...................... 1,086 164 -- 14,748 15,913 36,198 Treasury stock, at cost..... (85) -- -- -- -- -- Retained earnings........... 15,660 -- (1,493) (1,790) 12,377 -- ----------- -------- ----------------- -------- ------------ --------------- Total stockholders' equity..................... $ 16,667 164 (1,493) 12,959 28,297 36,200 ----------- -------- ----------------- -------- ------------ --------------- Total liabilities and stockholders' equity....... $ 142,297 $ 21,296 $ (429) $ (110) $ 163,054 $ -- ----------- -------- ----------------- -------- ------------ --------------- ----------- -------- ----------------- -------- ------------ --------------- PRO FORMA AS ADJUSTED ------------ Current assets: Cash...................... $ 430 Accounts Receivable....... 36,633 Inventories............... 49,746 Prepaid expenses and other.................... 2,505 Deferred income taxes..... 2,345 ------------ Total current assets........ 91,659 Property and equipment, net........................ 44,441 Excess of cost over net assets acquired............ 13,830 Intangible assets........... 11,070 Other assets................ 2,054 ------------ Total assets................ $ 163,054 ------------ ------------ PRO FORMA AS ADJUSTED ------------ Current liabilities: Accounts payable.......... $ 14,691 Accrued expenses.......... 13,458 Income taxes payable...... 2,688 Deferred income taxes..... 813 Current portion of long-term debt........... 5,475 ------------ Total current liabilities... 37,125 Long-term debt, less current portion.................... 46,539 Other liabilities........... 6,154 Deferred income taxes....... 8,739 Redeemable preferred stock...................... -- Common stock................ 9 Capital in excess of par value...................... 52,111 Treasury stock, at cost..... -- Retained earnings........... 12,377 ------------ Total stockholders' equity..................... 64,497 ------------ Total liabilities and stockholders' equity....... $ 163,054 ------------ ------------
See accompanying unaudited condensed notes to consolidated pro forma financial statements. F-6 THE TRIUMPH GROUP HOLDINGS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ACQUISITIONS The Company made the following acquisitions during the last year:
DATE OF AGGREGATE BUSINESS PURCHASE PURCHASE PRICE - ----------------------------------------------------------------- ---------- --------------- Air Lab, Inc..................................................... 10/2/95 $ 3,400 Triumph Controls, Inc............................................ 1/1/96 $ 40,100 AMTI............................................................. 7/31/96 $ 21,300
The acquisitions of Air Lab, Inc. and Triumph Controls, Inc. were made through the acquisition of assets and assumption of certain liabilities, while the acquisition of AMTI was made through the purchase of all the outstanding common stock. Each acquisition was accounted for using the purchase method. On January 31, 1996, AMTI acquired the assets and assumed certain liabilities of Special Processes of Arizona, Inc. (SPOA), for approximately $1.5 million in cash. The pro forma results of operations adjustments are those necessary to reflect the Company's income from continuing operations as if each acquisition took place at the beginning of the period presented. The results of operations of SPOA are included in the pro forma adjustments for periods subsequent to the date of acquisition by AMTI only. The pro forma balance sheet includes adjustments to reflect the purchase of AMTI, as it was the only acquisition to occur subsequent to June 30, 1996. The following are the components of the aggregate purchase price of AMTI: Cash consideration................................................ $ 7,950 Liabilities assumed and costs related to the transaction.......... 9,250 Amounts due under the covenant not-to-compete contract............ 2,800 Deferred taxes.................................................... 1,300 --------- Total purchase price.............................................. $ 21,300 --------- ---------
REFINANCING On July 19, 1996, the Company entered into an unsecured five year credit agreement for a $50,000 revolving credit facility and a $35,000 term loan. Proceeds from the new credit agreement were used to retire its revolving credit facility and senior term loans (existing credit facility) and senior subordinated notes. The refinancing resulted in an interest savings of 175 basis points over the existing credit facility and 385 basis points (based on weighted average interest rates for the year ended March 31, 1996) over the existing senior subordinated notes. Additionally, the Company reduced its annual commitment fee by $115. Due to the retirement of debt, the Company recorded an extraordinary loss of $1,478, net of a tax benefit of $985, in July 1996 (at June 30, 1996 the extraordinary loss would have been $1,493, net of a tax benefit of $995 had the refinancing been consummated at such date) related to prepayment penalties incurred and the write-off of deferred financing fees related to the existing debt. This loss is reflected as an adjustment to retained earnings in the pro forma balance sheet as of June 30, 1996. OTHER EQUITY TRANSACTIONS In conjunction with this offering, the Company has elected to exchange the common stock of Triumph Controls, Inc. held by minority shareholders (10% of the total outstanding) for 72,540 shares of Common Stock of the Company valued as of June 30, 1996. As a result of the conversion, $890 will be recorded as excess of cost over net assets acquired to reflect the excess of fair market value (based on an assumed net initial public offering price of $16.00 per share less underwriting discounts and commissions and estimated offering expenses payable by the Company) over book value as an increase in the purchase price of Triumph Controls, Inc. As a result of the transaction, Triumph Controls, Inc. will F-7 THE TRIUMPH GROUP HOLDINGS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) become a wholly owned subsidiary of the Company. This conversion is reflected in the June 30, 1996 pro forma balance sheet. Pro forma net income related to the minority shareholder's interest is added back to the results of operations for each period. In conjunction with this offering, the Company intends to exchange its 14% junior subordinated promissory notes plus accrued interest and preferred stock at liquidation value plus accumulated dividends for shares of Common Stock at an assumed initial public offering price of $16 per share (less underwriting discounts and commissions and estimated offering expenses payable by the Company). As a result of the exchange, 945,595 shares (as of June 30, 1996) of the Company's stock will be issued to the holders of the notes and preferred stock. The exchange is reflected in the pro forma balance sheet as of June 30, 1996. Interest expense related to the notes is added back to the results of operations for each period in the pro forma income statements. STATEMENTS OF INCOME (1) The pro forma results of operations adjustments are those necessary to reflect the Company's income from continuing operations as if each acquisition took place at the beginning of the period presented. The results of operations of SPOA are included in the pro forma adjustments for periods subsequent to the date of acquisition by AMTI only. (2) Selling, general and administrative expenses were increased to reflect total expenses as if the acquisitions occurred on April 1, 1995. Certain amounts, aggregating $3.5 million, were excluded from selling, general and administrative expenses for the year ended March 31, 1996 as they related to expenses incurred prior to the acquisitions which are neither recurring nor indicative of future operations. (3) Reflects increase in depreciation and amortization expense in excess of historical amounts as a result of the following factors: (i) fair market value of property, plant, and equipment acquired of $15,300, resulting in additional depreciation for the year ended March 31, 1996 of $873; and (ii) excess of cost over net assets acquired of $12,213 and other intangible assets acquired of $10,061, resulting in additional amortization for the year ended March 31, 1996 of $384 and $827, respectively. Intangible assets consist primarily of patents, trademarks, aerospace designs and covenants not-to-compete. Such assets are amortized on a straight line basis over their estimated useful lives which range from six to twenty-five years. The excess of cost over fair value of net assets acquired is amortized on a straight-line basis over twenty-five years. (4) Adjustments to interest expense for the year ended March 31, 1996 consist of: (i) $3,196 for interest incurred under the Company's existing credit facility used to finance the purchases and fund operations of the acquired companies and amounts incurred pertaining to actual borrowings under the senior term loans used to purchase the companies at historical rates; (ii) $493 for interest incurred related to the subordinated promissory note and junior subordinated promissory notes arising as a result of the acquisitions; (iii) $71 for amortization of deferred financing costs, classified as interest, pertaining to the Company's increase in senior term loans outstanding as a result of the acquisitions; and (iv) $240 incurred related to the interest cost associated with long-term covenants not-to-compete with the previous owners of certain acquired companies. (5) Represents the tax provision arising from the pro forma adjustments discussed herein (excluding the portion of the Company's income attributable to the minority interest's investment in Triumph Controls, Inc.) based on the Company's estimated tax rate of 40.0%. (6) Adjusted for interest savings consisting of: (i) a $579 and $1,162 net reduction of interest expense on the senior subordinated notes and existing credit facility, respectively, as a result of changes in F-8 THE TRIUMPH GROUP HOLDINGS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) interest rates under the refinancing. The new credit facility is assumed to bear interest at a weighted average rate of 7.1% for the year ended March 31, 1996, which is representative of historical interest rates plus the basis points specified in the new credit agreement; and (ii) a $307 reduction in amortization of deferred financing fees and commitment fees. (7) Represents the portion of the Company's income attributable to the minority interest's investment in Triumph Controls, Inc. (8) Represents amortization of excess of cost over net assets acquired (See "Other Equity Transactions"). Amount is amortized using the straight-line method over a period of twenty-five years. (9) Adjustment reflects interest savings on the 14% junior subordinated promissory notes converted to Common Stock. (10) Adjustment to eliminate interest expense as a result of retirement of the 10.5% subordinated note ($5,793 as of June 30, 1996) and the reduction in principal of the revolving credit facility of $30,407 through the use of the proceeds from the Offering. (11) Earnings per share information represents the Company's per share data and weighted average Common Stock outstanding restated to give effect to the 65-for-one stock split to be effected immediately prior to this offering, the dilutive effects of the Warrant and stock issued during the period commencing 12 months prior to the initial filing of the proposed initial public offering at prices below the anticipated public offering price and an adjustment for the interest on the 14% junior subordinated promissory notes, net of tax expense. Income from continuing operations represents the amounts reflected in the Company's Consolidated Financial Statements. Primary and fully diluted earnings per share are the same. See Note 2 to the Company's Consolidated Financial Statements. (12) The calculation of pro forma, as adjusted weighted average number of shares outstanding is as follows:
THREE MONTHS ------------------------ YEAR ENDED ENDED ENDED MARCH 31, JUNE 30, JUNE 30, 1996 1995 1996 ----------- ----------- ----------- Weighted average shares outstanding........................ 5,851 5,851 5,805 Warrants outstanding....................................... 650 650 650 Stock options issued within one year of the initial offering.................................................. 35 35 35 Assumed conversion of TCI minority interest................ 63 63 63 Assumed exchange of preferred shares....................... 309 278 321 Assumed exchange of 14% junior subordinated promissory notes..................................................... 608 547 625 Shares issued in connection with the initial public offering to be used to reduce debt........................ 2,500 2,500 2,500 ----------- ----------- ----------- Pro Forma weighted average shares outstanding, as adjusted.................................................. 10,016 9,924 9,999 ----------- ----------- ----------- ----------- ----------- -----------
(13) Reflects increase in depreciation expense of $84 in excess of historical amounts and an increase in amortization expense relating to excess of cost over net assets acquired and intangibles of $18 and $155, respectively, for the quarter ended June 30, 1996. F-9 THE TRIUMPH GROUP HOLDINGS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (14) Adjustments to interest expense for the quarter ended June 30, 1996 consist of: (i) $292 for interest incurred through the Company's existing credit facility used to fund the acquired companies at historical interest rates; and (2) $56 incurred related to the interest cost associated with long-term covenants not-to-compete with the previous owners of certain acquired companies. (15) Adjusted for interest savings consisting of: (i) a $167 and $269 net reduction of interest expense on the senior subordinated notes and existing credit facility, respectively, as a result of changes in interest rates under the refinancing. The new credit facility is assumed to bear interest at a weighted average rate of 6.6% for the quarter ended June 30, 1996 and is representative of historical rates plus the basis points specified in the new credit agreement; and (ii) a $77 reduction in amortization of deferred financing fees and commitment fees. (16) Reflects increase in depreciation expense of $251 in excess of historical amounts and an increase in amortization expense for excess of cost over net assets acquired and other intangible assets of $122 and $231, respectively, for the quarter ended June 30, 1995. (17) Adjustments to interest expense for the quarter ended June 30, 1995 consist of: (i) $937 for interest incurred through the Company's existing credit facility used to fund the acquired companies and amounts incurred pertaining to actual borrowings on the senior term loans used to purchase the companies at historical interest rates; (ii) $164 for interest incurred related to the subordinated promissory note and junior subordinated promissory notes arising as a result of the acquisitions; (iii) $24 amortization of deferred financing costs, classified as interest, pertaining to the Company's increase in senior term loans outstanding as a result of the acquisition; and (iv) $64 incurred related to the interest cost associated with long-term covenants not-to-compete with the previous owners of certain acquired companies. (18) Adjusted for interest savings consisting of: (i) $136 and $644 net reduction of interest expense on the senior subordinated notes and the existing credit facility, respectively, as a result of changes in interest rates under the refinancing. The new credit facility is assumed to bear interest at a weighted average rate of 7.4% for the quarter ended June 30, 1995, which is representative of historical interest rates plus the basis points specified in the new credit agreement; and (ii) a $88 reduction in amortization of deferred financing fees and commitment fees. BALANCE SHEET (19) Adjusted to reflect the opening balance sheet of AMTI as though the acquisition had occurred on June 30, 1996. These amounts include the write-up of fixed assets to estimated fair value; the recording of excess of cost over net assets acquired; the recording of the present value of the previous owner's covenant not-to-compete; and the recording of the excess of the market price over the exercise price of the options to purchase the Company's Common Stock granted to the previous owner of AMTI. The allocation of the purchase price is based upon estimates and will be finalized during the current year. (20) Adjustments reflect: (i) the write-off of the deferred financing fees related to the existing credit facility; (ii) prepayment penalties associated with early extinguishment of the senior subordinated note and the existing credit facility; (iii) payment of accrued interest related to the senior subordinated note and the existing credit facility, and the net increase in debt necessary to fund the prepayment penalties and the financing fees related to the new credit facility. F-10 THE TRIUMPH GROUP HOLDINGS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (21) Adjustments reflect (i) the reclassification of the deferred taxes related to interest on the 14% junior subordinated promissory notes; (ii) the accretion of the preferred stock to liquidation value and (iii) the conversion of the 14% junior subordinated promissory notes, the preferred stock and the minority interest in Triumph Controls, Inc. to the Company's Common Stock. (22) Adjustments give effect to the sale of shares of Common Stock offered by the Company hereby and the application of the net proceeds thereof to extinguish the $5,793 senior subordinated promissory note and the outstanding balance related to the pro forma revolving credit facility of $30,407. F-11 REPORT OF ERNST & YOUNG LLP , INDEPENDENT AUDITORS Board of Directors and Stockholders The Triumph Group Holdings, Inc. We have audited the accompanying consolidated balance sheets of The Triumph Group Holdings, Inc. as of March 31, 1996 and 1995, and the related consolidated statements of income, common stockholders' equity, and cash flows for each of the two years in the period ended March 31, 1996 and for the ten months ended March 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Triumph Group Holdings, Inc. at March 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the two years in the period ended March 31, 1996 and for the ten months ended March 31, 1994, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Philadelphia, Pennsylvania August 22, 1996 F-12 THE TRIUMPH GROUP HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS) ASSETS
MARCH 31, ---------------------- 1995 1996 ---------- ---------- JUNE 30, 1996 ------------ (UNAUDITED) Current assets: Cash............................................................................ $ 746 $ 539 $ 430 Accounts receivable, less allowance for doubtful accounts of $766, $973 and $1,011, respectively.................................................. 27,881 29,680 32,086 Inventories..................................................................... 30,474 45,098 48,295 Estimated net realizable value of business sold or discontinued, current........ 9,296 27,350 1,800 Prepaid expenses and other...................................................... 378 698 690 Deferred income taxes........................................................... 1,878 1,917 3,345 ---------- ---------- ------------ Total current assets.............................................................. 70,653 105,282 86,646 Property and equipment, at cost: Land............................................................................ 3,009 3,009 3,009 Buildings and improvements...................................................... 7,072 7,438 7,602 Machinery and equipment......................................................... 21,437 32,823 33,535 ---------- ---------- ------------ 31,518 43,270 44,146 Less accumulated depreciation................................................... 3,933 6,718 7,705 ---------- ---------- ------------ 27,585 36,552 36,441 Other net assets of business sold or discontinued................................. 10,869 -- -- Excess of cost over net assets acquired, less accumulated amortization of $0, $105 and $209, respectively............................................... -- 10,339 10,234 Intangible assets, less accumulated amortization of $656, $1,110 and $1,274 respectively.............................................................. 1,134 6,680 6,516 Other assets...................................................................... 1,145 2,553 2,460 ---------- ---------- ------------ Total assets...................................................................... $ 111,386 $ 161,406 $ 142,297 ---------- ---------- ------------ ---------- ---------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable................................................................ $ 18,047 $ 18,203 $ 14,213 Accrued expenses................................................................ 9,506 15,757 14,161 Income taxes payable............................................................ 542 2,137 3,458 Current portion of long-term debt............................................... 2,949 8,806 5,206 ---------- ---------- ------------ Total current liabilities......................................................... 31,044 44,903 37,038 Long-term debt, less current portion.............................................. 68,789 89,963 76,261 Other liabilities................................................................. 783 1,992 2,426 Deferred income taxes............................................................. 2,764 6,831 7,051 Redeemable preferred stock, 14% cumulative, $.01 par value 30,575 shares authorized and issued..................................................... 1,912 2,652 2,854 Common stockholders' equity: Common stock, $.001 par value: Class A -- 6,500,455 shares authorized; 1,300,000 shares issued............... 1 1 1 Class B convertible -- 4,550,000 shares authorized and issued................. 5 5 5 Class C convertible -- 455 shares authorized and issued....................... -- -- -- Capital in excess of par value.................................................. 994 1,006 1,086 Treasury stock, at cost......................................................... (9) -- (85) Retained earnings............................................................... 5,103 14,053 15,660 ---------- ---------- ------------ Total common stockholders' equity................................................. 6,094 15,065 16,667 ---------- ---------- ------------ Total liabilities and common stockholders' equity................................. $ 111,386 $ 161,406 $ 142,297 ---------- ---------- ------------ ---------- ---------- ------------
See notes to consolidated financial statements. F-13 THE TRIUMPH GROUP HOLDINGS, INC. CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
TEN MONTHS THREE MONTHS ENDED ENDED YEAR ENDED MARCH 31, JUNE 30, MARCH 31, ------------------------ -------------------- 1994 1995 1996 1995 1996 ------------ ----------- ----------- --------- --------- (UNAUDITED) Net sales......................................... $ 129,995 $ 164,165 $ 186,774 $ 42,374 $ 55,184 Operating costs and expenses: Cost of products sold........................... 97,095 125,836 139,740 32,078 39,146 Selling, general, and administrative............ 17,966 22,060 27,288 6,274 9,433 Depreciation and amortization................... 1,993 2,718 3,535 721 1,258 ------------ ----------- ----------- --------- --------- 117,054 150,614 170,563 39,073 49,837 ------------ ----------- ----------- --------- --------- Operating income.................................. 12,941 13,551 16,211 3,301 5,347 Interest expense.................................. 4,908 6,589 7,318 1,600 2,286 ------------ ----------- ----------- --------- --------- Income from continuing operations, before income taxes............................................ 8,033 6,962 8,893 1,701 3,061 Income tax expense................................ 3,125 2,598 3,699 687 1,252 ------------ ----------- ----------- --------- --------- Income from continuing operations................. 4,908 4,364 5,194 1,014 1,809 Income (loss) from discontinued operations........ (462) (2,852) 4,496 109 -- ------------ ----------- ----------- --------- --------- Net income........................................ $ 4,446 $ 1,512 $ 9,690 $ 1,123 $ 1,809 ------------ ----------- ----------- --------- --------- ------------ ----------- ----------- --------- --------- Income from continuing operations per share....... $ 0.72 $ 0.67 $ 0.78 $ 0.16 $ 0.26 Income from discontinued operations per share..... (0.06) (0.38) 0.60 0.01 -- ------------ ----------- ----------- --------- --------- Net income per share.............................. $ 0.66 $ 0.29 $ 1.38 $ 0.17 $ 0.26 ------------ ----------- ----------- --------- --------- ------------ ----------- ----------- --------- --------- Shares used in computing income per share (in thousands)....................................... 7,291 7,387 7,516 7,424 7,499 ------------ ----------- ----------- --------- --------- ------------ ----------- ----------- --------- ---------
See notes to consolidated financial statements. F-14 THE TRIUMPH GROUP HOLDINGS, INC. CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY (DOLLARS IN THOUSANDS)
COMMON STOCK CAPITAL IN ------------------------------- EXCESS OF TREASURY RETAINED CLASS A CLASS B CLASS C PAR VALUE STOCK EARNINGS TOTAL --------- --------- --------- ----------- ----------- --------- --------- Balance at June 1, 1993 (inception)........................ $ 1 $ 5 $ -- $ 994 $ -- $ -- $ 1,000 Net income........................ 4,446 4,446 Preferred stock dividends......... (357) (357) Accretion of preferred stock...... (9) (9) --------- --------- --------- ----------- ----------- --------- --------- Balance at March 31, 1994........... 1 5 -- 994 -- 4,080 5,080 Net income........................ 1,512 1,512 Preferred stock dividends......... (473) (473) Accretion of preferred stock...... (16) (16) Purchase of shares of Class A common stock..................... (9) (9) --------- --------- --------- ----------- ----------- --------- --------- Balance at March 31, 1995........... 1 5 -- 994 (9) 5,103 6,094 Net income........................ 9,690 9,690 Preferred stock dividends......... (594) (594) Accretion of preferred stock...... (146) (146) Sale of shares of Class A common stock............................ 12 9 21 --------- --------- --------- ----------- ----------- --------- --------- Balance at March 31, 1996........... 1 5 -- 1,006 -- 14,053 15,065 Net income (unaudited)............ 1,809 1,809 Preferred stock dividends (unaudited)...................... (166) (166) Accretion of preferred stock (unaudited)...................... (36) (36) Compensation in stock options issued to employee (unaudited)... 80 80 Purchase of shares of Class A common stock (unaudited)......... (85) (85) --------- --------- --------- ----------- ----------- --------- --------- Balance at June 30, 1996 (unaudited)...................... $ 1 $ 5 -- $ 1,086 $ (85) $ 15,660 $ 16,667 --------- --------- --------- ----------- ----------- --------- --------- --------- --------- --------- ----------- ----------- --------- ---------
See notes to consolidated financial statements. F-15 THE TRIUMPH GROUP HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
TEN MONTHS YEAR ENDED MARCH 31, THREE MONTHS ENDED ENDED JUNE 30, MARCH 31, --------------------- ---------------------- 1994 1995 1996 1995 1996 ------------ --------- ---------- ---------- ---------- (UNAUDITED) OPERATING ACTIVITIES Net income............................................... $ 4,446 $ 1,512 $ 9,690 $ 1,123 $ 1,809 Adjustments to reconcile net income to net cash provided by operating activities: Discontinued operations................................ 1,314 3,738 (4,396) (5,180) (1,030) Depreciation........................................... 1,695 2,360 2,977 631 989 Amortization........................................... 508 610 834 153 356 Provision (benefit) for deferred and imputed income taxes................................................. 864 877 719 289 (178) Interest on senior and junior subordinated promissory notes paid by issuance of additional notes............ 614 993 1,161 271 626 Compensation in stock options issued to employee....... -- -- -- -- 80 Changes in assets and liabilities, net of acquisitions and dispositions of businesses: Accounts receivable.................................. (3,461) (7,175) 3,783 660 (2,406) Inventories.......................................... 4,340 (2,979) (4,201) (5,286) (3,197) Prepaid expenses and other current assets............ (365) 318 353 2 8 Accounts payable, accrued expenses, and accrued income taxes payable................................ 2,782 4,867 4,627 (3,136) (4,265) Other................................................ (123) 526 554 120 438 ------------ --------- ---------- ---------- ---------- Net cash provided by (used in) operating activities...... 12,614 5,647 16,101 (10,353) (6,770) INVESTING ACTIVITIES Capital expenditures, net................................ (1,531) (3,229) (1,897) (478) (876) Proceeds from sale of property and equipment of discontinued operation.................................. 798 375 -- -- 25,550 Proceeds from sale of company, net of cash sold.......... -- 1,192 -- -- -- Cost of businesses acquired, net of cash acquired........ (623) -- (40,302) -- -- ------------ --------- ---------- ---------- ---------- Net cash (used in) provided by investing activities...... (1,356) (1,662) (42,199) (478) 24,674 FINANCING ACTIVITIES Net (decrease) increase in revolving credit.............. (9,555) (617) 2,129 10,881 (13,050) (Purchase) sale of treasury stock........................ -- (9) 21 21 (85) Proceeds from issuance of long-term debt................. -- -- 26,692 23 40 Payments on long-term debt............................... (1,957) (3,040) (2,951) (711) (4,918) ------------ --------- ---------- ---------- ---------- Net cash (used in) provided by financing activities...... (11,512) (3,666) 25,891 10,214 (18,013) ------------ --------- ---------- ---------- ---------- (Decrease) increase in cash.............................. (254) 319 (207) (617) (109) Cash at beginning of period.............................. 681 427 746 746 539 ------------ --------- ---------- ---------- ---------- Cash at end of period.................................... $ 427 $ 746 $ 539 $ 129 $ 430 ------------ --------- ---------- ---------- ---------- ------------ --------- ---------- ---------- ----------
See notes to consolidated financial statements. F-16 THE TRIUMPH GROUP HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED) 1. BASIS OF PRESENTATION AND FORMATION OF THE TRIUMPH GROUP HOLDINGS, INC. The Triumph Group Holdings, Inc. ("Holdings") is a Delaware corporation which was formed by Citicorp Venture Capital and other investors, including members of management of The Triumph Group, Inc. ("Triumph"), a wholly-owned subsidiary of Holdings, and Triumph's wholly-owned subsidiaries to acquire, effective June 1, 1993, certain operations of Alco Standard Corporation ("Alco") which are engaged in aviation services, paper converting (which was subsequently discontinued), and metals converting and distribution (the "acquisition"). The accompanying financial statements present the consolidated financial position, results of operations, and cash flows of Holdings and its subsidiaries (collectively, the "Company") as of the dates indicated. Intercompany accounts and transactions have been eliminated from the consolidated financial statements. The aggregate purchase price of $115,167 for the acquisition, including $3,500 of related costs, was allocated to assets based on their estimated fair values. In addition, the Company assumed certain liabilities of $28,467. The net purchase was financed as follows: Cash from initial capitalization of the Company: Common stock................................................... $ 900 Cumulative redeemable preferred stock.......................... 1,057 Junior subordinated promissory notes........................... 6,043 $ 8,000 --------- Debt: Revolving credit facility...................................... 30,200 Senior term loan............................................... 20,000 Senior subordinated note and warrants.......................... 15,000 Subordinated promissory note payable to Alco................... 13,500 78,700 --------- --------- $ 86,700 --------- ---------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION The Company's aviation segment contributes approximately three quarters of the Company's operating income, while the metals converting and distribution segment contributes the remainder. Triumph's aviation segment designs, engineers, manufactures or repairs and overhauls aircraft components for commercial airlines, air cargo carriers and original equipment manufacturers on a worldwide basis. Triumph's metals segment manufactures, machines, forges, processes and distributes metal products to customers in the computer, construction, container, farm equipment and office furniture industries, primarily within North America. EARNINGS PER SHARE Earnings per share is computed using the weighted average number of shares of common stock outstanding after giving effect to the 65-for-one stock split described in Note 18, except as noted below. Pursuant to the Securities and Exchange Commission Staff Accounting Bulletins and Staff policy, common and preferred shares, options and warrants issued during the period commencing 12 months prior to the initial filing of the proposed initial public offering at prices below the anticipated public offering price are presumed to have been in contemplation of the public offering and have been included in the F-17 THE TRIUMPH GROUP HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) calculation as if they were outstanding for all periods presented, determined using the treasury stock method and the anticipated price from the initial public offering. In addition, common share equivalents such as warrants and options are included in the computation. Earnings per share reflected in the consolidated statements of income has been computed as described above, but also gives effect to the exchange of all outstanding 14% junior subordinated promissory notes and preferred stock for common stock upon the closing of the Company's initial public offering (determined using the if-converted method) as described in Note 18. Additionally, income from continuing operations has been increased to reflect interest related to the 14% junior subordinated promissory notes net of income tax expense. Primary and fully diluted earnings per share are the same. INTERIM FINANCIAL INFORMATION The financial statements and disclosures included herein for the three months ended June 30, 1995 and 1996 are unaudited; however, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the consolidated financial statements in accordance with generally accepted accounting principles for these interim periods have been included. The results of interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out and last-in, first-out methods) or market. PROPERTY AND EQUIPMENT Property and equipment are recorded at cost, which is depreciated over the estimated useful lives of the related assets by the straight-line method. Buildings and improvements are depreciated over a period of 15 to 39 1/2 years, and machinery and equipment from 7 to 15 years (except for furnitures, fixtures and computer equipment which is depreciated over a period of 3 to 10 years). EXCESS OF COST OVER NET ASSETS ACQUIRED The excess of cost over the fair value of net assets acquired is being amortized on a straight-line basis over twenty-five years. The realizability of goodwill (and other intangibles) is evaluated periodically as events or circumstances indicate a possible inability to recover their carrying amount. Such evaluation is based on various analyses, including cash flow and profitability projections. INTANGIBLE ASSETS Intangible assets consist primarily of patents, trademarks, aerospace designs, and licensing agreements. Intangible assets are amortized on a straight-line basis over their estimated useful lives which range from five to twenty-five years. REVENUE RECOGNITION Revenues are recorded when services are performed or when products are shipped except for long-term construction contracts which are recorded on the percentage-of-completion method based on the relationship between actual costs incurred and total estimated costs at completion. Estimated costs to complete for each contract are reviewed periodically as work progresses and apropriate adjustments are made to revenue recognition percentages, if necessary. In the event such estimates indicate a loss would be incurred on the contract, the estimated amount of such loss would be recognized in the period the F-18 THE TRIUMPH GROUP HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) estimated loss was determined. Sales from long-term construction contracts approximated 11%, 11%, and 12% of total sales for the ten-month period ended March 31, 1994 and the years ended March 31, 1995 and 1996, respectively. INCOME TAXES The Company uses the liability method to account for income taxes. Accordingly, 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 reportable for income tax purposes. The Company files a consolidated federal income tax return with its subsidiaries. USE OF ESTIMATES The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions (for example, long-term contract revenue recognition and postretirement benefits) that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 3. ACQUISITIONS In January 1996, the Company acquired substantially all of the assets of Triumph Controls, Inc., formerly a division of Teleflex, Incorporated (Teleflex), for an aggregate purchase price of $40,100. Triumph Controls, Inc. manufactures and services mechanical controls for a broad range of end users, primarily in the aviation industry. The purchase price includes cash paid to Teleflex, Inc., a note to Teleflex, assumed liabilities and direct costs of the acquisition. The acquisition has been accounted for under the purchase method and, accordingly, the operating results of Triumph Controls, Inc. have been included for the three months ended March 31, 1996. The aggregate purchase price was allocated to the assets based on their estimated fair values, including $5,500 of intangible assets (patents, trademarks and aerospace designs). The Company assumed certain liabilities of $2,600 and incurred transaction-related costs of approximately $1,000. The excess of the purchase price over the fair value of net assets acquired of $10,400 was recorded as excess of cost over net assets acquired and is being amortized over twenty-five years on a straight-line basis. The acquisition was funded by the Company's operations and long-term borrowings. In October 1995, the Company acquired substantially all of the assets of Air Lab, Inc. of Seattle, WA, for an aggregate purchase price of $3,400. Air Lab, Inc. services instruments and avionics for the commercial aviation industry. The purchase price includes cash paid to Air Lab, Inc., a long-term liability related to a covenant not-to-compete contract, certain assumed liabilities and direct costs of the acquisition. The acquisition has been accounted for under the purchase method and, accordingly, the operating results of Air Lab, Inc. have been included in the consolidated operating results since the date of acquisition. F-19 THE TRIUMPH GROUP HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED) 3. ACQUISITIONS (CONTINUED) The following pro forma unaudited results of operations for the years ended March 31, 1995 and 1996 and the three months ended June 30, 1995 and 1996, have been prepared assuming the purchases of Triumph Controls, Inc. and Air Lab, Inc. had taken place at the beginning of the respective periods:
FOR YEARS ENDED MARCH FOR THREE MONTHS 31, ENDED JUNE 30, ------------------------ -------------------- 1995 1996 1995 1996 ----------- ----------- --------- --------- Net sales............................................. $ 199,952 $ 213,131 $ 51,833 $ 55,184 Income from continuing operations..................... 6,434 6,677 1,610 1,809 Income from continuing operations per share........... $ 1.07 $ 1.12 $ 0.27 $ 0.30
The pro forma information includes adjustments for interest expense that would have been incurred to finance the purchases, additional depreciation based on the estimated fair market value of the property, plant, and equipment acquired, and the amortization of the intangible assets arising from the transactions. The pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transactions been effected on the assumed dates. 4. DISCONTINUED PAPER OPERATIONS On March 31, 1996, the Company sold substantially all of the assets of its paper converting subsidiary, Quality Park Products, Inc. of St. Paul, MN, to Mail-Well, Inc. for approximately $27,350 in cash and supplemental payments, based upon estimated earnings for the two years ending March 31, 1998, and the assumption by the purchaser of certain liabilities. The results of Quality Park Products, Inc. have been reported separately as a component of discontinued operations in the Consolidated Statements of Income. The following is a summary of the results of operations of the Company's paper converting business:
TEN MONTHS YEAR ENDED THREE MONTHS ENDED ENDED MARCH 31, JUNE 30, MARCH 31, -------------------- -------------------- 1994 1995 1996 1995 1996 ------------ --------- --------- --------- --------- Net sales.................................. $ 63,975 $ 84,170 $ 99,531 $ 24,321 $ -- Income (loss) from operations (net of taxes -- $233, $1,628, $1,156, $61 and $0, respectively)............................. (462) (2,852) 2,046 109 -- Gain on sale (net of taxes -- $1,633 in 1996)..................................... -- -- 2,450 -- -- ------------ --------- --------- --------- --------- Income (loss) from discontinued operations................................ $ (462) $ (2,852) $ 4,496 $ 109 $ -- ------------ --------- --------- --------- --------- ------------ --------- --------- --------- ---------
Interest expense of $1,386, $1,700 and $2,045 was allocated to Quality Park Products, Inc. for the ten months ended March 31, 1994 and for the years ended March 31, 1995 and 1996, respectively, and $561 for the three months ended June 30, 1995. Such amounts are included in the income (loss) from discontinued operations of those years. These costs were allocated based on the operation's actual borrowings under the Company's revolving credit facility and the portion of the acquisition debt allocated to the subsidiary. F-20 THE TRIUMPH GROUP HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED) 5. INVENTORIES The components of inventories are as follows:
MARCH 31, -------------------- JUNE 30, 1995 1996 1996 --------- --------- --------- Raw materials....................................................... $ 10,897 $ 16,093 $ 17,480 Work-in-process.................................................... 6,448 12,862 13,103 Finished goods..................................................... 13,963 16,570 18,139 --------- --------- --------- Total inventories at current FIFO cost............................. 31,308 45,525 48,722 Less allowance to reduce certain current FIFO costs to LIFO basis............................................... 834 427 427 --------- --------- --------- Total inventories.................................................. $ 30,474 $ 45,098 $ 48,295 --------- --------- --------- --------- --------- ---------
Inventories would have been $834, $427 and $427 higher than reported at March 31, 1995 and 1996, and June 30, 1996, respectively, if the first-in, first-out method of determining cost had been used for all inventories. Approximately 22%, 15% and 17% of the inventory is valued using the LIFO method at March 31, 1995 and 1996, and June 30, 1996 respectively. 6. INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts reportable for income tax purposes. The components of deferred tax liabilities and assets are as follows:
MARCH 31, -------------------- JUNE 30, 1995 1996 1996 --------- --------- ----------- Deferred tax assets: Alternative minimum and other tax credits............................. $ 1,441 $ 1,171 $ -- Net operating losses.................................................. 384 -- -- Accruals and reserves................................................. 502 942 1,414 Accounts receivable................................................... 102 28 28 Inventories........................................................... 142 2,514 2,534 --------- --------- ----------- $ 2,571 $ 4,655 $ 3,976 --------- --------- ----------- --------- --------- ----------- Deferred tax liabilities: Property and equipment................................................ $ 2,764 $ 3,491 $ 3,723 Discontinued operations............................................... 536 2,521 320 Other assets.......................................................... -- 3,340 3,328 Prepaid expenses...................................................... 157 217 311 --------- --------- ----------- 3,457 9,569 7,682 --------- --------- ----------- Net deferred tax liabilities............................................ $ 886 $ 4,914 $ 3,706 --------- --------- ----------- --------- --------- -----------
F-21 THE TRIUMPH GROUP HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED) 6. INCOME TAXES (CONTINUED) The components of income tax expense related to continuing operations as follows:
TEN MONTHS YEAR ENDED THREE MONTHS ENDED MARCH 31, ENDED JUNE 30, MARCH 31, -------------------- -------------------- 1994 1995 1996 1995 1996 ------------ --------- --------- --------- --------- Current: Federal....................................... $ 2,053 $ 1,650 $ 2,689 $ 378 $ 1,235 State......................................... 208 71 291 20 195 ------------ --------- --------- --------- --------- 2,261 1,721 2,980 398 1,430 Deferred: Federal....................................... 254 685 574 223 (138) State......................................... 113 192 145 66 (40) ------------ --------- --------- --------- --------- 367 877 719 289 (178) Imputed: Federal....................................... 483 -- -- -- -- State......................................... 14 -- -- -- -- ------------ --------- --------- --------- --------- 497 -- -- -- -- ------------ --------- --------- --------- --------- $ 3,125 $ 2,598 $ 3,699 $ 687 $ 1,252 ------------ --------- --------- --------- --------- ------------ --------- --------- --------- ---------
Imputed income taxes represent income tax on pretax earnings of the Company for the period June 1, 1993 through July 31, 1993. Such taxes were paid by Alco under terms of the purchase agreement. A reconciliation of the statutory federal income tax rate to the effective tax rate is as follows:
TEN MONTHS YEAR ENDED MARCH 31, THREE MONTHS ENDED ENDED JUNE 30, MARCH 31, ---------------------- ---------------------- 1994 1995 1996 1995 1996 --------------- ---------- ---------- ---------- ---------- Statutory federal income tax rate.................. 34.0% 34.0% 34.0% 34.0% 34.0% State and local income tax rate, net of federal tax benefit........................................... 2.6 2.5 3.2 3.3 3.3 Miscellaneous permanent items and non-deductible accruals.......................................... 0.5 -- 1.3 1.7 1.1 Other.............................................. 1.8 0.8 3.1 1.4 2.5 --- --- --- --- --- Effective income tax rate.......................... 38.9% 37.3% 41.6% 40.4% 40.9% --- --- --- --- --- --- --- --- --- ---
Income taxes paid during the ten months ended March 31, 1994 and the years ended March 31, 1995 and 1996 were $1,318, $596 and $1,182, respectively. Income taxes paid during the three months ended June 30, 1995 and 1996 were $250 and $1,004, respectively. At March 31, 1995 and 1996, the Company had alternative minimum tax credit carryforwards of $1,430 and $1,160, respectively, for income tax purposes which can be carried forward indefinitely. At March 31, 1995, the Company had a regular tax net operating loss carryforward of $1,129. F-22 THE TRIUMPH GROUP HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED) 7. LONG-TERM DEBT Long-term debt consists of the following:
MARCH 31, -------------------- JUNE 30, 1995 1996 1996 --------- --------- --------- Revolving credit facility............................................ $ 20,028 $ 22,157 $ 9,109 Senior term loans.................................................... 15,316 32,460 27,598 Senior subordinated notes............................................ 14,900 14,900 14,900 Subordinated promissory notes........................................ 13,500 19,000 19,293 Junior subordinated promissory notes................................. 7,625 9,575 9,890 Other debt and capital lease obligations............................. 369 677 677 --------- --------- --------- 71,738 98,769 81,467 Less current portion................................................. 2,949 8,806 5,206 --------- --------- --------- $ 68,789 $ 89,963 $ 76,261 --------- --------- --------- --------- --------- ---------
On July 19, 1996, the Company entered into an unsecured five year credit agreement for a $50,000 revolving credit facility and a $35,000 term loan. Both credit instruments bear interest at either LIBOR plus between 0.63% and 1.88% or prime plus between 0% and 0.38% at the option of the Company. The variation in the interest rate is based upon the Company's ratio of total indebtedness to earnings before interest, taxes and depreciation and amortization. In addition, the Company is required to pay a commitment fee of between 0.2% and 0.45% on the unused portion of the revolving credit facility based upon the ratio described above. Principal payments on the term loan of $1,250 are made quarterly with a final balloon payment of $11,250 due on July 1, 2001. The Company may repay amounts owed under the credit agreement or reduce the revolving credit facility commitment without penalty. Additionally, the Company may allocate up to $5,000 of the available revolving credit facility for the issuance of letters of credit. The proceeds of the new term loan, amounts borrowed under the new revolving credit facility and the proceeds received from the sale of Quality Park Products, Inc. (see Note 4) were used to extinguish the outstanding balances of the revolving credit facility, the senior term loans and the senior subordinated notes existing at March 31, 1996. The extinguishment of this debt resulted in an extraordinary loss of $1,478, net of an income tax benefit of $985. Additionally, under the terms of the new credit agreement, upon completion of the common stock offering described in Note 18, the Company is required to make a principal payment of $15,000 which will be applied to any balance outstanding on the revolving credit facility followed by any balance remaining on the term loan. Should the Company fail to receive at least $30,000 in proceeds from the common stock offering by December 31, 1996, the new credit agreement will become secured as the Company is required to grant the holder a first priority lien and security interest in all real and personal property owned by the Company at that time. The Subordinated Promissory Notes consists of two notes, a $13,500 principal amount payable by Holdings to Alco, bearing interest at 10%, and due in equal installments on June 1, 2002 and June 1, 2003 and $5,500 principal amount payable by Holdings to Teleflex, bearing interest at 10.5%, and due in equal installments on December 31, 2002 and December 31, 2003. The Junior Subordinated Promissory Notes ("Junior Notes") consist of unsecured obligations of Holdings and one of its subsidiaries. The Junior Notes of Holdings, $7,625, $8,800 and $9,055 at F-23 THE TRIUMPH GROUP HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED) 7. LONG-TERM DEBT (CONTINUED) March 31, 1995 and 1996 and June 30, 1996, respectively, are subordinated to all liabilities of the Company and its subsidiaries and bear interest at 14%. The Company, in its sole discretion, may pay interest by issuance of additional Junior Notes and elected to do so for $614, $993 and $1,146 for the ten months ended March 31, 1994 and the years ended March 31, 1995 and 1996, respectively. Interest of $271 and $313 was paid by issuance of additional Junior Notes during the three months ended June 30, 1995 and 1996, respectively. The Junior Notes of Holdings mature on December 31, 2003, although the holders of the notes have no right to demand payment of principal until all superior debt, as defined, has been paid in full. In January 1996, additional Junior Notes of one of Triumph's subsidiaries were issued in the amount of $760 and are subordinated to all liabilities of the subsidiary and all indebtedness of Triumph and its subsidiaries pursuant to the revolving credit facility, the senior term loans and the senior subordinated notes and bear interest at 10.5%. The subsidiary, in its sole discretion, may pay interest by issuance of additional Junior Notes and elected to do so for $15 and $20 for the year ended March 31, 1996 and the three months ended June 30, 1996, respectively. These Junior Notes are due in equal installments on December 31, 2005 and 2006, although the holders of the notes have no right to demand payment of principal until all superior debt, as defined, has been paid in full. The indentures under the debt agreements described above contain restrictions and covenants which include limitations on the Company's ability to incur additional indebtedness, issue stock, options or warrants (excluding the offering described in Note 18 and any employee stock option plan the Company may enter into), make certain restricted payments and acquisitions, create liens, enter into transactions with affiliates, sell substantial portions of its assets, make capital expenditures and pay cash dividends. Additional covenants require compliance with financial tests, including current ratio, leverage, interest coverage ratio and maintenance of minimum net worth. As of July 19, 1996, subsequent to the refinancing, $31,029 of additional borrowings were available under the revolving credit facility. The fair value of the Company's long-term debt at March 31, 1996, excluding amounts which were refinanced, approximates the carrying value. Maturities of long-term debt, excluding payments which may be required under debt agreements based on excess cash flow (adjusted for the refinancing described above), are as follows: 1997 -- $2,648; 1998 -- $5,169; 1999 -- $5,176; 2000 -- $5,089; 2001 -- $5,096. Interest paid on indebtedness during the ten months ended March 31, 1994 and the years ended March 31, 1995 and 1996 amounted to $3,968, $6,909 and $7,552, respectively. Interest paid on indebtedness during the three months ended June 30, 1995 and 1996 amounted to $1,737 and $1,781, respectively. Financing fees and expenses of $2,103 incurred with respect to indebtedness have been capitalized and are reflected in other assets. These fees and expenses are being amortized over the terms of the related indebtedness (5-8 years). Total amortization (included in interest expense) for the ten months ended March 31, 1994 and the years ended March 31, 1995 and 1996 was $210, $252, and $276, respectively. Total amortization (included in interest expense) for the three months ended June 30, 1995 and 1996 was $63 and $87, respectively. On July 19, 1996, in conjunction with the refinancing, $923 in unamortized deferred financing fees related to the extinguished debt were written-off and an additional $510 in financing fees related to the new credit agreement were capitalized. F-24 THE TRIUMPH GROUP HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED) 8. COMMON STOCK The holders of the Class A, B, and C common stock are entitled to one vote, six-tenths of one vote, and 4,000 votes per share, respectively, on all matters to be voted upon by the stockholders of Holdings and are entitled to participate ratably in any distributions. The holders of Class B common stock may elect at any time to convert any or all such shares into the Class A common stock on a share-for-share basis. Upon the conversion of all shares of Class B common stock, each share of Class C common stock will automatically convert into one share of Class A common stock. The Company issued a stock purchase warrant which allows the holder to purchase 650,000 shares of Class A common stock at an exercise price of $.01 per share through July 31, 2003. The proceeds from the issuance of the senior subordinated notes allocated to the warrants of $100 has been included in capital in excess of par value. 9. PREFERRED STOCK The preferred stock provides for 14% cumulative dividends and redemption on July 21, 2004 or 91 days after the retirement date of senior debt at the lesser of the liquidation value of $100 per share ($3,058) plus all accumulated and unpaid dividends or 40% of the Company's equity value. Accumulated and unpaid dividends of approximately $830 or $27.15 per share, $1,424 or $46.57 per share and $1,590 or $52.00 per share are included in preferred stock as of March 31, 1995 and 1996 and June 30, 1996, respectively. The difference between the original issue price of $1,057 and the liquidation value of $3,057 is being accreted through July 21, 2004 using the effective interest method. The accretion of $9, $16 and $146 for the ten months ended March 31, 1994, and the years ended March 31, 1995 and 1996 respectively, and accretion of $4 and $36 for the three months ended June 30, 1995 and 1996, respectively, is charged to retained earnings and included in preferred stock. 10. PENSION AND OTHER BENEFIT PLANS The Company sponsors a defined contribution 401(k) plan, under which salaried and certain hourly employees may defer a portion of their compensation. Eligible participants may contribute to the plan up to 15% of their regular compensation before taxes. The Company matches 33% of the first 6% of compensation contributed by the participant. All contributions and Company matches are invested at the direction of the employee in one or more mutual funds. Company matching contributions vest immediately and aggregated $293, $404 and $437 for the period from August 1, 1993 (inception of the 401(k) Plan) through March 31, 1994 and the years ended March 31, 1995 and 1996, respectively. Company matching contributions for the three months ended June 30, 1995 and 1996 amounted to $100 and $143, respectively. 11. OTHER POSTRETIREMENT BENEFITS In connection with the acquisition of Triumph Controls, Inc., the Company provides certain postretirement medical and insurance benefits to eligible employees under a Collective Bargaining Agreement. For any employees who retired through the date of the acquisition, the Seller retained all liabilities for benefits due and administration of the postretirement benefits. The Company has assumed responsibility for administration of the postretirement coverage for any eligible employee who retires subsequent to the date of acquisition. The Company will pay the costs related to these benefits upon retirement and will be reimbursed by the Seller for its pro rata portion based on relative length of service. F-25 THE TRIUMPH GROUP HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED) 11. OTHER POSTRETIREMENT BENEFITS (CONTINUED) At March 31, 1996, the Company has recorded a total liability of $1,053 (as estimated by actuaries) for other postretirement benefits, of which $1,045 is estimated to be reimbursed by the Seller. The $1,053 and $1,045 are recorded in Other liabilities and Other assets, respectively. 12. LEASES Capital lease assets are included in property and equipment and the related obligations in other debt and capital lease obligations. Amortization of capital lease assets is included in depreciation expense. At March 31, 1996, future minimum payments under noncancelable operating leases with initial or remaining terms of more than one year were as follows: 1997 -- $1,461; 1998 -- $1,451; 1999 -- $1,326; 2000 -- $1,147; 2001 -- $821; thereafter (through 2006) -- $3,380. In the normal course of business, operating leases are generally renewed or replaced by other leases. Total rental expense was $730, $950, and $1,135 for the ten months ended March 31, 1994 and the years ended March 31, 1995 and 1996, respectively. Total rent expense for the three months ended June 30, 1995 and 1996 amounted to $283 and $365, respectively. 13. COMMITMENTS AND CONTINGENCIES During 1995, the Company entered into a consulting agreement for total consideration of $1,300 payable in annual installments, which expires on April 30, 2001. Certain of the Company's business operations and facilities are subject to a number of federal, state and local environmental laws and regulations. The Company is indemnified for environmental liabilities related to assets purchased from Alco which existed prior to the acquisition (Note 1) and any unidentified environmental liabilities which arise subsequent to the date of settlement through July 22, 2000, arising from conditions or activities existing at these facilities prior to the acquisition. In the opinion of management, there are no significant environmental concerns which would have a material effect on the financial condition or operating results of the Company which are not covered by such indemnification. The Company is involved in certain litigation matters arising out of its normal business activities. In the opinion of management, the ultimate resolution of such litigation will not have a material effect on the financial condition or operating results of the Company. 14. COLLECTIVE BARGAINING AGREEMENTS Approximately 30% of the Company's labor force is covered under collective bargaining agreements. These collective bargaining agreements expire over the next several years. 15. CONCENTRATIONS OF CREDIT RISK No single customer accounts for more than 5% of the Company's sales, however, the loss of any significant customer could have a material effect on the Company and its operating subsidiaries. F-26 THE TRIUMPH GROUP HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED) 16. SEGMENT REPORTING Selected financial information for each segment is as follows:
TEN MONTHS ENDED YEAR ENDED MARCH 31, MARCH 31, ------------------------ 1994 1995 1996 ------------ ----------- ----------- Revenues: Aviation...................................................... $ 57,257 $ 70,714 $ 100,166 Metals converting and distribution............................ 72,738 93,451 86,608 ------------ ----------- ----------- $ 129,995 $ 164,165 $ 186,774 ------------ ----------- ----------- ------------ ----------- ----------- Operating income: Aviation...................................................... $ 9,138 $ 8,778 $ 14,095 Metals converting and distribution............................ 5,376 6,379 4,638 Corporate expenses............................................ (1,573) (1,606) (2,522) ------------ ----------- ----------- $ 12,941 $ 13,551 $ 16,211 ------------ ----------- ----------- ------------ ----------- ----------- Assets: Aviation...................................................... $ 44,512 $ 53,100 $ 101,219 Metals converting and distribution............................ 33,688 32,550 29,965 Discontinued operations....................................... 24,821 20,165 27,350 Corporate and other........................................... 3,342 5,571 2,872 ------------ ----------- ----------- $ 106,363 $ 111,386 $ 161,406 ------------ ----------- ----------- ------------ ----------- ----------- Capital expenditures: Aviation...................................................... $ 555 $ 2,077 $ 1,684 Metals converting and distribution............................ 976 1,152 213 ------------ ----------- ----------- $ 1,531 $ 3,229 $ 1,897 ------------ ----------- ----------- ------------ ----------- ----------- Depreciation and amortization: Aviation...................................................... $ 1,379 $ 1,780 $ 2,513 Metals converting and distribution............................ 594 916 999 Corporate..................................................... 20 22 23 ------------ ----------- ----------- $ 1,993 $ 2,718 $ 3,535 ------------ ----------- ----------- ------------ ----------- -----------
17. SUBSEQUENT ACQUISITION On July 31, 1996, the Company acquired all of the outstanding stock of Advanced Materials Technologies, Inc. ("AMTI") based in Tempe, Arizona for an aggregate purchase price of $21,300, including cash consideration of $7,950, an option to purchase 200 shares of the Company's Class A Common Stock valued at $164, a five-year covenant not-to-compete contract valued at $2,800 and the assumption of liabilities and costs related to the transaction of $10,386. AMTI repairs and refurbishes gas turbine engine components used in the aviation industry. The acquisition will be accounted for under the purchase method, and the purchase price will be allocated to the assets based on their estimated fair values. The acquisition was funded through the Company's long-term borrowings. 18. OTHER SUBSEQUENT EVENTS In August 1996, the Company filed a registration statement with respect to a proposed underwritten public offering by the Company of 2,375,000 shares and an offering directly by the Company of an additional 125,000 shares. The net proceeds to the Company will be used to pay down a portion of the Company's long-term borrowings under its five year credit agreement and its subordinated promissory note of $5.5 million (see Note 7). F-27 THE TRIUMPH GROUP HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (INFORMATION WITH RESPECT TO THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED) 18. OTHER SUBSEQUENT EVENTS (CONTINUED) On August 21, 1996 the Company amended its certificate of incorporation to change its corporate name to Triumph Group, Inc. In conjunction with the sale of common stock, the Company intends to recapitalize the Common Stock and authorize a 65-for-one stock split. All references to earnings per share data in the financial statements have been restated to give effect to the stock split. In conjunction with the proposed public offering described above, the Company intends to exchange all outstanding preferred stock for Common Stock. The liquidation value of the preferred stock plus accumulated dividends at the date of the exchange (estimated to be October 15, 1996) of approximately $4,841 will convert to approximately 334,352 shares of Common Stock at an assumed initial public offering price of $16.00 (less underwriting discounts and commissions and estimated offering expenses payable by the Company). In addition, the Company intends to exchange all outstanding 14% junior subordinated promissory notes for Common Stock. The face value of the junior subordinated promissory notes plus accrued but unpaid interest at the date of exchange (estimated to be October 15, 1996) of approximately $9,419 will be exchanged for 650,508 shares of Common Stock at the estimated initial public offering price of $16.00 (less underwriting discounts and commissions and estimated offering expenses payable by the Company). The Company intends to adopt the 1996 Stock Option Plan (the "Plan") which will become effective upon the closing of the proposed public offering. The Plan provides for grants of stock options to officers and key employees of the Company. 19. QUARTERLY FINANCIAL DATA (UNAUDITED)
FOR THE THREE MONTHS ENDED -------------------------------------------------- 3/31/96(1) 12/31/95(2) 9/30/95 6/30/95 ----------- ----------- ----------- ----------- Net sales............................................. $ 54,206 $ 46,492 $ 43,702 $ 42,374 Gross profit.......................................... 15,630 10,520 10,588 10,296 Income from continuing operations..................... 1,850 1,199 1,131 1,014 Income from discontinued operations................... 4,008 315 64 109 Net income............................................ 5,858 1,514 1,195 1,123 Income from continuing operations per share(3)........ $ 0.27 $ 0.18 $ 0.17 $ 0.16 FOR THE THREE MONTHS ENDED -------------------------------------------------- 3/31/95(3) 12/31/94(3) 9/30/94(3) 6/30/94(3) ----------- ----------- ----------- ----------- Net sales............................................. $ 47,630 $ 37,819 $ 38,630 $ 40,086 Gross profit.......................................... 11,419 8,847 8,937 9,126 Income from continuing operations..................... 2,127 577 985 675 Income from discontinued operations................... (2,897) 241 15 (211) Net income............................................ (770) 818 1,000 464 Income from continuing operations per share(3)........ $ 0.31 $ 0.10 $ 0.15 $ 0.11
- -------------- (1) In January 1996, the Company completed its acquisition of Triumph Controls, Inc. The operating results of Triumph Controls, Inc. are included for the full period. (2) In October 1995, the Company completed its acquisition of Air Lab, Inc. The operating results of Air Lab, Inc. are included in the quarters ended December 31, 1995 and March 31, 1996. (3) See Note 2 "Summary of Significant Accounting Policies" for information regarding the calculation of income from continuing operations per share. F-28 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Teleflex Incorporated In our opinion, the accompanying statements of income and of cash flows present fairly, in all material respects, the results of operations and cash flows of North Wales Controls and Quadrants Group, a division of Teleflex Incorporated (the "Division") for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Division's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Philadelphia, Pennsylvania June 25, 1996 F-29 NORTH WALES CONTROLS AND QUADRANTS GROUP (A DIVISION OF TELEFLEX INCORPORATED) STATEMENT OF INCOME
YEAR ENDED ---------------------------------------------- DECEMBER 26, DECEMBER 25, DECEMBER 31, 1993 1994 1995 -------------- -------------- -------------- Net sales........................................................ $ 30,254,208 $ 30,958,560 $ 31,477,611 -------------- -------------- -------------- Cost and expenses: Materials, labor and other product costs....................... 17,039,342 17,389,166 17,801,964 Selling, engineering and administrative expenses............... 7,261,666 7,146,240 7,797,883 Interest expense............................................... 262,803 135,810 Interest income................................................ (16,970) (152,891) -------------- -------------- -------------- 24,563,811 24,654,246 25,446,956 -------------- -------------- -------------- Income before income taxes....................................... 5,690,397 6,304,314 6,030,655 Provision for income taxes....................................... 2,387,987 2,619,496 2,413,074 -------------- -------------- -------------- Net income....................................................... $ 3,302,410 $ 3,684,818 $ 3,617,581 -------------- -------------- -------------- -------------- -------------- --------------
The accompanying notes are an integral part of these financial statements. F-30 NORTH WALES CONTROLS AND QUADRANTS GROUP (A DIVISION OF TELEFLEX INCORPORATED) STATEMENT OF CASH FLOWS
YEAR ENDED ---------------------------------------------- DECEMBER 26, DECEMBER 25, DECEMBER 31, 1993 1994 1995 -------------- -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income..................................................... $ 3,302,410 $ 3,684,818 $ 3,617,581 Adjustments to reconcile net income to cash flows from operating activities: Depreciation................................................. 454,479 451,118 437,866 Decrease in accounts receivable.............................. 1,758,248 1,780,686 1,567,969 Decrease (increase) in inventories........................... 797,829 221,062 (1,317,175) (Increase) decrease in prepaid expenses...................... (6,506) (9,015) 22,317 Increase (decrease) in accounts payable and accrued expenses.................................................... 209,325 (5,513) 37,673 -------------- -------------- -------------- Net cash provided by operating activities........................ 6,515,785 6,123,156 4,366,231 -------------- -------------- -------------- CASH FLOWS FOR INVESTING ACTIVITIES: Additions to plant assets, net................................. (398,568) (871,922) (634,216) -------------- -------------- -------------- Net cash used in investing activities............................ (398,568) (871,922) (634,216) -------------- -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: (Decrease) in intercompany notes payable......................... (6,116,629) (5,250,700) (3,733,390) -------------- -------------- -------------- Net cash used in financing activities............................ (6,116,629) (5,250,700) (3,733,390) -------------- -------------- -------------- Net increase (decrease) in cash and cash equivalents............. 588 534 (1,375) Cash and cash equivalents at the beginning of the year........... 1,912 2,500 3,034 -------------- -------------- -------------- Cash and cash equivalents at the end of the year................. $ 2,500 $ 3,034 $ 1,659 -------------- -------------- -------------- -------------- -------------- --------------
The accompanying notes are an integral part of these financial statements. F-31 NORTH WALES CONTROLS AND QUADRANTS GROUP (A DIVISION OF TELEFLEX INCORPORATED) NOTES TO FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION North Wales Controls and Quadrants Group, a division of Teleflex Incorporated (the "Division"), consists of two business units: aerospace and non-aerospace. Aerospace manufactures and services qualified mechanical controls for a broad range of end users. Non-aerospace comprises the naval group, which produces remote valve operators, and the nuclear group, which provides flux mapping systems for the nuclear industry. All manufacturing operations of the Division are conducted at North Wales, PA. These financial statements have been prepared in conformity with generally accepted accounting principles and include management estimates and assumptions that affect the recorded amounts. Actual results could differ from those estimates. The statement of income includes all charges applicable to the Division. Teleflex Incorporated provides certain services to, and incurs costs on behalf of, the Division. All of the allocations and estimates in the financial statements are based on assumptions that the Division and Teleflex Incorporated believe are reasonable. However, these allocations and estimates are not necessarily indicative of the costs and expenses that would have resulted if the Division had been operated as a separate entity. In January 1996, the Division was sold by Teleflex Incorporated to Triumph Controls, Inc. and is currently doing business under that name. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVENTORIES Inventories are stated principally at the lower of aggregate average cost or market. PLANT ASSETS Plant assets include the cost of additions and those improvements which increase the capacity or lengthen the useful lives of the assets. Repairs and maintenance costs are expensed as incurred. With minor exceptions, straight-line composite lives for depreciation of plant assets are as follows: machinery and equipment -- 5 to 12 years; leasehold improvements -- 10 years. Depreciation expense was $454,479, $451,188, and $437,866 for the years ending December 26, 1993, December 25, 1994 and December 31, 1995, respectively. INCOME TAXES The taxable income of the Division is included in the consolidated tax return of Teleflex Incorporated. As such, separate income tax returns were not prepared or filed by the Division. Income tax expense has been determined as if the Division was a separate tax paying entity by applying an asset and liability approach. REVENUE RECOGNITION Revenue is recognized upon shipment of product. Revenues from long-term contracts, which are less than 10 percent of total sales, are recognized on a percentage of completion basis. 3. RELATED PARTY TRANSACTIONS NOTES PAYABLE The Company's cash requirements are met by funds generated from operations, supplemented as necessary by advances or borrowings from Teleflex Incorporated. Borrowings from Teleflex Incorporated are made pursuant to unwritten, informal arrangements. Interest is charged (earned) at a rate of 8%. Interest expense was $262,803 and $135,810 for the years ended December 26, 1993 and December 25, 1994, respectively. F-32 NORTH WALES CONTROLS AND QUADRANTS GROUP (A DIVISION OF TELEFLEX INCORPORATED) NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. RELATED PARTY TRANSACTIONS (CONTINUED) INSURANCE COVERAGE WORKER'S COMPENSATION. Teleflex Incorporated purchases workers' compensation coverage for all its U.S. Divisions from external carriers. Premiums paid are determined based upon claims experience subject to a stop-loss provision. Each Division is allocated a charge based upon the application of published workers' compensation rates to division payroll costs adjusted for claims experience. Charges for the years ended December 26, 1993, December 25, 1994 and December 31, 1995 were $536,000, $554,000 and $610,600, respectively. MEDICAL. Certain medical and other related benefits are provided to active employees of the Division. Monthly premiums are paid to insurance carriers by Teleflex and reimbursed by the Division on the basis of employee headcount. These contracts are negotiated by Teleflex on a Company-wide basis. Medical charges allocated to the Division were $2,013,000, $1,689,000 and $1,415,000 for the years ended December 26, 1993, December 25, 1994 and December 31, 1995. These charges and allocations are not necessarily indicative of the costs that would have been incurred if the Division had been operating as a separate entity. CORPORATE EXPENSES The results of operations include significant transactions with Teleflex business units that are outside of the Division's operations. These transactions involve functions and services (such as executive management, cash management, tax administration, legal services and research funding) that were provided to the Division by these other Teleflex units. The cost of these functions and services has been allocated to the Division based on a predetermined percentage of Division revenues. Teleflex management believes this allocation methodology is reasonable. Such charges and allocations are not necessarily indicative of the costs that would have been incurred by the Division as a separate entity. Corporate charges were $1,180,000, $1,190,000 and $1,191,000 for the years ended December 26, 1993, December 25, 1994 and December 31, 1995, respectively. SALES AND PURCHASES Sales by the Division to other divisions of Teleflex were $259,000, $212,000 and $45,000 for the years ending December 26, 1993, December 25, 1994 and December 31, 1995, respectively. Purchases by the Division from other divisions of Teleflex were $259,000, $245,000 and $335,000 for the years ending December 26, 1993, December 25, 1994 and December 31, 1995, respectively. RENT The Division rents its manufacturing facility from Teleflex under a month-to-month net lease. Charges of approximately $156,000 including rent, insurance and taxes were allocated to the Division for each of the three years ended December 31, 1995. 4. BENEFITS PLANS PENSIONS Teleflex has defined benefit plans which provide retirement benefits to eligible employees. The benefits for these plans are based on employee's years of service and pay. Assumptions used in determining the actuarial present value of benefit obligations reflect a weighted average discount rate of 7.8% in 1993, 8.0% in 1994 and 1995, and an investment return of 9% and a salary increase of 5%. Pension costs have been assigned to the Division for all employees participating in Plan 1039, a plan solely for Division hourly employees, in accordance with actuarial calculations. F-33 NORTH WALES CONTROLS AND QUADRANTS GROUP (A DIVISION OF TELEFLEX INCORPORATED) NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. BENEFITS PLANS (CONTINUED) Pension expense for Plan 1039 is summarized as follows:
1993 1994 1995 ----------- ----------- ----------- Service cost -- benefits earned during the year........ $ 145,800 $ 147,800 $ 147,600 Interest cost on projected benefit obligations......... 369,900 396,400 406,500 Actual return on plan assets........................... (135,100) (57,700) (740,320) Net amortization and deferral.......................... (181,700) (289,500) 441,420 ----------- ----------- ----------- $ 198,900 $ 197,000 $ 255,200 ----------- ----------- ----------- ----------- ----------- -----------
Salaried employees participate in a company-wide pension plan. Allocation of pension cost for salaried employees was made on the basis of proportional payroll and aggregated $250,000, $269,000 and $320,000 for the years ended December 26, 1993, December 25, 1994 and December 31, 1995, respectively. Such costs are not necessarily indicative of the pension cost that would be incurred if the Division operated as a separate entity. OTHER Teleflex has defined contribution 401(k) plans in which substantially all employees of the Division may participate. Under these plans, employees may make voluntary contributions of their compensation, which are partially matched by Teleflex. Employer contributions for the years ended December 26, 1993, December 25, 1994 and December 31, 1995 were $100,000, $143,000 and $140,000, respectively. 5. OTHER POSTRETIREMENT BENEFITS Teleflex provides postretirement medical and other benefits to eligible employees. Assumptions used in determining the expense and benefit obligations include a weighted average discount rate of 7.8% in 1993 and 8.0% in 1994 and 1995 and an initial health care cost trend rate of 12% in 1993, 11% in 1994 and 10% in 1995, declining to 6% over a period of 5 years. Increasing the health care cost trend rate by one percentage point would increase the postretirement benefit expense by approximately $20,000. Postretirement benefit expense has been assigned to the Division for all hourly employees participating in Plan 1039, in accordance with actuarial calculations. Postretirement benefit expense for this Plan allocated to the Division is summarized as follows:
1993 1994 1995 ----------- ----------- ----------- Service cost -- benefits earned during the year........ $ 138,000 $ 90,000 $ 22,000 Interest cost on projected benefit obligations......... 541,000 438,000 301,000 Net amortization and deferral.......................... 307,000 272,000 144,000 ----------- ----------- ----------- $ 986,000 $ 800,000 $ 467,000 ----------- ----------- ----------- ----------- ----------- -----------
The reduction in the accumulated postretirement benefit expense resulted from Plan amendments. Salaried employees participate in a company-wide plan. Allocation of postretirement benefit expense was made on the basis of employees headcount and aggregated $128,000, $139,000 and $113,000 for the years ended December 26, 1993, December 25, 1994 and December 31, 1995, respectively. Such costs are not necessarily indicative of the postretirement benefit cost that would be incurred if the Division operated as a separate entity. F-34 NORTH WALES CONTROLS AND QUADRANTS GROUP (A DIVISION OF TELEFLEX INCORPORATED) NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. CONCENTRATION OF CREDIT RISK AND OTHER INFORMATION The Division's sales are made principally to commercial OEM customers, airlines and the U.S. Government. Sales to the U.S. Government, directly and as a subcontractor amounted to approximately $11,151,000, $9,559,000 and $10,500,000 for the years ended December 26, 1993, December 25, 1994 and December 31, 1995, respectively. 7. INCOME TAXES The provision for income taxes consists of the following:
1993 1994 1995 ------------- ------------- ------------- Current Federal........................................ $ 1,712,816 $ 1,858,581 $ 1,709,879 State.......................................... 713,065 760,674 567,967 ------------- ------------- ------------- 2,425,881 2,619,255 2,277,846 ------------- ------------- ------------- Deferred Federal........................................ (26,864) (973) 92,997 State.......................................... (11,030) 1,214 42,231 ------------- ------------- ------------- (37,894) 241 135,228 ------------- ------------- ------------- $ 2,387,987 $ 2,619,496 $ 2,413,074 ------------- ------------- ------------- ------------- ------------- -------------
Deferred taxes primarily relate to additional costs capitalized in inventory for tax accounting in accordance with S-263A of the income tax code, and because of the use of accelerated depreciation for tax purposes. The following is a reconciliation of the effective income tax rate with the federal statutory income tax rate of 34%.
1993 1994 1995 ------------- ------------- ------------- Income tax expense at the statutory rate......... $ 1,934,905 $ 2,143,637 $ 2,050,423 State taxes, net of federal benefit.............. 463,343 502,090 396,657 Research credits................................. (23,861) (39,831) (47,605) Other............................................ 13,600 13,600 13,599 ------------- ------------- ------------- $ 2,387,987 $ 2,619,496 $ 2,413,074 ------------- ------------- ------------- ------------- ------------- -------------
8. COMMITMENTS AND CONTINGENCIES The Division has various purchase commitments for materials, supplies and items of permanent investment incident to the ordinary conduct of business. In the aggregate, such commitments are not at prices in excess of current market. The Division has entered into certain operating leases which require minimum annual payments as follows: 1996 -- $240,000; 1997 -- $156,000; 1998 -- $100,000; 1999 -- $95,000 and 2000 -- $48,000. The total rental expense for all operating leases was $80,000, $171,000 and $260,000 for the years ended December 26, 1993, December 25, 1994 and December 31, 1995, respectively. Certain equipment leased by the Division is used by other Teleflex units which reimburse the Division for their cost. Minimum annual payments for this equipment are as follows: 1996 -- $100,000 and 1997 -- $33,000. Teleflex is involved in a lawsuit in which a commissioned sales representative alleges breach of contract by the Division. The Division reached a settlement on May 14, 1996 in this lawsuit. The F-35 NORTH WALES CONTROLS AND QUADRANTS GROUP (A DIVISION OF TELEFLEX INCORPORATED) NOTES TO FINANCIAL STATEMENTS (CONTINUED) 8. COMMITMENTS AND CONTINGENCIES (CONTINUED) settlement required payment by the Division to the commissioned sales representative of $550,000. The Division had previously accrued approximately $430,000 in relation to this matter. No adjustment has been made to the financial statements for the outcome of this settlement. The United States Environmental Protection Agency notified Teleflex, as well as six other entities, that it is potentially responsible for costs of investigating and cleaning up a superfund site. The Division has received a settlement proposal in a suit with the North Penn Water Authority (NPWA) in June 1996, relative to the same property. The Division may be required to make a payment to NPWA of approximately $462,000. Teleflex has agreed to assume liability, if any is incurred in resolving this issue. Total environmental expenses, exclusive of allocated corporate expenses, recorded by the Division were approximately $17,000, $65,000 and $186,000 for the years ended December 26, 1993, December 25, 1994 and December 31, 1995. The Division is also subject to legal proceedings and claims which arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability, if any, with respect to these actions will not have a material adverse effect on the financial position, results of operations, or cash flows of the Division. F-36 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Board of Directors and Shareholders Advanced Materials Technologies, Inc. We have audited the accompanying consolidated balance sheet of Advanced Materials Technologies, Inc. and subsidiary as of March 31, 1996 and the related consolidated statements of income, shareholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Advanced Materials Technologies, Inc. and subsidiary at March 31, 1996, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. Phoenix, Arizona July 5, 1996, except for Note 12 as to which the date is July 31, 1996 F-37 ADVANCED MATERIALS TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS ASSETS
MARCH 31, 1996 -------------- JUNE 30, 1996 -------------- (UNAUDITED) Current assets: Cash and cash equivalents...................................................... $ 28,997 $ 310,917 Accounts receivable, less allowance for doubtful accounts of $35,000........... 3,961,012 4,617,173 Inventories.................................................................... 1,447,526 1,405,376 Other current assets........................................................... 246,214 15,080 -------------- -------------- Total current assets............................................................. 5,683,749 6,348,546 Property, plant and equipment, at cost: Land........................................................................... 147,844 147,844 Building and leasehold improvements............................................ 1,058,682 1,104,097 Machinery and equipment........................................................ 4,126,342 4,625,202 Office equipment............................................................... 146,455 179,043 Transportation equipment....................................................... 74,598 74,598 -------------- -------------- 5,553,921 6,130,784 Less accumulated depreciation and amortization................................... (1,438,980) (1,560,019) -------------- -------------- 4,114,941 4,570,765 Intangible assets, net........................................................... 861,339 840,881 Officer note receivable.......................................................... 199,541 192,316 Other assets..................................................................... 23,407 23,257 -------------- -------------- Total assets..................................................................... $ 10,882,977 $ 11,975,765 -------------- -------------- -------------- -------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Lines of credit................................................................ $ 1,421,082 $ 1,422,645 Accounts payable............................................................... 880,402 552,519 Accrued expenses............................................................... 457,210 436,523 Income taxes payable........................................................... 352,364 1,191,364 Deferred income taxes.......................................................... 813,000 482,000 Current portion of long-term debt.............................................. 865,636 758,224 -------------- -------------- Total current liabilities........................................................ 4,789,694 4,843,275 Long-term debt, less current portion............................................. 3,142,199 3,197,988 Deferred income taxes............................................................ 382,000 410,000 Commitments...................................................................... -- -- Shareholders' equity: Common stock, no par value, 1,000,000 shares authorized; 20,613 shares issued and outstanding.......................................... 131,193 131,193 Retained earnings.............................................................. 2,437,891 3,393,309 -------------- -------------- Total shareholders' equity....................................................... 2,569,084 3,524,502 -------------- -------------- Total liabilities and shareholders' equity....................................... $ 10,882,977 $ 11,975,765 -------------- -------------- -------------- --------------
See accompanying notes. F-38 ADVANCED MATERIALS TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED MARCH 31, 1996 --------------- THREE MONTHS ENDED JUNE 30, 1996 -------------- (UNAUDITED) Net sales....................................................................... $ 17,035,936 $ 6,214,611 Cost of sales................................................................... 9,608,858 3,604,474 --------------- -------------- Gross profit.................................................................... 7,427,078 2,610,137 Selling, general and administrative expenses.................................... 5,612,344 926,509 --------------- -------------- Income from operations.......................................................... 1,814,734 1,683,628 Other income (expense): Interest income............................................................... 19,286 1,490 Interest expense.............................................................. (270,992) (110,092) Other......................................................................... 11,249 20,392 --------------- -------------- Total other expense............................................................. (240,457) (88,210) --------------- -------------- Income before income taxes...................................................... 1,574,277 1,595,418 Provision for income taxes...................................................... 749,000 640,000 --------------- -------------- Net income...................................................................... $ 825,277 $ 955,418 --------------- -------------- --------------- --------------
See accompanying notes. F-39 ADVANCED MATERIALS TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
COMMON SHARES ---------------------- RETAINED SHARES AMOUNT EARNINGS TOTAL --------- ----------- ------------- ------------- Balances at April 1, 1995................................... 19,643 $ 19,643 $ 1,612,614 $ 1,632,257 Shares issued in connection with options exercised.......... 970 111,550 -- 111,550 Net income.................................................. -- -- 825,277 825,277 --------- ----------- ------------- ------------- Balances at March 31, 1996.................................. 20,613 131,193 2,437,891 2,569,084 Net income (unaudited)...................................... -- -- 955,418 955,418 --------- ----------- ------------- ------------- Balances at June 30, 1996 (unaudited)....................... 20,613 $ 131,193 $ 3,393,309 $ 3,524,502 --------- ----------- ------------- ------------- --------- ----------- ------------- -------------
See accompanying notes. F-40 ADVANCED MATERIALS TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31, 1996 --------------- THREE MONTHS ENDED JUNE 30, 1996 -------------- (UNAUDITED) OPERATING ACTIVITIES Net income...................................................................... $ 825,277 $ 955,418 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization................................................. 314,305 141,497 Deferred income taxes (benefit)............................................... 351,682 (303,000) Loss on disposal of assets.................................................... 8,250 -- Provision for doubtful accounts............................................... 17,527 -- Changes in assets and liabilities: Accounts receivable......................................................... (1,828,656) (656,161) Inventories................................................................. (1,066,206) 42,150 Prepaid expenses............................................................ (4,754) -- Other current assets........................................................ (191,320) 231,134 Accounts payable............................................................ 436,947 (327,883) Accrued expenses............................................................ 80,021 (20,687) Income taxes payable........................................................ 328,065 839,000 --------------- -------------- Net cash (used in) provided by operating activities............................. (728,862) 901,468 INVESTING ACTIVITIES Purchases of property, plant and equipment...................................... (1,034,878) (576,863) Proceeds from disposal of property, plant and equipment......................... 11,994 -- (Increase) decrease in deposits................................................. (9,554) 150 Acquisition of SPOA, net of cash acquired....................................... (761,221) -- --------------- -------------- Net cash used in investing activities........................................... (1,793,659) (576,713) FINANCING ACTIVITIES Net increase in lines of credit................................................. 1,215,194 1,563 Proceeds from long-term debt.................................................... 2,298,001 -- Payments of long-term debt...................................................... (431,416) (51,623) (Increase) decrease in officer note receivable.................................. (199,541) 7,225 Decrease in officer note payable................................................ (678,383) -- --------------- -------------- Net cash provided by (used in) financing activities............................. 2,203,855 (42,835) --------------- -------------- Net (decrease) increase in cash and cash equivalents............................ (318,666) 281,920 Cash and cash equivalents at beginning of period................................ 347,663 28,997 --------------- -------------- Cash and cash equivalents at end of period...................................... $ 28,997 $ 310,917 --------------- -------------- --------------- --------------
See accompanying notes. F-41 ADVANCED MATERIALS TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1996 (INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS Advanced Materials Technologies, Inc. (Company) and its wholly owned subsidiary, Special Processes of Arizona, Inc., are in one line of business as a repair operation of aircraft component parts used in the commercial airline industry. The Company was incorporated in the State of Arizona in January 1984 and is a licensed FAA repair station. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. Significant intercompany accounts and transactions have been eliminated in consolidation. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. INVENTORIES Inventories are stated at the lower of cost or market. Cost has been determined on the first-in, first-out basis. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated on the basis of cost. Depreciation and amortization are computed under the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows: Building and building improvements............................. 30 years 7 - 15 Machinery and equipment........................................ years 5 - 10 Office equipment............................................... years Transportation equipment....................................... 5 years
INTANGIBLES Intangibles assets were acquired in connection with the acquisition of Special Processes of Arizona, Inc. Intangible assets include a noncompete agreement and FAA approvals. The assets are being amortized over their estimated useful lives of 5 to 15 years. Accumulated amortization at March 31, 1996 and June 30, 1996 was $14,452 and $34,910, respectively. Management periodically evaluates the continuing value of its intangibles based upon the expected gross margin on the related assets. INCOME TAXES The Company accounts for income taxes using the liability method in accordance with Statement of Financial Accounting Standards No. 109 -- "Accounting for Income Taxes." STOCK BASED COMPENSATION The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant. 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. REVENUE RECOGNITION Sales are recorded at the time of shipment. F-42 ADVANCED MATERIALS TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 (INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts reported in the balance sheet for cash and cash equivalents, accounts receivable, accounts payable, and borrowings under its short-term revolving credit arrangements approximates their fair values. The fair values of the Company's long-term debt are estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements, and the carrying amounts approximate their fair value. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 2. ACQUISITIONS Effective January 31, 1996, the Company acquired the assets and assumed certain liabilities of Special Processes of Arizona, Inc. (SPOA). Under the terms of the agreement, the Company paid $764,564 in cash and issued a promissory note in the amount of $675,128. The acquisition has been accounted for using the purchase method of accounting; therefore, the accompanying financial statements include the accounts of SPOA since the date of acquisition. The purchase price was allocated to assets acquired based upon their fair market values at the date of acquisition, as follows: Cash and cash equivalents...................................... $ 3,343 Accounts receivable............................................ 416,275 Inventories.................................................... 93,359 Other current assets........................................... 17,626 Property, plant and equipment.................................. 725,000 Intangibles.................................................... 875,791 Line of credit................................................. (205,888) Accounts payable............................................... (236,464) Accrued expenses............................................... (21,462) Long-term debt................................................. (227,888) ---------- $1,439,692 ---------- ----------
Concurrent with the acquisition, the Company entered into a technical consulting agreement with the former owner of SPOA for transition facilitation services to be performed during February and March of 1996. The Company incurred expense of $450,000 related to this agreement for the year ended March 31, 1996. The results of operations of SPOA were not material when compared to the Company. 3. INVENTORIES Inventories consist of the following:
MARCH 31, JUNE 30, 1996 1996 ------------- ------------- Raw materials................................................... $ 152,288 $ 152,288 Work in process................................................. 1,295,238 1,253,088 ------------- ------------- $ 1,447,526 $ 1,405,376 ------------- ------------- ------------- -------------
F-43 ADVANCED MATERIALS TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 (INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED) 4. LINES OF CREDIT The Company has a revolving line of credit with maximum borrowings of the lesser of $1,500,000 or 75 percent of eligible accounts receivable less a borrowing base of $500,000. The revolving line of credit is personally guaranteed by the majority shareholder of the company and collateralized by substantially all receivables and equipment. The revolving line of credit bears interest at prime plus 1 percent and matures July 1996. At March 31, 1996, and June 30, 1996, the balance was $1,370,455 and $1,422,645, respectively, and there were no available funds under the line of credit. The line of credit agreement contains certain financial and other covenants for which the Company was not in compliance as of March 31, 1996. The lines of credit were paid in full subsequent to year-end as is discussed in Note 12. SPOA has a revolving line of credit with maximum borrowings of the lesser of $300,000 or 80 percent of eligible accounts receivable. The revolving line of credit is collateralized by substantially all receivables and equipment. The revolving line of credit bears interest at prime plus 2 percent. This line of credit had a balance of $50,627 at March 31, 1996 and was paid in full and was not renewed in April 1996. The weighted average interest rates in short-term borrowings as of March 31, 1996 was approximately 9.25 percent. F-44 ADVANCED MATERIALS TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 (INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED) 5. LONG-TERM DEBT
MARCH 31, JUNE 30, 1996 1996 ------------- ------------- Long-term debt consists of the following: Note payable to a bank, collateralized by a deed of trust, payable in monthly installments of $16,667, plus interest at prime plus 1.0 percent until December 1998. Guaranteed by the majority shareholder.............. $ 1,950,000 $ 1,900,000 Note payable to an individual, collateralized by substantially all assets of SPOA, payable in annual installments of $261,973 including interest at 8 percent until January 1999. Guaranteed by the majority shareholder..... 675,128 675,128 Note payable to a mortgage company, collateralized by deed of trust, payable in monthly installments of $3,660 including interest at 10.5 percent until March 1997, at which time the remaining balance is expected to be refinanced with bank debt at prime over 60 months; the debt maturities reflect the expected refinancing terms........................ 371,023 369,771 Note payable to a bank, collateralized by equipment, payable in monthly installments of $7,525, plus interest at prime until December 1999. Guaranteed by the majority shareholder................................... 335,636 312,061 Note payable to a bank, collateralized by equipment, payable in monthly installments of $3,457 including interest at prime until June 2001. Guaranteed by the majority shareholder................................... 169,000 169,000 Note payable to a bank, payable in monthly installments of $4,444, plus interest at prime plus 2.5 percent until December 1996, at which time the remaining balance is due. Guaranteed by the majority shareholder......... 141,399 -- Note payable to a bank, collateralized by equipment, payable in monthly installments of $4,059 including interest at 8.15 percent until December 1998. Guaranteed by the majority shareholder............................. 116,392 105,555 Other..................................................................... 249,257 424,697 ------------- ------------- 4,007,835 3,956,212 Less current portion...................................................... 865,636 758,224 ------------- ------------- $ 3,142,199 $ 3,197,988 ------------- ------------- ------------- -------------
Maturities of long-term debt for the five years succeeding March 31, 1996 are $865,636 in 1997, $677,774 in 1998, $1,976,891 in 1999, $148,733 in 2000, and $338,801 in 2001. Certain notes payable contain various covenants pertaining to the maintenance of working capital and net worth for which the Company was not in compliance. The notes are classified in accordance with these scheduled maturities given that such debt was paid in full subsequent to year-end as is discussed in Note 12. F-45 ADVANCED MATERIALS TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 (INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED) 5. LONG-TERM DEBT (CONTINUED) Interest paid during the year ended March 31, 1996 and the three months ended June 30, 1996 was approximately $171,000 and $107,000, respectively. 6. INCOME TAXES Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:
MARCH 31, JUNE 30, 1996 1996 ------------- ------------- Deferred tax liabilities: Tax over book depreciation.................................... $ 427,000 $ 455,000 Inventory basis differences................................... 540,000 209,000 Accounts receivable basis differences......................... 348,000 348,000 ------------- ------------- Total deferred tax liabilities:................................. 1,315,000 1,012,000 Deferred tax assets: Receivables and allowances.................................... 15,000 15,000 Accrued vacation.............................................. 58,000 58,000 Other......................................................... 47,000 47,000 ------------- ------------- Total deferred tax assets....................................... 120,000 120,000 ------------- ------------- Net deferred tax liability...................................... $ 1,195,000 $ 892,000 ------------- ------------- ------------- -------------
Significant components of the federal and state income tax expense are:
MARCH 31, JUNE 30, 1996 1996 ----------- ------------ Current: Federal.......................................................... $ 320,000 $ 730,000 State............................................................ 83,000 213,000 ----------- ------------ Total current...................................................... 403,000 943,000 Deferred: Federal.......................................................... 275,000 (235,000) State............................................................ 71,000 (68,000) ----------- ------------ Total deferred..................................................... 346,000 (303,000) ----------- ------------ $ 749,000 $ 640,000 ----------- ------------ ----------- ------------
The reconciliation of income tax computed at the U.S. federal statutory tax rates to the income tax expense effective rate is as follows:
MARCH 31, JUNE 30, 1996 1996 --------------- ------------- Tax at U.S. statutory rates............................................ 34% 34% State income taxes net of federal benefit.............................. 6 6 Nondeductible expenses................................................. 6 -- Other.................................................................. 1 -- -- -- 47% 40% -- -- -- --
F-46 ADVANCED MATERIALS TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 (INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED) 6. INCOME TAXES (CONTINUED) Total income tax payments, net of any refunds received, during the year ended March 31, 1996 and the three months ended June 30, 1996 were approximately $175,000 and $104,000, respectively. 7. STOCK OPTION PLAN The Company has a stock option plan which covers directors, officers and key employees of the Company. In August of 1993 the Company granted a key employee options to purchase a total of 2,425 shares at $115 per share. The exercise price of the options granted was at a price that approximated the fair value of the common shares at the date of grant. The options are exercisable in five equal annual options of 485 shares. All options expire six years after the date of grant. Options to purchase 970 shares were exercised for $111,550 during 1996. No cash was received under the exercise of these options as the amount due was offset against certain royalties payable due the option holder. No options were exercisable at March 31, 1996 and June 30, 1996, respectively. 8. SIGNIFICANT CUSTOMERS The Company's significant customers are businesses in the aerospace components industry. Credit losses have been provided for in the financial statements and have been within management's expectations. The Company performs ongoing credit evaluations of its customers' financial condition, and generally does not require collateral. Sales to one customer accounted for approximately 62 percent and 56 percent of total sales for the year ended March 31, 1996 and the period ended June 30, 1996, respectively. 9. COMMITMENTS LEASE COMMITMENTS The Company leases real property, vehicles and office equipment under noncancelable operating leases, including buildings leased from the majority shareholder. Certain leases have rent escalation clauses and renewal options up to ten years. Future minimum payments under the noncancelable operating leases with terms in excess of one year consisted of the following at March 31, 1996: 1997........................................................... $ 172,000 1998........................................................... 163,000 1999........................................................... 163,000 2000........................................................... 157,000 2001........................................................... 157,000 Thereafter..................................................... 905,000 ---------- $1,717,000 ---------- ----------
Rental expense under the noncancelable leases was approximately $76,000 and $36,000 for the year ended March 31, 1996 and the three months ended June 30, 1996, respectively, including approximately $26,000 and $31,000 in rental expenses paid to the majority shareholder. ROYALTY AGREEMENT During 1993, the Company formalized a royalty agreement with certain participants regarding the development of technical processes. The participants are compensated 12 percent, in aggregate, of gross revenues generated by the component part number for which the technical process was utilized. The royalty is paid based on revenues generated in the first eighteen months of each covered part numbers F-47 ADVANCED MATERIALS TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 (INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED) 9. COMMITMENTS (CONTINUED) existence. Royalty expense under this agreement was approximately $534,000 and $127,000 for the year ended March 31, 1996 and the three months ended June 30, 1996, respectively, of which approximately $358,000 and $127,000 was paid to the Company's majority shareholder. 10. BENEFIT PLAN The Company sponsors a defined contribution benefit plan covering employees who meet specified age and service requirements. The Company contributes an amount equal to 50 percent of each participant's contribution, not to exceed 6 percent of the employees salary per year per participant. The Company contributed and expensed approximately $43,000 and $12,000 during the year ended March 31, 1996 and the three months ended June 30, 1996, respectively. 11. RELATED PARTY TRANSACTIONS During 1996, the Company incurred $2,500,000 of debt from a bank for which the proceeds were advanced to its majority shareholder as an officer note receivable. The Company also paid a bonus of $2,507,500 to the same officer relating to improving operating results of the business and reduced the officer note receivable by that amount. The outstanding balance on the officer note receivable is unsecured, bears interest at 9.5 percent and is due on demand. 12. SUBSEQUENT EVENT Subsequent to March 31, 1996, a letter of intent was signed by the majority shareholder for an unrelated third party to acquire all of the outstanding stock of the Company for an estimated price of approximately $7,500,000 in cash. On July 31, 1996, the Company completed the sale of its stock to The Triumph Group Holdings, Inc. at which time funds were advanced to extinguish substantially all long-term debt. F-48 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. -------------- TABLE OF CONTENTS
PAGE --------- Prospectus Summary............................. 3 Risk Factors................................... 9 Historical Background.......................... 13 Use of Proceeds................................ 14 Dividend Policy................................ 14 Capitalization................................. 15 Dilution....................................... 16 Selected Financial Data........................ 17 Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 22 Business....................................... 30 Management..................................... 39 Certain Transactions........................... 43 Principal Stockholders......................... 44 Description of Capital Stock................... 45 Direct Sale.................................... 46 Shares Eligible for Future Sale................ 47 Underwriting................................... 48 Legal Matters.................................. 49 Experts........................................ 49 Additional Information......................... 49 Index to Financial Statements.................. F-1
-------------- UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. 2,375,000 SHARES [LOGO] TRIUMPH GROUP, INC. COMMON STOCK ------------ PROSPECTUS ------------ ALEX. BROWN & SONS INCORPORATED DILLON, READ & CO. INC. , 1996 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the estimated amount of various expenses in connection with the sale and distribution of the securities being registered: SEC registration fee......................................... $17,728.45 NASD filing fee.............................................. 5,675.00 NYSE filing fee.............................................. * Printing and engraving expenses.............................. * Legal fees and expenses (including blue sky fees and expenses)................................................... * Accounting fees and expenses................................. * Transfer agent fees.......................................... * Miscellaneous................................................ * ------------- Total........................................................ $1,000,000.00 ------------- -------------
- -------------- * To be provided by amendment. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The By-laws of the Registrant provide for indemnification of directors and officers in accordance with indemnification provisions of the Delaware General Corporation Law. The Delaware statute permits indemnification of directors and officers of a corporation under certain conditions and subject to certain limitations. The Registrant's Certificate of Incorporation, as amended, provides that, subject to certain limitations, no director shall be personally liable to the Registrant or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. The following sales of securities of the Company, including its subsidiaries, took place on the dates indicated (transactions shown are on a pre-Stock Split basis): On May 9, 1995, the Company sold 400 shares of Class A Common Stock to the president of Triumph Air Repair for $52.325 per share and 14% JSDs in the aggregate principal amount of $28,818 which bear interest at the rate of 14% per annum and mature on December 31, 2003. On January 23, 1996, TCI, a subsidiary of the Company, in connection with the acquisition of TCI by the Company, sold 2,150 shares of its common stock to one corporation for $10.00 per share and 10.5% JSDs in the aggregate principal amount of $344,000 which bear interest at the rate of 10.5% per annum and mature in two equal installments on December 31, 2002 and 2003 and sold an aggregate of 2,850 shares of its common stock and $416,000 aggregate principal amount of such 10.5% JSDs to five employees of TCI. On January 23, 1996, the Company issued a subordinated promissory note in connection with its acquisition of TCI in the aggregate principal amount of $5,500,000 which accrues interest at the rate of 10.5% per annum and matures in two equal installments on December 31, 2002 and 2003. The foregoing transactions were exempt from registration under the Securities Act pursuant to Section 4(2) of the Securities Act. II-1 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT NO. - ----------- 1 Form of Underwriting Agreement. 3.1 Amended and Restated Certificate of Incorporation of the Company. 3.2 By-laws of the Company. 4 Form of certificate evidencing Common Stock of the Company.* 5 Opinion of Ballard Spahr Andrews & Ingersoll regarding legality of securities being registered.* 10.1 1996 Stock Option Plan.* 10.2 Non-Employee Directors' Plan* 10.3 Credit Agreement with PNC Bank, N.A. dated July 19, 1996. 10.4 Guaranty of the Company to PNC Bank, N.A. dated July 19, 1996. 10.5 Purchase Agreement dated as of July 22, 1993 between the Company and Citicorp Venture Capital, Ltd. 10.6 Subordinated Promissory Note dated June 1, 1993 payable to MDR Corporation, as amended. 10.7 Stockholders Agreement dated as of July 22, 1993 among the Company, Citicorp Venture Capital, Ltd., World Equity Partners, L.P. and certain members of management of the Company, as amended on May 9, 1995. 10.8 Registration Agreement dated as of July 22, 1993 among the Company, Citicorp Venture Capital, Ltd., World Equity Partners, L.P. and certain members of management of the Company. 10.9 Warrant dated July 22, 1993 issued to World Equity Partners, L.P. 10.10 Warrant Agreement dated as of July 22, 1993 among the Company, Citicorp Venture Capital, Ltd. and World Equity Partners, L.P. 10.11 Asset Purchase Agreement dated as of December 31, 1995 among the Company, Triumph Control Systems, Inc. and Teleflex Incorporated. 10.12 Subordinated Promissory Note dated December 31, 1995 payable to Teleflex Incorporated. 10.13 Stock Purchase Agreement dated as of July 31, 1996 among The Triumph Group Holdings, Inc., Advanced Materials Technologies Inc. and certain members of management of Advanced Materials Technologies Inc. 10.14 Executive Securities Agreement dated July 31, 1996 between the Company and Jay Donkersloot. 10.15 Non-Competition Agreement dated July 31, 1996 between the Company and Jay Donkersloot. 10.16 Note Modification Agreement dated December 31, 1995 between the Company and MDR Corporation 10.17 Executive Stock Agreement dated as of May 9, 1995 between the Company and John M. Brasch 11.1 Statements re: computations of per share earnings. 21.1 Subsidiaries of the Registrant. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Price Waterhouse LLP. 23.3 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 5).* 27 Financial Data Schedule.
- -------------- * To be filed by amendment. II-2 ITEM 17. UNDERTAKINGS. The Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus 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. The Registrant hereby undertakes to provide to the underwriter at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names required by the underwriter to permit prompt delivery to each purchaser. 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. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of Chester, Commonwealth of Pennsylvania, on August 22, 1996. TRIUMPH GROUP, INC. By: ________/s/ RICHARD C. ILL________ Richard C. Ill PRESIDENT AND CHIEF EXECUTIVE OFFICER Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. /s/ RICHARD C. ILL President, Chief Executive August 22, 1996 Richard C. Ill Officer and Director Senior Vice President, Chief /s/ JOHN R. BARTHOLDSON Financial Officer, Treasurer August 22, 1996 John R. Bartholdson and Director /s/ RICHARD C. GOZON Director August 22, 1996 Richard C. Gozon /s/CLAUDE F. KRONK Director August 22, 1996 Claude F. Kronk /s/ JOSEPH M. SILVESTRI Director August 22, 1996 Joseph M. Silvestri /s/ MICHAEL A. DELANEY Director August 22, 1996 Michael A. Delaney
EXHIBIT INDEX
EXHIBIT NUMBER PAGE - --------- ----- 1 Form of Underwriting Agreement. 3.1 Amended and Restated Certificate of Incorporation of the Company. 3.2 By-laws of the Company. 4 Form of certificate evidencing Common Stock of the Company.* 5 Opinion of Ballard Spahr Andrews & Ingersoll regarding legality of securities being registered.* 10.1 1996 Stock Option Plan.* 10.2 Non-Employee Directors' Plan* 10.3 Credit Agreement with PNC Bank, N.A. dated July 19, 1996. 10.4 Guaranty of the Company to PNC Bank, N.A. dated July 19, 1996. 10.5 Purchase Agreement dated as of July 22, 1993 between the Company and Citicorp Venture Capital, Ltd. 10.6 Subordinated Promissory Note dated June 1, 1993 payable to MDR Corporation. 10.7 Stockholders Agreement dated as of July 22, 1993 among the Company, Citicorp Venture Capital, Ltd., World Equity Partners, L.P. and certain members of management of the Company, as amended on May 9, 1995. 10.8 Registration Agreement dated as of July 22, 1993 among the Company, Citicorp Venture Capital, Ltd., World Equity Partners, L.P. and certain members of management of the Company. 10.9 Warrant dated July 22, 1993 issued to World Equity Partners, L.P. 10.10 Warrant Agreement dated as of July 22, 1993 among the Company, Citicorp Venture Capital, Ltd. and World Equity Partners, L.P. 10.11 Asset Purchase Agreement dated as of December 31, 1995 among the Company, Triumph Control Systems, Inc. and Teleflex Incorporated. 10.12 Subordinated Promissory Note dated December 31, 1995 payable to Teleflex Incorporated. 10.13 Stock Purchase Agreement dated as of July 31, 1996 among The Triumph Group Holdings, Inc., Advanced Materials Technologies, Inc. and certain members of management of Advanced Materials Technologies, Inc. 10.14 Executive Securities Agreement dated July 31, 1996 between the Company and Jay Donkersloot. 10.15 Non-Competition Agreement dated July 31, 1996 between the Company and Jay Donkersloot. 10.16 Note Modification Agreement dated December 31, 1995 between the Company and MDR Corporation 10.17 Executive Stock Agreement dated as of May 9, 1995 between the Company and John M. Brasch 11.1 Statements re: computations of per share earnings. 21.1 Subsidiaries of the Registrant. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Price Waterhouse LLP. 23.3 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 5).* 27 Financial Data Schedule.
- -------------- * To be filed by amendment. EX-1 2 EX-1 2,375,000 SHARES TRIUMPH GROUP, INC. COMMON STOCK ($.001 PAR VALUE) UNDERWRITING AGREEMENT , 1996 ALEX. BROWN & SONS INCORPORATED DILLON, READ & CO. INC. As Representatives of the Several Underwriters c/o Alex. Brown & Sons Incorporated 135 East Baltimore Street Baltimore, Maryland 21202 Gentlemen: Triumph Group, Inc., a Delaware corporation (the "Company"), proposes to sell to the several underwriters (the "Underwriters") named in Schedule I hereto for whom you are acting as representatives (the "Representatives") an aggregate of 2,375,000 shares of the Company's Common Stock, $.001 par value (the "Firm Shares"). The respective amounts of the Firm Shares to be so purchased by the several Underwriters are set forth opposite their names in Schedule I hereto. The Company also proposes to sell at the Underwriters' option an aggregate of up to 375,000 additional shares of the Company's Common Stock (the "Option Shares") as set forth below. As the Representatives, you have advised the Company (a) that you are authorized to enter into this Agreement on behalf of the several Underwriters, and (b) that the several Underwriters are willing, acting severally and not jointly, to purchase the numbers of Firm Shares set forth opposite their respective names in Schedule I, plus their pro rata portion of the Option Shares if you elect to exercise the over-allotment option in whole or in part for the accounts of the several Underwriters. The Firm Shares and the Option Shares (to the extent the aforementioned option is exercised) are herein collectively called the "Shares." In consideration of the mutual agreements contained herein and of the interests of the parties in the transactions contemplated hereby, the parties hereto agree as follows: 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND PRINCIPLE SHAREHOLDERS. (a) The Company represents and warrants to each of the Underwriters as follows: (i) A registration statement on Form S-1 (File No. 333-______) with respect to the Shares has been carefully prepared by the Company in conformity with the requirements of the Securities Act of 1933, as amended (the "Act"), and the Rules and Regulations (the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") thereunder and has been filed with the Commission. Copies of such registration statement, including any amendments thereto, the preliminary prospectuses (meeting the requirements of the Rules and Regulations) contained therein and the exhibits, financial statements and schedules, as finally amended and revised, have heretofore been delivered by the Company to you. Such registration statement, together with any registration statement filed by the Company pursuant to Rule 462 (b) of the Act, herein referred to as the "Registration Statement," which shall be deemed to include all information omitted therefrom in reliance upon Rule 430A and contained in the Prospectus referred to below, has become effective under the Act and no post-effective amendment to the Registration Statement has been filed as of the date of this Agreement. "Prospectus" means (a) the form of prospectus first filed with the Commission pursuant to Rule 424(b) or (b) the last preliminary prospectus included in the Registration Statement filed prior to the time it becomes effective or filed pursuant to Rule 424(a) under the Act that is delivered by the Company to the Underwriters for delivery to purchasers of the Shares, together with the term sheet or abbreviated term sheet filed with the Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary prospectus included in the Registration Statement prior to the time it becomes effective is herein referred to as a "Preliminary Prospectus." (ii) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement. Each of the subsidiaries of the Company as listed in Exhibit 21 to Item 16(a) of the Registration Statement (collectively, the "Subsidiaries") has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement. The Subsidiaries are the only subsidiaries, direct or indirect, of the Company. The Company and each of the Subsidiaries are duly qualified to transact business in all jurisdictions in which the conduct of their business requires such qualification. The outstanding shares of capital stock of each of the Subsidiaries have been duly authorized and validly issued, are fully paid and non-assessable and to the extent set forth on Exhibit A hereto are owned by the Company or another Subsidiary free and clear of all liens, encumbrances and equities and claims; and no options, warrants or other rights to purchase, agreements or other obligations to issue or other rights to convert any obligations into shares of capital stock or ownership interests in the Subsidiaries are outstanding. (iii) The outstanding shares of Common Stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; the Shares to be issued and sold by the Company have been duly authorized and when issued and paid for as contemplated herein will be validly issued, fully paid and non-assessable; and no preemptive rights of stockholders exist with respect to any of the Shares or the issue and sale thereof. Neither the filing of the Registration Statement nor the offering or sale of the Shares as contemplated by this Agreement gives rise to any rights, other than those which have been waived or satisfied, for or relating to the registration of any shares of Common Stock. (iv) The information set forth under the caption "Capitalization" in the Prospectus is true and correct. All of the Shares conform to the description thereof contained in the Registration Statement. The form of certificates for the Shares conforms to the corporate law of the jurisdiction of the Company's incorporation. (v) The Commission has not issued an order preventing or suspending the use of any Prospectus relating to the proposed offering of the Shares nor instituted proceedings for that purpose. The Registration Statement contains, and the Prospectus and any amendments or supplements thereto will contain, all statements which are required to be stated therein by, and will conform, to the requirements of the Act and the Rules and Regulations. The Registration Statement and any amendment thereto do not contain, and will not contain, any untrue statement of a material fact and do not omit, and will not omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus and any amendments and supplements thereto do not contain, and will not contain, any untrue statement of material fact; and do not omit, and will not omit, to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to information contained in or omitted from the Registration Statement or the Prospectus, or any such amendment or supplement, in reliance upon, and in conformity with, written information furnished to the Company by or on behalf of any Underwriter through the Representatives, specifically for use in the preparation thereof. (vi) The consolidated financial statements of the Company and the Subsidiaries, together with related notes and schedules as set forth in the Registration Statement, present fairly the financial position and the results of operations and cash flows of the Company and the consolidated Subsidiaries, at the indicated dates and for the indicated periods. Such financial statements and related schedules have been prepared in accordance with generally accepted principles of accounting, consistently applied throughout the periods involved, except as disclosed herein, and all adjustments necessary for a fair presentation of results for such periods have been made. The summary financial and statistical data included in the Registration Statement presents fairly the information shown therein and such data has been compiled on a basis consistent with the financial statements presented therein and the books and records of the company. The pro forma financial statements and other pro forma financial information included in the Registration Statement and the Prospectus present fairly the information shown therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements, have been properly compiled on the pro forma bases described therein, and, in the opinion of the Company, the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein. (vii) Ernst & Young LLP, who have certified [certain of] the financial statements filed with the Commission as part of the Registration Statement, are independent public accountants as required by the Act and the Rules and Regulations. (viii) There is no action, suit, claim or proceeding pending or, to the knowledge of the Company, threatened against the Company or any of the Subsidiaries before any court or administrative agency or otherwise which if determined adversely to the Company or any of its Subsidiaries might result in any material adverse change in the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and of the Subsidiaries taken as a whole or to prevent the consummation of the transactions contemplated hereby, except as set forth in the Registration Statement. (ix) The Company and the Subsidiaries have good and marketable title to all of the properties and assets reflected in the financial statements (or as described in the Registration Statement) hereinabove described, subject to no lien, mortgage, pledge, charge or encumbrance of any kind except those reflected in such financial statements (or as described in the Registration Statement) or which are not material in amount. The Company and the Subsidiaries occupy their leased properties under valid and binding leases conforming in all material respects to the description thereof set forth in the Registration Statement. (x) The Company and the Subsidiaries have filed all federal, state, local and foreign income tax returns which have been required to be filed and have paid all taxes indicated by said returns and all assessments received by them or any of them to the extent that such taxes have become due. All tax liabilities have been adequately provided for in the financial statements of the Company. (xi) Since the respective dates as of which information is given in the Registration Statement, as it may be amended or supplemented, there has not been any material adverse change or any development involving a prospective material adverse change in or affecting the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise), or prospects of the Company and its Subsidiaries taken as a whole, whether or not occurring in the ordinary course of business, and there has not been any material transaction entered into or any material transaction that is probable of being entered into by the Company or the Subsidiaries, other than transactions in the ordinary course of business and changes and transactions described in the Registration Statement, as it may be amended or supplemented. The Company and the Subsidiaries have no material contingent obligations which are not disclosed in the Company's financial statements which are included in the Registration Statement. (xii) Neither the Company nor any of the Subsidiaries is or with the giving of notice or lapse of time or both, will be, in violation of or in default under its respective Certificate of Incorporation or charter, as applicable, or By-Laws or under any agreement, lease, contract, indenture or other instrument or obligation to which it is a party or by which it, or any of its properties, is bound and which default is of material significance in respect of the condition, financial or otherwise of the Company and its Subsidiaries taken as a whole or the business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and the Subsidiaries taken as a whole. The execution and delivery of this Agreement and the consummation of the transactions herein contemplated and the fulfillment of the terms hereof will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust or other agreement or instrument to which the Company or any Subsidiary is a party, or of the Certificate of Incorporation or By-Laws of the Company or any order, rule or regulation applicable to the Company or any Subsidiary of any court or of any regulatory body or administrative agency or other governmental body having jurisdiction. (xiii) Each approval, consent, order, authorization, designation, declaration or filing by or with any regulatory, administrative or other governmental body necessary in connection with the execution and delivery by the Company of this Agreement and the consummation of the transactions herein contemplated (except such additional steps as may be required by the Commission, the National Association of Securities Dealers, Inc. (the "NASD") or such additional steps as may be necessary to qualify the Shares for public offering by the Underwriters under state securities or Blue Sky laws) has been obtained or made and is in full force and effect. (xiv) The Company and each of the Subsidiaries holds all material licenses, certificates and permits from governmental authorities which are necessary to the conduct of their businesses; and neither the Company nor any of the Subsidiaries has infringed any patents, patent rights, trade names, trademarks or copyrights, which infringement is material to the business of the Company and the Subsidiaries taken as a whole. The Company knows of no material infringement by others of patents, patent rights, trade names, trademarks or copyrights owned by or licensed to the Company. (xv) Neither the Company, nor to the Company's best knowledge, any of its affiliates, has taken or may take, directly or indirectly, any action designed to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of Common Stock to facilitate the sale or resale of the Shares. (xvi) Neither the Company nor any Subsidiary is an "investment company" within the meaning of such term under the Investment Company Act of 1940 (the "1940 Act") and the rules and regulations of the Commission thereunder. (xvii) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (xviii) The Company and each of its Subsidiaries carry, or are covered by, insurance in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar industries. (xix) The Company is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company would have any liability; the Company has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code"); and each "pension plan" for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification. (xx) The Company confirms as of the date hereof that it is in compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198, AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH CUBA, and the Company further agrees that if it commences engaging in business with the government of Cuba or with any person or affiliate located in Cuba after the date the Registration Statement becomes or has become effective with the Commission or with the Florida Department of Banking and Finance (the "Department"), whichever date is later, or if the information reported or incorporated by reference in the Prospectus, if any, concerning the Company's business with Cuba or with any person or affiliate located in Cuba changes in any material way, the Company will provide the Department notice of such business or change, as appropriate, in a form acceptable to the Department. (xxi) The Company and its Subsidiaries (a) are in compliance with any and all material applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (b) have no properties listed or proposed for listing on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and neither the Company nor any Subsidiary has received written notification of any pending or threatened claims for personal injury or property damage with respect thereto or notice that it or they is a potentially responsible person ("PRP") for environmental remediation costs, (c) have received all material permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses, and (d) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, designation as a CERCLA site or as a PRP, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not have a material effect on the Company or any of its Subsidiaries. (xxii) The Shares have been approved for listing on the New York Stock Exchange. 2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES. (a) On the basis of the representations, warranties and covenants herein contained, and subject to the conditions herein set forth, the Company agrees to sell to the Underwriters and each Underwriter agrees, severally and not jointly, to purchase, at a price of $_____ per share, the number of Firm Shares set forth opposite the name of each Underwriter in Schedule I hereof, subject to adjustments in accordance with Section 9 hereof. (b) Payment for the Firm Shares to be sold hereunder is to be made in New York Clearing House funds by certified or bank cashier's checks drawn to the order of the Company against delivery of certificates therefor to the Representatives for the several accounts of the Underwriters. Such payment and delivery are to be made at the offices of Alex. Brown & Sons Incorporated, 135 East Baltimore Street, Baltimore, Maryland, at 10:00 a.m., Baltimore time, on the third business day after the date of this Agreement or at such other time and date not later than five business days thereafter as you and the Company shall agree upon, such time and date being herein referred to as the "Closing Date." (As used herein, "business day" means a day on which the New York Stock Exchange is open for trading and on which banks in New York are open for business and are not permitted by law or executive order to be closed.) The certificates for the Firm Shares will be delivered in such denominations and in such registrations as the Representatives request in writing not later than the second full business day prior to the Closing Date, and will be made available for inspection by the Representatives at least one business day prior to the Closing Date. (c) In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the several Underwriters to purchase the Option Shares at the price per share as set forth in the first paragraph of this Section 2. The option granted hereby may be exercised in whole or in part by giving written notice (i) at any time before the Closing Date and (ii) only once thereafter within 30 days after the date of this Agreement, by you, as Representatives of the several Underwriters, to the Company setting forth the number of Option Shares as to which the several Underwriters are exercising the option, the names and denominations in which the Option Shares are to be registered and the time and date at which such certificates are to be delivered. The time and date at which certificates for Option Shares are to be delivered shall be determined by the Representatives but shall not be earlier than three nor later than 10 full business days after the exercise of such option, nor in any event prior to the Closing Date (such time and date being herein referred to as the "Option Closing Date"). If the date of exercise of the option is three or more days before the Closing Date, the notice of exercise shall set the Closing Date as the Option Closing Date. The number of Option Shares to be purchased by each Underwriter shall be in the same proportion to the total number of Option Shares being purchased as the number of Firm Shares being purchased by such Underwriter bears to 2,500,000, adjusted by you in such manner as to avoid fractional shares. The option with respect to the Option Shares granted hereunder may be exercised only to cover over-allotments in the sale of the Firm Shares by the Underwriters. You, as Representatives of the several Underwriters, may cancel such option at any time prior to its expiration by giving written notice of such cancellation to the Company. To the extent, if any, that the option is exercised, payment for the Option Shares shall be made on the Option Closing Date in New York Clearing House funds by certified or bank cashier's check drawn to the order of the Company against delivery of certificates therefor at the offices of Alex. Brown & Sons Incorporated, 135 East Baltimore Street, Baltimore, Maryland. 3. OFFERING BY THE UNDERWRITERS. It is understood that the several Underwriters are to make a public offering of the Firm Shares as soon as the Representatives deem it advisable to do so. The Firm Shares are to be initially offered to the public at the initial public offering price set forth in the Prospectus. The Representatives may from time to time thereafter change the public offering price and other selling terms. To the extent, if at all, that any Option Shares are purchased pursuant to Section 2 hereof, the Underwriters will offer them to the public on the foregoing terms. It is further understood that you will act as the Representatives for the Underwriters in the offering and sale of the Shares in accordance with a Master Agreement Among Underwriters entered into by you and the several other Underwriters. 4. COVENANTS OF THE COMPANY. (a) The Company covenants and agrees with the several Underwriters that: (i) The Company will (A) use its best efforts to cause the Registration Statement to become effective or, if the procedure in Rule 430A of the Rules and Regulations is followed, to prepare and timely file with the Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form approved by the Representatives containing information previously omitted at the time of effectiveness of the Registration Statement in reliance on Rule 430A of the Rules and Regulations, and (B) not file any amendment to the Registration Statement or supplement to the Prospectus of which the Representatives shall not previously have been advised and furnished with a copy or to which the Representatives shall have reasonably objected in writing or which is not in compliance with the Rules and Regulations. (ii) The Company will advise the Representatives promptly (A) when the Registration Statement or any post-effective amendment thereto shall have become effective, (B) of receipt of any comments from the Commission, (C) of any request of the Commission for amendment of the Registration Statement or for supplement to the Prospectus or for any additional information, and (D) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the use of the Prospectus or of the institution of any proceedings for that purpose. The Company will use its best efforts to prevent the issuance of any such stop order preventing or suspending the use of the Prospectus and to obtain as soon as possible the lifting thereof, if issued. (iii) The Company will cooperate with the Representatives in endeavoring to qualify the Shares for sale under the securities laws of such jurisdictions as the Representatives may reasonably have designated in writing and will make such applications, file such documents, and furnish such information as may be reasonably required for that purpose, provided the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction where it is not now so qualified or required to file such a consent. The Company will, from time to time, prepare and file such statements, reports, and other documents, as are or may be required to continue such qualifications in effect for so long a period as the Representatives may reasonably request for distribution of the Shares. (iv) The Company will deliver to, or upon the order of, the Representatives, from time to time, as many copies of any Preliminary Prospectus as the Representatives may reasonably request. The Company will deliver to, or upon the order of, the Representatives during the period when delivery of a Prospectus is required under the Act, as many copies of the Prospectus in final form, or as thereafter amended or supplemented, as the Representatives may reasonably request. The Company will deliver to the Representatives at or before the Closing Date, four signed copies of the Registration Statement and all amendments thereto including all exhibits filed therewith, and will deliver to the Representatives such number of copies of the Registration Statement (including such number of copies of the exhibits filed therewith that may reasonably be requested), and of all amendments thereto, as the Representatives may reasonably request. (v) The Company will comply with the Act and the Rules and Regulations, and the Securities Exchange Act of 1934 (the "Exchange Act"), and the rules and regulations of the Commission thereunder, so as to permit the completion of the distribution of the Shares as contemplated in this Agreement and the Prospectus. If during the period in which a prospectus is required by law to be delivered by an Underwriter or dealer, any event shall occur as a result of which, in the judgment of the Company or in the reasonable opinion of the Underwriters, it becomes necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances existing at the time the Prospectus is delivered to a purchaser, not misleading, or, if it is necessary at any time to amend or supplement the Prospectus to comply with any law, the Company promptly will prepare and file with the Commission an appropriate amendment to the Registration Statement or supplement to the Prospectus so that the Prospectus as so amended or supplemented will not, in the light of the circumstances when it is so delivered, be misleading, or so that the Prospectus will comply with the law. (vi) The Company will make generally available to its security holders, as soon as it is practicable to do so, but in any event not later than 15 months after the effective date of the Registration Statement, an earning statement (which need not be audited) in reasonable detail, covering a period of at least 12 consecutive months beginning after the effective date of the Registration Statement, which earning statement shall satisfy the requirements of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will advise you in writing when such statement has been so made available. (vii) The Company will, for a period of five years from the Closing Date, deliver to the Representatives copies of annual reports and copies of all other documents, reports and information furnished by the Company to its stockholders or filed with any securities exchange pursuant to the requirements of such exchange or with the Commission pursuant to the Act or the Exchange Act. The Company will deliver to the Representatives similar reports with respect to significant subsidiaries, as that term is defined in the Rules and Regulations, which are not consolidated in the Company's financial statements. (viii) No offering, sale, short sale or other disposition of any shares of Common Stock of the Company or other securities convertible into or exchangeable or exercisable for shares of Common Stock or derivative of Common Stock (or agreement for such) will be made for a period of 180 days after the date of this Agreement, directly or indirectly, by the Company otherwise than hereunder or with the prior written consent of Alex. Brown & Sons Incorporated. (ix) The Company will use its best efforts to cause the Shares to be listed on the New York Stock Exchange. (x) The Company has caused each officer and director and the principal shareholders of the Company to furnish to you, on or prior to the date of this agreement, a letter or letters, in form and substance satisfactory to the Underwriters, pursuant to which each such person shall agree not to offer, sell, sell short or otherwise dispose of any shares of Common Stock of the Company or other capital stock of the Company, or any other securities convertible, exchangeable or exercisable for Common Shares or derivative of Common Shares owned by such person or request the registration for the offer or sale of any of the foregoing (or as to which such person has the right to direct the disposition of) for a period of 180 days after the date of this Agreement, directly or indirectly, except with the prior written consent of Alex. Brown & Sons Incorporated ("Lockup Agreements"). (xi) The Company shall apply the net proceeds of its sale of the Shares as set forth in the Prospectus and shall file such reports with the Commission with respect to the sale of the Shares and the application of the proceeds therefrom as may be required in accordance with Rule 463 under the Act. (xii) The Company shall not invest, or otherwise use the proceeds received by the Company from its sale of the Shares in such a manner as would require the Company or any of the Subsidiaries to register as an investment company under the 1940 Act. (xiii) The Company will maintain a transfer agent and, if necessary under the jurisdiction of incorporation of the Company, a registrar for the Common Stock. (xiv) The Company will not take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any securities of the Company. 5. COSTS AND EXPENSES. The Company will pay all costs, expenses and fees incident to the performance of the obligations of the Company under this Agreement, including, without limiting the generality of the foregoing, the following: accounting fees of the Company; the fees and disbursements of counsel for the Company; the cost of printing and delivering to, or as requested by, the Underwriters copies of the Registration Statement, Preliminary Prospectuses, the Prospectus, this Agreement, the Underwriters' Selling Memorandum, the Underwriters' Invitation Letter, the Listing Application, the Blue Sky Survey and any supplements or amendments thereto; the filing fees of the Commission; the filing fees and expenses (including legal fees and disbursements) incident to securing any required review by the NASD of the terms of the sale of the Shares; the Listing Fee of the New York Stock Exchange; and the expenses, including the fees and disbursements of counsel for the Underwriters, incurred in connection with the qualification of the Shares under State securities or Blue Sky laws. The Company agrees to pay all costs and expenses of the Underwriters, including the fees and disbursements of counsel for the Underwriters, incident to the offer and sale of directed shares of the Common Stock by the Underwriters to employees and persons having business relationships with the Company and its Subsidiaries. The Company shall not, however, be required to pay for any of the Underwriters expenses (other than those related to qualification under NASD regulation and State securities or Blue Sky laws) except that, if this Agreement shall not be consummated because the conditions in Section 6 hereof are not satisfied, or because this Agreement is terminated by the Representatives pursuant to Section 11 hereof, or by reason of any failure, refusal or inability on the part of the Company to perform any undertaking or satisfy any condition of this Agreement or to comply with any of the terms hereof on its part to be performed, unless such failure to satisfy said condition or to comply with said terms be due to the default or omission of any Underwriter, then the Company shall reimburse the several Underwriters for reasonable out-of-pocket expenses, including fees and disbursements of counsel, reasonably incurred in connection with investigating, marketing and proposing to market the Shares or in contemplation of performing their obligations hereunder; but the Company shall not in any event be liable to any of the several Underwriters for damages on account of loss of anticipated profits from the sale by them of the Shares. 6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS. The several obligations of the Underwriters to purchase the Firm Shares on the Closing Date and the Option Shares, if any, on the Option Closing Date are subject to the accuracy, as of the Closing Date or the Option Closing Date, as the case may be, of the representations and warranties of the Company contained herein, and to the performance by the Company of its covenants and obligations hereunder and to the following additional conditions: (a) The Registration Statement and all post-effective amendments thereto shall have become effective and any and all filings required by Rule 424 and Rule 430A of the Rules and Regulations shall have been made, and any request of the Commission for additional information (to be included in the Registration Statement or otherwise) shall have been disclosed to the Representatives and complied with to their reasonable satisfaction. No stop order suspending the effectiveness of the Registration Statement, as amended from time to time, shall have been issued and no proceedings for that purpose shall have been taken or, to the knowledge of the Company, shall be contemplated by the Commission and no injunction, restraining order, or order of any nature by a Federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance of the Shares. (b) The Representatives shall have received on the Closing Date or the Option Closing Date, as the case may be, the opinion of Ballard Spahr Andrews & Ingersoll, counsel for the Company, dated the Closing Date or the Option Closing Date, as the case may be, addressed to the Underwriters (and stating that it may be relied upon by counsel to the Underwriters) to the effect that: (i) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement; each of the Subsidiaries has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement; the Company and each of the Subsidiaries are duly qualified to transact business in all jurisdictions in which the conduct of their business requires such qualification, or in which the failure to qualify would have a materially adverse effect upon the business of the Company and the Subsidiaries taken as a whole; and the outstanding shares of capital stock of each of the Subsidiaries have been duly authorized and validly issued and are fully paid and non-assessable and are owned by the Company or a Subsidiary; and, to the best of such counsel's knowledge, the outstanding shares of capital stock of each of the Subsidiaries is owned free and clear of all liens, encumbrances and equities and claims, and no options, warrants or other rights to purchase, agreements or other obligations to issue or other rights to convert any obligations into any shares of capital stock or of ownership interests in the Subsidiaries are outstanding. (ii) The Company has authorized and outstanding capital stock as set forth under the caption "Capitalization" in the Prospectus; the authorized shares of the Company's Common Stock have been duly authorized; the outstanding shares of the Company's Common Stock have been duly authorized and validly issued and are fully paid and non-assessable; all of the Shares conform to the description thereof contained in the Prospectus; the certificates for the Shares, assuming they are in the form filed with the Commission, are in due and proper form; the shares of Common Stock, including the Option Shares, if any, to be sold by the Company pursuant to this Agreement have been duly authorized and will be validly issued, fully paid and non-assessable when issued and paid for as contemplated by this Agreement; and no preemptive rights of stockholders exist with respect to any of the Shares or the issue or sale thereof. (iii) Except as described in or contemplated by the Prospectus, to the knowledge of such counsel, there are no outstanding securities of the Company convertible or exchangeable into or evidencing the right to purchase or subscribe for any shares of capital stock of the Company and there are no outstanding or authorized options, warrants or rights of any character obligating the Company to issue any shares of its capital stock or any securities convertible or exchangeable into or evidencing the right to purchase or subscribe for any shares of such stock; and except as described in the Prospectus, to the knowledge of such counsel, no holder of any securities of the Company or any other person has the right, contractual or otherwise, which has not been satisfied or effectively waived, to cause the Company to sell or otherwise issue to them, or to permit them to underwrite the sale of, any of the Shares or the right to have any Common Shares or other securities of the Company included in the Registration Statement or the right, as a result of the filing of the Registration Statement, to require registration under the Act of any shares of Common Stock or other securities of the Company. (iv) The Registration Statement has become effective under the Act and, to the best of the knowledge of such counsel, no stop order proceedings with respect thereto have been instituted or are pending or threatened under the Act. (v) The Registration Statement, the Prospectus and each amendment or supplement thereto comply as to form in all material respects with the requirements of the Act and the applicable rules and regulations thereunder (except that such counsel need express no opinion as to the financial statements and related schedules). (vi) The statements under the captions "Historical Background," "Business-Environmental Matters," "Management," "Certain Transactions," "Description of Capital Stock" and "Shares Eligible for Future Sale" in the Prospectus, insofar as such statements constitute a summary of documents referred to therein or matters of law, fairly summarize in all material respects the information called for with respect to such documents and matters. (vii) Such counsel does not know of any contracts or documents required to be filed as exhibits to the Registration Statement or described in the Registration Statement or the Prospectus which are not so filed or described as required, and such contracts and documents as are summarized in the Registration Statement or the Prospectus are fairly summarized in all material respects. (viii) Such counsel knows of no material legal or governmental proceedings pending or threatened against the Company or any of the Subsidiaries except as set forth in the Prospectus. (ix) The execution and delivery of this Agreement and the consummation of the transactions herein contemplated do not and will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, the Certificate of Incorporation or By-laws of the Company, or any agreement or instrument known to such counsel to which the Company or any of the Subsidiaries is a party or by which the Company or any of the Subsidiaries may be bound. (x) This Agreement has been duly authorized, executed and delivered by the Company. (xi) No approval, consent, order, authorization, designation, declaration or filing by or with any regulatory, administrative or other governmental body is necessary in connection with the execution and delivery of this Agreement and the consummation of the transactions herein contemplated (other than as may be required by the NASD or as required by State securities and Blue Sky laws as to which such counsel need express no opinion) except such as have been obtained or made, specifying the same. (xii) The Company is not, and will not become, as a result of the consummation of the transactions contemplated by this Agreement, and application of the net proceeds therefrom as described in the Prospectus, required to register as an investment company under the 1940 Act. In rendering such opinion Ballard Spahr Andrews & Ingersoll may rely as to matters governed by the laws of states other than the corporate law of the States of Delaware and Pennsylvania or Federal laws on local counsel in such jurisdictions, provided that in each case Ballard Spahr Andrews & Ingersoll shall state that they believe that they and the Underwriters are justified in relying on such other counsel. In addition to the matters set forth above, such opinion shall also include a statement to the effect that nothing has come to the attention of such counsel which leads them to believe that (i) the Registration Statement, at the time it became effective under the Act (but after giving effect to any modifications incorporated therein pursuant to Rule 430A under the Act) and as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) the Prospectus, or any supplement thereto, on the date it was filed pursuant to the Rules and Regulations and as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements, in the light of the circumstances under which they are made, not misleading (except that such counsel need express no view as to financial statements, schedules and statistical information therein). With respect to such statement, Ballard Spahr Andrews & Ingersoll may state that their belief is based upon the procedures set forth therein, but is without independent check and verification. (c) The Representatives shall have received from Wilmer, Cutler & Pickering, counsel for the Underwriters, an opinion dated the Closing Date or the Option Closing Date, as the case may be, substantially to the effect specified in subparagraphs (ii), (iii), (iv) and (ix) of Paragraph (b) of this Section 6, and that the Company is a duly organized and validly existing corporation under the laws of the State of Delaware. In rendering such opinion Wilmer, Cutler & Pickering may rely as to all matters governed other than by the laws of the State of Maryland or Federal laws on the opinion of counsel referred to in Paragraph (b) of this Section 6. In addition to the matters set forth above, such opinion shall also include a statement to the effect that nothing has come to the attention of such counsel which leads them to believe that (i) the Registration Statement, or any amendment thereto, as of the time it became effective under the Act (but after giving effect to any modifications incorporated therein pursuant to Rule 430A under the Act) as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) the Prospectus, or any supplement thereto, on the date it was filed pursuant to the Rules and Regulations and as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact, necessary in order to make the statements, in the light of the circumstances under which they are made, not misleading (except that such counsel need express no view as to financial statements, schedules and statistical information therein). With respect to such statement, Wilmer, Cutler & Pickering may state that their belief is based upon the procedures set forth therein, but is without independent check and verification. (d) The Representatives shall have received at or prior to the Closing Date from Wilmer, Cutler & Pickering a memorandum or summary, in form and substance satisfactory to the Representatives, with respect to the qualification for offering and sale by the Underwriters of the Shares under the State securities or Blue Sky laws of such jurisdictions as the Representatives may reasonably have designated to the Company. (e) You shall have received, on each of the dates hereof, the Closing Date and the Option Closing Date, as the case may be, a letter dated the date hereof, the Closing Date or the Option Closing Date, as the case may be, in form and substance satisfactory to you, of Ernst & Young LLP confirming that they are independent public accountants within the meaning of the Act and the applicable published Rules and Regulations thereunder and stating that in their opinion the financial statements and schedules examined by them and included in the Registration Statement comply in form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations; and containing such other statements and information as is ordinarily included in accountants' "comfort letters" to Underwriters with respect to the financial statements and certain financial and statistical information contained in the Registration Statement and Prospectus. (f) The Representatives shall have received on the Closing Date or the Option Closing Date, as the case may be, a certificate or certificates of the President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer of the Company to the effect that, as of the Closing Date or the Option Closing Date, as the case may be, each of them severally represents as follows: (i) The Registration Statement has become effective under the Act and no stop order suspending the effectiveness of the Registration Statement has been issued, and no proceedings for such purpose have been taken or are, to his knowledge, contemplated by the Commission; (ii) The representations and warranties of the Company contained in Section 1 hereof are true and correct as of the Closing Date or the Option Closing Date, as the case may be; (iii) All filings required to have been made pursuant to Rules 424 or 430A under the Act have been made; (iv) He or she has carefully examined the Registration Statement and the Prospectus and, in his or her opinion, as of the effective date of the Registration Statement, the statements contained in the Registration Statement were true and correct, and such Registration Statement and Prospectus did not omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, and since the effective date of the Registration Statement, no event has occurred which should have been set forth in a supplement to or an amendment of the Prospectus which has not been so set forth in such supplement or amendment; and (v) Since the respective dates as of which information is given in the Registration Statement and Prospectus, there has not been any material adverse change or any development involving a prospective material adverse change in or affecting the condition, financial or otherwise, of the Company and its Subsidiaries taken as a whole or the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and the Subsidiaries taken as a whole, whether or not arising in the ordinary course of business. (g) The Company shall have furnished to the Representatives such further certificates and documents confirming the representations and warranties, covenants and conditions contained herein and related matters as the Representatives may reasonably have requested. (h) The Firm Shares and Option Shares, if any, have been approved for listing on the New York Stock Exchange. (i) The Lockup Agreements described in Section 4 (x) are in full force and effect. The opinions and certificates mentioned in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in all material respects satisfactory to the Representatives and to Wilmer, Cutler & Pickering, counsel for the Underwriters. If any of the conditions hereinabove provided for in this Section 6 shall not have been fulfilled when and as required by this Agreement to be fulfilled, the obligations of the Underwriters hereunder may be terminated by the Representatives by notifying the Company of such termination in writing or by telegram at or prior to the Closing Date or the Option Closing Date, as the case may be. In such event, the Company and the Underwriters shall not be under any obligation to each other (except to the extent provided in Sections 5 and 8 hereof). 7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY. The obligations of the Company to sell and deliver the portion of the Shares required to be delivered as and when specified in this Agreement are subject to the conditions that at the Closing Date or the Option Closing Date, as the case may be, no stop order suspending the effectiveness of the Registration Statement shall have been issued and in effect or proceedings therefor initiated or threatened. 8. INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of the Act, against any losses, claims, damages or liabilities to which such Underwriter or any such controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto, or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; and will reimburse each Underwriter and each such controlling person upon demand for any legal or other expenses reasonably incurred by such Underwriter or such controlling person in connection with investigating or defending any such loss, claim, damage or liability, action or proceeding or in responding to a subpoena or governmental inquiry related to the offering of the Shares, whether or not such Underwriter or controlling person is a party to any action or proceeding; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement, or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the Prospectus, or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by or through the Representatives specifically for use in the preparation thereof. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) Each Underwriter severally and not jointly will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the Registration Statement and each person, if any, who controls the Company within the meaning of the Act, against any losses, claims, damages or liabilities to which the Company or any such director, officer, or controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto, or (ii) the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; and will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, or controlling person in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding; provided, however, that each Underwriter will be liable in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission has been made in the Registration Statement, any Preliminary Prospectus, the Prospectus or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by or through the Representatives specifically for use in the preparation thereof. This indemnity agreement will be in addition to any liability which such Underwriter may otherwise have. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to this Section 8, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing. No indemnification provided for in Section 8(a) or (b) shall be available to any party who shall fail to give notice as provided in this Section 8(c) if the party to whom notice was not given was unaware of the proceeding to which such notice would have related and was materially prejudiced by the failure to give such notice, but the failure to give such notice shall not relieve the indemnifying party or parties from any liability which it or they may have to the indemnified party for contribution or otherwise than on account of the provisions of Section 8(a) or (b). In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel at its own expense. Notwithstanding the foregoing, the indemnifying party shall pay as incurred (or within 30 days of presentation) the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel, (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them or (iii) the indemnifying party shall have failed to assume the defense and employ counsel acceptable to the indemnified party within a reasonable period of time after notice of commencement of the action. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm for all such indemnified parties. Such firm shall be designated in writing by you in the case of parties indemnified pursuant to Section 8(a) and by the Company in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. In addition, the indemnifying party will not, without the prior written consent of the indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding of which indemnification may be sought hereunder (whether or not any indemnified party is an actual or potential party to such claim, action or proceeding) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action or proceeding. (d) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under Section 8(a) or (b) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, (or actions or proceedings in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 8(d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 8(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to above in this Section 8(d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), (i) no Underwriter shall be required to contribute any amount in excess of the underwriting discounts and commissions applicable to the Shares purchased by such Underwriter and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this Section 8(d) to contribute are several in proportion to their respective underwriting obligations and not joint. (e) In any proceeding relating to the Registration Statement, any Preliminary Prospectus, the Prospectus or any supplement or amendment thereto, each party against whom contribution may be sought under this Section 8 hereby consents to the jurisdiction of any court having jurisdiction over any other contributing party, agrees that process issuing from such court may be served upon him or it by any other contributing party and consents to the service of such process and agrees that any other contributing party may join him or it as an additional defendant in any such proceeding in which such other contributing party is a party. (f) Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 8 shall be paid by the indemnifying party to the indemnified party as such losses, claims, damages, liabilities or expenses are incurred. The indemnity and contribution agreements contained in this Section 8 and the representations and warranties of the Company set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter, the Company, its directors or officers or any persons controlling the Company, (ii) acceptance of any Shares and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to any Underwriter, or to the Company, its directors or officers, or any person controlling the Company, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 8. 9. DEFAULT BY UNDERWRITERS. If on the Closing Date or the Option Closing Date, as the case may be, any Underwriter shall fail to purchase and pay for the portion of the Shares which such Underwriter has agreed to purchase and pay for on such date (otherwise than by reason of any default on the part of the Company, you, as Representatives of the Underwriters, shall use your reasonable efforts to procure within 36 hours thereafter one or more of the other Underwriters, or any others, to purchase from the Company such amounts as may be agreed upon and upon the terms set forth herein, the Firm Shares or Option Shares, as the case may be, which the defaulting Underwriter or Underwriters failed to purchase. If during such 36 hours you, as such Representatives, shall not have procured such other Underwriters, or any others, to purchase the Firm Shares or Option Shares, as the case may be, agreed to be purchased by the defaulting Underwriter or Underwriters, then (a) if the aggregate number of shares with respect to which such default shall occur does not exceed 10% of the Firm Shares or Option Shares, as the case may be, covered hereby, the other Underwriters shall be obligated, severally, in proportion to the respective numbers of Firm Shares or Option Shares, as the case may be, which they are obligated to purchase hereunder, to purchase the Firm Shares or Option Shares, as the case may be, which such defaulting Underwriter or Underwriters failed to purchase, or (b) if the aggregate number of shares of Firm Shares or Option Shares, as the case may be, with respect to which such default shall occur exceeds 10% of the Firm Shares or Option Shares, as the case may be, covered hereby, the Company or you as the Representatives of the Underwriters will have the right, by written notice given within the next 36-hour period to the parties to this Agreement, to terminate this Agreement without liability on the part of the non-defaulting Underwriters or of the Company except to the extent provided in Section 8 hereof. In the event of a default by any Underwriter or Underwriters, as set forth in this Section 9, the Closing Date or Option Closing Date, as the case may be, may be postponed for such period, not exceeding seven days, as you, as Representatives, may determine in order that the required changes in the Registration Statement or in the Prospectus or in any other documents or arrangements may be effected. The term "Underwriter" includes any person substituted for a defaulting Underwriter. Any action taken under this Section 9 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. 10. NOTICES. All communications hereunder shall be in writing and, except as otherwise provided herein, will be mailed, delivered, telecopied or telegraphed and confirmed as follows: if to the Underwriters, to Alex. Brown & Sons Incorporated, 135 East Baltimore Street, Baltimore, Maryland 21202, Attention: David Bannister, Managing Director, with a copy to Alex. Brown & Sons Incorporated, 135 East Baltimore Street, Baltimore, Maryland 21202, Attention: General Counsel; if to the Company to Richard C. Ill, President and Chief Executive Officer, Four Glenhardie Corporate Center, 1255 Drummers Lane, Suite 200, Wayne, Pennsylvania 19087. 11. TERMINATION. This Agreement may be terminated by you by notice to the Company as follows: (a) at any time prior to the earlier of (i) the time the Shares are released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m. on the first business day following the date of this Agreement; (b) at any time prior to the Closing Date if any of the following has occurred: (i) since the respective dates as of which information is given in the Registration Statement and the Prospectus, any material adverse change or any development involving a prospective material adverse change in or affecting the condition, financial or otherwise, of the Company and its Subsidiaries taken as a whole or the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole, whether or not arising in the ordinary course of business, (ii) any outbreak or escalation of hostilities or declaration of war or national emergency or other national or international calamity or crisis or change in economic or political conditions if the effect of such outbreak, escalation, declaration, emergency, calamity, crisis or change on the financial markets of the United States would, in your reasonable judgment, make it impracticable to market the Shares or to enforce contracts for the sale of the Shares, or (iii) suspension of trading in securities generally on the New York Stock Exchange or the American Stock Exchange or limitation on prices (other than limitations on hours or numbers of days of trading) for securities on either such Exchange, (iv) the enactment, publication, decree or other promulgation of any statute, regulation, rule or order of any court or other governmental authority which in your opinion materially and adversely affects or may materially and adversely affect the business or operations of the Company, (v) declaration of a banking moratorium by United States or New York State authorities, (vi) any downgrading in the rating of the Company's debt securities by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Exchange Act); (vii) the suspension of trading of the Company's common stock by the Commission on the New York Stock Exchange, or (viii) the taking of any action by any governmental body or agency in respect of its monetary or fiscal affairs which in your reasonable opinion has a material adverse effect on the securities markets in the United States; or (c) as provided in Sections 6 and 9 of this Agreement. 12. SUCCESSORS. This Agreement has been and is made solely for the benefit of the Underwriters and the Company and their respective successors, executors, administrators, heirs and assigns, and the officers, directors and controlling persons referred to herein, and no other person will have any right or obligation hereunder. No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign merely because of such purchase. 13. INFORMATION PROVIDED BY UNDERWRITERS. The Company and the Underwriters acknowledge and agree that the only information furnished or to be furnished by any Underwriter to the Company for inclusion in any Prospectus or the Registration Statement consists of the information set forth in the last paragraph on the front cover page (insofar as such information relates to the Underwriters), legends required by Item 502(d) of Regulation S-K under the Act and the information under the caption "Underwriting" in the Prospectus. 14. MISCELLANEOUS. The reimbursement, indemnification and contribution agreements contained in this Agreement and the representations, warranties and covenants in this Agreement shall remain in full force and effect regardless of (a) any termination of this Agreement, (b) any investigation made by or on behalf of any Underwriter or controlling person thereof, or by or on behalf of the Company or its directors or officers and (c) delivery of and payment for the Shares under this Agreement. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Maryland. If the foregoing letter is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicates hereof, whereupon it will become a binding agreement among the Company and the several Underwriters in accordance with its terms. Very truly yours, TRIUMPH GROUP, INC. By ---------------------------------------- President and Chief Executive Officer The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. ALEX. BROWN & SONS INCORPORATED DILLON, READ & CO. INC. As Representatives of the several Underwriters listed on Schedule I By: Alex. Brown & Sons Incorporated By: ------------------------------------ Authorized Officer SCHEDULE I SCHEDULE OF UNDERWRITERS Number of Firm Shares Underwriter to be Purchased ----------- --------------------- Alex. Brown & Sons Incorporated Dillon, Read & Co., Inc. __________ Total 2,375,000 EX-3.1 3 EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF THE TRIUMPH GROUP HOLDINGS, INC. The Triumph Group Holdings, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of Delaware, DOES HEREBY CERTIFY: 1. The corporation was incorporated in Delaware on March 11, 1993 under the name Triumph Holdings, Inc. 2. This Restated Certificate of Incorporation restates and integrates but does not further amend the Certificate of Incorporation, as amended, of the Corporation, and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation. 3. This Restated Certificate of Incorporation was duly adopted by the Board of Directors of the corporation without a vote of the stockholders in accordance with the provisions of Section 245 of the Delaware General Corporation Law. 4. The text of the Certificate of Incorporation as amended or supplemented heretofore is hereby integrated and restated to read as herein set forth in full: FIRST: The name of the Corporation is The Triumph Group Holdings, Inc. (the "Corporation"). SECOND: The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, the City of Wilmington, County of New Castle 19801. The name of the Corporation's registered agent at such address is The Corporation Trust Company. THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: PART A. AUTHORIZED SHARES The total number of shares of capital stock which the Corporation has authority to issue is 200,589 shares, consisting of: (1) 30,575 shares of Preferred Stock, par value $.01 per share (the "Preferred Stock"); (2) 100,007 shares of Class A Common Stock, par value $.001 per share (the "Class A Common"); (3) 70,000 shares of Class B Common Stock, par value $.001 per share (the "Class B Common"); and (4) 7 shares of Class C Common Stock, par value $.001 per share (the "Class Common"). The Class A Common, the Class B Common and the Class C Common are hereafter collectively referred to as the "Common Stock." The Common Stock and the Preferred Stock are hereafter collectively referred to as the "Stock." No amendment or waiver of any provision of this Part A shall be effective without the prior approval of the holders of a majority of the then outstanding Common Stock voting as a single class. PART B. PREFERRED STOCK The Preferred Stock shall have the preferences, rights and limitations set forth herein. Certain capitalized terms used in this Part B are defined in Section 7 hereof. Section 1. DIVIDENDS. 1A. GENERAL OBLIGATION. When and as declared by the Corporation's board of directors and to the extent permitted under the General Corporation Law of Delaware, the Corporation shall pay preferential dividends to the holders of shares of the Preferred Stock (each, a "Preferred Share") as provided in this Section 1. Except as otherwise provided herein, dividends on each Preferred Share shall accrue on a daily basis at the rate of 2 14% per annum of the sum of the Liquidation Value thereof plus all accumulated and unpaid dividends thereon, from and including the date of issuance of such Preferred Share to and including the date on which the Liquidation Value of such Preferred Share (plus all accrued and unpaid dividends thereon) is paid. Such dividends shall accrue whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. Such dividends shall be cumulative such that all accrued and unpaid dividends shall be fully paid or declared with funds irrevocably set apart for payment before any dividend, distribution or payment may be made with respect to any Junior Securities. The date on which the Corporation initially issues any Preferred Share shall be deemed to be its "date of issuance" regardless of the number of times transfer of such Preferred Share is made on the stock records maintained by or for the Corporation and regardless of the number of certificates which may be issued to evidence such Preferred Share. 1B. DIVIDEND REFERENCE DATES. To the extent not paid on March 31, June 30, September 30 and December 31 of each year, beginning September 30, 1993 (the "Dividend Reference Dates"), all dividends which have accrued on each Preferred Share outstanding during the three-month period (or other period in the case of the initial Dividend Reference Date on which such Preferred Share is outstanding) ending upon each such Dividend Reference Date shall be accumulated and shall remain accrued, unpaid and accumulated dividends with respect to such Preferred Share until paid. 1C. DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS. Except as otherwise provided herein, if at any time the Corporation pays less than the total amount of dividends then accrued with respect to the Preferred Stock, such payment shall be distributed ratably among the holders of the Preferred Stock based upon the aggregate accrued but unpaid dividends on the Preferred Shares held by each such holder. Section 2. LIQUIDATION, DISSOLUTION OR WINDING UP. If the Corporation shall commence a voluntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or consent to the entry of an order or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or other similar official of the Corporation or any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the 3 Federal or state bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or if the Corporation shall otherwise liquidate, dissolve or wind up, each holder of Preferred Stock shall be entitled to be paid, before any distribution or payment is made upon any Junior Securities, an amount in cash equal to the aggregate Liquidation Value of (plus all accrued and unpaid dividends on) all Preferred Shares held by such holder, and the holders of Preferred Stock shall not be entitled to any further payment. If upon any such liquidation, dissolution or winding up of the Corporation, the Corporation's assets to be distributed among the holders of the Preferred Stock are insufficient to permit payment to such holders of the aggregate amount of the Liquidation Value (plus all accrued and unpaid dividends) which they are entitled to be paid, then the entire assets to be distributed shall be distributed ratably among such holders based upon the aggregate Liquidation Value of (plus all accrued and unpaid dividends on) the Preferred Stock held by each such holder. Prior to the time of any liquidation, dissolution or winding up of the Corporation, the Corporation shall declare for payment all accrued and unpaid dividends with respect to the Preferred Stock. The Corporation shall mail written notice of such liquidation, dissolution or winding up, not less than 60 days prior to the payment date stated therein, to each record holder of Preferred Stock. Neither the consolidation or merger of the Corporation into or with any other entity or entities, nor the sale or transfer by the Corporation of all or any part of its assets, nor the reduction of the capital stock of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 2. Section 3. REDEMPTIONS. 3A. SCHEDULED REDEMPTION. On the later to occur of (i) July 21, 2004 or (ii) 91 days following the Senior Debt Retirement Date (the "Scheduled Redemption Date"), the Corporation shall redeem all of the Preferred Shares then outstanding for an amount equal to the lesser of (x) 40% of the Company's Equity Value or (y) the Liquidation Value thereof plus all accrued and unpaid dividends thereon. 3B. OPTIONAL REDEMPTIONS. The Corporation may at any time redeem all or any portion of Preferred Stock then outstanding. Redemptions made pursuant to this paragraph shall not relieve the Corporation of its obligation on the Scheduled Redemption Date to redeem all Preferred Shares which are then outstanding. 3C. REDEMPTION PAYMENT. For each Preferred Share which is to be redeemed, the Corporation shall be obligated on the Redemption Date to pay to the holder thereof (upon surrender 4 by such holder at the Corporation's principal office of the certificate representing such Preferred Share) an amount in immediately available funds equal to the Liquidation Value of such Preferred Share plus all accrued and unpaid dividends thereon (other than pursuant to paragraph 3A above, which redemption shall be made at the price specified in paragraph 3A above). If the funds of the Corporation legally available for redemption of Preferred Shares on any Redemption Date are insufficient to redeem the total number of Preferred Shares to be redeemed on such date, those funds which are legally available for such purpose shall be used to redeem the maximum number of Preferred Shares which may be so redeemed ratably among the holders of the Preferred Shares to be redeemed based upon the aggregate Liquidation Value of such Preferred Shares held by each such holder plus all accrued and unpaid dividends thereon. At any time thereafter when additional funds of the Corporation are legally available for the redemption of Preferred Shares, such funds shall immediately be used to redeem the balance of the Preferred Shares which the Corporation has become obligated to redeem on any Redemption Date but which it has not redeemed. Prior to the time of any redemption of Preferred Stock, the Corporation shall declare for payment all accrued and unpaid dividends with respect to the Preferred Shares which are to be redeemed. 3D. NOTICE OF REDEMPTION. The Corporation shall mail written notice of each redemption of Preferred Stock to each record holder of Preferred Stock not more than 60 nor less than 30 days prior to the date on which such redemption is to be made. In case fewer than the total number of Preferred Shares represented by any certificate are redeemed, a new certificate representing the number of unredeemed Preferred Shares shall be issued to the holder thereof without cost to such holder within three business days after surrender of the certificate representing the redeemed Preferred Shares. 3E. DETERMINATION OF THE NUMBER OF EACH HOLDER'S PREFERRED SHARES TO BE REDEEMED. The number of Preferred Shares to be redeemed from each holder thereof in redemptions hereunder shall be determined by multiplying the total number of Preferred Shares to be redeemed times a fraction, the numerator of which shall be the total number of Preferred Shares then held by such holder and the denominator of which shall be the total number of Preferred Shares then outstanding. 3F. DIVIDENDS AFTER REDEMPTION DATE. No Preferred Share is entitled to any dividends accruing after the date on which the Liquidation Value of such Preferred Share plus all accrued and unpaid dividends thereon is paid to the holder thereof. On such date all rights of the holder of such Preferred 5 Share shall cease, and such Preferred Share shall not be deemed to be outstanding. 3G. REDEEMED OR OTHERWISE ACQUIRED PREFERRED SHARES. Any Preferred Shares which are redeemed or otherwise acquired by the Corporation shall be cancelled and shall not be reissued, sold or transferred. 3H. SPECIAL REDEMPTIONS. (i) If a Change in Control has occurred or the Corporation obtains knowledge that a Change in Control is to occur or if there is a cessation of the Corporation's business (a "Cessation"), the Corporation shall give prompt written notice of such Change in Control or Cessation describing in reasonable detail the definitive terms and date of consummation thereof to each holder of Preferred Stock, but in any event such notice shall not be given later than five days after the occurrence of such Change in Control or Cessation. The holder or holders of a majority of the Preferred Stock then outstanding may require the Corporation to redeem all or any portion of the Preferred Stock owned by such holder or holders at a price per Preferred Share equal to the Liquidation Value thereof (plus all accrued and unpaid dividends thereon) by giving written notice to the Corporation of such election prior to the later of (a) the 21st day after receipt of the Corporation's notice of such Change in Control or Cessation and (b) the fifth day prior to the consummation of the Change in Control or Cessation (the "Expiration Date"). The Corporation shall give prompt written notice of any such election to all other holders of Preferred Stock within five days after the receipt thereof, and each such holder shall have until the later of (a) the Expiration Date or (b) the tenth day after receipt of such second notice to request redemption (by giving written notice to the Corporation) of all or any portion of the Preferred Stock owned by such holder. Upon receipt of such election(s), the Corporation shall be obligated to redeem the aggregate number of Preferred Shares specified therein on the later of (a) the occurrence of the Change in Control or Cessation or (b) five days after the Corporation's receipt of such election(s). If in any case a proposed Change in Control or Cessation does not occur, all requests for redemption in connection therewith shall be automatically rescinded. (ii) Redemptions made pursuant to this paragraph 3H shall not relieve the Corporation of its obligation on the Scheduled Redemption Date to redeem all Preferred Stock which is then outstanding. 6 3I. SENIOR DEBT. Notwithstanding anything to the contrary contained herein, no Preferred Stock may be redeemed by the Corporation prior to the repayment in full of the Senior Debt. Section 4. EVENTS OF NONCOMPLIANCE. 4A. DEFINITION. An Event of Noncompliance shall be deemed to have occurred if: (i) the Corporation fails to make any redemption payment with respect to the Preferred Stock which it is obligated to make hereunder and which it is not prohibited from making under Section 3I above; or (ii) the Corporation makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts generally as they become due; or an order, judgment or decree is entered adjudicating the Corporation bankrupt or insolvent; or any order for relief with respect to the Corporation is entered under the Federal Bankruptcy Code; or the Corporation petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of the Corporation or of any substantial part of the assets of the Corporation, or commences any proceeding relating to the Corporation under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any such petition or application is filed, or any such proceeding is commenced, against the Corporation and either (a) the Corporation by any act indicates its approval thereof, consent thereto or acquiescence therein or (b) such petition, application or proceeding is not dismissed within 60 days. 4B. CONSEQUENCES OF CERTAIN EVENTS OF NONCOMPLIANCE. (i) If an Event of Noncompliance has occurred, the holder or holders of a majority of the Preferred Stock then outstanding may demand (by written notice delivered to the Corporation) immediate redemption of all or any portion of the Preferred Stock owned by such holder or holders at a price per Share equal to the Liquidation Value thereof (plus all accrued and unpaid dividends thereon). Subject to the prior repayment in full of Senior Debt, the Corporation shall redeem all Preferred Stock as to which rights under this paragraph have been exercised within 15 days after receipt of the initial demand for redemption. (ii) If an Event of Noncompliance has occurred, each holder of Preferred Stock shall also have any other 7 rights which such holder is entitled to under any contract or agreement at any time and any other rights which such holder may have pursuant to applicable law. Section 5. VOTING RIGHTS. Except as otherwise provided herein or as otherwise required by law, the Preferred Stock shall have no voting rights; provided that each holder of Preferred Stock shall be entitled to notice of all stockholders meetings at the same time and in the same manner as notice is given to the stockholders entitled to vote at such meeting. Section 6. AMENDMENT AND WAIVER. Any provision of this Part B may be waived by holders of a majority of the Preferred Shares outstanding at the time such action is taken. No amendment or modification of this Part B will be binding or effective with respect to any provision of this Part B without the prior written consent of the Corporation and the holders of a majority of the Preferred Shares outstanding at the time such action is taken. Section 7. DEFINITIONS. "AFFILIATE" of any particular Person means any other Person controlling, controlled by or under common control with such particular Person. "CHANGE IN CONTROL" shall mean have the meaning given to such term in the Senior Loan Agreement. "CMIF NOTE" means the Senior Subordinated Note issued by the Corporation to World Subordinated Debt Partners, L.P. as of July __, 1993 in an original principal amount of $15,000,000. "EQUITY VALUE" means at the date of determination the excess of (i) all assets of the Corporation and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles over (ii) all liabilities of the Corporation and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles. "INDEBTEDNESS" shall mean have the meaning given to such term in the Senior Loan Agreement. "JUNIOR SECURITIES" means any of the Corporation's equity securities other than the Preferred Stock. 8 "LIQUIDATION VALUE" of any Preferred Share as of any particular date shall be equal to $100.00. "PERSON" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "REDEMPTION DATE" as to any Preferred Share means the date specified in the notice of any redemption at the Corporation's option or the applicable date specified herein in the case of any other redemption; provided that no such date shall be a Redemption Date unless the Liquidation Value of such Preferred Share (plus all accrued and unpaid dividends thereon) is actually paid in full on such date, and if such amount is not so paid in full on such date, the Redemption Date shall be the date on which such amount is fully paid. "SELLER NOTE" means the Subordinated Promissory Note issued by the Corporation to Alco Standard Corporation as of June 1, 1993 in an original principal amount of $13,500,000. "SENIOR DEBT" means the Indebtedness evidenced by the CMIF Note, the Seller Note and all other Indebtedness of the Corporation and its Subsidiaries under the Senior Loan Agreement and any refinancings, extensions or other modifications thereof. "SENIOR DEBT RETIREMENT DATE" means the date on which the Senior Debt is repaid in full. "SENIOR LOAN AGREEMENT" means that certain Financing and Security Agreement, dated as of July __, 1993, by and among the Corporation, The CIT Group/Business Credit, Inc., as Lender and as Agent, and certain of the Corporation's Subsidiaries. "SUBSIDIARY" means any corporation, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors thereof is at the time owned or controlled, directly or indirectly, by the Corporation or one or more of the other Subsidiaries of the Corporation or a combination thereof, or (ii) if a partnership, association or other business entity, a majority of the partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by the Corporation or one or more of the other Subsidiaries of the Corporation or a combination thereof. For purposes hereof, the Corporation shall be deemed to have a majority ownership interest in a partnership, association or other business entity if the 9 Corporation shall be allocated a majority of partnership, association or other business entity gains or losses or shall be or control the managing director or general partner of such partnership, association or other business entity. PART C. COMMON STOCK Except as otherwise provided in this Part C or as otherwise required by applicable law, all shares of Class A Common, Class B Common and Class C Common shall be identical in all respects and shall entitle the holders thereof to the same rights and privileges, subject to the same qualifications, limitations and restrictions. Section 1. VOTING RIGHTS. Except as otherwise provided in Part A above or this Part C or as otherwise required by applicable law, the holders of Class A Common shall be entitled to one vote per share on all matters to be voted on by the stockholders of the Corporation, the holders of Class B Common shall be entitled to six- tenths (6/10) of one vote per share on all matters to be voted on by the stockholders of the Corporation, and the holders of Class C Common shall be entitled to 4,000 votes per share on all matters to be voted on by the stockholders of the Corporation; provided that the holders of Class B Common shall have the right to vote as a separate class on (i) any merger or consolidation of the Corporation with or into another entity or entities, (ii) any sale of all or substantially all of the Corporation's assets and (iii) any amendment to the Corporation's Certificate of Incorporation. Section 2. DIVIDENDS. As and when dividends are declared or paid thereon, whether in cash, property or securities of the Corporation, the holders of Class A Common, the holders of Class B Common and the holders of Class C Common shall be entitled to participate in such dividends ratably on a per share basis; provided that (i) if dividends are declared which are payable in shares of Common Stock, dividends shall be declared which are payable at the same rate on each class of stock and the dividends payable to holders of Class A Common shall be payable in shares of that class of stock, the dividends payable to holders of Class B Common shall be payable in shares of that class of stock and the dividends payable to holders of Class C Common shall be payable in shares of that class of stock and (ii) if the dividends consist of other voting securities of the Corporation, the Corporation shall make available to each holder of Class B Common, at such holder's request, dividends consisting of non-voting securities (or securities with less of a vote per share than the securities 10 issued to holders of the Class A Common) of the Corporation which are otherwise identical to the voting securities and which are convertible into or exchangeable for such voting securities on the same terms as the Class B Common is convertible into the Class A Common. The right of the holders of Common Stock to receive dividends are subject to the provisions of the Preferred Stock. Section 3. LIQUIDATION. Subject to the provisions of the Preferred Stock, the holders of the Class A Common, Class B Common and Class C Common shall be entitled to participate ratably on a per share basis in all distributions to the holders of Common Stock in any liquidation, dissolution or winding up of the Corporation. Section 4. CONVERSION. 4A. RIGHT TO CONVERT. Subject to Section 4B below, each record holder of Class B Common shall be entitled at any time to convert any or all of the shares of such holder's Class B Common into the same number of shares of Class A Common and, upon the conversion of all such shares of Class B Common, each share of Class C Common shall be automatically (without any action on the part of the holders of any shares of Class C Common) converted into one share of Class A Common. 4B. SURRENDER OF CERTIFICATES. Each conversion of shares of Class B Common into shares of Class A Common shall be effected by the surrender of the certificate or certificates representing the shares to be converted at the principal office of the Corporation at any time during normal business hours, together with a written notice by the holder of shares of such Class B Common stating that such holder desires to convert the shares, or a stated number of the shares, of such Class B Common represented by such certificate or certificates into shares of Class A Common. Each conversion of Class B Common shall be deemed to have been effected as of the close of business on the date on which such certificate or certificates have been surrendered and such notice has been received, and at such time the rights of the holder of the converted Class B Common as such holder shall cease and the person or persons in whose name or names the certificate or certificates for shares of Class A Common are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of Class A Common represented thereby. The conversion of Class C Common to Class A Common shall be deemed to have been effected as of the close of business on the date on which all shares of Class B Common have been deemed converted to Class A Common, and at such time the rights of the holder of the converted Class C Common as such holder shall cease and the person or persons in 11 whose name or names the certificate or certificates for shares of Class A Common are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of Class A Common represented thereby. 4C. ISSUANCE OF CERTIFICATES. Promptly after the surrender of certificates of Class B Common or Class C Common, as applicable, and the receipt of written notice (in the case of the Class B Common), the Corporation shall issue and deliver in accordance with the surrendering holder's instructions (i) the certificate or certificates for the Class A Common issuable upon such conversion and (ii) a certificate representing any Class B Common which was represented by the certificate or certificates delivered to the Corporation in connection with such conversion but which was not converted. 4D. NO CHARGE. The issuance of certificates for Class A Common upon conversion of Class B Common or Class C Common will be made without charge to the holders of such shares for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such conversion and the related issuance of Class A Common. 4E. RESERVE OF SHARES. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common, solely for the purpose of issuance upon the conversion of the Class B Common and Class C Common, such number of shares of Class A Common issuable upon the conversion of all outstanding Class B Common and Class C Common. All shares of Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Corporation shall take all such actions as may be necessary to assure that all such shares of Common Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock may be listed (except for official notice of issuance which will be immediately transmitted by the Corporation upon issuance). 4F. CLOSING BOOKS. The Corporation shall not close its books against the transfer of shares of Common Stock in any manner which would interfere with the timely conversion of any shares of Common Stock. Section 5. STOCK SPLITS. If the Corporation in any manner subdivides or combines the outstanding shares of one class of Common Stock, the outstanding shares of the other classes of Common Stock shall be proportionately subdivided or combined in a similar manner. 12 Section 6. AMENDMENT AND WAIVER. No amendment or waiver of any provision of this Part C shall be effective without the prior approval of the holders of a majority of the then outstanding shares of Class A Common, Class B Common and Class C Common voting together as one class. PART D. OTHER PROVISIONS Section 1. REGISTRATION OF TRANSFER. The Corporation shall keep at its principal office a register for the registration of the Stock. Upon the surrender of any certificate representing Stock at such place, the Corporation shall, at the request of the record holder of such certificate, execute and deliver (at the Corporation's expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares of Stock represented by the surrendered certificate. Each such new certificate shall be registered in such name and shall represent such number of shares of Stock as is requested by the holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate. Section 2. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of any class of Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the holder is a financial institution or other institutional investor its own agreement shall be satisfactory), or, in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate. Section 3. NOTICES. Except as otherwise expressly provided hereunder, all notices referred to herein shall be in writing and shall be delivered by registered or certified mail, return receipt requested and postage prepaid, or by reputable overnight courier service, charges prepaid, and shall be deemed to have been given when so mailed or sent (i) to the Corporation, at its principal executive offices and (ii) to any stockholder, at such holder's 13 address as it appears in the stock records of the Corporation (unless otherwise indicated by any such holder). FIFTH: The board of directors (the "Board of Directors") is authorized to make, alter or repeal the by-laws of the Corporation. Election of directors need not be by written ballot. SIXTH: 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 any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is hereafter amended to authorize the further elimination or limitation of the liability of directors, then the liability of the directors of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Delaware General Corporation Law. Any repeal or modification of this paragraph by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Corporation at the time of such repeal or modification. SEVENTH: The directors and officers of the Corporation shall be imdemnified by the Corporation to the fullest extent permitted by law. IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate of Incorporation to be executed by its duly authorized officers this 22 day of November , 1994. Attest: THE TRIUMPH GROUP HOLDINGS, INC. /s/Paul T. Stimmler By: /s/Richard C. III, President - ---------------------------- ---------------------------- Paul T. Stimmler, Secretary Richard C. Ill, President 14 OFFICE OF THE SECRETARY OF STATE I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF THE "THE TRIUMPH GROUP HOLDINGS, INC.", FILED IN THIS OFFICE ON THE TWENTY-EIGHTH DAY OF NOVEMBER, A.D. 1994, AT 9:01 O'CLOCK A.M. [SEAL] /s/Edward J. Freel ------------------------------------- Edward J. Freel, Secretary of State AUTHENTICATION: 8017016 DATE: 07-05-96 EX-3.2 4 EXHIBIT 3.2 B Y - L A W S OF THE TRIUMPH GROUP HOLDINGS, INC. ARTICLE I OFFICES Section 1. The registered office in the State of Delaware shall be as stated in the Certificate of Incorporation or at such other location in the State of Delaware to which the registered office shall be changed by action of the Board of Directors. Section 2. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. All meetings of the stockholders for the election of directors shall be held at such place either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual meetings of stockholders shall be held at such date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a Board of Directors and transact such other business as may properly be brought before the meeting. Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Section 4. The officer who has charge of the stock ledger of the Corporation 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. 2 Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the President and shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the Corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting, to each stockholder entitled to vote at such meeting. Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 8. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, 3 without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the Certificate of Incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 10. Unless otherwise provided in the Certificate of Incorporation each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Section 11. Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at 4 any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS Section 1. The business and affairs of the Corporation shall be managed by or under the direction of its Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-laws directed or required to be exercised or done by the stockholders. Section 2. The number of directors which shall constitute the Board of Directors shall be set by resolution of the Board. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 3 of this Article, and each director elected shall hold office until his 5 successor is elected and qualified or until his earlier resignation or removal. Directors need not be stockholders. Section 3. Vacancies and newly created directorships resulting from any increases in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. MEETINGS OF THE BOARD OF DIRECTORS Section 4. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. 6 Section 5. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors. Section 6. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board. Section 7. Special meetings of the Board may be called by the President on one day's notice to each director, either personally or by mail or by telegram; special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of two directors unless the Board consists of only one director, in which case special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of the sole director. Section 8. At all meetings of the Board a majority of the directors shall constitute a quorum for the transaction of 7 business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 10. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. 8 COMMITTEES OF DIRECTORS Section 11. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided in Section 151(a) of the General Corporation Law of Delaware, fix the designations and any of the preferences or 9 rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the By-laws of the Corporation; and, unless the resolution or the Certificate of Incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock or to adopt a certificate of ownership and merger. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Section 12. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. COMPENSATION OF DIRECTORS Section 13. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, the Board of 10 Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. REMOVAL OF DIRECTORS Section 14. Unless otherwise restricted by the Certificate of Incorporation or by law, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of shares then entitled to vote at an election of directors. ARTICLE IV NOTICES Section 1. Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these By-laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and 11 such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these By-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the Corporation shall be a President, a Secretary and a Treasurer or persons who shall act as such, regardless of the name or title by which they may be designated, elected or appointed. The Corporation may also have one or more Vice-Presidents and such other officers and assistant officers as the Board of Directors may choose. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these By-laws otherwise provide. Section 2. The officers and assistant officers shall be chosen by the Board of Directors at its first meeting after each annual meeting of stockholders and shall hold office until their successors are elected and qualified or until their earlier resignation or removal. 12 Section 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. Section 5. The salaries of all officers and agents of the Corporation shall be fixed by the Board of Directors. THE PRESIDENT Section 6. The President shall be the chief executive officer of the Corporation, shall preside at all meetings of the stockholders and the Board of Directors, shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. Section 7. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. 13 THE VICE-PRESIDENTS Section 8. In the absence of the President or in the event of his inability or refusal to act, and if a Vice-President has been appointed by the Board of Directors, the Vice-President (or in the event there be more than one Vice-President, the Vice-Presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice-Presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARY Section 9. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the Corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be. He shall have custody of the corporate seal of the Corporation and he, or an assistant Secretary, shall have authority to affix the same to any instrument requiring it 14 and when so affixed, it may be attested by his signature or by the signature of such assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. Section 10. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 11. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. Section 12. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or 15 when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. Section 13. If required by the Board of Directors, he shall give the Corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of this office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 14. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE VI CERTIFICATES FOR SHARES Section 1. The shares of the Corporation shall be represented by a certificate, provided that the Board of Directors may provide, by resolution or resolutions, that some or 16 all of any or all classes or series of its stock or shall be uncertificated shares. Certificates shall be signed by, or in the name of the Corporation by, the chairman or vice-chairman of the Board of Directors, or the President or a Vice-President, and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation. Within a reasonable time after the issuance or transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the General Corporation Law of Delaware or a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Section 2. Any of or all the signatures on a certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. 17 LOST CERTIFICATES Section 3. The Board of Directors may direct a new certificate or certificates or uncertificated shares to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates or uncertificated shares, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. TRANSFER OF STOCK Section 4. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Upon receipt of proper transfer instructions 18 from the registered owner of uncertificated shares, such uncertificated shares shall be cancelled and issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of the Corporation. FIXING RECORD DATE Section 5. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. REGISTERED STOCKHOLDERS Section 6. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books 19 as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to 20 interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. ANNUAL STATEMENT Section 3. The Board of Directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the Corporation. CHECKS Section 4. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. FISCAL YEAR Section 5. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. SEAL Section 6. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. 21 INDEMNIFICATION Section 7. The Corporation shall indemnify its officers and directors to the fullest extent permitted by the General Corporation Law of Delaware. ARTICLE VIII AMENDMENTS Section 1. These By-laws may be altered, amended or repealed or new by-laws may be adopted by the stockholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the Certificate of Incorporation, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new by- laws be contained in the notice of such special meeting. If the power to adopt, amend or repeal by-laws is conferred upon the Board of Directors by the Certificate of Incorporation it shall not divest or limit the power of the stockholders to adopt, amend or repeal by-laws. 22 EX-10.3 5 EXHIBIT 10.3 $50,000,000 REVOLVING CREDIT FACILITY $35,000,000 TERM LOAN CREDIT AGREEMENT by and among THE TRIUMPH GROUP, INC. AND ITS SUBSIDIARIES WHO ARE OR BECOME BORROWERS HEREUNDER AS BORROWERS and THE TRIUMPH GROUP HOLDINGS, INC. AS GUARANTOR and THE BANKS PARTY HERETO and PNC BANK, NATIONAL ASSOCIATION AS AGENT Dated as of July 19, 1996 TABLE OF CONTENTS Article Page - ------- ---- 1. CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Certain Definitions.. . . . . . . . . . . . . . . . . . . . . 1 1.2 Construction. . . . . . . . . . . . . . . . . . . . . . . . . 15 1.2.1 Number; Inclusion.. . . . . . . . . . . . . . . . . 16 1.2.2 Determination.. . . . . . . . . . . . . . . . . . . 16 1.2.3 Agent's Discretion and Consent. . . . . . . . . . . 16 1.2.4 Documents Taken as a Whole. . . . . . . . . . . . . 16 1.2.5 Headings. . . . . . . . . . . . . . . . . . . . . . 16 1.2.6 Implied References to this Agreement. . . . . . . . 16 1.2.7 Persons.. . . . . . . . . . . . . . . . . . . . . . 17 1.2.8 Modifications to Documents. . . . . . . . . . . . . 17 1.2.9 From, To and Through. . . . . . . . . . . . . . . . 17 1.2.10 Shall; Will.. . . . . . . . . . . . . . . . . . . . 17 1.3 Accounting Principles.. . . . . . . . . . . . . . . . . . . . 17 2. REVOLVING CREDIT FACILITY. . . . . . . . . . . . . . . . . . . . . . . . 17 2.1 Revolving Credit Commitments. . . . . . . . . . . . . . . . . 17 2.2 Nature of Banks' Obligations with Respect to Revolving Credit Loans. . . . . . . . . . . . . . . . . . . . . . . . 18 2.3 Commitment Fees.. . . . . . . . . . . . . . . . . . . . . . . 18 2.4 Revolving Credit Loan Requests. . . . . . . . . . . . . . . . 18 2.5 Making Revolving Credit Loans.. . . . . . . . . . . . . . . . 19 2.6 Revolving Credit Notes. . . . . . . . . . . . . . . . . . . . 19 2.7 Use of Proceeds.. . . . . . . . . . . . . . . . . . . . . . . 20 2.8 Letter of Credit Subfacility. . . . . . . . . . . . . . . . . 20 2.8.1 Issuance of Letters of Credit.. . . . . . . . . . . 20 2.8.2 Participations. . . . . . . . . . . . . . . . . . . 20 2.8.3 Letter of Credit Fees.. . . . . . . . . . . . . . . 20 2.8.4 Disbursements, Reimbursement. . . . . . . . . . . . 21 2.8.5 Documentation.. . . . . . . . . . . . . . . . . . . 21 2.8.6 Determinations to Honor Drawing Requests. . . . . . 22 2.8.7 Nature of Participation and Reimbursement Obligations. . . . . . . . . . . . . . . . . . . . 22 2.8.8 Indemnity . . . . . . . . . . . . . . . . . . . . . 23 2.8.9 Liability for Acts and Omissions. . . . . . . . . . 24 2.8.10 Extension by Banks of the Expiration Date . . . . . 24 -i- TABLE OF CONTENTS Article Page - ------- ---- 3. TERM LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 3.1 Term Loan Commitments.. . . . . . . . . . . . . . . . . . . . 25 3.2 Nature of Banks' Obligations with Respect to Term Loans.. . . 25 3.3 Term Loan Notes.. . . . . . . . . . . . . . . . . . . . . . . 25 3.4 Use of Proceeds.. . . . . . . . . . . . . . . . . . . . . . . 25 4. INTEREST RATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 4.1 Interest Rate Options.. . . . . . . . . . . . . . . . . . . . 26 4.1.1 Revolving Credit Interest Rate Options. . . . . . . 26 4.1.3 Rate Quotations.. . . . . . . . . . . . . . . . . . 27 4.2 Interest Periods. . . . . . . . . . . . . . . . . . . . . . . 27 4.2.1 Ending Date and Business Day. . . . . . . . . . . . 27 4.2.2 Amount of Borrowing Tranche.. . . . . . . . . . . . 27 4.2.3 Termination Before Expiration Date. . . . . . . . . 27 4.2.4 Renewals. . . . . . . . . . . . . . . . . . . . . . 28 4.3 Interest After Default. . . . . . . . . . . . . . . . . . . . 28 4.3.1 Letter of Credit Fees, Interest Rate. . . . . . . . 28 4.3.2 Other Obligations.. . . . . . . . . . . . . . . . . 28 4.3.3 Acknowledgment. . . . . . . . . . . . . . . . . . . 28 4.4 Euro-Rate Unascertainable.. . . . . . . . . . . . . . . . . . 28 4.4.1 Unascertainable.. . . . . . . . . . . . . . . . . . 28 4.4.2 Illegality; Increased Costs; Deposits Not Available. . . . . . . . . . . . . . . . . . . . . 29 4.4.3 Agent's and Banks' Rights . . . . . . . . . . . . . 29 4.5 Selection of Interest Rate Options. . . . . . . . . . . . . . 30 5. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 5.1 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 30 5.2 Pro Rata Treatment of Banks.. . . . . . . . . . . . . . . . . 31 5.3 Interest Payment Dates. . . . . . . . . . . . . . . . . . . . 31 5.4 Voluntary Prepayments and Commitment Reductions.. . . . . . . 31 5.4.1 Right to Prepay.. . . . . . . . . . . . . . . . . . 31 5.4.2 Replacement of a Bank . . . . . . . . . . . . . . . 33 5.4.3 Right to Reduce Commitments.. . . . . . . . . . . . 33 5.5 Mandatory Prepayments.. . . . . . . . . . . . . . . . . . . . 33 5.5.1 The IPO.. . . . . . . . . . . . . . . . . . . . . . 33 5.5.2 Sale of Assets. . . . . . . . . . . . . . . . . . . 34 5.5.3 Issuance of Debt. . . . . . . . . . . . . . . . . . 34 5.5.4 . . . . . . . . . . . . . . . . . . . . . . . . . . 34 -ii- TABLE OF CONTENTS Article Page - ------- ---- 5.5.5 Application among Types of Loans. . . . . . . . . . 34 5.5.6 Application among Interest Rate Options.. . . . . . 34 5.6 Additional Compensation in Certain Circumstances. . . . . . . 35 5.6.1 Increased Costs or Reduced Return Resulting From Taxes, Reserves, Capital Adequacy Requirements, Expenses, Etc. . . . . . . . . . . . . . . . . . . 35 5.6.2 Indemnity.. . . . . . . . . . . . . . . . . . . . . 36 6. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . 36 6.1 Representations and Warranties. . . . . . . . . . . . . . . . 36 6.1.1 Organization and Qualification. . . . . . . . . . . 37 6.1.2 Capitalization and Ownership. . . . . . . . . . . . 37 6.1.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . 37 6.1.4 Power and Authority.. . . . . . . . . . . . . . . . 37 6.1.5 Validity and Binding Effect.. . . . . . . . . . . . 38 6.1.6 No Conflict.. . . . . . . . . . . . . . . . . . . . 38 6.1.7 Litigation. . . . . . . . . . . . . . . . . . . . . 38 6.1.8 Title to Properties.. . . . . . . . . . . . . . . . 39 6.1.9 Financial Statements. . . . . . . . . . . . . . . . 39 6.1.10 Margin Stock. . . . . . . . . . . . . . . . . . . . 40 6.1.11 Full Disclosure.. . . . . . . . . . . . . . . . . . 40 6.1.12 Taxes.. . . . . . . . . . . . . . . . . . . . . . . 40 6.1.13 Consents and Approvals. . . . . . . . . . . . . . . 41 6.1.14 No Event of Default; Compliance with Instruments. . 41 6.1.15 Patents, Trademarks, Copyrights, Licenses, Etc. . . 41 6.1.16 [RESERVED]. . . . . . . . . . . . . . . . . . . . . 41 6.1.17 [RESERVED]. . . . . . . . . . . . . . . . . . . . . 41 6.1.18 [RESERVED]. . . . . . . . . . . . . . . . . . . . . 41 6.1.19 Insurance.. . . . . . . . . . . . . . . . . . . . . 41 6.1.20 Compliance with Laws. . . . . . . . . . . . . . . . 42 6.1.21 Material Contracts. . . . . . . . . . . . . . . . . 42 6.1.22 Investment Companies. . . . . . . . . . . . . . . . 42 6.1.23 Plans and Benefit Arrangements. . . . . . . . . . . 42 6.1.24 Employment Matters. . . . . . . . . . . . . . . . . 44 6.1.25 Environmental Matters . . . . . . . . . . . . . . . 44 6.1.26 Senior Debt Status. . . . . . . . . . . . . . . . . 45 6.2 Updates to Schedules. . . . . . . . . . . . . . . . . . . . . 45 -iii- TABLE OF CONTENTS Article Page - ------- ---- 7. CONDITIONS OF LENDING. . . . . . . . . . . . . . . . . . . . . . . . . . 46 7.1 First Loans.. . . . . . . . . . . . . . . . . . . . . . . . . 46 7.1.1 Officer's Certificate.. . . . . . . . . . . . . . . 46 7.1.2 Secretary's Certificate.. . . . . . . . . . . . . . 46 7.1.3 Delivery of Loan Documents. . . . . . . . . . . . . 47 7.1.4 Opinion of Counsel. . . . . . . . . . . . . . . . . 47 7.1.5 Legal Details.. . . . . . . . . . . . . . . . . . . 47 7.1.6 Payment of Fees.. . . . . . . . . . . . . . . . . . 48 7.1.8 [RESERVED]. . . . . . . . . . . . . . . . . . . . . 48 7.1.9 Consents. . . . . . . . . . . . . . . . . . . . . . 48 7.1.10 Officer's Certificate Regarding MACs. . . . . . . . 48 7.1.11 No Violation of Laws. . . . . . . . . . . . . . . . 48 7.1.12 No Actions or Proceedings.. . . . . . . . . . . . . 48 7.1.13 Insurance Policies; Certificates of Insurance; Endorsements. . . . . . . . . . . . . . . . . . . 49 7.1.14 [RESERVED]. . . . . . . . . . . . . . . . . . . . . 49 7.1.15 [RESERVED]. . . . . . . . . . . . . . . . . . . . . 49 7.1.16 [RESERVED]. . . . . . . . . . . . . . . . . . . . . 49 7.1.17 Cancellation of Existing Senior and Mezzanine Indebtedness.. . . . . . . . . . . . . . . . . . . 49 7.1.18 Other Credit Documents. . . . . . . . . . . . . . . 49 7.2 Each Additional Loan. . . . . . . . . . . . . . . . . . . . . 49 8. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 8.1 Affirmative Covenants.. . . . . . . . . . . . . . . . . . . . 50 8.1.1 Preservation of Existence, Etc. . . . . . . . . . . 50 8.1.2 Payment of Liabilities, Including Taxes, Etc. . . . 50 8.1.3 Maintenance of Insurance. . . . . . . . . . . . . . 51 8.1.4 Maintenance of Properties and Leases. . . . . . . . 52 8.1.5 Maintenance of Patents, Trademarks, Etc.. . . . . . 52 8.1.6 Visitation Rights.. . . . . . . . . . . . . . . . . 52 8.1.7 Keeping of Records and Books of Account.. . . . . . 52 8.1.8 Plans and Benefit Arrangements. . . . . . . . . . . 53 8.1.9 Compliance with Laws. . . . . . . . . . . . . . . . 53 8.1.10 Use of Proceeds.. . . . . . . . . . . . . . . . . . 53 8.1.11 [RESERVED]. . . . . . . . . . . . . . . . . . . . . 53 8.2 Negative Covenants. . . . . . . . . . . . . . . . . . . . . . 53 8.2.1 Indebtedness. . . . . . . . . . . . . . . . . . . . 53 8.2.2 Liens.. . . . . . . . . . . . . . . . . . . . . . . 54 8.2.3 Guaranties. . . . . . . . . . . . . . . . . . . . . 54 -iv- TABLE OF CONTENTS Article Page - ------- ---- 8.2.4 Loans and Investments.. . . . . . . . . . . . . . . 54 8.2.5 Dividends and Related Distributions.. . . . . . . . 55 8.2.6 Liquidations, Mergers, Consolidations, Acquisitions.. . . . . . . . . . . . . . . . . . . 56 8.2.7 Dispositions of Assets or Subsidiaries. . . . . . . 56 8.2.8 Affiliate Transactions. . . . . . . . . . . . . . . 57 8.2.9 Subsidiaries, Partnerships and Joint Ventures.. . . 57 8.2.10 Continuation of Present Business. . . . . . . . . . 58 8.2.11 Plans and Benefit Arrangements. . . . . . . . . . . 58 8.2.12 Fiscal Year.. . . . . . . . . . . . . . . . . . . . 59 8.2.13 Issuance of Stock.. . . . . . . . . . . . . . . . . 59 8.2.14 Changes in Organizational Documents.. . . . . . . . 60 8.2.15 Capital Expenditures and Leases.. . . . . . . . . . 60 8.2.16 Minimum Debt Service Coverage Ratio.. . . . . . . . 61 8.2.17 Maximum Total Indebtedness to EBITDA Ratio. . . . . 61 8.2.18 Minimum Net Worth.. . . . . . . . . . . . . . . . . 61 8.2.19 Minimum Current Ratio.. . . . . . . . . . . . . . . 61 8.3 Reporting Requirements. . . . . . . . . . . . . . . . . . . . 61 8.3.1 Monthly Financial Statements (pre-IPO). . . . . . . 62 8.3.2 Quarterly Financial Statements (post-IPO).. . . . . 62 8.3.3 Annual Financial Statements.. . . . . . . . . . . . 62 8.3.4 Compliance Certificate. . . . . . . . . . . . . . . 63 8.3.5 Notice of Default.. . . . . . . . . . . . . . . . . 63 8.3.6 Notice of Litigation. . . . . . . . . . . . . . . . 64 8.3.7 Certain Events. . . . . . . . . . . . . . . . . . . 64 8.3.8 Budgets, Forecasts, Other Reports and Information. . . . . . . . . . . . . . . . . . . . 64 8.3.9 Notices Regarding Plans and Benefit Arrangements. . 65 8.3.9.1 Certain Events. . . . . . . . . . . . . . 65 8.3.9.2 Notices of Involuntary Termination and Annual Reports.. . . . . . . . . . . . . 66 8.3.9.3 Notice of Voluntary Termination.. . . . . 66 8.4 Collateralization Upon Failure to Close IPO By December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 9. DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 9.1 Events of Default.. . . . . . . . . . . . . . . . . . . . . . 67 9.1.1 Payments Under Loan Documents.. . . . . . . . . . . 67 9.1.2 Breach of Warranty. . . . . . . . . . . . . . . . . 67 9.1.3 Breach of Negative Covenants on Visitation Rights.. . . . . . . . . . . . . . . . . . . . . . 67 9.1.4 Breach of Other Covenants.. . . . . . . . . . . . . 68 -v- TABLE OF CONTENTS Article Page - ------- ---- 9.1.5 Defaults in Other Agreements or Indebtedness. . . . 68 9.1.6 Final Judgments or Orders.. . . . . . . . . . . . . 68 9.1.7 Loan Document Unenforceable.. . . . . . . . . . . . 68 9.1.8 Uninsured Losses; Proceedings Against Assets. . . . 68 9.1.9 Notice of Lien or Assessment. . . . . . . . . . . . 69 9.1.10 Insolvency. . . . . . . . . . . . . . . . . . . . . 69 9.1.11 Events Relating to Plans and Benefit Arrangements.. . . . . . . . . . . . . . . . . . . 69 9.1.12 Cessation of Business.. . . . . . . . . . . . . . . 70 9.1.13 Change of Control.. . . . . . . . . . . . . . . . . 70 9.1.14 Involuntary Proceedings.. . . . . . . . . . . . . . 70 9.1.15 Voluntary Proceedings.. . . . . . . . . . . . . . . 71 9.2 Consequences of Event of Default. . . . . . . . . . . . . . . 71 9.2.1 Events of Default Other Than Bankruptcy, Insolvency or Reorganization Proceedings.. . . . . 71 9.2.2 Bankruptcy, Insolvency or Reorganization Proceedings. . . . . . . . . . . . . . . . . . . . 71 9.2.3 Set-off.. . . . . . . . . . . . . . . . . . . . . . 72 9.2.4 Suits, Actions, Proceedings.. . . . . . . . . . . . 72 9.2.5 Application of Proceeds.. . . . . . . . . . . . . . 73 9.3 RESERVED. . . . . . . . . . . . . . . . . . . . . . . . . . . 73 10. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 10.1 Appointment.. . . . . . . . . . . . . . . . . . . . . . . . . 73 10.2 Delegation of Duties. . . . . . . . . . . . . . . . . . . . . 74 10.3 Nature of Duties; Independent Credit Investigation. . . . . . 74 10.4 Actions in Discretion of Agent; Instructions from the Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 10.5 Reimbursement and Indemnification of Agent by the Borrower. . 75 10.6 Exculpatory Provisions. . . . . . . . . . . . . . . . . . . . 76 10.7 Reimbursement and Indemnification of Agent by Banks.. . . . . 76 10.8 Reliance by Agent.. . . . . . . . . . . . . . . . . . . . . . 77 10.9 Notice of Default.. . . . . . . . . . . . . . . . . . . . . . 77 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . 77 10.11 Banks in Their Individual Capacities. . . . . . . . . . . . . 77 10.12 Holders of Notes. . . . . . . . . . . . . . . . . . . . . . . 78 10.13 Equalization of Banks.. . . . . . . . . . . . . . . . . . . . 78 10.14 Successor Agent.. . . . . . . . . . . . . . . . . . . . . . . 78 10.15 Agent's Fee.. . . . . . . . . . . . . . . . . . . . . . . . . 79 10.16 Availability of Funds.. . . . . . . . . . . . . . . . . . . . 79 -vi- TABLE OF CONTENTS Article Page - ------- ---- 10.17 Calculations. . . . . . . . . . . . . . . . . . . . . . . . . 79 10.18 Beneficiaries.. . . . . . . . . . . . . . . . . . . . . . . . 80 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 11.1 Modifications, Amendments or Waivers. . . . . . . . . . . . . 80 11.1.1 Increase of Commitment; Extension or Expiration Date.. . . . . . . . . . . . . . . . . . . . . . . 80 11.1.2 Extension of Payment; Reduction of Principal Interest or Fees; Modification of Terms of Payment. . . . . . . . . . . . . . . . . . . . . . 80 11.1.3 Release of Guarantor. . . . . . . . . . . . . . . . 81 11.1.4 Miscellaneous . . . . . . . . . . . . . . . . . . . 81 11.2 No Implied Waivers; Cumulative Remedies; Writing Required.. . 81 11.3 Reimbursement and Indemnification of Banks by the Borrower; Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 11.4 Holidays. . . . . . . . . . . . . . . . . . . . . . . . . . . 82 11.5 Funding by Branch, Subsidiary or Affiliate. . . . . . . . . . 83 11.5.1 Notional Funding. . . . . . . . . . . . . . . . . . 83 11.5.2 Actual Funding. . . . . . . . . . . . . . . . . . . 83 11.6 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . 83 11.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 84 11.8 Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . 84 11.9 Prior Understanding.. . . . . . . . . . . . . . . . . . . . . 84 11.10 Duration; Survival. . . . . . . . . . . . . . . . . . . . . . 85 11.11 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 85 11.12 Confidentiality.. . . . . . . . . . . . . . . . . . . . . . . 86 11.13 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 86 11.14 Agent's or Bank's Consent.. . . . . . . . . . . . . . . . . . 87 11.15 Exceptions. . . . . . . . . . . . . . . . . . . . . . . . . . 87 11.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL. . . . . . . . . . . . 87 11.17 Tax Withholding Clause. . . . . . . . . . . . . . . . . . . . 87 11.18 Joinder of Additional Borrowers.. . . . . . . . . . . . . . . 88 11.19 Power of Attorney for The Triumph Group Operations, Inc.; Joint and Several Obligations of Loan Parties. . . . . . . . 89 11.20 Public Filings. . . . . . . . . . . . . . . . . . . . . . . . 89 -vii- LIST OF SCHEDULES AND EXHIBITS SCHEDULES SCHEDULE 1.1(B) - COMMITMENTS OF BANKS SCHEDULE 1.1(P) - PERMITTED LIENS SCHEDULE 6.1.1 - QUALIFICATIONS TO DO BUSINESS SCHEDULE 6.1.2 - CAPITALIZATION SCHEDULE 6.1.3 - SUBSIDIARIES SCHEDULE 6.1.13 - CONSENTS AND APPROVALS SCHEDULE 6.1.23 - EMPLOYEE BENEFIT PLAN DISCLOSURES SCHEDULE 6.1.25 - ENVIRONMENTAL DISCLOSURES SCHEDULE 8.2.1 - PERMITTED INDEBTEDNESS EXHIBITS EXHIBIT 1.1(A) - ASSIGNMENT AND ASSUMPTION AGREEMENT EXHIBIT 1.1(B) - BORROWER JOINDER EXHIBIT 1.1(G) - GUARANTY AGREEMENT EXHIBIT 1.1(P) - PRICING GRID EXHIBIT 1.1(R) - REVOLVING CREDIT NOTE EXHIBIT 1.1(T) - TERM NOTE EXHIBIT 2.4 - LOAN REQUEST EXHIBIT 7.1.4 - OPINION OF COUNSEL EXHIBIT 8.3.4 - COMPLIANCE CERTIFICATE -viii- CREDIT AGREEMENT THIS CREDIT AGREEMENT is dated as of July 19, 1996 and is made by and among THE TRIUMPH GROUP, INC., a Delaware corporation, (the "COMPANY") as a Borrower, each of the other BORROWERS (as hereinafter defined), the GUARANTOR (as hereinafter defined), the BANKS (as hereinafter defined), and PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent for the Banks under this Agreement (hereinafter referred to in such capacity as the "AGENT"). WITNESSETH: WHEREAS, the Borrowers have requested the Banks to provide (i) a revolving credit facility to the Borrowers in an aggregate principal amount not to exceed $50,000,000 and (ii) a $35,000,000 term loan facility; and WHEREAS, the revolving credit and term loan facilities shall be used for the purpose of refinancing existing indebtedness and for general corporate purposes, including acquisitions; WHEREAS, the Borrowers wish to give The Triumph Group Operations, Inc. a power of attorney to act on their behalf for all purposes under this Agreement (see Section 11.19), while confirming that their obligations hereunder are joint and several; and WHEREAS, the Banks are willing to provide such credit upon the terms and conditions hereinafter set forth. NOW, THEREFORE, the parties hereto, in consideration of their mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, covenant and agree as follows: 1. CERTAIN DEFINITIONS 1.1 CERTAIN DEFINITIONS. In addition to words and terms defined elsewhere in this Agreement, the following words and terms shall have the following meanings, respectively, unless the context hereof clearly requires otherwise: AFFILIATE as to any Person shall mean any other Person (i) which directly or indirectly controls, is controlled by, or is under common control with such Person, (ii) which beneficially owns or holds 10% or more of any class of the voting or other equity interests of such Person, or (iii) 10% or more of any class of voting interests or other equity interests of which is beneficially owned or held, directly or indirectly, by such Person. Control, as used in this definition, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, including the power to elect a majority of the directors or trustees of a corporation or trust, as the case may be. AGENT shall mean PNC Bank, National Association, and its successors and assigns. AGENT'S FEE shall have the meaning assigned to that term in Section 10.15. AGENT'S LETTER shall have the meaning assigned to that term in Section 10.15. AGREEMENT shall mean this Credit Agreement, as the same may be supplemented or amended from time to time, including all schedules and exhibits. ALCO NOTE shall mean the Subordinated Promissory Note dated June 1, 1993 issued by Guarantor to MDR Corporation in the original principal amount of $13,500,000, as amended by a Note Modification Agreement dated as of December 31, 1995. ANNUAL STATEMENTS shall have the meaning assigned to that term in Section 6.1.9(i). ASSIGNMENT AND ASSUMPTION AGREEMENT shall mean an Assignment and Assumption Agreement by and among a Purchasing Bank, the Transferor Bank and the Agent, as Agent and on behalf of the remaining Banks, substantially in the form of EXHIBIT 1.1(A). AUTHORIZED OFFICER shall mean those individuals, designated by written notice to the Agent from the Borrowers, authorized to execute notices, reports and other documents on behalf of the Loan Parties required hereunder. The Borrowers may amend such list of individuals from time to time by giving written notice of such amendment to the Agent. BANKS shall mean the financial institutions named on SCHEDULE 1.1(B) and their respective successors and assigns as permitted hereunder, each of which is referred to herein as a Bank. BASE RATE shall mean the greater of (i) the interest rate per annum announced from time to time by the Agent at its Principal Office as its then prime rate, which rate may not be the lowest rate then being charged commercial borrowers by the Agent, or (ii) the Federal Funds Effective Rate plus 1/2% per annum. BASE RATE OPTION shall mean either the Revolving Credit Base Rate Option or the Term Loan Base Rate Option. -2- BENEFIT ARRANGEMENT shall mean at any time an "employee benefit plan," within the meaning of Section 3(3) of ERISA, which is neither a Plan nor a Multiemployer Plan and which is maintained, sponsored or otherwise contributed to by any member of the ERISA Group. BORROWERS shall mean the Company, each of its Subsidiaries, which is designated as a "Borrower" on the signature page hereof, and each other Person that joins this Agreement as a Borrower after the date hereof pursuant to Section 11.18. BORROWER JOINDER shall mean a joinder by a Person as a Borrower under this Agreement and the Other Loan Documents in the form of Exhibit 1.1(B). BORROWING DATE shall mean, with respect to any Loan, the date for the making thereof or the renewal or conversion thereof to the same or a different Interest Rate Option, which shall be a Business Day. BORROWING TRANCHE shall mean specified portions of Loans outstanding as follows: (i) any Loans to which a Euro-Rate Option applies which become subject to the same Interest Rate Option under the same Loan Request by the Borrowers and which have the same Interest Period shall constitute one Borrowing Tranche, and (ii) all Loans to which a Base Rate Option applies shall constitute one Borrowing Tranche. BUSINESS DAY shall mean any day other than a Saturday or Sunday or a legal holiday on which commercial banks are authorized or required to be closed for business in Pittsburgh, Pennsylvania. CAPITAL STOCK shall mean any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. CLOSING DATE shall mean the Business Day on which the first Loan shall be made, which shall be July 19, 1996, or such other date as the parties agree. The closing shall take place at 10:00 a.m., Eastern time, on the Closing Date at the offices of Drinker Biddle & Reath in Berwyn, Pennsylvania, or at such other time and place as the parties agree. COLLATERAL shall mean the property described in Section 8.4(i). COMMITMENT shall mean as to any Bank the aggregate of its Revolving Credit Commitment and Term Loan Commitment, and COMMITMENTS shall mean the aggregate of the Revolving Credit Commitments and Term Loan Commitments of all of the Banks. -3- COMMITMENT FEE shall have the meaning assigned to that term in Section 2.3. COMPANY shall mean The Triumph Group, Inc., a corporation organized and existing under the laws of the State of Delaware. CONSOLIDATED EBITDA shall mean for any period of determination Consolidated Net Income (before extraordinary items) for such period plus the amount of income tax expense, interest expense, depreciation and amortization expense deducted from earnings in determining such Consolidated Net Income. CONSOLIDATED NET WORTH shall mean as of any date of determination total stockholders' equity of the Company and its Subsidiaries as of such date determined and consolidated in accordance with GAAP. CONSOLIDATED INTEREST EXPENSE shall mean for any period of determination the amount of cash interest expense deducted from the earnings of the Company and its Subsidiaries in determining Consolidated Net Income for such period in accordance with GAAP. CONSOLIDATED NET INCOME shall mean for any fiscal period the net income (or loss) after income taxes of the Company and its Subsidiaries for such period determined and consolidated in accordance with GAAP. CONSOLIDATED TOTAL INDEBTEDNESS shall mean as of any date of determination the aggregate of all Indebtedness (including subordinated indebtedness as to which cash interest is contractually payable) of the Company and its Subsidiaries as of such date determined and consolidated in accordance with GAAP. DEBT SERVICE COVERAGE RATIO shall mean for any period of determination the ratio of (i) Consolidated Net Income (before extraordinary items) for such period plus the amount of interest expense, depreciation and amortization expense deducted from earnings in determining such Consolidated Net Income to (ii) Consolidated Interest Expense plus required principal amortization of Indebtedness of the Company and its Subsidiaries for such period determined and consolidated in accordance with GAAP. DOLLAR, DOLLARS, U.S. DOLLARS and the symbol $ shall mean lawful money of the United States of America. ENVIRONMENTAL COMPLAINT shall mean any written complaint setting forth a cause of action for personal or property damage or natural resource damage or equitable relief, order, notice of violation, citation, request for information issued pursuant to any Environmental Laws by an Official Body, subpoena or other written notice asserting or threatening a claim -4- relating to, arising out of, or issued pursuant to any of the Environmental Laws or any Environmental Conditions, as the case may be. ENVIRONMENTAL CONDITIONS shall mean any conditions of the environment, including the workplace, the ocean, natural resources (including flora or fauna), soil, surface water, groundwater, any actual or potential drinking water supply sources, substrata or the ambient air, relating to or arising out of, or caused by the use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaking, pumping, emptying, discharging, injecting, escaping, leaching, disposal, dumping, threatened release or other management or mismanagement of Regulated Substances resulting from the use of, or operations on, the Property. ENVIRONMENTAL LAWS shall mean all federal, state, local and foreign Laws and regulations, including permits, licenses, authorizations, bonds, orders, judgments, consent decrees issued, or entered into, pursuant thereto, relating to pollution or protection of human health or the environment or employee safety in the workplace. ERISA shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect. ERISA GROUP shall mean, at any time, the Borrowers and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control and all other entities which, together with the Borrower, are treated as a single employer under Section 414 of the Internal Revenue Code. EURO-RATE shall mean with respect to the Loans comprising any Borrowing Tranche to which the Euro-Rate Option applies for any Interest Period, the interest rate per annum determined by the Agent by dividing (the resulting quotient rounded upward to the nearest 1/16th of 1% per annum) (i) the rate of interest determined by the Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the "offered" eurodollar rate evidenced by Telerate display page 3750 (or such other display on the Telerate system as may replace such page) at approximately 11:00 A.M., London time, two (2) London Business Days prior to the first day of such Interest Period for an amount comparable to such Borrowing Tranche and having a borrowing date and a maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus the Euro-Rate Reserve Percentage. The Euro-Rate may also be expressed by the following formula: Euro-Rate = Telerate page 3750 ----------------------------------- 1.00 - Euro-Rate Reserve Percentage -5- The Euro-Rate shall be adjusted with respect to any Euro-Rate Option outstanding on the effective date of any change in the Euro-Rate Reserve Percentage as of such effective date. The Agent shall give prompt notice to the Borrowers of the Euro-Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error. EURO-RATE OPTION shall mean either the Revolving Credit Euro-Rate Option or the Term Loan Euro-Rate Option. EURO-RATE RESERVE PERCENTAGE shall mean the maximum percentage (expressed as a decimal rounded upward to the nearest 1/100 of 1%) as determined by the Agent which is in effect during any relevant period, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including supplemental, marginal and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as "Eurocurrency Liabilities") of a member bank in such System. EVENT OF DEFAULT shall mean any of the Events of Default described in Section 9.1. EXPIRATION DATE shall mean, with respect to the Revolving Credit Commitments, the fifth anniversary of the Closing Date; PROVIDED that the Expiration Date may be extended under Section 2.8.10. FEDERAL FUNDS EFFECTIVE RATE for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed and rounded upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the "Federal Funds Effective Rate" as of the date of this Agreement; PROVIDED, if such Federal Reserve Bank (or its successor) does not announce such rate on any day, the "Federal Funds Effective Rate" for such day shall be the Federal Funds Effective Rate for the last day on which such rate was announced. FINANCIAL PROJECTIONS shall have the meaning assigned to that term in Section 6.1.9(ii). GAAP shall mean generally accepted accounting principles as are in effect from time to time, subject to the provisions of Section 1.3, and applied on a consistent basis both as to classification of items and amounts. -6- GOVERNMENTAL ACTS shall have the meaning assigned to that term in Section 2.8.8. GUARANTOR shall mean The Triumph Group Holdings, Inc., a corporation organized and existing under the laws of the state of Delaware. GUARANTY of any Person shall mean any obligation of such Person guaranteeing or in effect guaranteeing any liability or obligation of any other Person in any manner, whether directly or indirectly, including any performance bond or other suretyship arrangement and any other form of assurance against loss, except (i) endorsement of negotiable or other instruments for deposit or collection in the ordinary course of business or (ii) any guaranty of an obligation to indemnify or hold harmless any other Person incurred in connection with an acquisition or divestiture of Capital Stock or assets permitted under this Agreement. GUARANTY AGREEMENT shall mean the Guaranty and Suretyship Agreement in substantially the form of EXHIBIT 1.1(G) executed and delivered by the Guarantor to the Agent for the benefit of the Banks. HISTORICAL STATEMENTS shall have the meaning assigned to that term in Section 6.1.9(i). IPO means the initial public offering of Capital Stock in the Guarantor. INDEBTEDNESS shall mean, as to any Person at any time, any and all indebtedness, obligations or liabilities (whether matured or unmatured, liquidated or unliquidated, direct or indirect, absolute or contingent, or joint or several) of such Person for or in respect of: (i) borrowed money, (ii) amounts raised under or liabilities in respect of any note purchase or acceptance credit facility, (iii) reimbursement obligations under any letter of credit, currency swap agreement, interest rate swap, cap, collar or floor agreement or other interest rate management device, (iv) any other transaction (including forward sale or purchase agreements, capitalized leases and conditional sales agreements) having the commercial effect of a borrowing of money entered into by such Person to finance its operations or capital requirements (but not including trade payables and accrued expenses incurred in the ordinary course of business which are not represented by a promissory note or other evidence of indebtedness and which are not more than sixty (60) days past due), or (v) any Guaranty of Indebtedness for borrowed money. INTEREST PERIOD shall have the meaning assigned to such term in Section 4.2. INTEREST RATE OPTION shall mean any Euro-Rate Option or Base Rate Option. INTERIM STATEMENTS shall have the meaning assigned to that term in Section 6.1.9(i). -7- INTERNAL REVENUE CODE shall mean the Internal Revenue Code of 1986, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect. LABOR CONTRACTS shall mean all employment agreements, employment contracts, collective bargaining agreements and other agreements among any Loan Party or Subsidiary of a Loan Party and its employees. LAW shall mean any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, opinion, release, ruling, order, injunction, writ, decree or award of any Official Body. LETTER OF CREDIT shall have the meaning assigned to that term in Section 2.8.1. LETTER OF CREDIT FEE shall have the meaning assigned to that term in Section 2.8.3. LETTERS OF CREDIT OUTSTANDING shall mean at any time the sum of (i) the aggregate undrawn face amount of outstanding Letters of Credit and (ii) the aggregate amount of all unpaid and outstanding Reimbursement Obligations. LIEN shall mean any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, whether voluntarily or involuntarily given, including any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security and any filed financing statement or other notice of any of the foregoing (whether or not a lien or other encumbrance is created or exists at the time of the filing). LOAN DOCUMENTS shall mean this Agreement, the Guaranty Agreement, the Notes and any other instruments, certificates or documents delivered or contemplated to be delivered hereunder or thereunder or in connection herewith or therewith, as the same may be supplemented or amended from time to time in accordance herewith or therewith, and LOAN DOCUMENT shall mean any of the Loan Documents. LOAN PARTIES shall mean the Borrowers and the Guarantor. LOAN REQUEST shall mean a request for Revolving Credit Loans made in accordance with Section 2.4 or a request to select, convert to or renew a Euro- Rate Option in accordance with Section 4.2, 10.13. LOANS shall mean collectively and LOAN shall mean separately all Revolving Credit Loans and the Term Loans or any Revolving Credit Loan or the Term Loan. -8- MATERIAL ADVERSE CHANGE shall mean any set of circumstances or events which (a) has or is reasonably expected to have any material adverse effect whatsoever upon the validity or enforceability of this Agreement or any other Loan Document, (b) is or is reasonably expected to be material and adverse to the business, properties, assets, financial condition, results of operations or prospects of the Loan Parties taken as a whole, (c) impairs materially or is reasonably expected to impair materially the ability of the Loan Parties taken as a whole to duly and punctually pay or perform its Indebtedness, or (d) impairs materially or is reasonably expected to impair materially the ability of the Agent or any of the Banks, to the extent permitted, to enforce their legal remedies pursuant to this Agreement or any other Loan Document. MONTH, with respect to an Interest Period under the Euro-Rate Option, shall mean the interval between the days in consecutive calendar months numerically corresponding to the first day of such Interest Period. If any Euro-Rate Interest Period begins on a day of a calendar month for which there is no numerically corresponding day in the month in which such Interest Period is to end, the final month of such Interest Period shall be deemed to end on the last Business Day of such final month. MULTIEMPLOYER PLAN shall mean any employee benefit plan which is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to which the Borrowers or any member of the ERISA Group is then making or accruing an obligation to make contributions or, within the preceding five Plan years, has made or had an obligation to make such contributions. MULTIPLE EMPLOYER PLAN shall mean a Plan which has two or more contributing sponsors (including the Borrowers or any member of the ERISA Group) at least two of whom are not under common control, as such a plan is described in Sections 4063 and 4064 of ERISA. NOTES shall mean the Revolving Credit Notes and the Term Notes. NOTICES shall have the meaning assigned to that term in Section 11.6. OBLIGATION shall mean any obligation or liability of any of the Loan Parties to the Agent or any of the Banks, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, under or in connection with this Agreement, the Notes, the Letters of Credit, the Agent's Letter or any other Loan Document. OFFICIAL BODY shall mean any national, federal, state, local or other government or political subdivision or any agency, authority, bureau, central bank, commission, department -9- or instrumentality of either, or any court or tribunal in each case whether foreign or domestic, with jurisdiction to act with the force of law with respect to pertinent matters. PARTNERSHIP INTERESTS shall have the meaning given to such term in Section 6.1.3. PBGC shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor. PERMITTED INVESTMENTS shall mean: (i) direct obligations of the United States of America or any agency or instrumentality thereof or obligations backed by the full faith and credit of the United States of America maturing in twelve (12) months or less from the date of acquisition; (ii) commercial paper maturing in 180 days or less rated not lower than A-1, by Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc. on the date of acquisition; (iii) demand deposits, time deposits, money market account deposits or certificates of deposit maturing within one year in commercial banks whose obligations are rated A-1, A or the equivalent or better by Standard & Poor's Corporation on the date of acquisition; (iv) shares of money market mutual funds that invest substantially all of their assets in the investments described in clauses (i) through (iii) above; and (v) investments in Subsidiaries permitted under this Agreement. PERMITTED LIENS shall mean: (i) Liens for taxes, assessments, or similar charges, incurred in the ordinary course of business and which are not yet due and payable; (ii) Pledges or deposits made in the ordinary course of business to secure payment of worker's compensation, or to participate in any fund in connection with worker's compensation, unemployment insurance, old-age pensions or other social security programs; (iii) Liens of mechanics, materialmen, warehousemen, carriers, or other like Liens, securing obligations incurred in the ordinary course of business that are not yet due and payable and Liens of landlords securing obligations to pay lease payments that are not yet due and payable or in default; -10- (iv) Good-faith pledges or deposits made in the ordinary course of business to secure performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, not in excess of the aggregate amount due thereunder, or to secure statutory obligations, or surety, appeal, indemnity, performance or other similar bonds required in the ordinary course of business; (v) Encumbrances consisting of zoning restrictions, easements or other restrictions on the use of real property, none of which materially impairs the use of such property or the value thereof, and none of which is violated in any material respect by existing or proposed structures or land use; (vi) Liens, security interests and mortgages in favor of the Agent for the benefit of the Banks; (vii) Liens on property leased by any Loan Party or Subsidiary of a Loan Party under capital and operating leases permitted in Section 8.2.15 securing obligations of such Loan Party or Subsidiary to the lessor under such leases; (viii) Any Lien existing on the date of this Agreement and described on SCHEDULE 1.1(P), PROVIDED that the principal amount secured thereby is not hereafter increased, and no additional assets become subject to such Lien; (ix) Purchase Money Security Interests, PROVIDED that the aggregate amount of loans and deferred payments secured by such Purchase Money Security Interests shall not exceed $5,000,000 (excluding for the purpose of this computation any loans or deferred payments secured by Liens described on SCHEDULE 1.1(P)); and (x) The following, (A) if the validity or amount thereof is being contested in good-faith by appropriate and lawful proceedings diligently conducted so long as levy and execution thereon have been stayed and continue to be stayed or (B) if a final judgment is entered and such judgment is discharged within sixty (60) days of entry, and in either case they do not affect the Collateral or, in the aggregate, materially impair the ability of any Loan Party to perform its Obligations hereunder or under the other Loan Documents: (1) Claims or Liens for taxes, assessments or charges due and payable and subject to interest or penalty, PROVIDED that the Loan Party maintains such reserves or other appropriate provisions as shall be required by GAAP and pays all such taxes, assessments or charges forthwith upon the commencement of proceedings to foreclose any such Lien; -11- (2) Claims, Liens or encumbrances upon, and defects of title to, real or personal property other than the Collateral, including any attachment of personal or real property or other legal process prior to adjudication of a dispute on the merits; or (3) Claims or Liens of mechanics, materialmen, warehousemen, carriers, or other statutory nonconsensual Liens. (4) Liens resulting from final judgments or orders described in Section 9.1.6. PERSON shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, joint venture, government or political subdivision or agency thereof, or any other entity. PLAN shall mean at any time an employee pension benefit plan (including a Multiple Employer Plan, but not a Multiemployer Plan) which is covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained by any entity which was at such time a member of the ERISA Group for employees of any entity which was at such time a member of the ERISA Group. PIK SUBORDINATED INDEBTEDNESS shall mean Indebtedness which by its terms is subordinated to the Obligations of the Loan Parties to the Banks and on which interest is payable, at the option of the payor, in cash or by the issuance of additional Indebtedness that is likewise subordinated. PNC BANK shall mean PNC Bank, National Association, its successors and assigns. POTENTIAL DEFAULT shall mean any event or condition which with notice, passage of time or a determination by the Agent or the Required Banks, or any combination of the foregoing, would constitute an Event of Default. PRICING GRID means that the charts attached hereto as Exhibit 1.1(P) which set forth the rates at which Commitment Fees, Letter Credit Fees and interest rate margins are calculated, both before and after the IPO and the mandatory prepayment of the Loans required under Section 5.5.1, on the basis of the Total Indebtedness to EBITDA Ratio. PRINCIPAL OFFICE shall mean the main banking office of the Agent in Pittsburgh, Pennsylvania. -12- PROHIBITED TRANSACTION shall mean any prohibited transaction as defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA for which neither an individual nor a class exemption has been issued by the United States Department of Labor. PROPERTY shall mean all real property, both owned and leased, of any Loan Party or Subsidiary of a Loan Party. PURCHASE MONEY SECURITY INTEREST shall mean Liens upon tangible personal property securing loans to any Loan Party or Subsidiary of a Loan Party or deferred payments by such Loan Party or Subsidiary for the purchase of such tangible personal property. PURCHASING BANK shall mean a Bank which becomes a party to this Agreement by executing an Assignment and Assumption Agreement. RATABLE SHARE shall mean the proportion that a Bank's Commitment bears to the Commitments of all of the Banks. REGULATED SUBSTANCES shall mean any substance, including any solid, liquid, semisolid, gaseous, thermal, thoriated or radioactive material, refuse, garbage, wastes, chemicals, petroleum products, by-products, coproducts, impurities, dust, scrap, heavy metals, any substance defined as a "hazardous substance," "pollutant," "pollution," "contaminant," "hazardous or toxic substance," "extremely hazardous substance," "toxic chemical," "toxic waste," "hazardous waste," "industrial waste," "residual waste," "solid waste," "municipal waste," "mixed waste," "infectious waste," "chemotherapeutic waste," "medical waste," "regulated substance" or any related materials, substances or wastes as now or hereafter defined pursuant to any Environmental Laws, ordinances, rules, regulations or other directives of any Official Body, the generation, manufacture, extraction, processing, distribution, treatment, storage, disposal, transport, recycling, reclamation, use, reuse, spilling, leaking, dumping, injection, pumping, leaching, emptying, discharge, escape, release or other management or mismanagement of which is regulated by the Environmental Laws. REGULATION U shall mean Regulation U, T, G or X as promulgated by the Board of Governors of the Federal Reserve System, as amended from time to time. REIMBURSEMENT OBLIGATION shall have the meaning assigned to such term in Section 2.8.4(i). REPORTABLE EVENT means a reportable event described in Section 4043 of ERISA and regulations thereunder with respect to a Plan or Multiemployer Plan. -13- REQUIRED BANKS shall mean (i) if there are no Loans outstanding, Banks whose Commitments aggregate at least 66 2/3% of the Commitments of all of the Banks, or (ii) if there are Loans outstanding, Banks whose Loans outstanding aggregate at least 66 2/3% of the total principal amount of the Loans outstanding hereunder. REVOLVING CREDIT BASE RATE OPTION shall mean the option of the Borrowers to have Revolving Credit Loans bear interest at the rate and under the terms and conditions set forth in Section 4.1.1(i). REVOLVING CREDIT COMMITMENT shall mean, as to any Bank at any time, the amount initially set forth opposite its name on SCHEDULE 1.1(B) in the column labeled "Amount of Commitment for Revolving Credit Loans," and thereafter on Schedule I to the most recent Assignment and Assumption Agreement, and REVOLVING CREDIT COMMITMENTS shall mean the aggregate Revolving Credit Commitments of all of the Banks. REVOLVING CREDIT EURO-RATE OPTION shall mean the option of the Borrowers to have Revolving Credit Loans bear interest at the rate and under the terms and conditions set forth in Section 4.1.1(ii). REVOLVING CREDIT LOANS shall mean collectively and REVOLVING CREDIT LOAN shall mean separately all Revolving Credit Loans or any Revolving Credit Loan made by the Banks or one of the Banks to the Borrowers pursuant to Section 2.1 or 2.8.4(i) hereof. REVOLVING CREDIT NOTES shall mean collectively and REVOLVING CREDIT NOTE shall mean separately all the Revolving Credit Notes of the Borrowers in the form of EXHIBIT 1.1(R) evidencing the Revolving Credit Loans together with all amendments, extensions, renewals, replacements, refinancings or refundings thereof in whole or in part. REVOLVING FACILITY USAGE shall mean at any time the sum of the Revolving Credit Loans outstanding and the Letters of Credit Outstanding. SHARES shall have the meaning assigned to that term in Section 6.1.2. SUBSIDIARY of any Person at any time shall mean (i) any corporation or trust of which 50% or more (by number of shares or number of votes) of the outstanding capital stock or shares of beneficial interest normally entitled to vote for the election of one or more directors or trustees (regardless of any contingency which does or may suspend or dilute the voting rights) is at such time owned directly or indirectly by such Person or one or more of such Person's Subsidiaries, or any partnership of which such Person is a general partner or of which 50% or more of the partnership interests is at the time directly or indirectly owned by -14- such Person or one or more of such Person's Subsidiaries, or (ii) any corporation, trust, partnership or other entity which is controlled or capable of being controlled by such Person or one or more of such Person's Subsidiaries. SUBSIDIARY SHARES shall have the meaning assigned to that term in Section 6.1.3. TERM LOAN BASE RATE OPTION shall mean the option of the Borrowers to have Term Loans bear interest at the rate and under the terms and conditions set forth in Section 4.1.2(i). TERM LOAN COMMITMENT shall mean, as to any Bank at any time, the amount initially set forth opposite its name on SCHEDULE 1.1(B) in the column labeled "Amount of Commitment for Term Loans," and thereafter on Schedule I to the most recent Assignment and Assumption Agreement, and TERM LOAN COMMITMENTS shall mean the aggregate Term Loan Commitments of all of the Banks. TERM LOAN EURO-RATE OPTION shall mean the option of the Borrowers to have Term Loans bear interest at the rate and under the terms and conditions set forth in Section 4.1.2(ii). TERM LOANS shall mean collectively and TERM LOAN shall mean separately all Term Loans or any Term Loan made by the Banks or one of the Banks to the Borrowers pursuant to Section 3.1. TERM NOTES shall mean collectively and TERM NOTE shall mean separately all of the Term Notes of the Borrowers in the form of EXHIBIT 1.1(T) evidencing the Term Loans together with all amendments, extensions, renewals, replacements, refinancings or refundings thereof in whole or in part. TOTAL INDEBTEDNESS TO EBITDA RATIO shall mean the ratio of Consolidated Total Indebtedness to Consolidated EBITDA. TRANSFEROR BANK shall mean the selling Bank pursuant to an Assignment and Assumption Agreement. 1.2 CONSTRUCTION. Unless the context of this Agreement otherwise clearly requires, the following rules of construction shall apply to this Agreement and each of the other Loan Documents: -15- 1.2.1 NUMBER; INCLUSION. references to the plural include the singular, the plural, the part and the whole; "or" has the inclusive meaning represented by the phrase "and/or," and "including" has the meaning represented by the phrase "including without limitation"; 1.2.2 DETERMINATION. references to "determination" of or by the Agent or the Banks shall be deemed to include good-faith estimates by the Agent or the Banks (in the case of quantitative determinations) and good-faith beliefs by the Agent or the Banks (in the case of qualitative determinations) and such determination shall be conclusive absent manifest error; 1.2.3 AGENT'S DISCRETION AND CONSENT. whenever the Agent or the Banks are granted the right herein to act in its or their sole discretion or to grant or withhold consent such right shall be exercised in good-faith; 1.2.4 DOCUMENTS TAKEN AS A WHOLE. the words "hereof," "herein," "hereunder," "hereto" and similar terms in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document as a whole and not to any particular provision of this Agreement or such other Loan Document; 1.2.5 HEADINGS. the section and other headings contained in this Agreement or such other Loan Document and the Table of Contents (if any), preceding this Agreement or such other Loan Document are for reference purposes only and shall not control or affect the construction of this Agreement or such other Loan Document or the interpretation thereof in any respect; 1.2.6 IMPLIED REFERENCES TO THIS AGREEMENT. article, section, subsection, clause, schedule and exhibit references are to this Agreement or other Loan Document, as the case may be, unless otherwise specified; -16- 1.2.7 PERSONS. reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement or other Loan Document, as the case may be, and reference to a Person in a particular capacity excludes such Person in any other capacity; 1.2.8 MODIFICATIONS TO DOCUMENTS. reference to any agreement (including this Agreement and any other Loan Document together with the schedules and exhibits hereto or thereto), document or instrument means such agreement, document or instrument as amended, modified, replaced, substituted for, superseded or restated; 1.2.9 FROM, TO AND THROUGH. relative to the determination of any period of time, "from" means "from and including," "to" means "to but excluding," and "through" means "through and including"; and 1.2.10 SHALL; WILL. references to "shall" and "will" are intended to have the same meaning. 1.3 ACCOUNTING PRINCIPLES. Except as otherwise provided in this Agreement, all computations and determinations as to accounting or financial matters and all financial statements to be delivered pursuant to this Agreement shall be made and prepared in accordance with GAAP (including principles of consolidation where appropriate), and all accounting or financial terms shall have the meanings ascribed to such terms by GAAP. 2. REVOLVING CREDIT FACILITY 2.1 REVOLVING CREDIT COMMITMENTS. Subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, each Bank severally agrees to make Revolving Credit Loans to the Borrowers at any time or from time to time on or after the date hereof to the Expiration Date provided that after giving effect to such Loan the aggregate amount of Loans from such -17- Bank shall not exceed such Bank's Revolving Credit Commitment minus such Bank's Ratable Share of the Letters of Credit Outstanding. Within such limits of time and amount and subject to the other provisions of this Agreement, the Borrowers may borrow, repay and reborrow pursuant to this Section 2.1. 2.2 NATURE OF BANKS' OBLIGATIONS WITH RESPECT TO REVOLVING CREDIT LOANS. Each Bank shall be obligated to participate in each request for Revolving Credit Loans pursuant to Section 2.4 in accordance with its Ratable Share. The aggregate of each Bank's Revolving Credit Loans outstanding hereunder to the Borrowers at any time shall never exceed its Revolving Credit Commitment minus its Ratable Share of the Letter of Credit Outstandings. The obligations of each Bank hereunder are several. The failure of any Bank to perform its obligations hereunder shall not affect the Obligations of the Borrowers to any other party nor the several obligations of the other Banks to the Borrowers; nor shall any other party be liable for the failure of such Bank to perform its obligations hereunder. The Banks shall have no obligation to make Revolving Credit Loans hereunder on or after the Expiration Date. 2.3 COMMITMENT FEES. Accruing from the date hereof until the Expiration Date, the Borrowers agree to pay to the Agent for the account of each Bank, as consideration for such Bank's Revolving Credit Commitment hereunder, a nonrefundable commitment fee (the "COMMITMENT FEE"), calculated on a per annum (365 or 366 days, as appropriate, and actual days elapsed) basis under the Pricing Grid, on the average daily difference between the amount of (i) such Bank's Revolving Credit Commitment as the same may be constituted from time to time and (ii) the principal amount of such Bank's Ratable Share of Revolving Facility Usage. All Commitment Fees shall be payable in arrears on the first Business Day of each calendar quarter after the date hereof and on the Expiration Date or upon acceleration of the Notes. 2.4 REVOLVING CREDIT LOAN REQUESTS. Except as otherwise provided herein, the Borrowers may from time to time prior to the Expiration Date request the Banks to make Revolving Credit Loans, or renew or convert the Interest Rate Option applicable to existing Revolving Credit Loans pursuant to Section 4.2, by delivering to the Agent, not later than (i) 2:00 p.m., Eastern time, three (3) Business Days prior to the proposed Borrowing Date with respect to the making of Revolving Credit Loans to which the Euro-Rate Option applies or the conversion to or the renewal of the Euro-Rate Option for any Revolving Credit Loans; and (ii) 12:00 Noon, Eastern time on either the proposed Borrowing Date with respect to the making of a Revolving Credit Loan -18- to which the Base Rate Option applies or the last day of the preceding Interest Period with respect to the conversion to the Base Rate Option for any Revolving Credit Loan, of a duly completed request therefor substantially in the form of EXHIBIT 2.4 or a request by telephone immediately confirmed in writing by letter, facsimile or telex in such form (each, a "LOAN REQUEST"), it being understood that the Agent may rely on the authority of any individual making such a telephonic request without the necessity of receipt of such written confirmation. Each Revolving Credit Loan Request shall be irrevocable and shall specify (i) the proposed Borrowing Date; (ii) the aggregate amount of the proposed Revolving Credit Loans comprising each Borrowing Tranche, which shall be in integral multiples of $500,000 and not less than $1,000,000 for each Borrowing Tranche to which the Euro-Rate Option applies and not less than the lesser of $250,000 or the maximum amount available for Borrowing Tranches to which the Base Rate Option applies; (iii) whether the Euro-Rate Option or Base Rate Option shall apply to the proposed Revolving Credit Loans comprising the Borrowing Tranche; and (iv) in the case of a Borrowing Tranche to which the Euro-Rate Option applies, an appropriate Interest Period for the proposed Revolving Credit Loans comprising such Borrowing Tranche. 2.5 MAKING REVOLVING CREDIT LOANS. The Agent shall, promptly after receipt by it of a Loan Request pursuant to Section 2.4, notify the Banks of its receipt of such Loan Request specifying: (i) the proposed Borrowing Date and the time and method of disbursement of such Revolving Credit Loans; (ii) the amount and type of each such Revolving Credit Loan and the applicable Interest Period (if any); and (iii) the apportionment among the Banks of the Revolving Credit Loans as determined by the Agent in accordance with Section 2.2. Each Bank shall remit the principal amount of each Revolving Credit Loan to the Agent such that the Agent is able to, and the Agent shall, to the extent the Banks have made funds available to it for such purpose, fund such Revolving Credit Loans to the Borrowers in U.S. Dollars and immediately available funds at the Principal Office prior to 2:00 p.m., Eastern time, on the Borrowing Date, PROVIDED that if any Bank fails to remit such funds to the Agent in a timely manner, the Agent may elect in its sole discretion to fund with its own funds the Revolving Credit Loans of such Bank on the Borrowing Date, and such Bank shall be subject to the repayment obligation in Section 10.16. 2.6 REVOLVING CREDIT NOTES. The Obligation of the Borrowers to repay the aggregate unpaid principal amount of the Revolving Credit Loans made by each Bank, together with interest thereon, shall be evidenced by a Revolving Credit Note dated the Closing Date payable to the order of such Bank in a face amount equal to the Revolving Credit Commitment of such Bank. -19- 2.7 USE OF PROCEEDS. The proceeds of the Revolving Credit Loans shall be used for the purpose of refinancing existing indebtedness and for general corporate purposes, including acquisitions permitted hereunder. 2.8 LETTER OF CREDIT SUBFACILITY. 2.8.1 ISSUANCE OF LETTERS OF CREDIT. Borrowers may request the issuance of a letter of credit (each a "LETTER OF CREDIT") on behalf of itself or another Loan Party by delivering to the Agent a completed application and agreement for letters of credit in such form as the Agent may specify from time to time by no later than 10:00 a.m., Eastern time, at least five (5) Business Days, or such shorter period as may be agreed to by the Agent, in advance of the proposed date of issuance. Subject to the terms and conditions hereof and in reliance on the agreements of the other Banks set forth in this Section 2.8, the Agent will issue a Letter of Credit provided that each Letter of Credit shall (A) have a maximum maturity of twelve (12) months from the date of issuance, and (B) in no event expire later than one Business Day prior to the Expiration Date and providing that in no event shall (i) the Letters of Credit Outstanding exceed, at any one time, $5,000,000 or (ii) the Revolving Facility Usage exceed, at any one time, the Revolving Credit Commitments. 2.8.2 PARTICIPATIONS. Immediately upon issuance of each Letter of Credit, and without further action, each Bank shall be deemed to, and hereby agrees that it shall, have irrevocably purchased for such Bank's own account and risk from the Agent an individual participation interest in such Letter of Credit and drawings thereunder in an amount equal to such Bank's Ratable Share of the maximum amount which is or at any time may become available to be drawn thereunder, and each such Bank shall be responsible to reimburse the Agent immediately for its Ratable Share of any disbursement under any Letter of Credit which has not been reimbursed by Borrowers in accordance with Section 2.8.4(i). 2.8.3 LETTER OF CREDIT FEES. The Borrowers shall pay (i) to the Agent for the ratable account of the Banks a fee (the "LETTER OF CREDIT FEE") calculated on a per annum (365 or 366 days, as appropriate, and actual days elapsed) basis under the Pricing Grid, and (ii) to the Agent for its own account a fronting fee equal to 1/8% per annum, which fees shall be computed on -20- the daily average Letters of Credit Outstanding and shall be payable quarterly in arrears commencing with the first Business Day of each calendar quarter following issuance of each Letter of Credit and on the Expiration Date. The Borrowers shall also pay to the Agent for the Agent's sole account the Agent's then in effect customary fees and administrative expenses payable with respect to the Letters of Credit as the Agent may generally charge or incur from time to time in connection with the issuance, maintenance, modification (if any), assignment or transfer (if any), negotiation, and administration of Letters of Credit. 2.8.4 DISBURSEMENTS, REIMBURSEMENT. (i) Borrowers shall be obligated immediately to reimburse Agent for all amounts which Agent is required to advance pursuant to the Letters of Credit (the "REIMBURSEMENT OBLIGATION"). Such amounts advanced shall become, at the time they are advanced, Revolving Credit Loans from the Banks, unless Borrowers discharge their Reimbursement Obligation before such amounts are advanced. Such Revolving Credit Loans shall bear interest at the rate applicable under the Base Rate Option unless the Borrowers elect to have a different Interest Rate Option apply to such Revolving Credit Loans pursuant to and in accordance with the provisions contained in Section 4.1.1. (ii) The Agent will notify the (A) Borrowers of each demand or presentment for payment or other drawing under each Letter of Credit, and (B) Banks of the amount required to be advanced pursuant to the Letters of Credit. Before 10:00 a.m., Eastern time, on the date of any advance the Agent is required to make pursuant to the Letters of Credit, each Bank shall make available such Bank's Ratable Share of such advance in immediately available funds to the Agent. 2.8.5 DOCUMENTATION. Each Loan Party agrees to be bound by the terms of the Agent's application and agreement for Letters of Credit and the Agent's written regulations and customary practices relating to Letters of Credit, though such interpretation may be different from the such Loan Party's own. In the event of a conflict between such application or agreement and this Agreement, this Agreement shall govern. It is understood and agreed that, except in the case of gross negligence or willful misconduct, the Agent shall not be liable for any error, negligence and/or mistakes, whether of omission or commission, in following any Loan Party's instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto. -21- 2.8.6 DETERMINATIONS TO HONOR DRAWING REQUESTS. In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, the Agent shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit. 2.8.7 NATURE OF PARTICIPATION AND REIMBURSEMENT OBLIGATIONS. The obligation of the Banks to participate in Letters of Credit pursuant to Section 2.8.2 and the obligation of the Banks pursuant to Section 2.8.4(ii) to fund Revolving Credit Loans upon a draw under a Letter of Credit and the Obligations of the Borrowers to reimburse the Agent upon a draw under a Letter of Credit pursuant to Section 2.8.4(i) shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of such sections under all circumstances, including the following circumstances: (i) the failure of any Loan Party or any other Person to comply with the conditions set forth in Sections 2.1, 2.4, 2.5 or 7.2 or as otherwise set forth in this Agreement for the making of a Revolving Credit Loan, it being acknowledged that such conditions are not required for the making of a Revolving Credit Loan under Section 2.8.4; (ii) any lack of validity or enforceability of any Letter of Credit; (iii) the existence of any claim, set-off, defense or other right which any Loan Party or any Bank may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such transferee may be acting), the Agent or other bank or any other Person or, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between any Loan Party or Subsidiaries of a Loan Party and the beneficiary for which any Letter of Credit was procured); (iv) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (v) payment by the Agent under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit; -22- (vi) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of any Loan Party or Subsidiaries of a Loan Party; (vii) any breach of this Agreement or any other Loan Document by any party thereto; (viii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; (ix) the fact that an Event of Default or a Potential Default shall have occurred and be continuing; or (x) the Expiration Date shall have passed or this Agreement or the Commitments hereunder shall have been terminated; provided that none of the Banks nor any of the Loan Parties shall be precluded from bringing any separate action based on any circumstances described in clauses (ii) or (v) above. 2.8.8 INDEMNITY. In addition to amounts payable as provided in Section 10.5, the Borrowers hereby agree to protect, indemnify, pay and save harmless the Agent from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which the Agent may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit, other than as a result of (A) the gross negligence or willful misconduct of the Agent as determined by a final judgment of a court of competent jurisdiction, (B) the payment by the Agent under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not substantially comply with the terms of such Letter of Credit, or (C) subject to the following clause (ii), the wrongful dishonor by the Agent of a proper demand for payment made under any Letter of Credit or (ii) the failure of the Agent to honor a drawing under any such Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions herein called "GOVERNMENTAL ACTS"). -23- 2.8.9 LIABILITY FOR ACTS AND OMISSIONS. As between any Loan Party and the Agent, such Loan Party assumes all risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Agent shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary of any such Letter of Credit to comply fully with any conditions required in order to draw upon such Letter of Credit (provided the beneficiary shall have substantially complied with such conditions); (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of the Agent, including any Governmental Acts, and none of the above shall affect or impair, or prevent the vesting of, any of the Agent's rights or powers hereunder. In furtherance and extension and not in limitation of the specific provisions set forth above, any action taken or omitted by the Agent under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good-faith, shall not put the Agent under any resulting liability to the Borrower. 2.8.10 EXTENSION BY BANKS OF THE EXPIRATION DATE. Upon or promptly after delivery by the Loan Parties of the annual financial statements to be provided under Section 8.3.3 for the fiscal year ending March 31, 1997 or any subsequent fiscal year, the Borrowers may request a one-year extension of the Expiration Date by written notice to the Banks, and the Banks agree to respond to the Borrower request for an extension within sixty (60) days following receipt of the request; provided, however, that all the Banks must consent to any extension of the Expiration Date and the failure of the Banks to respond within such time period shall not in any manner constitute an extension of the Expiration Date. -24- 3. TERM LOANS 3.1 TERM LOAN COMMITMENTS. Subject to the terms and conditions hereof, and relying upon the representations and warranties herein set forth, each Bank severally agrees to make a term loan (the "TERM LOAN") to the Borrowers on the Closing Date in such principal amount as the Borrowers shall request up to, but not exceeding such Bank's Term Loan Commitment. 3.2 NATURE OF BANKS' OBLIGATIONS WITH RESPECT TO TERM LOANS. The obligations of each Bank to make Term Loans to the Borrowers shall be in the proportion that such Bank's Term Loan Commitment bears to the Term Loan Commitments of all Banks to the Borrower, but each Bank's Term Loan to the Borrowers shall never exceed its Term Loan Commitment. The failure of any Bank to make a Term Loan shall not relieve any other Bank of its obligations to make a Term Loan nor shall it impose any additional liability on any other Bank hereunder. The Banks shall have no obligation to make Term Loans hereunder after the Closing Date. The Term Loan Commitments are not revolving credit commitments, and the Borrowers shall not have the right to borrow, repay and reborrow under Section 2.1. 3.3 TERM LOAN NOTES. The Obligation of the Borrowers to repay the unpaid principal amount of the Term Loans made by each Bank, together with interest thereon, shall be evidenced by a Term Note dated the Closing Date payable to the order of each Bank in a face amount equal to the Term Loan of such Bank. The principal amount as provided therein of the Term Notes shall be payable quarterly on the first day of each calendar quarter after the Closing Date and ending on July 1, 2001. The aggregate amount of each of the first 19 quarterly principal payment on the Term Notes shall be $1,250,000; the aggregate amount of the 20th and final quarterly principal payment shall be $11,250,000 (or such lesser amount as may be necessary to repay the outstanding principal of the Term Notes in full). 3.4 USE OF PROCEEDS. The proceeds of the Term Loans shall be used for the purpose of refinancing existing senior and mezzanine indebtedness of the Borrowers. -25- 4. INTEREST RATES 4.1 INTEREST RATE OPTIONS. The Borrowers shall pay interest in respect of the outstanding unpaid principal amount of the Loans as selected by it from the Base Rate Option or Euro-Rate Option set forth below applicable to the Loans, it being understood that, subject to the provisions of this Agreement, the Borrowers may select different Interest Rate Options and different Interest Periods to apply simultaneously to the Loans comprising different Borrowing Tranches and may convert to or renew one or more Interest Rate Options with respect to all or any portion of the Loans comprising any Borrowing Tranche, PROVIDED that there shall not be at any one time outstanding more than five (5) Borrowing Tranches in the aggregate among all of the Loans. If at any time the designated rate applicable to any Loan made by any Bank exceeds such Bank's highest lawful rate, the rate of interest on such Bank's Loan shall be limited to such Bank's highest lawful rate. 4.1.1 REVOLVING CREDIT INTEREST RATE OPTIONS. The Borrowers shall have the right to select from the following Interest Rate Options applicable to the Revolving Credit Loans: (i) REVOLVING CREDIT BASE RATE OPTION: A fluctuating rate per annum (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) equal to the Base Rate plus the applicable number of basis points calculated under the Pricing Grid, such interest rate to change automatically from time to time effective as of the effective date of each change in the Base Rate; or (ii) REVOLVING CREDIT EURO-RATE OPTION: A rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equal to the Euro-Rate plus the applicable number of basis points calculated under the Pricing Grid. 4.1.2 TERM LOAN INTEREST RATE OPTIONS. The Borrowers shall have the right to select from the following Interest Rate Options applicable to the Term Loans: (i) TERM LOAN BASE RATE OPTION: A fluctuating rate per annum (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) equal to the Base Rate plus the applicable number of basis points calculated -26- under the Pricing Grid, such interest rate to change automatically from time to time effective as of the effective date of each change in the Base Rate; or (ii) TERM LOAN EURO-RATE OPTION: A rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equal to the Euro-Rate plus the applicable number of basis points calculated under the Pricing Grid. 4.1.3 RATE QUOTATIONS. The Borrowers may call the Agent on or before the date on which a Loan Request is to be delivered to receive an indication of the rates then in effect, but it is acknowledged that such projection shall not be binding on the Agent or the Banks nor affect the rate of interest which thereafter is actually in effect when the election is made. 4.2 INTEREST PERIODS. At any time when the Borrowers shall select, convert to or renew a Euro- Rate Option, the Borrowers shall notify the Agent thereof at least three (3) Business Days prior to the effective date of such Euro-Rate Option by delivering a Loan Request. The notice shall specify an interest period (the "INTEREST PERIOD") during which such Interest Rate Option shall apply, such Interest Period to be one, two, three or six Months in the event of a Euro-Rate Option, PROVIDED, that: 4.2.1 ENDING DATE AND BUSINESS DAY. any Interest Period which would otherwise end on a date which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day; 4.2.2 AMOUNT OF BORROWING TRANCHE. each Borrowing Tranche of Euro-Rate Loans shall be in integral multiples of $500,000 and not less than $1,000,000; 4.2.3 TERMINATION BEFORE EXPIRATION DATE. -27- the Borrowers shall not select, convert to or renew an Interest Period for any portion of the Loans that would end after the Expiration Date with respect to Euro-Rate Revolving Loans or beyond July 1, 2001 with respect to Euro-Rate Term Loans; and 4.2.4 RENEWALS. in the case of the renewal of a Euro-Rate Option at the end of an Interest Period, the first day of the new Interest Period shall be the last day of the preceding Interest Period, without duplication in payment of interest for such day. 4.3 INTEREST AFTER DEFAULT. To the extent permitted by Law, upon the occurrence of an Event of Default and until such time such Event of Default shall have been cured or waived: 4.3.1 LETTER OF CREDIT FEES, INTEREST RATE. the Letter of Credit Fees and the rate of interest for each Loan otherwise applicable pursuant to the Pricing Grid shall be increased by 2.0% per annum; and 4.3.2 OTHER OBLIGATIONS. each other Obligation hereunder if not paid when due shall bear interest at a rate per annum equal to the sum of the rate of interest applicable under the Revolving Credit Base Rate Option plus an additional 2.0% per annum from the time such Obligation becomes due and payable and until it is paid in full. 4.3.3 ACKNOWLEDGMENT. The Borrowers acknowledge that such increased rates reflect, among other things, the fact that such Loans or other amounts have become a substantially greater risk given their default status and that the Banks are entitled to additional compensation for such risk; and, all such interest shall be payable by Borrowers upon demand by Agent. 4.4 EURO-RATE UNASCERTAINABLE. 4.4.1 UNASCERTAINABLE. If on any date on which a Euro-Rate would otherwise be determined, the Agent shall have determined that: -28- (i) adequate and reasonable means do not exist for ascertaining such Euro-Rate, or (ii) a contingency has occurred which materially and adversely affects the London interbank eurodollar market relating to the Euro-Rate, the Agent shall have the rights specified in Section 4.4.3. 4.4.2 ILLEGALITY; INCREASED COSTS; DEPOSITS NOT AVAILABLE. If at any time any Bank shall have determined that: (i) the making, maintenance or funding of any Loan to which a Euro-Rate Option applies has been made impracticable or unlawful by compliance by such Bank in good-faith with any Law or any interpretation or application thereof by any Official Body or with any request or directive of any such Official Body (whether or not having the force of Law), or (ii) such Euro-Rate Option will not adequately and fairly reflect the cost to such Bank of the establishment or maintenance of any such Loan, or (iii) after making all reasonable efforts, deposits of the relevant amount in Dollars for the relevant Interest Period for a Loan to which a Euro-Rate Option applies are not available to such Bank with respect to such Loan in the London interbank market, then the Agent shall have the rights specified in Section 4.4.3. 4.4.3 AGENT'S AND BANKS' RIGHTS. In the case of any event specified in subsection 4.4.1 above, the Agent shall promptly so notify the Banks and the Borrowers thereof, and in the case of an event specified in subsection 4.4.2 above, such Bank shall promptly so notify the Agent and endorse a certificate to such notice as to the specific circumstances of such notice, and the Agent shall promptly send copies of such notice and certificate to the other Banks and the Borrowers. Upon such date as shall be specified in such notice (which shall not be earlier than the date such notice is given), the obligation of (A) the Banks, in the case of such notice given by the Agent, or (B) such Bank, in the case of such notice given by such Bank, to allow the Borrowers to select, convert to or renew a Euro-Rate Option shall be suspended until the Agent shall have later notified the Borrowers, or such Bank shall have later notified the Agent, of the Agent's or such Bank's, as the case may be, determination that the -29- circumstances giving rise to such previous determination no longer exist. If at any time the Agent makes a determination under subsection 4.4.1 of this Section 4.4 and the Borrowers have previously notified the Agent of their selection of, conversion to or renewal of a Euro-Rate Option and such Interest Rate Option has not yet gone into effect, such notification shall be deemed to provide for selection of, conversion to or renewal of the Base Rate Option otherwise available with respect to such Loans. If any Bank notifies the Agent of a determination under subsection 4.4.2 of this Section 4.4, the Borrowers shall, subject to the Borrowers' indemnification Obligations under Section 5.6.2, as to any Loan of the Bank to which a Euro-Rate Option applies, on the date specified in such notice either convert such Loan to the Base Rate Option otherwise available with respect to such Loan or prepay such Loan in accordance with Section 5.4. Absent due notice from the Borrowers of conversion or prepayment, such Loan shall automatically be converted to the Base Rate Option otherwise available with respect to such Loan upon such specified date. 4.5 SELECTION OF INTEREST RATE OPTIONS. If the Borrowers fail to select a new Interest Period to apply to any Borrowing Tranche of Euro-Rate Loans at the expiration of an existing Interest Period applicable to such Borrowing Tranche in accordance with the provisions of Section 4.1, the Borrowers shall be deemed to have converted such Borrowing Tranche to the Revolving Credit Base Rate Option or Term Loan Base Rate Option, as applicable, commencing upon the last day of the existing Interest Period. 5. PAYMENTS 5.1 PAYMENTS. All payments and prepayments to be made in respect of principal, interest, Commitment Fees, Letter of Credit Fees, Agent's Fee or other fees or amounts due from the Borrowers hereunder shall be payable prior to 11:00 a.m., Eastern time, on the date when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrower, and without set-off, counterclaim or other deduction of any nature, and an action therefor shall immediately accrue. Such payments shall be made to the Agent at the Principal Office for the ratable accounts of the Banks with respect to the Loans in U.S. Dollars and in immediately available funds, and the Agent shall promptly distribute such amounts to the Banks in immediately available funds, PROVIDED that in the event payments are received by 11:00 a.m., Eastern time, by the Agent with respect to the Loans and such payments are not distributed to the Banks on the same day received by the Agent, the Agent shall pay the Banks the Federal Funds Effective Rate with respect to the -30- amount of such payments for each day held by the Agent and not distributed to the Banks. The Agent's and each Bank's statement of account, ledger or other relevant record shall, in the absence of manifest error, be conclusive as the statement of the amount of principal of and interest on the Loans and other amounts owing under this Agreement and shall be deemed an "account stated." 5.2 PRO RATA TREATMENT OF BANKS. Each borrowing shall be allocated to each Bank according to its Ratable Share, and each selection of, conversion to or renewal of any Interest Rate Option and each payment or prepayment by the Borrowers with respect to principal, interest, Commitment Fees, Letter of Credit Fees, or other fees (except for the Agent's Fee) or amounts due from the Borrowers hereunder to the Banks with respect to the Loans, shall (except as provided in Section 4.4.2 [Illegality; Increased Costs; Deposits not Available] in the case of an event specified in Section 4.4, 4.4.1 [Euro-Rate Unascertainable], 5.4 [Voluntary Prepayments] or 5.6.1 [Additional Compensation in Certain Circumstances]) be made in proportion to the applicable Loans outstanding from each Bank and, if no such Loans are then outstanding, in proportion to the Ratable Share of each Bank. 5.3 INTEREST PAYMENT DATES. Interest on Loans to which the Base Rate Option applies shall be due and payable in arrears on the first Business Day of each calendar quarter after the date hereof and on the date such Loans are repaid in full. Interest on Loans to which the Euro-Rate Option applies shall be due and payable on the last day of each Interest Period for those Loans and, if such Interest Period is longer than three (3) months, also on the last day of every third month during such Interest Period. Interest on mandatory prepayments of principal under Section 5.5 shall be due on the date such mandatory prepayment is due. Interest on the principal amount of each Loan or other monetary Obligation shall be due and payable on demand after such principal amount or other monetary Obligation becomes due and payable (whether on the stated maturity date, upon acceleration or otherwise). 5.4 VOLUNTARY PREPAYMENTS AND COMMITMENT REDUCTIONS. 5.4.1 RIGHT TO PREPAY. The Borrowers shall have the right at their option from time to time to prepay the Loans in whole or part without premium or penalty (except as provided in subsection 5.4.2 below or in Section 5.6): -31- (i) at any time with respect to any Loan to which the Base Rate Option applies, (ii) on the last day of the applicable Interest Period with respect to Loans to which a Euro-Rate Option applies, (iii) on the date specified in a notice by any Bank pursuant to Section 4.4.2 [Illegality; Increased Costs; Deposits Not Available] with respect to any Loan to which a Euro-Rate Option applies. Whenever the Borrowers desire to prepay any part of the Loans, they shall provide a prepayment notice to the Agent on or before the date of prepayment of Loans setting forth the following information: (x) the date, which shall be a Business Day, on which the proposed prepayment is to be made; (y) a statement indicating the application of the prepayment between the Revolving Credit Loans and Term Loans; and (z) the total principal amount of such prepayment, which shall not be less than $1,000,000 for the Term Loans or less than $250,000 for the Revolving Credit Loans. All prepayment notices shall be irrevocable. The principal amount of the Loans for which a prepayment notice is given, together with interest on such principal amount except with respect to Loans to which the Base Rate Option applies, shall be due and payable on the date specified in such prepayment notice as the date on which the proposed prepayment is to be made. All Term Loan prepayments permitted pursuant to this Section 5.4 shall be applied to the unpaid installments of principal of the Term Loans in the inverse order of scheduled maturities. Except as provided in Section 4.3.3, if the Borrowers prepay a Loan but fail to specify the applicable Borrowing Tranche which the Borrowers are prepaying, the prepayment shall be applied (i) first to Revolving Credit Loans and then to Term Loans; and (ii) after giving effect to the allocations in clause (i) above and in the preceding sentence, first to Loans to which the Base Rate Option applies, then to Loans to which the Euro-Rate Option applies. Any prepayment hereunder shall be subject to the Borrower's Obligation to indemnify the Banks under Section 5.6.2. -32- 5.4.2 REPLACEMENT OF A BANK. In the event any Bank (i) gives notice under Section 4.4.2 or Section 5.6, (ii) does not fund Revolving Credit Loans because the making of such Loans would contravene any Law applicable to such Bank, (iii) does not approve any action as to which consent of the Required Banks is requested by the Borrowers and obtained hereunder, or (iv) becomes subject to the control of an Official Body (other than normal and customary supervision), then the Borrowers shall have the right at their option, with the consent of the Agent, which shall not be unreasonably withheld, to prepay the Loans of such Bank in whole, together with all interest accrued thereon, and terminate such Bank's Commitment within ninety (90) days after (w) receipt of such Bank's notice under Section 4.4.2 or 5.6.1, (x) the date such Bank has failed to fund Revolving Credit Loans because the making of such Loans would contravene Law applicable to such Bank, (y) the date of obtaining the consent which such Bank has not approved, or (z) the date such Bank became subject to the control of an Official Body, as applicable; PROVIDED that the Borrowers shall also pay to such Bank at the time of such prepayment any amounts required under Section 5.6 and any accrued interest due on such amount and any related fees; PROVIDED, however, that the Commitment and any Term Loan of such Bank shall be provided by one or more of the remaining Banks or a replacement bank acceptable to the Agent; PROVIDED, further, the remaining Banks shall have no obligation hereunder to increase their Commitments. Notwithstanding the foregoing, the Agent may only be replaced subject to the requirements of Section 10.14 and PROVIDED that all Letters of Credit have expired, been terminated or replaced or cash collateral or backup letters of credit shall have been deposited. 5.4.3 RIGHT TO REDUCE COMMITMENTS. The Borrowers shall have the right at their option from time to time to reduce permanently the Revolving Credit Commitments upon at least one Business Day's advance notice to the Agent. Each such permanent reduction shall be in the minimum amount of $1,000,000 and shall reduce the Revolving Credit Commitment of each Bank in proportion to its Ratable Share. Upon the effective date of each permanent reduction in the Revolving Credit Commitments, the Borrowers shall also prepay, with interest and with any additional compensation required under Section 5.6.2, the amount (if any) by which the Revolving Facility Usage at the time of the reduction exceeds the amount of the Revolving Commitments as reduced. 5.5 MANDATORY PREPAYMENTS. 5.5.1 THE IPO. -33- Within five (5) Business Days of the Guarantor's receipt of the proceeds of the IPO, the Guarantor shall make a capital contribution to the Company in the amount of not less than $15,000,000, which the Company in turn shall use to make a mandatory prepayment of principal on the Loans in the same amount, together with accrued interest on such principal amount. 5.5.2 SALE OF ASSETS. Within five (5) Business Days of any sale of assets authorized by Section 8.2.7(v), the Borrowers shall make a mandatory prepayment of principal on the Loans equal to the after-tax proceeds of such sale (as estimated in good- faith by the Borrowers), together with accrued interest on such principal amount. 5.5.3 ISSUANCE OF DEBT. Within five (5) Business Days of the issuance of any Indebtedness, other than PIK Subordinated Indebtedness, by any Loan Party, the Borrowers shall make a mandatory prepayment of principal on the Loans equal to 100% of the proceeds (net of the reasonable fees and expenses incurred by the issuer) of the Indebtedness, together with any accrued interest on such principal amount. 5.5.4 [RESERVED] 5.5.5 APPLICATION AMONG TYPES OF LOANS. The prepayment required under Section 5.5.1 shall first be applied to the payment in full of the principal amount of the Revolving Credit Loans by application to the unpaid principal balance and then to the payment in full of the principal amount of the Term Loans by application to the unpaid installments of principal in reverse order of scheduled maturities. All other prepayments required pursuant to this Section 5.5 shall first be applied to the payment in full of the principal amount of the Term Loans by application to the unpaid installments of the principal in reverse order of scheduled maturities and then to the permanent reduction of the Revolving Credit Commitments. 5.5.6 APPLICATION AMONG INTEREST RATE OPTIONS. All prepayments required pursuant to this Section 5.5 shall first be applied among the Interest Rate Options to the principal amount of the Loans subject to a Base Rate Option, then to Loans subject to the Euro-Rate Option. In accordance with Section 5.6.2, the Borrowers shall indemnify the Banks for any loss or expense, including loss of margin, -34- actually incurred with respect to any such prepayments applied against Loans subject to a Euro-Rate Option on any day other than the last day of the applicable Interest Period. 5.6 ADDITIONAL COMPENSATION IN CERTAIN CIRCUMSTANCES. 5.6.1 INCREASED COSTS OR REDUCED RETURN RESULTING FROM TAXES, RESERVES, CAPITAL ADEQUACY REQUIREMENTS, EXPENSES, ETC. If any Law, guideline or interpretation or any change in any Law, guideline or interpretation or application thereof by any Official Body charged with the interpretation or administration thereof or compliance with any request or directive (whether or not having the force of Law) of any central bank or other Official Body: (i) subjects any Bank to any tax or changes the basis of taxation with respect to this Agreement, the Notes, the Loans or payments by the Borrowers of principal, interest, Commitment Fees, or other amounts due from the Borrowers hereunder or under the Notes (except for taxes on the overall net income of such Bank), (ii) imposes, modifies or deems applicable any reserve, special deposit or similar requirement against credits or commitments to extend credit extended by, or assets (funded or contingent) of, deposits with or for the account of, or other acquisitions of funds by, any Bank, or (iii) imposes, modifies or deems applicable any capital adequacy or similar requirement (A) against assets (funded or contingent) of, or letters of credit, other credits or commitments to extend credit extended by, any Bank, or (B) otherwise applicable to the obligations of any Bank under this Agreement, and the result of any of the foregoing is to increase the cost to, reduce the income receivable by, or impose any expense (including loss of margin) upon any Bank with respect to this Agreement, the Notes or the making, maintenance or funding of any part of the Loans (or, in the case of any capital adequacy or similar requirement, to have the effect of reducing the rate of return on any Bank's capital, taking into consideration such Bank's customary policies with respect to capital adequacy) by an amount which such Bank in its sole discretion deems to be material, such Bank shall from time to time notify the Borrowers and the Agent of the amount determined in good-faith (using any averaging and attribution methods employed in good-faith) by such Bank to be necessary to compensate such Bank for such increase in cost, reduction of income or additional expense (to the extent not reflected in the determination of Base Rate). Such notice shall set forth in reasonable detail the basis for such determination. -35- Such amount shall be due and payable by the Borrowers to such Bank ten (10) Business Days after such notice is given. 5.6.2 INDEMNITY. In addition to the compensation required by subsection 5.6.1 of this Section 5.6, the Borrowers shall indemnify each Bank against all liabilities, losses or expenses (including loss of margin, any loss or expense incurred in liquidating or employing deposits from third parties and any loss or expense incurred in connection with funds acquired by a Bank to fund or maintain Loans subject to the Euro-Rate Option) which such Bank actually sustains or incurs as a consequence of any (i) payment, prepayment, conversion or renewal of any Loan to which the Euro-Rate Option applies on a day other than the last day of the corresponding Interest Period (whether or not such payment or prepayment is mandatory, voluntary or automatic and whether or not such payment or prepayment is then due), (ii) attempt by the Borrowers to revoke (expressly, by later inconsistent notices or otherwise) in whole or part any notice relating to Loan Requests under Section 2.4 or Section 4.2 or prepayments under Section 5.4, or (iii) default by the Borrowers in the performance or observance of any covenant or condition contained in this Agreement or any other Loan Document, including any failure of the Borrowers to pay when due (by acceleration or otherwise) any principal, interest, Commitment Fee or any other amount due hereunder. If any Bank actually sustains or incurs any such loss or expense, it shall from time to time notify the Borrowers of the amount determined in good- faith by such Bank (which determination may include such assumptions, allocations of costs and expenses and averaging or attribution methods as such Bank shall deem reasonable) to be necessary to indemnify such Bank for such loss or expense. Such notice shall set forth in reasonable detail the basis for such determination. Such amount shall be due and payable by the Borrowers to such Bank ten (10) Business Days after such notice is given. 6. REPRESENTATIONS AND WARRANTIES 6.1 REPRESENTATIONS AND WARRANTIES. The Loan Parties, jointly and severally, represent and warrant to the Agent and each of the Banks as follows: -36- 6.1.1 ORGANIZATION AND QUALIFICATION. Each Loan Party and each Subsidiary of each Loan Party is a corporation or partnership, duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Each Loan Party and each Subsidiary of each Loan Party has the lawful power to own or lease its properties and to engage in the business it presently conducts or proposes to conduct. Each Loan Party and each Subsidiary of each Loan Party is duly licensed or qualified and in good standing in each jurisdiction listed on SCHEDULE 6.1.1 and in all other jurisdictions where the property owned or leased by it or the nature of the business transacted by it or both makes such licensing or qualification necessary. 6.1.2 CAPITALIZATION AND OWNERSHIP. SCHEDULE 6.1.2 states, as of the Closing Date, the authorized capital stock of the Guarantor, the issued and outstanding shares (referred to herein as the "SHARES") of such stock, and the owners thereof. All of the Shares have been validly issued and are fully paid and nonassessable. There are no options, warrants or other rights outstanding to purchase any such Shares except as indicated on SCHEDULE 6.1.2. 6.1.3 SUBSIDIARIES. SCHEDULE 6.1.3 states, as of the Closing Date, the name of each of the Guarantor's Subsidiaries, its jurisdiction of incorporation, its authorized capital stock, the issued and outstanding shares (referred to herein as the "SUBSIDIARY SHARES") and the owners thereof if it is a corporation and its outstanding partnership interests (the "PARTNERSHIP INTEREST") if it is a partnership. The Guarantor and each Subsidiary of the Guarantor has good and marketable title to all of the Subsidiary Shares and Partnership Interests it purports to own, free and clear in each case of any Lien. All Subsidiary Shares and Partnership Interests have been validly issued, and all Subsidiary Shares are fully paid and nonassessable. All capital contributions and other consideration required to be made or paid in connection with the issuance of the Partnership Interests have been made or paid, as the case may be. There are no options, warrants or other rights outstanding to purchase any such Subsidiary Shares or Partnership Interests except as indicated on SCHEDULE 6.1.3. 6.1.4 POWER AND AUTHORITY. Each Loan Party has full power to enter into, execute, deliver and carry out this Agreement and the other Loan Documents to which it is a party, to incur the Indebtedness contemplated by the Loan Documents and to perform its Obligations under the -37- Loan Documents to which it is a party, and all such actions have been duly authorized by all necessary proceedings on its part. 6.1.5 VALIDITY AND BINDING EFFECT. This Agreement has been duly and validly executed and delivered by each Loan Party, and each other Loan Document which any Loan Party is required to execute and deliver on or after the date hereof will have been duly executed and delivered by such Loan Party on the required date of delivery of such Loan Document. This Agreement and each other Loan Document constitutes, or will constitute, legal, valid and binding obligations of each Loan Party which is or will be a party thereto on and after its date of delivery thereof, enforceable against such Loan Party in accordance with its terms, except to the extent that enforceability of any of such Loan Document may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforceability of creditors' rights generally or limiting the right of specific performance. 6.1.6 NO CONFLICT. Neither the execution and delivery of this Agreement or the other Loan Documents by any Loan Party nor the consummation of the transactions herein or therein contemplated or compliance with the terms and provisions hereof or thereof by them will conflict with, constitute a default under or result in any breach of (i) the terms and conditions of the certificate of incorporation, bylaws or other organizational documents of any Loan Party or (ii) any Law or of any material agreement, instrument, order, writ, judgment, injunction or decree to which any Loan Party is a party or by which it is bound or to which it is subject, or result in the creation or enforcement of any Lien, charge or encumbrance whatsoever upon any property (now or hereafter acquired) of any Loan Party (other than Liens granted under the Loan Documents). 6.1.7 LITIGATION. There are no actions, suits, proceedings or investigations pending or, to the knowledge of any Loan Party, threatened against such Loan Party or any Subsidiary of such Loan Party at law or equity before any Official Body which individually or in the aggregate may result in any Material Adverse Change. None of the Loan Parties or any Subsidiaries of any Loan Party is in violation of any order, writ, injunction or any decree of any Official Body which may result in any Material Adverse Change. -38- 6.1.8 TITLE TO PROPERTIES. The real property owned or leased by each Loan Party and each Subsidiary of each Loan Party is described on SCHEDULE 6.1.8. Each Loan Party and each Subsidiary of each Loan Party has good and marketable title to or valid leasehold interests in all properties, assets and other rights which it purports to own or lease or which are reflected as owned or leased on its books and records, free and clear of all Liens and encumbrances except Permitted Liens, and subject to the terms and conditions of the applicable leases. All leases of property are in full force and effect without the necessity for any consent which has not previously been obtained upon consummation of the transactions contemplated hereby. 6.1.9 FINANCIAL STATEMENTS. (i) HISTORICAL STATEMENTS. The Loan Parties have delivered to the Agent copies of their audited consolidated and unaudited consolidating year- end financial statements for and as of the end of the fiscal year ended March 31, 1996 (the "ANNUAL STATEMENTS"). In addition, the Loan Parties have delivered to the Agent copies of their unaudited consolidated and consolidating interim financial statements for the months of April and May, 1996 (the "INTERIM STATEMENTS") (the Annual and Interim Statements being collectively referred to as the "HISTORICAL STATEMENTS"). The Historical Statements were compiled from the books and records maintained by the Loan Parties' management, are correct and complete and present fairly in all material respects the financial condition of the Loan Parties as of their dates and the results of operations for the fiscal periods then ended and have been prepared in accordance with GAAP consistently applied, subject (in the case of the Interim Statements) to normal year-end audit adjustments and the absence of footnotes. (ii) FINANCIAL PROJECTIONS. The Loan Parties have delivered to the Agent financial projections of the Loan Parties for the fiscal year ending March 31, 1997, derived from various assumptions of the Loan Parties' management (the "FINANCIAL PROJECTIONS"). The Financial Projections represent a reasonable range of possible results in light of the history of the business, present and foreseeable conditions and the intentions of the Loan Parties' management. The Financial Projections accurately reflect the liabilities of the Loan Parties upon consummation of the transactions contemplated hereby as of the Closing Date. (iii) ACCURACY OF FINANCIAL STATEMENTS. None of the Loan Parties has any liabilities, contingent or otherwise, or forward or long-term commitments that are not disclosed in the Historical Statements or in the notes thereto, and except as disclosed therein there are no unrealized or anticipated losses from any commitments of the Guarantor -39- or any Subsidiary of the Guarantor which may cause a Material Adverse Change. Since March 31, 1996, no Material Adverse Change has occurred. 6.1.10 MARGIN STOCK. None of the Loan Parties or any Subsidiaries of any Loan Party engages or intends to engage principally, or as one of its important activities, in the business of extending credit for the purpose, immediately, incidentally or ultimately, of purchasing or carrying margin stock (within the meaning of Regulation U). No part of the proceeds of any Loan has been or will be used, immediately, incidentally or ultimately, to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock or to refund Indebtedness originally incurred for such purpose, or for any purpose which entails a violation of or which is inconsistent with the provisions of Regulation U of the Board of Governors of the Federal Reserve System. None of the Loan Parties or any Subsidiary of any Loan Party holds or intends to hold margin stock in such amounts that more than 25% of the reasonable value of the assets of any Loan Party or Subsidiary of any Loan Party are or will be represented by margin stock. 6.1.11 FULL DISCLOSURE. Neither this Agreement nor any other Loan Document, nor any certificate, statement, agreement or other documents furnished to the Agent or any Bank in connection herewith or therewith, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein, in light of the circumstances under which they were made, not misleading. On the Closing Date, there is no fact known to any Loan Party which materially adversely affects the business, property, assets, financial condition, results of operations or prospects of any Loan Party or Subsidiary of any Loan Party which has not been set forth in this Agreement or in the certificates, statements, agreements or other documents furnished in writing to the Agent and the Banks prior to or at the date hereof in connection with the transactions contemplated hereby. 6.1.12 TAXES. All federal, state, local and other tax returns required to have been filed with respect to each Loan Party and each Subsidiary of each Loan Party have been filed, and payment or adequate provision has been made for the payment of all taxes, fees, assessments and other governmental charges which have or may become due pursuant to said returns or to assessments received, except to the extent that such taxes, fees, assessments and other charges are being contested in good faith by appropriate proceedings diligently conducted and -40- for which such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made. Other than extensions of tax return filing deadlines for which the Loan Parties have applied in the ordinary course of business, there are no agreements or waivers extending the statutory period of limitations applicable to any federal income tax return of any Loan Party or Subsidiary of any Loan Party for any period. 6.1.13 CONSENTS AND APPROVALS. No consent, approval, exemption, order or authorization of, or a registration or filing with, any Official Body or any other Person is required by any Law or any agreement in connection with the execution, delivery and carrying out of this Agreement and the other Loan Documents by any Loan Party, except as listed on SCHEDULE 6.1.13, all of which shall have been obtained or made on or prior to the Closing Date except as otherwise indicated on SCHEDULE 6.1.13. 6.1.14 NO EVENT OF DEFAULT; COMPLIANCE WITH INSTRUMENTS. No event has occurred and is continuing and no condition exists or will exist after giving effect to the borrowings to be made on the Closing Date under the Loan Documents which constitutes an Event of Default or Potential Default. None of the Loan Parties or any Subsidiaries of any Loan Party is in violation of (i) any term of its certificate of incorporation, bylaws, or other organizational documents or (ii) any material agreement or instrument to which it is a party or by which it or any of its properties may be subject or bound where such violation would constitute a Material Adverse Change. 6.1.15 PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES, ETC. Each Loan Party and each Subsidiary of each Loan Party owns or possesses all the material patents, trademarks, service marks, trade names, copyrights, licenses, registrations, franchises, permits and rights necessary to own and operate its properties and to carry on its business as presently conducted and planned to be conducted by such Loan Party or Subsidiary, without known conflict with the rights of others. 6.1.16 [RESERVED] 6.1.17 [RESERVED] 6.1.18 [RESERVED] 6.1.19 INSURANCE. -41- All insurance policies and other bonds to which any Loan Party or Subsidiary of any Loan Party is a party are valid and in full force and effect. No notice has been given or claim made and no grounds exist to cancel or avoid any of such policies or bonds or to reduce the coverage provided thereby. Such policies and bonds provide adequate coverage from reputable and financially sound insurers in amounts sufficient to insure the assets and risks of each Loan Party and each Subsidiary of each Loan Party in accordance with prudent business practice in the industry of the Loan Parties and their Subsidiaries. 6.1.20 COMPLIANCE WITH LAWS. The Loan Parties and their Subsidiaries are in compliance in all material respects with all applicable Laws (other than Environmental Laws which are specifically addressed in subsection 6.1.25) in all jurisdictions in which any Loan Party or Subsidiary of any Loan Party does business except where the failure to so comply would not constitute a Material Adverse Change. 6.1.21 MATERIAL CONTRACTS. All material contracts relating to the business operations of each Loan Party and each Subsidiary of any Loan Party, including all employee benefit plans and Labor Contracts are valid, binding and enforceable upon such Loan Party or Subsidiary and each of the other parties thereto in accordance with their respective terms, and there is no default thereunder, to the Loan Parties' knowledge, with respect to parties other than such Loan Party or Subsidiary which could result in a Material Adverse Change. 6.1.22 INVESTMENT COMPANIES. None of the Loan Parties or any Subsidiaries of any Loan Party is an "investment company" registered or required to be registered under the Investment Company Act of 1940 or under the "control" of an "investment company" as such terms are defined in the Investment Company Act of 1940 and shall not become such an "investment company" or under such "control." 6.1.23 PLANS AND BENEFIT ARRANGEMENTS. Except as set forth on SCHEDULE 6.1.23: (i) The Guarantor and each member of the ERISA Group are in compliance in all material respects with any applicable provisions of ERISA with respect to all Benefit Arrangements, Plans and Multiemployer Plans. There has been no -42- Prohibited Transaction with respect to any Benefit Arrangement or any Plan or, to the knowledge of the Borrower, with respect to any Multiemployer Plan or Multiple Employer Plan, which could result in any material liability of the Guarantor or any other member of the ERISA Group. The Guarantor and all members of the ERISA Group have made when due any and all payments required to be made under any agreement relating to a Multiemployer Plan or a Multiple Employer Plan or any Law pertaining thereto. With respect to each Plan and Multiemployer Plan, the Guarantor and each member of the ERISA Group (i) have fulfilled in all material respects their obligations under the minimum funding standards of ERISA, (ii) have not incurred any liability to the PBGC, and (iii) have not had asserted against them any penalty for failure to fulfill the minimum funding requirements of ERISA. (ii) To the Borrower's knowledge, each Multiemployer Plan and Multiple Employer Plan is able to pay benefits thereunder when due. (iii) Neither the Guarantor nor any other member of the ERISA Group has instituted or intends to institute proceedings to terminate any Plan. No event requiring notice to the PBGC under Section 302(f)(4)(A) of ERISA has occurred or is reasonably expected to occur with respect to any Plan, and no amendment with respect to which security is required under Section 307 of ERISA has been made or is reasonably expected to be made to any Plan. (iv) The aggregate actuarial present value of accumulated benefit obligations (as per Financial Accounting Standards Board Opinion No. 87) under each Plan, as disclosed in, and as of the date of, the most recent actuarial report for such Plan, does not exceed the aggregate fair market value of the assets of such Plan. (v) Neither the Guarantor nor any other member of the ERISA Group has incurred or reasonably expects to incur any material withdrawal liability under ERISA to any Multiemployer Plan or Multiple Employer Plan. Neither the Guarantor nor any other member of the ERISA Group has been notified by any Multiemployer Plan or Multiple Employer Plan that such Multiemployer Plan or Multiple Employer Plan has been terminated within the meaning of Title IV of ERISA and, to the knowledge of the Borrower, no Multiemployer Plan or Multiple Employer Plan is reasonably expected to be reorganized or terminated, within the meaning of Title IV of ERISA. (vi) To the extent that any Benefit Arrangement is insured, the Guarantor and all members of the ERISA Group have paid when due all premiums required to be paid for all periods through the Closing Date. To the extent that any Benefit -43- Arrangement is funded other than with insurance, the Guarantor and all members of the ERISA Group have made when due all contributions required to be paid for all periods through the Closing Date. (vii) All Plans, Benefit Arrangements and to the knowledge of the Borrower Multiemployer Plans have been administered in all material respects in accordance with their terms and the applicable provisions of ERISA. 6.1.24 EMPLOYMENT MATTERS. Each of the Loan Parties is in compliance with the Labor Contracts and all applicable federal, state and local labor and employment Laws including those related to equal employment opportunity and affirmative action, labor relations, minimum wage, overtime, child labor, medical insurance continuation, worker adjustment and relocation notices, immigration controls and worker and unemployment compensation, where the failure to comply would constitute a Material Adverse Change. There are no outstanding grievances, arbitration awards or appeals therefrom arising out of the Labor Contracts or current or threatened strikes, picketing, handbilling or other work stoppages or slowdowns at facilities of any of the Loan Parties which in any case would constitute a Material Adverse Change. 6.1.25 ENVIRONMENTAL MATTERS. Except as disclosed on SCHEDULE 6.1.25 and except as is not reasonably likely to constitute or result in a Material Adverse Change: (i) None of the Loan Parties or any Subsidiaries of any Loan Party has received any Environmental Complaint from any Official Body or private Person alleging that such Loan Party or Subsidiary or, with respect to the Property, any prior or subsequent owner of the Property is a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, ET SEQ., and none of the Loan Parties has any reason to believe that such an Environmental Complaint is reasonably likely to be received. There are no pending or, to any Loan Party's knowledge, threatened Environmental Complaints relating to any Loan Party or Subsidiary of any Loan Party or, to any Loan Party's knowledge with respect to the Property, any prior or subsequent owner of the Property pertaining to, or arising out of, any Environmental Conditions. (ii) There are no circumstances at, on or under the Property that constitute a breach of or non-compliance with any of the Environmental Laws, -44- and there are no Environmental Conditions at, on or under the Property or, to the knowledge of any officer of the Guarantor, at, on or under adjacent property, that prevent compliance with the Environmental Laws at the Property. (iii) Neither the Property nor any structures, improvements, equipment, fixtures, activities or facilities thereon or thereunder contain or use Regulated Substances except in compliance with Environmental Laws. There are no processes, facilities, operations, equipment or any other activities at, on or under the Property, or, to the knowledge of any officer of the Guarantor, at, on or under adjacent property, that currently result in the release or threatened release of Regulated Substances onto the Property, except to the extent that such releases or threatened releases are not a breach of or otherwise not a violation of the Environmental Laws or are not likely to result in a Material Adverse Change. (iv) Each Loan Party and each Subsidiary of any Loan Party has all permits, licenses, authorizations, plans and approvals necessary under the Environmental Laws for the conduct of the business of such Loan Party and Subsidiary as presently conducted. Each Loan Party and each Subsidiary of any Loan Party has submitted all notices, reports and other filings required by the Environmental Laws to be submitted to an Official Body which pertain to past and current operations on the Property. (v) All past and present on-site generation, storage, processing, treatment, recycling, reclamation, disposal or other use or management of Regulated Substances at, on, or under the Property and all off- site transportation, storage, processing, treatment, recycling, reclamation, disposal or other use or management of Regulated Substances has been done by the Loan Parties in accordance with the Environmental Laws. 6.1.26 SENIOR DEBT STATUS. The Obligations of each Loan Party under this Agreement, the Notes, the Guaranty Agreement and each of the other Loan Documents to which it is a party do rank and will rank at least PARI PASSU in priority of payment with all other Indebtedness of such Loan Party except Indebtedness of such Loan Party to the extent secured by Permitted Liens. There is no Lien upon or with respect to any of the properties or income of any Loan Party or Subsidiary of any Loan Party which secures indebtedness or other obligations of any Person except for Permitted Liens. 6.2 UPDATES TO SCHEDULES. -45- Should any of the information or disclosures provided on any of the Schedules attached hereto become outdated or incorrect in any material respect, the Loan Parties shall promptly provide the Agent in writing with such revisions or updates to such Schedule as may be necessary or appropriate to update or correct same; PROVIDED, however, that no Schedule shall be deemed to have been amended, modified or superseded by any such correction or update, nor shall any breach of warranty or representation resulting from the inaccuracy or incompleteness of any such Schedule be deemed to have been cured thereby, unless and until the Required Banks, in their sole and absolute discretion, shall have accepted in writing such revisions or updates to such Schedule. 7. CONDITIONS OF LENDING The obligation of each Bank to make Loans and of the Agent to issue Letters of Credit hereunder is subject to the performance by each of the Loan Parties of its Obligations to be performed hereunder at or prior to the making of any such Loans or issuance of such Letters of Credit and to the satisfaction of the following further conditions: 7.1 FIRST LOANS. On the Closing Date: 7.1.1 OFFICER'S CERTIFICATE. The representations and warranties of each of the Loan Parties contained in Article 6 shall be true and accurate on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of such date (except representations and warranties which relate solely to an earlier date or time, which representations and warranties shall be true and correct on and as of the specific dates or times referred to therein), and each of the Loan Parties shall have performed and complied with all covenants and conditions hereof, no Event of Default or Potential Default under this Agreement shall have occurred and be continuing or shall exist; and there shall be delivered to the Agent for the benefit of each Bank a certificate of each of the Loan Parties, dated the Closing Date and signed by the Chief Executive Officer, President or Chief Financial Officer of each of the Loan Parties, to each such effect. 7.1.2 SECRETARY'S CERTIFICATE. There shall be delivered to the Agent for the benefit of each Bank a certificate dated the Closing Date and signed by the Secretary or an Assistant Secretary of each of the Loan Parties, certifying as appropriate as to: -46- (i) all action taken by each Loan Party in connection with this Agreement and the other Loan Documents; (ii) the names of the officer or officers authorized to sign this Agreement and the other Loan Documents and the true signatures of such officer or officers and specifying the Authorized Officers permitted to act on behalf of each Loan Party for purposes of this Agreement and the true signatures of such officers, on which the Agent and each Bank may conclusively rely; and (iii) copies of its organizational documents, including its certificate of incorporation and bylaws as in effect on the Closing Date certified by the appropriate state official where such documents are filed in a state office together with certificates from the appropriate state officials as to the continued existence and good standing of each Loan Party in each state where organized or qualified to do business. 7.1.3 DELIVERY OF LOAN DOCUMENTS. The Guaranty Agreement and the Notes shall have been duly executed and delivered to the Agent for the benefit of the Banks. 7.1.4 OPINION OF COUNSEL. There shall be delivered to the Agent for the benefit of each Bank a written opinion of Ballard Spahr Andrews & Ingersoll, counsel for the Loan Parties (who may rely on the opinions of such other counsel as may be acceptable to the Agent), dated the Closing Date and in form and substance satisfactory to the Agent and its counsel: (i) as to the matters set forth in EXHIBIT 7.1.4; and (ii) as to such other matters incident to the transactions contemplated herein as the Agent may reasonably request. 7.1.5 LEGAL DETAILS. All legal details and proceedings in connection with the transactions contemplated by the Agreement and the other Loan Documents shall be in form and substance satisfactory to the Agent and counsel for the Agent, and the Agent shall have received all such other counterpart originals or certified or other copies of such documents -47- and proceedings in connection with such transactions, in form and substance satisfactory to the Agent and said counsel, as the Agent or said counsel may reasonably request. 7.1.6 PAYMENT OF FEES. The Borrowers shall pay or cause to be paid to the Agent for itself and for the account of the Banks, to the extent not previously paid, all commitment and other fees accrued through the Closing Date and the costs and expenses for which the Agent and the Banks are entitled to be reimbursed. 7.1.7 [RESERVED] 7.1.8 [RESERVED] 7.1.9 CONSENTS. All material consents required to effectuate the transactions contemplated hereby as set forth on SCHEDULE 6.1.13 shall have been obtained. 7.1.10 OFFICER'S CERTIFICATE REGARDING MACS. Since March 31, 1996, no Material Adverse Change in any Loan Party or Subsidiary of any Loan Party shall have occurred; and there shall be delivered to the Agent for the benefit of each Bank a certificate dated the Closing Date and signed by the Chief Executive Officer, President or Chief Financial Officer of each Loan Party to such effect. 7.1.11 NO VIOLATION OF LAWS. The making of the Loans shall not contravene any Law applicable to any Loan Party or any of the Banks. 7.1.12 NO ACTIONS OR PROCEEDINGS. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain or prohibit, or to obtain damages in respect of this Agreement or the consummation of the transactions contemplated hereby or which, in the Agent's sole discretion, would make it inadvisable to consummate the transactions contemplated by this Agreement or any of the other Loan Documents. -48- 7.1.13 INSURANCE POLICIES; CERTIFICATES OF INSURANCE; ENDORSEMENTS. The Loan Parties shall deliver evidence acceptable to the Agent that adequate insurance in compliance with Section 8.1.3 is in full force and effect and that all premiums then due thereon have been paid, together with a certified copy of each Loan Party's casualty insurance policy or policies evidencing coverage satisfactory to the Agent, with an additional insured, special endorsement attached thereto in form and substance satisfactory to the Agent and its counsel naming the Agent as additional insured. 7.1.14 [RESERVED]. 7.1.15 [RESERVED]. 7.1.16 [RESERVED]. 7.1.17 CANCELLATION OF EXISTING SENIOR AND MEZZANINE INDEBTEDNESS. The Loan Parties shall have delivered to the Agent payoff statements from The CIT Group/Business Credit, Inc., for itself and as agent for other lenders (collectively ("CIT") and World Subordinated Debt Partners, L.P. ("CITICORP MEZZANINE") evidencing the fact that upon disbursement of the initial Loans to CIT and Citicorp Mezzanine, respectively, the Loan Parties' existing Indebtedness to those two lenders will have been repaid in full. The Loan Parties shall also have delivered to the Agent from CIT UCC-3 termination statements, mortgage satisfaction pieces and CIT's agreement to take all action necessary to terminate its existing liens and security interests in the assets of the Loan Parties. 7.1.18 OTHER CREDIT DOCUMENTS. The Loan Parties shall have delivered to the Agent, copies of all documents evidencing or securing any of their Indebtedness that will remain outstanding after the Closing Date. The terms of all such Indebtedness shall be satisfactory to the Agent in all respects. 7.2 EACH ADDITIONAL LOAN. At the time of making any Loans or issuing any Letters of Credit other than Loans made or Letters of Credit issued on the Closing Date hereunder and after giving effect to the proposed borrowings: the representations and warranties of the Loan Parties contained in Article 6 shall be true on and as of the date of such additional Loan or Letter of Credit with -49- the same effect as though such representations and warranties had been made on and as of such date (except representations and warranties which expressly relate solely to an earlier date or time, which representations and warranties shall be true and correct on and as of the specific dates or times referred to therein) and the Loan Parties shall have performed and complied with all covenants and conditions hereof; no Event of Default or Potential Default shall have occurred and be continuing or shall exist; the making of the Loans or issuance of such Letter of Credit shall not contravene any Law applicable to any Loan Party or Subsidiary of any Loan Party or any of the Banks; and the Borrowers shall have delivered to the Agent a duly executed and completed Loan Request or application for a Letter of Credit as the case may be. 8. COVENANTS 8.1 AFFIRMATIVE COVENANTS. The Loan Parties, jointly and severally, covenant and agree that until payment in full of the Loans and interest thereon, expiration or termination of all Letters of Credit, satisfaction of all of the Loan Parties' other Obligations under the Loan Documents and termination of the Revolving Credit Commitments, the Loan Parties shall comply at all times with the following affirmative covenants: 8.1.1 PRESERVATION OF EXISTENCE, ETC. Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain its corporate existence and its license or qualification and good standing in each jurisdiction in which its ownership or lease of property or the nature of its business makes such license or qualification necessary. 8.1.2 PAYMENT OF LIABILITIES, INCLUDING TAXES, ETC. Each Loan Party shall, and shall cause each of its Subsidiaries to, duly pay and discharge all liabilities to which it is subject or which are asserted against it, promptly as and when the same shall become due and payable, including all taxes, assessments and governmental charges upon it or any of its properties, assets, income or profits, prior to the date on which penalties attach thereto, except to the extent that such liabilities, including taxes, assessments or charges, are being contested in good-faith and by appropriate and lawful proceedings diligently conducted and for which such reserve or other appropriate provisions, if any, as shall be required by GAAP shall have been made, but only to the extent that failure to discharge any such liabilities would not result in any additional liability which would adversely affect to a material extent the financial condition of any Loan Party -50- or Subsidiary of any Loan Party which would affect the Collateral, PROVIDED that the Loan Parties and their Subsidiaries will pay all such liabilities forthwith upon the commencement of proceedings to foreclose any Lien which may have attached as security therefor. 8.1.3 MAINTENANCE OF INSURANCE. Each Loan Party shall, and shall cause each of its Subsidiaries to, insure its properties and assets against loss or damage by fire and such other insurable hazards as such assets are commonly insured (including fire, extended coverage, property damage, workers' compensation, public liability and business interruption insurance) and against other risks (including errors and omissions) in such amounts as similar properties and assets are insured by prudent companies in similar circumstances carrying on similar businesses, and with reputable and financially sound insurers, including self-insurance to the extent customary, all as reasonably determined by the Agent. At the request of the Agent, the Loan Parties shall deliver (x) on the Closing Date and annually thereafter an original certificate of insurance signed by the Loan Parties' independent insurance broker describing and certifying as to the existence of the insurance required to be maintained by this Agreement and the other Loan Documents, together with a copy of the endorsement described in the next sentence attached to such certificate and (y) from time to time a summary schedule indicating all insurance then in force with respect to each of the Loan Parties. Such policies of insurance shall contain special endorsements, in form and substance acceptable to the Agent, which shall (i) specify the Agent as an additional insured as its interests may appear, with the understanding that any obligation imposed upon the insured (including the liability to pay premiums) shall be the sole obligation of the applicable Loan Parties and not that of the Agent, (ii) [RESERVED], (iii) include effective waivers by the insurer of all claims for insurance premiums against the Agent, (iv) provide that no cancellation of such policies for any reason (including non-payment of premium) nor any change therein shall be effective until at least thirty (30) days after receipt by the Agent of written notice of such cancellation or change, (v) be primary without right of contribution of any other insurance carried by or on behalf of any additional insureds, and (vi) provide that inasmuch as the policy covers more than one insured, all terms, conditions, insuring agreements and endorsements (except limits of liability) shall operate as if there were a separate policy covering each insured. The applicable Loan Parties shall notify the Agent promptly of any occurrence causing a material loss or decline in value of insured assets and the estimated (or actual, if available) amount of such loss or decline. Any monies received by the Agent constituting insurance proceeds may, at the option of the Agent, (i) [RESERVED], or (ii) be disbursed to the applicable Loan Parties on such terms as are deemed appropriate by the Agent for the repair, restoration and/or replacement of property in respect of which such proceeds were received. -51- 8.1.4 MAINTENANCE OF PROPERTIES AND LEASES. Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain in good repair, working order and condition (ordinary wear and tear excepted) in accordance with the general practice of other businesses of similar character and size, all of those properties useful or necessary to its business, and from time to time, such Loan Party will make or cause to be made all appropriate repairs, renewals or replacements thereof. 8.1.5 MAINTENANCE OF PATENTS, TRADEMARKS, ETC. Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain in full force and effect all patents, trademarks, trade names, copyrights, licenses, franchises, permits and other authorizations necessary for the ownership and operation of its properties and business if the failure so to maintain the same would constitute a Material Adverse Change. 8.1.6 VISITATION RIGHTS. Each Loan Party shall, and shall cause each of its Subsidiaries to, permit any of the officers or authorized employees or representatives of the Agent or any of the Banks to visit and inspect any of its properties and to examine and make excerpts from its books and records and discuss its business affairs, finances and accounts with its officers, all in such detail and at such times during normal business hours and as often as any of the Banks may reasonably request, PROVIDED that each Bank shall provide the Borrowers and the Agent with reasonable notice prior to any visit or inspection. In the event any Bank desires to conduct an audit of any Loan Party, such Bank shall make a reasonable effort to conduct such audit contemporaneously with any audit to be performed by the Agent. No Loan Party shall be obligated to reimburse the Agent and the Banks for more than one audit of such Loan Party per year. 8.1.7 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Guarantor shall, and shall cause each Subsidiary of the Guarantor to, maintain and keep proper books of record and account which enable the Guarantor and its Subsidiaries to issue financial statements in accordance with GAAP and as otherwise required by applicable Laws of any Official Body having jurisdiction over the Guarantor or any Subsidiary of the Guarantor, and in which full, true and correct entries shall be made in all material respects of all its dealings and business and financial affairs. -52- 8.1.8 PLANS AND BENEFIT ARRANGEMENTS. The Guarantor shall, and shall cause each member of the ERISA Group to, comply with the provisions of ERISA and the Internal Revenue Code applicable to each Plan and Benefit Arrangement except where such failure, alone or in conjunction with any other failure, would not result in a Material Adverse Change. Without limiting the generality of the foregoing, the Guarantor shall cause all of its Plans and all Plans maintained by any member of the ERISA Group to be funded in accordance with the minimum funding requirements of ERISA and shall make, and cause each member of the ERISA Group to make, in a timely manner, all contributions due to Plans, Benefit Arrangements and Multiemployer Plans. 8.1.9 COMPLIANCE WITH LAWS. Each Loan Party shall, and shall cause each of its Subsidiaries to, comply with all applicable Laws, including all Environmental Laws, in all respects, PROVIDED that it shall not be deemed to be a violation of this Section 8.1.9 if any failure to comply with any Law would not result in fines, penalties, remediation costs, other similar liabilities or injunctive relief which in the aggregate would constitute a Material Adverse Change. 8.1.10 USE OF PROCEEDS. The Borrowers will use the proceeds of the Loans only for lawful purposes in accordance with Sections 2.7 and 3.4 as applicable and such uses shall not contravene any applicable Law or any other provision hereof. 8.1.11 [RESERVED]. 8.2 NEGATIVE COVENANTS. The Loan Parties, jointly and severally, covenant and agree that until payment in full of the Loans and interest thereon, expiration or termination of all Letters of Credit, satisfaction of all of the Loan Parties' other Obligations hereunder and termination of the Revolving Credit Commitments, the Loan Parties shall comply with the following negative covenants: 8.2.1 INDEBTEDNESS. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Indebtedness, except: -53- (i) Indebtedness under the Loan Documents; (ii) Existing Indebtedness as set forth on SCHEDULE 8.2.1 (including any extensions or renewals thereof, PROVIDED there is no increase in the amount thereof or other significant change in the terms thereof unless otherwise specified on SCHEDULE 8.2.1); (iii) Capitalized and operating leases as and to the extent permitted under Section 8.2.15; (iv) PIK Subordinated Indebtedness, PROVIDED that no such Indebtedness shall mature earlier than one year after the Expiration Date in effect at the time such Indebtedness was incurred; (v) Indebtedness secured by Purchase Money Security Interests not exceeding $5,000,000; and (vi) Indebtedness whose net proceeds are applied as a mandatory prepayment of the Loans under Section 5.5.3. 8.2.2 LIENS. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien on any of its property or assets, tangible or intangible, now owned or hereafter acquired, or agree or become liable to do so, except Permitted Liens. 8.2.3 GUARANTIES. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time, directly or indirectly, become or be liable in respect of any Guaranty, or assume, guarantee, become surety for, endorse or otherwise agree, become or remain directly or contingently liable upon or with respect to any obligation or liability of any other Person, except for Guaranties of Indebtedness of the Loan Parties permitted hereunder. 8.2.4 LOANS AND INVESTMENTS. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time make or suffer to remain outstanding any loan or advance to, or -54- purchase, acquire or own any stock, bonds, notes or securities of, or any partnership interest (whether general or limited) in, or any other investment or interest in, or make any capital contribution to, any other Person, or agree, become or remain liable to do any of the foregoing, except: (i) trade credit extended on usual and customary terms in the ordinary course of business; (ii) advances to employees to meet expenses incurred by such employees in the ordinary course of business; (iii) Permitted Investments; and (iv) loans, advances and investments in other Loan Parties. 8.2.5 DIVIDENDS AND RELATED DISTRIBUTIONS. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, make or pay, or agree to become or remain liable to make or pay, any dividend or other distribution of any nature (whether in cash, property, securities or otherwise) on account of or in respect of its shares of capital stock or partnership interests on account of the purchase, redemption, retirement or acquisition of its shares of capital stock (or warrants, options or rights therefor) or partnership interests, except (i) dividends or other distributions payable to another Loan Party; (ii) distributions to fund the quarterly interest payments due on the Alco Note; PROVIDED that before making any such quarterly payment, the Company demonstrates to the satisfaction of the Agent that the Loan Parties will be in compliance with the financial covenants set forth in Section 8.2 (specifically with the proposed Alco Note interest payment included in the denominator in the calculation of the Debt Service Coverage Ratio) and that no other Event of Default then exists or will result from the payment; (iii) REDEMPTIONS OF AN EMPLOYEE'S CAPITAL STOCK IN THE GUARANTOR UPON TERMINATION OF EMPLOYMENT; PROVIDED THAT BEFORE MAKING ANY SUCH REDEMPTION, THE COMPANY DEMONSTRATES TO THE SATISFACTION OF THE AGENT THAT THE LOAN PARTIES WILL BE IN COMPLIANCE WITH THE FINANCIAL COVENANTS SET FORTH IN SECTION 8.2 AND THAT NO OTHER EVENT OF DEFAULT THEN EXISTS OR WILL RESULT FROM THE REDEMPTION; AND -55- (iv) dividends or other distributions payable in stock. 8.2.6 LIQUIDATIONS, MERGERS, CONSOLIDATIONS, ACQUISITIONS. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, dissolve, liquidate or wind-up its affairs, or become a party to any merger or consolidation, or acquire by purchase, lease or otherwise all or substantially all of the assets or capital stock of any other Person, except that (i) any Loan Party other than the Company may consolidate or merge into another Loan Party; and (ii) the Company or any of its Subsidiaries may acquire assets or Capital Stock of other Persons engaged in the business of aviation services, metals converting, or metals distribution provided that (a) any such Person has a history of positive operating profits and reasonable prospects for continuing to produce operating profits in the future; (b) no Event of Default exists or will result from such acquisition; (c) following the closing of the acquisition, the Borrowers will have at least $2,000,000 in availability under the Revolving Credit Commitments; and (d) if the acquisition results in a new Subsidiary of the Company, the new Subsidiary joins in this Agreement as a Borrower under section 11.18; and (iii) QUALITY PARK PRODUCTS, INC. MAY BE DISSOLVED. 8.2.7 DISPOSITIONS OF ASSETS OR SUBSIDIARIES. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or dispose of, voluntarily or involuntarily, any of its properties or assets, tangible or intangible (including sale, assignment, discount or other disposition of accounts, contract rights, chattel paper, equipment or general intangibles with or without recourse or of capital stock, shares of beneficial interest or partnership interests of a Subsidiary of such Loan Party), except: (i) transactions involving the sale of Inventory in the ordinary course of business; (ii) any sale, transfer or lease of assets in the ordinary course of business which are no longer necessary or required in the conduct of the Loan Party's business; -56- (iii) any sale, transfer or lease of assets by any wholly owned Subsidiary of such Loan Party to another Loan Party; (iv) any sale, transfer or lease of assets in the ordinary course of business which are replaced by substitute assets acquired or leased within the parameters of Section 8.2.15, or (v) any sale, transfer or lease of assets, other than those specifically excepted pursuant to clauses (i) through (iv) above, which is approved by the Required Banks so long as the after-tax proceeds (as reasonably estimated by the Loan Parties) are applied as a mandatory prepayment of the Term Loans in accordance with the provisions of Section 5.5.2 above; PROVIDED that the sale of the C-17 HARNESS ASSETS BY TRIUMPH CONTROLS, INC. shall not require the approval of the Required Banks or be subject to the mandatory prepayment provisions of Section 5.5.2. 8.2.8 AFFILIATE TRANSACTIONS. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, enter into or carry out any transaction (including purchasing property or services from or selling property or services to any Affiliate of any Loan Party or other Person) unless such transaction is not otherwise prohibited by this Agreement, is entered into in the ordinary course of business upon fair and reasonable arm's-length terms and conditions which are fully disclosed to the Agent and is in accordance with all applicable Law. The payment of customary directors fees shall not be considered a prohibited Affiliate transaction. 8.2.9 SUBSIDIARIES, PARTNERSHIPS AND JOINT VENTURES. (i) Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, own or create directly or indirectly any Subsidiaries other than (a) any Subsidiary which has joined this Agreement as a Borrower on the Closing Date; and (b) any Subsidiary acquired or formed after the Closing Date which joins this Agreement as a Borrower pursuant to Section 11.18. (ii) Each of the Loan Parties shall not become or agree to become a general or limited partner in any general or limited partnership or a joint venturer in any joint venture, except that the Loan Parties may be general or limited partners in other Loan Parties. (iii) The Loan Parties shall not permit Quality Park Products, Inc. to operate any business or to acquire any assets. The Loan Parties will not contribute any -57- capital or assets to Quality Park except as may be necessary to fulfill its indemnification obligations to Mail-well I Corporation under the acquisition agreement dated March 31, 1996 under which Mail-well I acquired Quality Park's assets. (iv) The Loan Parties will not invest or advance more than $50,000 to Triumph Group Foreign Sales Corporation. 8.2.10 CONTINUATION OF PRESENT BUSINESS. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, engage in any business other than aviation services and metals converting and distribution, substantially as conducted and operated by such Loan Party or Subsidiary during the present fiscal year, and such Loan Party or Subsidiary shall not permit any material change in such business. 8.2.11 PLANS AND BENEFIT ARRANGEMENTS. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to: (i) fail to satisfy the minimum funding requirements of ERISA and the Internal Revenue Code with respect to any Plan; (ii) request a minimum funding waiver from the Internal Revenue Service with respect to any Plan; (iii) engage in a Prohibited Transaction with any Plan, Benefit Arrangement or Multiemployer Plan which, alone or in conjunction with any other circumstances or set of circumstances resulting in liability under ERISA, would constitute a Material Adverse Change; (iv) permit the aggregate actuarial present value of all benefit liabilities (whether or not vested) under each Plan, determined on a plan termination basis, as disclosed in the most recent actuarial report completed with respect to such Plan, to exceed, as of any actuarial valuation date, the fair market value of the assets of such Plan by more than $1,000,000; (v) fail to make when due any contribution to any Multiemployer Plan that the Borrowers or any member of the ERISA Group may be required -58- to make under any agreement relating to such Multiemployer Plan, or any Law pertaining thereto; (vi) withdraw (completely or partially) from any Multiemployer Plan or withdraw (or be deemed under Section 4062(e) of ERISA to withdraw) from any Multiple Employer Plan, where any such withdrawal is likely to result in a material liability of the Borrowers or any member of the ERISA Group; (vii) terminate, or institute proceedings to terminate, any Plan, where such termination is likely to result in a material liability to the Borrowers or any member of the ERISA Group; (viii) make any amendment to any Plan with respect to which security is required under Section 307 of ERISA; or (ix) fail to give any and all notices and make all disclosures and governmental filings required under ERISA or the Internal Revenue Code, where such failure is likely to result in a Material Adverse Change. 8.2.12 FISCAL YEAR. The Borrowers shall not, and shall not permit any Subsidiary of the Borrowers to, change its fiscal year from the twelve-month period beginning April 1 and ending March 31. 8.2.13 ISSUANCE OF STOCK. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, issue any additional shares of its Capital Stock or any options, warrants or other rights in respect thereof, except the issuance of Capital Stock of the Guarantor: (i) pursuant to the IPO; (ii) to the existing shareholders, management, and directors of the Guarantor under stock option plans; (iii) to World Equity Partners, L.P. pursuant to warrants for the issuance of 10,000 shares; or (iv) otherwise. -59- 8.2.14 CHANGES IN ORGANIZATIONAL DOCUMENTS. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, amend any provisions of its certificate of incorporation relating to capital stock without providing at least thirty (30) calendar days' prior written notice to the Agent and the Banks and, in the event such change would be adverse to the Banks as determined by the Agent in its sole discretion, obtaining the prior written consent of the Required Banks. 8.2.15 CAPITAL EXPENDITURES AND LEASES. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, make any payments on account of the purchase or lease of any assets which if purchased would constitute fixed assets or which if leased would constitute a capitalized lease, except for (i) such payments in connection with acquisitions permitted under Section 8.2.6(ii); (ii) such payments up to $7,000,000 in the aggregate for the fiscal year ending March 31, 1997; (iii) such payments in an amount not to exceed the greater of $7,000,000 or 150% of the previous year's depreciation (for the Company and its Subsidiaries, determined and consolidated in accordance with GAAP) for any fiscal year ending after March 31, 1997; and (iv) such payments up to $1,000,000 per year in the aggregate under operating leases entered into after the Closing Date. All such capital expenditures and leases shall be made under usual and customary terms and in the ordinary course of business. 8.2.16 MINIMUM DEBT SERVICE COVERAGE RATIO. The Borrowers shall not permit the Debt Service Coverage Ratio, calculated as of the end of each fiscal quarter for the four fiscal quarters then ended, to be less than 1.25 to 1.0. -60- 8.2.17 MAXIMUM TOTAL INDEBTEDNESS TO EBITDA RATIO. The Borrowers shall not at any time permit the Total Indebtedness to EBITDA Ratio, calculated as of the end of each fiscal quarter, to exceed 3.50 to 1.00 before the IPO or 3.00 to 1.00 after the IPO. 8.2.18 MINIMUM NET WORTH. The Borrowers shall not at any time permit Consolidated Net Worth to be less than $40,800,000 plus (i) 50% of Consolidated Net Income for each fiscal year in which net income was earned (as opposed to net loss) beginning with the fiscal year ending March 31, 1997 (with the necessary adjustment to be made as of the end of the relevant fiscal year:PROVIDED that the adjustment to be made for the fiscal year ending March 31, 1997 will only take into account Consolidated Net Income earned after June 30, 1996, because the base figure of $40,800,000 already includes 50% of Consolidated Net Income earned between April 1, 1996 and June 30, 1996) and (ii) 100% of the proceeds (after the payment of any fees and expenses) from any capital contribution to, or any sale or issuance of Capital Stock by, the Company (with any necessary adjustment to be made upon the receipt of such proceeds). 8.2.19 MINIMUM CURRENT RATIO. The Borrowers shall not at any time permit the ratio of current assets to current liabilities (for the Company and its Subsidiaries, determined and consolidated in accordance with GAAP) to be less than 1.50 to 1.0. 8.3 REPORTING REQUIREMENTS. The Loan Parties, jointly and severally, covenant and agree that until payment in full of the Loans and interest thereon, expiration or termination of all Letters of Credit, satisfaction of all of the Loan Parties' other Obligations hereunder and under the other Loan Documents and termination of the Revolving Credit Commitments, the Loan Parties will furnish or cause to be furnished to the Agent and each of the Banks: 8.3.1 MONTHLY FINANCIAL STATEMENTS (PRE-IPO). Before the IPO, soon as available and in any event within thirty (30) calendar days after the end of the first eleven months of each fiscal year, the Loan Parties' financial statements, consisting of consolidated and consolidating balance sheets as of the end of such month and related consolidated and consolidating statements of income, stockholders' equity -61- and cash flows for the month then ended and the fiscal year through that date, all in reasonable detail and certified (subject to normal year-end adjustments and the absence of footnotes) by the Chief Executive Officer, President or Chief Financial Officer of the Guarantor as having been prepared in accordance with GAAP, consistently applied, and setting forth in comparative form the respective financial statements for the corresponding date and period in the previous fiscal year. 8.3.2 QUARTERLY FINANCIAL STATEMENTS (POST-IPO). After the IPO, as soon as available and in any event within forty-five (45) calendar days after the end of each of the first three fiscal quarters in each fiscal year, the Loan Parties' financial statements, consisting of consolidated and consolidating balance sheets as of the end of such fiscal quarter and related consolidated and consolidating statements of income, stockholders' equity and cash flows for the fiscal quarter then ended and the fiscal year through that date, all in reasonable detail and certified (subject to normal year-end audit adjustments and the absence of footnotes) by the Chief Executive Office, President or Chief Financial Officer of the Guarantor as having been prepared in accordance with GAAP, consistently applied, and setting forth in comparative form the respective financial statements for the corresponding date and period in the previous fiscal year. 8.3.3 ANNUAL FINANCIAL STATEMENTS. As soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year before the IPO and within ninety (90) days after the end of each fiscal year after the IPO, consolidated and consolidating financial statements of the Loan Parties consisting of consolidated and consolidating balance sheets as of the end of such fiscal year, and related consolidated and consolidating statements of income, stockholders' equity and cash flows for the fiscal year then ended, all in reasonable detail and setting forth in comparative form the financial statements as of the end of and for the preceding fiscal year, with the consolidated statements being certified by independent certified public accountants of nationally recognized standing satisfactory to the Agent. The certificate or report of accountants shall be free of qualifications (other than any consistency qualification that may result from a change in the method used to prepare the financial statements as to which such accountants concur) and shall not indicate the occurrence or existence of any event, condition or contingency which would materially impair the prospect of payment or performance of any covenant, agreement or duty of the Loan Parties under any of the Loan Documents, together with a letter of such accountants substantially to the effect that, based upon their ordinary and customary examination of the affairs of the Loan Parties, performed in connection with the preparation of such consolidated financial statements, and in accordance with generally accepted auditing standards, they are not aware of the existence of any -62- condition or event which constitutes an Event of Default or Potential Default or, if they are aware of such condition or event, stating the nature thereof and confirming the Loan Parties' calculations with respect to the certificate to be delivered pursuant to Section 8.3.4 with respect to such financial statements. 8.3.4 COMPLIANCE CERTIFICATE. Concurrently with the financial statements of the Loan Parties furnished to the Agent and to the Banks pursuant to Sections 8.3.1 and 8.3.3, a certificate of the Loan Parties signed by the Chief Executive Officer, President or Chief Financial Officer of the Loan Parties, in the form of EXHIBIT 8.3.4, to the effect that, except as described pursuant to Section 8.3.5, (i) the representations and warranties of the Loan Parties contained in Article 6 are true on and as of the date of such certificate with the same effect as though such representations and warranties had been made on and as of such date (except representations and warranties which expressly relate solely to an earlier date or time) and the Loan Parties have performed and complied with all covenants and conditions hereof, (ii) no Event of Default or Potential Default exists and is continuing on the date of such certificate and (iii) containing calculations in sufficient detail to demonstrate compliance as of the date of the financial statements with all financial covenants contained in Section 8.2. If an acquisition permitted under Section 8.2.6(ii) occurred during the reporting period covered by the compliance certificate and if the Loan Parties have provided the Agent with audited historical financial statements on the acquired business, the Loan Parties may also calculate the Section 8.2 financial covenants on a pro forma basis to include the financial performance and condition of the acquired business during the period; and the pro forma calculation of the Total Indebtedness to EBITDA Ratio may be relied upon as a basis for a change in the pricing level under the Pricing Grid. 8.3.5 NOTICE OF DEFAULT. Promptly after any officer of Guarantor has learned of the occurrence of an Event of Default or Potential Default, a certificate signed by the Chief Executive Officer, President or Chief Financial Officer of Guarantor setting forth the details of such Event of Default or Potential Default and the action which the affected Loan Party proposes to take with respect thereto. 8.3.6 NOTICE OF LITIGATION. Promptly after the commencement thereof, notice of all actions, suits, proceedings or investigations before or by any Official Body or any other Person against any Loan Party or Subsidiary of any Loan Party which involve a claim or series of claims in -63- excess of $500,000 or which if adversely determined would constitute a Material Adverse Change with respect to any Loan Party or Subsidiary of any Loan Party. 8.3.7 CERTAIN EVENTS. Written notice to the Agent: (i) at least thirty (30) calendar days prior thereto, with respect to any proposed sale or transfer of assets pursuant to Section 8.2.7(iv) or (v). (ii) within the time limits set forth in Section 8.2.14, the amendment to the charter affecting the capital structure of any Loan Party. 8.3.8 BUDGETS, FORECASTS, OTHER REPORTS AND INFORMATION. Promptly upon their becoming available to the Loan Parties: (i) the annual budget and any forecasts or projections of the Loan Parties, to be supplied at the request of the Agent prior to commencement of the fiscal year to which any of the foregoing may be applicable, (ii) any reports including management letters submitted to the Loan Parties by independent accountants in connection with any annual, interim or special audit, (iii) any reports, notices or proxy statements generally distributed by the Loan Parties to its stockholders on a date no later than the date supplied to the stockholders, (iv) regular or periodic reports, including Forms 10-K, 10-Q and 8-K, registration statements and prospectuses (especially for the IPO), filed by the Guarantor with the Securities and Exchange Commission, (v) a copy of any order, issued by any Official Body in any proceeding to which the Borrowers or any of its Subsidiaries is a party, and in which the amount in controversy exceeds $1,000,000, (vi) such other reports and information as the Banks may from time to time reasonably request. The Loan Parties shall also notify the Banks promptly -64- of the enactment or adoption of any Law which may result in a Material Adverse Change with respect to any Loan Party, and (vii) within 60 days of closing on any acquisition permitted under Section 8.2.6 in which the total consideration paid by the Loan Parties exceeded $2,500,000, such financial information as the Agent may reasonably request concerning the acquisition and its effect on the financial conditions and performance of the Loan Parties. 8.3.9 NOTICES REGARDING PLANS AND BENEFIT ARRANGEMENTS. 8.3.9.1 CERTAIN EVENTS. Promptly upon becoming aware of the occurrence thereof, notice (including the nature of the event and, when known, any action taken or threatened by the Internal Revenue Service or the PBGC with respect thereto) of: (i) any Reportable Event with respect to the Guarantor or any member of the ERISA Group for which reporting to the PBGC has not been waived, (ii) any Prohibited Transaction which could subject the Guarantor or any member of the ERISA Group to a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Internal Revenue Code in connection with any Plan, Benefit Arrangement or any trust created thereunder, (iii) any assertion of material withdrawal liability with respect to any Multiemployer Plan, (iv) any partial or complete withdrawal from a Multiemployer Plan by the Guarantor or any member of the ERISA Group under Title IV of ERISA (or assertion thereof), where such withdrawal is likely to result in material withdrawal liability, (v) withdrawal by the Guarantor or any member of the ERISA Group from a Multiple Employer Plan, (vi) a failure by the Guarantor or any member of the ERISA Group to make a payment to a Plan required to avoid imposition of a lien under Section 302(f) of ERISA, -65- (vii) the adoption of an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA, or (viii) any change in the actuarial assumptions or funding methods used for any Plan (other than interest rate changes required by Financial Standards Board Opinion No. 87), where the effect of such change is to materially increase or materially reduce the unfunded benefit liability or obligation to make periodic contributions. 8.3.9.2 NOTICES OF INVOLUNTARY TERMINATION AND ANNUAL REPORTS. Promptly after receipt thereof, copies of (a) all notices received by the Guarantor or any member of the ERISA Group of the PBGC's intent to terminate any Plan administered or maintained by the Guarantor or any member of the ERISA Group, or to have a trustee appointed to administer any such Plan; and (b) at the request of the Agent or any Bank each annual report (IRS Form 5500 series) and all accompanying schedules, the most recent actuarial reports, the most recent financial information concerning the financial status of each Plan administered or maintained by the Guarantor or any member of the ERISA Group, and schedules showing the amounts contributed to each such Plan by or on behalf of the Guarantor or any member of the ERISA Group in which any of their personnel participate or from which such personnel may derive a benefit, and each Schedule B (Actuarial Information) to the annual report filed by the Guarantor or any member of the ERISA Group with the Internal Revenue Service with respect to each such Plan. 8.3.9.3 NOTICE OF VOLUNTARY TERMINATION. Promptly upon the filing thereof, copies of any Form 5310, or any successor or equivalent form to Form 5310, filed with the PBGC in connection with the termination of any Plan. 8.4 COLLATERALIZATION UPON FAILURE TO CLOSE IPO BY DECEMBER 31, 1996. If the Guarantor fails to receive at least $30,000,000 in IPO proceeds (after the payment of fees and expenses) and the Borrowers fail to make the mandatory prepayment of the Loans required under Section 5.5.1 by Noon on December 31, 1996, the Loan Parties will, not later than 11:59 p.m. on December 31, 1996, (i) grant to Agent on behalf of the Banks a first priority lien and security interest in all real and personal property then owned or thereafter acquired by the Loan Parties (such property being the "COLLATERAL"), (ii) execute such security agreements, stock pledge agreements, collateral assignments, mortgages, financing statements, blank stock powers, intellectual property assignments and other -66- documents the Agent may reasonably request on behalf of the Banks to ensure they will have a first priority perfected lien and security interest in the Collateral, with all such documents to be in form and substance reasonably satisfactory to the Agent, and (iii) join with the Agent and the Banks in amending and restating this Agreement to take into account the Collateral and make such other changes as the Agent deems reasonably necessary in view of the failure of the IPO. 9. DEFAULT 9.1 EVENTS OF DEFAULT. An Event of Default shall mean the occurrence or existence of any one or more of the following events or conditions (whatever the reason therefor and whether voluntary, involuntary or effected by operation of Law): 9.1.1 PAYMENTS UNDER LOAN DOCUMENTS. The Borrowers shall fail to pay when due any principal of any Loan (including scheduled installments, mandatory prepayments or the payment due at maturity) or shall fail to pay, for more than two Business Days after the due date, any interest on any Loan or when due any other amount owing hereunder or under the other Loan Documents; 9.1.2 BREACH OF WARRANTY. Any representation or warranty made at any time by any of the Loan Parties herein or by any of the Loan Parties in any other Loan Document, or in any certificate, other instrument or statement furnished pursuant to the provisions hereof or thereof, shall prove to have been false or misleading in any material respect as of the time it was made or furnished; 9.1.3 BREACH OF NEGATIVE COVENANTS ON VISITATION RIGHTS. Any of the Loan Parties shall default in the observance or performance of any covenant contained in Section 8.1.6 or Section 8.2; 9.1.4 BREACH OF OTHER COVENANTS. Any of the Loan Parties shall default in the observance or performance of any other covenant, condition or provision hereof or of any other Loan Document and such -67- default shall continue unremedied for a period of ten (10) Business Days after any officer of Guarantor becomes aware of the occurrence thereof; 9.1.5 DEFAULTS IN OTHER AGREEMENTS OR INDEBTEDNESS. A default or event of default shall occur at any time under the terms of any other agreement involving borrowed money or the extension of credit or any other Indebtedness under which any Loan Party or Subsidiary of any Loan Party may be obligated as a borrower or guarantor in excess of $500,000 in the aggregate, and such breach, default or event of default consists of the failure to pay (beyond any period of grace permitted with respect thereto, whether waived or not) any indebtedness when due (whether at stated maturity, by acceleration or otherwise) or if such breach or default permits or causes the acceleration of any indebtedness (and such right shall not have been waived) or the termination of any commitment to lend; 9.1.6 FINAL JUDGMENTS OR ORDERS. Any final judgments or orders for the payment of money in excess of $500,000 in the aggregate shall be entered against any Loan Party by a court having jurisdiction in the premises, which judgment is not discharged, vacated, bonded or stayed pending appeal within a period of thirty (30) days from the date of entry; 9.1.7 LOAN DOCUMENT UNENFORCEABLE. Any of the Loan Documents shall cease to be legal, valid and binding agreements enforceable against the party executing the same or such party's successors and assigns (as permitted under the Loan Documents) in accordance with the respective terms thereof or shall in any way be terminated (except in accordance with its terms) or become or be declared ineffective or inoperative or shall in any way be challenged or contested or cease to give or provide the respective Liens, security interests, rights, titles, interests, remedies, powers or privileges intended to be created thereby; 9.1.8 UNINSURED LOSSES; PROCEEDINGS AGAINST ASSETS. There shall occur any material uninsured damage to or loss, theft or destruction of any of the Loan Parties' assets in excess of $1,000,000 or any other of the Loan Parties' assets are attached, seized, levied upon or subjected to a writ or distress warrant; or such come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors and the same is not cured within sixty (60) days thereafter; -68- 9.1.9 NOTICE OF LIEN OR ASSESSMENT. A notice of Lien or assessment in excess of $500,000 which is not a Permitted Lien is filed of record with respect to all or any part of any of the Loan Parties' assets by the United States, or any department, agency or instrumentality thereof, or by any state, county, municipal or other governmental agency, including the Pension Benefit Guaranty Corporation, or if any taxes or debts owing at any time or times hereafter to any one of these becomes payable and the same is not paid within thirty (30) days after the same becomes payable (unless the Loan Party is contesting the obligation as provided in Section 8.1.2); 9.1.10 INSOLVENCY. Any Loan Party ceases to be solvent or admits in writing its inability to pay its debts as they mature; 9.1.11 EVENTS RELATING TO PLANS AND BENEFIT ARRANGEMENTS. Any of the following occurs: (i) any Reportable Event, which the Agent determines in good-faith constitutes grounds for the termination of any Plan by the PBGC or the appointment of a trustee to administer or liquidate any Plan, shall have occurred and be continuing; (ii) proceedings shall have been instituted or other action taken to terminate any Plan, or a termination notice shall have been filed with respect to any Plan; (iii) a trustee shall be appointed to administer or liquidate any Plan; (iv) the PBGC shall give notice of its intent to institute proceedings to terminate any Plan or Plans or to appoint a trustee to administer or liquidate any Plan; and, in the case of the occurrence of (i), (ii), (iii) or (iv) above, the Agent determines in good-faith that the amount of the Borrower's liability is likely to exceed 10% of its Consolidated Tangible Net Worth; (v) the Guarantor or any member of the ERISA Group shall make any amendment to a Plan with respect to which security is required under Section 307 of ERISA; (vi) the Guarantor or any member of the ERISA Group shall withdraw completely or partially from a Multiemployer Plan; (vii) the Guarantor or any member of the ERISA Group shall withdraw (or shall be deemed under Section 4062(e) of ERISA to withdraw) from a Multiple Employer Plan; or (viii) any applicable Law is adopted, changed or interpreted by any Official Body with respect to or otherwise affecting one or more Plans, Multiemployer Plans or Benefit Arrangements and, with respect to any of the events specified in (v), (vi), (vii), or (viii), the Agent determines in good- faith that any such occurrence is reasonably likely to materially and adversely affect the total enterprise represented by the Guarantor and the other members of the ERISA Group; -69- 9.1.12 CESSATION OF BUSINESS. Any Loan Party ceases to conduct its business as contemplated or such Loan Party is enjoined, restrained or in any way prevented by court order from conducting all or any material part of its business and such injunction, restraint or other preventive order is not dismissed within thirty (30) days after the entry thereof; 9.1.13 CHANGE OF CONTROL. (i) Before the IPO, if Citicorp Venture Capital and Affiliates own less than 50% of the equity ownership of the Guarantor; or (ii) After the IPO, Citicorp Venture Capital and Affiliates own less than 33 1/3% of the equity ownership of the Guarantor or any person or group of persons (within the meaning of Sections 13(a) or 14(a) of the Securities Exchange Act of 1934, as amended), other than the persons listed on Schedule 6.1.2, shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of more of the voting capital stock of the Guarantor than the ownership interest of Citicorp Venture Capital and Affiliates; or (iii) If at any time the Guarantor owns less than 100% of the Capital Stock of the Company. 9.1.14 INVOLUNTARY PROCEEDINGS. A proceeding shall have been instituted in a court having jurisdiction in the premises seeking a decree or order for relief in respect of any Loan Party in an involuntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator (or similar official) of any Loan Party for any substantial part of its property, or for the winding-up or liquidation of its affairs, and such proceeding shall remain undismissed or unstayed and in effect for a period of sixty (60) consecutive days or such court shall enter a decree or order granting any of the relief sought in such proceeding; or 9.1.15 VOLUNTARY PROCEEDINGS. Any Loan Party shall commence a voluntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall -70- consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator (or other similar official) of itself or for any substantial part of its property or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any action in furtherance of any of the foregoing. 9.2 CONSEQUENCES OF EVENT OF DEFAULT. 9.2.1 EVENTS OF DEFAULT OTHER THAN BANKRUPTCY, INSOLVENCY OR REORGANIZATION PROCEEDINGS. If an Event of Default specified under subsections 9.1.1 through 9.1.13 of Section 9.1 shall occur and be continuing, the Banks and the Agent shall be under no further obligation to make Loans or issue Letters of Credit, as the case may be, and the Agent may, and upon the request of the Required Banks, shall (i) by written notice to the Borrowers, declare the unpaid principal amount of the Notes then outstanding and all interest accrued thereon, any unpaid fees and all other Indebtedness of the Borrowers to the Banks hereunder and thereunder to be forthwith due and payable, and the same shall thereupon become and be immediately due and payable to the Agent for the benefit of each Bank without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, and (ii) require the Borrowers to, and the Borrowers shall thereupon, deposit in a non-interest bearing account with the Agent, as cash collateral for its Obligations under the Loan Documents, an amount equal to the maximum amount currently or at any time thereafter available to be drawn on all outstanding Letters of Credit, and the Borrowers hereby pledge to the Agent and the Banks, and grant to the Agent and the Banks a security interest in, all such cash as security for such Obligations. Upon the curing of all existing Events of Default to the satisfaction of the Required Banks, the Agent shall return such cash collateral to the Borrowers; and 9.2.2 BANKRUPTCY, INSOLVENCY OR REORGANIZATION PROCEEDINGS. If an Event of Default specified under subsections 9.1.14 or 9.1.15 of Section 9.1 shall occur, the Banks shall be under no further obligations to make Loans hereunder and the unpaid principal amount of the Notes then outstanding and all interest accrued thereon, any unpaid fees and all other Indebtedness of the Borrowers to the Banks hereunder and thereunder shall be immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived; and -71- 9.2.3 SET-OFF. If an Event of Default shall occur and be continuing, any Bank to whom any Obligation is owed by any Loan Party hereunder or under any other Loan Document or any participant of such Bank which has agreed in writing to be bound by the provisions of Section 4.2, 10.13 and any branch, Subsidiary or Affiliate of such Bank or participant anywhere in the world shall have the right, in addition to all other rights and remedies available to it, without notice to such Loan Party, to set-off against and apply to the then unpaid balance of all the Loans and all other Obligations of the Borrowers and the other Loan Parties hereunder or under any other Loan Document any debt owing to, and any other funds held in any manner for the account of, the Borrowers or such other Loan Party by such Bank or participant or by such branch, Subsidiary or Affiliate, including all funds in all deposit accounts (whether time or demand, general or special, provisionally credited or finally credited, or otherwise) now or hereafter maintained by the Borrowers or such other Loan Party for its own account (but not including funds held in custodian or trust accounts) with such Bank or participant or such branch, Subsidiary or Affiliate. Such right shall exist whether or not any Bank or the Agent shall have made any demand under this Agreement or any other Loan Document, whether or not such debt owing to or funds held for the account of the Borrowers or such other Loan Party is or are matured or unmatured and regardless of the existence or adequacy of any Guaranty or any other security, right or remedy available to any Bank or the Agent; and 9.2.4 SUITS, ACTIONS, PROCEEDINGS. If an Event of Default shall occur and be continuing, and whether or not the Agent shall have accelerated the maturity of Loans to the Borrowers pursuant to any of the foregoing provisions of this Section 9.2, the Agent or any Bank, if owed any amount with respect to the Notes, may proceed to protect and enforce its rights by suit in equity, action at law and/or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement or the Notes, including as permitted by applicable Law the obtaining of the EX PARTE appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Agent or such Bank; and 9.2.5 APPLICATION OF PROCEEDS. From and after the date on which the Agent has taken any action pursuant to this Section 9.2 and until all Obligations of the Loan Parties have been paid in full, any and all proceeds received by the Agent from the exercise of any other remedy by the Agent, shall be applied as follows: -72- (i) first, to reimburse the Agent and the Banks for out-of- pocket costs, expenses and disbursements, including reasonable attorneys' and paralegals' fees and legal expenses, incurred by the Agent or the Banks in connection with collection of any Obligations of any of the Loan Parties under any of the Loan Documents; (ii) second, to the repayment of all Indebtedness then due and unpaid of the Loan Parties to the Banks incurred under this Agreement or any of the Loan Documents, whether of principal, interest, fees, expenses or otherwise, in such manner as the Agent may determine in its discretion; and (iii) the balance, if any, to Borrowers or as required by Law. 9.2.6 [RESERVED] 9.3 RESERVED 10. THE AGENT 10.1 APPOINTMENT. Each Bank hereby irrevocably designates, appoints and authorizes PNC Bank to act as Agent for such Bank under this Agreement to execute and deliver or accept on behalf of each of the Banks the other Loan Documents. Each Bank hereby irrevocably authorizes, and each holder of any Note by the acceptance of a Note shall be deemed irrevocably to authorize, the Agent to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and any other instruments and agreements referred to herein, and to exercise such powers and to perform such duties hereunder as are specifically delegated to or required of the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. PNC Bank agrees to act as the Agent on behalf of the Banks to the extent provided in this Agreement. 10.2 DELEGATION OF DUTIES. The Agent may perform any of its duties hereunder by or through agents or employees (PROVIDED such delegation does not constitute a relinquishment of its duties as Agent) and, subject to Sections 10.5 and 10.6, shall be entitled to engage and pay for the advice or services of any attorneys, accountants or other experts concerning all matters pertaining to its duties hereunder and to rely upon any advice so obtained. -73- 10.3 NATURE OF DUTIES; INDEPENDENT CREDIT INVESTIGATION. The Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and no implied covenants, functions, responsibilities, duties, obligations, or liabilities shall be read into this Agreement or otherwise exist. The duties of the Agent shall be mechanical and administrative in nature; the Agent shall not have by reason of this Agreement a fiduciary or trust relationship in respect of any Bank; and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon the Agent any obligations in respect of this Agreement except as expressly set forth herein. Each Bank expressly acknowledges (i) that the Agent has not made any representations or warranties to it and that no act by the Agent hereafter taken, including any review of the affairs of any of the Loan Parties, shall be deemed to constitute any representation or warranty by the Agent to any Bank; (ii) that it has made and will continue to make, without reliance upon the Agent, its own independent investigation of the financial condition and affairs and its own appraisal of the creditworthiness of each of the Loan Parties in connection with this Agreement and the making and continuance of the Loans hereunder; and (iii) except as expressly provided herein, that the Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Bank with any credit or other information with respect thereto, whether coming into its possession before the making of any Loan or at any time or times thereafter. 10.4 ACTIONS IN DISCRETION OF AGENT; INSTRUCTIONS FROM THE BANKS. The Agent agrees, upon the written request of the Required Banks, to take or refrain from taking any action of the type specified as being within the Agent's rights, powers or discretion herein, PROVIDED that the Agent shall not be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or any other Loan Document or applicable Law. In the absence of a request by the Required Banks, the Agent shall have authority, in its sole discretion, to take or not to take any such action, unless this Agreement specifically requires the consent of the Required Banks or all of the Banks. Any action taken or failure to act pursuant to such instructions or discretion shall be binding on the Banks, subject to Section 10.6. Subject to the provisions of Section 10.6, no Bank shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Banks, or in the absence of such instructions, in the absolute discretion of the Agent. -74- 10.5 REIMBURSEMENT AND INDEMNIFICATION OF AGENT BY THE BORROWER. Subject to the limitations set forth in the letter agreement dated July 3, 1996 between the Agent and the Company, the Borrowers unconditionally agree to pay or reimburse the Agent and save the Agent harmless against (a) liability for the payment of all reasonable out-of-pocket costs, expenses and disbursements, including fees and expenses of counsel, appraisers and environmental consultants, incurred by the Agent (i) in connection with the development, negotiation, preparation, printing, execution, administration, syndication, interpretation and performance of this Agreement and the other Loan Documents, (ii) relating to any requested amendments, waivers or consents pursuant to the provisions hereof, (iii) in connection with the enforcement of this Agreement or any other Loan Document or collection of amounts due hereunder or thereunder or the proof and allowability of any claim arising under this Agreement or any other Loan Document, whether in bankruptcy or receivership proceedings or otherwise, and (iv) in any workout, restructuring or in connection with the protection, preservation, exercise or enforcement of any of the terms hereof or of any rights hereunder or under any other Loan Document or in connection with any foreclosure, collection or bankruptcy proceedings, and (b) all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent, in its capacity as such, in any way relating to or arising out of this Agreement or any other Loan Documents or any action taken or omitted by the Agent hereunder or thereunder, PROVIDED that the Borrowers shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements if the same results from the Agent's gross negligence or willful misconduct, or if the Borrowers were not given notice of the subject claim and the opportunity to participate in the defense thereof, at its expense (except that the Borrowers shall remain liable to the extent such failure to give notice does not result in a loss to the Borrower), or if the same results from a compromise or settlement agreement entered into without the consent of the Borrower, which shall not be unreasonably withheld. In addition, the Borrowers agree to reimburse and pay all reasonable out-of-pocket expenses of the Agent's regular employees and agents engaged periodically to perform audits of the Loan Parties' books, records and business properties, PROVIDED that, before an Event of Default, the Borrower shall not be obligated to pay for more than one such audit per year. 10.6 EXCULPATORY PROVISIONS. Neither the Agent nor any of its directors, officers, employees, agents, attorneys or Affiliates shall (a) be liable to any Bank for any action taken or omitted to be taken by it or them hereunder, or in connection herewith including pursuant to any Loan Document, unless caused by its or their own gross negligence or willful misconduct, (b) be responsible in any -75- manner to any of the Banks for the effectiveness, enforceability, genuineness, validity or the due execution of this Agreement or any other Loan Documents or for any recital, representation, warranty, document, certificate, report or statement herein or made or furnished under or in connection with this Agreement or any other Loan Documents, or (c) be under any obligation to any of the Banks to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions hereof or thereof on the part of the Loan Parties, or the financial condition of the Loan Parties, or the existence or possible existence of any Event of Default or Potential Default. Neither the Agent nor any Bank nor any of their respective directors, officers, employees, agents, or Affiliates shall be liable to any of the Loan Parties for consequential damages resulting from any breach of contract in connection with the negotiation, documentation, administration or collection of the Loans or any of the Loan Documents. 10.7 REIMBURSEMENT AND INDEMNIFICATION OF AGENT BY BANKS. Each Bank agrees to reimburse and indemnify the Agent (to the extent not reimbursed by the Borrowers and without limiting the Obligation of the Borrowers to do so) in proportion to its Ratable Share from and against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent, in its capacity as such, in any way relating to or arising out of this Agreement or any other Loan Documents or any action taken or omitted by the Agent hereunder or thereunder, PROVIDED that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (a) if the same results from the Agent's gross negligence or willful misconduct, or (b) if such Bank was not given notice of the subject claim and the opportunity to participate in the defense thereof, at its expense (except that such Bank shall remain liable to the extent such failure to give notice does not result in a loss to the Bank), or (c) if the same results from a compromise and settlement agreement entered into without the consent of such Bank, which shall not be unreasonably withheld. In addition, each Bank agrees promptly upon demand to reimburse the Agent (to the extent not reimbursed by the Borrowers and without limiting the Obligation of the Borrowers to do so) in proportion to its Ratable Share for all amounts due and payable by the Borrowers to the Agent in connection with the Agent's periodic audit of the Loan Parties' books, records and business properties. 10.8 RELIANCE BY AGENT. The Agent shall be entitled to rely upon any writing, telegram, telex or teletype message, resolution, notice, consent, certificate, letter, cablegram, statement, order or other -76- document or conversation by telephone or otherwise believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon the advice and opinions of counsel and other professional advisers selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action hereunder unless it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. 10.9 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Potential Default or Event of Default unless the Agent has received written notice from a Bank or the Borrowers referring to this Agreement, describing such Potential Default or Event of Default and stating that such notice is a "notice of default." 10.10 NOTICES. The Agent shall promptly send to each Bank a copy of all notices received from the Borrowers pursuant to the provisions of this Agreement or the other Loan Documents promptly upon receipt thereof. The Agent shall promptly notify the Borrowers and the other Banks of each change in the Base Rate and the effective date thereof. 10.11 BANKS IN THEIR INDIVIDUAL CAPACITIES. With respect to its Revolving Credit Commitments, the Revolving Credit Loans and the Term Loan made by it, the Agent shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not the Agent, and the term "Banks" shall, unless the context otherwise indicates, include the Agent in its individual capacity. PNC Bank and its Affiliates and each of the Banks and their respective Affiliates may, without liability to account, except as prohibited herein, make loans to, accept deposits from, discount drafts for, act as trustee under indentures of, and generally engage in any kind of banking or trust business with, the Loan Parties and their Affiliates, in the case of the Agent, as though it were not acting as Agent hereunder and in the case of each Bank, as though such Bank were not a Bank hereunder. 10.12 HOLDERS OF NOTES. The Agent may deem and treat any payee of any Note as the owner thereof for all purposes hereof unless and until written notice of the assignment or transfer thereof shall have been filed with the Agent. Any request, authority or consent of any Person who at the time of making such request or giving such authority or consent is the holder of any Note -77- shall be conclusive and binding on any subsequent holder, transferee or assignee of such Note or of any Note or Notes issued in exchange therefor. 10.13 EQUALIZATION OF BANKS. The Banks and the holders of any participations in any Notes agree among themselves that, with respect to all amounts received by any Bank or any such holder for application on any Obligation hereunder or under any Note or under any such participation, whether received by voluntary payment, by realization upon security, by the exercise of the right of set-off or banker's lien, by counterclaim or by any other non-pro rata source, equitable adjustment will be made in the manner stated in the following sentence so that, in effect, all such excess amounts will be shared ratably among the Banks and such holders in proportion to their interests in payments under the Notes, except as otherwise provided in Sections 4.4.2, 5.4.2, or 5.6.1. The Banks or any such holder receiving any such amount shall purchase for cash from each of the other Banks an interest in such Bank's Loans in such amount as shall result in a ratable participation by the Banks and each such holder in the aggregate unpaid amount under the Notes, PROVIDED that if all or any portion of such excess amount is thereafter recovered from the Bank or the holder making such purchase, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other amounts, if any, required by law (including court order) to be paid by the Bank or the holder making such purchase. 10.14 SUCCESSOR AGENT. The Agent may resign as Agent by giving not less than thirty (30) days' prior written notice to the Borrower. If the Agent shall resign under this Agreement, then either (a) the Required Banks shall appoint from among the Banks a successor agent for the Banks, subject to the consent of the Borrower, such consent not to be unreasonably withheld, or (b) if a successor agent shall not be so appointed and approved within the thirty (30) day period following the Agent's notice to the Banks of its resignation, then the Agent shall appoint, with the consent of the Borrower, such consent not to be unreasonably withheld, a successor agent who shall serve as Agent until such time as the Required Banks appoint and the Borrowers consent to the appointment of a successor agent. Upon its appointment pursuant to either clause (a) or (b) above, such successor agent shall succeed to the rights, powers and duties of the Agent, and the term "Agent" shall mean such successor agent, effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement. After the resignation of any Agent hereunder, the provisions of this Article 10 shall inure to the benefit of such former Agent and such former Agent shall -78- not by reason of such resignation be deemed to be released from liability for any actions taken or not taken by it while it was an Agent under this Agreement. 10.15 AGENT'S FEE. The Borrowers shall pay to the Agent a nonrefundable fee (the "AGENT'S FEE") under the terms of a letter (the "AGENT'S LETTER") between the Borrowers and Agent, as amended from time to time. 10.16 AVAILABILITY OF FUNDS. Unless the Agent shall have been notified by a Bank prior to the date upon which a Loan is to be made that such Bank does not intend to make available to the Agent such Bank's portion of such Loan, the Agent may assume that such Bank has made or will make such proceeds available to the Agent on such date and the Agent may, in reliance upon such assumption (but shall not be required to), make available to the Borrowers a corresponding amount. If such corresponding amount is not in fact made available to the Agent by such Bank, the Agent shall be entitled to recover such amount on demand from such Bank (or, if such Bank fails to pay such amount forthwith upon such demand from the Borrower) together with interest thereon, in respect of each day during the period commencing on the date such amount was made available to the Borrowers and ending on the date the Agent recovers such amount, at a rate per annum equal to the applicable interest rate in respect of the Loan. 10.17 CALCULATIONS. In the absence of gross negligence or willful misconduct, the Agent shall not be liable for any error in computing the amount payable to any Bank whether in respect of the Loans, fees or any other amounts due to the Banks under this Agreement. In the event an error in computing any amount payable to any Bank is made, the Agent, the Borrowers and each affected Bank shall, forthwith upon discovery of such error, make such adjustments as shall be required to correct such error, and any compensation therefor will be calculated at the Federal Funds Effective Rate. 10.18 BENEFICIARIES. Except as expressly provided herein, the provisions of this Article 10 are solely for the benefit of the Agent and the Banks, and the Loan Parties shall not have any rights to rely on or enforce any of the provisions hereof. In performing its functions and duties under this Agreement, the Agent shall act solely as agent of the Banks and does not assume and shall -79- not be deemed to have assumed any obligation toward or relationship of agency or trust with or for any of the Loan Parties. 11. MISCELLANEOUS 11.1 MODIFICATIONS, AMENDMENTS OR WAIVERS. With the written consent of the Required Banks, the Agent, acting on behalf of all the Banks, and the Loan Parties may from time to time enter into written agreements amending or changing any provision of this Agreement or any other Loan Document or the rights of the Banks or the Loan Parties hereunder or thereunder, or may grant written waivers or consents to a departure from the due performance of the Obligations of the Loan Parties hereunder or thereunder. Any such agreement, waiver or consent made with such written consent shall be effective to bind all the Banks and the Loan Parties; PROVIDED, that, without the written consent of all the Banks, no such agreement, waiver or consent may be made which will: 11.1.1 INCREASE OF COMMITMENT; EXTENSION OR EXPIRATION DATE. Increase the amount of the Revolving Credit Commitment or Term Loan Commitment of any Bank hereunder or extend the Expiration Date; 11.1.2 EXTENSION OF PAYMENT; REDUCTION OF PRINCIPAL INTEREST OR FEES; MODIFICATION OF TERMS OF PAYMENT. Whether or not any Loans are outstanding, extend the time for payment of principal or interest of any Loan, the Commitment Fee or any other fee payable to any Bank, or reduce the principal amount of or the rate of interest borne by any Loan or reduce the Commitment Fee or any other fee payable to any Bank, or otherwise affect the terms of payment of the principal of or interest of any Loan, the Commitment Fee or any other fee payable to any Bank; 11.1.3 RELEASE OF GUARANTOR. Release the Guarantor from its Obligations under the Guaranty Agreement; 11.1.4 MISCELLANEOUS Amend Sections 5.2 [Pro Rata Treatment of Banks], 10.6 [Exculpatory Provisions], 10.13 [Equalization of Banks] or this Section 11.1, alter any provision regarding -80- the pro rata treatment of the Banks, change the definition of Required Banks, or change any requirement providing for the Banks or the Required Banks to authorize the taking of any action hereunder. PROVIDED further, that no agreement, waiver or consent which would modify the interests, rights or obligations of the Agent in its capacity as Agent or as the issuer of Letters of Credit shall be effective without the written consent of the Agent. 11.2 NO IMPLIED WAIVERS; CUMULATIVE REMEDIES; WRITING REQUIRED. No course of dealing and no delay or failure of the Agent or any Bank in exercising any right, power, remedy or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or operate as a waiver thereof, nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power, remedy or privilege preclude any further exercise thereof or of any other right, power, remedy or privilege. The rights and remedies of the Agent and the Banks under this Agreement and any other Loan Documents are cumulative and not exclusive of any rights or remedies which they would otherwise have. Any waiver, permit, consent or approval of any kind or character on the part of any Bank of any breach or default under this Agreement or any such waiver of any provision or condition of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing. 11.3 REIMBURSEMENT AND INDEMNIFICATION OF BANKS BY THE BORROWER; TAXES. The Borrowers agree unconditionally upon demand to pay or reimburse to each Bank (other than the Agent, as to which the Borrower's Obligations are set forth in Section 10.5) and to save such Bank harmless against (i) liability for the payment of all reasonable out-of-pocket costs, expenses and disbursements (including fees and expenses of counsel for each Bank except with respect to (a) and (b) below), incurred by such Bank (a) in connection with the administration and interpretation of this Agreement, and other instruments and documents to be delivered hereunder, (b) relating to any amendments, waivers or consents pursuant to the provisions hereof, (c) in connection with the enforcement of this Agreement or any other Loan Document, or collection of amounts due hereunder or thereunder or the proof and allowability of any claim arising under this Agreement or any other Loan Document, whether in bankruptcy or receivership proceedings or otherwise, and (d) in any workout, restructuring or in connection with the protection, preservation, exercise or enforcement of any of the terms hereof or of any rights hereunder or under any other Loan Document or in connection with any foreclosure, collection or bankruptcy proceedings, or (ii) all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against such -81- Bank, in its capacity as such, in any way relating to or arising out of this Agreement or any other Loan Documents or any action taken or omitted by such Bank hereunder or thereunder, PROVIDED that the Borrowers shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (A) if the same results from such Bank's gross negligence or willful misconduct, or (B) if the Borrowers were not given notice of the subject claim and the opportunity to participate in the defense thereof, at its expense (except that the Borrowers shall remain liable to the extent such failure to give notice does not result in a loss to the Borrower), or (C) if the same results from a compromise or settlement agreement entered into without the consent of the Borrower, which shall not be unreasonably withheld. The Banks will attempt to minimize the fees and expenses of legal counsel for the Banks which are subject to reimbursement by the Borrowers hereunder by considering the usage of one law firm to represent the Banks and the Agent if appropriate under the circumstances. The Borrowers agree unconditionally to pay all stamp, document, transfer, recording or filing taxes or fees and similar impositions now or hereafter determined by the Agent or any Bank to be payable in connection with this Agreement or any other Loan Document, and the Borrowers agree unconditionally to save the Agent and the Banks harmless from and against any and all present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such taxes, fees or impositions. 11.4 HOLIDAYS. Whenever payment of a Loan to be made or taken hereunder shall be due on a day which is not a Business Day such payment shall be due on the next Business Day and such extension of time shall be included in computing interest and fee, except that the Loans shall be due on the Business Day preceding the Expiration Date if the Expiration Date is not a Business Day. Whenever any payment or action to be made or taken hereunder (other than payment of the Loans) shall be stated to be due on a day which is not a business Day, such payment or action shall be made or taken on the next following Business Day (except as provided in Section 4.2 with respect to Interest Periods under the Euro-Rate Option), and such extension of time shall not be included in computing interest or fees, if any, in connection with such payment or action. 11.5 FUNDING BY BRANCH, SUBSIDIARY OR AFFILIATE. 11.5.1 NOTIONAL FUNDING. Each Bank shall have the right from time to time, without notice to the Borrower, to deem any branch, Subsidiary or Affiliate (which for the purposes of this Section 11.5 shall mean any corporation or association which is directly or indirectly -82- controlled by or is under direct or indirect common control with any corporation or association which directly or indirectly controls such Bank) of such Bank to have made, maintained or funded any Loan to which the Euro-Rate Option applies at any time, PROVIDED that immediately following (on the assumption that a payment were then due from the Borrowers to such other office), and as a result of such change, the Borrowers would not be under any greater financial obligation pursuant to Section 5.6 than they would have been in the absence of such change. Notional funding offices may be selected by each Bank without regard to the Bank's actual methods of making, maintaining or funding the Loans or any sources of funding actually used by or available to such Bank. 11.5.2 ACTUAL FUNDING. Each Bank shall have the right from time to time to make or maintain any Loan by arranging for a branch, Subsidiary or Affiliate of such Bank to make or maintain such Loan subject to the last sentence of this Section 11.5.2. If any Bank causes a branch, Subsidiary or Affiliate to make or maintain any part of the Loans hereunder, all terms and conditions of this Agreement shall, except where the context clearly requires otherwise, be applicable to such part of the Loans to the same extent as if such Loans were made or maintained by such Bank, but in no event shall any Bank's use of such a branch, Subsidiary or Affiliate to make or maintain any part of the Loans hereunder cause such Bank or such branch, Subsidiary or Affiliate to incur any cost or expenses payable by the Borrowers hereunder or require the Borrowers to pay any other compensation to any Bank (including any expenses incurred or payable pursuant to Section 5.6 which would otherwise not be incurred). 11.6 NOTICES. All notices, requests, demands, directions and other communications (as used in this Section 11.6, collectively referred to as "NOTICES") given to or made upon any party hereto under the provisions of this Agreement shall be by telephone or in writing (including telex or facsimile communication) unless otherwise expressly permitted hereunder and shall be delivered or sent by telex or facsimile to the respective parties at the addresses and numbers set forth under their respective names on the signature pages hereof or in accordance with any subsequent unrevoked written direction from any party to the others. All notices shall, except as otherwise expressly herein provided, be effective (a) in the case of telex or facsimile, when received, (b) in the case of hand- delivered notice, when hand-delivered, (c) in the case of telephone, when telephoned, PROVIDED, however, that in order to be effective, telephonic notices must be confirmed in writing no later than the next day by letter, facsimile or telex, (d) if given by mail, four (4) days after such communication is deposited in the mail with first-class postage prepaid, return receipt requested, and (e) if given by any other means -83- (including by air courier), when delivered; PROVIDED, that notices to the Agent shall not be effective until received. Any Bank giving any notice to any Loan Party shall simultaneously send a copy thereof to the Agent, and the Agent shall promptly notify the other Banks of the receipt by it of any such notice. 11.7 SEVERABILITY. The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction. 11.8 GOVERNING LAW. Each Letter of Credit and Section 2.8 shall be subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be revised or amended from time to time, and to the extent not inconsistent therewith, the internal laws of the Commonwealth of Pennsylvania without regard to its conflict of laws principles and the balance of this Agreement shall be deemed to be a contract under the Laws of the Commonwealth of Pennsylvania and for all purposes shall be governed by and construed and enforced in accordance with the internal laws of the Commonwealth of Pennsylvania without regard to its conflict of laws principles. 11.9 PRIOR UNDERSTANDING. This Agreement and the other Loan Documents supersede all prior understandings and agreements, whether written or oral, between the parties hereto and thereto relating to the transactions provided for herein and therein, including any prior confidentiality agreements and commitments. 11.10 DURATION; SURVIVAL. All representations and warranties of the Loan Parties contained herein or made in connection herewith shall survive the making of Loans and issuance of Letters of Credit and shall not be waived by the execution and delivery of this Agreement, any investigation by the Agent or the Banks, the making of Loans, issuance of Letters of Credit, or payment in full of the Loans. All covenants and agreements of the Loan Parties contained in Sections 8.1, 8.2 and 8.3 herein shall continue in full force and effect from and after the date hereof so long as the Borrowers may borrow or request Letters of Credit hereunder and until -84- termination of the Revolving Credit Commitments and payment in full of the Loans and expiration or termination of all Letters of Credit. All covenants and agreements of the Borrowers contained herein relating to the payment of additional compensation or expenses and indemnification, including those set forth in the Notes, Article 5 and Sections 10.5, 10.7 and 11.3, shall survive payment in full of the Loans, expiration or termination of the Letters of Credit and termination of the Revolving Credit Commitments. 11.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the Banks, the Agent, the Loan Parties and their respective successors and assigns, except that none of the Loan Parties may assign or transfer any of its rights and Obligations hereunder or any interest herein. Each Bank may, at its own cost, make assignments of or sell participations in all or any part of its Revolving Credit Commitment and the Loans made by it to one or more banks or other financial institutions, subject to the consent of the Borrowers and the Agent with respect to any assignee, such consent not to be unreasonably withheld, and PROVIDED that assignments may not be made in amounts less than $5,000,000. In the case of an assignment, upon receipt by the Agent of the Assignment and Assumption Agreement, the assignee shall have, to the extent of such assignment (unless otherwise provided therein), the same rights, benefits and obligations as it would have if it had been a signatory Bank hereunder, the Commitments in Section 2.1 shall be adjusted accordingly, and upon surrender of any Note subject to such assignment, the Borrowers shall execute and deliver a new Note to the assignee in an amount equal to the amount of the Revolving Credit Commitment or Term Loan assumed by it and a new Revolving Credit Note or Term Note to the assigning Bank in an amount equal to the Revolving Credit Commitment or Term Loan retained by it hereunder. The assigning Bank shall pay to the Agent a service fee in the amount of $3,000 for each assignment. In the case of a participation, the selling Bank shall notify the Borrowers and the Agent of the participants identity, and the participant shall only have the rights specified in Section 9.2.3 (the participant's rights against such Bank in respect of such participation to be those set forth in the agreement executed by such Bank in favor of the participant relating thereto and not to include any voting rights except with respect to changes of the type referenced in clauses 11.1.1, 11.1.2, or 11.1.3 under Section 11.1), all of such Bank's obligations under this Agreement or any other Loan Document shall remain unchanged, and all amounts payable by any Loan Party hereunder or thereunder shall be determined as if such Bank had not sold such participation. Any assignee or participant which is not incorporated under the Laws of the United States of America or a state thereof shall deliver to the Borrowers and the Agent the form of certificate described in Section 11.17 relating to federal income tax withholding. Each Bank may furnish any publicly available information concerning any Loan Party or its Subsidiaries and any other information concerning any Loan Party or its Subsidiaries in the possession of such Bank -85- from time to time to assignees and participants (including prospective assignees or participants), PROVIDED that such assignees and participants agree to be bound by the provisions of Section 11.12. 11.12 CONFIDENTIALITY. The Agent and the Banks each agree to keep confidential all information obtained from any Loan Party or its Subsidiaries which is nonpublic and confidential or proprietary in nature (including any information the Borrowers specifically designates as confidential), except as provided below, and to use such information only in connection with their respective capacities under this Agreement and for the purposes contemplated hereby. The Agent and the Banks shall be permitted to disclose such information (i) to outside legal counsel, accountants and other professional advisors who need to know such information in connection with the administration and enforcement of this Agreement, subject to agreement of such Persons to maintain the confidentiality, (ii) to assignees and participants as contemplated by Section 11.11, (iii) to the extent requested by any bank regulatory authority or, with notice to the Borrower, as otherwise required by applicable Law or by any subpoena or similar legal process, or in connection with any investigation or proceeding arising out of the transactions contemplated by this Agreement, (iv) if it becomes publicly available other than as a result of a breach of this Agreement or becomes available from a source not subject to confidentiality restrictions, or (v) if the Borrowers shall have consented to such disclosure. 11.13 COUNTERPARTS. This Agreement may be executed by different parties hereto on any number of separate counterparts, each of which, when so executed and delivered, shall be an original, and all such counterparts shall together constitute one and the same instrument. 11.14 AGENT'S OR BANK'S CONSENT. Whenever the Agent's or any Bank's consent is required to be obtained under this Agreement or any of the other Loan Documents as a condition to any action, inaction, condition or event, the Agent and each Bank shall be authorized to give or withhold such consent in its sole and absolute discretion and to condition its consent upon the giving of additional collateral, the payment of money or any other matter. 11.15 EXCEPTIONS. The representations, warranties and covenants contained herein shall be independent of each other, and no exception to any representation, warranty or covenant shall be deemed -86- to be an exception to any other representation, warranty or covenant contained herein unless expressly provided, nor shall any such exceptions be deemed to permit any action or omission that would be in contravention of applicable Law. 11.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL. EACH LOAN PARTY HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF THE COURT OF COMMON PLEAS OF CHESTER COUNTY AND THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA, AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH LOAN PARTY AT THE ADDRESSES PROVIDED FOR IN SECTION 11.6 AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH LOAN PARTY WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. EACH LOAN PARTY, THE AGENT AND THE BANKS HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW. 11.17 TAX WITHHOLDING CLAUSE. Each Bank or assignee or participant of a Bank that is not incorporated under the Laws of the United States of America or a state thereof agrees that it will deliver to each of the Borrowers and the Agent two (2) duly completed copies of the following: (i) Internal Revenue Service Form W-9, 4224 or 1001, or other applicable form prescribed by the Internal Revenue Service, certifying that such Bank, assignee or participant is entitled to receive payments under this Agreement and the other Loan Documents without deduction or withholding of any United States federal income taxes, or is subject to such tax at a reduced rate under an applicable tax treaty, or (ii) Internal Revenue Service Form W-8 or other applicable form or a certificate of the Bank, assignee or participant indicating that no such exemption or reduced rate is allowable with respect to such payments. Each Bank, assignee or participant required to deliver to the Borrowers and the Agent a form or certificate pursuant to the preceding sentence shall deliver such form or certificate as follows: (A) each Bank which is a party hereto on the Closing Date shall deliver such form or certificate at least five (5) Business Days prior to the first date on which any interest or fees are payable -87- by the Borrowers hereunder for the account of each Bank; (B) each assignee or participant shall deliver such form or certificate at least five (5) Business Days before the effective date of such assignment or participation (unless the Agent in its sole discretion shall permit such assignee or participant to deliver such form or certificate less than five (5) Business Days before such date in which case it shall be due on the date specified by the Agent). Each Bank, assignee or participant which so delivers a Form W-8, W-9, 4224 or 1001 further undertakes to deliver to each of the Borrowers and the Agent two (2) additional copies of such form (or a successor form) on or before the date that such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Borrowers or the Agent, either certifying that such Bank, assignee or participant is entitled to receive payments under this Agreement and the other Loan Documents without deduction or withholding of any United States federal income taxes or is subject to such tax at a reduced rate under an applicable tax treaty or stating that no such exemption or reduced rate is allowable. The Agent shall be entitled to withhold United States federal income taxes at the full withholding rate unless the Bank, assignee or participant establishes an exemption or that it is subject to a reduced rate as established pursuant to the above provisions. 11.18 JOINDER OF ADDITIONAL BORROWERS. Any Subsidiary of the Company which is required to join this Agreement as an additional Borrower pursuant to Section 8.2.9 shall execute and deliver to the Agent (i) a Borrower Joinder in substantially the form attached hereto as EXHIBIT 1.1(G)(1) pursuant to which it shall join as a Borrower each of the documents to which the Borrowers are parties and (ii) documents in the forms described in Section 7.1 modified as appropriate to relate to such Subsidiary. The Loan Parties shall deliver such Borrower Joinder and related documents to the Agent within five (5) Business Days after the date such Subsidiary was organized or acquired. 11.19 POWER OF ATTORNEY FOR THE TRIUMPH GROUP OPERATIONS, INC.; JOINT ANDSEVERAL OBLIGATIONS OF LOAN PARTIES. (i) Each Borrower other than The Triumph Group Operations, Inc. hereby grants to The Triumph Group Operations, Inc. an irrevocable power of attorney to act as its attorney-in-fact with regard to all matters relating to this Agreement and each other Loan Document, including, without limitation, execution and delivery of any Loan Request, and amendments, supplements, waivers or other modifications hereto or thereto, receipt of any notices hereunder or thereunder and receipt of service of process in connection herewith or therewith and making all elections as to interest rates and interest -88- periods. Each such Borrower hereby explicitly acknowledges that the Agent and each Bank have executed and delivered this Agreement and each other Loan Document to which they are parties, and have performed their obligations under this Agreement and each other Loan Document to which they are parties, in reliance upon the irrevocable grant of such power of attorney pursuant to this Section 11.19. (ii) The obligations of the Borrowers and the Loan Parties under this Agreement and the other Loan Documents are joint and several. 11.20 PUBLIC FILINGS. The Agent agrees to use reasonable efforts to provide to the Company this Agreement, any other Loan Document and any amendments or supplements hereto or thereto in a computer readable format if so requested by the Company in connection with public filings. -89- IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed this Agreement as of the day and year first above written. ATTEST: THE TRIUMPH GROUP, INC. /s/ Paul T. Stimler By: /s/ John R. Bartholdson - ----------------------------- ----------------------------- Name: Paul T. Stimmler Name: John R. Bartholdson Title: Secretary Title: President ATTEST: THE TRIUMPH GROUP OPERATIONS, INC. /s/ Paul T. Stimler By: /s/ John R. Bartholdson - ----------------------------- ----------------------------- Name: Paul T. Stimmler Name: John R. Bartholdson Title: Secretary Title: Senior Vice President Address for Notices for all Borrowers: Four Glenhardie Corporate Center 1255 Drummers Lane, Suite 200 Wayne, PA 19087-1565 Telecopier No. (610) 975-0563 Attention: John R. Bartholdson Telephone No. (610) 975-0420 -90- ATTEST: TRIUMPH CONTROLS, INC. /s/ Paul T. Stimler By: /s/ Richard C. Ill - ----------------------------- ----------------------------- Name: Paul T. Stimmler Name: Richard C. Ill Title: Assistant Secretary Title: Chairman ATTEST: AEROSPACE TECHNOLOGIES, INC. /s/ Paul T. Stimler By: /s/ John R. Bartholdson - ----------------------------- ----------------------------- Name: Paul T. Stimmler Name: John R. Bartholdson Title: Secretary Title: Vice President ATTEST: KILROY STEEL, INC. /s/ Paul T. Stimler By: /s/ John R. Bartholdson - ----------------------------- ----------------------------- Name: Paul T. Stimmler Name: John R. Bartholdson Title: Secretary Title: Vice President ATTEST: KILROY STRUCTURAL STEEL CO. /s/ Paul T. Stimler By: /s/ John R. Bartholdson - ----------------------------- ----------------------------- Name: Paul T. Stimmler Name: John R. Bartholdson Title: Secretary Title: Vice President -91- ATTEST: THE TRIUMPH GROUP HOLDINGS, INC., as Guarantor /s/ Paul T. Stimler By: /s/ Richard C. Ill - ----------------------------- ----------------------------- Name: Paul T. Stimmler Name: Richard C. Ill Title: Secretary Title: President Address for Notices: Four Glenhardie Corporate Center 1255 Drummers Lane, Suite 200 Wayne, PA 19087-1565 Telecopier No. (610)925-0563 Attention: John R. Bartholdson Senior Vice President Telephone No. (610) 925-0420 PNC BANK, NATIONAL ASSOCIATION, individually and as Agent By: /s/ -------------------------------- Title: ----------------------------- Address for Notices: 1000 Westlakes Drive, Suite 200 Berwyn, PA 19312 Telecopier No. (610) 725-5799 Attention: Mark E. Bevilacqua Vice President Telephone No. (610) 725-5740 -92- and One PNC Plaza Fourth Floor Annex 245 Fifth Avenue Pittsburgh, PA 15222-2707 Attention: Arlene Ohler Telephone No. (412) 762-3627 Telecopier No. (412) 762-8672 -93- EX-10.4 6 EXHIBIT 10.4 CONTINUING AGREEMENT OF GUARANTY AND SURETYSHIP This Continuing Agreement of Guaranty and Suretyship (the "Guarantee") is made and entered into this 19th day of July, 1996, by and between THE TRIUMPH GROUP HOLDINGS, INC., a Delaware corporation (the "Guarantor"), in favor of PNC BANK, NATIONAL ASSOCIATION (the "Agent") as agent for the Banks under the Credit Agreement described below. BACKGROUND In order to induce the Banks to make loans to The Triumph Group, Inc. and its subsidiaries (the "Borrowers"), in accordance with that certain Credit Agreement of even date herewith (as it may hereafter from time to time be amended, restated, modified or supplemented, the "Credit Agreement") by and among the Borrowers, the Guarantor and the "Banks" named therein, and the Agent, the Guarantor hereby unconditionally and irrevocably guarantees and becomes surety as though it was a primary obligor for the full and timely payment when due, whether at maturity, by declaration, acceleration or otherwise, of the principal of and interest and fees on all Loans (as defined in the Credit Agreement), both those now in existence and those that shall hereafter be made, of the Banks to the Borrowers under the Credit Agreement and the Notes issued by the Borrowers in connection therewith and any extensions, renewals, replacements or refundings thereof, and each and every other obligation or liability (both those now in existence and those that shall hereafter arise and including, without limitation, all costs and expenses of enforcement and collection, including reasonable attorney's fees) of the Borrowers to the Banks under the Credit Agreement and the other Loan Documents (as defined in the Credit Agreement) except this Agreement, and any extensions, renewals, replacements or refundings thereof (hereinafter referred to as the "Guaranteed Indebtedness"), whether or not such Guaranteed Indebtedness or any portion thereof shall hereafter be discharged in bankruptcy or is for any reason invalid or unenforceable. 1. Capitalized terms used herein and not otherwise defined herein shall have such meanings given to them in the Credit Agreement. 2. Guarantor agrees to make such full payment forthwith upon demand of the Agent when the Guaranteed Indebtedness or any portion thereof is due to be paid by the Borrowers to the Banks, whether at stated maturity, by declaration, acceleration or otherwise. Guarantor agrees to make such full payment irrespective of whether or not any one or more of the following events has occurred: (i) the Agent has made any demand on the Borrower; (ii) the Agent has taken any action of any nature against the Borrower; (iii) the Agent has pursued any rights which it has against any other Person who may be liable for the Guaranteed Indebtedness; (iv) the Agent holds or has resorted to any security for the Guaranteed Indebtedness; or (v) the Agent has invoked any other remedy or right it has available with respect to the Guaranteed Indebtedness. The Guarantor further agrees to make full payment to the Banks even if circumstances exist which otherwise constitute a legal or equitable discharge of the Guarantor as surety or guarantor. 3. Guarantor warrants that: (i) no other agreement, representation or special condition exists between the Guarantor and any Bank regarding the liability of the Guarantor hereunder, nor does any understanding exist between the Guarantor and any Bank that the obligations of the Guarantor hereunder are or will be other than as set forth herein; and (ii) as of the date hereof, the Guarantor has no defense whatsoever to any action or proceeding that may be brought to enforce this Guarantee. 4. Until the Gauranteed Obligations have been finally and indefeasibly paid in full, Guarantor agrees not to enforce any of its rights against the Borrowers, including, but not limited to: (i) any right of the Guarantor to be subrogated in whole or in part to any right or claim with respect to any Guaranteed Indebtedness or any portion thereof to the Banks which might otherwise arise from payment by the Guarantor to the Banks on the account of the Guaranteed Indebtedness or any portion thereof; and (ii) any right of the Guarantor to require the marshalling of assets of the Borrowers which might otherwise arise from payment by the Guarantor to the Banks on account of the Guaranteed Indebtedness or any portion thereof. If any amount shall be paid to the Guarantor in violation of the preceding sentence, such amount shall be deemed to have been paid to the Guarantor for the benefit of, and held in trust for the benefit of, the Banks and shall forthwith be paid to the Agent to be credited and applied upon the Guaranteed Indebtedness, whether matured or unmatured, in accordance with the terms of the Credit Agreement. 5. Guarantor waives promptness and diligence by the Banks with respect to its rights under the Credit Agreement or any of the other Loan Documents, including, but not limited to, this Guarantee. 6. Guarantor waives any and all notice with respect to: (i) acceptance by the Agent on behalf of the Banks of this Guarantee; (ii) the provisions of any note, instrument or agreement relating to the Guaranteed Indebtedness; and (iii) any default in connection with the Guaranteed Indebtedness. 7. Guarantor waives any presentment, demand, notice of dishonor or nonpayment, protest, and notice of protest in connection with the Guaranteed Indebtedness. 8. Guarantor agrees that the Banks may from time to time do any of the following without notice to Guarantor and without adversely affecting the validity or enforceability of this Guarantee: (i) release, surrender, exchange, compromise, or settle the Guaranteed Indebtedness or any portion thereof; (ii) change, renew, or waive the terms of the Guaranteed Indebtedness or any portion thereof; (iii) change, renew, or waive the terms, including without limitation, the rate of interest charged to the Borrowers on any note, instrument, or agreement relating to the Guaranteed Indebtedness or any portion thereof; (iv) grant any extension or indulgence with respect to the payment to the Banks of the Guaranteed Indebtedness or any portion thereof; (v) enter into any agreement of forbearance with respect to the Guaranteed Indebtedness or any portion thereof; (vi) release, surrender, exchange or compromise any security held by the Banks for the Guaranteed Indebtedness; (vii) release any Person who is a guarantor or surety or who has agreed to purchase the Guaranteed Indebtedness or any portion thereof; and (viii) release, surrender, exchange or compromise any security or Lien held by the Banks for the liabilities of any Person who is a guarantor or surety for the Guaranteed Indebtedness or any portion thereof. Guarantor agrees that the Agent on behalf of the Banks may do any of the above as it deems necessary or advisable, in its sole discretion, without giving any notice to Guarantor, and that Guarantor will remain liable for full payment to the Banks of the Guaranteed Indebtedness. 9. If any amount owing hereunder shall have become due and payable (by acceleration or otherwise), each Bank and any branch, subsidiary or affiliate of such Bank anywhere in the world shall each have the right, at any time and from time to time to the fullest extent permitted by Law, in addition to all other rights and remedies available to it, without prior notice to the Guarantor, to set-off against and to appropriate and apply to such due and payable amounts any debt owing to, and any other funds held in any manner for the account of the Guarantor by such Bank or any such branch, subsidiary or affiliate including, without limitation, all funds in all deposit accounts (whether time or demand, general or special, provisionally credited or finally credited, or otherwise) now or hereafter maintained by the Guarantor with such Bank or such branch, subsidiary or affiliate. Such right shall exist whether or not the Bank shall have given notice or made any demand hereunder or under any of the Notes or Loan Documents, whether or not such debt owing to or funds held for the account of the Guarantor is or are matured or unmatured, and regardless of the existence or adequacy of any collateral, guarantee or any other security, right or remedy available to such Bank. Guarantor hereby consents to and confirms the foregoing arrangements, and confirms such Bank's rights and each such branch's, subsidiary's and affiliate's rights of banker's lien and set-off. 10. Guarantor recognizes and agrees that the Borrowers, after the date hereof, may incur additional Indebtedness or other obligations, fees and expenses to the Banks under the Credit Agreement, refinance existing Guaranteed Indebtedness or pay existing Guaranteed Indebtedness and subsequently incur additional Indebtedness to the Banks under the Credit Agreement, and that in any such transaction, even if such transaction is not now contemplated, the Banks will rely in any such case upon this Guarantee and the enforceability thereof against the Guarantor and that this Guarantee shall remain in full force and effect with respect to such future Indebtedness of the Borrowers to the Bank and such Indebtedness shall for all purposes constitute Guaranteed Indebtedness. 11. Guarantor further agrees that, if at any time all or any part of any payment, from whomever received, theretofore applied by the Banks to any of the Guaranteed Indebtedness is or must be rescinded or returned by the Banks for any reason, such liability shall, for the purposes of this Guarantee, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by the Banks, and this Guarantee shall continue to be effective or be reinstated, as the case may be, as to such liabilities, all as though such application by the Banks had not been made. 12. Guarantor agrees that no failure or delay on the part of the Agent to exercise any of its rights, powers or privileges under this Guarantee shall be a waiver of such rights, powers or privileges or a waiver of any default, nor shall any single or partial exercise of any of the Agent's rights, powers or privileges preclude other or further exercise thereof or the exercise of any other right, power or privilege or be construed as a waiver of any default. Guarantor further agrees that no waiver or modification of any rights of the Agent under this Guarantee shall be effective unless in writing and signed by the Agent. Guarantor further agrees that each written waiver shall extend only to the specific instance actually recited in such written waiver and shall not impair the rights of the Agent in any other respect. 13. Guarantor unconditionally agrees to pay all costs and expenses, including attorney's fees, incurred by the Bank in enforcing this Guarantee against it. 14. Guarantor agrees that this Guarantee and the rights and obligations of the parties hereto shall for all purposes be governed by and construed and enforced in accordance with the substantive law of the Commonwealth of Pennsylvania without giving effect to its principles of conflict of laws. 15. Guarantor recognizes that this Guarantee when executed constitutes a sealed instrument and as a result the instrument will be enforceable as such without regard to any statute of limitations which might otherwise be applicable and without any consideration. 16. Guarantor acknowledges that in addition to binding itself to this Guarantee, at the time of execution of this Guarantee the Agent offered to the Guarantor a copy of this Guarantee in the form in which it was executed and that by acknowledging this fact the Guarantor may not later be able to claim that a copy of the Guarantee was not received by it. 17. Guarantor agrees that this Guarantee shall be binding upon the Guarantor, its successors and assigns; provided, however, that Guarantor may not assign or transfer any of rights and obligations hereunder or any interest herein. Guarantor further agrees that (i) this Guarantee is freely assignable and transferable by the Banks in connection with any permitted assignment or transfer of the Guaranteed Indebtedness and (ii) this Guarantee shall inure to the benefit of the Banks, their successors and assigns. 18. Guarantor agrees that if it fails to perform any covenant or agreement hereunder or if there occurs an Event of Default under the Credit Agreement, all or any part of the Guaranteed Indebtedness may be declared to be forthwith due and payable and, in the case of an Event of Default described in subsections 9.1.14 or 9.1.15 of Section 9 of the Credit Agreement, the Guaranteed Indebtedness shall be immediately due and payable, in any case without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived. 19. Guarantor agrees that the enumeration of the Banks' rights and remedies set forth in this Guarantee is not intended to be exhaustive and the exercise by the Banks of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative and shall be in addition to any other right or remedy given hereunder or under any other agreement among the parties to the Loan Documents or which may now or hereafter exist at law or in equity or by suit or otherwise. 20. Guarantor agrees that all notices, statements, requests, demands and other communications under this Guarantee shall be given to the Guarantor at the address set forth below its respective name on the signature page hereof in the manner provided in Section 11.6 of the Credit Agreement. 21. (a) Guarantor agrees that the provisions of this Guarantee are severable, and in an action or proceeding involving any state or federal bankruptcy, insolvency or other law affecting the rights of creditors generally: (i) if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision in this Guarantee in any jurisdiction. (ii) if this Guarantee would be held or determined to be void, invalid or unenforceable on account of the amount of a Guarantor's aggregate liability under this Guarantee, then, notwithstanding any other provision of this Guarantee to the contrary, the aggregate amount of such liability shall, without any further action by the Bank, the Guarantor or any other Person, be automatically limited and reduced to the highest amount which is valid and enforceable as determined in such action or proceeding, which (without limiting the generality of the foregoing) may be an amount which is not greater than the greater of: (A) the fair consideration actually received by the Guarantor under the terms of and as a result of the Loan Documents, including, without limiting the generality of the foregoing, and to the extent not inconsistent with applicable federal and state laws affecting the enforceability of guarantees, distributions or advances made to the Guarantor with the proceeds of any credit extended under the Loan Documents in exchange for its guaranty of the Guaranteed Indebtedness, or (B) the excess of (1) the amount of the fair saleable value of the assets of the Guarantor as of the date of this Guarantee as determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors as in effect on the date thereof over (2) the amount of all liabilities of the Guarantor as of the date of this Guarantee, also as determined on the basis of applicable federal and state laws governing the insolvency of debtors as in effect on the date thereof. (b) If the guarantee by the Guarantor of the Guaranteed Indebtedness is held or determined to be void, invalid or unenforceable, in whole or in part, such holding or determination shall not impair or affect the validity and enforceability of any clause or provision not so held to be void, invalid or unenforceable. 22. [RESERVED.] 23. GUARANTOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTEE. GUARANTOR (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND EXECUTION AND DELIVERY HEREOF BY THE GUARANTOR, AND (ii) ACKNOWLEDGES THAT THE ENTERING INTO OF THE CREDIT AGREEMENT BY THE BANK HAS BEEN INDUCED BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS SET FORTH IN THIS SECTION. 24. Guarantor (i) hereby irrevocably submits to the nonexclusive jurisdiction of the Court of Common Pleas of Chester County, Commonwealth of Pennsylvania, or any successor to said court, and to the nonexclusive jurisdiction of the United States District Court for the Eastern District of Pennsylvania, or any successor to said court (hereinafter referred to as the "Pennsylvania Courts") for purposes of any suit, action or other proceeding which relates to this Guarantee or any other Loan Document, (ii) to the extent permitted by applicable Law, hereby waives and agrees not to assert by way of motion, as a defense or otherwise in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of the Pennsylvania Courts; that such suit, action or proceeding is brought in an inconvenient forum; that the venue of such suit, action or proceeding is improper; or that this Guarantee or any Loan Document may not be enforced in or by the Pennsylvania Courts, (iii) hereby agrees not to seek, and hereby waives, any collateral review by any other court, which may be called upon to enforce the judgment of any of the Pennsylvania Courts, of the merits of any such suit, action or proceeding or the jurisdiction of the Pennsylvania Courts, and (iv) waives personal service of any and all process upon it and consents that all such service of process made by certified or registered mail addressed as provided in Section 21 hereof and service so made shall be deemed to be completed upon actual receipt thereof. Nothing herein shall limit the Bank's right to bring any suit, action or other proceeding against the Guarantor or any of Guarantor's assets or to serve process on the Guarantor by any means authorized by Law. 25. Guarantor waives all defenses based on suretyship not specifically waived above. IN WITNESS WHEREOF, Guarantor intending to be legally bound, has executed this Guarantee as of the date first above written with the intention that this Guarantee shall constitute a sealed instrument. Attest: THE TRIUMPH GROUP HOLDINGS, INC. By: /s/Paul T. Stimmler By: /s/Richard T. Ill ----------------------- -------------------------- Name:Paul T. Stimmler Name:Richard T. Ill --------------------- ------------------------ Title:Secretary Title:President -------------------- ----------------------- Address for Notices: Four Glenhardie Corporate Center 1255 Drummers Lane, Suite 200 Wayne, Pennsylvania 19087-1565 EX-10.5 7 EXHIBIT 10.5 PURCHASE AGREEMENT THIS AGREEMENT is made as of July 22, 1993 by and among The Triumph Group Holdings, Inc., a Delaware corporation (the "COMPANY") and the Persons listed on the Schedule of Purchasers attached hereto (collectively referred to herein as the "PURCHASERS" and individually as a "PURCHASER"). Certain capitalized terms used herein are defined in Section 10 below. The parties hereto agree as follows: 1. AUTHORIZATION AND CLOSING. (a) AUTHORIZATION OF THE SECURITIES. The Company shall authorize the issuance and sale to the Purchasers of (i) 70,000 shares of its Class B Common Stock, par value $.001 per share (the "CLASS B COMMON"), and 26,525 shares of its Preferred Stock, par value $.01 per share (the "PREFERRED"), each having the rights and preferences set forth in EXHIBIT A attached hereto, and (ii) promissory notes in the form set forth in EXHIBIT B attached hereto (the "NOTES") in the aggregate principal amount of $5,323,030.75. The Class B Common and the Preferred are collectively referred to herein as the "STOCK." The Stock and the Notes are collectively referred to herein as the "SECURITIES." (b) PURCHASE AND SALE OF THE SECURITIES. At the Closing, the Company shall sell to each Purchaser and, subject to the terms and conditions set forth herein, each Purchaser shall purchase from the Company (i) the number of shares of Class B Common set forth opposite such Purchaser's name on the Schedule of Purchasers attached hereto at a price of $10.00 per share, (ii) the number of shares of Preferred set forth opposite such Purchaser's name on the Schedule of Purchasers attached hereto at a price of $34.57 per share and (iii) a Note in the principal amount set forth opposite such Purchaser's name on the Schedule of Purchasers attached hereto at a price equal to the face amount thereof. (c) THE CLOSING. The closing of the purchase and sale of the Securities (the "CLOSING") shall take place at the offices of Kirkland & Ellis, 55 East 52nd Street, New York, NY at 10:00 a.m. on July 22, 1993 or at such other place or such other date as may be mutually agreeable to the Company and each Purchaser. At the Closing, the Company shall deliver to each Purchaser (i) stock certificates evidencing the Stock to be purchased by such Purchaser and (ii) a Note in the principal amount to be purchased by such Purchaser, each registered in such Purchaser's or its nominee's name, upon payment of the purchase price thereof by a cashier's or certified check, or by wire transfer of immediately available funds to an account designated by the Company. 2. FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company shall, upon the request of any Purchaser (so long as such Purchaser holds any Securities), deliver to such Purchaser: (a) as soon as available but in any event within 45 days after the end of each monthly accounting period in each fiscal year, unaudited consolidating and consolidated statements of income and cash flows of the Company and its Subsidiaries for such monthly period and for the period from the beginning of the fiscal year to the end of such month, and consolidating and consolidated balance sheets of the Company and its Subsidiaries as of the end of such monthly period, setting forth in each case comparisons to the annual budget and to the corresponding period in the preceding fiscal year, and all such statements shall be prepared in accordance with generally accepted accounting principles, consistently applied, subject to the absence of footnote disclosures and to normal year-end adjustments; (b) within 90 days after the end of each fiscal year, consolidating and consolidated statements of income and cash flows of the Company and its Subsidiaries for such fiscal year, and consolidating and consolidated balance sheets of the Company and its Subsidiaries as of the end of such fiscal year, setting forth in each case comparisons to the annual budget and to the preceding fiscal year, all prepared in accordance with generally accepted accounting principles, consistently applied, and accompanied by (a) with respect to the consolidated portions of such statements, an opinion of an independent accounting firm of recognized national standing, (b) a certificate from such accounting firm, addressed to the Company's board of directors, stating that in the course of its examination nothing came to its attention that caused it to believe that there was any default by the Company or any Subsidiary in the fulfillment of or compliance with any of the terms, covenants, provisions or conditions of any other material agreement to which the Company or any Subsidiary is a party or, if such accountants have reason to believe any default by the Company or any Subsidiary exists, a certificate specifying the nature and period of existence thereof, and (c) a copy of such firm's annual management letter to the board of directors; (c) promptly upon receipt thereof, any additional reports, management letters or other detailed information concerning significant aspects of the Company's operations or financial affairs given to the Company by its independent accountants (and not otherwise contained in other materials provided hereunder); (d) at least 30 days prior to the beginning of each fiscal year, an annual budget prepared on a monthly basis for the Company and its Subsidiaries for such fiscal year (displaying anticipated statements of income and cash flows and balance 2 sheets), and promptly upon preparation thereof any other significant budgets prepared by the Company and any revisions of such annual or other budgets, and within 30 days after any monthly period in which there is a material adverse deviation from the annual budget, an Officer's Certificate explaining the deviation and what actions the Company has taken and proposes to take with respect thereto; (e) promptly (but in any event within five business days) after the discovery or receipt of notice of any default under any material agreement to which it or any of its Subsidiaries is a party or any other material adverse event or circumstance affecting the Company or any Subsidiary (including the filing of any material litigation against the Company or any Subsidiary or the existence of any dispute with any Person which involves a reasonable likelihood of such litigation being commenced), an Officer's Certificate specifying the nature and period of existence thereof and what actions the Company and its Subsidiaries have taken and propose to take with respect thereto; (f) within ten days after transmission thereof, copies of all financial statements, proxy statements, reports and any other general written communications which the Company sends to its stockholders and copies of all registration statements and all regular, special or periodic reports which it files, or any of its officers or directors file with respect to the Company, with the Securities and Exchange Commission or with any securities exchange on which any of its securities are then listed, and copies of all press releases and other statements made available generally by the Company to the public concerning material developments in the Company's businesses; and (g) with reasonable promptness, such other information and financial data concerning the Company and its Subsidiaries as any Person entitled to receive information under this Section 2 may reasonably request. 3. RESERVATION OF COMMON STOCK. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common, solely for the purpose of issuance upon the conversion of the Class B Common, such number of shares of Class A Common issuable upon the conversion of all outstanding Class B Common. All shares of Class A Common which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Company shall take all such actions as may be necessary to assure that all such shares of Class A Common may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Class A Common may be listed (except for official notice 3 of issuance which shall be immediately transmitted by the Company upon issuance). 4. REGULATORY COMPLIANCE COOPERATION. In the event that Citicorp Venture Capital, Ltd., a New York corporation ("CVC"), determines that it has a Regulatory Problem (as defined below), the Company agrees to take all such actions as are reasonably requested by CVC in order (a) to effectuate and facilitate any transfer by CVC of any securities of the Company then held by CVC to any Person designated by CVC and (b) to continue and preserve the respective allocation of the voting interests with respect to the Company provided for in the Stockholders Agreement by and among the Company, CVC and others dated as of the date hereof, and with respect to CVC's ownership of the Company's Stock. Such actions may include, but shall not necessarily be limited to entering into such additional agreements, adopting such amendments to the Certificate of Incorporation and bylaws of the Company and taking such additional actions as are reasonably requested by CVC in order to effectuate the intent of the foregoing. For purposes of this Agreement, a "REGULATORY PROBLEM" means any set of facts or circumstances wherein it has been asserted by any governmental regulatory agency (or CVC believes that there is a substantial risk of such assertion) that CVC is not entitled to hold, or exercise any significant right with respect to, the Stock. 5. PRO RATA PAYMENT. Any payments to the holders of the Notes (whether for principal, interest or otherwise) shall be made pro rata among such holders based upon the aggregate unpaid principal amount of the Notes held by each such holder. If any holder of a Note obtains any payment (whether voluntary, involuntary, by application of offset or otherwise) of principal or interest on any Note in excess of such holder's pro rata share of payments obtained by all holders of the Notes, by acceptance of the Note such holder agrees to purchase from the other holders of the Notes such participation in the Notes held by them as is necessary to cause such holders to share the excess payment ratably among each of them as provided in this Section 5. 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a material inducement to each Purchaser to enter into this Agreement and purchase the Securities, the Company hereby represents and warrants that: (a) ORGANIZATION AND CORPORATE POWER. The Company is a corporation duly organized, validly existing and in good standing under the laws of Delaware and is qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify. The Company has all requisite corporate power and authority to carry out the transactions contemplated by this Agreement. 4 (b) AUTHORIZATION; NO BREACH. The execution, delivery and performance of this Agreement has been duly authorized by the Company. This Agreement constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms. The execution and delivery by the Company of this Agreement, the offering, sale and issuance of the Securities hereunder and the fulfillment of and compliance with the respective terms hereof and thereof by the Company, do not and shall not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any lien, security interest, charge or encumbrance upon the Company's capital stock or assets pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of, or (vi) require any authorization, consent, approval, exemption or other action by or notice to any court or administrative or governmental body pursuant to the charter or bylaws of the Company, or any law, statute, rule or regulation to which the Company is subject, or any agreement, instrument, order, judgment or decree to which the Company is subject. (c) CONDUCT OF BUSINESS; LIABILITIES. Prior to the Closing, the Company has not conducted any business, incurred any expenses, obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise, whether or not known to the Company, and whether due or to become due), violated any laws or governmental rules or regulations, or entered into any contracts or agreements other than this Agreement, the Stockholders Agreement, the Registration Agreement, the Executive Stock Agreements, the Stock and Asset Purchase Agreement and any other agreements contemplated by such agreements. In addition, prior to the Closing, the Company has not violated any laws or governmental rules or regulations. (d) SMALL BUSINESS MATTERS. The Company, together with its "affiliates" (as that term is defined in Title 13, Code of Federal Regulations, Section 121.401), is a "small business concern" within the meaning of the Small Business Investment Act of 1958 and the regulations thereunder, including Title 13, Code of Federal Regulations, Section 121.802. The information set forth in the Small Business Administration Forms 480, 652 and Section A of Form 1031 regarding the Company is accurate and complete. Copies of such forms shall have been completed by the Company and delivered to each Purchaser at the Closing. Neither the Company nor any Subsidiary presently engages in, and it shall not hereafter engage in, any activities, nor shall the Company or any Subsidiary use directly or indirectly the proceeds from the sale of the Securities hereunder for any purpose, for which a Small Business Investment Company is prohibited from providing funds by the Small Business Investment Act of 1958 and the regulations thereunder, including Title 13, Code of Federal Regulations, Section 107.901. 5 7. TRANSFER OF RESTRICTED SECURITIES. (a) Restricted Securities are transferable only pursuant to (i) public offerings registered under the Securities Act, (ii) Rule 144 or Rule 144A of the Securities and Exchange Commission (or any similar rule or rules then in force) if such rule is available and (iii) subject to the conditions specified in Section 7(b) below, any other legally available means of transfer. (b) In connection with the transfer of any Restricted Securities (other than a transfer described in clause (i) or (ii) of Section 7(a) above), the holder thereof shall deliver written notice to the Company describing in reasonable detail the transfer or proposed transfer, together with an opinion of counsel to the effect that such transfer of Restricted Securities may be effected without registration of such Restricted Securities under the Securities Act. In addition, if the holder of the Restricted Securities delivers to the Company an opinion of counsel that no subsequent transfer of such Restricted Securities shall require registration under the Securities Act, the Company shall promptly upon such contemplated transfer deliver new certificates for such Restricted Securities which do not bear the Securities Act legend set forth in Section 8 below. If the Company is not required to deliver new certificates for such Restricted Securities not bearing such legend, the holder thereof shall not transfer the same until the prospective transferee has confirmed to the Company in writing its agreement to be bound by the conditions contained in this Section 7 and Section 8 below. (c) Upon the request of any Purchaser, the Company shall promptly supply to such Purchaser or its prospective transferees all information regarding the Company required to be delivered in connection with a transfer pursuant to Rule 144A of the Securities and Exchange Commission. (d) Upon the request of any holder of Restricted Securities, the Company shall remove the foregoing legend from the certificates for such holder's Restricted Securities; provided that such Restricted Securities are eligible for sale pursuant to Rule 144(k) of the Securities and Exchange Commission. (e) Transfers of Restricted Securities are subject to the terms of the Stockholder Agreement to the extent applicable. 8. PURCHASERS' INVESTMENT REPRESENTATIONS. Each Purchaser hereby represents that it is acquiring the Restricted Securities purchased hereunder or acquired pursuant hereto for its own account with the present intention of holding such securities for purposes of investment, and that it has no intention of selling such securities in a public distribution in violation of the federal securities laws or any applicable state securities laws; 6 provided that nothing contained herein shall prevent the Purchasers and subsequent holders of Restricted Securities from transferring such securities in compliance with the provisions of Section 7 hereof. Each certificate for Restricted Securities shall be imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON JULY _, 1993, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE PURCHASE AGREEMENT, DATED AS OF JULY _, 1993, BETWEEN THE ISSUER (THE "COMPANY") AND CERTAIN INVESTORS. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE." 9. SBA FORMS. Prior to the Closing, the Company shall deliver to each Purchaser all of the following documents: SBA Forms 480, 652 and 1031 and a list of (a) the name of each of the Company's directors as of the Closing, (b) the name and title of each of the Company's officers as of the Closing and (c) after giving effect to the transactions contemplated by this Agreement, the name of each of the Company's stockholders setting forth the number and class of shares held. 10. DEFINITIONS. For the purposes of this Agreement, the following terms have the meanings set forth below: "AFFILIATE" of any particular Person or entity means any other Person or entity controlling, controlled by or under common control with such particular Person or entity and, in the case of a limited partnership, "Affiliate" includes limited partners of such limited partnership. "CERTIFICATE OF INCORPORATION" means the Company's certificate of incorporation, as amended from time to time. "EXECUTIVE STOCK AGREEMENTS" means those certain Executive Stock Agreements dated as of the date hereof between the Company and certain members of the management of the Company and its Subsidiaries. "OFFICER'S CERTIFICATE" means a certificate signed by the Company's president or its chief financial officer, stating that (i) the officer signing such certificate has made or has caused to be made such investigations as are necessary in order to permit him to verify the accuracy of the information set forth in such certificate and (ii) such certificate does not misstate any material fact and does not omit to state any fact necessary to make the certificate not misleading. 7 "PERSON" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "REGISTRATION AGREEMENT" means that certain Registration Agreement dated as of the date hereof among the Company, the Purchasers and certain other parties thereto. "RESTRICTED SECURITIES" means (i) the Securities issued hereunder and (ii) any securities issued with respect to the securities referred to in clause (i) above by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular Restricted Securities, such securities shall cease to be Restricted Securities when they have (a) been effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them, (b) become eligible for sale pursuant to Rule 144 (or any similar provision then in force) under the Securities Act or (c) been otherwise transferred and new certificates for them not bearing the Securities Act legend set forth in Section 8 have been delivered by the Company in accordance with Section 7(b). Whenever any particular securities cease to be Restricted Securities, the holder thereof shall be entitled to receive from the Company, without expense, new securities of like tenor not bearing a Securities Act legend of the character set forth in Section 8. "SECURITIES ACT" means the Securities Act of 1933, as amended, or any similar federal law then in force. "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any similar federal law then in force. "SECURITIES AND EXCHANGE COMMISSION" includes any governmental body or agency succeeding to the functions thereof. "STOCK AND ASSET PURCHASE AGREEMENT" means that certain Stock and Asset Purchase Agreement dated as of April 21, 1993 among the Company, Alco Standard Corporation and certain Subsidiaries of Alco Standard Corporation. "STOCKHOLDERS AGREEMENT" means that certain Stockholders Agreement dated as of the date hereof among the Company, the Purchasers and certain other parties thereto. "SUBSIDIARY" means any corporation of which the securities having a majority of the ordinary voting power in electing the board of directors are, at the time as of which any determination is being made, owned by the Company either directly or through one or more Subsidiaries. 8 11. MISCELLANEOUS. (a) EXPENSES. The Company agrees to pay and hold each Purchaser harmless from and against liability for the payment of all fees and expenses incurred in connection with the transactions contemplated by this Agreement and each of the agreements contemplated hereby, including (i) reasonable attorneys', consultants', and accountants' fees and expenses arising in connection with the negotiation, execution and consummation of the transactions contemplated by this Agreement and each of the agreements contemplated hereby, (ii) reasonable fees and expenses incurred with respect to any amendments or waivers (whether or not the same become effective) under or in respect of this Agreement, the agreements contemplated hereby or the Certificate of Incorporation, (iii) stamp and other taxes which may be payable in respect of the execution and delivery of this Agreement, (iv) reasonable fees and expenses incurred in respect of the enforcement of the rights granted under this Agreement, the agreements contemplated hereby and the Certificate of Incorporation, and (v) fees and expenses incurred by any Purchaser in filing with any governmental agency with respect to its investment in the Company or any other filing with any governmental agency with respect to the Company which mentions any Purchaser. (b) REMEDIES. The Purchasers shall have all rights and remedies set forth in this Agreement and the Certificate of Incorporation and all rights and remedies which the Purchasers have been granted at any time under any other agreement or contract and all of the rights which the Purchasers have under any law. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any Person having any rights under this Agreement may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or other security) for specific performance and for other injunctive relief in order to enforce or prevent violation of the provisions of this Agreement. (c) SUCCESSORS AND ASSIGNS. All covenants and agreements in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. In addition, whether or not any express assignment has been made, the provisions of this Agreement which are for the benefit of purchasers or holders of Registrable Securities are also for the benefit of, and enforceable by, any subsequent holder of Registrable Securities. (d) CONSENT TO AMENDMENTS. Except as otherwise expressly provided herein, the provisions of this Agreement may be amended and the Company may take any action herein prohibited, or 9 omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of holders of a majority of the issued and outstanding shares of Common Stock issued hereunder. No other course of dealing between the Company and any Purchaser or any delay in exercising any rights hereunder or under the Certificate of Incorporation shall operate as a waiver of any rights of such Purchaser. (e) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties contained herein or made in writing by any party in connection herewith shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, regardless of any investigation made by the Purchasers or on their behalf. (f) SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. (g) ENTIRE AGREEMENT. Except as otherwise expressly set forth herein, this document embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. (h) COUNTERPARTS. This Agreement may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement. (i) GOVERNING LAW. This Agreement will be governed by and construed in accordance with the domestic laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. (j) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. * * * * * 10 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. THE TRIUMPH GROUP HOLDINGS, INC. By /s/ Richard C. Ill ----------------------------------------- Its President and Chief Executive Officer ----------------------------------------- CITICORP VENTURE CAPITAL, LTD. By /s/ ----------------------------------------- Its Vice President ----------------------------------------- 11 SCHEDULE OF PURCHASERS Shares of Shares of Principal Total Purchaser Class B Common Preferred Amount of Notes Purchase Price - --------- -------------- --------- --------------- -------------- Citicorp Venture Capital Ltd. 70,000 25,525 $5,323,030.75 $6,940,000 12 EXHIBITS Exhibit A - Article IV of Certificate of Incorporation Exhibit B - Form of Promissory Note 13 EX-10.6 8 EXHIBIT 10.6 THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS NOTE IS SUBJECT TO CERTAIN SUBORDINATION PROVISIONS SET FORTH IN PARAGRAPH 3 HEREIN. THIS NOTE WAS ORIGINALLY ISSUED ON JUNE 1, 1993 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY COMPARABLE STATE SECURITIES LAW. THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN PARAGRAPH 9 HEREIN. SUBORDINATED PROMISSORY NOTE June 1, 1993 $13,500,000 THE TRIUMPH GROUP HOLDINGS, INC., a Delaware corporation (the "Company"), hereby promises to pay to MDR Corporation (the "Seller"), or its permitted assigns (the Seller and each of its permitted assigns is a "Holder") the principal amount of Thirteen Million Five Hundred Thousand Dollars, together with interest thereon calculated from the date hereof in accordance with the provisions of this Note. This Note is the "SUBORDINATED NOTE" issued pursuant to that certain Stock and Asset Purchase Agreement, dated as of April 21, 1993 (the "PURCHASE AGREEMENT"), by and among the Company, the Seller and the other parties named therein. Certain defined terms used herein are set forth in paragraph 14 hereof. 1. PAYMENT OF INTEREST. Interest shall accrue at the rate of ten percent (10%) per annum, compounded quarterly, on the unpaid principal amount of this Note outstanding from time to time. Subject to the provisions of subparagraph 2(c) and paragraph 3 hereof, the Company shall pay to the holder of this Note quarterly, in arrears, all accrued interest on each March 31, June 30, September 30 and December 31 during the term of this Note (each such date being hereinafter referred to as an "INTEREST PAYMENT DATE"), beginning on September 30, 1993. Any accrued interest which for any reason has not theretofore been paid shall be paid in full on the date on which the remaining principal amount of this Note is paid. Interest shall accrue on any principal payment due under this Note, and, unless otherwise prohibited under applicable law, on any interest which has not been paid on the date on which it is due, until such time as payment therefor is actually delivered to the holder of this Note. 2. PAYMENT OF PRINCIPAL ON NOTE. (a) SCHEDULED PAYMENT. The Company shall repay 50% of the original principal amount of this Note, together with all accrued and unpaid interest thereon on June 1, 2002 (the "INITIAL PRINCIPAL PAYMENT DATE"). The Company shall repay the entire remaining principal amount of this Note, together with all accrued and unpaid interest thereon, on June 1, 2003 (the "Maturity Date"). (b) PREPAYMENTS. (i) OPTIONAL. Subject to the provisions of paragraph 3 hereof, the Company may, at any time and from time to time without premium or penalty, prepay all or a portion of the outstanding principal amount of this Note. (ii) MANDATORY. At such time as the Superior Debt is no longer outstanding, the Company shall, within 90 days after the end of each if its fiscal years, use 50% of Excess Cash Flow (as defined in the Senior Loan Agreement) for such prior fiscal year to make prepayments of the outstanding principal amount of this Note. (c) TIME OF PAYMENT. If any payment of principal or interest on this Note shall become due on a Saturday, Sunday, or legal holiday under the laws of the State of New York, such payment shall be made on the next succeeding business day and such extension of time shall in such case be included in computing interest in connection with such payment. 3. SUBORDINATION; RESTRICTIONS ON PAYMENT. (a) Notwithstanding anything in this Note to the contrary, the obligations of the Company in respect of the principal, interest, fees and charges on this Note shall be subordinate and junior in right of payment, to the extent and in the manner hereinafter set forth, to all Superior Debt. (b) Upon the occurrence of any Insolvency Event with respect to the Company or upon any acceleration of the Superior Debt, then: (i) the holders of Superior Debt shall be entitled to receive payment in full in cash of all principal, premium, interest, fees and charges then due on all Superior Debt (including interest, fees and charges accruing thereon after the commencement of any such proceedings) before the Holder is entitled to receive any payment on account of principal, interest or other amounts due (or past due) upon this Note, and the holders of Superior Debt shall be entitled to receive for application in payment thereof any payment or distribution of any kind or character, whether in cash, property or securities or by set-off or otherwise, which may be payable or deliverable in any such proceedings in respect of this Note; and 2 (ii) any payment or distribution of assets of the Company, of any kind or character, whether in cash, property or securities, to which the Holder would be entitled except for the provisions of this subparagraph 3(b) shall be paid or delivered by the Company directly to the holders of all Superior Debt in the manner provided in paragraph 3(f) below, for application in payment thereof until all Superior Debt (including interest, fees and charges accrued thereon after the date of commencement of such proceedings) shall have been paid in full (whether in cash or such other form of consideration acceptable to the holders of Superior Debt in their sole discretion (hereinafter "Acceptable Assets")). (c) Until all Superior Debt shall have been paid in full in Acceptable Assets, the Company shall not, directly or indirectly, make any payment of any amount payable with respect to this Note if there shall have occurred and be continuing or there would exist as a result of such payment or distribution any default or event of default under any of the terms of any Superior Debt Agreement which (whether with or without notice, lapse of time or both) would permit the holder of such Superior Debt to accelerate all or any portion of such Superior Debt (collectively, the "BLOCKAGE EVENTS"); provided that if, immediately prior to the time a particular payment is due hereunder, (x) no Blockage Event is continuing, and (y) payment in full of the amount then due is prohibited by this paragraph 3(c), then the Company shall be permitted to, and shall, pay to the Holder the maximum portion of such amount as would not create a default under any of the terms of any Superior Debt Agreement which (whether with or without notice, lapse of time or both) would permit the holder of such Superior Debt to accelerate all or any portion of such Superior Debt. The Company shall use reasonable efforts to notify the Holder in writing of the occurrence of a Blockage Event; provided that notwithstanding anything to the contrary in this Note, the failure of the Company to so notify the Holder of the occurrence of a Blockage Event shall have no effect on the obligations of the Company or the Holder during the continuance of such Blockage Event as set forth herein. (d) Any amendment or modification of the terms of paragraph 3 of this Note shall not be effective against any Person who was a holder of Superior Debt prior to or at the time of such amendment or modification unless such holder of Superior Debt so consents in writing. (e) The holders of Superior Debt may, at any time, in their discretion, renew, amend, extend or otherwise modify the terms and provisions of Superior Debt so held or exercise any of their rights under the Superior Debt including, without limitation, the waiver of defaults thereunder and the amendment of any of the terms or provisions thereof (or any notice evidencing or creating 3 the same), all without notice to or assent from the Holder. No compromise, alteration, amendment, renewal or other change of, or waiver, consent or other action in respect of any liability or obligation under or in respect of, any terms, covenants or conditions of the Superior Debt (or any instrument evidencing or creating the same), whether or not such compromise, alteration, amendment, renewal, change, waiver, consent or other action is in accordance with the provisions of the Superior Debt (or any instrument evidencing or creating the same), shall in any way alter or affect any of the subordination provisions of this Note. (f) If, notwithstanding the provisions of paragraph 3 of this Note, any payment or distribution of any character (whether in cash, securities or other property) or any security shall be received by the Holder in contravention of this paragraph 3 before all the Superior Debt shall have been paid in full in Acceptable Assets, such payment, distribution or security shall be held in trust for the benefit of, and shall be immediately paid over or delivered or transferred to, the holders of Superior Debt or their duly appointed agents for application of payment according to the priorities of such Superior Debt and ratably among the holders of any class of Superior Debt. Such payments received by the Holder and delivered to the holders of the Superior Debt shall be deemed not to be a payment on this Note for any reason whatsoever and the indebtedness under this Note shall remain as if such erroneous payment had never been paid by the Company or received by the Holder. In the event of the failure of any Holder to endorse or assign any such payment, distribution or security, each holder of any Superior Debt is hereby irrevocably authorized to endorse or assign the same. (g) No present or future holder of Superior Debt shall be prejudiced in its right to enforce the provisions of paragraph 3 of this Note by any act or failure to act on the part of the Company. (h) If there shall exist any Blockage Event, no Holder shall (other than in connection with a failure by the Company to make a scheduled principal payment) take or continue any action, or exercise or continue to exercise any rights, remedies or powers under the terms of this Note, or exercise or continue to exercise any other right or remedy at law or equity that such holder might otherwise possess, to collect any amount due and payable in respect of this Note, including, without limitation, the acceleration of this Note (and if this Note has already been accelerated, the holder will, immediately upon becoming aware of the occurrence of such Blockage Event, reverse such acceleration), the commencement of any foreclosure on any lien or security interest, the filing of any petition in bankruptcy or the taking advantage of any other insolvency law of any jurisdiction, unless and until the Superior Debt shall have been fully and finally paid in Acceptable Assets and satisfied, unless one or more of the holders of the Superior 4 Debt shall have commenced any action or taken any judicial action to enforce their rights as provided in their respective agreements relating to, or instruments evidencing, their Superior Debt in connection with an Insolvency Event (other than an action to dismiss a proceeding commenced against the Company). Notwithstanding the foregoing or any permissible action taken by the Holder, the Holder shall not be entitled to receive any payment in contravention of the other provisions of this paragraph 3, including, without limitation, subparagraphs 3(b), 3(c) and 3(f). Notwithstanding anything to the contrary in this subparagraph 3(h), the Holder may take such steps as are necessary to avoid a loss of its rights as a result of the running of any applicable statute of limitations or any other statute or rule which limits the time for filing claims, or making proofs of claims, or would otherwise cause a claim to be timebarred. (i) If any payment or distribution to which the Holder would otherwise have been entitled but for the provisions of this paragraph 3 shall have been applied, pursuant to the provisions of this paragraph 3, to the payment of the Superior Debt, then in such case and to such extent, the Holder (x) shall be entitled to receive from the holders of Superior Debt then outstanding any payments or distributions received by such Persons in excess of the amount sufficient to pay all of the Superior Debt in full in Acceptable Assets (whether or not then due), (y) following payment in full in Acceptable Assets of the Superior Debt, shall be entitled to receive any and all further payments or distributions applicable to the Superior Debt, and (z) following payment in full in Acceptable Assets of the Superior Debt, shall be subrogated to the rights of the holders of Superior Debt to receive distributions applicable to the Superior Debt, in each case until this Note shall have been paid in full. If the Holder has been subrogated to the rights of the holders of Superior Debt due to the operation of this subparagraph 3(i), the Company agrees to take all such actions as are reasonably requested by such Person in order to cause such Person to be able to obtain payments from the Company with respect to such subrogation rights as soon as possible. (j) The provisions of this paragraph 3 are solely for the purpose of defining the relative rights of the holders of Superior Debt, on the one hand, and the Holder on the other, against the Company and its assets, and nothing herein is intended to or shall impair, as between the Company and the Holder, the obligations of the Company which are absolute and unconditional, to pay to the Holder the principal and interest on this Note as and when they become due and payable in accordance with their terms, or is intended to or will affect the relative rights of the Holder and creditors of the Company other than the holders of Superior Debt, nor, except as provided in this paragraph 3, will anything herein or therein prevent the Holder from exercising all remedies 5 otherwise permitted by applicable law upon default under this Note, subject to the rights, if any, under this paragraph 3 of the holders of Superior Debt in respect of cash, property or securities of the Company received upon the exercise of any such remedy and subject to this paragraph 3. 4. EVENTS OF DEFAULT. (a) DEFINITION. For purposes of this Note, an "EVENT OF DEFAULT" shall be deemed to have occurred if: (i) the Company shall default in the payment of (A) principal of this Note on the date when due, whether at maturity, by acceleration or otherwise, or (B) the portion of the interest on this Note which is permitted to be paid pursuant to paragraph 3(c) above within 5 days of the date when due; (ii) an Insolvency Event occurs with respect to the Company; or (iii) a Change in Ownership occurs. A "CHANGE IN OWNERSHIP" will be deemed to have occurred if (a) Citicorp Venture Capital, Ltd. ("CVC") and its Affiliates cease to own at least one-third (1/3) of the Company's Common Stock, par value $.01 per share (the "COMMON STOCK"), on a fully diluted basis, if, at such time, the Common Stock is not registered with the Securities and Exchange Commission pursuant to Section 12 of the Securities Exchange Act of 1934 or (b) the Company sells all or substantially all of its assets to an Independent Third Party. For purposes of this paragraph (iii), "INDEPENDENT THIRD PARTY" means any Person who, immediately prior to the contemplated transaction, does not own in excess of 5% of the Common Stock on a fully-diluted basis (a "5% OWNER"), who is not controlling, controlled by or under common control with any such 5% Owner and who is not the spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other persons. In connection with any sale of a material amount of assets by the Company to an Independent Third Party which does not constitute a Change in Ownership hereunder, the Company shall use the net proceeds received in such transaction to repay the Superior Debt then outstanding and/or replace assets sold in such transaction as required by the Senior Loan Agreement. (b) CONSEQUENCES OF EVENTS OF DEFAULT. The provisions of this paragraph 4(b) are expressly subject to paragraph 3 hereof. (i) If an Event of Default of the type described in clause (i) or (iii) of subparagraph 4(a) has occurred and is 6 continuing, the Holder may declare all or any portion of the outstanding principal amount of this Note due and payable and demand immediate payment of all or any portion of the outstanding principal amount of this Note. If the Holder demands immediate payment of all or any portion of this Note, the Company shall immediately pay to such Holder the principal amount of this Note requested to be paid together with all accrued and unpaid interest thereon. (ii) If an Event of Default of the type described in clause (ii) of subparagraph 4(a) has occurred, all of the outstanding principal amount of this Note shall automatically be immediately due and payable without any notice or other action on the part of the Holder. (iii) Upon the occurrence of an Event of Default, the Holder shall also have any other rights which such Person may have pursuant to applicable law; provided that no Holder shall have the right to set-off or any similar right prior to payment in full in Acceptable Assets of the Superior Debt. 6. SUPERIOR DEBT. Without the prior written consent of the Majority Holders, the Company shall not permit the amount of Superior Debt to exceed an aggregate of $90 million. 7. RESTRICTED PAYMENTS. So long as any portion of the principal amount of this Note (together with all accrued interest thereon) remains outstanding, without the prior written consent of the Majority Holders, the Company shall not (a) declare or pay any cash dividends or make any cash distributions upon any of its Common Stock or (b) redeem, retire, purchase or otherwise acquire any of its equity securities for cash (other than redemptions, retirements, purchases or acquisitions of equity securities from employees in connection with the termination of their employment) (each such prohibited declaration, payment, distribution, purchase, redemption, acquisition or retirement being referred to as a "RESTRICTED PAYMENT"); provided that at such time as the Superior Debt is no longer outstanding, the Company may use up to 50% of Excess Cash Flow to make Restricted Payments. 8. FINANCIAL STATEMENTS. So long as any portion of the principal amount of this Note remains outstanding and the Seller is the holder of at least a majority of such outstanding principal amount, the Company will deliver to the Seller (a) as soon as available but in any event within 45 days after the end of each quarterly accounting period in each fiscal year, unaudited consolidated statements of income for such quarterly period, and consolidated balance sheets as of the end of such quarterly period, and all such statements will be prepared in accordance with United States generally accepted accounting principles, consistently 7 applied ("GAAP"), and (b) within 120 days after the end of each fiscal year, audited consolidated statements of income for such fiscal year and audited consolidated balance sheets as of the end of such fiscal year, all prepared in accordance with GAAP. 9. TRANSFER RESTRICTIONS. This Note has not been registered under the Securities Act of 1933, as amended or any comparable state securities law. If the Holder desires to transfer this Note, such Person first must furnish the Company with (i) a written opinion reasonably satisfactory to the Company in form and substance from counsel reasonably satisfactory to the Company to the effect that the Holder may transfer this Note as desired without registration under the Securities Act or any relevant state securities law and (ii) a written undertaking executed by the desired transferee reasonably satisfactory to the Company in form and substance agreeing to be bound by all of the provisions of this Note, including, without limitation, the subordination provisions set forth in paragraph 3 hereof. 10. AMENDMENT AND WAIVER. Except as otherwise expressly provided herein, the provisions of this Note may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of (i) the Majority Holders, and (ii) the holders of a majority of the outstanding principal amount of the Senior Notes. 11. CANCELLATION. After all principal and accrued interest at any time owed on this Note has been paid in full, this Note shall be surrendered to the Company for cancellation and shall not be reissued. 12. PLACE OF PAYMENT; NOTICES. Payments of principal and interest and any notice hereunder are to be delivered to the Holder at the following address: MDR Corporation Silverside Carr Executive Center 501 Silverside Road Wilmington, DE 19809 or to such other address as specified in a written notice delivered to the Company by Holder. Notices sent by the Company shall be deemed received when delivered personally or one (1) day after being sent by Federal Express or other overnight carrier or three (3) days after being sent by certified or registered mail. 13. GOVERNING LAWS. The validity, construction, and interpretation of this Note will be governed by the internal laws, and not the laws of conflicts, of the State of New York. 8 14. DEFINITIONS. Unless otherwise indicated herein, capitalized terms used in this Note shall have the meanings given such terms in the Purchase Agreement. "INDEBTEDNESS" shall mean, with respect to any Person at a particular time, without duplication, (a) indebtedness for borrowed money or for the deferred purchase price of property or services in respect of which such Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other current liabilities incurred in the ordinary course of business) or any commitment by which such Person assures a creditor against loss, including contingent reimbursement obligations with respect to letters of credit, (b) indebtedness guaranteed in any manner by such Person, including guarantees in the form of an agreement to repurchase or reimburse, (c) obligations under capitalized leases in respect of which obligations such Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person assures a creditor against loss and (d) any unsatisfied obligation of such Person for "withdrawal liability" to a "multiemployer plan" as such terms are defined under ERISA. "MAJORITY HOLDERS" means the holders of Notes representing a majority of the principal amount then outstanding under all of the Notes. "NOTES" means all of the Notes issued pursuant to the Purchase Agreement. "PERSON" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a governmental entity or any department or agency thereof. "SENIOR LENDER" means the Lender or Lenders as defined in the Senior Loan Agreement. "SENIOR LOAN AGREEMENT" means that certain Financing and Security Agreement, dated as of July 22, 1993, by and among The CIT Group/Business Credit, Inc., as Lender and as Agent for the Lender(s) named or to be named therein, the Company and certain Subsidiaries of the Company as Borrowers and certain Subsidiaries and affiliates of the Company as Guarantors, including all amendments, modifications, supplements, waivers, extensions and refinancings thereof. "SENIOR NOTE" means the promissory note(s) issued to the Senior Lender by the Company and certain of its Subsidiaries on July 22, 1993 pursuant to the Senior Loan Agreement in the original principal amount of up to $55 million, including all amendments, 9 modifications, supplements, waivers, extensions and refinancings thereof. "SUBSIDIARY" shall mean any Person which the Company has the direct or indirect right to control, direct or cause direction of management and policies of, whether through the ownership of voting securities, by contract or otherwise. "SUPERIOR DEBT" means the Indebtedness evidenced by the Senior Note and such additional Indebtedness incurred by the Company and its Subsidiaries from time to time and permitted under paragraph 5 above. "SUPERIOR DEBT AGREEMENT" means any agreement relating to, or instrument evidencing, any Superior Debt. IN WITNESS WHEREOF, the Company has executed and delivered this Note on the date first above written. THE TRIUMPH GROUP HOLDINGS, INC. By: /s/ Richard C. Ill ---------------------------- Its: President ---------------------------- 10 EX-10.7 9 EXHIBIT 10.7 STOCKHOLDERS AGREEMENT THIS AGREEMENT is made as of July 22 , 1993, by and among The Triumph Group Holdings, Inc., a Delaware corporation (the "Company"), Citicorp Venture Capital, Ltd., a New York corporation ("CVC"), World Equity Partners, L.P. (the "Fund"), and each of the executives listed on the signature pages hereto (the "Executives"). CVC, the Fund and the Executives are collectively referred to herein as the "Stockholders" and individually as a "Stockholder." Capitalized terms used herein are defined in paragraph 5 hereof. CVC will purchase shares of the Company's Class B Common Stock, par value $.001 per share (the "Common Stock), pursuant to a purchase agreement between CVC and the Company dated as of the date hereof (the "Purchase Agreement"). The Fund will receive warrants to purchase shares of the Company's Class A Common Stock, par value $.001 per share (the "Warrants"), which Warrants shall be subject to a Warrant Agreement dated as of the date hereof between the Fund and the Company. The Company and each Executive are parties to an Executive Stock Agreement, dated as of the date hereof (the "Executive Stock Agreements"), pursuant to which each Executive will purchase shares of the Common Stock. The Company and the Stockholders desire to enter into this Agreement for the purposes, among others, of (i) establishing the composition of the Company's Board of Directors (the "Board"), (ii) assuring continuity in the management and ownership of the Company and (iii) limiting the manner and terms by which the Executives' Common Stock may be transferred. The execution and delivery of this Agreement is a condition to CVC's purchase of the Common Stock pursuant to the Purchase Agreement. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows: 1. BOARD OF DIRECTORS. (a) From and after the Closing (as defined in the Purchase Agreement) and until the provisions of this paragraph 1 cease to be effective, each Stockholder shall vote all of his Stockholder Shares and any other voting securities of the Company over which such Stockholder has voting control and shall take all other necessary or desirable actions within his control (whether in his capacity as a stockholder, director, member of a board committee or officer of the Company or otherwise, and including, without limitation, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), and the Company shall take all necessary and desirable actions within its control (including, without limitation, calling special board and stockholder meetings), so that: (i) The authorized number of directors on the Board shall be established at five directors; (ii) the following persons shall be elected to the Board: (A) two representatives designated by CVC (the "CVC Directors"); (B) the Company's Chief Executive Officer; and (C) two directors designated by the holders of a majority of the voting power represented by the Stockholder Shares, one of which until the termination of his employment with the Company shall be John Bartholdson (the "Majority Holders Directors"). (iii) the removal from the Board (with or without cause) of any of the CVC Directors or the Majority Holders Directors shall be only at the written request of the person or persons originally entitled to designate such director pursuant to Section l(a)(ii) hereof (or in the case of John Bartholdson as one of the Majority Holders Directors, the termination of John Bartholdson's employment), provided that if any director elected pursuant to (ii)(B) above ceases to be Chief Executive Officer of the Company, he shall be removed as a director promptly after his employment ceases; and (iv) in the event that any representative designated hereunder for any reason ceases to serve as a member of the Board during his term of office, the resulting vacancy on the Board shall be filled by a representative designated by the person or persons originally entitled to designate such director pursuant to Section l(a)(ii) hereof, other than a vacancy resulting from the termination of the employment of the Company's Chief Executive Officer, which vacancy shall be filled by the Company's subsequent Chief Executive Officer. (b) The Company shall pay reasonable fees to each director (other than directors who are employees of the Company or any of its subsidiaries and directors who are employees of CVC) and shall pay the reasonable out-of-pocket expenses incurred by each director in connection with attending the meetings of the Board and 2 any committee thereof. So long as any CVC Director serves on the Board and for six years thereafter, the Company shall maintain directors and officers indemnity insurance coverage satisfactory to CVC. (c) The provisions of this paragraph 1 shall terminate automatically and be of no further force and effect upon the first to occur of (i) the tenth anniversary of the date hereof (unless extended by the parties hereto in accordance with Section 218 of the Delaware General Corporation Law) or (ii) a Qualified Public Offering. (d) If any party fails to designate a representative to fill a directorship pursuant to the terms of this paragraph 1, the election of a person to such directorship shall be accomplished in accordance with the Company's bylaws and applicable law. 2. IRREVOCABLE PROXY: CONFLICTING AGREEMENTS. (a) In order to secure each Executive's obligation to vote his Stockholder Shares and other voting securities of the Company in accordance with the provisions of paragraph 1 hereof, each Executive hereby appoints CVC as his true and lawful proxy and attorney-in-fact, with full power of substitution, to vote all of his Stockholder Shares and other voting securities of the Company for the election and/or removal of directors and all such other matters as expressly provided for in paragraph 1. CVC may exercise the irrevocable proxy granted to him hereunder at any time any Executive fails to comply with the provisions of this Agreement. The proxies and powers granted by each Executive pursuant to this paragraph 2 are coupled with an interest and are given to secure the performance of the Executive's obligations to CVC under this Agreement. Such proxies and powers will be irrevocable for the term set forth in paragraph 1(d) of this Agreement and will survive the death, incompetency and disability of such Executive and the holders of his Stockholder Shares. (b) Each Stockholder represents that he has not granted and is not a party to any proxy, voting trust or other agreement which is inconsistent with or conflicts with the provisions of this Agreement, and no holder of Stockholder Shares shall grant any proxy or become party to any voting trust or other agreement which is inconsistent with or conflicts with the provisions of this Agreement. 3. LEGEND. Each certificate evidencing Stockholder Shares and each certificate issued in exchange for or upon the transfer of any Stockholder Shares (if such shares remain Stockholder Shares as defined herein after such transfer) shall be 3 stamped or otherwise imprinted with a legend in substantially the following form: "The securities represented by this certificate are subject to a Stockholders Agreement dated as of July __, 1993, among the issuer of such securities (the "Company") and certain of the Company's stockholders. A copy of such Stockholders Agreement will be furnished without charge by the Company to the holder hereof upon written request." The Company shall imprint such legend on certificates evidencing Stockholder Shares outstanding prior to the date hereof. The legend set forth above shall be removed from the certificates evidencing any shares which cease to be Stockholder Shares in accordance with paragraph 6 hereof. 4. TRANSFER. Prior to transferring any Stockholder Shares (other than in a Public Sale) to any person or entity, the transferring Stockholder shall cause the prospective transferee to execute and deliver to the Company and the other Stockholders a counterpart of this Agreement. 5. DEFINITIONS. "INDEPENDENT THIRD PARTY" means any person who, immediately prior to the contemplated transaction, does not own in excess of 5% of the Common Stock on a fully-diluted basis (a "5% Owner"), who is not controlling, controlled by or under common control with any such 5% Owner and who is not the spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other persons. "PUBLIC SALE" means any sale of Stockholder Shares to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker pursuant to the provisions of Rule 144 adopted under the Securities Act. "QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public offering registered under the Securities Act of shares of the Company's Common Stock having an aggregate offering value of at least $40 million. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "STOCKHOLDER SHARES" means (i) any Common Stock purchased or otherwise acquired by any Stockholder, (ii) any Common Stock issued or issuable with respect to the Warrants, (iii) any equity securities issued or issuable directly or indirectly with respect 4 to the Common Stock referred to in clauses (i) and (ii) above by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, and (iv) any other shares of any class or series of capital stock of the Company held by a Stockholder. As to any particular shares constituting Stockholder Shares, such shares will cease to be Stockholder Shares when they have been (x) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them or (y) sold to the public through a broker, dealer or market maker pursuant to Rule 144 (or any similar provision then in force) under the Securities Act. 6. TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted Transfer of any Stockholder Shares in violation of any provision of this Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported transferee of such Stockholder Shares as the owner of such shares for any purpose. 7. AMENDMENT AND WAIVER. Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective against the Company or the Stockholders unless such modification, amendment or waiver is approved in writing by the Company or the holders of at least a majority of the Stockholder Shares, respectively. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. 8. SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 9. ENTIRE AGREEMENT. Except as otherwise expressly set forth herein, this document embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. 5 10. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the Company and its successors and assigns and the Stockholders and any subsequent holders of Stockholder Shares and the respective successors and assigns of each of them, so long as they hold Stockholder Shares. 11. COUNTERPARTS. This Agreement may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement. 12. REMEDIES. The Company, CVC, the Fund and the Executives shall be entitled to enforce their rights under this Agreement specifically to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that the Company, CVC, the Fund and any Executive may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement. 13. NOTICES. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, or mailed first class mail (postage prepaid) or sent by reputable overnight courier service (charges prepaid) to the Company at the address set forth below and to any other recipient at the address indicated on the signature pages hereto and to any subsequent holder of Stockholder Shares subject to this Agreement at such address as indicated by the Company's records, or at such address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will be deemed to have been given hereunder when delivered personally, three days after deposit in the U.S. mail and one day after deposit with a reputable overnight courier service. The Company's address is: The Triumph Group Holdings, Inc. c/o The Triumph Group Management Services, Inc. 825 Duportail Road Wayne, PA 19087 Attention: President 14. GOVERNING LAW. The corporate law of Delaware shall govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement shall be governed by the internal law, and not the law of conflicts, of Delaware. 6 15. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. * * * * * 7 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. THE TRIUMPH GROUP HOLDINGS, INC. By /s/ Richard C. Ill ------------------------------------------ Its President & CEO ----------------------------------------- CITICORP VENTURE CAPITAL, LTD. Address: By /s/ 399 Park Avenue ------------------------------------------ New York, NY 10043 Its V.P. Attention: Bruce C. Bruckman ----------------------------------------- Joseph M. Silvestri WORLD EQUITY PARTNERS, L.P. Address: By /s/ 399 Park Avenue ------------------------------------------ New York, NY 10043 Its Attention: Byron Knief ----------------------------------------- Address: /s/ Richard C. Ill 1356 Sugartown Road --------------------------------------------- Berwyn, PA 19312 Richard C. Ill Address: /s/ John R. Bartholson 168 Hollow Road --------------------------------------------- Malvern, PA 19355 John R. Bartholson Address: /s/ Robert E. Janis 94 Briarwood Circle --------------------------------------------- Oak Brook, IL 60521 Robert E. Janis Address: /s/ Richard R. Rockwood 32112 Canyon Ridge --------------------------------------------- Westlake Village, CA 91361 Richard R. Rockwood Address: /s/ Richard J. LeJeurne 10 Pinecrest --------------------------------------------- Wellington, KS 87152 Richard J. LeJeurrne 8 Address: 443 South Jackson /s/ Thomas J. Fournier Hinsdale, IL 60521 --------------------------------------------- Thomas J. Fournier Address: 906 Thistle Lane /s/ Paul T. Stimmler West Chester, PA 19382 --------------------------------------------- Paul T. Stimmler Address: 700 Dorchester Drive /s/ John W. Malec Bolingbrook, IL 60439 --------------------------------------------- John W. Malec Address: 111 Marquette Avenue S, Apt. 2601 /s/ Kenneth E. Templin Minneapolis, MN 55401 --------------------------------------------- Kenneth E. Templin Address: 1400 Mayview N.E. /s/ Frederick W. Kuebrich Albany, OR 97321 --------------------------------------------- Frederick W. Kuebrich Address: 5619 Blair Drive /s/ Frank R. Hondlik Highland Heights, OH 44143 --------------------------------------------- Frank R. Hondlik Address: 1500 N. Markdale, Villa #40 /s/ K. Neil Mottern Mesa, AZ 85201 --------------------------------------------- K. Neil Mottern Address: 24234 West Lema Drive /s/ Steven W. Williamson Valencia, CA 91356 --------------------------------------------- Steven W. Williamson Address: 603 Brademas Court /s/ James E. Hunt Wood Ranch, CA 93065 --------------------------------------------- James E. Hunt Address: 1027 St. Paul Street /s/ Donald E. Kendall Shelbyville, IN 46176 --------------------------------------------- Donald E. Kendall 9 Address: 3159 E Meadow Dr. /s/ George J. Bakker Shelbyville, IN 46176 --------------------------------------------- George J. Bakker Address: 38575 Carriage Lane /s/ John P. Lawson, Jr. Willoughby, OH 44094 --------------------------------------------- John P. Lawson, Jr. Address: 216 N. Park Drive /s/ M. David Brummet Hutchinson, KS 67502 --------------------------------------------- M. David Brummet Address: 1148 Fielding Drive /s/ Kevin E. Kindig West Chester, PA 19382 --------------------------------------------- Kevin E. Kindig Address: 1118 Whirloway Avenue /s/ Richard W. Carney, Jr. Naperville, IL 60540 --------------------------------------------- Richard W. Carney, Jr. 10 EX-10.8 10 EXHIBIT 10.8 REGISTRATION AGREEMENT THIS AGREEMENT is made as of July 22,1993, among The Triumph Group Holdings, Inc., a Delaware corporation (the "Company"), Citicorp Venture Capital, Ltd. a New York corporation ("CVC"), World Equity Partners, L.P. (the "Fund"), and the executives of the Company and its subsidiaries listed on the signature pages hereto (the "Executives"). The Company and each of the Executives are parties to Executive Stock Agreements, dated as of the date hereof (the "Executive Stock Agreements"), pursuant to which each of the Executives will purchase shares of the Company's Class A Common Stock, par value $.001 per share (the "Class A Common"). The Company and CVC are parties to a Purchase Agreement of even date herewith (the "Purchase Agreement"), pursuant to which CVC will purchase shares of the Company's Class B Common Stock par value $.001 per share (the "Class B Common"). The Fund will receive warrants to purchase shares of the Class A Common (the "Warrants"), which Warrants will be subject to a Warrant Agreement dated as of the date hereof between the Fund and the Company. In order to induce CVC and the Fund (the "Investors") to enter into the Purchase Agreement and the Warrant Agreement, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the Closing under the Purchase Agreement. Unless otherwise provided in this Agreement, capitalized terms used herein shall have the meanings set forth in paragraph 8 hereof. The parties hereto agree as follows: 1. DEMAND REGISTRATIONS. (a) REQUESTS FOR REGISTRATION. At any time the holders of at least a majority of the CVC Registrable Securities or, after the later to occur of (i) the fifth anniversary of the date hereof or (ii) a Qualified Public Offering, the holders of a majority of Fund Registrable Securities may request registration under the Securities Act of all or part of their Registrable Securities on Form S-1 or any similar long-form registration ("Long-Form Registrations"), and the holders of at least a majority of the CVC Registrable Securities or the holders of a majority of Fund Registrable Securities may request registration under the Securities Act of all or part of their Registrable Securities on Form S-2 or S-3 or any similar short-form registration ("Short-Form Registrations"), if available. Each request for a Demand Registration shall specify the approximate number of Registrable Securities requested to be registered and the anticipated per share price range for such offering. Within ten days after receipt of any such request, the Company will give written notice of such requested registration to all other holders of CVC Registrable Securities or Fund Registrable Securities, as applicable, and will include in such registration all CVC Registrable Securities or Fund Registrable Securities, as applicable, with respect to which the Company has received written requests for inclusion therein within 15 days after the receipt of the Company's notice. All registrations requested pursuant to this paragraph 1(a) are referred to herein as "Demand Registrations". (b) LONG-FORM REGISTRATIONS. Subject to paragraph 1(a) hereof, the holders of CVC Registrable Securities will be entitled to request (i) two Long-Form Registrations in which the Company will pay all Registration Expenses ("Company-paid Long-Form Registrations") and (ii) an unlimited number of Long-Form Registrations in which the holders of CVC Registrable Securities will pay their share of the Registration Expenses as set forth in paragraph 5 hereof. Subject to paragraph 1(a) hereof, the holders of Fund Registrable Securities will be entitled to request (i) one Company-paid Long-Form Registration and (ii) no Long-Form Registrations in which the holders of Fund Registrable Securities will pay their share of the Registration Expenses as set forth in paragraph 5 hereof. A registration will not count as one of the permitted Company-paid Long-Form Registrations until it has become effective (unless such Long-Form Registration has not become effective due solely to the fault of the holders requesting such registration) and unless the holders of Registrable Securities are able to register and sell at least 90% of the Registrable Securities requested to be included in such registration; provided that in any event the Company will pay all Registration Expenses in connection with any registration initiated as a Company-paid Long-Form Registration whether or not it has become effective. All Long-Form Registrations shall be underwritten registrations. (c) SHORT-FORM REGISTRATIONS. In addition to the Long-Form Registrations provided pursuant to paragraph 1(b), the holders of a majority of CVC Registrable Securities and the holders of a majority of Fund Registrable Securities will be entitled to request an unlimited number of Short-Form Registrations in which the Company will pay all Registration Expenses. Demand Registrations will be Short-Form Registrations whenever the Company is permitted to use any applicable short form. After the Company has become subject to the reporting requirements of the Exchange Act, the Company will use its best efforts to make Short-Form Registrations available for the sale of Registrable Securities. (d) PRIORITY ON DEMAND REGISTRATIONS. The Company will not include in any Demand Registration any securities which 2 are not Registrable Securities without the prior written consent of the holders of at least a majority of the Registrable Securities initially requesting such registration. If a Demand Registration is an underwritten offering and the managing underwriters advise the Company in writing that in their opinion the number of Registrable Securities and, if permitted hereunder, other securities requested to be included in such offering exceeds the number of Registrable Securities and other securities, if any, which can be sold in an orderly manner in such offering within a price range acceptable to the holders of a majority of the Registrable Securities initially requesting registration, the Company will include in such registration prior to the inclusion of any securities which are not Registrable Securities the number of Registrable Securities requested to be included which in the opinion of such underwriters can be sold in an orderly manner within the price range of such offering, pro rata among the respective holders thereof on the basis of the amount of Registrable Securities owned by each such holder. Any Persons other than holders of Registrable Securities who participate in Demand Registrations which are not at the Company's expense must pay their share of the Registration Expenses as provided in paragraph 5 hereof. (e) RESTRICTIONS ON DEMAND REGISTRATIONS. The Company will not be obligated to effect any Demand Registration within six months after the effective date of a previous Demand Registration. (f) SELECTION OF UNDERWRITERS. The holders of a majority of the Registrable Securities initially requesting such registration will have the right to select the investment banker(s) and manager(s) to administer the offering. (g) OTHER REGISTRATION RIGHTS. Except as provided in this Agreement, the Company will not grant to any Persons the right to request the Company to register any equity securities of the Company, or any securities convertible or exchangeable into or exercisable for such securities, without the prior written consent of the holders of at least a majority of the CVC Registrable Securities and a majority of the Fund Registrable Securities. 2. PIGGYBACK REGISTRATIONS. (a) RIGHT TO PIGGYBACK. Whenever the Company proposes to register any of its securities under the Securities Act (other than pursuant to a Demand Registration) and the registration form to be used may be used for the registration of Registrable Securities (a "Piggyback Registration"), the Company will give prompt written notice to all holders of Registrable Securities of its intention to effect such a registration and will include in 3 such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after the receipt of the Company's notice. (b) PIGGYBACK EXPENSES. The Registration Expenses of the holders of Registrable Securities will be paid by the Company in all Piggyback Registrations. (c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration is an underwritten primary registration on behalf of the Company, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in an orderly manner in such offering within a price range acceptable to the Company, the Company will include in such registration (i) first, the securities the Company proposes to sell, (ii) second, the Registrable Securities requested to be included in such registration, pro rata among the holders of such Registrable Securities on the basis of the number of shares owned by each such holder, and (iii) third, other securities requested to be included in such registration. (d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is an underwritten secondary registration on behalf of holders of the Company's securities, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in an orderly manner in such offering within a price range acceptable to the holders initially requesting such registration, the Company will include in such registration (i) first, the securities requested to be included therein by the holders requesting such registration, (ii) second, the Registrable Securities requested to be included in such registration, pro rata among the holders of such Registrable Securities on the basis of the number of shares owned by each such holder, and (iii) third, other securities requested to be included in such registration. (e) SELECTION OF UNDERWRITERS. If any Piggyback Registration is an underwritten offering, the selection of investment banker(s) and manager(s) for the offering must be approved by the holders of a majority of the Registrable Securities included in such Piggyback Registration. Such approval will not be unreasonably withheld. (f) OTHER REGISTRATIONS. If the Company has previously filed a registration statement with respect to Registrable Securities pursuant to paragraph 1 or pursuant to this paragraph 2, and if such previous registration has not been withdrawn or abandoned, the Company will not file or cause to be effected any other registration of any of its equity securities 4 or securities convertible or exchangeable into or exercisable for its equity securities under the Securities Act (except on Form S-8 or any successor form), whether on its own behalf or at the request of any holder or holders of such securities, until a period of at least six months has elapsed from the effective date of such previous registration. 3. HOLDBACK AGREEMENTS. (a) Each holder of Registrable Securities agrees not to effect any public sale or distribution (including sales pursuant to Rule 144) of equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and the 180-day period beginning on the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration in which Registrable Securities are included (except as part of such underwritten registration), unless the underwriters managing the registered public offering otherwise agree. (b) The Company agrees (i) not to effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and during the 180-day period beginning on the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration (except as part of such underwritten registration or pursuant to registrations on Form S-8 or any successor form), unless the underwriters managing the registered public offering otherwise agree, and (ii) to cause each holder of its Common Stock, or any securities convertible into or exchangeable or exercisable for Common Stock, purchased from the Company at any time after the date of this Agreement (other than in a registered public offering) to agree not to effect any public sale or distribution (including sales pursuant to Rule 144) of any such securities during such period (except as part of such underwritten registration, if otherwise permitted), unless the underwriters managing the registered public offering otherwise agree. 4. REGISTRATION PROCEDURES. Whenever the holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to this Agreement, the Company will use its best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof and pursuant thereto the Company will as expeditiously as possible: (a) prepare and file with the Securities and Exchange Commission a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective (provided that before 5 filing a registration statement or prospectus or any amendments or supplements thereto, the Company will furnish to the counsel selected by the holders of a majority of the Registrable Securities covered by such registration statement copies of all such documents proposed to be filed; (b) prepare and file with the Securities and Exchange Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than six months and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement; (c) furnish to each seller of Registrable Securities such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller; (d) use its best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller (provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction); (e) notify each seller of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such seller, the Company will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading; 6 (f) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed and, if not so listed, to be listed on the NASD automated quotation system and, if listed on the NASD automated quotation system, use its best efforts to secure designation of all such Registrable Securities covered by such registration statement as a NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or, failing that, to secure NASDAQ authorization for such Registrable Securities and, without limiting the generality of the foregoing, to arrange for at least two market makers to register as such with respect to such Registrable Securities with the NASD; (g) provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement; (h) enter into such customary agreements (including underwriting agreements in customary form) and take all such other actions as the holders of a majority of the Registrable Securities being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (including, without limitation, effecting a stock split or a combination of shares); (i) make available for inspection by any seller of Registrable Securities, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement; (j) otherwise use its best efforts to comply with all applicable rules and regulations of the Securities and Exchange Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Company's first full calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and (k) permit any holder of Registrable Securities which holder, in its sole and exclusive judgment, might be deemed to be an underwriter or a controlling person of the Company, to participate in the preparation of such registration or comparable 7 statement and to require the insertion therein of material, furnished to the Company in writing, which in the reasonable judgment of such holder and its counsel should be included; and (l) in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any common stock included in such registration statement for sale in any jurisdiction, the Company will use its reasonable best efforts promptly to obtain the withdrawal of such order. (m) use its best efforts to cause such Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the sellers thereof to consummate the disposition of such Registrable Securities; (n) obtain a cold comfort letter from the Company's independent public accountants in customary form and covering such matters of the type customarily covered by cold comfort letters as the holders of a majority of the Registrable Securities being sold reasonably request (provided that such Registrable Securities constitute at least 10% of the securities covered by such registration statement). If any such registration or comparable statement refers to any holder by name or otherwise as the holder of any securities of the Company and if, in its sole and exclusive judgment, such holder is or might be deemed to be a controlling person of the Company, such holder shall have the right to require (i) the insertion therein of language, in form and substance satisfactory to such holder and presented to the Company in writing, to the effect that the holding by such holder of such securities is not to be construed as a recommendation by such holder of the investment quality of the Company's securities covered thereby and that such holding does not imply that such holder will assist in meeting any future financial requirements of the Company, or (ii) in the event that such reference to such holder by name or otherwise is not required by the Securities Act or any similar Federal statute then in force, the deletion of the reference to such holder; provided that with respect to this clause (ii) such holder shall furnish to the Company an opinion of counsel to such effect, which opinion and counsel shall be reasonably satisfactory to the Company. 5. REGISTRATION EXPENSES. (a) All expenses incident to the Company's performance of or compliance with this Agreement, including without limitation all registration and filing fees, fees and expenses of 8 compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, and fees and disbursements of counsel for the Company and all independent certified public accountants, underwriters (excluding discounts and commissions) and other Persons retained by the Company (all such expenses being herein called "Registration Expenses"), will be borne as provided in this Agreement, except that the Company will, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed or on the NASDAQ National Market System. (b) In connection with each Demand Registration and each Piggyback Registration, the Company will reimburse the holders of Registrable Securities covered by such registration for the reasonable fees and disbursements of one counsel chosen by the holders of a majority of the Registrable Securities initially requesting such registration. (c) To the extent Registration Expenses are not required to be paid by the Company, each holder of securities included in any registration hereunder will pay those Registration Expenses allocable to the registration of such holder's securities so included, and any Registration Expenses not so allocable will be borne by all sellers of securities included in such registration in proportion to the aggregate selling price of the securities to be so registered. 6. INDEMNIFICATION. (a) The Company agrees to indemnify, to the extent permitted by law, each holder of Registrable Securities, its officers, directors, partners and each Person who controls such holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses caused by any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such holder expressly for use therein or by such holder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Company has furnished such holder with a sufficient number of copies of the same. In connection with an underwritten offering, the Company will 9 indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the holders of Registrable Securities. (b) In connection with any registration statement in which a holder of Registrable Securities is participating, each such holder will furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, will indemnify the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder; provided that the obligation to indemnify will be individual to each holder and will be limited to the net amount of proceeds received by such holder from the sale of Registrable Securities pursuant to such registration statement. (c) Any Person entitled to indemnification hereunder will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. (d) The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or 10 any officer, director or controlling Person of such indemnified party and will survive the transfer of securities. The Company also agrees to make such provisions as are reasonably requested by any indemnified party for contribution to such party in the event the Company's indemnification is unavailable for any reason. 7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may participate in any registration hereunder which is underwritten unless such Person (a) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements; provided that no holder of Registrable Securities included in any underwritten registration shall be required to make any representations or warranties to the Company or the underwriters other than representations and warranties regarding such holder and such holder's intended method of distribution. 8. DEFINITIONS. "Common Stock" means the Company's Class A Common and Class B Common and any equity securities issued in exchange therefor or replacement thereof. "CVC Registrable Securities" means (i) any Common Stock issued pursuant to the Purchase Agreement, (ii) any equity security issued or issuable with respect to the securities referred to in clause (i) by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, and (iii) any shares of Common Stock held by Persons holding securities described in clause (i) or (ii), inclusive, above. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fund Registrable Securities" means (i) any Common Stock issued or issuable pursuant to the Warrants issued pursuant to the Warrant Agreement, (ii) any equity security issued or issued or issuable with respect to the securities referred to in clause (i) by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, and (iii) any shares of Common Stock held by Persons holding securities described in clause (i) or (ii), inclusive, above. 11 "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "Qualified Public Offering" means the sale in an underwritten public offering registered under the Securities Act of shares of the Company's Common Stock having an aggregate offering value of at least $40 million. "Registrable Securities" means (i) any Common Stock issued pursuant to the Purchase Agreement or the Executive Stock Agreements, (ii) any Common Stock issued or issuable upon the exercise of the Warrants issued pursuant to the Purchase Agreement, (iii) any equity security issued or issuable with respect to the securities referred to in clauses (i) and (ii) by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, and (iv) any other shares of Common Stock held by Persons holding securities described in clauses (i) to (iii), inclusive, above. As to any particular Registrable Securities, such securities will cease to be Registrable Securities when they have been distributed to the public pursuant to an offering registered under the Securities Act or sold to the public through a broker, dealer or market maker in compliance with Rule 144 under the Securities Act (or any similar rule then in force). For purposes of this Agreement, a Person will be deemed to be a holder of Registrable Securities whenever such Person has the right to acquire directly or indirectly such Registrable Securities (upon conversion or exercise in connection with a transfer of securities or otherwise, but disregarding any restrictions or limitations upon the exercise of such right), whether or not such acquisition has actually been effected. "Securities Act" means the Securities Act of 1933, as amended. Unless otherwise stated, other capitalized terms contained herein have the meanings set forth in the Purchase Agreement. 9. MISCELLANEOUS. (a) SELECTION OF INVESTMENT BANKERS. Except as otherwise provided herein in connection with Demand Registrations, the selection of investment banker(s) and manager(s) for any public offering or private sale by the Company of its securities must be approved by the holders of a majority of the Registrable Securities, which approval will not be unreasonably withheld. 12 (b) NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the holders of Registrable Securities in this Agreement. (c) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company will not take any action, or permit any change to occur, with respect to its securities which would materially and adversely affect the ability of the holders of Registrable Securities to include such Registrable Securities in a registration undertaken pursuant to this Agreement or which would materially and adversely affect the marketability of such Registrable Securities in any such registration (including, without limitation, effecting a stock split or a combination of shares). (d) REMEDIES. Any Person having rights under any provision of this Agreement will be entitled to enforce such rights specifically to recover damages caused by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or other security) for specific performance and for other injunctive relief in order to enforce or prevent violation of the provisions of this Agreement. (e) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the provisions of this Agreement may be amended or waived only upon the prior written consent of the Company and holders of at least a majority of the CVC Registrable Securities and a majority of the Fund Registrable Securities. (f) SUCCESSORS AND ASSIGNS. All covenants and agreements in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. In addition, whether or not any express assignment has been made, the provisions of this Agreement which are for the benefit of purchasers or holders of Registrable Securities are also for the benefit of, and enforceable by, any subsequent holder of Registrable Securities. (g) SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the 13 extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. (h) COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. (i) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. (j) GOVERNING LAW. The corporate law of Delaware will govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement and the exhibits and schedules hereto will be governed by the internal law, and not the law of conflicts, of Delaware. (k) NOTICES. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the recipient, sent to the recipient by reputable express courier service (charges prepaid) or mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to each Investor at the address indicated on the signature pages hereto and to the Company at the address indicated below: The Triumph Group Holdings, Inc. c/o The Triumph Group Management Services, Inc. 825 Duportail Road Wayne, PA 19087 Attention: President or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. * * * * * 14 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. THE TRIUMPH GROUP HOLDINGS, INC. By /s/ Richard C. Ill ----------------------------------------- Its President & CEO ----------------------------------------- CITICORP VENTURE CAPITAL, LTD. Address: 399 Park Avenue By /s/ New York, NY 10043 ---------------------------------------- Attention: Bruce C. Bruckman Its VP Joseph M. Silvestri ---------------------------------------- WORLD EQUITY PARTNERS, L.P. Address: 399 Park Avenue By /s/ New York, NY 10043 ----------------------------------------- Attention: Byron Knief It VP ----------------------------------------- Address: 1356 Sugartown Road /s/ Richard C. Ill Berwyn, PA 19312 -------------------------------------------- Richard C. Ill Address: 168 Hollow Road /s/ John R. Bartholson Malvern, PA 19355 -------------------------------------------- John R. Bartholson Address: 94 Briarwood Circle /s/ Robert E. Janis Oak Brook, IL 60521 -------------------------------------------- Robert E. Janis Address: 32112 Canyon Ridge /s/ Richard R. Rockwood Westlake Village, CA 91361 -------------------------------------------- Richard R. Rockwood Address: 10 Pinecrest /s/ Richard J. Lejeurrne Wellington, KS 87152 --------------------------------------------- Richard J. Lejeurrne 15 Address: 443 South Jackson /s/ Thomas J. Fournier Hinsdale, IL 60521 -------------------------------------------- Thomas J. Fournier Address: 906 Thistle Lane /s/ Paul T. Stimmler West Chester, PA 19382 --------------------------------------------- Paul T. Stimmler Address: 700 Dorchester Drive /s/ John W. Malec Bolingbrook, IL 60439 --------------------------------------------- John W. Malec Address: 111 Marquette Avenue S, Apt. 2601 /s/ Kenneth E. Templin Minneapolis, MN 55401 --------------------------------------------- Kenneth E. Templin Address: 1400 Mayview N.E. /s/ Frederick W. Kuebrich Albany, OR 97321 --------------------------------------------- Frederick W. Kuebrich Address: 5619 Blair Drive /s/ Frank R. Hondlik Highland Heights, OH 44143 --------------------------------------------- Frank R. Hondlik Address: 1500 N. Markdale, Villa #40 --------------------------------------------- Mesa, AZ 85201 K. Neil Mottern Address: 24234 West Lema Drive /s/ Steven W. Williamson Valencia, CA 91356 -------------------------------------------- Steven W. Williamson Address: 603 Brademas Court /s/ James E. Hunt Wood Ranch, CA 93065 --------------------------------------------- James E. Hunt Address: 1027 St. Paul Street /s/ Donald E. Kendall Shelbyville, IN 46176 --------------------------------------------- Donald E. Kendall 16 Address: 3159 E. Meadow Drive /s/ George J. Bakker Shelbyville, IN 46176 --------------------------------------------- George J. Bakker Address: 38575 Carriage Lane /s/ John P. Lawson, Jr. Willoughby, OH 44094 --------------------------------------------- John P. Lawson, Jr. Address: 216 N. Park Drive /s/ M. David Brummet Hutchinson, KS 67502 --------------------------------------------- M. David Brummet Address: 1148 Fielding Drive /s/ Kevin E. Kindig West Chester, PA 19382 --------------------------------------------- Kevin E. Kindig Address: 1118 Whirloway Avenue /s/ Richard W. Carney, Jr. Naperville, IL 60540 --------------------------------------------- Richard W. Carney, Jr. 17 EX-10.9 11 EXHIBIT 10.9 Exhibit 10.9 THIS WARRANT WAS ORIGINALLY ISSUED ON JULY 22, 1993 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. THIS WARRANT IS ALSO SUBJECT TO A WARRANT AGREEMENT DATED JULY 22, 1993 AMONG THE TRIUMPH GROUP HOLDINGS, INC., CITICORP VENTURE CAPITAL, LTD. AND THE ORIGINAL HOLDER HEREOF. A COPY OF THE WARRANT AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST. STOCK PURCHASE WARRANT Date of Issuance: July 22, 1993 Certificate No. W-1 For value received, THE TRIUMPH GROUP HOLDINGS, INC., a Delaware corporation (the "COMPANY"), hereby grants to WORLD EQUITY PARTNERS, L.P. ("WEP"), or its transferees and assigns, the right to purchase from the Company a total of 10,000 Warrant Shares (as defined herein) at a price per share of $.01 (the "INITIAL EXERCISE PRICE"). The exercise price and number of Warrant Shares (and the amount and kind of other securities) for which this Warrant is exercisable shall be subject to adjustment as provided herein. Certain capitalized terms used herein are defined in Section 5 hereof. This Warrant is subject to the following provisions: SECTION 1. EXERCISE OF WARRANT. 1A. EXERCISE PERIOD. The purchase rights represented by this Warrant may be exercised, in whole or in part, at any time and from time to time after the date hereof to and including 5:00 p.m., New York City time, on July 31, 2003 or, if such day is not a business day, on the next preceding business day (the "EXERCISE PERIOD"). The Company shall give the Registered Holder written notice of the expiration of the Exercise Period at least 60 days but not more than 90 days prior to the expiration of the Exercise Period. 1B. EXERCISE PROCEDURE. (i) This Warrant shall be deemed to have been exercised when all of the following items have been delivered to the Company (the "EXERCISE TIME"): (a) a completed Exercise Agreement, as described in Section 1C below, executed by the Person exercising all or part of the purchase rights represented by this Warrant (the "PURCHASER"); (b) this Warrant; (c) if the Purchaser is not the Registered Holder, an Assignment or Assignments in the form set forth in EXHIBIT II hereto evidencing the assignment of this Warrant to the Purchaser; and (d) either (x) a check payable to the Company in an amount equal to the product of the Exercise Price (as such term is defined in Section 2) multiplied by the number of Warrant Shares being purchased upon such exercise (the "AGGREGATE EXERCISE PRICE"), (y) the surrender to the Company of securities of the Company having a value equal to the Aggregate Exercise Price of the Warrant Shares being purchased upon such exercise (which value in the case of debt securities shall be the principal amount thereof and in the case of shares of Common Stock shall be the Fair Market Value thereof), or (z) the delivery of a notice to the Company that the Purchaser is exercising the Warrant by authorizing the Company to reduce the number of Warrant Shares subject to the Warrant by the number of shares having an aggregate Fair Market Value equal to the Aggregate Exercise Price. (ii) Certificates for Warrant Shares purchased upon exercise of this Warrant shall be delivered by the Company to the Purchaser within five days after the date of the Exercise Time together with any cash payable in lieu of a fraction of a share pursuant to Section 14 hereof. Unless this Warrant has expired or all of the purchase rights represented hereby have been exercised, the Company shall prepare a new Warrant, substantially identical hereto, representing the rights formerly represented by this Warrant which have not expired or been exercised and shall, within such five-day period, deliver such new Warrant to the Person designated for delivery in the Exercise Agreement. (iii) The Warrant Shares issuable upon the exercise of this Warrant shall be deemed to have been issued to the Purchaser at the Exercise Time, and the Purchaser shall be deemed for all purposes to have become the record holder of such Warrant Shares at the Exercise Time. (iv) The issuance of certificates for Warrant Shares upon exercise of this Warrant shall be made without charge to the Registered Holder or the Purchaser for any issuance tax in respect thereof or other cost incurred by the Company in connection with such exercise and the related issuance of Warrant Shares. (v) The Company shall not close its books against the transfer of this Warrant or of any Warrant Shares issued or issuable upon the exercise of this Warrant in any manner which interferes with the timely exercise of this Warrant. The Company 2 shall from time to time take all such action as may be necessary to assure that the par value per share of the unissued Warrant Shares acquirable upon exercise of this Warrant is at all times equal to or less than the Exercise Price then in effect. In the event that the Company fails to comply with its obligations set forth in the foregoing sentence, the Purchaser may (but shall not be obligated to) purchase Warrant Shares hereunder at par value, and the Company shall be obligated to reimburse the Purchaser for the aggregate amount of consideration paid in connection with such exercise in excess of the Exercise Price then in effect. (vi) The Company shall assist and cooperate with the Registered Holder or any Purchaser required to make any governmental filings or obtain any governmental approvals prior to or in connection with any exercise of this Warrant. (vii) Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a public offering or a sale of the Company (pursuant to a merger, sale of stock or otherwise), such exercise may at the election of the holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until the consummation of such transaction. (viii) The Company shall at all times reserve and keep available out of its authorized but unissued Warrant Shares solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant. All Warrant Shares which are so issuable shall, when issued and upon the payment of the applicable Exercise Price, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares may be so issued without violation by the Company of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares may be listed (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance). The Company will use its best efforts to cause the Warrant Shares, immediately upon such exercise, to be listed on any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares are listed at the time of such exercise. (ix) If the Warrant Shares issuable by reason of exercise of this Warrant are convertible into or exchangeable for any other stock or securities of the Company, the Company shall, at the Purchaser's option and upon surrender of this Warrant by such Purchaser as provided above together with any notice, statement or payment required to effect such conversion or exchange of Warrant 3 Shares, deliver to such Purchaser (or as otherwise specified by such Purchaser) a certificate or certificates representing the stock or securities into which the Warrant Shares issuable by reason of such conversion are convertible or exchangeable, registered in such name or names and in such denomination or denominations as such Purchaser has specified. 1C. EXERCISE AGREEMENT Upon any exercise of this Warrant, the Purchaser shall deliver to the Company an Exercise Agreement in substantially the form set forth in EXHIBIT I hereto, except that if the Warrant Shares are not to be issued in the name of the Registered Holder, the Exercise Agreement shall also state the name of the Person to whom the certificates for the Warrant Shares are to be issued, and if the number of Warrant Shares to be issued does not include all of the Warrant Shares purchasable hereunder, it shall also state the name of the Person to whom a new Warrant for the unexercised portion of the rights hereunder is to be issued. SECTION 2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. In order to prevent dilution of the rights granted under this Warrant, the Initial Exercise Price shall be subject to adjustment from time to time as provided in this Section 2 (as so adjusted, the "EXERCISE PRICE"), and the number of Warrant Shares obtainable upon exercise of this Warrant shall be subject to adjustment from time to time, each as provided in this Section 2. 2A. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON ISSUANCE OF COMMON STOCK. If and whenever, on or after the date hereof, the Company issues or sells, or in accordance with Section 2B is deemed to have issued or sold, other than pursuant to a Permitted Issuance, any shares of Common Stock for a consideration per share less than the Fair Market Value per share of the Common Stock determined as of the date of such issuance or sale, then immediately upon such issuance or sale the Exercise Price shall be reduced to equal the amount determined by multiplying the Exercise Price in effect immediately prior to such issuance or sale by a fraction, the numerator of which will be the sum of (1) the number of shares of Common Stock Deemed Outstanding immediately prior to such issuance or sale multiplied by the Fair Market Value per share of the Common Stock determined as of the date of such issuance or sale, plus (2) the consideration, if any, received by the Company upon such issuance or sale, and the denominator of which will be the product derived by multiplying such Fair Market Value per share of the Common Stock by the number of shares of Common Stock Deemed Outstanding immediately after such issuance or sale. Upon each such adjustment of the Exercise Price hereunder, the number of Warrant Shares acquirable upon exercise of this Warrant shall be adjusted to equal the number of shares determined by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares acquirable upon exercise of this Warrant immediately prior to such adjustment 4 and dividing the product thereof by the Exercise Price resulting from such adjustment. 2B. EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of determining the adjusted Exercise Price under Section 2A, the following shall be applicable: (i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner grants any rights or options (other than Purchase Rights covered by Section 4 hereof or a Permitted Issuance) to subscribe for or to purchase Common Stock or any stock or other securities convertible into or exchangeable for Common Stock (including without limitation convertible common stock) (such rights or options being herein called "OPTIONS" and such convertible or exchangeable stock or securities being herein called "CONVERTIBLE SECURITIES") and the price per share for which Common Stock is issuable upon the exercise of such Options or upon conversion or exchange of such Convertible Securities is less than the Fair Market Value per share of the Common Stock then in effect, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Options shall be deemed to be outstanding and to have been issued and sold by the Company for such price per share. For purposes of this paragraph, the "price per share for which Common Stock is issuable upon exercise of such Options or upon conversion or exchange of such Convertible Securities" is determined by dividing (A) the total amount, if any, received or receivable by the Company as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon the issuance or sale of such Convertible Securities and the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options. No further adjustment of the Exercise Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion or exchange of such convertible Securities. (ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any manner issues or sells any Convertible Securities and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Fair Market Value per share of the Common Stock then in effect, then the maximum number of shares of Common Stock issuable upon conversion or exchange of such Convertible Securities shall be deemed to be outstanding and 5 to have been issued and sold by the Company for such price per share. For the purposes of this paragraph, the "price per share for which Common Stock is issuable upon such conversion or exchange" is determined by dividing (A) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment of the Exercise Price shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustments of the Exercise Price have been or are to be made pursuant to other provisions of this Section 2B, no further adjustment of the Exercise Price shall be made by reason of such issue or sale. (iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If either the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock shall change at any time, the Exercise Price in effect at the time of such change shall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold and the number of Warrant Shares shall be correspondingly readjusted. (iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE SECURITIES. Upon the expiration of any Option or the termination of any right to convert or exchange any Convertible Securities, in either case without the exercise of such Option or right, the Exercise Price then in effect and the number of Warrant Shares acquirable hereunder shall be adjusted to the Exercise Price and the number of shares which would have been in effect at the time of such expiration or termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination, never been issued. (v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor shall be deemed to be the net amount received by the Company therefor. In case any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be the fair value of such consideration, 6 except where such consideration consists of marketable securities, in which case the amount of consideration received by the Company shall be the market price thereof as of the date of receipt. In case any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger or other business combination in which the Company is the surviving entity, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or marketable securities shall be determined jointly by the Company and the Required Holders. If such parties are unable to reach agreement within a reasonable period of time, such fair value shall be determined by an appraiser jointly selected by the Company and the Required Holders, whose determination shall be final and binding on the Company and all holders of Warrants. The fees and expenses of such appraiser shall be paid by the Company. (vi) INTEGRATED TRANSACTIONS. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options shall be deemed to have been issued for no consideration. (vii) TREASURY SHARES. The number of shares of Common Stock outstanding at any given time does not include shares owned or held by or for the account of the Company or any subsidiary of the Company and the disposition of any shares so owned or held shall be considered an issue or sale of Common Stock. (viii) RECORD DATE. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. 2C. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) the Common Stock into a greater number of shares or pays a dividend or makes a distribution to holders of the Common Stock in the form of shares of Common Stock, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of Warrant Shares obtainable upon exercise of this Warrant shall be proportionately 7 increased. If the Company at any time combines (by reverse stock split or otherwise) the Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares obtainable upon exercise of this Warrant shall be proportionately decreased. 2D. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company's assets or other transaction which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock is referred to herein as an "ORGANIC CHANGE". Prior to the consummation of any Organic Change, the Company shall make appropriate provision to ensure that each holder of Warrants shall thereafter have the right to acquire and receive upon exercise thereof, in lieu of or addition to (as the case may be) the Warrant Shares immediately theretofore acquirable and receivable upon exercise of such holder's Warrants, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for the number of Warrant Shares immediately theretofore acquirable and receivable upon exercise of such holder's Warrants had such Organic Change not taken place. In any such case, the Company shall make appropriate provision with respect to such holder's rights and interests to insure that the provisions hereof (including this Section 2) shall thereafter be applicable to the Warrants (including, in the case of any such Organic Change in which the successor entity or purchasing entity is other than the Company, an immediate adjustment of the Exercise Price to the value for the Common Stock reflected by the terms of such Organic Change and a corresponding immediate adjustment in the number of Warrant Shares acquirable and receivable upon exercise of the Warrants, if the value so reflected is less than the Fair Market Value of the Common Stock in effect immediately prior to such Organic Change). The Company shall not effect any such Organic Change unless, prior to the consummation thereof, the successor entity (if other than the Company) resulting from such Organic Change (including a purchaser of all or substantially all the Company's assets) assumes by written instrument the obligation to deliver to each holder of Warrants such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire upon exercise of Warrants. 2E. CERTAIN EVENTS. If any event occurs of the type contemplated by the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company's board of directors shall make an appropriate adjustment in the Exercise 8 Price and the number of Warrant Shares obtainable upon exercise of this Warrant so as to protect the rights of the holder of this Warrant. 2F. NOTICES. (i) Immediately upon any adjustment of the Exercise Price, the Company shall give written notice thereof to the Registered Holder, setting forth in reasonable detail and certifying the calculation of such adjustment. (ii) The Company shall give written notice to the Registered Holder at least 30 days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock, or (C) for determining rights to vote with respect to any Organic Change, dissolution or liquidation. (iii) The Company shall also give written notice to the Registered Holder at least 30 days prior to the date on which any Organic Change, dissolution or liquidation shall take place. SECTION 3. CERTAIN RIGHTS OF HOLDERS REGARDING DIVIDENDS. If the Company pays a dividend or distribution upon the Common Stock, other than dividends or distributions described in Section 2C, then the Company shall pay to the holder of this Warrant, at the time of payment thereof, such dividend or distribution which would have been paid to such holder had this Warrant been fully exercised immediately prior to the date on which a record is taken for such dividend or distribution or, if no record is taken, the date as of which the record holders of Common Stock entitled to said dividends or distributions are to be determined. SECTION 4. PURCHASE RIGHTS. If at any time the Company grants, issues or sells any options, convertible securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of the Common Stock (the "PURCHASE RIGHTS"), then the Company shall distribute to the Registered Holder the aggregate Purchase Rights which such holder would have acquired if such holder had held the maximum number of Warrant Shares acquirable upon complete exercise of this Warrant immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. SECTION 5. DEFINITIONS. The following terms have the meanings set forth below: 9 "COMMON STOCK" means the Company's Class A Common Stock, $.001 par value per share, or any securities into which such Common Stock is hereafter converted or exchanged. "COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding pursuant to Section 2B(i) or 2B(ii) hereof. "FAIR MARKET VALUE" means (i) the average of the closing sales prices of the Common Stock on all domestic securities exchanges on which the Common Stock is listed, or (ii) if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day or, (iii) if on any day the Common Stock is not so listed, the sales price for the Common Stock as of 4:00 P.M., New York time, as reported on the NASDAQ National Market System or, (iv) if the Common Stock is not reported on the NASDAQ National Market System, the average of the representative bid and asked quotations for the Common Stock as of 4:00 P.M., New York time, as reported on the NASDAQ interdealer quotation system, or any similar successor organization, in each such case averaged over a period of 21 trading days consisting of the day as of which "Fair Market Value" is being determined and the 20 consecutive trading days prior to such day. Notwithstanding the foregoing, if at any time of determination either (x) the Common Stock is not registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, and either listed on a national securities exchange or authorized for quotation in the NASDAQ system, or (y) less than 25% of the outstanding Common Stock is held by the public free of transfer restrictions under the Securities Act of 1933, as amended, then Fair Market Value shall mean the price that would be paid for the entire common equity interest in the Company in an orderly sale transaction between a willing buyer and a willing seller, taking into account the appropriate lack of liquidity of the Company's securities and appropriate any discount for the minority position represented by the Warrants and Warrant Shares, using valuation techniques then prevailing in the securities industry and assuming full disclosure of all relevant information and a reasonable period of time for effectuating such sale. Fair Market Value shall be determined by the Company's Board of Directors in its good faith judgment. A majority of the Required Holders shall have the right to require that an independent investment banking firm mutually acceptable to the Company and the Required Holders determine Fair Market Value, which firm shall submit to the Company and the Warrantholders a written report setting forth such determination. The expenses of such firm will be borne by the Company, and the determination of such firm will be final and binding upon all parties. 10 "PERMITTED ISSUANCE" means any issuance of any class of Common Stock upon (a) the conversion of any other class of common stock in accordance with the terms thereof, (b) a registered offering to the public, (c) exercise of the Warrant and (d) up to 5,000 shares of Common Stock in the aggregate issued to members of management of the Company and its subsidiaries (as adjusted for stock splits, stock dividends and similar events). "PERSON" means any individual, partnership, joint venture, corporation, trust, unincorporated organization or government or department or agency thereof. "REGISTERED HOLDER" means the holder of this Warrant as reflected in the records of the Company maintained pursuant to Section 13. "REQUIRED HOLDERS" means the holders of a majority of the purchase rights represented by this Warrant as originally issued which remain outstanding and unexercised. "WARRANT SHARES" means shares of the Company's Common Stock; provided, however, that if the securities issuable upon exercise of the Warrants are issued by an entity other than the Company or there is a change in the class of securities so issuable, then the term "Warrant Shares" shall mean shares of the security issuable upon exercise of the Warrants if such security is issuable in shares, or shall mean the equivalent units in which such security is issuable if such security is not issuable in shares. SECTION 6. NO VOTING RIGHTS: LIMITATIONS OF LIABILITY. This Warrant shall not entitle the holder hereof to any voting rights or other rights as a stockholder of the Company. No provision hereof, in the absence of affirmative action by the Registered Holder to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Registered Holder shall give rise to any liability of such holder for the Exercise Price of Warrant Shares acquirable by exercise hereof or as a stockholder of the Company. SECTION 7. WARRANT TRANSFERABLE. This Warrant and all rights hereunder are transferable, in whole or in part, without charge to the Registered Holder upon surrender of this Warrant with a properly executed Assignment (in the form of EXHIBIT II hereto) at the principal office of the Company. SECTION 8. WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is exchangeable, upon the surrender hereof by the Registered Holder at the principal office of the Company, for new Warrants of like tenor representing in the aggregate the purchase rights hereunder, and each of such new Warrants shall 11 represent such portion of such rights as is designated by the Registered Holder at the time of such surrender. At the request of the Registered Holder (pursuant to a transfer of Warrants or otherwise), this Warrant may be exchanged for one or more Warrants to purchase Common Stock. The date the Company initially issues this Warrant shall be deemed to be the date of issuance hereof regardless of the number of times new certificates representing the unexpired and unexercised rights formerly represented by this Warrant shall be issued. All Warrants representing portions of the rights hereunder are referred to herein as the "WARRANTS." SECTION 9. EXCHANGE. In the event that it becomes unlawful or, in the reasonable judgment of any holder of this Warrant, unduly burdensome by reason of a change in legal or regulatory considerations or the interpretation thereof affecting the ability of financial institutions or their affiliates to hold equity securities, or any material change (including a reduction in the number of shares of Common Stock outstanding) in the capital structure of the Company, to hold any or all of the Warrants or Warrant Shares, the holder of this Warrant shall have the right to require all or part of such holder's Warrants or Warrant Shares to be exchanged for non-voting stock or similar interests that convey equivalent economic benefits to such Warrants or Warrant Shares and include equivalent anti-dilution protection. Any such exchange shall occur as soon as practicable but in any event within 60 days after written notice by the holder of this Warrant to the Company (or such earlier date if required to comply with applicable law). SECTION 10. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to the Company (an affidavit of the Registered Holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing this Warrant, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Company (provided that if the holder is a financial institution or other institutional investor its own agreement shall be satisfactory), or, in the case of any such mutilation upon surrender of such certificate, the Company shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the same rights represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate. SECTION 11. NOTICES. Except as otherwise expressly provided herein, all notices and deliveries referred to in this Warrant shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid and shall be deemed to have been given when so delivered (or when received, if delivered by any other method) if sent (i) to the Company, at its principal executive offices and (ii) to a Registered Holder, at such holder's address as it appears 12 in the records of the Company (unless otherwise indicated by any such holder). SECTION 12. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of the Warrants may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the prior written consent of the Registered Holder. SECTION 13. WARRANT REGISTER. The Company shall maintain at its principal executive offices books for the registration and the registration of transfer of Warrants. The Company may deem and treat the Registered Holder as the absolute owner hereof (notwithstanding any notation of ownership or other writing thereon made by anyone) for all purposes and shall not be affected by any notice to the contrary. SECTION 14. FRACTIONS OF SHARES. The Company may, but shall not be required to, issue a fraction of a Warrant Share upon the exercise of this Warrant in whole or in part. As to any fraction of a share which the Company elects not to issue, the Company shall make a cash payment in respect of such fraction in an amount equal to the same fraction of the Fair Market Value of a Warrant Share on the date of such exercise. SECTION 15. DESCRIPTIVE HEADINGS: GOVERNING LAW. The descriptive headings of the several Sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. * * * * 13 IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and attested by its duly authorized officers under its corporate seal and to be dated the date hereof. THE TRIUMPH GROUP HOLDINGS, INC. By: _/s/ Richard C. Ill___________ Name: Richard C. Ill Title: President and Chief Executive Officer [Corporate Seal] Attest: /s/_______________________ Treasurer 14 EXHIBIT I EXERCISE AGREEMENT To: Dated: The undersigned, pursuant to the provisions set forth in the attached Warrant (Certificate No. W-___), hereby agrees to subscribe for the purchase of ______ Warrant Shares covered by such Warrant and makes payment herewith in full therefor at the price per share provided by such Warrant. Signature ____________________ Address ______________________ 15 EXHIBIT II ASSIGNMENT FOR VALUE RECEIVED, ___________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant (Certificate No. W- ) with respect to the number of the Warrant Shares covered thereby set forth below, unto: Names of Assignee Address No. of Shares - ----------------- ------- ------------- Dated: Signature ____________________ ____________________ Witness ____________________ 16 EX-10.10 12 EXHIBIT 10.10 Exhibit 10.10 WORLD EQUITY PARTNERS, L.P. WARRANT AGREEMENT Warrant Agreement (the "Agreement") dated as of July 22, 1993 among WORLD EQUITY PARTNERS, L.P., a Delaware limited partnership (the "Purchaser"), THE TRIUMPH GROUP HOLDINGS, INC., a Delaware corporation ("Holdings"), and CITICORP VENTURE CAPITAL, LTD., a New York corporation ("CVC"). WHEREAS, the Purchaser is acquiring from Holdings, (a) a warrant attached as Exhibit 1 hereto (the "Warrant"), representing the right to purchase from Holdings certain Warrant Shares (as adjusted from time to time pursuant to the provisions of the Warrant) on the terms and conditions set forth in the Warrant. WHEREAS, the Warrant is being issued as an inducement and partial consideration for World Subordinated Debt Partners, L.P., a Delaware limited partnership ("WSDP"), to enter into that certain Senior Subordinated Loan Agreement (the "Loan Agreement") dated as of the date of this Agreement between WSDP and The Triumph Group Operations, Inc., a Delaware corporation and an indirect wholly-owned subsidiary of Holdings ("TGI"), and to make the loan to TGI contemplated therein (the "Loan"), and without such issuance, WSDP will not enter into the Loan Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: I. PURCHASE PRICE AND CLOSING. A. ALLOCATION. The parties agree to allocate a portion of the Loan under the Loan Agreement to the Warrant following delivery of the Warrant. B. CLOSING. The closing of the issuance of the Warrant to the Purchaser (the "Closing") shall take place simultaneously with the closing pursuant to the Loan Agreement. The date of such Closing is hereinafter referred to as the "Closing Date." C. TRANSACTIONS ON CLOSING DATE. At the Closing, Holdings shall deliver to the Purchaser the duly issued Warrant. II. REPRESENTATIONS AND WARRANTIES OF HOLDINGS. Holdings represents and warrants to the Purchaser as follows: A. GOOD STANDING. Holdings is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. B. AUTHORITY RELATIVE TO THIS AGREEMENT. Holdings has all requisite corporate power and authority to enter into and perform this Agreement and to issue and deliver the Warrant to the Purchaser. The execution, delivery and performance by Holdings of this Agreement, including the issuance and delivery of the Warrant to the Purchaser, have been duly authorized by all necessary corporate action on the part of Holdings. This Agreement has been duly executed and delivered by Holdings and (assuming due execution and delivery by the Purchaser) is a legal, valid and binding obligation of Holdings and is enforceable against Holdings in accordance with its terms. C. NO CONFLICT OR VIOLATION. The execution and delivery of this Agreement by Holdings, the performance by Holdings of its terms and the issuance and delivery of the Warrant to the Purchaser will not on the Closing Date conflict with or result in a violation of (i) the Restated Certificate of Incorporation or By-Laws of Holdings, or (ii) any agreement, instrument, law, rule, regulation, order, writ, judgment or decree to which Holdings is a party or is subject, except for such conflicts and violations which will not, in the aggregate, have a material adverse effect on the business, operations, assets or financial condition of Holdings and will not deprive the Purchaser of any material benefit under this Agreement. D. VALIDITY OF ISSUANCE. The Warrant to be issued to the Purchaser pursuant to this Agreement and the Warrant Shares issued upon exercise of the Warrant will, when issued, be duly and validly issued, fully paid and nonassessable (assuming in the case of the Warrant Shares, payment of the exercise price is made in accordance with the terms of the Warrant). III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby represents and warrants to Holdings as follows: A. INVESTMENT INTENTION. The Purchaser is acquiring the Warrant, and if exercised, the Warrant Shares, for investment solely for its own account and not with a view to, or for resale in connection with, the distribution or other disposition thereof. The Purchaser agrees and acknowledges that it will not, directly or indirectly, offer, transfer or sell the Warrant or any Warrant Shares, or solicit any offers to purchase or acquire the Warrant or any Warrant Shares, unless the transfer or sale is (x) pursuant to an effective registration statement under the Securities Act of 1933, as amended, and the rules and regulations thereunder (the "Securities Act") and has been registered under any applicable state securities or "blue sky" laws or (y) pursuant to an exemption from registration under the Securities Act and applicable state securities or "blue sky" laws. 2 B. LEGEND. The Purchaser has been advised by Holdings that the certificates representing the Warrant and the Warrant Shares will bear the following legend: THIS WARRANT [CERTIFICATE] WAS ORIGINALLY ISSUED ON JULY 22, 1993 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT CERTIFICATE. THIS WARRANT [CERTIFICATE] IS ALSO SUBJECT TO A WARRANT AGREEMENT DATED JULY 22, 1993 AMONG THE TRIUMPH GROUP, INC., CITICORP VENTURE CAPITAL, LTD. AND THE ORIGINAL HOLDER HEREOF. A COPY OF THE WARRANT AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST. A COPY OF THE WARRANT AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST. Upon reasonable request of Holdings in connection with any transfer of the Warrant or the Warrant Shares (other than a transfer pursuant to a public offering registered under the Securities Act, pursuant to Rule 144 or Rule 144A promulgated under the Securities Act (or any similar rules then in effect), or to an affiliate of the Purchaser), the Purchaser will deliver, if requested by Holdings, an opinion of counsel knowledgeable in securities laws reasonably satisfactory to Holdings to the effect that such transfer may be effected without registration under the Securities Act. Holdings agrees to issue certificates evidencing the Warrant Shares that do not contain such legend upon receipt of an opinion of counsel, which opinion and counsel shall be reasonably satisfactory to Holdings, to the effect that registration under the Securities Act is not required because of the availability of an exemption from such registration. C. ADDITIONAL INVESTMENT REPRESENTATIONS. The Purchaser is an "accredited investor" as such term is defined in Rule 501 promulgated under the Securities Act. IV. TAG-ALONG. If CVC proposes to transfer any shares of any class of common stock of Holdings (collectively, "Common Stock"), CVC shall give written notice to the Purchaser not less than 30 days before the date of the proposed disposition of such proposed transfer specifying the identity of the proposed transferee(s) and disclosing in reasonable detail the price and other terms and conditions of the proposed transfer. The Purchaser may elect to participate in the proposed transfer by delivering written notice to CVC prior to the expiration of the 30-day period. If the Purchaser elects to participate in such transfer, the Purchaser shall be entitled to sell in such proposed transfer, at the same price and on the same terms as CVC, a number of Warrant Shares 3 equal to the product of (a) the quotient determined by dividing (i) the number of shares of Common Stock proposed to be sold by (ii) the aggregate number of shares of Common Stock then held by CVC, its affiliates and the Purchaser (including shares which may be purchased under the Warrant), and (b) the number of shares of Common Stock then held by the Purchaser (including shares which may be purchased under the Warrant). This Section IV shall not apply to transfers to affiliates of CVC or transfers pursuant to a public offering under the Securities Act; provided that in the case of a transfer to an affiliate such affiliate agrees to be bound by the terms of this Article IV. V. CERTAIN RIGHTS OF PURCHASE. If Holdings proposes to issue any shares of Common Stock other than pursuant to a Permitted Issuance or by virtue of a stock split, stock dividend or similar event, the Purchaser shall have the right of first refusal to purchase a portion of Common Stock sufficient to enable the Purchaser to maintain its percentage interest in the Common Stock on a fully-diluted basis (giving effect to the exercise of all presently exercisable options or other rights to acquire Common Stock, including the Warrant) immediately prior to such issuance. Holdings shall give the Purchaser at least 30 days' prior written notice of any such proposed issuance setting forth in reasonable detail the proposed terms and conditions thereof and shall offer to the Purchaser the opportunity to purchase such securities at the same price, on the same terms, and at the same time as the securities proposed to be issued by Holdings. The Purchaser may exercise its right of first refusal by delivery of an irrevocable written notice to Holdings not more than 10 days after delivery of Holdings' notice. VI. INSPECTION RIGHTS. Holdings shall permit one holder of the Warrant or the Warrant Shares selected by the holders of the majority of the Warrant Shares (assuming for purposes of this section that the Warrant has been exercised), upon reasonable notice and during normal business hours and such other times as any such holder may reasonably request, to (i) visit and inspect any of the properties of Holdings and its subsidiaries (ii) examine the corporate and financial records of Holdings and its subsidiaries and make copies thereof or extracts therefrom and (iii) discuss the affairs, finances and accounts of any such corporations with the directors, officers, key employees and independent accountants of Holdings and its subsidiaries. VII. ATTENDANCE AT BOARD MEETINGS. Holdings shall give one holder of the Warrant or Warrant Shares selected by the holders of a majority of the Warrant Shares (assuming the Warrant has been exercised), written notice of each meeting of its board of directors and each meeting of the board of directors of TGI at the 4 same time and in the same manner as notice is given to the directors, and Holdings shall permit a representative of such holder to attend, as an observer, all such meetings unless attendance at such meeting, in Holdings' reasonable judgment, would create a conflict of interest for such holder; provided that in the case of telephonic meetings, such holder need receive only actual notice thereof at the same time and in the same manner as notice is given to the directors, and such holder's representative shall be given the opportunity to listen to such telephonic meetings. Each representative shall be entitled to receive all written materials and other information (including, without limitation, copies of meeting minutes) given to directors of such corporations in connection with such meetings at the same time such materials and information are given to the directors unless receipt of such materials would create a conflict of interest by such holder. Holdings shall give written notice of any action by written consent in lieu of a meeting of directors of such corporations to such holder prior to the effective date of such consent describing in reasonable detail the nature and substance of such action. VIII. INFORMATION RIGHTS. For so long as the Purchaser shall hold any Warrant Shares or the Warrant, the Purchaser shall have the right to receive the financial information set forth in Section 5.1(a), (b) and (c) of the Loan Agreement, regardless of whether such agreement shall continue to be in force and effect. IX. MISCELLANEOUS A. DEFINITIONS. For the purposes of this Agreement, the following terms shall have the following meanings: "PERMITTED ISSUANCE" means any issuance of any class of Common Stock upon (a) the conversion of any other class of common stock in accordance with the terms thereof, (b) a registered offering to the public, (c) exercise of the Warrant and (d) up to 5,000 shares of Common Stock in the aggregate issued to members of management of Holdings and its subsidiaries (as adjusted for stock splits, dividends and similar events). "WARRANT SHARES" means shares of the Common Stock obtained or obtainable upon exercise of the Warrant; PROVIDED, HOWEVER, that if there is a change such that the securities issuable upon exercise of the Warrant are issued by an entity other than Holdings or there is a change in the class of securities so issuable, then the term "Warrant Shares" shall mean shares of the security issuable upon exercise of the Warrant if such security is issuable in shares, or shall mean the equivalent units in which such security is issuable if such security is not issuable in shares. 5 B. NOTICES. All notices and other communications provided for herein shall be dated and in writing and shall be deemed to have been duly given (i) when delivered, if delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, and (iii) when received if delivered otherwise, to the party to whom it is directed: Holdings: The Triumph Group Holdings, Inc. c/o Citicorp Venture Capital, Ltd. 399 Park Avenue New York, NY 10043 Attention: Bruce Bruckman with a copy to: Kirkland & Ellis 55 East 52nd Street New York, NY 10055 Attention: Stephen Zide, Esq. Purchaser: World Equity Partners, L.P. c/o Citicorp Capital Investors Ltd. 399 Park Avenue New York, New York 10043 Attention: Byron Knief with a copy to: Kirkland & Ellis 55 East 52nd Street New York, NY 10055 Attention: Steven S. Siegel, Esq. CVC: Citicorp Venture Capital, Ltd. 399 Park Avenue New York, NY 10043 Attention: Bruce Bruckman with a copy to: Kirkland & Ellis 55 East 52nd Street New York, NY 10055 Attention: Kirk Radke, Esq. 6 or to such other address as either party hereto shall have specified by notice in writing to the others. C. ASSIGNMENT. This Agreement and all the provisions hereof shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns, except that neither this Agreement nor any rights or obligations hereunder shall be assigned by Holdings without the prior written consent of the Purchaser. D. AMENDMENT. This Agreement may be amended only by a written instrument signed by Holdings and the Purchaser and, in the case of Section IV, with the consent of CVC. E. WAIVER. Either party hereto may (a) extend the time for the performance of any of the obligations or other acts of the other party hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid as to such party if set forth in an instrument in writing signed by such party. F. SEVERABILITY. In the event that any one or more of the provisions hereof, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, it being intended that all rights, powers and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law. G. APPLICABLE LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without regard to the conflicts of laws rules thereof. H. EXPENSES. All reasonable fees and expenses incurred by Purchaser in connection with the preparation of this Agreement and the transactions referred to herein, including the reasonable fees of Purchaser's counsel, shall be paid by Holdings, whether or not the issuance of the Warrant, the execution and delivery of the Loan Agreement or any other transaction contemplated hereby is consummated. I. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which together shall be deemed to be one and the same agreement. 7 J. DESCRIPTIVE HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of the terms contained herein. * * * * * IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be signed and attested by its duly authorized officers under its corporate seal and to be dated the date hereof. THE TRIUMPH GROUP HOLDINGS, INC. By: __/s/ Richard C. Ill_______________ Name: Richard C. Ill Title: President and Chief Executive Officer WORLD EQUITY PARTNERS, L.P. By: _/s/_______________________________ its general partner By: _/s/_______________________________ Name: Title: CITICORP VENTURE CAPITAL, LTD. By: __/s/______________________________ Name: Title: 8 EX-10.11 13 EXHIBIT 10.11 ASSET PURCHASE AGREEMENT DATED AS OF DECEMBER 31, 1995 BY AND BETWEEN THE TRIUMPH GROUP HOLDINGS, INC., TRIUMPH CONTROL SYSTEMS, INC. AND TELEFLEX INCORPORATED TABLE OF CONTENTS PAGE SECTION 1. ASSETS TO BE ACQUIRED . . . . . . . . . . . . . . . . . . . . . 2 1.1 Description of Assets to be Purchased by Holdings. . . . . . . . . 2 1.2 Description of Assets to be Purchased by Buyer . . . . . . . . . . 3 1.3 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 2. THE PURCHASE PRICE AND RELATED MATTERS. . . . . . . . . . . . . 9 2.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.2. Adjustment of Purchase Price . . . . . . . . . . . . . . . . . . . 10 2.3 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . 12 SECTION 3. ASSUMPTION OF ENUMERATED LIABILITIES. . . . . . . . . . . . . . 13 3.1 Assumed Liabilities and Obligations. . . . . . . . . . . . . . . . 13 3.2 Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . 14 3.3 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 3.4 Consent of Third Parties . . . . . . . . . . . . . . . . . . . . . 24 SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER. . . . . . . . . . . . 26 4.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . 26 4.2 Corporate Authority. . . . . . . . . . . . . . . . . . . . . . . . 27 4.3 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 4.4 Consents and Approvals of Governmental Authorities and Others. . . 28 4.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 29 4.6 Litigation; Compliance with Laws . . . . . . . . . . . . . . . . . 29 4.7 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . 30 4.8 No Prior Sale or Licensing of Purchased Assets . . . . . . . . . . 31 4.9 Certain Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 4.10 Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . 31 4.11 Technical Information. . . . . . . . . . . . . . . . . . . . . . . 32 4.12 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 4.13 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 4.14 Open Orders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 4.15 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . 33 4.16 Permits and Licenses . . . . . . . . . . . . . . . . . . . . . . . 34 4.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 4.18 Warranty; Product Liability. . . . . . . . . . . . . . . . . . . . 34 4.19 Absence of Sensitive Payments. . . . . . . . . . . . . . . . . . . 35 4.20 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 4.21 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 35 4.22 Subsidiaries; Investments. . . . . . . . . . . . . . . . . . . . . 39 4.23 Benefit Plans and Employment Arrangements. . . . . . . . . . . . . 39 i SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER AND HOLDINGS. . . . . . 42 5.1 Representations and Warranties of Buyer. . . . . . . . . . . . . . 42 5.2 Representations and Warranties of Holdings . . . . . . . . . . . . 44 SECTION 6. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 6.1 Sales Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 6.2 Access to Offices, Officers, Accountants, Due Diligence, Etc.. . . 47 6.3 Buyer's Environmental Investigation. . . . . . . . . . . . . . . . 48 6.4 Approvals; Consents. . . . . . . . . . . . . . . . . . . . . . . . 49 6.5 Preservation of Business Organization. . . . . . . . . . . . . . . 49 6.6 Approval of Certain Transactions . . . . . . . . . . . . . . . . . 50 6.7 Exclusive Dealing. . . . . . . . . . . . . . . . . . . . . . . . . 51 6.8 Leased Vehicles. . . . . . . . . . . . . . . . . . . . . . . . . . 51 6.9 Intercompany Accounts. . . . . . . . . . . . . . . . . . . . . . . 52 6.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 52 6.11 Supply Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 7. THE ESCROW CLOSING. . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER AND HOLDINGS TO DIRECT THE RELEASE FROM ESCROW . . . . . . . . . 53 8.1 Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . 54 8.2 Representations and Warranties . . . . . . . . . . . . . . . . . . 54 8.3 Performance of Obligations . . . . . . . . . . . . . . . . . . . . 55 8.4 Instruments of Conveyance, Etc.. . . . . . . . . . . . . . . . . . 55 8.5 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 8.6 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . 56 8.7 Required Consents. . . . . . . . . . . . . . . . . . . . . . . . . 56 8.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 8.9 Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 8.10 Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 8.11 Audited Financials . . . . . . . . . . . . . . . . . . . . . . . . 57 8.12 No Material Adverse Change.. . . . . . . . . . . . . . . . . . . . 57 SECTION 9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER TO DIRECT THE RELEASE FROM ESCROW. . . . . . . . . . . . 57 9.1 Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . 57 9.2 Representations and Warranties . . . . . . . . . . . . . . . . . . 58 9.3 Performance of Obligations . . . . . . . . . . . . . . . . . . . . 58 9.4 Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 9.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . 59 9.6 Required Consents. . . . . . . . . . . . . . . . . . . . . . . . . 59 9.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 9.8 Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 10. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 60 ii SECTION 11. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 60 11.1 Environmental Indemnity and Covenant . . . . . . . . . . . . . . . 60 11.2 Indemnity by Seller. . . . . . . . . . . . . . . . . . . . . . . . 65 11.3 Indemnity by Buyer.. . . . . . . . . . . . . . . . . . . . . . . . 66 11.4 Indemnity by Holdings. . . . . . . . . . . . . . . . . . . . . . . 66 11.5 Notice of Claim. . . . . . . . . . . . . . . . . . . . . . . . . . 67 11.6 Limitation of Indemnification. . . . . . . . . . . . . . . . . . . 68 11.7 No Set Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 11.8 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . 70 SECTION 12. NONCOMPETITION; NON-SOLICITATION.. . . . . . . . . . . . . . . 70 12.1 NonCompetition.. . . . . . . . . . . . . . . . . . . . . . . . . . 70 12.2 Non-Solicitation.. . . . . . . . . . . . . . . . . . . . . . . . . 71 12.3 Limitation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 12.4 Remedies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 SECTION 13. TERMINATION; MODIFICATION OR WAIVER. . . . . . . . . . . . . . 72 13.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 13.2 Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 13.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 SECTION 14. COSTS INCIDENT TO PREPARATION OF AGREEMENT . . . . . . . . . . 73 SECTION 15. RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . 74 SECTION 16. BEST EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . . 74 SECTION 17. GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 17.1 Parties in Interest; Assignment. . . . . . . . . . . . . . . . . . 74 17.2 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . 75 17.3 Public Statements. . . . . . . . . . . . . . . . . . . . . . . . . 76 17.4 Choice of Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 76 17.5 Mediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 17.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 17.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 78 17.8 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 17.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 17.10 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 17.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 79 17.12 Facsimiles. . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 17.13 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . 79 17.14 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . 80 iii SCHEDULES 1.1 Intellectual Property 1.2(b) Equipment 1.2(d) Open Orders 1.2(e) Other Contracts 1.2(g) Permits, Licenses 1.2(j) Computer Software Assets 1.3(g) Owned Real Property 1.3(l) Excluded Assets 2.2(a) Operating Cash Flow 2.3 Preliminary Allocation of Purchase Price 3.1 Bid Balance Sheet 3.4 Material Non-Assignable Contracts 4.4 Consents 4.5 Material Adverse Changes 4.6 Litigation; Compliance with Laws 4.7 Intellectual Property 4.8 Prior Sales or Licenses 4.13 Material Contracts 4.17 Insurance 4.18 Warranty; Product Liability 4.20 Taxes 4.21 Environmental Matters 4.23 Benefit Plans and Employment Arrangements iv EXHIBITS A Seller's Union Plan Documents B Seller's Counsel Opinion C Buyer's Counsel Opinion v GLOSSARY OF TERMS Defined Term Section - ------------ ------- Accounts Receivable 1.2(f) Adjusted Closing Net Book Value 2.2(a) Affiliate 1.2 Agreement Heading Assumed Liabilities 3.1 Bid Balance Sheet 3.1(a) Books and Records 4.5 Business Recitals Buyer Heading Buyer Purchased Assets 1.2 Buyer's Union Plan 3.3(h) Cash Portion 2.1(a) Closing Balance Sheet 2.2(b) Code 4.23(c) Collective Bargaining Agreement 3.3(a)(iii) Computer Software Assets 1.2(j) Contracts 1.2(e) Disposal 4.21(f) Disposed 4.21(f) Effective Date 2.2(a) Environmental Permits 4.21(c) Environmental Laws 4.21(a) Environmental Reports 11.1(a) Equipment 1.2(b) ERISA 4.23(a) Escrow Closing 7 Escrow Agent 7 Escrowed Documents 7 Excluded Assets 1.3 Excluded Liabilities 3.2 GAAP 1.2(k) Governmental Authority 4.21(a) Hazardous Materials 4.21(a) Hired Represented Employees 3.3(a)(iv) Hired Non-Represented Employees 3.3(b) HSR Act 4.4 Indemnified Party 11.5 Indemnifying Party 11.5 Intellectual Property 1.1 Interim Note 1.3(b) Inventory 1.2(c) Lease 1.2(h) Liens 4.10(b) Local 1039 3.3(a)(i) Losses 11.2 vi Material Contract 4.13(b) Material Non-Assignable Contracts 3.4 Multiemployer Plan 4.23(b) Non-Assignable Contract 3.4 Non-Competition Period 12.1 Open Orders 1.2(d) Owned Real Property 1.3(g) Permits 1.2(g) Person 1.2 Product Liability Claims 3.2(e) Purchase Price 2.1 Purchased Assets 1.2 Related Rights 1.1 Release 4.21(a) Release Date 7 Remediation 11.1(b) Restricted Business 12.1 Seller Heading Seller's Union Plan 3.3(h) Subordinated Note 1.3(b) Taxes 3.2(c) TCE Remediation 11.1(b) Technical Information 1.2(a) Warranty Claims 3.2(i) Warranty Reserve 3.2(i) vii ASSET PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT dated as of this 31st day of December, 1995 ("AGREEMENT") by and among THE TRIUMPH GROUP HOLDINGS, INC., a Delaware corporation ("HOLDINGS"), TRIUMPH CONTROL SYSTEMS, INC., a Pennsylvania corporation and indirect subsidiary of Holdings ("BUYER"), and TELEFLEX INCORPORATED, a Delaware corporation ("SELLER"). RECITALS: Seller is engaged in the business of designing, manufacturing and selling mechanical and electromechanical control systems and electrical actuation systems for commercial and military aircraft, nuclear reactors, space vehicles, ground support equipment, missiles and naval vessels for the aerospace, naval, industrial and power industries through Seller's Aerospace/Defense division located at North Wales, Pennsylvania (the "BUSINESS"). Seller desires to sell, and Buyer and Holdings desire to acquire, certain of the assets of the Business upon the terms and conditions set forth herein. In consideration of the mutual covenants, agreements, representations and warranties contained herein, and in reliance thereon, Buyer, Holdings and Seller, intending to be legally bound, agree as follows: SECTION 1. ASSETS TO BE ACQUIRED. 1.1 DESCRIPTION OF ASSETS TO BE PURCHASED BY HOLDINGS. Subject to the terms and conditions of this Agreement, and in reliance on the representations, warranties and covenants contained herein, on the Release Date (capitalized terms shall be used as defined in the Sections mentioned in the Glossary of Terms to this Agreement), Seller will sell, convey, assign, transfer and deliver to Holdings, and Holdings will purchase and acquire all of Seller's right, title and interest in and to the following assets used principally in the Business, as the same shall exist on the Release Date (other than the Excluded Assets): all unpatented inventions, invention disclosures, multinational invention registrations, patents and patent applications (including, but not limited to, all reissues, divisions, continuations, continuations-in-part, extensions and reexaminations) and all rights therein provided by law, multinational treaties or conventions; publications and copyrights; mask works; trade secrets, know-how and show-how; formulas; and all common law and registered trademarks, trademark registrations, applications for trademark registrations, tradenames, trade dress, brand names, service marks and logos; including in each case without limitation, those identified on SCHEDULE 1.1, together with the goodwill associated therewith and symbolized thereby (collectively, the "INTELLECTUAL PROPERTY"); , and an assignment of any licenses relating to the Business for Intellectual Property to or from Seller and all income, 2 royalties, damages and payments due or payable with respect to any time on or after the Release Date, including, without limitation, damages and payments for infringements or misappropriations of any thereof throughout the world after the Release Date; together with an assignment of all rights of Seller in and to, including rights to enforce the terms of, confidentiality agreements and noncompetition agreements of, and any agreements relating to the assignment of inventions made by, prior and present employees the Business and any such agreements with any other Person with respect to the Intellectual Property (collectively, the "RELATED RIGHTS"). 1.2 DESCRIPTION OF ASSETS TO BE PURCHASED BY BUYER. Subject to the terms and conditions of this Agreement, and in reliance on the representations, warranties and covenants contained herein, on the Release Date, Seller will sell, convey, assign, transfer and deliver to Buyer, and Buyer will purchase and acquire, the Business as a going concern and all of Seller's right, title and interest in and to the assets, properties and rights of every kind and description, real, personal and mixed, tangible and intangible, wherever situated constituting or used principally in the Business, as the same shall exist on the Release Date (other than the Excluded Assets, the Intellectual Property and the Related Rights) (the "BUYER PURCHASED ASSETS" and together with the Intellectual Property and the Related Rights, the "PURCHASED ASSETS"), including without limitation: 3 (a) TECHNICAL INFORMATION. All customer, dealer, supplier and installation lists; serial number records; engineering, manufacturing, design, installation and other technical drawings and specifications, calculations and manufacturing and production processes and techniques; research and development information; operating, maintenance and repair manuals and instruction books; cost and estimating information, cost records, vendor data and other business records (including without limitation, sales histories); sales inquiries; consultant's reports; bills of material, test data and selected test material samples; advertising and promotional literature, including reproducible masters and all other commercial, sales, marketing and technical data (including, but not limited to, data stored electronically or on other format, together with an assignment of any third party licenses necessary to use such data) (collectively, the "TECHNICAL INFORMATION"); (b) EQUIPMENT. All machinery, equipment, owned trucks, owned automobiles, office furniture, office equipment, computing and telecommunications equipment (including the software loaded on such equipment other than software listed on SCHEDULE 1.2(j)), including leased equipment if the lease agreement relating thereto is a Contract; existing patterns, dies, jigs, fixtures, tooling, test equipment and working models, including that identified on SCHEDULE 1.2(b) (collectively, the "EQUIPMENT"); 4 (c) INVENTORY. All raw materials inventory, work-in-process inventory, finished goods inventory and spare parts inventory, together with all manufacturing supplies and boxing, labeling and other shipping materials and an assignment of all related manufacturer or fabricator warranties, guaranties and indemnities (collectively, the "INVENTORY"); (d) OPEN ORDERS. Open orders for goods and services with customers of Seller arising from the Business, including those set forth on SCHEDULE 1.1(d) (the "OPEN ORDERS"), together with related purchase orders, contracts, subcontracts and accounts receivable and credit support associated with such Open Orders; (e) OTHER CONTRACTS. All contracts, orders for spare parts, distribution agreements, service agreements, development agreements, consulting agreements, leases of machinery, equipment and other personal property, guarantees, commitments, instruments and other agreements relating to the acquisition or ownership or any of the Buyer Purchased Assets or relating principally to the operation of the Business, including those listed on SCHEDULE 1.1(e) (the "CONTRACTS"); (f) ACCOUNTS. All accounts and notes receivable of Seller arising from the Business including, after the Effective Date, intercompany receivables for products shipped or sold by the Business to Seller or an Affiliate of Seller (collectively, the "ACCOUNTS RECEIVABLE"); 5 (g) PERMITS, LICENSES. All governmental permits, licenses, registrations, orders and approvals relating to the Business, including those listed on SCHEDULE 1.1(g), to the extent such permits, licenses, registrations, orders and approvals are legally transferrable to Buyer (collectively, the "PERMITS"); (h) LEASED REAL PROPERTY. Seller's interest as lessee, under the Lease Agreement dated June 29, 1995, between Advance Lane Associates, as lessor, and Seller, as lessee (the "LEASE") and the leasehold interest and leasehold improvements leased pursuant thereto; (i) BUSINESS RECORDS AND SUPPLIES. All other records of Seller relating principally to the Business, including property records and copies of personnel records of employees who become employees of Buyer, all office supplies and the right to receive and retain mail and other communications relating to the Business; (j) COMPUTER SOFTWARE ASSETS. All computer software, data rights, documentation and associated license, escrow, support and maintenance agreements, used in the conduct of the Business, including those listed on SCHEDULE 1.1(j) to the extent they are legally transferrable by Seller with or without the consent of any other party (the "COMPUTER SOFTWARE ASSETS"); (k) PREPAID EXPENSES. All payments made by Seller with respect to the Business, which constitute prepaid expenses of the Business and which are included on the asset side of the Closing Balance Sheet in accordance with generally 6 accepted accounting principles ("GAAP") consistently applied, to the extent the benefits thereof are transferable to Buyer; (l) QUALITY CONTROL SYSTEMS. All certifications, ratings, listings and similar benefits from any product or quality control certification organization and all systems and manuals related thereto; and (m) OTHER ASSETS. All other assets of the Seller used principally in the Business and which are included on the asset side of the Closing Balance Sheet. As used in this Agreement, the term "AFFILIATE" shall mean any Person who controls, is controlled by or is under common control with the designated party, and ownership, directly or indirectly, of 20% or more of the voting stock or other equity interest shall be deemed to constitute control; and "PERSON" shall mean an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, limited liability company or any other entity of whatever nature. 1.3 EXCLUDED ASSETS. Notwithstanding Section 1.1 or Section 1.2, the following assets (collectively, the "EXCLUDED ASSETS") shall be excluded from this Agreement and shall not be sold, conveyed, assigned, transferred or delivered to Buyer or to Holdings: (a) Any insurance policies maintained by Seller with respect to the Business and any prepaid insurance expenses; (b) Any intercompany deposits with Seller and intercompany receivables from Seller, except intercompany 7 receivables for products shipped or sold by the Business to Seller or an Affiliate of Seller after the Effective Date; (c) All of Seller's goodwill and rights in and to the name "Teleflex" or the stylized "T" Teleflex logo and in any trade name, trademark or service mark thereof, or application therefor or registrations thereof; (d) Corporate minute books and stock books; (e) Any claims and rights against third parties (including, without limitation, insurance carriers), to the extent they relate to liabilities or obligations that are not assumed by Buyer; (f) Any notes, pension, health or welfare plans, prepaid expenses, claims for refunds of Taxes and other governmental charges whether or not included on the Closing Balance Sheet; (g) The real property owned in fee by Seller at 205 Church Road, North Wales, Pennsylvania together with the improvements located thereon as described on SCHEDULE 1.3(g) (the "OWNED REAL PROPERTY"); (h) All cash and cash equivalents on hand related to the Business, wherever located, including without limitation, at the Owned Real Property, in lock boxes or accounts (whether maintained at a bank, thrift, mutual fund or other similar financial institution); (i) Seller's or any of its Affiliates licenses, permits and other governmental authorizations and deposits that are not legally transferrable; 8 (j) All claims, choses in action and rights of action by Seller or any of its Affiliates against third parties, including but not limited to claims for refunds against Governmental Authorities or other Persons, rebates, refunds, prepaid discounts, allowances or other monies or consideration received by Seller or any of its Affiliates under any agreement or transaction effected prior to the Release Date and other general intangibles arising from the operations of Seller or its Affiliates at the Owned Real Property prior to the Release Date unless otherwise included as an asset on the Closing Balance Sheet; (k) any other right or asset used principally by Seller and its Affiliates not in connection with the Business; and (l) All assets listed on SCHEDULE 1.3(l). SECTION 2. THE PURCHASE PRICE AND RELATED MATTERS. 2.1 PURCHASE PRICE. In consideration of the sale, conveyance, assignment, transfer and delivery of the Purchased Assets, and subject to adjustment pursuant to Section 2.2, Buyer agrees to pay and deliver to Seller $31,000,000 and Holdings agrees to pay and deliver to Seller $5,500,000 (collectively, the "PURCHASE PRICE") to be paid as follows: (a) Holdings shall deliver a subordinated promissory note in the principal amount of $36,500,000 to the Escrow Agent at the Escrow Closing (the "INTERIM NOTE"). Buyer shall pay $31,000,000 of the Purchase Price (the "CASH PORTION") 9 plus a cash payment in the amount of all accrued, unpaid interest on the Interim Note to Seller on the Release Date for the Buyer Purchased Assets by wire transfer of immediately available funds to a bank account designated by Seller by prior written notice; and (b) $5,500,000 shall be paid by Holdings to Seller for the Intellectual Property and the Related Rights by delivery on the Release Date of a subordinated promissory note of Holdings to Seller (the "SUBORDINATED NOTE"). 2.2. ADJUSTMENT OF PURCHASE PRICE. (a) The Cash Portion of the Purchase Price shall be decreased by one dollar for each dollar that the Adjusted Closing Net Book Value as reflected in the Closing Balance Sheet is less than $16,198,000.00, and shall be increased by one dollar for each dollar that the Adjusted Closing Net Book Value as reflected in the Closing Balance Sheet is greater than $16,198,000.00. After the close of business on December 31, 1995 (the "EFFECTIVE DATE"), Seller shall operate the business for the benefit of Buyer, and all Operating Cash Flow (as defined in SCHEDULE 2.2(a)) shall belong to Buyer. There shall be a reduction to the Cash Portion of the Purchase Price to the extent Seller has removed Operating Cash Flow from the Business on or after the Effective Date and an increase to the Cash Portion of the Purchase Price to the extent Seller has deposited Operating Cash Flow to the Business on or after the Effective Date. "ADJUSTED CLOSING NET BOOK VALUE" shall mean the value of the 10 owner's net investment as reflected on the Closing Balance Sheet minus $253,000. (b) Prior to or as soon as practical after the Release Date, Seller shall furnish to Buyer special purpose financial statements for the North Wales Controls and Quadrants Group of Seller as of the close of business on the Effective Date prepared in accordance with GAAP, properly and consistently applied and audited by Price Waterhouse LLP, including a special purpose balance sheet at December 31, 1995 (the "CLOSING BALANCE SHEET"), and a calculation of the Adjusted Closing Net Book Value and any required adjustment to the Purchase Price. If Buyer has no objection to the calculation of Adjusted Closing Net Book Value and if the Adjusted Closing Net Book Value is less than $16,198,000.00, Seller shall pay the difference to Buyer. If Buyer has no objection to the calculation of Adjusted Closing Net Book Value and if the Adjusted Closing Net Book Value is greater than $16,198,000.00, Buyer shall pay the difference to Seller. In the event Buyer disputes the calculation of the Adjusted Closing Net Book Value or any cash flow adjustment, Buyer shall notify Seller in writing of such dispute and the basis therefor and Buyer and Seller shall attempt to resolve such dispute for a period of thirty days. In the event Buyer and Seller are unable to resolve such dispute within thirty days, they shall reduce to writing those points on which they agree and those points on which they disagree and shall (i) retain as arbitrator Arthur Andersen or, failing their agreement to act as arbitrator, such 11 other independent accounting firm as may be mutually agreed upon by Buyer and Seller to review such matters as to which the parties have not agreed in writing and (ii) request such arbitrator to act as promptly as practicable in accordance with the rules to be established by Buyer, Seller and such arbitrator to resolve all such disputed matters within thirty days after being retained. The decision of the arbitrator shall be issued in writing to both Buyer and Seller and shall be final, non-appealable and binding on Seller and Buyer, and the fees and expenses, if any, of such arbitrator shall be paid one-half by Seller and one- half by Buyer. If the arbitrator determines that the Adjusted Closing Net Book Value is less than or greater than $16,198,000.00 or that a cash flow adjustment is due, Seller or Buyer, as the case may be, shall pay the amount of any required adjustment to the Purchase Price within ten days after receipt of the arbitrator's determination. 2.3 ALLOCATION OF PURCHASE PRICE. Buyer, Holdings and Seller agree that the Purchase Price and the Assumed Liabilities (each as adjusted pursuant to Section 2.2) shall be allocated to the various assets comprising the Purchased Assets for all purposes (including Tax and financial accounting purposes) in a manner to be determined in writing by Buyer, Holdings and Seller, as soon as practicable following the final determination of Adjusted Closing Net Book Value. The Purchase Price will be allocated in a manner consistent with the allocation schedule attached as SCHEDULE 2.3 prepared by Buyer, Holdings and Seller. 12 Buyer, Holdings and Seller acknowledge that the final allocation shall be binding upon the parties for all applicable federal, state, local and foreign Tax purposes. Buyer, Holdings and Seller covenant to report gain or loss or cost basis, as the case may be, in a manner consistent with such allocation on all Tax returns filed by any of them subsequent to the Release Date and not to take voluntarily any inconsistent position therewith in any administrative or judicial proceeding relating to such returns. Buyer, Holdings and Seller shall exchange mutually acceptable and completed IRS Forms 8594, which they shall use to report the transaction contemplated hereunder to the Internal Revenue Service in accordance with such allocation. SECTION 3. ASSUMPTION OF ENUMERATED LIABILITIES. 3.1 ASSUMED LIABILITIES AND OBLIGATIONS. On and subject to the terms and conditions set forth in this Agreement, as additional consideration for the Purchased Assets, on the Release Date, Buyer shall undertake, assume, perform and otherwise pay, satisfy and discharge, and hold Seller harmless from only the following liabilities and obligations of the Seller relating to the Business (collectively, the "ASSUMED LIABILITIES"): (a) Seller's liabilities and obligations relating to the Business to the extent incurred in the ordinary course of business and reflected on the liability side of the Closing Balance Sheet except liabilities which constitute Excluded 13 Liabilities (but not including any liability or obligation which relates to any indebtedness or capitalized lease obligation, breach of contract, breach of warranty, product liability, tort, infringement, cash overdrafts, litigation and litigation accruals, violation of law or liabilities relating to Environmental Laws from occurrences prior to the Release Date or which arose out of any charge, complaint, action, suit, proceeding, hearing, investigation, claim or demand made prior to the Release Date) which liabilities and obligations are of the same type as the liabilities and obligations reflected on the liability side of the audited special purpose balance sheet of the Business dated as of September 24, 1995 and attached hereto as SCHEDULE 3.1 (the "BID BALANCE SHEET") and (ii) all payables to Seller or any Affiliate of Seller by the Business; (b) the liabilities and obligations of the Business pursuant to Open Orders, Contracts, Permits and the Lease, but not including any liability or obligation arising out of or in connection with any breach thereof occurring prior to the Release Date; and (c) the liabilities expressly assumed in Section 3.3. 3.2 EXCLUDED LIABILITIES. Notwithstanding anything to the contrary contained in this Agreement, neither Buyer nor Holdings will assume or in any way become liable for, and Seller shall retain, all of Seller's and its Affiliates debts, liabilities and obligations of any nature whatsoever (other than 14 the Assumed Liabilities) (the "EXCLUDED LIABILITIES"), whether accrued, absolute or contingent, whether known or unknown, whether due or to become due, including without limitation the following: (a) the liabilities or obligations of Seller to its stockholders respecting dividends, distributions to its stockholders in liquidation, redemptions of stock, or otherwise; (b) liabilities or obligations of Seller arising out of any transactions occurring, or obligations incurred, after the Release Date; (c) any obligations of Seller for expenses, Taxes or fees incident to or arising out of the negotiation, preparation, approval or authorization of this Agreement or the consummation of the transactions contemplated hereby, including, without limitation, all attorneys and accountants fees and all brokers or finders fees or commissions payable by Seller. As used in this Agreement, the term "TAXES" shall mean all income or profits taxes (including, but not limited to, federal income taxes and state income taxes), estimated taxes, payroll and employee withholding taxes, unemployment insurance, social security taxes, sales and use taxes, ad valorem taxes, value added taxes, excise taxes, capital stock or franchise taxes, gross receipts taxes, business license taxes, occupation taxes, real and personal property taxes, stamp taxes, environmental taxes, transfer taxes, workers' compensation, Pension Benefit Guaranty Corporation premiums and other governmental charges, and 15 other obligations of the same or of a similar nature to any of the foregoing, which a corporation may be required to pay, withhold or collect, imposed by any federal, territorial, state, local or foreign government or any agency or political subdivision of any such government. (d) any obligation of Seller under or arising out of this Agreement; (e) all liabilities and obligations of the Business resulting from product liability claims for damages or injury to persons or property arising from the ownership, possession or use of any product of the Business (i) sold before the Release Date or (ii) manufactured prior to the Release Date (the "PRODUCT LIABILITY CLAIMS"); provided that a Product Liability Claim shall be deemed an Assumed Liability if the existence thereof shall have first been asserted after the fifth anniversary of the Release Date; (f) any liability or obligation of the Business to Seller or Affiliates of Seller, except payables for products sold or shipped to the Business by Seller or an Affiliate of Seller after the Effective Date; (g) any obligations or liabilities of Seller to indemnify its officers, directors, employees or agents; (h) all Taxes imposed on Seller, including any Tax of any other corporation, which Tax is assessed against Seller by virtue of its status as a member of any consolidated group of which such other corporation was also a member; 16 (i) all liabilities and obligations of the Business to furnish warranty service under unexpired warranties for the repair or replacement of products manufactured, sold or delivered by Seller prior to the Release Date or otherwise to provide credits or price adjustments for such products, ("WARRANTY CLAIMS"); provided, however, that Warranty Claims shall be deemed an Assumed Liability to the extent that (i) the amount thereof does not exceed the average of the last three years' Warranty Claims plus twenty percent (the "WARRANTY RESERVE"), or (ii) with respect to any Warranty Claim, it shall have first been asserted after the later of (A) the first anniversary of the Effective Date, or (B) the date on which any written warranty applicable to such Warranty Claim expires; and provided further that Buyer shall provide service for all Warranty Claims after the Release Date and shall be reimbursed therefor by Seller once the Warranty Reserve is exceeded until any such Warranty Claim becomes an Assumed Liability; (j) all liabilities and obligations arising under or imposed pursuant to Environmental Laws, whether or not attributable to actions or failures to act by Seller, with respect to the operation of or properties utilized in connection with the Business at any time prior to the Release Date; (k) all liabilities and obligations for employee benefits of the Business, except as expressly assumed by Buyer in Section 3.3; and 17 (l) all other liabilities of Seller relating to the Business that arise as a result of actions or events occurring before the Release Date. 3.3 EMPLOYEES. (a) REPRESENTED EMPLOYEES. (i) Local Union No. 1039 of the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) ("LOCAL 1039") is the only labor union or other collective bargaining agent which represents or claims to represent any of the employees of Seller at its plant in North Wales, Upper Gwynedd Township, Montgomery County, Pennsylvania. (ii) Buyer agrees to recognize Local 1039 as the exclusive collective bargaining agent for all hourly rated production and maintenance employees at the Seller's plant in North Wales, Upper Gwynedd Township, Montgomery County, Pennsylvania. (iii) Buyer agrees to assume the obligations of Seller under the terms and conditions of the Agreement between Seller and Local 1039, dated March 4, 1994, and effective from February 26, 1994, through February 28, 1997 (the "COLLECTIVE BARGAINING AGREEMENT"). (iv) At the Release Date, Buyer will extend offers of employment to the represented current employees of Seller covered by the Collective Bargaining Agreement 18 ("HIRED REPRESENTED EMPLOYEES") under the terms and conditions stated in the Collective Bargaining Agreement. (v) Seller agrees that nothing in this Section 3.3 shall be construed or interpreted to modify in any way or transfer to Buyer the "Excluded Employee Liabilities" in Section 3.3(e). (b) NON-REPRESENTED EMPLOYEES. At the Release Date, Buyer will extend offers of employment to the non-represented employees who are actively employed at Seller's plant in North Wales, Upper Gwynedd Township, Montgomery County, Pennsylvania and who are not hourly rated production and maintenance employees in the collective bargaining unit ("HIRED NON-REPRESENTED EMPLOYEES"). Such offers of employment, subject to Buyer's right to terminate any such employee following the Release Date, shall be on terms and conditions, including without limitation compensation and employee benefits, as may be determined by Buyer in its sole discretion; provided that Buyer will make the benefits available to Hired Non-Represented Employees as of the Effective Date that are at least comparable to employee benefits provided to other employees of The Triumph Group Operations, Inc. and its divisions and will maintain such comparable employee benefits until June 30, 1997. (c) ACCRUED VACATION. Buyer agrees to assume and pay the accrued and unused vacation as of the Release Date for all Hired Represented Employees and Hired Non-Represented Employees. 19 (d) TERMINATION OF EMPLOYMENT. Seller shall discharge all its employees from Seller's employment as of the Release Date and shall pay in a timely manner all wages, salaries and other sums due its employees through the close of business on the Release Date. (e) EXCLUDED EMPLOYEE LIABILITIES. Except as specifically set forth in this Section 3.3, Buyer shall assume no and shall have no obligations to any of Seller's employees for accrued benefits, severance or deferred pay, pension, medical or disability benefits or any other payments or benefits, which may be or become due to such employees from Seller. Seller agrees that, with respect to claims for workers' compensation and all claims under Seller's employee benefit programs by persons working for the Business arising out of events occurring prior to the Release Date, whether reported or unreported as of the Release Date and whether insured or uninsured (including, but not limited to, workers' compensation, unemployment compensation, life insurance and disability programs), Seller shall, at its own expense, honor or cause its insurance carriers to honor such claims in accordance with the terms and conditions of such programs or applicable workers' compensation or unemployment compensation statutes. Without limiting the scope of the preceding sentence, Seller shall be responsible for any and all claims and liabilities arising out of or relating to (i) its employment of its employees; (ii) the termination by Seller of such employment of any such employees; and (iii) the provision of 20 any employee benefits to such employees (and their beneficiaries and eligible dependents) attributable to their employment with, or their participation in any plans or programs maintained or contributed to by Seller or any of its Affiliates. (f) SERVICE CREDIT FOR HIRED REPRESENTED AND HIRED NON- REPRESENTED EMPLOYEES. Buyer shall give to Hired Represented Employees and Hired Non-Represented Employees service credit for time worked at Seller for purposes of eligibility and vesting requirements in pension and medical plans, for purposes of severance by Buyer and for purposes of determining sick and vacation pay. Buyer's medical plan insuring Hired Represented Employees, Hired Non-Represented Employees and their covered dependents shall not contain any exclusion or limitation with respect to pre-existing conditions. Seller shall continue to be responsible for all pre-Release Date incurred, but unpaid incurred, health claims and expenses for Hired Represented Employees and Hired Non-Represented Employees and their covered dependents. Buyer shall be responsible for all post-Release Date incurred, health claims and expenses for Hired Represented Employees and Hired Non-Represented Employees and their covered dependents. (g) WELFARE PLANS. If any welfare plans maintained under the Collective Bargaining Agreement provide health care benefits, health insurance coverage or life insurance coverage for retirees (collectively, "COVERAGES") who were employees of the Business and whose retirement occurred prior to 21 the Release Date, Seller shall be responsible for such Coverages for such retirees and their covered dependents and Buyer shall have no liability with regard thereto. Buyer shall assume responsibility for the payment of post- retirement Coverages including the payment of premiums for post-retirement health insurance for Hired Represented Employees and their covered dependents as required by the Collective Bargaining Agreement. Seller shall reimburse Buyer for such payments and premiums for Coverages in an amount per retired Hired Represented Employee equal to the amount provided under the welfare plan as required by the Collective Bargaining Agreement, multiplied by the ratio of a Hired Represented Employee's service with Seller as a member of Local 1039 through the Release Date to such Hired Represented Employee's combined service with Seller and Buyer as a member of Local 1039. Seller shall not be liable for any additional amounts that are due solely to modifications to benefits as a result of collective bargaining or as a result of any additional benefits made available outside of the collective bargaining process after the Release Date. Buyer shall invoice Seller quarterly in arrears for such reimbursable amounts, and Seller shall pay such amount within thirty (30) days of receipt of Buyer's invoice. Seller shall have the right, upon giving reasonable notice to Buyer in advance, to audit at Seller's expense, at Buyer's business office during business hours, all of the books and records in Buyer's possession reasonably related to 22 the determination of the amounts Seller is required to pay Buyer under this Section 3.3(g) after the Release Date. (h) UNION PENSION PLAN. As of the Release Date, Buyer shall establish a defined benefit pension plan (the "BUYER'S UNION PLAN"), which shall be intended to meet the requirements of Section 401(a) of the Code, to cover Hired Represented Employees and that complies with the terms of the Collective Bargaining Agreement. No assets or liabilities shall be transferred from the Teleflex Incorporated UAW Local 1039 Retirement Income Plan (the "SELLER'S UNION PLAN") to the Buyer's Union Plan. Each Hired Represented Employee shall be given credit for all purposes, including, but not limited to, benefit accrual, under the Buyer's Union Plan for all service with which such employee had been credited under Seller's Union Plan, regardless of whether Seller fulfills its obligations under the Seller's Union Plan. The benefits under the Buyer's Union Plan shall be based on the benefit rate in effect at the time of the employee's termination of service with Buyer and such rate shall apply to all service, including service with Seller. The monthly benefit paid from the Buyer's Union Plan to each Hired Represented Employee shall be reduced by the amount of the monthly benefit to which such employee is entitled under the Seller's Union Plan. Benefits under the Seller's Union Plan shall be paid to Hired Represented Employees according to the terms of the Seller's Union Plan. Seller shall deliver to Buyer 23 on the Release Date all records as are reasonably required by Buyer for the proper administration of the Buyer's Union Plan. (i) V.I.P. PLAN. Seller shall deliver to Buyer on the Release Date a list of all Hired Represented Employees who are eligible to participate as of the Release Date in the Teleflex Incorporated Voluntary Investment Plan. 3.4 CONSENT OF THIRD PARTIES. Nothing in this Agreement shall be construed as an attempt by Seller to assign to Buyer any contract, agreement, permit, franchise, claim or asset included in the Purchased Assets which is by its terms or by law nonassignable without the consent of any other party or parties, unless such consent or approval shall have been given, or as to which all the remedies for the enforcement thereof available to Seller would not by law pass to Buyer as an incident of the assignments provided for by this Agreement (a "NON-ASSIGNABLE CONTRACT"). Prior to the Release Date, Seller shall use its best efforts to obtain consents or approvals to the assignment of the Contracts, Open Orders and Permits described on SCHEDULE 3.4 (collectively "MATERIAL NON-ASSIGNABLE CONTRACTS"); provided that Seller and its Affiliates shall not be required to pay any money or other consideration or grant forbearances to any third party to effect such consent or approval. To the extent that any such consent or approval in respect of, or a novation of, a Non- Assignable Contract shall not have been obtained on or before the Release Date, the parties hereto shall use reasonable efforts and shall cooperate in any reasonable arrangement to assure Buyer the 24 benefits of such Non-Assignable Contract to the extent permitted by law. To the extent lawful, practicable and reasonable in the circumstances, including the obtaining of any such necessary consent or approval after the Release Date (provided that Seller and its Affiliates shall not be required to pay any money or other consideration or grant forbearances to any third party to effect such consent or approval), Seller at the request and under the direction of Buyer shall take all reasonable actions to assure that the rights of Seller under the Non-Assignable Contracts shall be preserved for the benefit of Buyer to the extent not involving any undue hardships upon Seller or unreasonable time constraints in the request or compliance with such instructions. Buyer shall reimburse Seller and its Affiliates for their reasonable out-of-pocket expenses related thereto. Except with respect to the Material Non-Assignable Contracts, Buyer acknowledges that certain consents to the transactions contemplated by this Agreement may be required from parties to the Contracts, Permits and Open Orders and that such consents may not be obtained. Buyer agrees that Seller shall not have any liability arising solely out of or solely relating to the failure to obtain any consents that may have been or may be required in connection with the transactions contemplated by this Agreement or because of the default under or acceleration or termination of any Contract, Permit or Open Order solely as a result thereof. Buyer further agrees that no representation, warranty or covenant of Seller contained herein shall be breached 25 or deemed breached as a result of the failure to obtain any such consent, or as a result of any default, acceleration or termination resulting solely from such failure. Buyer further agrees that no condition to Buyer's obligations to close the transactions contemplated by this Agreement shall be deemed not satisfied as a result of the failure to obtain any such consent, except consents with respect to Material Non-Assignable Contracts. Buyer and Seller shall jointly cooperate in attempting to obtain any consents required in connection with the transactions contemplated by this Agreement; PROVIDED, HOWEVER, that Seller shall not be required to incur our-of-pocket expenses, commence any litigation or offer or grant any accommodation (financial or otherwise) to any third party. SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents and warrants to Buyer and to Holdings that: 4.1 ORGANIZATION AND GOOD STANDING. Seller is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, with full corporate power and authority to carry on the Business as presently conducted by it, and Seller is qualified to do business in each foreign jurisdiction where the failure to be so qualified would materially and adversely affect the condition (financial or otherwise), properties, assets or operations of the Business. 26 4.2 CORPORATE AUTHORITY. Seller has full corporate power and authority to execute and deliver this Agreement and the instruments of transfer and other documents delivered or to be delivered pursuant hereto, to perform all the terms and conditions hereof and thereof to be performed by it and to consummate the transactions contemplated hereby and thereby. This Agreement and all instruments of transfer and other documents delivered or to be delivered by Seller in connection with this Agreement have been duly authorized and approved by all necessary and proper corporate action of Seller (including all necessary shareholder action) and constitute, and will constitute, the valid and binding obligations of Seller enforceable against Seller in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws or equitable principles from time to time in effect relating to or affecting the rights of creditors generally. 4.3 NO VIOLATION. Neither the execution and delivery by Seller of this Agreement or the instruments of transfer and other documents delivered or to be delivered pursuant hereto by Seller and the performance by Seller hereunder or thereunder, nor the consummation of the transactions contemplated hereby or thereby, will violate, conflict with, result in the breach of or accelerate the performance required by any of the terms, conditions or provisions of the Certificate of Incorporation or Bylaws of Seller or any covenant, agreement or understanding to 27 which Seller is a party or any order, ruling, decree, judgment, arbitration award or stipulation to which Seller is subject, or constitute a default thereunder or result in the creation or imposition of any Lien upon any of the Purchased Assets, or allow any Person to accelerate any debt secured by any Purchased Asset, if as a result of any such violation, conflict, breach or acceleration, default or lien, Seller could not consummate the transactions contemplated by, or otherwise perform its obligations under, this Agreement in accordance with the terms hereof. 4.4 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES AND OTHERS. No approval or authorization of, filing or registration with, or notification to, any governmental or regulatory authority is required in connection with the execution and delivery of this Agreement by Seller or the performance of its obligations hereunder or the consummation of the transactions contemplated hereby, except as required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT"). Except as disclosed on SCHEDULE 4.4, no consent, approval or authorization of any Person is required in connection with the execution or delivery of this Agreement by Seller, the transfer to Buyer of the tangible personal property included in the Purchased Assets or the assignment of the Material Non-Assignable Contracts or the performance by Seller of its indemnification obligations under Section 11 of this Agreement. 28 4.5 FINANCIAL STATEMENTS. The Bid Balance Sheet has been, and the Audited Balance Sheets, including the Closing Balance Sheet will be, prepared in accordance with GAAP consistently applied throughout the periods involved except as may be noted therein, present or will present fairly in all material respects the financial condition of Seller, including all Purchased Assets and Assumed Liabilities of Seller as of the dates thereof, subject only to normal year-end adjustments in the case of the Bid Balance Sheet. Except as set forth in SCHEDULE 4.5, there has not been since September 24, 1995, any material adverse change in the condition (financial or other), properties, assets or liabilities of the Business. All books of account and other financial records of Seller directly relating to the Business (the "BOOKS AND RECORDS") have been prepared and maintained, where applicable, in conformity with GAAP and in compliance with applicable laws, regulations and other requirements and have been made available to Buyer. 4.6 LITIGATION; COMPLIANCE WITH LAWS. Except as disclosed on SCHEDULE 4.6 or except as would not have a material adverse effect on the condition (financial or other), properties, assets, operations, liabilities or prospects of the Business, Seller is not engaged in, or a party to, or, to its knowledge, threatened with, any legal action, suit, investigation or other proceeding by or before any court, arbitrator or administrative 29 agency relating to the Business. There are no outstanding orders, rulings, decrees, judgments or stipulations or proceedings relating to the Business to which Seller is a party or by which Seller is bound, by or with any court, arbitrator or administrative agency that could have a material adverse effect on the condition (financial or other), properties, assets, operations, liabilities or prospects of the Business. Seller is operating the Business in material compliance with the requirements of all federal, state and local laws, regulations, judgments, injunctions, decrees, court orders and administrative orders regarding such operations. 4.7 INTELLECTUAL PROPERTY. The Intellectual Property, Related Rights, Technical Information and Computer Software Assets include all intellectual property and proprietary rights that are necessary to operate the Business as currently conducted by Seller. Seller requires no material rights under any patent, trade secret or other proprietary information or computer software license known to Seller, which Seller does not have or does not have the lawful right to use, in order to conduct the Business as currently conducted or to manufacture and sell any product manufactured and sold by the Business. Except as described on SCHEDULE 4.7, all patents, copyrights (where such registration is permitted or required by applicable law), trademarks, tradenames and service marks included in the Intellectual Property are registered to or owned by or licensed to Seller, and all annuities, if any, are fully paid. There are 30 no pending or, to the knowledge of Seller, threatened actions against Seller for infringement of any patents, copyrights, trademarks, tradenames or service marks. None of the patents or patent applications included in the Intellectual Property is involved in a reissue, reexamination, interference, opposition or similar proceeding, and, to Seller's knowledge, there is no threat or other indication that any such proceeding will be declared or commenced. All licenses permitting Seller to use any Intellectual Property, Technical Information or Computer Software Assets are in full force and effect and, the terms of such licenses do not provide that they shall be terminated or restricted as a result of the consummation of the transactions contemplated by this Agreement. 4.8 NO PRIOR SALE OR LICENSING OF PURCHASED ASSETS. Except as disclosed on SCHEDULE 4.8, Seller is not a party to any license with respect to, and has not made any sale, pledge or other transfer of, and has not granted any rights or options to purchase or acquire, all or any part of the Purchased Assets, except as contemplated by this Agreement. 4.9 CERTAIN FEES. Neither Seller nor any of its officers, directors, employees or other affiliates has agreed to pay or has incurred any claims for any brokerage fees, commissions or finders' fees in connection with the transactions contemplated hereby other than to Coopers & Lybrand LLP. 4.10 PURCHASED ASSETS. (a) The Lease and all leases of personal property included in the Purchased Assets are valid 31 and enforceable against Seller in accordance with their respective terms. There is not, under any such lease, any existing default by Seller, or a claim by any other party to any such lease that the lease is unenforceable. All commissions payable by Seller under or with respect to the Lease have been paid. (b) Seller has good title to, and all right, title and interest in, all the Purchased Assets, and will transfer and convey the Purchased Assets to Buyer, free and clear of all Liens. None of the Purchased Assets were purchased by Seller in a bulk sale. As used in this Agreement, "LIENS" shall mean and include all mortgages, liens, pledges, charges, title retention or security agreements, claims, restrictions, leases, options, rights of first offer or first refusal, defects of title or other encumbrances or rights of others. (d) All the tangible Purchased Assets of Seller are used and operated by Seller in conformity in all material respects with all applicable laws and regulations. (e) The Purchased Assets include all tangible and intangible personal property which are necessary to operate the Business as currently operated by Seller, except the Excluded Assets. 4.11 TECHNICAL INFORMATION. On the Release Date, Seller will have delivered all patterns, manufacturer's manuals and copies of all other Technical Information in its possession to Buyer. 32 4.12 INVENTORY. The Inventory (whether finished or unfinished, to which title has not yet passed, or which has not been delivered, to a customer) of Seller is valued at the lower of cost on a first-in, first-out basis or fair market value, in accordance with GAAP consistently applied. 4.13 CONTRACTS. (a) A true and correct copy of each Contract has previously been made available to Buyer. All Contracts are valid, binding and in full force and effect, and neither Seller nor, to Seller's knowledge, any other party to any such Contracts is in default thereunder. The Business is in compliance in all material respects with all CAS requirements with respect to any Contracts with the United States or any agency thereof. (b) Set forth on SCHEDULE 4.13 is a list of all Contracts having an aggregate future liability in excess of $100,000 which are not terminable by Seller on (i) not more than 90 days notice without penalty or premium or (ii) for an aggregate cost of less than $100,000 (the "MATERIAL CONTRACTS"). 4.14 OPEN ORDERS. All Open Orders are valid, binding and in full force and effect and neither Seller nor, to Seller's knowledge, the other party thereto is in default thereunder. 4.15 ACCOUNTS RECEIVABLE. All of the Accounts Receivable arose in BONA FIDE transactions in the ordinary course of Seller's business. The accounts receivable balances reflected on the Bid Balance Sheet and the Closing Balance Sheet include 33 appropriate reserves for doubtful accounts in accordance with GAAP consistently applied. 4.16 PERMITS AND LICENSES. The Permits (other than the Environmental Permits which are subject to Section 4.21) are the only permits, franchises, licenses or authorizations currently necessary for the operation of the Business as operated by Seller. Seller has no actual knowledge and has received no written notice that any other permit, franchise, license or authorization is required to be obtained to operate the Business as currently operated by Seller. All Permits are in full force and effect and, to Seller's knowledge, no suspension or cancellation of any have been threatened. No claims have been made in writing by any Governmental Authority or other Person relating to the Permits and, to Seller's knowledge, no such claim is contemplated by any Governmental Authority or other Person nor does any basis therefor exist. True and correct copies of all Permits have been delivered to Buyer. 4.17 INSURANCE. Set forth on SCHEDULE 4.17 is a list and description of all insurance policies held by or on behalf of Seller as of the date hereof covering the Business. Seller has not received any notice of actual or proposed cancellation or of reduction in coverage of, or of any increase in premium under, such policies of insurance. 4.18 WARRANTY; PRODUCT LIABILITY. Except as set forth on SCHEDULE 4.18, there is not presently any action, suit, proceeding, claim or investigation pending, or to Seller's 34 knowledge, threatened, against Seller for personal injury or property damage or otherwise relating to the safety or fitness of the goods or products manufactured by the Business. 4.19 ABSENCE OF SENSITIVE PAYMENTS. Seller has not made any contributions, payments or gifts to or for the private use of any governmental official, governmental employee or governmental agent in any amount where either the payment or the purpose in making such contribution, payment or gift is illegal under the laws of the United States or any other jurisdiction; Seller has not established or maintained any unrecorded fund or asset for any purpose or made any false or artificial entries on its books; and Seller has not made any payments to any Person with the intention or understanding that any part of such payment was to be used for any purpose other than that described in the document supporting the payment. 4.20 TAXES. Except as described on SCHEDULE 4.20 attached hereto, Seller has duly and timely filed all tax returns required to be filed by it or for which it may be held responsible, and has paid all Taxes, interest, penalties, duties, assessments and deficiencies due and payable by it, where the failure to pay could result in a Lien on the Purchased Assets. 4.21 ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 4.21: (a) in connection with the use, ownership, or operation of the Business and the Purchased Assets, to Seller's knowledge, Seller is in continuous compliance in all material 35 respects with all applicable laws, agreements, and regulations promulgated or issued or applied to the Business by any municipal, local, city, county, state, federal or foreign court, agency, board, legislature, commission or other legislative, judicial, administrative or regulatory body ("GOVERNMENTAL AUTHORITY") relating to the protection of the environment ("ENVIRONMENTAL LAWS") (including, without limitation, all Environmental Laws concerning (i) emission, discharge, spill, leak, release or threatened release ("RELEASE") of Hazardous Materials into the environment, or (ii) the production, manufacture, processing, distribution, generation, use, treatment, storage, disposal, transportation or handling of Hazardous Materials), in connection with which the failure to comply could have a material adverse effect on the condition (financial or other), properties, assets, operations, liabilities or prospects of the Business. The term "HAZARDOUS MATERIALS" means hazardous substances or regulated substances as defined under any applicable federal, state or local Environmental Law, or any other substance considered toxic, hazardous or a potential threat to human health or the environment under applicable law or common law, the presence of which has resulted or might result in a party incurring costs, losses, liabilities, damages or legal obligations; (b) no facts, events or conditions relating to the facilities, properties or operations of the Business will prevent, hinder or limit continued compliance with any 36 Environmental Laws in a way which could have a material adverse effect on the condition (financial or other), operations, liabilities or prospects of the Business or the Purchased Assets; (c) all permits necessary for the operation of the Business in compliance with Environmental Laws ("ENVIRONMENTAL PERMITS") have been obtained by Seller and are listed on SCHEDULE 4.21, except such Environmental Permits the lack of which could not have a material adverse effect on the condition (financial or other), operations, liabilities or prospects of the Business or the Purchased Assets. All Environmental Permits are in full force and effect and are not subject to any appeals or to any unsatisfied conditions which pursuant to Environmental Law had to be satisfied by the Release Date. To Seller's knowledge, no modification, suspension, recision, revocation or cancellation of any Environmental Permit is pending or threatened; (d) Seller has not given or received written notice to or from any Governmental Authority or Person of, and no notice, citation, summons or order has been issued, no review remains pending or has been threatened in writing by any Governmental Authority with respect to, any alleged Release, event, condition, activity, practice or incident concerning the reissuance of permits to Buyer or to proposed or adopted changes in Environmental Law that (i) would have some reasonable likelihood of preventing material compliance or continued material compliance by Seller (or by Buyer after the Release 37 Date) with any Environmental Law or (ii) would be reasonably likely to give rise to or result in any liability of Buyer after the Release Date to the Person or Governmental Authority, and which, with respect to either (i) or (ii), could have a material adverse effect on the condition (financial or other), properties, assets, operations, liabilities or prospects of the Business. (e) SCHEDULE 4.21 identifies all sites at or to which any waste generated by the Business is currently being transported, stored, treated or disposed ("DISPOSED" or "DISPOSAL"). Except as identified in SCHEDULE 4.21: (i) To the knowledge of Seller, none of the sites identified in SCHEDULE 4.21 is or may become the subject of a response action under the Comprehensive Environmental Response, Compensation and Liability Act, as amended, or any similar federal, state or local law imposing liability for remediation; (ii) Seller has not, in connection with the Business, received (A) a written request for information from any Governmental Authority with respect to any discharge or removal of any Hazardous Materials, or (B) other written notice that it has been identified in any litigation, administrative proceeding or investigation as a responsible party or a potentially responsible party for any liability under any Environmental Law or in connection with any Hazardous Material; (iii) Seller has not filed any notice with any Governmental Authority reporting a release of Hazardous 38 Materials in connection with the Business or any property owned, leased or operated by the Business. 4.22 SUBSIDIARIES; INVESTMENTS. The Business does not own, directly or indirectly, any shares in the capital of any corporation, association, trust or similar entity, any interest in the equity of any partnership or similar entity, any share in any joint venture, or any other equity or proprietary interest in any entity or enterprise, however organized and however such interest may be denominated or evidenced. 4.23 BENEFIT PLANS AND EMPLOYMENT ARRANGEMENTS. (a) SCHEDULE 4.23 is a list of each welfare plan as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); pension plan, as defined in Section 3(2) of ERISA; or retirement, insurance, bonus, deferred compensation or other plan or arrangement currently maintained by Seller or to which Seller contributes or is obligated to contribute for the benefit of one or more Hired Represented Employees or Hired Non-Represented Employees. (b) The acquisition by Buyer and Holdings of the Purchased Assets and the employment of the Hired Represented Employees and Hired Non- Represented Employees by Buyer will not, directly or indirectly, give rise to any withdrawal liability or potential withdrawal liability on the part of Buyer with respect to any plan maintained by Seller or to which Seller has or has had any obligation to contribute for the benefit of any such employees that is a "multiemployer plan" as that term is defined 39 in Section 3(37)(A) of ERISA ("MULTIEMPLOYER PLAN"). Except as described on SCHEDULE 4.23, Seller has no unfulfilled obligation to contribute to any Multiemployer Plan or collectively bargained welfare plan. Seller (i) has not incurred any liability, which has not been discharged, that arises from either a complete or partial withdrawal (as defined in Section 4203 or 4205 of ERISA, respectively) from any Multiemployer Plan and (ii) has not incurred a decline in contributions to a Multiemployer Plan such that, if the current rate of contributions continues, a 70% or greater decline in contributions will occur within the next three plan years. (c) All material liabilities to the Pension Benefit Guaranty Corporation pursuant to Section 4007 of ERISA and all liabilities to the Internal Revenue Service under Section 4971 of the Internal Revenue Code of 1986, as amended (the "CODE") have been fully paid. Apart from such liabilities under Section 4007 of ERISA and Section 4971 of the Code, Seller has no liability to the Pension Benefit Guaranty Corporation or to the Internal Revenue Service with respect to any pension plan intended to be qualified under Section 401 of the Code. To Seller's knowledge, there does not exist any condition, there has not occurred any event, and there has not been any omission, with respect to the sponsorship, funding or administration of any employee benefit plan which has or could result in a Lien upon or claim with respect to any of the Purchased Assets, or Buyer or Holdings being liable for any contribution, withdrawal liability, 40 benefit, claim, settlement, Tax, penalty, or payment of any nature. (d) Except as set forth in SCHEDULE 4.23, each group health plan that provides health coverage to any present or former employee of the Business has operated in compliance with all requirements of Sections 601 through 608 of ERISA and either Section 162(i)(2) and (k) of the Code and the regulations promulgated thereunder (for years prior to 1989) or Section 4980B of the Code and the regulations promulgated under former Section 162(i)(2) and (u) of the Code (for years after 1988), relating to the continuation of coverage under certain circumstances in which coverage would otherwise cease. SCHEDULE 4.23, to be delivered on or before the Release Date, sets forth a true and complete list of all Hired Represented Employees of the Business and their respective beneficiaries who are receiving or who are eligible to elect to receive such continuation coverage under such group health plans pursuant to such provisions of ERISA and the Code. (e) Except with respect to Local 1039, Seller has not carried on discussions regarding organization with any labor union and there has not been any strike, work stoppage, labor dispute or other labor trouble relating to employees of the Business, and there are no significant threats of work stoppage or labor trouble by employees of the Business. (f) Attached as EXHIBIT B is a true and correct copy of the Seller's Union Plan. 41 SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER AND HOLDINGS. 5.1 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to Seller as follows: (a) Buyer is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania and has full corporate power and authority to execute and deliver this Agreement and the other documents delivered or to be delivered pursuant hereto, to perform all the terms and conditions hereof and thereof to be performed by it and to consummate the transactions contemplated hereby and thereby. This Agreement and the other documents delivered or to be delivered pursuant hereto have been duly authorized and approved by all necessary and proper corporate action of Buyer (including all necessary shareholder action) and constitute, and will constitute, the valid and binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws or equitable principles from time to time in effect relating to or affecting the rights of creditors generally. (b) Neither the execution and delivery by Buyer of this Agreement or the instruments of transfer and other documents delivered or to be delivered pursuant hereto by Buyer and the performance by Buyer hereunder or thereunder, nor the 42 consummation of the transactions contemplated hereby or thereby, will violate, conflict with, result in the breach of or accelerate the performance required by any of the terms, conditions or provisions of the Articles of Incorporation or Bylaws of Buyer or any covenant, agreement or understanding to which Buyer is a party or any order, ruling, decree, judgment, arbitration award or stipulation to which Buyer is subject, or constitute a default thereunder. (c) No approval or authorization of, filing or registration with, or notification to, any Governmental Authority is required in connection with the execution and delivery of this Agreement by Buyer or the performance of its obligations hereunder or the consummation of the transactions contemplated hereby, except filings under the HSR Act. (d) Neither Buyer nor any of its officers, directors, employees or Affiliates has agreed to pay or has incurred any claims for any brokerage fees, commissions or finders' fees in connection with the transactions contemplated hereby, other than a $365,000 financing fee to TFX Equities in connection with issuance of a subordinated note to TFX Equities. (e) Except as would not have a material adverse effect on the condition (financial or other), properties, assets, liabilities or prospects of Buyer, Buyer is not engaged in, or a party to, or, to its knowledge, threatened with, any legal action, suit, investigation or other proceeding by or before any court, arbitrator or administrative agency. There are no 43 outstanding orders, rulings, decrees, judgments or stipulations or proceedings to which Buyer is a party or by which Buyer is bound, by or with any court, arbitrator or administrative agency that could have a material adverse effect on the condition (financial or other), properties, assets, liabilities or prospects of the Business when it is acquired by Buyer. (f) Buyer does not own of record or beneficially, directly or indirectly, any shares of outstanding capital stock or securities convertible into capital stock of any corporation or any participating interest in any noncorporate business enterprise. 5.2 REPRESENTATIONS AND WARRANTIES OF HOLDINGS. (a) Holdings is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and has full corporate power and authority to execute and deliver this Agreement, the Subordinated Note and the other documents delivered or to be delivered pursuant hereto, to perform all the terms and conditions hereof and thereof to be performed by it and to consummate the transactions contemplated hereby and thereby. As of the Release Date, this Agreement, the Subordinated Note and the other documents delivered or to be delivered pursuant hereto will be authorized and approved by all necessary and proper corporate action of Holdings (including all necessary shareholder action) and will constitute the valid and binding obligations of Holdings, enforceable against Holdings in accordance with their respective terms, except as such 44 enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws or equitable principles from time to time in effect relating to or affecting the rights of creditors generally. (b) Neither the execution and delivery by Holdings of this Agreement, the Subordinated Note or the instruments of transfer and other documents delivered or to be delivered pursuant hereto by Holdings and the performance by Holdings hereunder or thereunder, nor the consummation of the transactions contemplated hereby or thereby, will, as of the Release Date, violate, conflict with, result in the breach of or accelerate the performance required by any of the terms, conditions or provisions of the Certificate of Incorporation or Bylaws of Holdings or any covenant, agreement or understanding to which Holdings is a party or any order, ruling, decree, judgment, arbitration award or stipulation to which Holdings is subject, or constitute a default thereunder. No approval or authorization of, filing or registration with, or notification to, any Governmental Authority is required in connection with the execution and delivery of this Agreement by Holdings or the performance of its obligations hereunder or the consummation of the transactions contemplated hereby, except filings under the HSR Act. (c) Neither Holdings nor any of its officers, directors, employees or Affiliates has agreed to pay or has incurred any claims for any brokerage fees, commissions or 45 finders' fees in connection with the transactions contemplated hereby, other than a $365,000 financing fee to TFX Equities in connection with issuance of the Subordinated Note. (d) Except as would not have a material adverse effect on the condition (financial or other), properties, assets, liabilities or prospects of Holdings, Holdings is not engaged in, or a party to, or, to its knowledge, threatened with, any legal action, suit, investigation or other proceeding by or before any court, arbitrator or administrative agency. There are no outstanding orders, rulings, decrees, judgments or stipulations or proceedings to which Holdings is a party or by which Holdings is bound, by or with any court, arbitrator or administrative agency that could have a material adverse effect on the condition (financial or other), properties, assets, liabilities or prospects of Holdings. (e) Holdings has furnished to Seller the consolidated balance sheet of Holdings and its subsidiaries as of March 31, 1995 and the related consolidated statements of income, changes in stockholders' equity and cash flows for the fiscal year then ended. Such financial statements have been prepared in accordance with GAAP consistently applied and present fairly in all material respects the consolidated financial position of Holdings and its subsidiaries as of such date, and the consolidated results of their operations for the period then ended. 46 SECTION 6. COVENANTS. 6.1 SALES TAXES. Buyer and Seller shall each pay one half of, and Seller shall collect and remit, all sales, use and transfer Taxes, if any, arising from the sale of the Purchased Assets pursuant hereto. Buyer shall deliver to Seller on of before the Release Date one or more fully executed sales tax resale certificates as reasonably requested by Seller in connection with the purchase and sale of inventory under this Agreement. 6.2 ACCESS TO OFFICES, OFFICERS, ACCOUNTANTS, DUE DILIGENCE, ETC. Seller will afford to, and will cause its Affiliates to afford to, the officers and authorized representatives of Buyer and Holdings (including without limitation, attorneys, accountants, surveyors, building inspectors, engineers, environmental consultants, insurance brokers, financial advisors and bankers) reasonable access during regular business hours to the offices, officers, properties, books and records of Seller relating to the Business, including contact with attorneys, accountants and other representatives of Seller and its Affiliates, and will furnish Buyer and Holdings with such additional financial and operating data and other information as to the Business and Purchased Assets as Buyer or Holdings may from time to time reasonably request. Seller will cooperate with Buyer to facilitate Buyer's contacting, jointly with Seller, vendors, dealers, customers and such other Persons as Buyer and its representatives may reasonably desire to contact 47 in connection with Buyer's investigation of the Business. Investigations conducted Buyer, Holdings and their agents shall be conducted in such a manner as to minimize, to the extent reasonably practicable, the disruption of orderly business operations of Seller and properties examined shall be returned to their preexamination condition by Buyer and Holdings. 6.3 BUYER'S ENVIRONMENTAL INVESTIGATION. Buyer has commissioned an investigation of Seller's compliance with Environmental Laws, and a Phase I assessment of the presence of Hazardous Materials or other toxic or hazardous materials on properties currently owned, leased or operated by the Business. In connection with any such investigation: (a) Seller will comply, and will cause its Affiliates to comply, with any reasonable request for non-privileged, non-confidential information made by Buyer or its agents in connection with any such investigation. (b) Seller will assist Buyer or its agents to obtain any non- privileged, non-confidential records pertaining to the Business or to properties owned or operated by the Business in connection with such an investigation. (c) Seller will accord, and will cause its Affiliates to accord, Buyer and its agents access to all areas of the properties owned or operated by Seller at reasonable times and in a reasonable manner in connection with any such investigation. 48 6.4 APPROVALS; CONSENTS. (a) Seller and Buyer have filed the notification required under the HSR Act relating to the purchase and sale contemplated by this Agreement with the United States Department of Justice and the Federal Trade Commission, (ii) shall promptly respond to inquiries from the United States Department of Justice and the Federal Trade Commission in connection with such notification, and (iii) have requested early termination of the waiting period under the HSR Act. (b) Subject to Section 3.4, Seller shall use its best efforts to obtain the consents of all other parties to all Contracts, Open Orders, Permits and rights of Seller, which require the consent of such parties for the consummation of the transactions contemplated hereby. (c) Buyer will promptly file and use its best efforts to transfer or have issued to it all Environmental Permits relating to the Business that are currently maintained by Seller and which are required to be obtained by a tenant in connection with the operation of the Business. 6.5 PRESERVATION OF BUSINESS ORGANIZATION. Seller will conduct the Business in the ordinary course, in a manner consistent with applicable federal and state regulations, and will use its best efforts to preserve Seller's business relationships intact and to preserve the goodwill of Seller with its suppliers, customers and others having business relations with it. 49 6.6 APPROVAL OF CERTAIN TRANSACTIONS. Except as specifically contemplated by this Agreement, without the prior written consent of Buyer, Seller will not, in the conduct of the Business: (a) incur or agree to incur any liability or obligation or enter into any agreement or transaction that cannot be cancelled upon sixty days (60) notice, except purchase orders and supply contracts for less than $100,000 in any individual instance entered into in the ordinary course of business and renewals or replacements of existing Contracts in the ordinary course on substantially the same terms; (b) mortgage, pledge, sell, lease, distribute, dispose of or otherwise encumber or convey any interest in any Purchased Assets; (c) make any capital expenditures in excess of $100,000; (d) waive or release any material rights with respect to the Purchased Assets or the Business; (e) change its methods of accounting; (f) adopt or modify or pay any bonus, pension, profit sharing or other compensation plan, other than budgeted increases for non-management employees, or enter into or modify any Contract or terms and conditions of employment; or (g) take any other action (i) which would result in a material adverse change in the condition (financial or other) of the Business or the Purchased Assets or (ii) which if 50 taken prior to the date hereof would constitute a breach of any representation or warranty contained in Section 4 of this Agreement. 6.7 EXCLUSIVE DEALING. Seller will not: (a) solicit or initiate discussions or engage in negotiations with any Person other than Buyer and Holdings (whether or not such discussions are initiated by Seller), with respect to the possible acquisition of the Business or the Purchased Assets by such Person (whether by merger, purchase of capital stock, purchase of assets or otherwise); (b) provide any information with respect to Seller, the Business or the Purchased Assets to any Person other than Buyer and Holdings relating to the possible acquisition of Seller, the Business or the Purchased Assets by such Person (whether by merger, purchase of capital stock, purchase of assets or otherwise); or (c) enter into a transaction with any Person other than Buyer and Holdings concerning the possible acquisition of Seller, the Business or the Purchased Assets by such Person (whether by merger, purchase of capital stock, purchase of assets or otherwise). 6.8 LEASED VEHICLES. Seller shall maintain the fleet lease agreement with respect to leased automobiles and trucks used by the Business and otherwise comply with all the terms and conditions of such lease agreement, until such lease expires by its terms, without extension. Buyer will reimburse Seller 51 monthly as invoiced for the monthly lease payments under such lease agreement for such leased automobiles and trucks. 6.9 INTERCOMPANY ACCOUNTS. As of the opening of business on the Effective Date, Seller and the Business will have cancelled and forgiven (without recourse), as between Seller on the one hand and Buyer and the Business on the other hand, all amounts with respect to any intercompany accounts or otherwise (a) due by Seller to the Business or (b) due by the Business to Seller. 6.10 FURTHER ASSURANCES. From time to time after the Release Date, at Buyer's or Holdings' request and without further consideration, Seller will, consistent with Section 3.4, execute and deliver such other and further instruments of conveyance, assignment and transfer, and take such other action, as Buyer or Holdings may reasonably request for the more effective conveyance and transfer of the Buyer Purchased Assets to Buyer and the Intellectual Property and the Related Rights to Holdings. To the extent that the assignment of confidentiality and noncompetition agreements to Buyer or Holdings is not enforceable against the other parties to such agreements, Seller shall use its best efforts to enforce such agreements with respect to the Business at Buyer's or Holdings' expense. Seller shall cooperate with Buyer in obtaining execution of any documents by current or prior employees of Seller with respect to inventions, invention disclosures and patent applications for goods or processes invented prior to the Release Date. 52 6.11 SUPPLY CONTRACTS. Buyer and Seller shall continue to sell products to the other on substantially similar terms and conditions as in effect on December 31, 1995. SECTION 7. THE ESCROW CLOSING. The closing in escrow of the sale and purchase of the Purchased Assets (the "ESCROW CLOSING") shall take place at the offices of Ballard Spahr Andrews & Ingersoll, 1735 Market Street, 51st Floor, Philadelphia, PA, on December 29, 1995. At the Escrow Closing, this Agreement, the Interim Note, a lease from Seller to Buyer of the Owned Real Property and improvements located thereon, bills of sale for the Purchased Assets and an assignment and assumption agreement (collectively, the "ESCROWED DOCUMENTS") shall be deposited in escrow with Ballard Spahr Andrews & Ingersoll to be replaced by a financial institution (the "ESCROW AGENT") and shall be held and released on the terms and conditions of the Escrow Agreement dated December 29, 1995 by and among Buyer, Holdings, Seller and the Escrow Agent when all conditions precedent to the obligation to such release described in Section 8 and Section 9 of this Agreement are met or waived (such date, the "RELEASE DATE"), or on the date this Agreement is terminated pursuant to Section 13.1. SECTION 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER AND HOLDINGS TO DIRECT THE RELEASE FROM ESCROW. The obligation of Buyer and Holdings to direct the Escrow Agent to release the Escrowed Documents from the escrow is 53 subject to the satisfaction, or waiver in writing by Buyer and Holdings, on or prior to the Release Date of each of the following conditions: 8.1 CORPORATE ACTION. All corporate and other actions necessary to authorize and effectuate the consummation of the transactions contemplated hereby by Seller, Buyer and Holdings shall have been duly taken prior to the Release Date, and Seller shall have delivered to Buyer and Holdings a certificate of duly authorized officers or employees of Seller to that effect with respect to Seller, together with certified copies of resolutions of the Executive Committee of the Board of Directors of Seller authorizing the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 8.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Seller set forth in this Agreement shall be true and correct in all material respects on and as of the Release Date with the same effect as though all such representations and warranties had been made on and as of such date, and there shall have been delivered to Buyer and Holdings a certificate to that effect, dated the Release Date, signed by a duly authorized officer of Seller. For purposes of this Section 8.2 only, the representations and warranties will not be true in all material respects if Buyer and Holdings are not fully indemnified with respect to the change in such representation and warranty or the change in all such representations and warranties for which Buyer and Holdings are 54 not fully indemnified is likely to result in any loss, claim, obligation, action, damage, penalty, liability, cost, expense or other adverse monetary effect in an amount equal to or greater than $50,000 in the aggregate. 8.3 PERFORMANCE OF OBLIGATIONS. Each and all of the covenants and agreements of Seller to be performed or complied with pursuant to this Agreement on or prior to the Release Date shall have been duly performed and complied with, except in any immaterial respect, or duly waived and there shall have been delivered to Buyer and Holdings a certificate to that effect, dated the Release Date, signed by a duly authorized officer of Seller. 8.4 INSTRUMENTS OF CONVEYANCE, ETC. Seller shall have executed and delivered to Holdings patent assignments to transfer to Holdings of all of Seller's right, title and interest in and to the patents included in the Purchased Assets for recording with the applicable Governmental Authorities, trademark assignments to transfer to Buyer all of Seller's right, title and interest in and to the trademarks included in the Purchased Assets for recording with the applicable Governmental Authorities and a license agreement for the use of the name "Teleflex," and all Purchased Assets shall be free and clear of all Liens. 8.5 DELIVERY. On the Release Date, Seller shall deliver physical possession of all Equipment, Inventory, Technical Information and tangible property included in the Purchased Assets and any tangible evidence of all Open Orders and 55 Accounts Receivable to Buyer, and Seller shall deliver any tangible evidence of all Intellectual Property to Holdings. 8.6 OPINION OF COUNSEL. Buyer and Holdings shall have been provided with an opinion of Seller's counsel substantially in form attached as EXHIBIT B. 8.7 REQUIRED CONSENTS. Seller shall have obtained all consents and approvals of all third parties with respect to Material Non-Assignable Contracts, and all Governmental Authorities required for the transactions contemplated hereby, and all waiting periods specified by law the passing of which is necessary for the consummation of such transactions (including without limitation the waiting period under the HSR Act) shall have passed or been terminated. Seller shall have cooperated with Buyer in novating any Contracts that require a novation for Buyer to have the benefit of such Contracts. 8.8 LITIGATION. No order of any court or administrative agency shall be in effect which restrains or prohibits the transactions contemplated hereby and there shall not have been threatened in writing, nor shall there be pending, any action or proceeding by or before any court or governmental agency or other regulatory or administrative agency or commission, seeking to enjoin the transactions contemplated by this Agreement or seeking monetary relief from Buyer Holdings for which Buyer or Holdings is not fully indemnified by Seller under Section 11, by reason of the consummation of such transactions. 56 8.9 LEASE. Seller and Buyer shall have entered into a lease for record storage space at Seller's facility in Limerick, Pennsylvania on terms and conditions satisfactory to Buyer and Seller. 8.10 FINANCING. Buyer will have obtained financing from the CIT Group/Business Credit, Inc. on terms and conditions substantially similar to those described in the term sheet dated December 27, 1995, and Holdings shall have obtained all required waivers and consents from existing lenders. 8.11 AUDITED FINANCIALS. Seller shall have delivered financial statements for the Business audited by Price Waterhouse LLP for the periods ended December 31, 1993, December 31, 1994 and September 24, 1995 (which includes the Bid Balance Sheet). 8.12 NO MATERIAL ADVERSE CHANGE. There shall not have occurred any material adverse change in the business, financial condition, prospects, assets or operations of the Business or the Purchased Assets. SECTION 9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER TO DIRECT THE RELEASE FROM ESCROW. The obligation of Seller to direct the Escrow Agent to release the Escrowed Documents from the escrow is subject to the satisfaction, or waiver in writing by Seller, on or prior to the Release Date of each of the following conditions: 9.1 CORPORATE ACTION. All corporate and other actions necessary to authorize and effectuate the consummation of the 57 transactions contemplated hereby by Seller, Buyer and Holdings shall have been duly taken prior to the Release Date, and Buyer and Holdings shall each have delivered to Seller a certificate of duly authorized officers or employees of Buyer or Holdings, as the case may be, to that effect, together with certified copies of resolutions of the Board of Directors of Buyer and Holdings authorizing the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 9.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Buyer and Holdings set forth in this Agreement shall be true and correct on and as of the Release Date with the same effect as though all such representations and warranties had been made on and as of such date and there shall have been delivered to Seller a certificate of Buyer and of Holdings to that effect, dated the Release Date, signed by a duly authorized officer of Buyer or Holdings, as the case may be. 9.3 PERFORMANCE OF OBLIGATIONS. Each and all of the covenants and agreements of Buyer and Holdings to be performed or complied with pursuant to this Agreement on or prior to the Release Date shall have been duly performed and complied with, except in any immaterial respect, or duly waived and there shall have been delivered to Seller certificates to that effect, dated the Release Date, signed by a duly authorized officer of Buyer and of Holdings. 9.4 PAYMENT. Buyer shall have paid the Cash Portion of the Purchase Price together with cash equal to all accrued 58 interest on the Interim Note to Seller and shall have issued and delivered to Seller the Subordinated Note which shall be in form and substance acceptable to Seller and Holdings. 9.5 OPINION OF COUNSEL. Seller shall have been provided with an opinion of Buyer's and Holdings' counsel substantially in form attached as EXHIBIT C. 9.6 REQUIRED CONSENTS. Buyer and Holdings shall have obtained all consents and approvals of all third parties set forth on SCHEDULE 3.4 and all Governmental Authorities required for the transactions contemplated hereby, and all waiting periods specified by law the passing of which is necessary for the consummation of such transactions (including without limitation the waiting period under the HSR Act) shall have passed or been terminated. 9.7 LITIGATION. No order of any court or administrative agency shall be in effect which restrains or prohibits the transactions contemplated hereby and there shall not have been threatened in writing, nor shall there be pending, any action or proceeding by or before any court or governmental agency or other regulatory or administrative agency or commission, seeking to enjoin the transactions contemplated by this Agreement. 9.8 EQUITY. Buyer shall have issued and delivered to TFX Equities certificates evidencing a number of shares of Buyer's common stock representing 4.294% of the outstanding shares of common stock of Buyer on a fully diluted basis on terms 59 and conditions and subject to stock purchase and shareholder's agreements satisfactory to Buyer and TFX Equities. SECTION 10. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and warranties made by Seller or Buyer or Holdings as to any fact or condition existing on or before the Release Date in this Agreement, in any Schedule or in any certificate delivered pursuant to this Agreement, shall survive until June 30, 1997; provided that there shall be no termination of any such representation or warranty as to which a claim has been asserted prior to the termination of any such survival period; and provided further that the representations and warranties in Section 4.2 and in Section 5.1(a) and Section 5.2(a) shall survive indefinitely. All such representations and warranties shall be unaffected by any investigation made by or on behalf of Buyer or Seller or by knowledge obtained as a result thereof or otherwise. Except as otherwise expressly provided in this Agreement, all covenants, agreements, undertakings and indemnities set forth in this Agreement shall survive indefinitely. SECTION 11. INDEMNIFICATION. 11.1 ENVIRONMENTAL INDEMNITY AND COVENANT. (a) Seller has provided Buyer access to a copy of the results of all non-privileged, non-confidential environmental reports in connection 60 with the Owned Real Property by or on behalf of Seller through the date hereof. (This information shall be referred to collectively as the "ENVIRONMENTAL REPORTS".) (b) Seller agrees that it shall bear the expenses of, and responsibility for, any monitoring, remediation and other response actions and costs, claims, liabilities, damages or losses in relation to the matter of NORTH PENN WATER AUTHORITY V. LEEDS & NORTHRUP COMPANY, ET AL, United Sates District Court, Eastern District of Pennsylvania, Civil Action No. 94-CV-0455, and in connection with the North Penn Area 7 Superfund site, except to the extent caused or exacerbated by actions attributable to Buyer after the Release Date ("TCE REMEDIATION"). Any such monitoring, remediation and any other response action required at or in connection with the Owned Real Property shall be completed by Seller, at Seller's expense, subject to the provisions of Section 11.1(d). All such monitoring, remediation and any other response action required at the Owned Real Property shall be performed to the least stringent levels, criteria and requirements in effect at the time of such monitoring, remediation or response action acceptable to all Governmental Authorities with jurisdiction over the Owned Real Property. Subject to the limitations set forth in Section 11.1(c), all remediation shall be conducted under the exclusive direction and control of Seller, and/or its agents and consultants unless, because of Seller's failure to perform such remediation, a Governmental Authority takes action against Buyer, and Seller, 61 except as provided in Section 11.1(c), shall have the sole right to negotiate with any Governmental Authority concerning the timing, scope and levels of remediation, but shall proceed according to applicable levels, criteria and requirements applied by the respective Governmental Authority; provided however, Seller shall be entitled to contest the applicability of any such level, criteria or requirement. (All monitoring, remediation and other response activities required to be performed by Seller pursuant to this Section 11.1 shall collectively be referred to as the "REMEDIATION".) (c) Buyer agrees to cooperate with Seller with respect to any TCE Remediation or any other Remediation. During the course of any Remediation, Buyer shall, and hereby does, grant to Seller, its agents, employees, contractors and consultants, all access reasonably necessary to perform such remediation at reasonable times and in compliance with any health and safety requirements of Buyer. Such access shall include access to employees at the Business, including those with relevant environmental, health and safety knowledge or experience, as well as use of utilities at Seller's expense, and shall also include reasonable parking and storage space. Buyer agrees to allow Seller to install any remediation devices at, on or under the Owned Real Property, including, but not limited to, monitoring wells or pump and treat systems, that are required by any Governmental Authority or that Seller deems reasonably necessary to perform the Remediation, provided that such 62 remediation devices shall be installed and located to minimize impact on Buyer's operations considering technical and economic feasibility for both Buyer and Seller. During the course of the Remediation, Seller shall use its best efforts to avoid or minimize interference with the ongoing business of Buyer. Buyer may, at its own expense (such expense to include costs of consultants' and attorneys' fees), monitor the remediation in person, obtain split samples of any samples taken by Seller and/or its consultants, take samples from wells installed at any time by Seller on the Owned Real Property, provided Seller has consented (which consent shall not unreasonably be withheld), review all filings with any Governmental Authority prior to submission to the Governmental Authority and recommend changes to minimize interference with Buyer's operations. Buyer shall be entitled, at its own expense, to participate in any meetings with any Governmental Authority concerning the Remediation. Seller shall give Buyer access to information reasonably necessary to allow Buyer to undertake such activities and to monitor the progress of the Remediation, including, but not limited to, any materials or data created after the Release Date. If such access would require Seller to reveal information that would otherwise be protected by the attorney-client privilege, or any attorney work product doctrine or other privilege pertaining to confidentiality, then Seller and Buyer shall enter into a reasonable joint defense agreement, or similar agreement, governing the terms and conditions of such access and preserving, 63 to the greatest extent possible, the confidentiality of the information provided. Seller will provide Buyer (by informing Buyer's facility manager) with reasonable advance notice of any entry or access or other actions it proposes to or on the Owned Real Property. (d) Except for Buyer's monitoring expenses and Buyer's fees, if any, set forth in Section 11.1(c), Seller shall defend, indemnify and hold Buyer, its officers, directors, employees, subsidiaries and Affiliates harmless from all claims, liabilities, losses, damages, costs and expenses, including reasonable attorneys' fees and disbursements and other legal costs and consultants' fees, (i) arising from a failure by Seller to operate, own or conduct the Business in compliance with Environmental Laws, (ii) arising out of third party claims to the extent based on conditions that require the TCE Remediation or any other Remediation or the TCE Remediation or any other Remediation itself, (iii) arising from the off-site transportation, treatment, storage or disposal of Hazardous Materials at any time prior to the Release Date by Seller, and (iv) arising from any Release or presence of Hazardous Materials prior to the Release Date, including but not limited to from any response action relating to such Release or presence of Hazardous Materials at, on, in or under any real property now or previously owned, leased or operated by Seller at any such property. This indemnification obligation shall not include consequential 64 damages, lost profits or costs or expenses relating to any interruption of the Business. 11.2 INDEMNITY BY SELLER. (a) Seller shall defend, indemnify and hold Buyer and Holdings, their officers, directors, employees, subsidiaries and Affiliates harmless from and against all claims, damages, losses, liabilities, costs and expenses (including reasonable attorneys' fees and disbursements and any other legal costs) (collectively, "LOSSES") arising out of or resulting from: (i) Seller's operation or ownership of the Business or the Purchased Assets before the Release Date; (ii) the Excluded Liabilities; (iii) the breach by Seller of any covenant contained herein or in any agreement entered into by Seller pursuant to this Agreement requiring performance after the Release Date; (iv) the failure of any representation or warranty of Seller contained herein (other than in Section 4.2), in any Schedule or in any certificate delivered on the Release Date pursuant hereto to be true and correct; and (v) the failure of the representation and warranty of Seller contained in Section 4.2 to be true and correct. (b) Seller shall not have any liability under Section 11.2(a)(iv) until the aggregate amount of all such Losses exceeds $375,000, and then only to the extent that such Losses exceed 65 $250,000, and the Seller's maximum aggregate liability under Section 11.2(a)(iv) shall not exceed $10,000,000. 11.3 INDEMNITY BY BUYER. (a) Buyer shall defend, indemnify and hold Seller, its officers, directors, employees, subsidiaries and Affiliates harmless from and against all Losses arising out of or resulting from: (i) Buyer's operation or ownership of the Business or the Buyer Purchased Assets on and after the Release Date; (ii) the Assumed Liabilities; (iii) the breach by Buyer of any covenant contained herein or in any agreement entered into by Buyer pursuant to this Agreement requiring performance after the Release Date; (iv) the failure of any representation or warranty of Buyer contained herein (other than in Section 5.1(a)), in any Schedule or in any certificate delivered on the Release Date pursuant hereto to be true and correct; and (v) the failure of any representation or warranty of Buyer contained in Section 5.1(a) to be true and correct. (b) Buyer shall not have any liability under Section 11.3(a)(iv) until the aggregate amount of all such Losses exceeds $375,000, and then only to the extent that such Losses exceed $250,000. 11.4 INDEMNITY BY HOLDINGS. (a) Holdings shall defend, indemnify and hold Seller, its officers, directors, 66 employees, subsidiaries and Affiliates harmless from and against all Losses arising out of or resulting from: (i) Holdings' ownership of the Intellectual Property and the Related Rights on and after the Release Date; (ii) the breach by Holdings of any covenant contained herein or in any agreement entered into by Buyer pursuant to this Agreement requiring performance after the Release Date; (iii) the failure of any representation or warranty of Holdings contained herein (other than in Section 5.2(a)), in any Schedule or in any certificate delivered on the Release Date pursuant hereto to be true and correct; and (iv) the failure of any representation or warranty of Holdings contained in Section 5.2(a) to be true and correct. (b) Holdings shall not have any liability under Section 11.4(a)(iii) until the aggregate amount of all such Losses exceeds $375,000, and then only to the extent that such Losses exceed $250,000. 11.5 NOTICE OF CLAIM. Promptly after service of notice of any claim or of process on Buyer, on Seller or on Holdings (hereinafter in this Section 11.5, the "INDEMNIFIED PARTY") by any third party, or promptly after obtaining actual knowledge by the Indemnified Party of any other claim, in any matter in respect of which indemnity may be sought pursuant to this Section 11, the Indemnified Party shall promptly notify Buyer, Holdings or Seller (hereinafter in this Section 11.5, the "INDEMNIFYING 67 PARTY") of the receipt thereof. In the case of any action or proceeding by a third party, the Indemnifying Party shall have the right to participate in, or assume, at its own expense, the defense of any such claim or process or settlement thereof. After notice from the Indemnifying Party of its election so to assume the defense thereof, the Indemnified Party shall not be liable to the Indemnifying Party for any legal or other expense in connection with such defense. Such defense shall be conducted expeditiously (but with due regard for obtaining the most favorable outcome reasonably likely under the circumstances, taking into account costs and expenditures) and the Indemnified Party shall be advised of all significant developments. With respect to any matter which is the subject of any such claim and as to which the Indemnified Party fails to give the Indemnifying Party such notice as aforesaid, and such failure adversely affects the ability of the Indemnifying Party to defend such claim or materially increases the amount of indemnification which the Indemnifying Party is obligated to pay hereunder, the amount of indemnification which the Indemnified Party shall be entitled to receive shall be reduced to an amount which the Indemnified Party would have been entitled to receive had such notice been timely given. 11.6 LIMITATION OF INDEMNIFICATION. (a) The obligation of Seller to indemnify Buyer under Section 11.1, under Section 11.2(a)(i), under Section 11.2(a)(ii) and under Section 11.2(a)(v) shall survive without time limitation. The obligation 68 of Seller to indemnify Buyer under Section 11.2(a)(iii) shall expire with respect to each covenant six months after performance of the last event required under such covenant by its terms and the obligation of Seller to indemnify Buyer under Section 11.2(a)(iv) shall terminate on June 30, 1997. The obligation of Buyer to indemnify Seller under Section 11.3(a)(i), under Section 11.3(a)(ii) and under Section 11.3(a)(v) shall survive without time limitation; the obligation of Buyer to indemnify Seller under Section 11.3(a)(iii) shall expire with respect to each covenant six months after performance of the last event required under such covenant by its terms and the obligation of Buyer to indemnify Seller under Section 11.3(a)(iv) shall terminate on June 30, 1997. The obligation of Holdings to indemnify Seller under Section 11.4(a)(i) and under Section 11.4(a)(iv) shall survive without time limitation; the obligation of Holdings to indemnify Seller under Section 11.4(a)(ii) shall expire with respect to each covenant six months after performance of the last event required under such covenant by its terms and the obligation of Holdings to indemnify Seller under Section 11.4(a)(iii) shall terminate on June 30, 1997. No such termination shall occur as to matters as to which an Indemnified Person has given notice of a claim for indemnification in accordance with Section 11.5 on or prior to the applicable termination date, in which case the obligation shall survive until the claim is finally resolved, and (b) except with respect to any fraudulent misrepresentation or fraudulent material 69 omission or fraudulent breach of warranty, which shall survive without time limitation. 11.7 NO SET OFF. Neither Buyer nor Holdings shall be authorized at any time to set off and apply against any sum which is due and payable to Seller by Buyer or Holdings, any sum, liability or other obligation which may be owed to Buyer or Holdings by Seller under this Agreement or otherwise. Seller shall not be authorized at any time to set off and apply against any sum which is due and payable to Buyer or Holdings by Seller, any sum, liability or other obligation which may be owed to Seller by Buyer or Holdings under this Agreement or otherwise. 11.8 EXCLUSIVE REMEDY. Except as set forth in Section 12.4, Buyer, Holdings and Seller each acknowledge and agree that from and after the Release Date, their sole and exclusive remedy with respect to all claims relating to the subject matter of this Agreement shall be pursuant to the indemnification provisions of this Section 11. SECTION 12. NONCOMPETITION; NON-SOLICITATION. 12.1 NONCOMPETITION. The term "RESTRICTED BUSINESS" shall mean the manufacture or sale of controls of which flexible cable is a principal feature: (a) in the aerospace market; (b) for use in mechanical valve actuation in commercial and military shipping; and (c) for flux mapping systems of nuclear reactors. As a significant inducement to Buyer to enter into and to perform its obligations under this Agreement, and to acquire the 70 Business, Seller agrees that, for a period of five years after the Release Date (the "NONCOMPETITION PERIOD"), Seller will not, directly or indirectly, own, manage, control, operate, invest or acquire any interest in, or otherwise engage in, or act for or on behalf of any person engaged in, any Restricted Business; provided that this Section 12.1 shall not prohibit: (a) the acquisition of the securities or assets of a business where the gross annual revenues of such business attributable to a Restricted Business do not constitute more than 20% of the total gross revenues of such business, provided Seller offers to sell the Restricted Business to Buyer at the fair market value thereof, and (b) the acquisition of not more than 5% of the outstanding stock of any class of a corporation which is publicly traded, so long as Seller shall have no active participation in the management of such corporation. 12.2 NON-SOLICITATION. Seller agrees that for a period of five years after the Release Date, neither it nor any of its Affiliates will directly or indirectly offer employment to or hire any then current employee of the Business who is hired by Buyer without the prior written consent of Buyer. 12.3 LIMITATION. If, at the time of enforcement of this Section 12, a court shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area. 71 12.4 REMEDIES. Seller agrees that if it commits or threatens to commit a breach of any of the covenants and agreements contained in this Section 12, Buyer shall have the right to seek and obtain appropriate injunctive and other equitable remedies therefor, in addition to any other rights and remedies that may be available at law, it being acknowledged and agreed that any such breach would cause irreparable injury to Buyer and that money damages would not provide an adequate remedy therefor. SECTION 13. TERMINATION; MODIFICATION OR WAIVER. 13.1 TERMINATION. This Agreement may be terminated at any time prior to the Release Date: (a) by mutual written agreement of Buyer and Seller; (b) by Buyer or Holdings if the conditions to release of the Escrowed Documents have not been satisfied, through no fault or failure of Buyer and Holdings, on or before January 19, 1996; or (c) by Seller if the conditions to release of the Escrowed Documents have not been satisfied, through no fault or failure of Seller, on or before January 19, 1996. 13.2 MODIFICATION. This Agreement may be amended, modified and supplemented only by written agreement of the parties hereto. 72 13.3 WAIVER. Any failure of Seller, Buyer or Holdings to comply with any obligation, covenant, agreement or condition contained herein may be expressly waived in writing by Buyer and Holdings in the case of any such failure by Seller or by Seller in the case of any such failure by Buyer or Holdings, but such waiver or failure to insist upon strict compliance shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 13.3. SECTION 14. COSTS INCIDENT TO PREPARATION OF AGREEMENT. Each of the parties hereto shall pay, without right of reimbursement from the other, all costs incurred by it incident to the preparation, execution and delivery of this Agreement and the performance of its obligations hereunder, whether or not the transactions contemplated by this Agreement shall be consummated, including without limitation fees and disbursements of legal counsel, accountants and consultants employed by the respective parties hereto in connection with the transactions contemplated by this Agreement. 73 SECTION 15. RISK OF LOSS. All risk of damage or loss of any sort from any cause with respect to the Purchased Assets shall remain with Seller until the Release Date. SECTION 16. BEST EFFORTS. Each of the parties covenants to use its best efforts to cause the satisfaction of all conditions to release of the Escrowed Documents to be performed by it or satisfied on its part at or prior to January 19, 1996. SECTION 17. GENERAL. 17.1 PARTIES IN INTEREST; ASSIGNMENT. (a) This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and permitted assigns. Except as otherwise expressly provided in this Agreement, this Agreement is not made for the benefit of any Person not a party hereto, and nothing in this Agreement will be construed as giving any Person, other than the parties hereto and their respective successors and permitted assigns, any right, remedy or claim under or in respect of this Agreement, or any provision hereof. (b) Buyer and Holdings may assign their rights under this Agreement for collateral security purposes to the lenders providing financing for the transactions contemplated 74 hereby and all extensions, renewals, replacements, refinancings and refundings thereof in whole or in part. (c) After the Release Date, Buyer and Holdings may assign their rights under this Agreement to any purchaser of Buyer or to any purchaser of the Business, whether such purchase is accomplished by purchase of stock, purchase of assets, merger, consolidation or otherwise. (d) No party to this Agreement shall assign its rights and obligations under this Agreement without the prior written consent of all other parties. 17.2 CONFIDENTIALITY. Each party to this Agreement shall take all reasonable precautions to maintain the confidentiality of the negotiation or existence of this Agreement, the identity of the parties hereto and any nonpublic information concerning the other parties or their subsidiaries or affiliates provided to or discovered by it or its representatives and shall not disclose any of the above information to anyone other than (i) those people directly involved in the investigation and negotiations pertaining to the transactions contemplated by this Agreement, including without limitation, attorneys, accountants and similar representatives, (ii) such lenders or investors as may be necessary to finance the transactions contemplated hereby and (iii) such Persons or Governmental Authorities whose consents or approvals may be necessary or to whom notice needs to be given to permit consummation of the transactions contemplated hereby. In the 75 event of termination of this Agreement, Buyer and Holdings shall promptly return or destroy all documents, records or other information concerning Seller and/or the Business and shall not retain any copies of same. 17.3 PUBLIC STATEMENTS. No party to this Agreement shall, without the prior written consent of the other parties hereto, such consent not to be unreasonably withheld, make or cause to be made any press release or other public statement or announcement that directly or indirectly discloses the transactions contemplated by this Agreement. 17.4 CHOICE OF LAW. This Agreement shall be governed by, construed, interpreted and the rights of the parties determined in accordance with the laws, including equitable principles but without regard to principles of conflict of laws, of the Commonwealth of Pennsylvania. 17.5 MEDIATION. In the event of a dispute arising out of or related to this Agreement, the parties shall, prior to initiating litigation, first submit the dispute to non-binding mediation under the commercial mediation rules of the American Arbitration Association. The parties hereby acknowledge and agree that such mediation shall be deemed to be in the nature of settlement discussions and that neither the fact that such discussions took place, nor any statement or conduct of any participant in such discussions shall be admissible into evidence in any subsequent litigation or in any arbitration or other dispute resolution proceeding involving the parties. It is 76 further understood and agreed that any disclosure in any form, including oral, by any Person participating in such mediation shall not operate as a waiver of any privilege, including work product or attorney-client privilege, applicable to the subject matter thereof. 17.6 NOTICES. Any notice, request, consent, waiver or other communication required or permitted to be given hereunder shall be effective only if in writing and shall be deemed sufficiently given only if delivered in person or sent by telecopy, telegram, cable or by certified or registered mail, postage prepaid, return receipt requested, addressed as follows: IF TO SELLER: Teleflex Incorporated 630 West Germantown Pike, Suite 450 Plymouth Meeting, PA 19462 Attention: Steven K. Chance Vice President and General Counsel with a copy to: Christopher G. Karras, Esquire Dechert Price & Rhoads 4000 Bell Atlantic Tower 1717 Arch Street Philadelphia, PA 19103 IF TO BUYER OR HOLDINGS: The Triumph Group Operations, Inc. Four Glenhardie Corporate Center 1255 Drummers Lane - Suite 200 Wayne, PA 19087 Attention: President 77 with a copy to: E. Carolan Berkley Ballard Spahr Andrews & Ingersoll 1735 Market Street, 51st Floor Philadelphia, PA 19103 or to such other Person or address as either such party may have specified in a notice duly given by the sender as provided herein. Such notice or communication shall be deemed to have been given as of the date so delivered, telegraphed, cabled or mailed. 17.7 ENTIRE AGREEMENT. This Agreement (including the Schedules and Exhibits attached hereto) and the documents referred to herein as having been entered into by any of the parties hereto or delivered by a party hereto to another party hereto constitute the entire agreement and understanding of the parties relating to the subject matter hereof and supersede all prior and contemporaneous agreements and understandings, representations and warranties, whether oral or written, relating to the subject matter hereof. The terms of this Agreement cannot be changed, modified, released or discharged orally. 17.8 NO WAIVER. No delay or failure on the part of any party in exercising any rights hereunder, and no partial or single exercise thereof, will constitute a waiver of such rights or of any other rights hereunder. The rights and remedies provided in this Agreement are cumulative and are not exclusive of any rights or remedies a party may otherwise have at law or in equity. 78 17.9 SEVERABILITY. The unenforceability or invalidity of any Section or subsection or provision of this Agreement shall not affect the enforceability or validity of the balance of this Agreement. If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only as broad as is enforceable. 17.10 HEADINGS. The headings of the Sections and subsections contained in this Agreement are for reference purposes only and shall not in any way affect the meaning, interpretation, enforceability or validity of this Agreement. 17.11 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which so executed will be deemed to be an original, but all of which together will constitute one and the same agreement. 17.12 FACSIMILES. Any facsimile signature of any party hereto or to any other agreement executed in connection herewith shall constitute a legal, valid and binding execution hereof by such party. 17.13 CONSTRUCTION. Seller, Buyer and Holdings hereby agree that any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. Within this Agreement, the singular shall include the plural and the plural shall include the singular, and any gender shall include all other genders, all as the meaning and the context of this Agreement shall require. 79 Section, Exhibit and Schedule references contained in this Agreement refer to those contained in or attached to this Agreement unless otherwise specified. 17.14 WAIVER OF JURY TRIAL. SELLER, BUYER AND HOLDINGS HEREBY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY LITIGATION RELATING TO THIS AGREEMENT AND THE OTHER DOCUMENTS EXECUTED IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY. 80 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. TELEFLEX INCORPORATED By /s/ John R. Bartholdson ----------------------------- Title Sr. Vice Pres --------------------------- THE TRIUMPH GROUP HOLDINGS, INC. By /s/ Richard C. Ill ----------------------------- Title President --------------------------- TRIUMPH CONTROL SYSTEMS, INC. By /s/ Richard C. Ill ----------------------------- Title President --------------------------- 81 EX-10.12 14 EXHIBIT 10.12 Exhibit 10.12 THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS NOTE IS SUBJECT TO CERTAIN SUBORDINATION PROVISIONS SET FORTH IN PARAGRAPH 8 HEREIN. THIS NOTE WAS ORIGINALLY ISSUED ON DECEMBER 31, 1995 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY COMPARABLE STATE SECURITIES LAW. THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN PARAGRAPH 12 HEREIN. SUBORDINATED PROMISSORY NOTE December 31, 1995 $5,500,000 THE TRIUMPH GROUP HOLDINGS, INC., a Delaware corporation (the "COMPANY"), hereby promises to pay to Teleflex Incorporated (the "SELLER"), or its permitted assigns (the Seller and each of its permitted assigns is a "HOLDER") the principal amount of Five Million Five Hundred Thousand Dollars, together with interest thereon calculated from the date hereof in accordance with the provisions of this Note. This Note is the "SUBORDINATED NOTE" issued pursuant to that certain Asset Purchase Agreement, dated as of December 31, 1995 (the "PURCHASE AGREEMENT"), by and among The Triumph Group Holdings, Inc., Triumph Control Systems, Inc. and the Seller. Certain defined terms used herein are set forth in paragraph 17 hereof. 1. PAYMENT OF INTEREST. Interest shall accrue at the rate of ten and one-half percent (10-1/2%) per annum, compounded quarterly, on the unpaid principal amount of this Note outstanding from time to time. Subject to the provisions of paragraph 6 and paragraph 8 hereof, the Company shall pay to the holder of this Note quarterly, in arrears, all accrued interest on each April 30, July 31, October 31 and January 31 during the term of this Note (each such date being hereinafter referred to as an "INTEREST PAYMENT DATE"), beginning on April 30, 1996. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law to the extent that such interest is an allowed claim enforceable against the debtor in a bankruptcy case under Title 11 of the U.S. Code) on overdue principal, at the rate then borne by this Note plus 2%; it shall pay interest to the extent permitted by law (including post-petition interest in any proceeding under any Bankruptcy Law to the extent that such interest is an allowed claim enforceable against the debtor in a bankruptcy case under Title 11 of the U.S. Code), on overdue installments of interest at the rate then borne by this Note to the extent legally permitted. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts (payment may be by check payable in such money), except that the Company may, at its option and in its sole discretion at any time and from time to time elect to pay all or any portion of such interest on any Interest Payment Date in the form of additional Notes (the "Additional Notes"). If the Company elects to issue Additional Notes in lieu of cash payment of interest due on any Note on any Interest Payment Date, the Company shall issue Additional Notes, dated the date of such Interest Payment Date, in a principal amount equal to the amount of cash interest due but not paid in cash on such Interest Payment Date. Any Additional Notes issued during any fiscal year of the Company shall be delivered to the Holder or Holders with the financial statements delivered pursuant to paragraph 11 hereof. The issuance of such Additional Notes shall constitute payment in full of the interest in lieu of cash payment of which such Additional Notes are issued. Each issuance of Additional Notes in lieu of cash payments of interest on this Note shall be made pro rata with respect to the outstanding Notes. Each Additional Note shall be subject to the same terms and conditions as this Note. 2. TRANSFER OR EXCHANGE OF NOTES. The Company shall keep at its office or agency maintained as provided in subparagraph 7(a) a register in which) the Company shall provide for the registration of Notes and for the registration of transfer and exchange of Notes. The holder of this Note may, at its option, and either in person or by duly authorized attorney, surrender the same for registration of transfer or exchange at the office or agency of the Company maintained as provided in subparagraph 7(a), and, without expense to such holder (except for taxes or governmental charges imposed in connection therewith), receive in exchange therefor a Note or Notes each in such denomination or denominations as such holder may request, dated as of the date to which interest has been paid on the Note or Notes so surrendered for transfer or exchange, for the same aggregate principal amount as the then unpaid principal amount of the Note or Notes so surrendered for transfer or exchange, and registered in the name of such person or persons as may be designated by such holder. Every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed, or shall be accompanied by a written instrument of transfer, satisfactory in form to the Company, duly executed by the holder of such Note or his attorney duly authorized in writing. Every Note so made and delivered in exchange for this Note shall in all other respects be in the same form and have the same terms as this Note. Seller shall not transfer more than 49% of the sum of the original principal amount of this Note and the aggregate principal amount of all Additional Notes outstanding on the date of transfer; provided, however that no Note shall be issued in a denomination of less than $1,000,000, and there shall be no more than three Holders at any one time. No transfer or exchange of any Note shall be valid unless made in the foregoing manner at such office or agency. 3. LOSS, THEFT, DESTRUCTION OR MUTILATION OF NOTE. Upon receipt of evidence satisfactory to the Company of the loss, 2 theft, destruction or mutilation of this Note, and, in the case of any such loss, theft or destruction, upon receipt of an affidavit of loss from the holder hereof and indemnity if the Holder is Seller and if the Holder is another Person indemnity and/or bond as may be reasonably required by the Company, in each case in form reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Note, the Company will make and deliver, in lieu of this Note, a new Note of like tenor and unpaid principal amount and dated as of the date to which interest has been paid on this Note. 4. SCHEDULED PAYMENT. The Company shall prepay 50% of the sum of the original principal amount of this Note and any Additional Notes outstanding, together with all accrued and unpaid interest thereon, on December 31, 2002 (the "INITIAL PRINCIPAL PAYMENT DATE"). The Company shall repay the entire remaining principal amount of this Note and any Additional Notes outstanding, together with all accrued and unpaid interest thereon, on December 31, 2003 (the "MATURITY DATE"). 5. OPTIONAL PREPAYMENT. Subject to the provisions of paragraph 8 hereof, the Company may, at any time and from time to time without premium or penalty, prepay all or a portion of the outstanding principal amount of this Note at 100% of the principal amount paid together with interest on the amount prepaid accrued to the date of prepayment. 6. TIME OF PAYMENT; PAR. If any payment of principal or interest on this Note shall become due on a Saturday, Sunday, or legal holiday under the laws of the Commonwealth of Pennsylvania, such payment shall be made on the next succeeding day that is not a Saturday, Sunday or such legal holiday (a "BUSINESS DAY") and such extension of time shall in such case be included in computing interest in connection with such payment. 7. COVENANTS. The Company covenants and agrees that, so long as any Note shall be outstanding: (a) MAINTENANCE OF OFFICE. The Company shall maintain an office or agency in such place in the United States of America as the Company may designate in writing to the registered holder hereof, where the Notes may be presented for registration of transfer and for exchange as herein provided, where notices and demands to or upon the Company in respect of the Notes may be served and where, at the option of the holders thereof, the Notes may be presented for payment. Until the Company otherwise notifies the holders of the Notes, said office shall be the principal office of the Company in Wayne, Pennsylvania. 3 (b) PAYMENT OF TAXES. The Company shall promptly pay and discharge or cause to be paid and discharged, before any material penalty or fine shall be incurred with respect thereto, all lawful taxes and assessments imposed upon the Company or any Subsidiary or upon the income and profits of the Company or any Subsidiary, or upon any property, real, personal or mixed, belonging to the Company or any Subsidiary, or upon any part thereof by the United States or any State thereof; PROVIDED, HOWEVER, that neither the Company nor any Subsidiary shall be required to pay and discharge or to cause to be paid and discharged any such tax or assessment so long as both (x) the Company has set aside adequate reserves for such tax or assessment and (y)(i) the Company or Subsidiary shall be contesting the validity thereof in good faith by appropriate proceedings and (ii) with respect to which any right to execute upon or sell any assets of the Company or the respective Subsidiary has not matured or has been and continues to be effectively enjoined, superseded or stayed. (c) CORPORATE EXISTENCE. The Company shall do or cause to be done all things necessary and lawful to preserve and keep in full force and effect its corporate existence, rights and franchises and the corporate existence, rights and franchises of each of its Subsidiaries, except where failure to so preserve or keep rights and franchises will not have a material adverse effect on (a) the business, condition (financial or otherwise), operations, performance, properties or prospects of the Company and its Subsidiaries taken as a whole or (b) the rights and remedies of the holders under the Notes. (d) INSURANCE. The Company will maintain or cause to be maintained, with financially sound and reputable insurers, insurance with respect to its properties and business and the properties and business of its Subsidiaries against loss or damage of the kinds customarily insured against by corporations of established reputation engaged in the same or similar businesses and similarly situated, of such types and in such amounts as are customarily carried under similar circumstances by such corporations. (e) KEEPING OF BOOKS. The Company shall at all times keep, and cause each of its Subsidiaries to keep, proper books of record and account in which proper entries will be made of its transactions in accordance with generally accepted accounting principles consistently applied. (f) TRANSACTIONS WITH AFFILIATES. Neither the Company nor any of its Subsidiaries will enter into any transaction (including, without limitation, the purchase, sale or exchange of property or the rendering of any service) with any holder of 5% or more of any class of equity securities of the Company or with 4 any Subsidiary, on terms that are less favorable to the Company or such Subsidiaries, as the case may be, than those that might be obtained at the time from persons who are not such a holder or Subsidiary as determined by the Company's Board of Directors (which determination shall be presumed reasonable); provided that this subparagraph 7(f) shall not apply to (i) any transaction between the Company and any of its Subsidiaries or between any of its Subsidiaries; (ii) customary fees paid by the Company or a Subsidiary to members of its Board of Directors; (iii) any transaction between the Company or any Subsidiary and any employee of such Person that is approved by such Person's Board of Directors (provided that approval shall not be required with respect to normal compensation arrangements involving any such employee), (iv) payment of a management fee to Citicorp Venture Capital Ltd. in an annual amount not to exceed $400,000, so long as such fee is permitted to be paid by the Senior Lender and (v) the exercise of the Warrants to purchase common stock of the Company by World Equity Partners, L.P. in accordance with the terms and conditions of such warrants as outstanding and in effect on the date of original issuance of this Note. (g) NOTICE OF DEFAULT. If any one or more Events of Default under paragraph 9 shall occur, or if the holder of any Note shall demand payment or take any other action permitted upon the occurrence of any such Event of Default, the Company shall promptly give notice to all holders of the Notes, specifying the nature of such Event of Default or of such demand or action, as the case may be. 8. SUBORDINATION: RESTRICTIONS ON PAYMENT. (a) Notwithstanding anything in this Note to the contrary, the obligations of the Company to pay the principal of, and interest on, this Note shall be subordinate and junior in right of payment, to the extent and in the manner hereinafter set forth, to all obligations of the Company under all Superior Debt. (b) Upon-the occurrence of any Insolvency Event or upon any acceleration of the Superior Debt, then: (i) the holders of Superior Debt shall be entitled to receive payment in full in cash of all principal of, and premium, interest, fees and charges then due on, all Superior Debt (including, in the case of an Insolvency Event, interest, fees and charges accruing thereon after the commencement of any such proceedings) before the holder of this Note is entitled to receive any payment on account of principal of, interest or other amounts due (or past due) upon this Note, and the holders of Superior Debt shall be entitled to receive for application in payment thereof any payment or distribution of any kind or character, whether in 5 cash, property or securities, which may be payable or deliverable in any such proceedings in respect of this Note except that the holder of this Note may receive securities that are subordinate to the Superior Debt at least to the same extent as this Note; and (ii) any payment or distribution of assets of the Company, of any kind or character, whether in cash, property or securities, to which the Holder would be entitled except for the provisions of this subparagraph 8(b) shall be paid or delivered by the Company directly to the holders of all Superior Debt in the manner provided in paragraph 8(e) below, for application in payment thereof until all Superior Debt (including, in the case of an Insolvency Event, interest, fees and charges accrued thereon after the date of commencement of such proceedings) shall have been paid in full (whether in cash or such other form of consideration acceptable to the holders of Superior Debt in their discretion (hereinafter "Acceptable Assets")). (c) Until all Superior Debt shall have been paid in full in Acceptable Assets, the Company shall not, directly or indirectly, make any payment of any amount payable with respect to this Note if at the time of such payment there exists a default in the payment of all or any portion of principal of, premium, if any, or interest on any Superior Debt (a "PAYMENT DEFAULT"), and such default shall not have been cured or waived or the benefits of this sentence waived by or on behalf of the holders of such Superior Debt. In addition, during the continuance of any other event of default with respect to any Superior Debt pursuant to which the maturity thereof may be accelerated, upon the occurrence of (A) receipt by the Holders of written notice from the Senior Lender (the "Suspension Notice") or (B) if such event of default results from the acceleration of the Notes, the date of such acceleration, no such payment may be made by the Company upon or in respect of the Notes during a Payment Blockage Period commencing on the earlier of the date of receipt of such notice or the date of such acceleration. Notwithstanding the foregoing, if, immediately prior to the time a particular payment is due hereunder, (x) no Payment Default or Payment Blockage Period is continuing, and (y) payment in full of the amount then due is prohibited by this paragraph 8(c), then the Company shall be permitted to, and shall, pay to the Holder the maximum portion of such amount as would not create a default under any of the terms of any Superior Debt Agreement which (whether with or without notice, lapse of time or both) would permit the holder of such Superior Debt to accelerate all or any portion of such Superior Debt. The Company shall notify the Holder in writing of the occurrence of a Payment Default, provided that notwithstanding anything to the contrary in this Note, the failure of the Company so to notify the Holder of the 6 occurrence of a Payment Default shall have no effect on the obligations of the Company or, from and after the Holder's receipt of notice (from any source), the Holder, as set forth herein. "Payment Blockage Period" shall mean a period of up to 179 consecutive days, which period the Senior Lender may terminate at any time prior to the 179th day upon written notice of such termination to the Holder and the Company. With respect to Suspension Notice(s): (i) there shall be no limit of the number of Suspension Notices which the Senior Lender may give; (ii) the Senior Lender shall not be entitled to give successive Suspension Notices based on a continuing event of default under Superior Debt, which event of default was the basis for a prior Suspension Notice; and (iii) nothing contained herein shall prohibit the Senior Lender from giving successive Suspension Notices based upon an event of default under the Superior Debt other than the event of default which was the basis for any prior Suspension Notice or any other event of default of which the Senior Lender had actual knowledge of such event of default at the time it gave such prior Suspension Notice; PROVIDED that no subsequent Suspension Notice shall be effective prior to the expiration of a number of days equal to the Payment Blockage Period last in effect. (d) The holders of Superior Debt may, at any time, in their discretion, renew, amend, extend or otherwise modify the terms and provisions of Superior Debt so held or exercise any of their rights under the Superior Debt including, without limitation, the waiver of defaults thereunder and the amendment of any of the terms or provisions thereof (or any notice evidencing or creating the same), all without notice to or assent from the Holder. No compromise, alteration, amendment, renewal or other change of, or waiver, consent or other action in respect of any liability or obligation under or in respect of, any terms, covenants or conditions of the Superior Debt (or any instrument evidencing or creating the same), whether or not such compromise, alteration, amendment, renewal, change, waiver, consent or other action is in accordance with the provisions of the Superior Debt (or any instrument evidencing or creating the same), shall in any way alter or affect any of the subordination provisions of this Note. (e) If, notwithstanding the provisions of paragraph 8 of this Note, any payment or distribution of any character (whether in cash, securities or other property) or any security 7 shall be received by the Holder in contravention of this paragraph 8 before all the Superior Debt shall have been paid in full in Acceptable Assets, such payment, distribution or security shall be held in trust for the benefit of, and shall be immediately paid over or delivered or transferred to, the holders of Superior Debt or their duly appointed agents for application of payment according to the priorities of such Superior Debt and ratably among the holders of any class of Superior Debt. Such payments received by the Holder and delivered to the holders of the Superior Debt shall be deemed not to be a payment on this Note for any reason whatsoever and the indebtedness under this Note shall remain as if such erroneous payment had never been paid by the Company or received by the Holder. In the event of the failure of any Holder to endorse or assign any such payment, distribution or security, each holder of any Superior Debt is hereby irrevocably authorized to endorse or assign the same. (f) No present or future holder of Superior Debt shall be prejudiced in its right to enforce the provisions of paragraph 8 of this Note by any act or failure to act on the part of the Company. (g) If there shall exist any Payment Default or Payment Blockage Period on any Superior Debt of which the Holder has received notice (from the Company or otherwise), no Holder shall (other than in connection with a failure by the Company to make a scheduled principal payment) take or continue any action, or exercise or continue to exercise any rights, remedies or powers under the terms of this Note, or exercise or continue to exercise any other right or remedy at law or equity that such holder might otherwise possess, to collect any amount due and payable in respect of this Note, including, without limitation, the acceleration of this Note (and if this Note has already been accelerated, the Holder will, immediately upon becoming aware of the occurrence of such Payment Default or Payment Blockage Period or upon its receipt of a Suspension Notice or other notice that a Payment Blockage Period is in effect, reverse such acceleration), the commencement of any foreclosure on any lien or security interest, the filing of any petition in bankruptcy or the taking advantage of any other insolvency law of any jurisdiction, unless and until the Superior Debt shall have been fully and finally paid in Acceptable Assets and satisfied, unless one or more of the holders of the Superior Debt shall have commenced any action or taken any judicial action to enforce their rights as provided in their respective agreements relating to, or instruments evidencing, their Superior Debt in connection with an Insolvency Event (other than an action to dismiss a proceeding commenced against the Company). Notwithstanding the foregoing or any permissible action taken by the Holder, the Holder shall not be entitled to receive 8 any payment in contravention of the other provisions of this paragraph 8, including, without limitation, subparagraphs 8(b), 8(c) and 8(e). Notwithstanding anything to the contrary in this subparagraph 8(g), the Holder may take such steps as are necessary to avoid a loss of its rights as a result of the running of any applicable statute of limitations or any other statute or rule which limits the time for filing claims, or making proofs of claims, or would otherwise cause a claim to be time-barred. (h) If any payment or distribution to which the Holder would otherwise have been entitled but for the provisions of this paragraph 8 shall have been applied, pursuant to the provisions of this paragraph 8, to the payment of the Superior Debt, then in such case and to such extent, the Holder, together with holders of other debt of the Company subordinated to the Superior Debt on similar terms and conditions, (x) shall be entitled to receive from the holders of Superior Debt then outstanding any payments or distributions received by such Persons in excess of the amount sufficient to pay all of the Superior Debt in full in Acceptable Assets (whether or not then due), (y) following payment in full in Acceptable Assets of the Superior Debt, shall be entitled to receive any and all further payments or distributions applicable to the Superior Debt, and (z) following payment in full in Acceptable Assets of the Superior Debt, shall be subrogated to the rights of the holders of Superior Debt to receive distributions applicable to the Superior Debt, in each case until this Note shall have been paid in full. If the Holder has been subrogated to the rights of the holders of Superior Debt due to the operation of this subparagraph 8(h), the Company agrees to take all such actions as are reasonably requested by such Person, consistent with the rights of other Persons having similar subrogation rights, in order to cause such Person to be able to obtain payments from the Company with respect to such subrogation rights as soon as possible. (i) The provisions of this paragraph 8 are solely for the purpose of defining the relative rights of the holders of Superior Debt, on the one hand, and the Holder on the other, against the Company and its assets, and nothing herein is intended to or shall impair, as between the Company and the Holder, the obligations of the Company which are absolute and unconditional, to pay to the Holder the principal and interest on this Note as and when they become due and payable in accordance with their terms, or is intended to or will affect the relative rights of the Holder and creditors of the Company other than the holders of Superior Debt, nor, except as provided in this paragraph 8, will anything herein or therein prevent the Holder from exercising all remedies otherwise permitted by applicable law upon default under this Note, subject to the rights, if any, under this paragraph 8 of the holders of Superior Debt in respect 9 of cash, property or securities of the Company received upon the exercise of any such remedy and subject to this paragraph 8. 9. EVENTS OF DEFAULT. (a) DEFINITION. For purposes of this Note, an "EVENT OF DEFAULT" shall be deemed to have occurred if: (i) the Company shall default in the payment of (A) principal of this Note on the date when due, whether at maturity, by acceleration or otherwise, or (B) any interest on this Note and such default shall continue for 5 Business Days; (ii) default shall be made in the due observance or performance of any other covenant, condition or agreement on the part of the Company to be observed or performed pursuant to the terms hereof and such default shall continue for 30 days after written notice thereof, specifying such default and requesting that the same be remedied, shall have been given to the Company by the holder of this Note; (iii) default as defined in any instrument evidencing or under which the Company has outstanding at the time any indebtedness for money borrowed in excess of $5,000,000 in aggregate principal amount shall occur and as a result thereof the maturity of any such indebtedness shall have been accelerated so that the same shall have become due and payable prior the date on which the same would otherwise have become due and payable and such acceleration shall not have been rescinded or annulled within 30 days; (iv) an Insolvency Event occurs. (b) CONSEQUENCES OF EVENTS OF DEFAULT. Subject in all respects to paragraph 8, (i) If an Event of Default of the type other than that described in clause (iv) of subparagraph 9(a) has occurred and is continuing, the Holder may declare all or any portion of the outstanding principal amount of the Notes due and payable and demand immediate payment of all or any portion of the outstanding principal amount of the Notes. If the Holder demands immediate payment of all or any portion of the Notes, the Company shall immediately pay to such Holder the principal amount of the Notes requested to be paid together with all accrued and unpaid interest thereon. 10 (ii) If an Event of Default of the type described in clause (iv) of subparagraph 9(a) has occurred, all of the outstanding principal amount of the Notes shall automatically be immediately due and payable without any notice or other action on the part of the Holder. (iii) Upon the occurrence of an Event of Default, each Holder shall also have any other rights which such Person may have pursuant to applicable law. 10. RESTRICTED PAYMENTS. So long as any portion of the principal amount of any Note or Additional Note remains outstanding, without the prior written consent of the Majority Holders, the Company shall not (a) declare any dividends on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for the purchase, repurchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of capital stock of the Company or any Subsidiary, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Company or any Subsidiary, or permit any Subsidiary or Affiliate of any thereof to make any payment on account of, or purchase or otherwise acquire, any shares of any class of capital of the Company or any Subsidiary from any Person (such actions, collectively, "SHAREHOLDER DISTRIBUTIONS"), (b) make any payment (whether of principal, premium, interest or otherwise) on account of, or set apart assets for a sinking fund or other analogous fund for the purchase, repurchase, redemption, defeasance, retirement or other acquisition of, any Junior Debt, whether now or hereafter outstanding, or make any other payment in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Company or any Subsidiary, or permit any Subsidiary or Affiliate of any thereof to make any payment on account of, or purchase or otherwise acquire, any Junior Debt from any Person (such actions, collectively, "JUNIOR DEBT DISTRIBUTIONS") or (c) enter into any agreement requiring Shareholder Distributions or Junior Debt Distributions, except that: (i) any Subsidiary may pay dividends to the Company or any Wholly-Owned Subsidiary of the Company, (ii) unless an Event of Default has occurred and is continuing or would result therefrom, the Company may repurchase or redeem shares of its common stock from officers or employees of the Company or any Subsidiary who are no longer employed by the Company or any Subsidiary, so long as (A) the Company has determined such repurchase or redemption would not 11 materially adversely affect its liquidity and (B) the aggregate number of shares acquired by the Company in connection with such repurchases and redemptions after the date of original issuance of this Note does not exceed (a) 2% of the shares of common stock of the Company outstanding on the date of original issuance of this Note plus (b) such number of shares of common stock as may have been repurchased or redeemed in accordance with this clause (ii) after the date of original issuance of this Note, (iii) unless an Event of Default has occurred and is continuing or would result therefrom, a Subsidiary may repurchase or redeem shares of its common stock from officers or employees of such Subsidiary who are no longer employed by the Subsidiary, so long as (A) the Subsidiary has determined such repurchase or redemption would not materially adversely affect its liquidity and (B) the aggregate number of shares acquired by the Subsidiary in connection with such repurchases and redemptions from the date of original issuance of this Note does not exceed (a) 2% of the shares of common stock outstanding on the date of initial capitalization of the Subsidiary plus (b) such number of shares of common stock as may have been repurchased or redeemed in accordance with this clause (iii) after the date of initial issuance of this Note, (iv) unless an Event of Default has occurred and is continuing and there are no Additional Notes outstanding (the Company having paid all interest due and owing to the Holders in cash), the Company may pay regular dividends in cash on the Preferred Stock in accordance with the terms of the Preferred Stock as in effect on the date of original issuance of this Note and pay interest in cash on the JSDs in accordance with the terms of the JSDs as in effect on the date of original issuance of this Note, and (v) unless an Event of Default has occurred and is continuing, the Company may make payments of interest on Junior Debt in additional Junior Debt to the extent required in the instrument governing the Junior Debt. 11. FINANCIAL STATEMENTS. So long as any portion of the principal amount of this Note remains outstanding, the Company will deliver to the Holders (a) within 120 days after the end of each fiscal year, audited consolidated statements of income, changes in stockholders' equity and cash flows for such fiscal 12 year and audited consolidated balance sheets as of the end of such fiscal year, all prepared in accordance with United States generally accepted accounting principles, consistently applied; and (b) within 45 days after the end of each fiscal quarter, unaudited consolidated statements of income, changes in stockholders' equity and cash flows for such fiscal quarter and unaudited balance sheets as at the end of such fiscal quarter, all prepared in accordance with United States generally accepted accounting principles, consistently applied. Seller shall not disclose such financial statements to any Person other than (i) Seller's executive officers, (ii) prospective purchasers of a portion of the Notes that are Qualified Institutional Buyers (as such term is used in Rule 144A under the Securities Act of 1933, as amended) and (iii) with the prior written consent of the Company (which shall not be unreasonably withheld) any other Person. 12. TRANSFER RESTRICTIONS. This Note has not been registered under the Securities Act of 1933, as amended or any applicable state securities law. If the Holder desires to transfer this Note, such Person at its sole cost and expense first must furnish the Company with (i) a written opinion reasonably satisfactory to the Company in form and substance from counsel reasonably satisfactory to the Company to the effect that the Holder may transfer this Note as desired without registration under the Securities Act or any applicable state securities law and (ii) a written acknowledgement executed by the transferee stating that such transferee is aware (x) of the Subordination provisions set forth in paragraph 8 hereof and (y) that the Company is party to certain agreements that restrict or prohibit the Company from amending this Note without the prior written consent of the holders of certain Superior Debt. 13. AMENDMENT AND WAIVER. This Note may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Majority Holders. 14. CANCELLATION. After all principal and accrued interest at any time owed on this Note has been paid in full, this Note shall be surrendered to the Company for cancellation and shall not be reissued. 15. PLACE OF PAYMENT: NOTICES. Payments of principal and interest and any notice hereunder are to be delivered to the Holder at the following address: Teleflex Incorporated 630 West Germantown Pike, Suite 450 Plymouth Meeting, PA 19462 13 Attention: Steven K. Chance Vice President and General Counsel or to such other address as specified in a written notice delivered to the Company by Holder. Notices sent by the Company shall be deemed received when delivered personally or one (1) Business Day after being sent by Federal Express or other overnight carrier or three (3) Business Days after being sent by certified or registered mail. 16. GOVERNING LAWS. The validity, construction, and interpretation of this Note shall be governed by the internal laws, and not the laws of conflicts, of the Commonwealth of Pennsylvania. 17. DEFINITIONS. Unless otherwise indicated herein, capitalized terms used in this Note shall have the following meanings: "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar Federal or state law for the relief of debtors. "INDEBTEDNESS" shall mean, with respect to any Person at a particular time, without duplication, (a) indebtedness for borrowed money or for~the deferred purchase price of property or services in respect of which such Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other current liabilities incurred in the ordinary course of business) or any commitment by which such Person assures a creditor against loss, including contingent reimbursement obligations with respect to letters of credit, (b) indebtedness guaranteed in any manner by such Person, including guarantees in the form of an agreement to repurchase or reimburse, and (c) obligations under capitalized leases in respect of which obligations such Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person assures a creditor against loss. "INSOLVENCY EVENT" means any dissolution, winding up, liquidation, reorganization, arrangement, adjustment, protection, relief or composition of the Company or its debts, whether voluntary or involuntary or in bankruptcy, insolvency, receivership, arrangement, reorganization, relief or other proceedings or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Company. "JSD" means the Junior Subordinated Debt Securities of the Company outstanding on the date of original issuance of this Note. 14 "JUNIOR DEBT" means the Company's JSDs. "MAJORITY HOLDERS" means the holders of Notes representing a majority of the principal amount then outstanding under all of the Notes. "NOTES" means all of the Notes issued pursuant to the Purchase Agreement. "PREFERRED STOCK" means the 14 percent Preferred Stock due on or after July 21, 2004 of the Company issued and outstanding on the date of original issuance of this Note. "PERSON" means and includes an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization and a governmental entity or any department or agency thereof. "SENIOR LENDER" means the Lender or Lenders as defined in the Senior Loan Agreement. "SENIOR LOAN AGREEMENT" means that certain Financing and Security Agreement, dated as of July 22, 1993, by and among The CIT Group/Business Credit, Inc., as Lender and as Agent for the Lender(s) named or to be named therein, the Company and certain Subsidiaries of the Company as Borrowers and certain Subsidiaries and affiliates of the Company as Guarantors, including all amendments, modifications, supplements, waivers, extensions and refinancings thereof. "SENIOR NOTE" means the promissory note(s) issued or to be issued to the Senior Lender by the Company and/or certain of its Subsidiaries and affiliates pursuant to the Senior Loan Agreement. "SUBSIDIARY" means any Person which the Company has the direct or indirect right to control, direct or cause direction of management and policies of, whether through the ownership of voting securities, by contract or otherwise. "SUPERIOR DEBT" means all obligations under the Indebtedness evidenced by the Senior Note and such additional Indebtedness incurred by the Company from time to time unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding,it is provided that such obligations are not superior in right of payment to the Notes; PROVIDED, HOWEVER, that Superior Debt shall not be deemed to include any Junior Debt or (i) any obligations of the Company to any of its Subsidiaries, (ii) the Company's $13,500,000 Subordinated Promissory Note dated June 1, 1993 issued by Holdings to MDR Corporation, (iii) any obligations of the Company 15 to any person from which, or from any Affiliate of which, the Company or any of its Affiliates obtained, directly or indirectly, any goods or services in a transaction substantially concurrent with the incurrence by the Company of such obligations, (iv) any liability for federal, state, local or other taxes owed or owing by the Company and (v) any accounts payable or other liability to trade creditors arising in the ordinary course of business. "SUPERIOR DEBT AGREEMENT" means any agreement relating to, or instrument evidencing, any Superior Debt. "WHOLLY-OWNED SUBSIDIARY" means a Subsidiary all of the capital stock of which is owned by the Company or by another Wholly-Owned Subsidiary of the Company. IN WITNESS WHEREOF, the Company has executed and delivered this Note on the date first above written. THE TRIUMPH GROUP HOLDINGS, INC By: /s/ Richard C. Ill --------------------------------- Its: President --------------------------------- 16 EX-10.13 15 EXHIBIT 10.13 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of this 31st day of July, 1996, by and among The Triumph Group, Inc., a Delaware corporation, or its nominee ("Buyer"), Advanced Materials Technologies Inc., an Arizona corporation (the "Company"), Daryl Jay Donkersloot ("Mr. Donkersloot") and Gayla Sue Donkersloot ("Mrs. Donkersloot") (with Mr. Donkersloot and Mrs. Donkersloot hereinafter collectively referred to as the "Stockholders"). RECITALS The Company provides turbine engine coatings technologies to gas turbine engine manufacturers and repairs and recoating services in the gas turbine engine aftermarket. All of the issued and outstanding shares of capital stock of the Company are owned by the Stockholders. The Stockholders desire to sell, and Buyer desires to purchase, all of the issued and outstanding shares of capital stock of the Company (the "Shares"), for the consideration and on the terms set forth in this Agreement. AGREEMENT The parties, intending to be legally bound, agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the following terms have the meanings set forth in this Section 1: "ACQUIRED COMPANIES" means the Company and Special Processes of Arizona, Inc., an Arizona corporation which is a wholly owned Subsidiary of the Company. "BALANCE SHEET" has the meaning set forth in Section 3.4. "BEST EFFORTS" means the efforts that a prudent Person desirous of achieving a result would use in similar circumstances to ensure that such result is achieved as expeditiously and as cost effectively as possible. "BUYER" has the meaning set forth in the first paragraph of this Agreement. "CLOSING" has the meaning set forth in Section 2.3. "CLOSING DATE" means the date and time as of which the Closing actually takes place. "COMPANY" has the meaning set forth in the Recitals of this Agreement. "CONSENT" means any approval, consent, ratification, waiver, or other authorization (including any Governmental Authorization). "CONTRACT" means any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or implied) that is legally binding. "DAMAGES" has the meaning set forth in Section 11.2. "ENCUMBRANCE" means any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership. "ENVIRONMENT" means soil, land surface or subsurface strata, surface waters (including navigable waters, ocean waters, streams, ponds, drainage basins, and wetlands), groundwaters, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life, and any other environmental medium or natural resource. "ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" means any cost, damages, expense, liability, obligation, or other responsibility arising from or under Environmental Law or Occupational Safety and Health Law. "ENVIRONMENTAL LAW" means any Legal Requirement that requires or relates to: (a) advising appropriate authorities, employees and the public of intended or actual releases of pollutants or hazardous substances or materials, violations of discharge limits, or other prohibitions and of the commencements of activities, such as resource extraction or construction, that could have significant impact on the Environment; (b) preventing or reducing to acceptable levels the release of pollutants or hazardous substances or materials into the Environment; (c) reducing the quantities, preventing the release or minimizing the hazardous characteristics of wastes that are generated; (d) assuring that products are designed, formulated, packaged and used so that they do not present unreasonable risks to human health or the Environment when used or disposed of; - 2 - (e) protecting resources, species or ecological amenities; (f) reducing to acceptable levels the risks inherent in the transportation of hazardous substances, pollutants, oil or other potentially harmful substances; (g) cleaning up pollutants that have been released, preventing the threat of release or paying the costs of such clean up or prevention; or (h) making responsible parties pay private parties, or groups of them, for damages done to their health or the Environment, or permitting self- appointed representatives of the public interest to recover for injuries done to public assets. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor law, and regulations and rules issued pursuant to that Act or any successor law. "FACILITIES" means any real property, leaseholds or other interests currently or formerly owned or operated by any Acquired Company and any buildings, plants, structures or equipment (including motor vehicles, tank cars and rolling stock) currently or formerly owned or operated by any Acquired Company. "GAAP" means generally accepted United States accounting principles, applied on a basis consistent with the basis on which the financial statements referred to in Section 3.4 were prepared. "GOVERNMENTAL AUTHORIZATION" means any approval, Consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any governmental body or pursuant to any Legal Requirement. "HAZARDOUS ACTIVITY" means the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, Release, storage, transfer, transportation, treatment or use (including any withdrawal or other use of groundwater) of Hazardous Materials in, on, under, about or from the Facilities or any part thereof into the Environment, and any other act, business, operation or thing that increases the danger, or risk of danger, or poses an unreasonable risk of harm to persons or property on or off the Facilities, or that may affect the value of the Facilities or the Acquired Companies. "HAZARDOUS MATERIALS" means any waste or other substance that is listed, defined, designated or classified as, or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under or pursuant to any Environmental Law, including any admixture or solution thereof, and specifically including petroleum and all derivatives thereof or synthetic substitutes therefor and asbestos or asbestos-containing materials. - 3 - "INTERIM BALANCE SHEET" has the meaning set forth in Section 3.4. "IRC" means the Internal Revenue Code of 1986, as amended, or any successor law, and regulations issued by the IRS pursuant to the IRC or any successor law. "IRS" means the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury. "KNOWLEDGE" means an individual will be deemed to have "Knowledge" of a particular fact or other matter if (a) such individual is actually aware of such fact or other matter; or (b) a prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the course of conducting a reasonably comprehensive investigation concerning the existence of such fact or other matter. A Person other than an individual will be deemed to have "Knowledge" of a particular fact or other matter if any individual who is serving, or who has at any time served, as a director, officer, partner, executor, or trustee of such Person (or in any similar capacity) has, or at any time had, Knowledge of such fact or other matter. "LEGAL REQUIREMENT" means any federal, state, local, municipal, foreign, international, multinational or other administrative order, constitution, law, ordinance, principle of common law, regulation, statute or treaty. "OCCUPATIONAL SAFETY AND HEALTH LAW" means any Legal Requirement designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards. "ORDER" means any award, decision, injunction, judgment, order, ruling, subpoena or verdict entered, issued, made or rendered by any court, administrative agency or other governmental body or by any arbitrator. "PERSON" means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union or other entity or governmental body. "PLAN" has the meaning set forth in Section 3.13. "PROCEEDING" means any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any governmental body or arbitrator. - 4 - "PURCHASE PRICE" has the meaning set forth in Section 2.2. "RELATED PERSON" means with respect to a particular individual: (a) each other member of such individual's Family; (b) any Person that is directly or indirectly controlled by such individual or one or more members of such individual's Family; (c) any Person in which such individual or members of such individual's Family hold (individually or in the aggregate) a Material Interest; and (d) any Person with respect to which such individual or one or more members of such individual's Family serves as a director, officer, partner, executor or trustee (or in a similar capacity). "Related Person" means with respect to a specified Person other than an individual: (a) any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person; (b) any Person that holds a Material Interest in such specified Person; (c) each Person that serves as a director, officer, partner, executor, or trustee of such specified Person (or in a similar capacity); (d) any Person in which such specified Person holds a Material Interest; (e) any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity); and (f) any Related Person of any individual described in clause (b) or (c). For purposes of this definition, (a) the "Family" of an individual includes (i) the individual, (ii) the individual's spouse and former spouses, (iii) any other natural person who is related to the individual or the individual's spouse within the second degree, and (iv) any other natural person who resides with such individual, and (b) "Material Interest" means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or other voting interests representing at least 10% of the outstanding voting power of a Person or equity securities or other equity interests representing at least 10% of the outstanding equity securities or equity interests in a Person. "RELEASE" means any spilling, leaking, emitting, discharging, depositing, escaping, leaching, dumping or other releasing into the Environment, whether intentional or unintentional. "REPRESENTATIVE" means, with respect to a particular Person, any director, officer, employee, agent, consultant, advisor or other representative of such Person, including legal counsel, accountants and financial advisors. "SECURITIES ACT" means the Securities Act of 1933 or any successor law, and regulations and rules issued pursuant to that Act or any successor law. "SELLERS" means the Acquired Companies and the Stockholders. - 5 - "SHARES" has the meaning set forth in the Recitals of this Agreement. "SUBSIDIARY" means, with respect to any Person (the "Owner"), any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation's or other Person's board of directors or similar governing body or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred) are held by the Owner or one or more of its Subsidiaries; when used without reference to a particular Person, "Subsidiary" means a Subsidiary of the Company. "THREAT OF RELEASE" means a substantial likelihood of a Release that may require action in order to prevent or mitigate damage to the Environment that may result from such Release. "THREATENED" means a claim, Proceeding, dispute, action, or other matter will be deemed to have been "Threatened" if any written demand or statement has been made or any written notice has been given that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken or otherwise pursued in the future. 2. SALE AND TRANSFER OF SHARES; CLOSING. 2.1 SHARES. Subject to the terms and conditions of this Agreement, at the Closing, the Stockholders will sell and transfer the Shares to Buyer, and Buyer will purchase the Shares from the Stockholders. 2.2 PURCHASE PRICE. The purchase price for the Shares will be $7,500,000 (the "Purchase Price"). 2.3 CLOSING. The purchase and sale (the "Closing") provided for in this Agreement will take place at the offices of Nearhood & Associates, P.C., Suite 114N, 7501 East McCormick Parkway, Scottsdale, Arizona 85258, at 10:00 a.m. (local time), on July 31, 1996. 2.4 CLOSING OBLIGATIONS. At the Closing: (a) Buyer will deliver an amount equal to the Purchase Price by wire transfer of same day funds to an account specified by the Stockholders. (b) Upon bank acknowledgement of receipt of the Purchase Price wired by Buyer to the Stockholders' account, the Stockholders will deliver to Buyer certificates representing the Shares, accompanied by duly executed stock powers (the "Certificates"), for transfer to Buyer, with signatures guaranteed. - 6 - 3. REPRESENTATIONS AND WARRANTIES OF SELLERS. The Acquired Companies and the Stockholders (collectively, "Sellers"), jointly and severally, represent and warrant to Buyer that: 3.1 ORGANIZATION AND GOOD STANDING. Each Acquired Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Arizona, with full corporate power and authority to conduct its business as it is now being conducted. Each Acquired Company is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification. 3.2 AUTHORITY AND LEGAL CAPACITY; DUE AUTHORIZATION, EXECUTION AND DELIVERY; NO CONFLICT. (a) The Company has the corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement. The execution, delivery, and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby, subject to the conditions set forth herein, have been duly authorized by all necessary corporate action on the part of the Company. Each Stockholder has the full power and legal right and authority to execute and deliver this Agreement and to perform his obligations under this Agreement. This Agreement has been duly and validly executed and delivered by Sellers. This Agreement constitutes the legal, valid and binding obligation of Sellers, enforceable against Sellers in accordance with its terms. (b) Except as set forth in SCHEDULE 3.2 attached hereto, neither the execution and delivery of this Agreement nor the consummation or performance of any obligations hereunder will, directly or indirectly (i) contravene, conflict with or result in a violation of the charter or Bylaws of any Acquired Company; (ii) contravene, conflict with or result in a violation of, or give any governmental body or other Person the right to challenge any of the transactions contemplated by this Agreement or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which any Seller, or any of the assets owned or used by any Acquired Company, may be subject; (iii) contravene, conflict with or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any material Contract. Except as set forth in SCHEDULE 3.2 attached hereto, Sellers are not required to obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the transactions contemplated by this Agreement. - 7 - 3.3 CAPITALIZATION. The authorized equity securities of the Company consist of 1,000,000 shares of Common Stock, no par value per share ("Common Stock"), of which 20,613 shares of Common Stock are currently issued and outstanding, which, in the aggregate, constitute the Shares. Except as set forth in SCHEDULE 3.3 attached hereto, the Stockholders are the record and beneficial owners and holders of the Shares, free and clear of all Encumbrances. With the exception of the Shares (which are owned by the Stockholders), all of the outstanding equity securities and other securities of each Acquired Company are owned of record and beneficially by one or more of the Acquired Companies, free and clear of all Encumbrances. There are no Contracts relating to the issuance or transfer of any equity securities or other securities of any Acquired Company (other than a stock option agreement between Frank Boorboor and the Company and a stock purchase agreement between Frank Boorboor and Mr. Donkersloot, copies of which have been provided to Buyer (collectively, the "Boorboor Agreements"), and no legend or other reference to any purported Encumbrance appears upon any certificate representing equity securities of any Acquired Company. None of the outstanding equity securities or other securities of any Acquired Company was issued in violation of the Securities Act or any other Legal Requirement. The Acquired Companies neither own nor have any Contract to acquire any equity securities or other securities of any Person or any direct or indirect equity or ownership interest in any other business. 3.4 FINANCIAL STATEMENTS. Sellers have delivered to Buyer: (a) consolidated reviewed balance sheets of the Acquired Companies as at March 31 in each of the years 1993 through 1995, and the related consolidated reviewed statements of income, changes in stockholders' equity, and cash flow for each of the fiscal years then ended, together with the report thereon of Valentine & Bond Ltd., independent certified public accountants, (b) a consolidated reviewed balance sheet of the Acquired Companies as at March 31, 1996 (including the notes thereto, the "Balance Sheet"), and the related consolidated reviewed statements of income, changes in stockholders' equity, and cash flow for the fiscal year then ended, together with the report thereon of Valentine & Bond Ltd., independent certified public accountants, and (c) a consolidated unaudited balance sheet of the Acquired Companies as at June 30, 1996 (including the notes thereto, the "Interim Balance Sheet"), and the related consolidated unaudited statements of income, changes in stockholders' equity, and cash flow for the three months then ended, including in each case the notes thereto. Except as set forth in SCHEDULE 3.4 attached hereto, such financial statements and notes fairly present the financial condition and the results of operations, changes in stockholders' equity, and cash flow of the Acquired Companies as at the respective dates of and for the periods referred to in such financial statements, all in accordance with GAAP; the financial statements referred to in this Section 3.4 reflect the consistent application of such accounting principles throughout the periods involved, except as disclosed in the notes to such financial statements. No financial statements of - 8 - any Person other than the Acquired Companies are required by GAAP to be included in the financial statements of the Acquired Companies. 3.5 BOOKS AND RECORDS. The books of account, minute books, stock record books and other records of the Acquired Companies, all of which have been made available to Buyer, have been maintained in accordance with sound business practices. 3.6 TITLE TO PROPERTIES; ENCUMBRANCES. SCHEDULE 3.6 attached hereto contains a true and complete list of all real property, leaseholds, or other interests therein owned by any Acquired Company. The Acquired Companies own (with good and marketable title in the case of real property) all the properties and assets (whether real, personal, or mixed and whether tangible or intangible) reflected as owned in the books and records of the Acquired Companies, including all of the properties and assets reflected in the Interim Balance Sheet (except for personal property sold since the date of the Interim Balance Sheet in the ordinary course of business), and all of the properties and assets purchased or otherwise acquired by the Acquired Companies since the date of the Interim Balance Sheet (except for personal property acquired and sold since the date of the Interim Balance Sheet in the ordinary course of business and consistent with past practice). Except as set forth in SCHEDULE 3.6 attached hereto, all material properties and assets reflected in the Interim Balance Sheet are free and clear of all Encumbrances. 3.7 CONDITION AND SUFFICIENCY OF ASSETS. To Sellers' Knowledge, the buildings, plants, structures, and equipment of the Acquired Companies are structurally sound, are in good operating condition and repair and are adequate for the uses to which they are being put. None of such buildings, plants, structures, or equipment is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost. To Sellers' Knowledge, the building, plants, structures, and equipment of the Acquired Companies are sufficient for the continued conduct of the Acquired Companies' businesses after the Closing in substantially the same manner as conducted prior to the Closing. 3.8 ACCOUNTS RECEIVABLE. All accounts receivable of the Acquired Companies that are reflected on the Balance Sheet or the Interim Balance Sheet or on the accounting records of the Acquired Companies as of the Closing Date (collectively, the "Accounts Receivable") represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business. Unless paid prior to the Closing Date, the Accounts Receivable are current and collectible net of the respective reserves shown on the Balance Sheet or the Interim Balance Sheet or on the accounting records of the Acquired Companies as of the Closing Date (which reserves are adequate and calculated consistent with past practice and, in the case of the reserve as of the Closing Date, will not represent a greater percentage of the - 9 - Accounts Receivable as of the Closing Date than the reserve reflected in the Interim Balance Sheet represented of the Accounts Receivable reflected therein and will not represent a material adverse change in the composition of such Accounts Receivable in terms of aging). Subject to such reserves, each of the Accounts Receivable either has been or will be collected in full, without any set-off, within 180 days after the day on which it first becomes due and payable. There is no contest, claim, or right of set-off, other than returns in the ordinary course of business, under any Contract with any obligor of an Accounts Receivable relating to the amount or validity of such Accounts Receivable. SCHEDULE 3.8 attached hereto contains a true and complete list of all Accounts Receivable as of the date of the Interim Balance Sheet, which list sets forth the aging of such Accounts Receivable. 3.9 INVENTORY. All inventory of the Acquired Companies, whether or not reflected in the Balance Sheet or the Interim Balance Sheet, consists of a quality and quantity usable and salable in the ordinary course of business, except for obsolete items and items of below-standard quality, all of which have been written off or written down to net realizable value in the Balance Sheet or the Interim Balance Sheet or on the accounting records of the Acquired Companies as of the Closing Date, as the case may be. All inventories not written off have been priced at the lower of cost or first in, first out basis. The quantities of each item of inventory (whether raw materials, work-in-process, or finished goods) are not excessive, but are reasonable in the present circumstances of the Acquired Companies' operations. 3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in SCHEDULE 3.10 attached hereto, the Acquired Companies have no liabilities or obligations of any nature (whether known or unknown and whether absolute, accrued, contingent, or otherwise) except for liabilities or obligations reflected or reserved against in the Balance Sheet or the Interim Balance Sheet and current liabilities incurred in the ordinary course of business since the respective dates thereof. 3.11 TAXES. (a) Except as set forth in SCHEDULE 3.11 attached hereto, the Acquired Companies have filed or caused to be filed all tax returns that are or were required to be filed by or with respect to any of them, either separately or as a member of a group of corporations, pursuant to applicable Legal Requirements. Sellers have made available to Buyer copies of all such tax returns filed since 1993. Except as set forth in SCHEDULE 3.11 attached hereto, the Acquired Companies have paid, or made provision for the payment of, all taxes that have or may have become due pursuant to those tax returns or otherwise, or pursuant to any assessment received by any Acquired Company, except such taxes, if any, as are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been provided in the Interim Balance Sheet. - 10 - (b) Except as set forth in SCHEDULE 3.11 attached hereto, the charges, accruals, and reserves with respect to taxes on the respective books of each Acquired Company are adequate (determined in accordance with GAAP) and are at least equal to that Acquired Company's liability for taxes. There exists no proposed tax assessment against any Acquired Company except as disclosed in the Interim Balance Sheet. All taxes that any Acquired Company is or was required by Legal Requirements to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper governmental body or other Person. 3.12 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance Sheet, there has not been any material adverse change in the business, operations, properties, prospects, assets, or condition of the Acquired Companies, taken as a whole, and no event has occurred or circumstance exists that may result in such a material adverse change. 3.13 EMPLOYEE BENEFITS. (a) For purposes of this Section 3.13, the following terms have the meanings set forth below: "COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit Obligation owed, adopted, or followed by an Acquired Company or an ERISA Affiliate of an Acquired Company. "COMPANY PLAN" means all Plans of which an Acquired Company or an ERISA Affiliate of an Acquired Company is or was a Plan Sponsor, or to which an Acquired Company or an ERISA Affiliate of an Acquired Company otherwise contributes or has contributed, or in which an Acquired Company or an ERISA Affiliate of an Acquired Company otherwise participates or has participated. All references to Plans are to Company Plans unless the context requires otherwise. "COMPANY VEBA" means a VEBA whose members include employees of any Acquired Company or any ERISA Affiliate of an Acquired Company. "ERISA AFFILIATE" means, with respect to an Acquired Company, any other Person that, together with the Company, would be treated as a single employer under IRC Section 414. "MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37)(A). "OTHER BENEFIT OBLIGATIONS" means all obligations, arrangements or customary practices, whether or not legally enforceable, to provide benefits, other than salary, as compensation for services rendered, to present or former directors, employees or agents, other than obligations, arrangements and practices that are embodied in Plans. - 11 - "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto. "PENSION PLAN" has the meaning set forth in ERISA Section 3(2)(A). "PLAN" has the meaning set forth in ERISA Section 3(3). "PLAN SPONSOR" has the meaning set forth in ERISA Section 3(16)(B). "QUALIFIED PLAN" means any Plan that meets or purports to meet the requirements of IRC Section 401(a). "TITLE IV PLANS" means all Pension Plans that are subject to Title IV of ERISA, 29 U.S.C. Section 1301 et seq., other than Multiemployer Plans. "VEBA" means a voluntary employees' beneficiary association under IRC Section 501(c)(9). "WELFARE PLAN" has the meaning set forth in ERISA Section 3(1). (b) SCHEDULE 3.13 attached hereto contains a true and complete list of all Company Plans and Company VEBAs of which an Acquired Company or any ERISA Affiliate of an Acquired Company is or was a Plan Sponsor, or in which an Acquired Company or any ERISA Affiliate of an Acquired Company participates or has participated, or to which an Acquired Company or any ERISA Affiliate of an Acquired Company contributes or has contributed and in which employees of the Acquired Companies participate, and identifies as such all Company Plans that are (i) defined benefit Pension Plans, (ii) Qualified Plans other than Pension Plans or (iii) Multiemployer Plans. (c) With respect to Company Plans and Company VEBAs identified in SCHEDULE 3.13 attached hereto, Sellers have delivered to Buyer: (i) all documents that set forth the terms of each Company Plan, Company Other Benefit Obligation or Company VEBA and of any related trust, including: (A) all plan descriptions and summary plan descriptions of Company Plans for which Sellers or the Acquired Companies are required to prepare, file and distribute, and (B) all summaries and descriptions furnished to participants and beneficiaries regarding Company Plans, Company Other Benefit Obligations and Company VEBAs for which a summary plan description is not required; - 12 - (ii) all collective bargaining agreements pursuant to which contributions have been made or obligations incurred (including both pension and welfare benefits) by the Acquired Companies and the ERISA Affiliates of the Acquired Companies, and all collective bargaining agreements pursuant to which contributions are being made or obligations are owed by such entities; (iii) all registration statements filed with respect to any Company Plan; (iv) all insurance policies purchased by or to provide benefits under any Company Plan; (v) all Contracts with third party administrators, actuaries, investment managers, consultants and other independent contractors that relate to any Company Plan, Company Other Benefit Obligations or Company VEBA; (vi) the most recent reports submitted by third party administrators, actuaries, investment managers, consultants or other independent contractors with respect to any Company Plan, Company Other Benefit Obligation or Company VEBA; (vii) the most current Form 5500 with respect to each Company Plan, including all schedules thereto and the opinions of independent accountants; (viii) all notices that were given by any Acquired Company or any ERISA Affiliate of an Acquired Company or any Company Plan to the IRS, the PBGC, or any participant or beneficiary, pursuant to statute, within the two years preceding the date of this Agreement, including notices that are expressly mentioned elsewhere in this Section 3.13; (ix) all notices that were given by the IRS, the PBGC, or the Department of Labor to any Acquired Company, any ERISA Affiliate of an Acquired Company or any Company Plan within the two years preceding the date of this Agreement; (x) with respect to Qualified Plans and VEBAs, the most recent determination letter for each Company Plan that is a Qualified Plan; and (xi) with respect to Title IV Plans, the most recent Form PBGC-1. (d) With respect to employees of the Company, except as set forth in SCHEDULE 3.13 attached hereto: (i) The Acquired Companies have performed, in all material respects, their respective obligations under all Company Plans, Company Other Benefit Obligations and Company VEBAs. The Acquired Companies have made appropriate entries in their financial - 13 - records and statements for all obligations and liabilities under such Plans, VEBAs and Obligations that have accrued but are not due. (ii) The Acquired Companies, with respect to all Company Plans, Company Other Benefit Obligations and Company VEBAs, are, and each Company Plan, Company Other Benefit Obligation and Company VEBA in which an Acquired Company participates or to which an Acquired Company contributes is, in material compliance with ERISA, the IRC and other applicable laws, including the provisions of such laws expressly mentioned in this Section 3.13, including that: (A) No transaction prohibited by ERISA Section 406 and no "prohibited transaction" under IRC Section 4975(c) have occurred with respect to any Company Plan. (B) No Seller or Acquired Company has any liability to the IRS with respect to any Plan, including any liability imposed by Chapter 43 of the IRC. (C) No Seller or Acquired Company has any liability to the PBGC with respect to any Plan or has any liability under ERISA Section 502 or Section 4071. (D) All filings required by ERISA and the IRC as to each Plan have been timely filed, and all notices and disclosures to participants required by either ERISA or the IRC have been timely provided. (E) All contributions and payments made or accrued with respect to all Company Plans, Company Other Benefit Obligations and Company VEBAs are deductible under IRC Section 162 or Section 404. No amount, or any asset of any Company Plan or Company VEBA, is subject to tax as unrelated business taxable income. (iii) Other than claims for benefits submitted by participants or beneficiaries, no claim against, or Proceeding involving, any Company Plan, Company Other Benefit Obligation or Company VEBA is pending or, to Sellers' Knowledge, is Threatened. (iv) Each Company Plan which is a Qualified Plan is in compliance with IRC Section 401(a); each trust for each such Plan is exempt from federal income tax under IRC Section 501(a) and each such Plan has been operated in compliance with applicable laws. (v) Each Acquired Company and each ERISA Affiliate of an Acquired Company has met the minimum funding standard, and has made all contributions required, under ERISA Section 302 and IRC Section 402. (vi) The Acquired Companies have paid all amounts due to the PBGC pursuant to ERISA Section 4007. - 14 - (vii) No Acquired Company or any ERISA Affiliate of an Acquired Company has ceased operations at any Facility or has withdrawn from any Title IV Plan in a manner that would subject any such entity or Sellers to liability under ERISA Section 4062(e), Section 4063, or Section 4064. (viii) No Acquired Company or any ERISA Affiliate of an Acquired Company has filed a notice of intent to terminate any Plan or has adopted any amendment to treat a Plan as terminated. The PBGC has not instituted proceedings to treat any Company Plan as terminated. No event has occurred or circumstance exists that may constitute grounds under ERISA Section 402 for the termination of, or the appointment of a trustee to administer, any Company Plan. (ix) No amendment has been made, or is reasonably expected to be made, to any Plan that has required or could require the provision of security under ERISA Section 307 or IRC Section 401(a)(29). (x) No accumulated funding deficiency, whether or not waived, exists with respect to any Company Plan; no event has occurred or circumstance exists that may result in an accumulated funding deficiency as of the last day of the current plan year of any such Plan. (xi) The actuarial report for each Pension Plan of each Acquired Company and each ERISA Affiliate of an Acquired Company fairly presents the financial condition and the results of operations of each such Plan in accordance with GAAP. (xii) Since the last valuation date for each Pension Plan of each Acquired Company and each ERISA Affiliate of an Acquired Company, no event has occurred or circumstance exists that would increase the amount of benefits under any such Plan or that would cause the excess of Plan assets over benefit liabilities (as defined in ERISA Section 4001) to decrease, or the amount by which benefit liabilities exceed assets to increase, except insofar as such event or circumstance has occurred as a result of the operation of the Plan. (xiii) Except with respect to the transaction contemplated by this Agreement, no reportable event (as defined in ERISA Section 4043 and in regulations issued thereunder) has occurred. (xiv) Except with respect to annual premiums, no Seller or Acquired Company has Knowledge of any facts or circumstances that may give rise to any liability of any Seller, any Acquired Company or Buyer to the PBGC under Title IV of ERISA. (xv) No Acquired Company or any ERISA Affiliate of an Acquired Company has withdrawn from any Multiemployer Plan with respect to which there is any outstanding liability as of the date of this Agreement. No event has occurred or circumstance exists that presents a risk of the occurrence of any withdrawal from, or - 15 - the participation, termination, reorganization, or insolvency of, any Multiemployer Plan that could result in any liability of any Acquired Company or Buyer to a Multiemployer Plan. (xvi) No Acquired Company or any ERISA Affiliate of an Acquired Company has received notice from any Multiemployer Plan that it is in reorganization or is insolvent, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of any excise tax, or that such Plan intends to terminate or has terminated. (xvii) Except to the extent required under ERISA Section 601 et seq. and IRC Section 4980B, no Acquired Company provides health or welfare benefits for any retired or former employee or is obligated to provide health or welfare benefits to any active employee following such employee's retirement or other termination of service. (xviii) The Acquired Companies have substantially complied with the provisions of ERISA Section 601 et seq. and IRC Section 4980B. 3.14 COMPLIANCE WITH LEGAL REQUIREMENTS. Except as set forth in SCHEDULE 3.14 attached hereto, (i) each Acquired Company is in compliance with each Legal Requirement that is applicable to it, except where the failure so to comply would not reasonably be expected, in the aggregate, to have a material adverse effect on the operations or assets of the Acquired Company; and (ii) no Acquired Company has received, at any time since September 30, 1995, any written notice or other written communication from any governmental body regarding any actual or potential material violation of, or material failure to comply with, any Legal Requirement. 3.15 LEGAL PROCEEDINGS; ORDERS. (a) Except as set forth in SCHEDULE 3.15 attached hereto, there is no pending Proceeding (i) that has been commenced by or against any Acquired Company; or (ii) that challenges, or that may have the effect of preventing or delaying, any of the transactions contemplated by this Agreement; and, to Sellers' Knowledge, no such Proceeding has been Threatened. (b) Except as set forth in SCHEDULE 3.15 attached hereto, there is no Order to which any Acquired Company, or any of the assets owned or used by any Acquired Company, is subject that would reasonably be expected to have a material adverse effect on the operations or assets of any Acquired Company. 3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in SCHEDULE 3.16 attached hereto, since the date of the Interim Balance Sheet, the Acquired Companies have conducted their - 16 - businesses only in the ordinary course of business and there has not been any: (a) change in any Acquired Company's authorized or issued capital stock; grant of any stock option or right to purchase shares of capital stock of any Acquired Company; issuance of any security convertible into such capital stock; grant of any registration rights; purchase, redemption, retirement, or other acquisition by any Acquired Company of any shares of any such capital stock; or declaration or payment of any dividend or other distribution or payment in respect of shares of capital stock, except as set forth in the Boorboor Agreements; (b) damage to or destruction or loss of any asset or property of any Acquired Company, whether or not covered by insurance, materially and adversely affecting the properties, assets, business, financial condition or prospects of the Acquired Companies, taken as a whole; (c) entry into, termination of or receipt of notice of termination of (i) any license, distributorship, dealer, sales representative, joint venture, credit, or similar agreement, or (ii) any Contract or transaction, involving a total remaining commitment by or to any Acquired Company of at least $25,000; or (d) sale (other than sales of inventory in the ordinary course of business), lease, or other disposition of any material asset or property of any Acquired Company or mortgage, pledge, or imposition of any Encumbrance on any material asset or property of any Acquired Company. Since the date of the Interim Balance Sheet, Sellers have not (a) taken any affirmative action, or failed to take any reasonable action within their or its control, as a result of which any of the changes or events listed in Section 3.16 is likely to occur; (b) declared, set aside or paid any dividends or other distributions in respect of any Acquired Company's capital stock or redeemed, purchased or otherwise acquired any shares of any Acquired Company's capital stock (except pursuant to the Boorboor Agreements); (c) amended any Acquired Company's charter or Bylaws; or (d) made adjustments to the compensation of, or bonuses to, any Acquired Company's employees or entered into any new employment, severance or similar agreements or modified any such existing agreements. 3.17 CONTRACTS; NO DEFAULTS. (a) SCHEDULE 3.17 attached hereto contains a true and complete list of: (i) each Contract that involves performance of services or delivery of goods or materials to or by one or more Acquired Companies of an amount or value in excess of $25,000 - 17 - (other than the purchase of inventory in the ordinary course of business); (ii) each Contract that was not entered into in the ordinary course of business and that involves expenditures or receipts of one or more Acquired Companies in excess of $25,000; (iii) each collective bargaining agreement and other Contract to or with any labor union or other employee representative of a group of employees; (iv) each lease, rental or occupancy agreement, license, installment and conditional sale agreement and other Contract affecting the ownership of, leasing of, title to, use of or any leasehold or other interest in, any real or personal property; (v) each licensing agreement or other Contract with respect to patents, trademarks, copyrights or other intellectual property, including agreements with current or former employees, consultants or contractors regarding the appropriation or the non-disclosure of any intellectual property, to which any Acquired Company is a party; (vi) each joint venture, partnership and other Contract (however named) involving a sharing of profits, losses, costs, or liabilities by any Acquired Company with any other Person; and (vii) each Contract containing covenants that in any way purport to restrict the business activity of any Acquired Company or any Affiliate of an Acquired Company or limit the freedom of any Acquired Company or any Affiliate of an Acquired Company to engage in any line of business or to compete with any Person. (b) Except as set forth in SCHEDULE 3.17 attached hereto, each Acquired Company is in compliance with applicable terms and requirements of each Contract under which such Acquired Company has any obligation or liability or by which such Acquired Company or any of the assets owned or used by such Acquired Company is bound. 3.18 INSURANCE. (a) Sellers have delivered to Buyer true and complete copies of all policies of insurance (and applications therefor) to which any Acquired Company is a party or under which any Acquired Company, or any director of any Acquired Company, is covered. (b) No Seller or Acquired Company has received (i) any written refusal of coverage, or (ii) any written notice of cancellation or any other written indication that any insurance policy is no longer in full force or effect or will not be renewed - 18 - or that the issuer of any policy is not willing or able to perform its obligations thereunder. 3.19 ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.19 attached hereto: (a) To Sellers' Knowledge, each Acquired Company is in compliance with, in all material respects, and is not in violation of or liable under, in any material respect, any Environmental Law. No Seller or Acquired Company received any actual or Threatened order, notice, or other communication from (i) any governmental body or private citizen acting in the public interest, or (ii) the current or prior owner or operator of any Facilities, of any actual or potential violation or failure to comply with any Environmental Law, or of any actual or Threatened obligation to undertake or bear the cost of any Environmental, Health and Safety Liabilities with respect to any of the Facilities or any other properties or assets in which Sellers or any Acquired Company has had an interest, or with respect to any property or Facility at or to which Hazardous Materials were generated, manufactured, refined, transferred, imported, used, or processed by Sellers or any Acquired Company, or from which Hazardous Materials have been transported, treated, stored, handled, transferred, disposed, recycled, or received. (b) There are no pending (in which Sellers have received notice) or, to Sellers' Knowledge, Threatened claims, Encumbrances, or other restrictions of any nature, resulting from any Environmental, Health and Safety Liabilities or arising under or pursuant to any Environmental Law, with respect to or affecting any of the Facilities or any other properties and assets in which any Acquired Company has an interest. (c) Except as set forth on SCHEDULE 3.19 attached hereto, there are no Hazardous Materials present on or in the Environment at the Facilities or at any geologically or hydrologically adjoining property, including any Hazardous Materials contained in barrels, above or underground storage tanks, landfills, land deposits, dumps, equipment (whether moveable or fixed) or other containers, either temporary or permanent, and deposited or located in land, water, sumps, or any other part of the Facilities or such adjoining property, or incorporated into any structure therein or thereon. None of Sellers, any other Person for whose conduct they are or may be held responsible or, to Sellers' Knowledge, any other Person has permitted or conducted, or is aware of, any Hazardous Activity conducted with respect to the Facilities or any other properties or assets (whether real, personal, or mixed) in which Sellers have or had an interest, except in full compliance with all applicable Environmental Laws. (d) There has been no Release or, to Sellers' Knowledge, Threat of Release of any Hazardous Materials at or from the Facilities or at any other locations where any Hazardous Materials were generated, manufactured, refined, transferred, produced, - 19 - imported, used or processed from or by the Facilities, or from or by any other properties and assets (whether real, personal, or mixed) in which Sellers have or had an interest, or, to Sellers' Knowledge, any geologically or hydrologically adjoining property, whether by Sellers or any other Person. (e) Sellers have delivered to Buyer true and complete copies and results of any reports, studies, analyses, tests or monitoring possessed or initiated by Sellers pertaining to Hazardous Materials or Hazardous Activities in, on, or under the Facilities, or concerning compliance by Sellers or any other Person for whose conduct they are or may be held responsible with Environmental Laws. 3.20 LABOR RELATIONS; COMPLIANCE. Except as described in SCHEDULE 3.17 attached hereto, no Acquired Company is a party to any collective bargaining agreement. Since the date of the Interim Balance Sheet, there is not presently pending or existing, and to Sellers' Knowledge there is not Threatened, (a) any strike, slowdown, picketing, or work stoppage, (b) any Proceeding against any Acquired Company relating to the alleged violation of any Legal Requirement pertaining to labor relations or employment matters, including any charge or complaint filed by an employee or union with the National Labor Relations Board, affecting any Acquired Company that would reasonably be expected to have a material adverse effect on any Acquired Company, or (c) any application for certification of a collective bargaining agent. 3.21 INTELLECTUAL PROPERTY. (a) PATENTS. SCHEDULE 3.21 attached hereto contains a true and complete list of all patents and patent applications owned by the Acquired Companies (collectively, the "Patents"). One of the Acquired Companies is the owner of all right, title, and interest in and to each of the Patents, free and clear of all Encumbrances and other adverse claims. No Patent is now involved in any interference, reissue, reexamination or opposition proceeding and, to Sellers' Knowledge, no such action is Threatened with respect to any of the Patents. To Sellers' Knowledge, no Patent is infringed or has been challenged or threatened in any way. To Sellers' Knowledge, none of the products manufactured and sold, nor any process or know-how used, by the Acquired Companies infringes or is alleged to infringe any patent or other proprietary right of any other Person. (b) TRADEMARKS. SCHEDULE 3.21 contains a true and complete list of all registered and unregistered trademarks and service marks owned by the Acquired Companies (the "Marks"). One of the Acquired Companies is the owner of all right, title, and interest in and to each of the Marks, free and clear of all Encumbrances and other adverse claims. No Mark is now involved in any opposition, invalidation or cancellation proceeding and, to Sellers' Knowledge, no such action is Threatened with the respect to any of the Marks. To Sellers' Knowledge, no Mark is infringed - 20 - or has been challenged or threatened in any way. To Sellers' Knowledge, none of the Marks used by the Acquired Companies infringes or is alleged to infringe any trade name, trademark or service mark of any third party. 3.22 CUSTOMERS. SCHEDULE 3.22 contains a true and complete list of all customers of each Acquired Company who or which accounted for five percent (5%) or more of such Acquired Company's gross sales in any of the three most recent years. Sellers have received no notice that, and have no reason to believe that, any customer of the Acquired Companies does not plan to continue to do business with the Acquired Companies or plans to reduce its volume of orders from the Acquired Companies or will not do business with Buyer on substantially the same terms and conditions as such customer currently is doing business with the Acquired Companies. 3.23 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly provided in this Agreement, Sellers have caused all indebtedness owed to the Acquired Companies by any Stockholder or Related Person of any Seller to be paid in full prior to Closing. 3.24 DISCLOSURE. No representation or warranty of Sellers in this Agreement and no statement in the Schedules attached hereto omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances in which they were made, not misleading. Except as set forth in this Agreement, Sellers make no representations or warranties, express or implied, regarding the Shares or the Acquired Companies. 4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to Sellers that: 4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. 4.2 AUTHORITY; DUE AUTHORIZATION, EXECUTION AND DELIVERY. Buyer has the corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement. The execution, delivery, and performance by Buyer of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Buyer. This Agreement has been duly and validly executed and delivered by Buyer. This Agreement constitutes the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms. 4.3 NO CONFLICT. Except as set forth in SCHEDULE 4.3 attached hereto, neither the execution and delivery of this Agreement nor the consummation or performance of any of the transactions contemplated by this Agreement will give any Person the right to prevent, delay, or otherwise interfere with any of the transactions contemplated by this Agreement pursuant to (a) any - 21 - provision of Buyer's charter or Bylaws; (b) any resolution adopted by the Board of Directors or stockholders of Buyer; (c) any Legal Requirement or Order to which Buyer may be subject; or (d) any Contract to which Buyer is a party or by which Buyer may be bound. Except as set forth in SCHEDULE 4.3 attached hereto, Buyer is not required to obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the transactions contemplated by this Agreement. 4.4 INVESTMENT INTENT. Buyer is acquiring the Shares for its own account and not with a view to their distribution within the meaning of Section 2(11) of the Securities Act. 4.5 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been commenced against Buyer and that challenges, or may have the effect of preventing, delaying, making illegal or otherwise interfering with, any of the transactions contemplated by this Agreement. To Buyer's Knowledge, no such Proceeding has been Threatened. 4.6 AVAILABILITY OF FUNDS. Buyer has sufficient funds available to it to enable it to consummate the transactions contemplated by this Agreement. 5. COVENANTS OF SELLERS. [INTENTIONALLY OMITTED.] 6. COVENANT OF BUYER. [INTENTIONALLY OMITTED.] 7. EMPLOYMENT AND EMPLOYEE BENEFIT ARRANGEMENTS. 7.1 EMPLOYMENT. (a) CONTINUATION OF EMPLOYMENT. Following the Closing Date, Buyer will cause the Acquired Companies to continue to employ all employees of the Acquired Companies as of the Closing Date, including, without limitation, all employees who on the Closing Date are on layoff or leave of absence and who, under applicable policies and procedures of the Acquired Companies as in effect on the day immediately preceding the Closing Date, are entitled to recall or return rights which have not yet expired (including but not limited to circumstances where such employees have the right to be reinstated to active employment under the terms of an applicable collective bargaining agreement or applicable law, including, without limitation, the Family and Medical Leave Act of 1993, as amended, and the Americans with Disabilities Act of 1990, as amended, or upon the expiration of any holiday, vacation or leave taken pursuant to the policies or practices of the Acquired Companies as in effect on the day immediately preceding the Closing Date), who Buyer reasonably determines are able, with or without reasonable accommodation, to adequately perform all of the essential functions of the job that they held immediately prior to the Closing; PROVIDED, HOWEVER, that neither Buyer nor the Acquired Companies is required to continue such employment thereafter. - 22 - (b) INSTALLATION OF BUYER'S BENEFIT PLANS. On or prior to the Closing Date, the Acquired Companies shall contribute to the accounts of participants under each Company Plan any contributions that the Acquired Companies are required to make with respect to such accounts based on service as of the Closing Date. As of the Closing Date, Buyer will establish retirement and welfare benefit plans (including, without limitation, group health insurance), programs and arrangements for the benefit of the Acquired Companies' employees that are substantially comparable to those plans, programs and arrangements currently maintained by Buyer and its affiliates for their current employees. Buyer will cause the Acquired Companies to recognize, for all purposes, including but not limited to eligibility, vesting, level of benefits and benefit accruals, all service, compensation and plan participation credited to each employee by the Acquired Companies through the Closing Date. Those employee benefit plans, programs and arrangements in effect prior to the Closing Date for the benefit of the Acquired Companies' employees will be terminated by Buyer. Notwithstanding the foregoing, it is Buyer's expectation to maintain the Seller's existing benefit arrangements for a brief period of time following the Closing Date, to extend participation in the Buyer's 401(k) retirement plan on approximately October 1, 1996, and to convert the Seller's health, dental, vision and life insurance benefits into comparable (although not necessarily identical) arrangements maintained by the Buyer on approximately November 1, 1996. Buyer may require employees covered under the Buyer's above-described welfare benefit arrangements to pay a portion of the cost of coverage. (c) PERSONNEL INFORMATION. Sellers will furnish to Buyer such information in its personnel files as Buyer may reasonably request in connection with determining whether to continue or resume the employment of any person currently employed by the Acquired Companies after the Closing Date. 7.2 NO THIRD PARTY BENEFICIARY RIGHTS. Nothing in this Section 7 will create any third party beneficiary rights in any employee or former employee of the Acquired Companies or Buyer (including any dependent or beneficiary thereof) to continued or resumed employment or to benefits that may be provided under any employee benefits plan or arrangement. 8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's obligation to purchase the Shares and to take the other actions required to be taken by Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Buyer, in whole or in part): 8.1 ACCURACY OF REPRESENTATIONS. The representations and warranties of Sellers set forth in Section 3 hereof shall be true and complete as of the Closing in all material respects (giving full effect to any supplements to the Schedules that were delivered by Sellers to Buyer prior to the Closing Date). - 23 - 8.2 SELLERS' PERFORMANCE. The covenants of Sellers set forth in Section 7 hereof shall have been duly performed and complied with in all material respects. 8.3 APPROVALS AND CONSENTS. Each of the Consents identified in SCHEDULE 3.2 attached hereto shall have been obtained and shall be in full force and effect. 8.4 DELIVERY OF DOCUMENTS. Each of the following documents shall have been delivered to Buyer: (a) an opinion of Nearhood & Associates, P.C., dated the Closing Date, substantially in the form attached hereto as EXHIBIT 8.4(A); (b) a certificate executed by Sellers representing and warranting to Buyer that each of Sellers' representations and warranties set forth in Section 3 hereof is true and complete as of the Closing Date (giving full effect to any supplements to the Schedules that were delivered by Sellers to Buyer prior to the Closing Date), in the form attached hereto as EXHIBIT 8.4(B); (c) an employment agreement executed by Mr. Donkersloot, in the form attached hereto as EXHIBIT 8.4(C); (d) a non-competition agreement executed by Mr. Donkersloot, in the form attached hereto as EXHIBIT 8.4(D); (e) an asset purchase agreement executed by the Stockholders, in the form attached hereto as EXHIBIT 8.4(E), pursuant to which a facility and other assets owned by the Stockholders and used in connection with the Acquired Companies' businesses will be purchased by Buyer for a purchase price of $450,000; (f) a written acknowledgement of Allied Signal, Inc. that it (i) plans to continue to do business with the Acquired Companies, (ii) does not plan to reduce its volume of orders from the Acquired Companies, and (iii) will do business with Buyer on substantially the same terms and conditions as it currently is doing business with the Acquired Companies; (g) the Certificates; and (h) such other documents as Buyer may reasonably request for the purpose of facilitating the consummation or performance of any of the transactions contemplated by this Agreement. 8.5 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance Sheet, there shall not have been any material adverse change in the business, operations, properties, prospects, assets, or condition of the Acquired Companies, taken as a whole, and no event shall have occurred or circumstance shall exist that may result in such a material adverse change. - 24 - 8.6 NO INJUNCTION. There must not be in effect any Legal Requirement or any injunction or other Order that (a) prohibits the sale of the Shares by the Stockholders to Buyer, and (b) has been adopted or issued, or has otherwise become effective, since the date of this Agreement. 8.7 NO PROCEEDINGS. There must not have been commenced or threatened against Buyer, or against any Person affiliated with Buyer, any Proceeding (a) involving any challenge to, or seeking damages or other relief in connection with, any of the transactions contemplated by this Agreement, or (b) that may have the effect of preventing, delaying, making illegal, or otherwise interfering with any of the transactions contemplated by this Agreement. 9. CONDITIONS PRECEDENT TO STOCKHOLDERS' OBLIGATION TO CLOSE. The Stockholders' obligation to sell the Shares and to take the other actions required to be taken by the Stockholders at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by the Stockholders, in whole or in part): 9.1 ACCURACY OF REPRESENTATIONS. The representations and warranties of Buyer set forth in Section 4 hereof shall be true and complete as of the Closing in all material respects. 9.2 BUYER'S PERFORMANCE. The covenant of Buyer set forth in Section 2.4(a) hereof shall have been duly performed and complied with in all respects, and the covenants of Buyer set forth in Section 7 hereof shall have been duly performed and complied with in all material respects. 9.3 APPROVALS AND CONSENTS. Each of the Consents identified in SCHEDULE 4.3 attached hereto shall have been obtained and shall be in full force and effect. 9.4 DELIVERY OF DOCUMENTS. Each of the following documents shall have been delivered to the Stockholders: (a) an opinion of Ballard Spahr Andrews & Ingersoll, dated the Closing Date, substantially in the form attached hereto as EXHIBIT 9.4(a); (b) a certificate executed by Buyer representing and warranting to Sellers that each of Buyer's representations and warranties set forth in Section 4 hereof is true and complete as of the Closing Date, in the form attached hereto as EXHIBIT 9.4(b); and (c) such other documents as the Stockholders may reasonably request for the purpose of facilitating the consummation of any of the transactions contemplated by this Agreement. 9.5 NO INJUNCTION. There must not be in effect any Legal Requirement or any injunction or other Order that - 25 - (a) prohibits the sale of the Shares by the Stockholders to Buyer, and (b) has been adopted or issued, or has otherwise become effective. 10. TERMINATION. [INTENTIONALLY OMITTED.] 11. INDEMNIFICATION; REMEDIES. 11.1 SURVIVAL. The representations and warranties set forth in this Agreement, the Schedules, any supplements to the Schedules that are delivered prior to the Closing Date, and any other certificate or document delivered pursuant to this Agreement, and the covenants and obligations set forth in this Agreement, will survive the Closing Date and, except for the representations set forth in Sections 3.3 (relating to capitalization) and 3.11 (relating to taxes) which will survive the Closing Date until the expiration of the applicable statutory period of limitation, and except for the representation set forth in Section 3.19 (relating to environmental matters) which will expire on the sixth anniversary of the Closing Date, will expire on the second anniversary of the Closing Date, and, thereafter, no claim may be brought arising under or in connection with this Agreement or any of the transactions contemplated hereby; PROVIDED, HOWEVER, that any covenants and obligations of Buyer set forth in this Agreement to be performed by Buyer after the Closing Date will survive without limitation. The right to indemnification, payment of Damages (as defined in Section 11.2) or other remedy based on such representations, warranties, covenants and obligations will not be affected by any investigation conducted, or any Knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant or obligation. 11.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY STOCKHOLDERS. The Stockholders, jointly and severally, will indemnify and hold harmless Buyer, and their respective Representatives, stockholders, controlling persons, and affiliates (collectively, the "Indemnified Persons") for, and will pay to the Indemnified Persons the amount of, any loss, liability, claim, damage (including incidental and consequential damages), expense (including costs of investigation and defense and reasonable attorneys' fees), or diminution of value, whether or not involving a third-party claim (collectively, "Damages"), arising, directly or indirectly, from or in connection with (a) any breach of any representation or warranty made by Sellers in Section 3 of this Agreement, the Schedules, any supplements to the Schedules, or any other certificate or document delivered by Sellers to Buyer pursuant to this Agreement (including, without limitation, the Employment Agreement and the Non-Competition Agreement); (b) any breach by any Seller of any covenant or obligation of such Seller in this Agreement; (c) any product shipped or manufactured by, or any services provided by, the Acquired Companies prior to the Closing - 26 - Date; (d) any claim arising out of, relating to or in connection with the Acquired Companies on account of any matter arising, occurring or taking place prior to the Closing Date; (e) any claim or liability with respect to the investment by participants of their accounts under the Advanced Materials Technologies Inc. Retirement Savings Plan which claim or liability arises, in whole or in part, from that Plan's failure to comply with the requirements of Section 404(c) of ERISA; or (f) any claim or liability with respect to an employee benefit plan or plans sponsored or maintained by Special Processes of Arizona, Inc. or Advanced Materials Joining Corp. The remedies provided in this Section 11.2 will not be exclusive of or limit any other remedies that may be available to Buyer or the other Indemnified Persons. 11.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY STOCKHOLDERS -- ENVIRONMENTAL MATTERS. In addition to the provisions of Section 11.2, the Stockholders, jointly and severally, will indemnify and hold harmless Buyer, the Acquired Companies, and the other Indemnified Persons for, and will pay to Buyer, the Acquired Companies, and the other Indemnified Persons the amount of, any Damages (including costs of cleanup, containment, or other remediation) arising, directly or indirectly, from or in connection with: (a) any Environmental, Health, and Safety Liabilities arising out of or relating to: (i) (A) the ownership, operation, or condition at any time on or prior to the Closing Date of the Facilities or any other properties and assets (whether real, personal, or mixed and whether tangible or intangible) in which Sellers has or had an interest, or (B) any Hazardous Materials or other contaminants that were present on the Facilities or such other properties and assets at any time on or prior to the Closing Date; or (ii) (A) any Hazardous Materials or other contaminants, wherever located, that were, or were allegedly, generated, transported, stored, treated, Released, or otherwise handled by Sellers or by any other Person for whose conduct they are or may be held responsible at any time on or prior to the Closing Date, or (B) any Hazardous Activities that were, or were allegedly, conducted by Sellers or by any other Person for whose conduct they are or may be held responsible; or (b) any bodily injury (including illness, disability, and death, and regardless of when any such bodily injury occurred, was incurred, or manifested itself), personal injury, property damage (including trespass, nuisance, wrongful eviction, and deprivation of the use of real property), or other damage of or to any Person, including any employee or former employee of Sellers or any other Person for whose conduct they are or may be held responsible, in any way arising from or allegedly arising from any Hazardous Activity conducted or allegedly conducted with respect to the Facilities or the operation of the Acquired Companies prior to - 27 - the Closing Date, or from Hazardous Material that was (i) present or suspected to be present on or before the Closing Date on or at the Facilities (or present or suspected to be present on any other property, if such Hazardous Material emanated or allegedly emanated from any of the Facilities and was present or suspected to be present on any of the Facilities on or prior to the Closing Date), or (ii) Released or allegedly Released by Sellers or any other Person for whose conduct they are or may be held responsible, at any time on or prior to the Closing Date. Buyer will be entitled to control any Cleanup, any related Proceeding, and, except as provided in the following sentence, any other Proceeding with respect to which indemnity may be sought under this Section 11.3. The procedure described in Section 11.5 will apply to any claim solely for monetary damages relating to a matter covered by this Section 11.3. 11.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will indemnify and hold harmless the Stockholders, and will pay to the Stockholders the amount of any Damages arising, directly or indirectly, from or in connection with (a) any breach of any representation or warranty made by Buyer in this Agreement, the Schedules, any supplements to the Schedules or any certificate delivered by Buyer to Sellers pursuant to this Agreement; (b) any breach by Buyer of any covenant or obligation of Buyer in this Agreement; or (c) any claim arising out of, relating to or in connection with the Acquired Companies on account of any matter arising, occurring or taking place on or after the Closing Date. 11.5 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS. (a) Promptly after receipt by an indemnified party under Sections 11.2, (to the extent provided in the last sentence of Section 11.3) 11.3, or 11.4 of notice of the commencement of any Proceeding against it, such indemnified party will, if a claim is to be made against an indemnifying party under such Section, give notice to the indemnifying party of the commencement of such claim, but the failure to notify the indemnifying party will not relieve the indemnifying party of any liability that it may have to any indemnified party, except to the extent that the indemnifying party demonstrates that the defense of such action is prejudiced by the indemnified party's failure to give such notice. (b) The indemnifying party will, unless the claim involves taxes, be entitled to participate in such Proceeding and, to the extent that it wishes (unless (i) the indemnifying party is also a party to such Proceeding and the indemnified party determines in good faith that joint representation would be inappropriate, or (ii) the indemnifying party fails to provide reasonable assurance to the indemnified party of its financial capacity to defend such Proceeding and provide indemnification with respect to such Proceeding), to assume the defense of such Proceeding with counsel satisfactory to the indemnified party and, - 28 - after notice from the indemnifying party to the indemnified party of its election to assume the defense of such Proceeding, the indemnifying party will not, as long as it diligently conducts such defense, be liable to the indemnified party under this Section 11 for any fees of other counsel or any other expenses with respect to the defense of such Proceeding, in each case subsequently incurred by the indemnified party in connection with the defense of such Proceeding. If the indemnifying party assumes the defense of a Proceeding, (i) it will be conclusively established for purposes of this Agreement that the claims made in that Proceeding are within the scope of and subject to indemnification; (ii) no compromise or settlement of such claims may be effected by the indemnifying party without the indemnified party's consent unless (A) there is no finding or admission of any violation of Legal Requirements or any violation of the rights of any Person and no effect on any other claims that may be made against the indemnified party, and (B) the sole relief provided is monetary damages that are paid in full by the indemnifying party; and (iii) the indemnified party will have no liability with respect to any compromise or settlement of such claims effected without its consent. If notice is given to an indemnifying party of the commencement of any Proceeding and the indemnifying party does not, within ten days after the indemnified party's notice is given, give notice to the indemnified party of its election to assume the defense of such Proceeding, the indemnifying party will be bound by any determination made in such Proceeding or any compromise or settlement effected by the indemnified party. (c) Notwithstanding the foregoing, if an indemnified party determines in good faith that there is a reasonable probability that a Proceeding may adversely affect it or its affiliates other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the indemnified party may, by notice to the indemnifying party, assume the exclusive right to defend, compromise, or settle such Proceeding, but the indemnifying party will not be bound by any determination of a Proceeding so defended or any compromise or settlement effected without its consent (which may not be unreasonably withheld). (d) Sellers hereby consent to the non-exclusive jurisdiction of any court in which a Proceeding is brought against any Indemnified Person for purposes of any claim that an Indemnified Person may have under this Agreement with respect to such Proceeding or the matters alleged therein, and agree that process may be served on Sellers with respect to such a claim anywhere in the world. 11.6 PROCEDURE FOR INDEMNIFICATION-- OTHER CLAIMS. A claim for indemnification for any matter not involving a third-party claim may be asserted by notice to the party from whom indemnification is sought. - 29 - 12. GENERAL PROVISIONS. 12.1 EXPENSES. Except as otherwise expressly provided in this Agreement, (a) all expenses incurred by Buyer in connection with the preparation, execution, and performance of this Agreement and the transactions contemplated by this Agreement, including all fees and expenses of agents, Representatives, investment bankers, counsel, and accountants, whether incurred as of the date hereof or later incurred, will be paid by Buyer; and (b) all expenses incurred by Sellers in connection with the preparation, execution, and performance of this Agreement and the transactions contemplated by this Agreement, including all fees and expenses of agents, Representatives, investment bankers, counsel, and accountants, whether incurred as of the date hereof or later incurred, will be paid by the Stockholders. Further, Buyer will pay any fee required in order to obtain any Governmental Authorization necessary to consummate the transactions contemplated by this Agreement. Sellers will cause the Acquired Companies not to incur any out-of-pocket expenses in connection with the preparation, execution and performance of this Agreement and the transactions contemplated by this Agreement. 12.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity with respect to this Agreement or the transactions contemplated by this Agreement will be issued, if at all, at such time and in such manner as Buyer determines. Prior to the Closing, unless consented to by Buyer in advance or required by Legal Requirements, Sellers will keep this Agreement strictly confidential and may not make any disclosure of this Agreement to any Person. Buyer and Sellers will consult with each other concerning the means by which the Acquired Companies' employees, customers and suppliers and others having dealings with the Acquired Companies will be informed of the transactions contemplated by this Agreement, and Buyer will have the right to be present for any such communication. Without limitation to the foregoing, the parties agree that the Purchase Price and other monetary terms of this Agreement will not be disclosed to any third party, except as may be required by Legal Requirements. 12.3 CONFIDENTIALITY. Between the date of this Agreement and the Closing Date, Buyer and Sellers will maintain in confidence, and will cause the directors, officers, employees, agents, and advisors of Buyer and the Acquired Companies to maintain in confidence, and not use to the detriment of another party any written, oral, or other information obtained in confidence from another party in connection with this Agreement or the transactions contemplated by this Agreement, unless (a) such information is already known to such party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such party, (b) the use of such information is necessary or appropriate in making any filing or obtaining any consent or approval required for the consummation of the transactions contemplated by this Agreement, or (c) the furnishing or use of such information is required by or necessary - 30 - or appropriate in connection with legal proceedings or legal filings required to be made by Buyer. If the transactions contemplated by this Agreement are not consummated, each party will return or destroy as much of such written information as the other party may reasonably request. Whether or not the Closing takes place, Sellers waive any cause of action, right, or claim arising out of the access of Buyer or its Representatives to any trade secrets or other confidential information of the Acquired Companies except for the intentional competitive misuse by Buyer of such trade secrets or confidential information. 12.4 NOTICES. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand, (b) sent by telecopier, provided that a copy is concurrently mailed by first class mail, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service, in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): Sellers: Advanced Materials Technologies Inc. 2015 West Alameda Drive Tempe, Arizona 85282-3170 Attention: Mr. Daryl Jay Donkersloot Telecopier: (602) 431-9051 with a copy to: James R. Nearhood, Esq. Nearhood & Associates, P.C. 7501 East McCormick Parkway, Suite 114N Scottsdale, Arizona 85258 Telecopier: (602) 998-0820 Buyer: The Triumph Group, Inc. Four Glenhardie Corporate Center 1255 Drummers Lane, Suite 200 Wayne, Pennsylvania 19087-1565 Attention: Mr. John R. Bartholdson Telecopier: (610) 975-0563 - 31 - with a copy to: Edward D. Slevin, Esq. Ballard Spahr Andrews & Ingersoll 1735 Market Street, 51st Floor Philadelphia, Pennsylvania 19103 Telecopier: (215) 864-8999 12.5 FURTHER ASSURANCES. The parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement. 12.6 WAIVER. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement. 12.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all prior agreements between the parties with respect to its subject matter (except the letter of intent between Buyer and Mr. Donkersloot dated May 15, 1996, and accepted May 31, 1996) and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by the party to be charged with the amendment. 12.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party may assign any of its rights under this Agreement without the prior consent of the other parties, except that Buyer may assign any of its rights under this Agreement to any Subsidiary of Buyer. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing - 32 - expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. 12.9 SEVERABILITY. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 12.10 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Section" or "Sections" refer to the corresponding Section or Sections of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms. 12.11 GOVERNING LAW. This Agreement will be governed by the laws of the Commonwealth of Pennsylvania without regard to conflicts of laws principles. 12.12 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. BUYER: THE TRIUMPH GROUP, INC. By: /s/Richard C. Ill ------------------------- President and Chief Executive Officer - 33 - THE COMPANY: ADVANCED MATERIALS TECHNOLOGIES INC. By: /s/Daryl Jay Donkersloot --------------------------- Daryl Jay Donkersloot President THE STOCKHOLDERS: /s/Daryl Jay Donkersloot ------------------------- Daryl Jay Donkersloot /s/Gayla Sue Donkersloot ---------------------------- Gayla Sue Donkersloot - 34 - EX-10.14 16 EXHIBIT 10.14 EXECUTIVE SECURITIES AGREEMENT THIS AGREEMENT is made as of July 31, 1996 between THE TRIUMPH GROUP HOLDINGS, INC., a Delaware corporation (the "Company"), and Jay Donkersloot ("Executive"). The Company and Executive desire to enter into an agreement pursuant to which Executive will be entitled to purchase, and the Company will sell, Two Hundred (200) shares of the Company's Class A Common Stock, par value $.01 per share (the "Common Stock"), and a junior subordinated promissory note substantially in the form of Exhibit A attached hereto (such note and any Additional Notes issued pursuant thereto being referred to herein, unless the context indicates otherwise, as (the "Note")) in the principal amount of $17,162.45. This Agreement is being entered into contemporaneously with the closing of the Stock Purchase Agreement dated as of July 31, 1996 (the "Stock Purchase Agreement") by and between The Triumph Group, Inc., a wholly-owned subsidiary of the Company, and the Executive and represents a further inducement to Executive to enter into the Stock Purchase Agreement and to complete the transactions contemplated thereby. All of such shares of Common Stock now owned or hereafter acquired by Executive are referred to herein as "Executive Common Stock." Executive Common Stock and the Note are referred to herein as "Executive Securities." Certain definitions are set forth in paragraph 11 of this Agreement. The parties hereto agree as follows: 1. PURCHASE AND SALE OF EXECUTIVE SECURITIES. (a) Upon execution of this Agreement, Executive will be entitled purchase, for a period of ninety (90) days following the date on which the Memorandum referred to in Section 1(b) hereof is delivered to Executive (the "Subscription Term"), and the Company will sell, upon receipt of the Election Notice (as defined in Section 1(b) hereof) from Executive, Two Hundred (200) shares of Common Stock at a price of $121.55 per share and the Note at a price equal to the face amount thereof. (b) Not later than thirty (30) days following the date hereof, the Company shall deliver to Executive a Memorandum containing the information required by Rule 502(a)(2)(i) of the Securities and Exchange Commission issued under the Securities Act of 1933, as amended, in order to assist Executive in determining whether to exercise his right to subscribe to the Executive Securities pursuant hereto. (c) Executive shall be entitled to purchase the Executive Securities at any time during the Subscription Term by delivering to the Company notice of his election to as subscribe (the "Election Notice"). The sale and purchase of the Executive Securities shall occur on the fifth business day following the day on which the Company receives the Election Notice (the "Sale Date"). On the Sale Date the Company will deliver to Executive a certificate or certificates representing the Common Stock and the Note, and Executive will deliver to the Company a cashier's or certified check or wire transfer of funds in the aggregate amount of $41,472.45 (d) Within thirty (30) days after Executive purchases any Executive Securities from the Company, Executive will make an effective election with the Internal Revenue Service under Section 83(b) of the Internal Revenue Code and the regulations promulgated thereunder in the form of Annex A attached hereto. (e) In connection with the purchase and sale of the Executive Securities hereunder, Executive will represent and warrant to the Company, on the Sale Date, that: (i) The Executive Securities to be acquired by Executive pursuant to this Agreement will be acquired for Executive's own account and not with a view to, or intention of, distribution thereof in violation of the 1933 Act, or any applicable state securities laws, and the Executive Securities will not be disposed of in contravention of the 1933 Act or any applicable state securities laws. (ii) Executive is sophisticated in financial matters and is able to evaluate the risks and benefits of the investment in the Executive Securities. (iii) Executive is able to bear the economic risk of his investment in the Executive Securities for an indefinite period of time because the Executive Securities have not been registered under the 1933 Act and, therefore, cannot be sold unless subsequently registered under the 1933 Act or an exemption from such registration is available. (iv) Executive has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of Executive Securities and has had full access to such other information concerning the Company as he has requested. (v) This Agreement constitutes the legal, valid and binding obligation of Executive, enforceable in accordance with its terms, and the execution, delivery and 2 performance of this Agreement by Executive does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject. (f) As an inducement to the Company to issue the Executive Securities to Executive and as a condition thereto, Executive acknowledges and agrees that: (i) neither the issuance of the Executive Securities to Executive nor any provision contained herein shall entitle Executive to remain in the employment of the Company or any of its Subsidiaries or affect the right of the Company or any such Subsidiary to terminate Executive's employment other than in accordance with the terms and conditions of the Employment Agreement, dated July 31, 1996, by and between Advanced Material Technologies Inc., an Arizona corporation, and Executive; and (ii) the Company shall have no duty or obligation to disclose to Executive, and Executive shall have no right to be advised of, any material information regarding the Company at any time prior to, upon or in connection with the repurchase of Executive Securities upon the termination of Executive's employment with the Company or any of its Subsidiaries, or as otherwise provided hereunder. 2. REGULAR AND TIME VALUED EXECUTIVE COMMON STOCK. (a) Except as otherwise provided in paragraph 2(b) below, the shares of Executive Common Stock will become "Time Valued Shares" in accordance with the following schedule, if as of each such date Executive is still employed by the Company: Cumulative Percentage of Executive Common Stock to become Date Time Valued Shares - ---- ----------------------- Date hereof: 0.0% On the first anniversary of the date hereof: 20.0% On the second anniversary of the date hereof: 40.0% 3 On the third anniversary of the date hereof: 60.0% On the fourth anniversary of the date hereof: 80.0% On the fifth anniversary of the date hereof: 100.0% (b) If Executive ceases to be employed by the Company or a Subsidiary of the Company for any reason, including the death or permanent disability of Executive, on any date other than any anniversary date prior to the fifth anniversary date, the cumulative percentage of Executive Common Stock to become Time Valued Shares will be determined on a pro rata basis according to the number of days elapsed since the prior anniversary date. Upon the occurrence of a Sale of the Company or a Qualified Public Offering, all shares of Executive Common Stock which have not yet become Time Valued Shares shall become Time Valued Shares at the time of such event. For purposes of this paragraph 2(b), the determination of permanent disability shall be made in good faith by the Company's board of directors (the "Board"). All shares of Executive Common Stock which have not become Time Valued Shares are referred to herein as "Regular Shares." 3. REPURCHASE OPTION. (a) In the event Executive ceases to be employed by the Company or a Subsidiary of the Company for any reason (the "Termination"), the Executive Securities (whether held by Executive or one or more of Executive's transferees) will be subject to repurchase by the Company, pursuant to the terms and conditions set forth in this paragraph 3 (the "Repurchase Option"). (b) Except as provided in subsection 3(c) below, the purchase price for each Regular Share of Executive Common Stock will be the lesser of Book Value or Executive's Original Cost for such share, and the purchase price for each Time Valued Share of Executive Common Stock will be the Book Value for such share. The purchase price for the Note will be the outstanding principal amount thereof plus all accrued and unpaid interest thereon until the date of payment (whether or not represented by an Additional Note). (c) If the Executive resigns or his employment is terminated for Cause, the purchase price for each Time Valued and 4 Regular Share will be the lesser of Book Value or Executive's Original Cost for such share. (d) The Board may elect to purchase all or any portion of the Executive Common Stock and the Note by delivering written notice (the "Repurchase Notice") to the holder or holders of the Executive Securities within 90 days after the Termination. The Repurchase Notice will set forth the number of Regular Shares and Time Valued Shares and the amount of the Note (in each case if less than all) to be acquired from each holder, the aggregate consideration to be paid for such shares and the Note (or portion thereof) and the time and place for the closing of the transaction. The number of shares to be repurchased by the Company shall first be satisfied to the extent possible from the shares of Executive Common Stock held by Executive at the time of delivery of the Repurchase Notice. If the number of shares of Executive Common Stock and the principal amount of the Note then held by Executive are less than the total number of shares of Executive Common Stock and the amount of the Note the Company has elected to purchase, the Company shall purchase the remaining shares and amount of the Note elected to be purchased from the transferees of such Executive's Executive Common Stock and Note under this Agreement, pro rata according to the number of shares of Executive Common Stock and principal amount of Note held by such transferees at the time of delivery of such Repurchase Notice (determined as nearly as practicable to the nearest share or nearest dollar, as applicable). The number of Regular Shares and Time Valued Shares to be repurchased hereunder will be allocated among Executive and such transferees of Executive Common Stock (if any) pro rata according to the number of shares of Executive Common Stock to be purchased from such persons. (e) The closing of the purchase of the Executive Securities pursuant to the Repurchase Option shall take place on the date designated by the Company in the Repurchase Notice which date shall not be more than 60 days nor less than five days after the delivery of the later of any such notice to be delivered. The Company will pay for the Executive Securities to be purchased by delivery of (i) a check or wire transfer of funds, (ii) a subordinated note or notes payable in up to three equal annual installments beginning on the first anniversary of the closing of such purchase and bearing interest (payable quarterly) at a rate per annum equal to the prime rate announced from time to time by Citibank, N.A. or (iii) both (i) and (ii), in each case, in the aggregate amount of the purchase price for such securities. Any notes issued by the Company pursuant to this paragraph 3(e) shall be subject to any restrictive covenants to which the Company is subject at the time of such purchase. In addition, the Company may pay the purchase price for the Executive Securities by offsetting amounts outstanding under any bona fide debts owed by Executive to the Company. If less than all of the Note is 5 purchased, the Company shall issue to the holder or holders a note or notes of like tenor as the Note in the amount not purchased, which note shall thereafter be the Note for purposes of this Agreement. (f) The rights of the Company to repurchase Time Valued Shares pursuant to this paragraph 3 shall terminate upon the first to occur of the Sale of the Company or a Qualified Public Offering. (g) Notwithstanding anything to the contrary contained in this Agreement, all repurchases of Executive Common Stock and the Note (or portion thereof) by the Company shall be subject to applicable restrictions contained in the Pennsylvania Business Corporation Law and in the Company's financing agreements. If any such restrictions prohibit the repurchase of Executive Common Stock and the Note (or portion thereof) hereunder which the Company is otherwise entitled or required to make, the Company may make such repurchases (plus interest accruing at the rate of 7% per annum from the date the Company elects to make such prohibited repurchase to the date such repurchase is actually made) as soon as it is permitted to do so under such restrictions. 4. RESTRICTIONS ON TRANSFER. (a) TRANSFER OF EXECUTIVE SECURITIES. Executive shall not sell, transfer, assign, pledge or otherwise dispose of (whether with or without consideration and whether voluntarily or involuntarily or by operation of law) any interest in any of the Executive Securities (a "Transfer"), except pursuant to (i) the provisions of paragraph 3 hereof, a Public Sale or a Sale of the Company ("Exempt Transfers") or (ii) the provisions of this paragraph 4; provided that in no event shall any Transfer of Executive Securities pursuant to this paragraph 4 be made for any consideration other than cash payable upon consummation of such Transfer or in installments over time. Prior to making any Transfer other than an Exempt Transfer, Executive will give written notice (the "Sale Notice") to the Company. The Sale Notice will disclose in reasonable detail the identity of the prospective transferee(s), the number of shares of Executive Common Stock and the portion of the Note to be transferred and the terms and conditions of the proposed transfer. Executive will not consummate any Transfer until 60 days after the Sale Notice has been given to the Company, unless the parties to the Transfer have been finally determined pursuant to this paragraph 4 prior to the expiration of such 60-day period. (The date of the first to occur of such events is referred to herein as the "Authorization Date"). 6 (b) FIRST REFUSAL RIGHTS. The Company may elect to purchase all or any portion of the Executive Securities to be transferred upon the same terms and conditions as those set forth in the Sale Notice by delivering a written notice of such election to Executive within 25 days after the Sale Notice has been given to the Company. If the Company does not elect to purchase all of the Executive Securities specified in the Sale Notice, Executive may transfer the remaining Executive Securities specified in the Sale Notice at a price and on terms no more favorable to the transferee(s) thereof than specified in the Sale Notice during the 60-day period immediately following the Authorization Date. Any Executive Securities not transferred within such 60-day period will be subject to the provisions of this paragraph 4(b) upon subsequent transfer. The Company may pay the purchase price for such shares by offsetting amounts outstanding under any bona fide debts owed by Executive to the Company. (c) CERTAIN PERMITTED TRANSFERS. The restrictions contained in this paragraph 4 will not apply with respect to transfers of Executive Securities (i) pursuant to applicable laws of descent and distribution or (ii) among Executive's family group; provided that (x) such restrictions will continue to be applicable to the Executive Securities after any such transfer and (y) the transferees of such Executive Securities have agreed in writing to be bound by the provisions of this Agreement. Executive's "family group" means Executive's spouse and descendants (whether natural or adopted) and any trust solely for the benefit of Executive and/or Executive's spouse and/or descendants. (d) PLEDGES. Notwithstanding the provisions of this paragraph 4, Executive may not pledge any Executive Securities. (e) TERMINATION OF RESTRICTIONS. The restrictions on the transfer of shares of Executive Securities set forth in this paragraph 4 will continue with respect to all Executive Securities following any transfer thereof; provided that in any event such restrictions will terminate on the first to occur of a Sale of the Company or a Qualified Public Offering. 5. ADDITIONAL RESTRICTIONS ON TRANSFER. (a) the certificates representing the Executive Common Stock and the Note will bear the following legend: "THE SECURITIES REPRESENTED HEREBY WERE ORIGINALLY ISSUED AS OF ________________, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE 7 "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN EXECUTIVE SECURITIES AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THE SECURITIES EVIDENCED HEREBY. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." (b) No holder of Executive Securities may sell, transfer or dispose of any Executive Securities (except pursuant to an effective registration statement under the 1933 Act) without first delivering to the Company an opinion of counsel (reasonably acceptable in form and substance to the Company) that neither registration nor qualification under the 1933 Act and applicable state securities laws is required in connection with such transfer. (c) Each holder of Executive Securities agrees not to effect any public sale or distribution of any Executive Securities or other equity securities of the Company, or any securities convertible into or exchangeable or exercisable for any of the Company's equity securities, during the seven days prior to and the 180 days after the effectiveness of any underwritten public offering, except as part of such underwritten public offering or if otherwise permitted by the Company. 6. SALE OF THE COMPANY. (a) If the Board and the holders of a majority of the Company's Common Stock approve a Sale of the Company (the "Approved Sale"), the holders of Executive Securities will consent to and raise no objections against the Approved Sale, and if the Approved Sale of the Company is structured as a sale of stock, the holders of Executive Common Stock will agree to sell their shares of Executive Common Stock on the terms and conditions approved by the Board and the holders of a majority of the Company's Common Stock and will raise no objections to process and will waive dissenters or similar rights. The holders of Executive Securities will take all necessary and desirable actions in connection with the consummation of the Approved Sale of the Company. (b) The obligations of the holders of Executive Securities with respect to the Approved Sale of the Company are subject to the satisfaction of the following conditions: (i) upon the consummation of the Approved Sale, all of the holders of Common Stock will receive the same form and amount of 8 consideration per share of Common Stock, or if any holders of Common Stock are given an option as to the form and amount of consideration to be received, all holders will be given the same option; and (ii) all holders of rights to acquire shares of Common Stock will be given an opportunity to either (A) exercise such rights prior to the consummation of the Approved Sale and participate in such sale as holders of Common Stock or (B) upon the consummation of the Approved Sale, receive in exchange for such rights consideration equal to the amount determined by multiplying (1) the same amount of consideration per share of Common Stock received by the holders of Common Stock in connection with the Approved Sale less the exercise price per share of Common Stock of such rights to acquire Common Stock by (2) the number of shares of Common Stock represented by its rights. (c) If the Company or the holders of the Company's securities enter into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated by the Securities Exchange Commission may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), the holders of Executive Common Stock will, at the request of the Company, appoint a purchaser representative (as such term is defined in Rule 501) reasonably acceptable to the Company. If any holder of Executive Common Stock appoints a purchaser representative designated by the Company, the Company will pay the fees of such purchaser representative, but if any holder of Executive Common Stock declines to appoint the purchaser representative designated by the Company such holder will appoint another purchaser representative (reasonably acceptable to the Company), and such holder will be responsible for the fees of the purchaser representative so appointed. (d) Executive and the other holders of Executive Common Stock (if any) will bear their pro rata share (based upon the number of shares sold) of the costs of any sale of Executive Common Stock pursuant to an Approved Sale to the extent such costs are incurred for the benefit of all holders of Common Stock and are not otherwise paid by the Company or the acquiring party. Costs incurred by Executive and the other holders of Executive Common Stock on their own behalf will not be considered costs of the transaction hereunder. (e) The provisions of this paragraph 6 will terminate upon the completion of a Qualified Public Offering. 7. CONFIDENTIAL INFORMATION. The Executive acknowledges that the information, observations and data obtained by him while employed by the Company concerning the business or affairs of the Company ("Confidential Information") are the 9 property of the Company. Therefore, Executive agrees that he shall not disclose to any unauthorized person or use for his own account any Confidential Information without the prior written consent of the Board, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of Executive's acts or omissions to act. Executive shall deliver to the Company at the termination of the Executive's employment, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information, Work Product (as defined in Section 9 below) or the business of the Company which he may then possess or have under his control. 8. INVENTIONS AND PATENTS. Executive agrees that all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, and all similar or related information which relates to the Company's actual or anticipated business, research and development or existing or future products or services and which are conceived, developed or made by Executive while employed by Executive's Business ("Work Product") belong to the Company. Executive will promptly disclose such Work Product to the Board and perform all actions reasonably requested by the Board (whether during or after Executive's employment period) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments). 9. NON-COMPETE; NON-SOLICITATION. (a) Executive acknowledges that in the course of his employment with the Company he has become familiar, and he will become familiar, with the Company's trade secrets and with other confidential information concerning the Company and that his services have been and will be of special, unique and extraordinary value to the Company. Therefore, Executive agrees that, prior to the termination of Executive's employment and for two years thereafter (the "Noncompete Period"), he shall not directly or indirectly own, manage, control, participate in, consult with, render services for, or in any manner engage in any business competing with the businesses of the Company as such businesses exist or are in process on the date of the termination of Executive's employment, within any geographical area in which the Company engages or plans to engage in such businesses. Nothing herein shall prohibit Executive from being a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as Executive has no active participation in the business of such corporation. 10 (b) During the Noncompete Period, Executive shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company to leave the employ of the Company, or in any way interfere with the relationship between the Company and any employee thereof, (ii) hire any person who was an employee of the Company at any time during the Executive's employment period, or (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company to cease doing business with the Company, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company. (c) If, at the time of enforcement of this paragraph 9, a court should hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. (d) In the event of the breach or a threatened breach by Executive of any of the provisions of this paragraph 10, the Company, in addition and supplementary to other rights and remedies existing in its favor, may apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security). 10. DEFINITIONS. "BOOK VALUE" of each share of Executive Common Stock or Triumph Common Stock will be equal to the quotient determined by dividing (A) the excess of Company's or Triumph's assets over its liabilities as of the end of the fiscal quarter immediately preceding the date of Executive's Termination or an Exchange (provided however that if Executive's Termination occurs in connection with a Sale of the Company, the excess of the Company's assets over its liabilities shall be determined on a pro forma basis assuming the Sale of the Company occurred on the last day of such fiscal quarter), determined on a consolidated basis in accordance with generally accepted accounting principles, consistently applied, less the liquidation value of all outstanding preferred stock, by (B) the total number of shares of Common Stock or Triumph Common Stock outstanding on a fully diluted basis (including in such calculation the aggregate conversion price and exercise price of all outstanding convertible securities, options and warrants). 11 "CAUSE" shall mean (i) a material breach of this Agreement by Executive, (ii) a breach of Executive's duty of loyalty to the Company, (iii) the commission by Executive of a felony, a crime involving moral turpitude or other act causing material harm to the Company's standing and reputation, (iv) Executive's continued failure to perform his duties to the Company or (v) Executive's substandard performance. For the purposes of this agreement, "substandard performance" shall be determined in good faith by a majority of the Board. In assessing Executive's performance, the Board shall give due consideration to the overall industry experience in assessing Executive's performance. After due consideration of these factors, if a majority of the Board determines in good faith that the Company would have performed substantially better with other management and that the future performance of the Company would be best served by new management, the Board may terminate Executive for "substandard performance." "EXECUTIVE COMMON STOCK" will continue to be Executive Common Stock in the hands of any holder other than Executive (except for the Company and except for transferees in a Public Sale), and except as otherwise provided herein, each such other holder of Executive Common Stock will succeed to all rights and obligations attributable to Executive as a holder of Executive Common Stock hereunder. Executive Common Stock will also include shares of the Company's capital stock issued with respect to Executive Common Stock by way of a stock split, stock dividend or other recapitalization. "INDEPENDENT THIRD PARTY" means any person who, immediately prior to the contemplated transaction, does not own in excess of 5% of the Company's Common Stock on a fully diluted basis, who is not controlling, controlled by or under common control with any such 5% owner of the Company's Common Stock and who is not the spouse or descendent (by birth or adoption) of any such 5% owner of the Company's Common Stock. "1933 ACT" means the Securities Act of 1933, as amended from time to time. "ORIGINAL COST" of each share of Common Stock purchased hereunder will be equal to $121.55 (as proportionately adjusted for all subsequent stock splits, stock dividends and other recapitalizations). "PERMITTED TRANSFEREE" means any holder of Executive Common Stock who acquired such stock pursuant to a transfer permitted by paragraph 4(c). "PUBLIC SALE" means any sale pursuant to a registered public offering under the 1933 Act or any sale to the 12 public pursuant to Rule 144 promulgated under the 1933 Act effected through a broker, dealer or market maker. "QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public offering registered under the 1933 Act of shares of the Company's Common Stock having an aggregate offering value of at least $15 million. "REGULAR SHARES" means those shares of Executive Common Stock designated as such pursuant to Section 2. "SALE OF THE COMPANY" means the sale of the Company to an Independent Third Party or affiliated group of Independent Third Parties pursuant to which such party or parties acquire (i) capital stock of the Company possessing the voting power to elect a majority of the Company's board of directors (whether by merger, consolidation or sale or transfer of the Company's capital stock) or (ii) all or substantially all of the Company's assets determined on a consolidated basis. "SUBSIDIARY" means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries. "TIME VALUED SHARES" means those shares of Executive Common Stock designated as such pursuant to Section 2. 12. NOTICES. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated: To the Company, The Triumph Group Holdings, Inc. c/o The Triumph Group Operations, Inc. Four Glenhardie Corporate Center 1255 Drummers Lane, Suite 200 Wayne, PA 19087 Attention: President With a copy to: Ballard Spahr Andrews & Ingersoll 1735 Market St., 51st Floor Philadelphia, PA 19103 Attention: Edward D. Slevin, Esquire 13 To Executive: Mr. Daryl Jay Donkersloot 9681 South Palm Drive Tempe, AZ 85284 or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered or sent or, if mailed, five days after deposit in the U.S. mail. 13. GENERAL PROVISIONS. (a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted Transfer of any Executive Securities in violation of any provision of this Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported transferee of such Executive Securities as the owner of such securities for any purpose. (b) SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. (c) COMPLETE AGREEMENT. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. (d) COUNTERPARTS. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. (e) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company and their respective successors and assigns (including subsequent holders of Executive Securities); provided that the rights and obligations of Executive under this Agreement shall not be 14 assignable except in connection with a permitted transfer of Executive Securities hereunder. (f) CHOICE OF LAW. The corporate law of the Commonwealth of Pennsylvania will govern all questions concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will be governed by the internal law, and not the law of conflicts, of the Commonwealth of Pennsylvania. (g) REMEDIES. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorney's fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. (h) AMENDMENT AND WAIVER. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive. (i) BUSINESS DAYS. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company's chief executive office is located, the time period shall be automatically extended to the business day immediately following such Saturday, Sunday or holiday. * * * * * IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. THE TRIUMPH GROUP HOLDINGS, INC. By /s/ Richard C. Ill ----------------------------------------- Its President ----------------------------------------- /s/ Daryl Jay Donkersloot ----------------------------------------- Daryl Jay Donkersloot 15 CONSENT The undersigned spouse of Executive hereby acknowledges that I have read the foregoing Executive Securities Agreement and that I understand its contents. I am aware that the Agreement provides for the repurchase of my spouse's Executive Securities (as defined in the foregoing agreement) under certain circumstances and imposes other restrictions on the transfer of such Executive Securities. I agree that my spouse's interest in the Executive Securities is subject to this Agreement and any interest I may have in such Executive Securities shall be irrevocably bound by this Agreement and further that my community property or equitable interest in such Executive Securities, if any, shall be similarly bound by this Agreement. I am aware that the legal, financial and other matters contained in this Agreement are complex and I am free to seek advice with respect thereto from independent counsel. I have either sought such advice or determined after carefully reviewing this Agreement that I will waive such right. /s/ Gayla Sue Donkersloot --------------------------------------------- Gayla Sue Donkersloot --------------------------------------------- Witness 16 EXHIBIT A The payment of principal and interest on this Note is subject to certain subordination provisions set forth in paragraph 3 herein. This Note was originally issued on _____________ and has not been registered under the Securities Act of 1933, as amended, or any comparable state securities law. The transfer of this Note is subject to certain restrictions set forth in paragraph 6 herein. The following information is provided solely for purposes of applying the U.S. federal income tax original issue discount ("OID") rules to this note. The issue date of this note is __________, and the issue price is equal to 100% of its face amount. Assuming that the issuer exercises its right to issue additional notes in lieu of cash interest payments at each opportunity, and that all payments of principal and interest on this note and such additional notes are made on the scheduled maturity date of December 31, 2006, the total amount of OID on this note (including OID with respect to the additional notes issued in lieu of cash interest payments) will be $_________ per $1,000 face amount of this note, and the yield to maturity of this Note will be 10 1/2%, compounded quarterly. JUNIOR SUBORDINATED PROMISSORY NOTE (Date) $_________ THE TRIUMPH GROUP HOLDINGS, INC., a Delaware corporation (the "Company"), hereby promised to pay to _____________ (the "LENDER") the principal amount of ___________________, together with interest thereon calculated from the date hereof in accordance with the provisions of this Note. This Note is the "Note" issued pursuant to that certain Executive Securities Agreement, dated as of __________ (the "EXECUTIVE SECURITIES AGREEMENT"), between the Company and the Lender. Certain defined terms used herein are set forth in paragraph 11 hereof. 1. PAYMENT OF INTEREST. Interest shall accrue at the rate of ten and one-half percent (10 1/2%) per annum, compounded quarterly, on the unpaid principal amount of this Note outstanding from time to time. Subject to the provisions of subparagraph 2(c) and paragraph 3 hereof, the Company shall pay to the Lender quarterly, in arrears, all accrued interest on each April 30, July 31, October 31 and January 31 during the term of this Note (each such date being hereinafter referred to as an "INTEREST PAYMENT DATE"), beginning on ___________. The Company, in its sole discretion, in lieu of paying cash interest on any Interest Payment Date, may pay all or any portion of the accrued interest by issuance of a promissory note or notes (the "Additional Notes") in an amount or amounts equal to the amount of interest due on such Interest Payment Date (less any cash interest payments), payable to the Lender and otherwise identical to this Note. Any such Additional Notes shall be issued annually, but shall include accrued interest as if issued quarterly and shall be delivered to the Lender on or before May 31 in each year. All accrued interest which for any reason has not theretofore been paid shall be paid in full on the Maturity Date, as defined in Section 2(a) below, of this Note. Interest shall accrue on any principal payment due under this Note, and, unless otherwise prohibited under applicable law, on any interest which has not been paid on the date on which it is due, until such time as payment therefor is actually delivered to the Lender. 2. PAYMENT OF PRINCIPAL ON NOTE. (a) SCHEDULED PAYMENT. The Company shall repay the principal amount of this Note in two equal installments on December 31, 2005 and December 31, 2006 (the latter being referred to as the "MATURITY DATE"). (b) OPTIONAL PREPAYMENTS. Subject to the provisions of paragraph 3 hereof, the Company may, at any time and from time to time without premium or penalty, prepay all or a portion of the outstanding principal amount of this Note. (c) TIME OF PAYMENT. If any payment of principal or interest on this Note shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall in such case be included in computing interest in connection with such payment. 3. SUBORDINATION; RESTRICTIONS ON PAYMENT. (a) Notwithstanding anything in this Note to the contrary, the obligations of the Company in respect of the principal, interest, fees and charges on this Note shall be subordinate and junior in right of payment, to the extent and in the manner hereinafter set forth, to all Superior Debt. (b) Upon the occurrence of any Insolvency Event with respect to the Company or any of its Subsidiaries or upon any acceleration of the Superior Debt, then: (i) the holders of Superior Debt shall be entitled to receive payment in full of all principal, premium, interest, fees and charges then due on all Superior Debt (including interest, fees and charges accruing thereon after the commencement of any such proceedings) before the Lender is entitled to receive any payment on account of 2 principal, interest or other amounts due (or past due) upon this Note, and the holders of Superior Debt shall be entitled to receive for application in payment thereof any payment or distribution of any kind or character, whether in cash, property or securities or by set-off or otherwise (other than in the form of Additional Notes), which may be payable or deliverable in any such proceedings in respect of this Note, and (ii) any payment or distribution of assets of the Company, of any kind or character, whether in cash, property or securities (other than in the form of Additional Notes), to which the Lender would be entitled except for the provisions of this subparagraph 3(b) shall be paid or delivered by the Company directly to the holders of all Superior Debt in the manner provided in paragraph 3(f) below, for application in payment thereof until all Superior Debt (including interest, fees and charges accrued thereon after the date of commencement of such proceedings) shall have been paid in full. (c) Until all Superior Debt shall have been paid in full, the Company shall not, directly or indirectly, make any payment of any amount payable with respect to this Note (other than in the form of Additional Notes) if there shall have occurred and be continuing or there would exist as a result of such payment or distribution any default or event of default under any of the terms of any Superior Debt Agreement which (whether with or without notice, lapse of time or both) would permit the holder of such Superior Debt to accelerate all or any portion of such Superior Debt (collectively, the "BLOCKAGE EVENTS"); provided that if, immediately prior to the time a particular payment is due hereunder, (x) no Blockage Event is continuing, and (y) payment in full of the amount then due is prohibited by this paragraph 3(c), then the Company shall be permitted to, and may, pay to the Lender in cash the maximum portion of such amount as would not create a default under any of the terms of any Superior Debt Agreement which would permit the holder of such Superior Debt to accelerate all or any portion of such Superior Debt. The Company shall use reasonable efforts to notify the Lender in writing of the occurrence of a Blockage Event; provided that notwithstanding anything to the contrary in this Note, the failure of the Company to so notify the Lender of the occurrence of a Blockage Event shall have no effect on the obligations of the Company or the Lender during the continuance of such Blockage Event as set forth herein. (d) Any amendment or modification of the terms of paragraph 3 of this Note shall be effective against any Person who was a holder of Superior Debt prior to or at the time 3 of such amendment or modification unless such holder of Superior Debt so consents. (e) The holders of Superior Debt may, at any time, in their discretion, renew, amend, extend or otherwise modify the terms and provisions of Superior Debt so held or exercise any of their rights under the Superior Debt including, without limitation, the waiver of defaults thereunder and the amendment of any of the terms or provisions thereof (or any notice evidencing or creating the same), all without notice to or assent from the Lender. No compromise, alteration, amendment, renewal or other change of, or waiver, consent or other action in respect of any liability or obligation under or in respect, any terms, covenants or conditions of the Superior Debt (or any instrument evidencing or creating the same), whether or not such compromise, alteration, amendment, renewal, change, waiver, consent or other action is in accordance with the provisions of the Superior Debt (or any instrument evidencing or creating the same), shall in any way alter or affect any of the subordination provisions of this Note. (f) If, notwithstanding the provisions of paragraph 3 of this Note, any payment or distribution of any character, whether in cash, securities or other property (except in the form of Additional Notes), or any security shall be received by the Lender in contravention of this paragraph 3 before all the Superior Debt shall have been paid in full, such payment, distribution or security shall be held in trust for the benefit of, and shall be immediately paid over or delivered or transferred to, the holders of Superior Debt or their duly appointed agents for application of payment according to the priorities of such Superior Debt and ratably among the holders of any class of Superior Debt. Such payments received by the Lender and delivered to the holders of the Superior Debt shall be deemed not to be a payment on this Note for any reason whatsoever and the indebtedness under this Note shall remain as if such erroneous payment had never been paid by the Company or received by the Lender. In the event of the failure of any Lender to endorse or assign any such payment, distribution or security, each holder of any Superior Debt is hereby irrevocably authorized to endorse or assign the same. (g) No present or future holder of Superior Debt shall be prejudiced in its right to enforce the provisions of paragraph 3 of this Note by any act or failure to act on the part of the Company. (h) If there shall exist any Blockage Event, the Lender shall not (other than in connection with a failure by the Company to make a scheduled principal payment) take or continue any action, or exercise or continue to exercise any rights, 4 remedies or powers under the terms of this Note, or exercise or continue to exercise any other right or remedy at law or equity that the Lender might otherwise possess, to collect any amount due and payable in respect of this Note, including, without limitation, the acceleration of this Note (and if this Note has already been accelerated, the Lender will, immediately upon becoming aware of the occurrence of such Blockage Event, reverse such acceleration), the commencement of any foreclosure on any lien or security interest, the filing of any petition in bankruptcy or the taking advantage of any other insolvency law of any jurisdiction, unless and until the Superior Debt shall have been fully and finally paid (whether in cash or such other form of consideration acceptable to the holders of Superior Debt in their sole discretion) and satisfied, unless one or more of the holders of the Superior Debt shall have commenced any action or taken any judicial action to enforce their rights as provided in their respective agreements relating to, or instruments evidencing, their Superior Debt in connection with an Insolvency Event (other than an action to dismiss a proceeding commenced against the Company). Notwithstanding the foregoing or any permissible action taken by the Lender, the Lender shall not be entitled to receive any payment in contravention of the other provisions of this paragraph 3, including, without limitation, subparagraphs 3(b), 3(c), and 3(f). Notwithstanding anything to the contrary in this subparagraph 3(h), the Lender may take such steps as are necessary to avoid a loss of its rights as a result of the running of any applicable statute of limitations or any other statute or rule which limits the time for filing claims, or making proofs of claims, or would otherwise cause a claim to be time- barred. (i) If any payment or distribution to which the Lender would otherwise have been entitled but for the provisions of this paragraph 3 shall have been applied, pursuant to the provisions of this paragraph 3, to the payment of the Superior Debt, then in such case and to such extent, the Lender (x) shall be entitled to receive from the holders of Superior Debt then outstanding any payments or distributions received by such Persons in excess of the amount sufficient to pay all of the Superior Debt in full (whether or not then due and whether such payment was in cash or such other form of consideration acceptable to the holders of Superior Debt in their sole discretion), (y) following payment in full of the Superior Debt (whether in cash or such other form of consideration acceptable to the holders of Superior Debt in their sole discretion), shall be entitled to receive any and all further payments or distributions applicable to the Superior Debt, and (z) following payment in full of the Superior Debt (whether in cash or such other form of consideration acceptable to the holders of Superior 5 Debt in their sole discretion), shall be subrogated to the rights of the holders of Superior Debt to receive distributions applicable to the Superior Debt, in each case until this Note shall have been paid in full. If the Lender has been subrogated to the rights of the holders of Superior Debt due to the operation of this subparagraph 3(i), the Company agrees to take all such actions as are reasonably requested by the Lender in order to cause the Lender to be able to obtain payments from the Company with respect to such subrogation rights as soon as possible. (j) The provisions of this paragraph 3 are solely for the purpose of defining the relative rights of the holders of Superior Debt, on the one hand, and the Lender on the other, against the Company and its assets, and nothing herein is intended to or shall impair, as between the Company and the Lender, the obligations of the Company which are absolute and unconditional, to pay to the Lender the principal and interest on this Note as and when they become due and payable in accordance with their terms, or is intended to or will affect the relative rights of the Lender and creditors of the Company other than the holders of Superior Debt, nor, except as provided in this paragraph 3, will anything herein or therein prevent the Lender from exercising all remedies otherwise permitted by applicable law upon default under this Note, subject to the rights, if any, under this paragraph 3 of the holders of Superior Debt in respect of cash, property or securities of the Company received upon the exercise of any such remedy and subject to this paragraph 3. 4. CONVERSION. The Company may upon a completion of Qualified Public Offering cause the Note and any Additional Notes issued pursuant to paragraph 1 hereof to be converted into shares of Common Stock of the Company. The number of shares of Common Stock to be issued upon such conversion shall be determined by dividing the principal amount of this Note and any Additional Notes issued by the Company pursuant to paragraph 1 hereof and all accrued and unpaid interest hereon and thereon to the Conversion Date (as herein defined) by the net offering price per share (the "Net Offering Price") in any such Qualified Public Offering. The Company shall give written notice of its election to issue shares of Common Stock in conversion of the Note and the Additional Notes (the "Conversion Notice") at any time after its announcement of a Qualified Public Offering, but not less than three (3) days prior to the date designated for the conversion in the Conversion Notice (the "Conversion Date"). On the Conversion Date the Holder shall deliver to the Company this Note and any Additional Notes to be converted in exchange for a certificate or certificates evidencing the shares of Common Stock into which this Note and such Additional Notes have been converted pursuant hereto (the "Conversion"). No fractional share of Common Stock shall be issued in the Conversion, but in lieu thereof the 6 Company shall pay to the Holder in cash an amount equal to the product derived by multiplying the Net Offering Price by such fraction. The shares of Common Stock issued in the Conversion shall thereafter be subject to all of the restrictions set forth in the Executive Securities Agreement. 5. EVENTS OF DEFAULT. (a) DEFINITION. For purposes of this Note, an "EVENT OF DEFAULT" shall be deemed to have occurred if: (i) the Company shall default in the payment of (A) principal of this Note on the dates when due, whether at maturity, by acceleration or otherwise, or (B) the portion of the interest on this Note which is permitted to be paid pursuant to paragraph 3(C) above within five (5) Business Days of the dates when due; or (ii) an Insolvency Event occurs with respect to the Company. (b) CONSEQUENCES OF EVENTS OF DEFAULT. The provisions of this paragraph 5(b) are expressly subject to paragraph 3 hereof. (i) If an Event of Default of the type described in clause (i) of subparagraph 5(a) has occurred and is continuing, the Lender may declare all of any portion of the outstanding principal amount of this Note due and payable and demand immediate payment of all or any portion of the outstanding principal amount of this Note. If the Lender demands immediate payment of all or any portion of this Note, the Company shall immediately pay to the Lender the principal amount of this Note requested to be paid together with all accrued and unpaid interest thereon. (ii) If an Event of Default of the type described in clause (ii) of subparagraph 5(a) has occurred, all of the outstanding principal amount of this Note shall automatically be immediately due and payable without any notice or other action on the part of the Lender. (iii)Upon the occurrence of an Event of Default, the Lender shall also have any other rights which the Lender may have been afforded by the Company under any contract or agreement at any time and any other rights which such Person may have pursuant to applicable law. 6. CHANGE IN OWNERSHIP. Upon a Change in Control, the Company will pay to the Lender the principal amount of this Note then outstanding together with all accrued and unpaid 7 interest thereon. The term "CHANGE IN CONTROL" shall have the meaning set forth for such term in the Senior Loan Agreement. 7. TRANSFER RESTRICTIONS. This Note may be transferred only as a whole and not in part. This Note has not been registered under the Securities Act or any comparable state securities law. If the Lender desires to transfer this Note, the Lender first must furnish the Company with (i) the legal opinion required under Paragraph 4 of the Executive Securities Agreement and (ii) a written undertaking executed by the desired transferee in form and substance reasonably satisfactory to the Company agreeing to be bound by all of the provisions of this Note, including, without limitation, the subordination provisions set forth in paragraph 3 hereof. 8. AMENDMENT AND WAIVER. Except as otherwise expressly provided herein, the provisions of this Note may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Lender. 9. CANCELLATION. After all principal and accrued interest at any time owed on this Note has been paid in full, this Note shall be surrendered to the Company for cancellation and shall not be reissued. 10. PLACE OF PAYMENT; NOTICES. Payments of principal and interest and any notice hereunder are to be delivered to the Lender at the following address: or to such other address as specified in a written notice delivered to the Company by Lender. Notices sent by the Company shall be deemed received when delivered personally or one (1) day after being sent by Federal Express or other overnight carrier or three (3) days after being sent by certified or registered mail. 11. GOVERNING LAWS. The validity, construction, and interpretation of this Note will be governed by the internal laws, and not the laws of conflicts, of the Commonwealth of Pennsylvania. 12. DEFINITIONS. Unless otherwise indicated herein, capitalized terms used in this Note shall have the meanings given such terms in the Executive Securities Agreement. 8 "BUSINESS DAY" shall mean any day other than Saturday, Sunday or legal holiday under the laws of the Commonwealth of Pennsylvania. "INDEBTEDNESS" shall mean, with respect to any Person at a particular time, without duplication, (a) indebtedness for borrowed money or for the deferred purchase price of property (or services in respect of which such Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other current liabilities incurred in the ordinary course of business) or any commitment by which such Person assures a creditor against loss, including contingent reimbursement obligations with respect to letters of credit, (b) indebtedness guaranteed in any manner by such Person, including guarantees in the form of an agreement to repurchase or reimburse, (c) obligations under capitalized leases in respect of which obligations such Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person assures a creditor against loss and (d) any unsatisfied obligation of such Person for "withdrawal liability" to a "multiemployer plan" as such terms are defined under ERISA. "INSOLVENCY EVENT" shall mean any of the occurrences referred to in Sections 9.1.10, 9.1.14 and 9.1.15 of the Senior Loan Agreement. "NOTES" shall mean the Note and notes of similar tenor issued pursuant to and Executive Securities Agreements between the Company and certain members of the management of the Company. "PERSON" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a governmental entity or any department or agency thereof. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. "SENIOR LOAN AGREEMENT" shall mean that certain Credit Agreement, dated as of July 19, 1996, as amended, by and among The Triumph Group, Inc. ("TG") and its Subsidiaries and PNC Bank, National Association. "SUBSIDIARY" shall mean any Person which the Company or TG has the direct or indirect right to control, direct or cause direction of management and policies of, whether through the ownership of voting securities, by contract or otherwise. "SUPERIOR DEBT" shall mean (i) all Indebtedness incurred by the Company and its Subsidiaries from time to time 9 which is not by its terms expressly subordinate to the Notes and (ii) all Indebtedness incurred by TG and its Subsidiaries from time to time pursuant to the Senior Loan Agreement. "SUPERIOR DEBT AGREEMENT" shall mean any agreement relating to, or instrument evidencing, any Superior Debt. "TG" shall mean The Triumph Group, Inc., all of the outstanding voting shares of which are owned by the Company. IN WITNESS WHEREOF, the Company has executed and delivered this Note on the date first above written. THE TRIUMPH GROUP HOLDINGS, INC. By: ----------------------------- Its: ---------------------------- 10 EX-10.15 17 EXHIBIT 10.15 NON-COMPETITION AGREEMENT THIS NON-COMPETITION AGREEMENT (this "Agreement") is made as of this 31st day of July, 1996, by and between The Triumph Group, Inc., a Delaware corporation, or its nominee ("Buyer"), and Daryl Jay Donkersloot, an individual residing at 9681 South Palm Drive, Tempe, Arizona 85284 ("Seller"). RECITALS Concurrently with the execution and delivery of this Agreement, Buyer is purchasing from Seller and Gayla Sue Donkersloot, an individual residing at 9681 South Palm Drive, Tempe, Arizona 85284 ("Mrs. Donkersloot"), all of the issued and outstanding shares (the "Shares") of Common Stock, no par value per share, of Advanced Materials Technologies Inc., an Arizona corporation (the "Company"), pursuant to the terms and conditions of a Stock Purchase Agreement dated as of the date hereof (the "Stock Purchase Agreement"). Section 8.4(d) of the Stock Purchase Agreement requires that a non-competition agreement be executed and delivered by Seller as a condition to the purchase of the Shares by Buyer. AGREEMENT The parties, intending to be legally bound, agree as follows: 1. DEFINITIONS. Capitalized terms used but not expressly defined in this Agreement have the meanings assigned to them in the Stock Purchase Agreement. 2. ACKNOWLEDGMENTS BY SELLER. Seller acknowledges that (a) Seller has occupied a position of trust and confidence with the Acquired Companies prior to the date hereof and has become familiar with the following, any and all of which constitute confidential information of the Acquired Companies (collectively, the "Confidential Information"): (i) any and all Trade Secrets (as defined below) concerning the business and affairs of the Acquired Companies, (ii) any and all information concerning the business and affairs of the Acquired Companies (which includes historical financial statements, financial projections and budgets, historical and projected sales, capital spending budgets and plans, the names and backgrounds of key personnel, personnel training and techniques and materials), however documented, and (iii) any and all notes, analysis, compilations, studies, summaries and other material prepared by or for the Acquired Companies containing or based, in whole or in part, on any information included in the foregoing; (b) the business of the Acquired Companies is national in scope; (c) its products and services are marketed throughout the United States; (d) the Acquired Companies compete with other businesses that are or could be located in any part of the United States; (e) Buyer has required that Seller make the covenants set forth in Sections 3 and 4 of this Agreement as a condition to Buyer's purchase of the Shares owned by Seller and Mrs. Donkersloot; (f) the provisions of Sections 3 and 4 of this Agreement are reasonable and necessary to protect and preserve the Acquired Companies' businesses; and (g) the Acquired Companies would be irreparably damaged if Seller were to breach the covenants set forth in Sections 3 and 4 of this Agreement. As used herein, the term "Trade Secrets" will mean product specifications, data, know-how, formulae, compositions, processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas, past, current and planned research and development, current and planned manufacturing and distribution methods and processes, customer lists, current and anticipated customer requirements, price lists, market studies, business plans, computer software and programs (including object code and source code), computer software and database technologies, systems, structures and architectures of the Acquired Companies and any other information, however documented, of the Acquired Companies that is a "trade secret" within the meaning of the Arizona Uniform Trade Secrets Act. 3. CONFIDENTIAL INFORMATION. Seller acknowledges and agrees that all Confidential Information known or obtained by Seller, whether before or after the date hereof, is the property of the Acquired Companies. Therefore, Seller agrees that Seller will not, at any time, disclose to any unauthorized Persons or use for his own account or for the benefit of any third party (other than the Company, the Acquired Companies or any of their successors) any Confidential Information, whether Seller has such information in Seller's memory or embodied in writing or other physical form, without Buyer's written consent, unless and to the extent that the Confidential Information is or becomes generally known to and available for use by the public other than as a result of Seller's fault or the fault of any other Person bound by a duty of confidentiality to Buyer or the Acquired Companies. Seller agrees to deliver to Buyer, at any time Buyer may request, all documents, memoranda, notes, plans, records, reports and other documentation, models, components, devices or computer software, whether embodied in a disk or in other form (and all copies of all of the foregoing), relating to the businesses, operations or affairs of the Acquired Companies and any other Confidential Information that Seller may then possess or have under Seller's control. -2- 4. NONCOMPETITION. As an inducement for Buyer to enter into the Stock Purchase Agreement and as additional consideration for the consideration to be paid to Seller under the Stock Purchase Agreement and the consideration to be paid under this Agreement, Seller agrees that: (a) For a period of six years after the Closing: (i) Seller will not, directly or indirectly, engage or invest in, own, manage, operate, finance, control or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend Seller's name or any similar name to, lend Seller's credit to, or render services or advice to, any business whose products or activities compete in whole or in part with the products or activities of the Acquired Companies, anywhere within the United States; provided, however, that Seller may purchase or otherwise acquire up to (but not more than) one percent (1%) of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934. Seller agrees that this covenant is reasonable with respect to its duration, geographical area and scope. (ii) Seller will not, directly or indirectly, either for himself or any other Person, (A) induce or attempt to induce any employee of an Acquired Company to leave the employ of such Acquired Company, (B) in any way interfere with the relationship between an Acquired Company and any employee of such Acquired Company, (C) employ, or otherwise engage as an employee, independent contractor or otherwise, any non-secretarial employee of an Acquired Company, or (D) induce or attempt to induce any customer, supplier, licensee or business relation of an Acquired Company to cease doing business with such Acquired Company, or in any way interfere with the relationship between any customer, supplier, licensee or business relation of an Acquired Company. (iii) Seller will not, directly or indirectly, either for himself or any other Person, solicit the business of any Person known to Seller to be a customer of an Acquired Company, whether or not Seller had personal contact with such Person, with respect to products or activities which compete in whole or in part with the products or activities of the Acquired Companies. (b) In the event of a breach by Seller of any covenant set forth in Section 4(a) of this Agreement, the term of such covenant will be extended by the period of the duration of such breach. -3- (c) Seller will not, at any time during or after the six year period, disparage Buyer or the Acquired Companies, or any of their stockholders, directors, officers, employees or agents. (d) Seller will, for a period of six years after the Closing, within ten days after accepting any employment, advise Buyer of the identity of any employer of Seller. 5. COMPENSATION. As additional consideration for the covenants in Section 4 of this Agreement, Buyer will pay to Seller the sum of $3,720,000 (the "Consideration"), in six consecutive annual installments of $620,000 each, due and payable on each of the six anniversary dates of the Closing; provided, however, that in the event the IRS challenges Seller's past compensation, installments of the Consideration will be reduced by amounts equal to any taxes, penalties and expenses (including reasonable attorneys' fees) (not to exceed, in the aggregate, $300,000) paid by Buyer in connection with the defense of such matter. 6. BUYERS' REMEDIES. If Seller breaches the covenants set forth in Sections 3 or 4 of this Agreement, Buyer and the Acquired Companies will be entitled to the following remedies: (a) Damages from Seller; (b) To offset against any and all amounts owing to Seller under Section 5(b) of this Agreement the amount of any money judgment awarded to Buyer or the Acquired Companies by a court of competent jurisdiction based upon a claim under Section 6(a) of this Agreement, plus costs of defense and reasonable attorneys' fees; and (c) In addition to its right to Damages and any other rights it may have, to obtain injunctive or other equitable relief to restrain any breach or threatened breach or otherwise to specifically enforce the provisions of Sections 3 and 4 of this Agreement, it being agreed that money damages alone would be inadequate to compensate Buyer and the Acquired Companies and would be an inadequate remedy for such breach. 7. SELLER'S REMEDIES. If a court of competent jurisdiction determines that Buyer breached any covenant set forth in Section 5 of this Agreement, Seller may elect either (a) to terminate this Agreement whereupon Seller will be released from all of the covenants set forth in Sections 3 and 4 of this Agreement and Buyer and the Acquired Companies will be relieved of all liability hereunder, or (b) to receive a money judgment, together with pre-judgment interest at the rate of ten percent (10%) per annum on the unpaid installment only, commencing on the date on which the court determines that such installment was due and payable. -4- 8. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon Buyer and Seller and will inure to the benefit of Buyer and its affiliates, successors and assigns and Seller and Seller's assigns, heirs and legal representatives. Buyer may assign any of its rights under this Agreement to any Subsidiary of Buyer. 9. WAIVER. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power or privilege under this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement. 10. GOVERNING LAW. This Agreement will be governed by the laws of the Commonwealth of Pennsylvania without regard to conflicts of laws principles. 11. JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the courts of the Commonwealth of Pennsylvania, County of Montgomery, or, if it has or can acquire jurisdiction, in the United States District Court for the Eastern District of Pennsylvania, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world. 12. SEVERABILITY. Whenever possible each provision and term of this Agreement will be interpreted in a manner to be effective and valid but if any provision or term of this Agreement is held to be prohibited or invalid, then such provision or term will be ineffective only to the extent of such prohibition or invalidity, without invalidating or affecting in any manner whatsoever the remainder of such provision or term or the remaining provisions or terms of this Agreement. If any of the covenants set forth in Section 4 of this Agreement are held to be unreasonable, -5- arbitrary or against public policy, such covenants will be considered divisible with respect to scope, time and geographic area, and in such lesser scope, time and geographic area, will be effective, binding and enforceable against Seller. 13. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. 14. SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Section" or "Sections" refer to the corresponding Section or Sections of this Agreement unless otherwise specified. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms. 15. NOTICES. All notices, consents, waivers and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties): Seller: Mr. Daryl Jay Donkersloot 9681 South Palm Drive Tempe, Arizona 85284 with a copy to: James R. Nearhood, Esq. Nearhood & Associates, P.C. 7501 East McCormick Parkway, Suite 114N Scottsdale, Arizona 85258 Telecopier: (602) 998-0820 Buyer: The Triumph Group, Inc. Four Glenhardie Corporate Center 1255 Drummers Lane, Suite 200 Wayne, Pennsylvania 19087-1565 Attention: Mr. John R. Bartholdson -6- Telecopier: (610) 975-0563 with a copy to: Edward D. Slevin, Esq. Ballard Spahr Andrews & Ingersoll 1735 Market Street, 51st Floor Philadelphia, Pennsylvania 19103 Telecopier: (215) 864-8999 16. ENTIRE AGREEMENT. This Agreement, the Employment Agreement and the Stock Purchase Agreement constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersede all prior written and oral agreements and understandings between Buyer and Seller with respect to the subject matter of this Agreement. This Agreement may not be amended except by a written agreement executed by the party to be charged with the amendment. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written. BUYER: THE TRIUMPH GROUP, INC. By: /s/ Richard C. Ill ------------------------------------- Richard C. Ill President and Chief Executive Officer SELLER: /s/ Daryl Jay Donkersloot ---------------------------------------- Daryl Jay Donkersloot -7- EX-10.16 18 EXHIBIT 10.16 NOTE MODIFICATION AGREEMENT This Note Modification Agreement is made as of December 31, 1995 by and between The Triumph Group Holdings, Inc., a Delaware corporation ("Company") and MDR Corporation, a Delaware corporation ("Holder"). BACKGROUND Company issued its $13,500,000 Subordinated Promissory Note dated June 1, 1993 to Holder (the "Note") in connection with a certain Stock and Asset Purchase Agreement dated as of April 21, 1993 by and among Company, Holder and certain other parties named therein. Each capitalized term used herein, which is not separately defined herein, shall have the meaning given to such term in the Note. The Company and a newly formed indirect subsidiary have entered into an Asset Purchase Agreement with Teleflex Incorporated to purchase certain assets of the aerospace/defense division of Teleflex Incorporated. In order to consummate such acquisition, the Company and certain other subsidiaries will incur additional Indebtedness. Company has requested, and Holder has agreed, to amend the Note to permit the incurrence of additional Superior Debt, as more fully set forth herein. NOW, THEREFORE, in consideration of the premises and intending to be legally bound hereby, the parties hereto agree as follows: 1. Paragraph 6 of the Note is hereby amended to change the reference to "$90 million" to $110 million. 2. As required by the terms of the Note, the holders of a majority of the outstanding Senior Notes are being requested to consent to such amendment. 3. Except as hereinabove modified and amended, the Note shall remain unaltered and in full force and effect, and is hereby ratified and confirmed in all respects, as amended. 4. THE VALIDITY, CONSTRUCTION AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAWS, AND NOT THE LAWS OF CONFLICTS, OF THE STATE OF NEW YORK. 5. This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective successor and assigns. IN WITNESS WHEREOF, Company and Holder have caused this Agreement to be executed by their duly authorized officers as of the date first above written. THE TRIUMPH GROUP HOLDINGS, INC. By: /s/ Richard C. Ill ---------------------------- Title: President ------------------------- MDR CORPORATION By: /s/ Barbara H. Moyer ---------------------------- Title: Secretary ------------------------- 2 Consented to and agreed this 22 day of April, 1996. -- ----- THE CIT GROUP/BUSINESS CREDIT, INC., individually and as agent for itself, BOT Financial Corporation and Heller Financial, Inc. By: /s/ ----------------------------- Title: Vice President -------------------------- 3 EX-10.17 19 EXHIBIT 10.17 EXECUTIVE STOCK AGREEMENT THIS AGREEMENT is made as of May 9, 1995 between The Triumph Group Holdings, Inc., a Delaware corporation (the "Company"), and John M. Brasch ("Executive"). The Company and Executive desire to enter into an agreement pursuant to which Executive will purchase, and the Company will sell, 400 shares of the Company's Class A Common Stock, par value $.001 per share (the "Common Stock"), and the Company's Promissory Note substantially in the form of EXHIBIT A attached hereto (the "JSDs") in an aggregate principal amount of $28,818. All of such shares of Common Stock and all shares of Common Stock hereafter acquired by Executive are referred to herein as "Executive Common Stock." Executive Common Stock and all JSDs, including JSDs acquired hereafter are referred to herein as "Executive Securities." Certain definitions are set forth in paragraph 10 of this Agreement. The execution and delivery of this Agreement by the Company and Executive is required by the terms of a Purchase Agreement dated as of July 22, 1993 (the "Purchase Agreement") pursuant to which Citicorp Venture Capital, Ltd. ("CVC") purchased shares of Common Stock, shares of the Company's Preferred Stock, par value $.01 per share (the "Preferred Stock") and JSDs. Certain provisions of this Agreement are intended for the benefit of, and will be enforceable by, CVC. The parties hereto agree as follows: 1. PURCHASE AND SALE OF EXECUTIVE SECURITIES. (a) Upon execution of this Agreement, Executive will purchase, and the Company will sell, 400 shares of Common Stock at a price of $52.325 per share and JSDs in an aggregate principal amount of $28,818 at a price equal to the face amount thereof. The Company will deliver to Executive the JSDs and the certificates representing the Common Stock, and Executive will deliver to the Company a cashier's or certified check or wire transfer of funds in the aggregate amount of $49,748. (b) Within 30 days after Executive purchases any Executive Securities from the Company, Executive will make an effective election with the Internal Revenue Service under Section 83(b) of the Internal Revenue Code and the regulations promulgated thereunder in the form of Annex A attached hereto. (c) In connection with the purchase and sale of the Executive Securities hereunder, Executive represents and warrants to the Company that: (i) The Executive Securities to be acquired by Executive pursuant to this Agreement will be acquired for Executive's own account and not with a view to, or intention of, distribution thereof in violation of the 1933 Act, or any applicable state securities laws, and the Executive Securities will not be disposed of in contravention of the 1933 Act or any applicable state securities laws. (ii) Executive is an executive officer of the Company or a Subsidiary or a Division, is sophisticated in financial matters and is able to evaluate the risks and benefits of the investment in the Executive Securities. (iii) Executive is able to bear the economic risk of his investment in the Executive Securities for an indefinite period of time because the Executive Securities have not been registered under the 1933 Act and, therefore, cannot be sold unless subsequently registered under the 1933 Act or an exemption from such registration is available. (iv) Executive has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of Executive Securities and has had full access to such other information concerning the Company as he has requested. Executive has reviewed, or has had an opportunity to review, a copy of the Stock and Asset Purchase Agreement, dated April 21, 1993 (the "Purchase Agreement"), between the Company and Alco Standard Corporation, MDR Corporation, Paper Corporation of America, and PCA Brands, Inc. (collectively the "Sellers"), pursuant to which the Company acquired all of the assets and stock of the divisions and subsidiaries of the Sellers which, upon closing of the Purchase Agreement, comprised the Company's Subsidiaries, and Executive is familiar with the transactions contemplated thereby. Since his employment by the Company, Executive has received monthly financial statements showing the performance of each of the Company's operating units. Executive has also had an opportunity to review the following documents: (A) the Company's Certificate of Incorporation and Bylaws; (B) the loan agreements, notes and related documents with the Company; senior and subordinated lenders; (C) the Private Placement Memorandum prepared by the Company; and (D) the audited financial statements of the Company for the fiscal year ended March 31, 1995. (v) This Agreement constitutes the legal, valid and binding obligation of Executive, enforceable in 2 accordance with its terms, and execution, delivery and performance of this Agreement by Executive does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject. (d) As an inducement to the Company to issue the Executive Securities to Executive, as a condition thereto, Executive acknowledges and agrees that: (i) neither the issuance of the Executive Securities to Executive nor any provision contained herein shall entitle Executive to remain in the employment of the Company or its Subsidiaries or Divisions or affect the right of the Company or its Subsidiaries or Divisions to terminate Executive's employment at any time for any reason; and (ii) the Company shall have no duty or obligation to disclose to Executive, and Executive shall have no right to be advised of, any material information regarding the Company and its Subsidiaries and Divisions at any time prior to, upon or in connection with the repurchase of Executive Securities upon the termination of Executive's employment with the Company and its Subsidiaries or Divisions or as otherwise provided hereunder. 2. REGULAR AND TIME VALUED EXECUTIVE COMMON STOCK. (a) Except as otherwise provided in paragraph 2(b) below, the shares of Executive Common Stock will become "Time Valued Shares" in accordance with the following schedule, if as of each such date Executive is still employed by the Company or any of its Subsidiaries or Divisions: Cumulative Percentage of Executive Common Stock to become Date Time Valued Shares ---------------------- ----------------------- On May 9, 1996: 20.0% On May 9, 1997: 40.0% On May 9, 1998: 60.0% On May 9, 1999: 80.0% On May 9, 2000: 100.0% (b) If Executive ceases to be employed by the Company or its Subsidiaries or Divisions for any reason, including the death or permanent disability of Executive, on any date other than any May 9 prior to May 9, 2000, the cumulative 3 percentage of Executive Common Stock to become Time Valued Shares will be determined on a pro rata basis according to the number of days elapsed since the prior May 9th. Upon the occurrence of a Sale of the Company or a Qualified Public Offering, all shares of Executive Common Stock which have not yet become Time Valued Shares shall become Time Valued Shares at the time of such event. For purposes of this paragraph 2(b), the determination of permanent disability shall be made in good faith by the Company's board of directors (the "Board"). All shares of Executive Common Stock which have not become Time Valued Shares are referred to herein as "Regular Shares." 3. REPURCHASE OPTION. (a) In the event Executive ceases to be employed by the Company and its Subsidiaries and Divisions for any reason (the "Termination"), the Executive Securities (whether held by Executive or one or more of Executive's transferees) will be subject to repurchase by the Company, Management and CVC pursuant to the terms and conditions set forth in this paragraph 3 (the "Repurchase Option"). (b) Except as provided in subsection 3(c) below, the purchase price for each Regular Share of Executive Common Stock will be the lesser of Book Value or Executive's Original Cost for such share, and the purchase price for each Time Valued Share of Executive Common Stock will be the Book Value for such Share. The purchase price for the JSDs will be the outstanding principal amount so purchased plus all accrued and unpaid interest thereon until the date of payment. (c) If the Executive resigns or his employment is terminated for Cause, the purchase price for each Time Valued and Regular Share will be the lesser of Book Value or Executive's Original Cost for such share. (d) The Board may elect to purchase all or any portion of the Executive Securities by delivering written notice (the "Repurchase Notice") to the holder or holders of the Executive Securities within 90 days after the Termination. The Repurchase Notice will set forth the number of Regular Shares and Time Valued Shares and the principal amount of JSDs to be acquired from each holder, the aggregate consideration to be paid for such shares or JSDs and the time and place for the closing of the transaction. The number of shares and principal amount of JSDs to be repurchased by the Company shall first be satisfied to the extent possible from the shares of Executive Common Stock or principal amount of JSDs held by Executive at the time of delivery of the Repurchase Notice. If the number of shares of Executive Common Stock or principal amount of JSDs then held by Executive is less than the total number of shares of Executive 4 Common Stock or principal amount of JSDs the Company has elected to purchase, the Company shall purchase the remaining shares elected to be purchased from the transferees of such Executive's Executive Common Stock or JSDs under this Agreement, pro rata according to the number of shares of Executive Common Stock or principal amount of JSDs held by such transferees at the time of delivery of such Repurchase Notice (determined as nearly as practicable to the nearest share or nearest dollar, as applicable). The number of Regular Shares and Time Value Shares to be repurchased hereunder will be allocated among Executive and such transferees of Executive Common Stock (if any) pro rata according to the number of shares of Executive Common Stock to be purchased from such persons. (e) If for any reason the Company does not elect to purchase all of the Executive Securities pursuant to the Repurchase Option, Management shall be entitled to exercise the Repurchase Option for the shares of Executive Common Stock and principal amount of JSDs the Company has not elected to purchase (the "Available Securities"). As soon as practicable after the Company has determined that there will be Available Securities, but in any event within 30 days after the Termination, the Company shall give written notice (the "Option Notice") to each member of Management setting forth the Available Securities and the purchase price for the JSDs and Executive Common Stock comprising the Available Securities. Each member of Management may elect to purchase his pro rata share (based on the number of shares of Common Stock owned by such member and the total number of shares owned by Management) of the Available Securities by giving written notice to the Company within 20 days after the Option Notice has been given by the Company. As soon as practicable, and in any event within fifteen days after the expiration of the 20-day period set forth above, the Company shall notify each holder of Executive Common Stock and JSDs as to the number of shares and principal amount of JSDs being purchased from such holder by Management (the "Supplemental Repurchase Notice"). At the time the Company delivers the Supplemental Repurchase Notice to the holder(s) of Executive Securities, the Company shall also deliver written notice to each member of Management who is purchasing Available Securities setting forth the number of shares and principal amount of JSDs that each member of Management is entitled to purchase, the aggregate purchase price and the time and place of the closing of the transaction. The number of Regular Shares and Time Valued Shares to be repurchased hereunder shall be allocated among the Company and each member of Management pro rata according to the number of shares of Executive Common Stock to be purchased by each of them. (f) If for any reason the Company and Management do not elect to purchase all of the Executive Securities pursuant to the Repurchase Option, CVC shall be entitled to exercise the 5 Repurchase Option for the shares of Executive Common Stock and principal amount of JSDs the Company and Management have not elected to purchase (the "CVC Available Securities"). As soon as practicable after the Company has determined that there will be CVC Available Securities, but in any event within 60 days after the Termination, the Company shall give written notice (the "CVC Option Notice") to CVC setting forth the CVC Available Securities and the purchase price for the JSDs and Executive Common Stock comprising the CVC Available Securities. CVC may elect to purchase any or all of the CVC Available Securities by giving written notice to the Company within 20 days after the CVC Option Notice has been given by the Company. As soon as practicable, and in any event within ten days after the expiration of the 20-day period set forth above, the Company shall notify each holder of Executive Common Stock and JSDs as to the number of shares and principal amount of JSDs being purchased from such holder by CVC (the "CVC Supplemental Repurchase Notice"). At the time the Company delivers the CVC Supplemental Repurchase Notice to the holder(s) of Executive Securities, the Company shall also deliver written notice to CVC setting forth the number of shares and principal amount of JSDs that CVC is entitled to purchase, the aggregate purchase price and the time and place of the closing of the transaction. The number of Regular Shares and Time Valued Shares and principal amount of JSDs to be repurchased hereunder shall be allocated among the Company, Management and CVC pro rata according to the number of shares of Executive Common Stock and principal amount of JSDs to be purchased by each of them. (g) The closing of the purchase of the Executive Securities pursuant to the Repurchase Option shall take place on the date designated by the Company in the Repurchase Notice, Supplemental Repurchase Notice or CVC Supplemental Repurchase Notice, which date shall not be more than 60 days nor less than five days after the delivery of the later of any such notice to be delivered. The Company, Management and/or CVC will pay for the Executive Securities to be purchased pursuant to the Repurchase Option by delivery of, in the case of Management or CVC, a check or wire transfer of funds and, in the case of the Company, (i) a check or wire transfer of funds, (ii) a subordinated note or notes payable in up to three equal annual installments beginning on the first anniversary of the closing of such purchase and bearing interest (payable quarterly) at a rate per annum equal to the prime rate announced from time to time by Citibank, N.A. or (iii) both (i) and (ii), in each case, in the aggregate amount of the purchase price for such securities. Any notes issued by the Company pursuant to this paragraph 3(g) shall be subject to any restrictive covenants to which the Company is subject at the time of such purchase. In addition, the Company may pay the purchase price for the Executive Securities by offsetting amounts outstanding under any bona fide debts owed by 6 Executive to the Company. The purchasers of Executive Common Stock hereunder will be entitled to receive customary representations and warranties from the sellers regarding such sale and to require all sellers' signatures be guaranteed. (h) The rights of the Company, Management and CVC to repurchase Time Valued Shares pursuant to this paragraph 3 shall terminate upon the first to occur of the Sale of the Company or a Qualified Public Offering. (i) Notwithstanding anything to the contrary contained in this Agreement, all repurchases of Executive Common Stock by the Company shall be subject to applicable restrictions contained in the Delaware General Corporation Law and in the Company's and its Subsidiaries' debt and equity financing agreements. If any such restrictions prohibit the repurchase of Executive Common Stock hereunder which the Company is otherwise entitled or required to make, the Company may make such repurchases (plus interest accruing at the rate of 7% per annum from the date the Company elects to make such prohibited repurchase to the date such repurchase is actually made) as soon as it is permitted to do so under such restrictions. 4. RESTRICTIONS ON TRANSFER. (a) TRANSFER OF EXECUTIVE SECURITIES. Executive shall not sell, transfer, assign, pledge or otherwise dispose of (whether with or without consideration and whether voluntarily or involuntarily or by operation of law) any interest in any of the Executive Securities (a "Transfer"), except pursuant to (i) the provisions of paragraph 3 hereof, a Public Sale or a Sale of the Company ("Exempt Transfers") or (ii) the provisions of this paragraph 4; provided that in no event shall any Transfer of Executive Securities pursuant to this paragraph 4 be made for any consideration other than cash payable upon consummation of such Transfer or in installments over time. Prior to making any Transfer other than an Exempt Transfer, Executive will give written notice (the "Sale Notice") to the Company and CVC. The Company shall send a copy of the Sale Notice to each member of Management. The Sale Notice will disclose in reasonable detail the identity or the prospective transferee(s), the number of shares to be transferred and the terms and conditions of the proposed transfer. Executive will not consummate any Transfer until 60 days after the Sale Notice has been given to the Company and to CVC, unless the parties to the Transfer have been finally determined pursuant to this paragraph 4 prior to the expiration of such 60-day period. (The date of the first to occur of such events is referred to herein as the "Authorization Date"). (b) FIRST REFUSAL RIGHTS. The Company may elect to purchase all or any portion of the Executive Securities to be 7 transferred upon the same terms and conditions as those set forth in the Sale Notice by delivering a written notice of such election to Executive, each member of Management and CVC within 25 days after the Sale Notice has been given to the Company. If the Company has not elected to purchase all of the Executive Securities to be transferred, each member of Management may elect to purchase his pro rata portion (based on the number of shares of Common Stock owned by such member and the total number of shares owned by Management) of the Executive Securities not purchased or not to be purchased by the Company upon the same terms and conditions as those set forth in the Sale Notice by giving written notice of such election to Executive within 40 days after the Sale Notice has been given to the Company. If the Company and Management have not elected to purchase all of the Executive Securities to be transferred, CVC may elect to purchase all or any portion of the Executive Securities not purchased or not to be purchased by the Company and Management upon the same terms and conditions as those set forth in the Sale Notice by giving written notice of such election to Executive within 50 days after the Sale Notice has been given to CVC. If the Company, Management and CVC do not elect to purchase all of the Executive Securities specified in the Sale Notice, Executive may transfer the remaining Executive Securities specified in the Sale Notice at a price and on terms no more favorable to the transferee(s) thereof than specified in the Sale Notice during the 60-day period immediately following the Authorization Date. Any Executive Securities not transferred within such 60-day period will be subject to the provisions of this paragraph 4(b) upon subsequent transfer. The Company may pay the purchase price for such shares by offsetting amounts outstanding under any bona fide debts owed by Executive to the Company. (c) CERTAIN PERMITTED TRANSFERS. The restrictions contained in this paragraph 4 will not apply with respect to transfers of Executive Securities (i) pursuant to applicable laws of descent and distribution or (ii) among Executive's family group; provided that (x) such restrictions will continue to be applicable to the Executive Securities after any such transfer and (y) the transferees of such Executive Securities have agreed in writing to be bound by the provisions of this Agreement. Executive's "family group" means Executive's spouse and descendants (whether natural or adopted) and any trust solely for the benefit of Executive and/or Executive's spouse and/or descendants. (d) PLEDGES. Notwithstanding the provisions of this paragraph 4, Executive may not pledge any Executive Securities. (e) TERMINATION OF RESTRICTIONS. The restrictions on the transfer of shares of Executive Securities 8 set forth in this paragraph 4 will continue with respect to all Executive Securities following any transfer thereof; provided that in any event such restrictions will terminate on the first to occur of a Sale of the Company or a Qualified Public Offering. 5. ADDITIONAL RESTRICTIONS ON TRANSFER. (a) The JSDs and the certificates representing the Executive Common Stock will bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN EXECUTIVE STOCK AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THE SHARES REPRESENTED BY THIS CERTIFICATE DATED AS OF MAY 9, 1995. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." (b) No holder of Executive Securities may sell, transfer or dispose of any Executive Securities (except pursuant to an effective registration statement under the 1933 Act) without first delivering to the Company an opinion of counsel (reasonably acceptable in form and substance to the Company) that neither registration nor qualification under the 1933 Act and applicable state securities laws is required in connection with such transfer. (c) Each holder of Executive Securities agrees not to effect any public sale or distribution of any Executive Securities or other equity securities of the Company, or any securities convertible into or exchangeable or exercisable for any of the Company's equity securities, during the seven days prior to and the 180 days after the effectiveness of any underwritten public offering, except as part of such underwritten public offering or if otherwise permitted by the Company. 6. SALE OF THE COMPANY. (a) If the Board and the holders of a majority of the Company's Common Stock approve a Sale of the Company (the 9 "Approved Sale"), the holders of Executive Securities will consent to and raise no objections against the Approved Sale of the Company, and if the Approved Sale of the Company is structured as a sale of stock, the holders of Executive Securities will agree to sell their shares of Executive Securities on the terms and conditions approved by the Board and the holders of a majority of the Company's Common Stock and will raise no objections to process and will waive dissenters or similar rights. The holders of Executive Securities will take all necessary and desirable actions in connection with the consummation of the Approved Sale of the Company. The Company shall give management thirty days notice prior to a Sale of the Company. (b) The obligations of the holders of Executive Securities with respect to the Approved Sale of the Company are subject to the satisfaction of the following conditions: (i) upon the consummation of the Approved Sale, all of the holders of Common Stock will receive the same form and amount of consideration per share of Common Stock, or if any holders of Common Stock are given an option as to the form and amount of consideration to be received, all holders will be given the same option; and (ii) all holders of rights to acquire shares of Common Stock will be given an opportunity to either (A) exercise such rights prior to the consummation of the Approved Sale and participate in such sale as holders of Common Stock or (B) upon the consummation of the Approved Sale, receive in exchange for such rights consideration equal to the amount determined by multiplying (1) the same amount of consideration per share of Common Stock in connection with the Approved Sale less the exercise price per share of Common Stock of such rights to acquire Common Stock by (2) the number of shares of Common Stock represented by such rights. (c) If the Company or the holders of the Company's securities enter into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated by the Securities Exchange Commission may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), the holders of Executive Common Stock will, at the request of the Company, appoint a purchaser representative (as such term is defined in Rule 501) reasonably acceptable to the Company. If any holder of Executive Common Stock appoints a purchaser representative designated by the Company, the Company will pay the fees of such purchaser representative, but if any holder of Executive Common Stock declines to appoint the purchaser representative designated by the Company such holder will appoint another purchaser representative (reasonably acceptable to the Company), and such holder will be responsible for the fees of the purchaser representative so appointed. 10 (d) Executive and the other holders of Executive Common Stock (if any) will bear their pro rata share (based upon the number of shares sold) of the costs of any sale of Executive Common Stock pursuant to an Approved Sale to the extent such costs are incurred for the benefit of all holders of Common Stock and are not otherwise paid by the Company or the acquiring party. Costs incurred by Executive and the other holders of Executive Common Stock on their own behalf will not be considered costs of the transaction hereunder. (e) The provisions of this paragraph 6 will terminate upon the completion of a Qualified Public Offering. 7. CONFIDENTIAL INFORMATION. The Executive acknowledges that the information, observations and data obtained by him while employed by Executive's Business concerning the business or affairs of the Company, Executive's Business or any other Subsidiary or Division ("Confidential Information") are the property of the Company or such Subsidiary or Division. Therefore, Executive agrees that he shall not disclose to any unauthorized person or use for his own account any Confidential Information without the prior written consent of the Board, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of Executive's acts or omissions to act. Executive shall deliver to the Company at the termination of the Executive's employment, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information, Work Product (as defined in Section 8 below) or the business of the Company or any Subsidiary or Division which he may then possess or have under his control. 8. INVENTIONS AND PATENTS. Executive agrees that all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports and all similar or related information which relates to the Company's or any of its Subsidiaries' or Divisions' actual or anticipated business, research and development or existing or future products or services and which are conceived, developed or made by Executive while employed by Executive's Business ("Work Product") belong to the Company or such Subsidiary or Division. Executive will promptly disclose such Work Product to the Board and perform all actions reasonably requested by the Board (whether during or after Executive's employment period) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments). 11 9. NON-COMPETE NON-SOLICITATION. (a) Executive acknowledges that in the course of his employment with Executive's Business he has become familiar, and he will become familiar, with the Company's and its Subsidiaries' and Divisions' trade secrets and with other confidential information concerning the Company and its Subsidiaries and Divisions and that his services have been and will be of special, unique and extraordinary value to the Company. Therefore, Executive agrees that, prior to the termination of Executive's employment and, in the event Executive resigns or is terminated for cause, for a period of two years thereafter (the "Noncompete Period"), he shall not directly or indirectly own, manage, control, participate in, consult with, render services for, or in any manner engage in any business competing with the businesses of the Executive's Business as such businesses exist or are in process on the date of the termination of Executive's employment, within any geographical area in which Executive's Business engages or plans to engage in such businesses. Nothing herein shall prohibit Executive from being a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as Executive has no active participation in the business of such corporation. (b) During the Noncompete Period, Executive shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company or any Subsidiary or Division to leave the employ of the Company or such Subsidiary or Division, or in any way interfere with the relationship between the Company or any Subsidiary or Division and any employee thereof, (ii) hire any person who was an employee of the Company or any Subsidiary or Division at any time during the Executive's employment period, or (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or any Subsidiary or Division to cease doing business with the Company or such Subsidiary or Division, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or any Subsidiary or Division. (c) If, at the time of enforcement of this paragraph 9, a court shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. 12 (d) In the event of the breach or a threatened breach by Executive of any of the provisions of this paragraph 9, the Company, in addition and supplementary to other rights and remedies existing in its favor, may apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security). 10. DEFINITIONS. "BOOK VALUE" of each share of Executive Common Stock will be equal to the quotient determined by dividing (A) the excess of Company's assets over its liabilities as of the end of the fiscal quarter immediately preceding the date of Executive's Termination (provided however that if Executive's Termination occurs in connection with a Sale of Executive's Business, the excess of the Company's assets over its liabilities shall be determined on a pro forma basis assuming the Sale of Executive's Business occurred on the last day of such fiscal quarter), determined on a consolidated basis in accordance with generally accepted accounting principles, consistently applied, less the liquidation value of all outstanding preferred stock, by (B) the total number of shares of Common Stock outstanding on a fully diluted basis (including in such calculation the aggregate conversion price and exercise price of all outstanding convertible securities, options and warrants). "CAUSE" shall mean (i) a material breach of this Agreement by Executive, (ii) a breach of Executive's duty of loyalty to the Company, (iii) the commission by Executive of a felony, a crime involving moral turpitude or other act causing material harm to the Company's standing and reputation, (iv) Executive's continued failure to perform his duties to the Company or (v) Executive's substandard performance. For the purposes of this agreement, "substandard performance" shall be determined in good faith by a majority of the Board (excluding Executive). In assessing Executive's performance, the Board shall give due consideration to the overall industry experience in assessing Executive's performance. After due consideration of these factors, if a majority of the Board (excluding Executive) determines in good faith that the Company would have performed substantially better with other management and that the future performance of the Company would be best served by new management, the Board may terminate Executive for "substandard performance." "CREDIT AGREEMENT" means the Financing and Security Agreement, dated as of July 22, 1993, among the Company, certain of the Company's Subsidiaries and The CIT Group/Business Credit, Inc., as Lender and as Agent, as now or hereafter amended. 13 "DIVISION" means an operating division of the Company or any Subsidiary. "EXECUTIVE COMMON STOCK" will continue to be Executive Common Stock in the hands of any holder other than Executive (except for the Company and CVC and except for transferees in a Public Sale), and except as otherwise provided herein, each such other holder of Executive Common Stock will succeed to all rights and obligations attributable to Executive as a holder of Executive Common Stock hereunder. Executive Common Stock will also include shares of the Company's capital stock issued with respect to Executive Common Stock by way of a stock split, stock dividend or other recapitalization. "INDEPENDENT THIRD PARTY" means any person who, immediately prior to the contemplated transaction, does not own in excess of 5% of the Company's Common Stock on a fully diluted basis, who is not controlling, controlled by or under common control with any such 5% owner of the Company's Common Stock and who is not the spouse or descendent (by birth or adoption) of any such 5% owner of the Company's Common Stock. "MANAGEMENT" means all of the other executive officers of the Company and its Subsidiaries and Divisions who have purchased JSDs or Preferred Stock and shares of Common Stock from time to time pursuant to Executive Stock Agreements between such executive officers and the Company, substantially in the form hereof. "1933 ACT" means the Securities Act of 1933, as amended from time to time. "ORIGINAL COST" of each share of Common Stock purchased hereunder will be equal to $52.325 (as proportionately adjusted for all subsequent stock splits, stock dividends and other recapitalization). "PERMITTED TRANSFEREE" means any holder of Executive Common Stock who acquired such stock pursuant to a transfer permitted by paragraph 4(c). "PUBLIC SALE" means any sale pursuant to a registered public offering under the 1933 Act or any sale to the public pursuant to Rule 144 promulgated under the 1933 Act effected through a broker, dealer or market maker. "QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public offering registered under the 1933 Act of shares of the Company's Common Stock having an aggregate offering value of at least $40 million. 14 "REGULAR SHARES" means those shares of Executive Common Stock designated as such pursuant to Section 2. "SALE OF THE COMPANY" means the sale of the Company to an Independent Third Party or affiliate group of Independent Third Parties pursuant to which such party or parties acquire (i) capital stock of the Company possessing the voting power to elect a majority of the Company's board of directors (whether by merger, consolidation or sale or transfer of the Company's capital stock) or (ii) all or substantially all of the Company's assets determined on a consolidated basis. "SUBSIDIARY" means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries. "TIME VALUED SHARES" means those shares of Executive Common Stock designated as such pursuant to Section 3. 11. NOTICES. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated: To the Company: The Triumph Group Holdings, Inc. c/o The Triumph Group 1255 Drummers Lane, Suite 200 Wayne, PA 19087 Attention: President With copies to: Ballard Spahr Andrews & Ingersoll 1735 Market Street, 51st Floor Philadelphia, PA 19103 Attention: Edward D. Slevin To Executive: John M. Brasch 12093 E. Gold Dust Avenue Scottsdale, AZ 85259 15 To CVC: Citicorp Venture Capital, Ltd. 399 Park Avenue New York, NY 10043 Attention: Joseph Silvestri with a copy to: Kirkland & Ellis 55 East 52nd Street New York, NY 10055 Attention: Kirk A. Radke or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered or sent or, if mailed, five days after deposit in the U.S. mail. 12. GENERAL PROVISIONS. (a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted Transfer of any Executive Securities in violation of any provision of this Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported transferee of such Executive Securities as the owner of such securities for any purpose. (b) SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. (c) COMPLETE AGREEMENT. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. (d) COUNTERPARTS. This Agreement may be executed in separate counterparts, each of which is deemed to be an 16 original and all of which taken together constitute one and the same agreement. (e) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company, CVC and their respective successors and assigns (including subsequent holders of Executive Securities); provided that the rights and obligations of Executive under this Agreement shall not be assignable except in connection with a permitted transfer of Executive Securities hereunder. (f) CHOICE OF LAW. The corporate law of the State of Delaware will govern all questions concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will be governed by the internal law, and not the law of conflicts, of the State of Delaware. (g) REMEDIES. Each of the parties to this Agreement (including CVC) will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorney's fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. (h) AMENDMENT AND WAIVER. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company, Executive and CVC. (i) BUSINESS DAYS. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company's chief executive office is located, the time period shall be automatically extended to the business day immediately following each Saturday, Sunday or holiday. * * * * * * * * 17 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the 15 day of September, 1996. - -- --------- The Triumph Group Holdings, Inc. By /s/ --------------------------- Its Senior Vice President -------------------------- /s/ John M. Brasch ------------------------------ John M. Brasch Agreed and Accepted: Citicorp Venture Capital, Ltd. By /s/ ------------------------- Its AVP ------------------------- CONSENT The undersigned spouse of Executive hereby acknowledges that I have read the foregoing Executive Stock Agreement and that I understand its contents. I am aware that the Agreement provides for the repurchase of my spouse's Executive Securities (as defined in the foregoing agreement) under certain circumstances and imposes other restrictions on the transfer of such Executive Securities. I agree that my spouse's interest in the Executive Securities is subject to this Agreement and any interest I may have in such Executive Securities shall be irrevocably bound by this Agreement and further that my community property interest in such Executive Securities, if any, shall be similarly bound by this Agreement. I am aware that the legal, financial and other matters contained in this Agreement are complex and I am free to seek advice with respect thereto from independent counsel. I have either sought such advice or determined after carefully reviewing this Agreement that I will waive such right. /s/ Christine M. Fox /s/ Barbara A. Brasch - -------------------- ------------------------------ Witness Print Name:BARBARA A. BRASCH 18 EXHIBIT A THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS NOTE IS SUBJECT TO CERTAIN SUBORDINATION PROVISIONS SET FORTH IN PARAGRAPH 3 HEREIN. THIS NOTE WAS ORIGINALLY ISSUED ON ______________, 1995 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY COMPARABLE STATE SECURITIES LAW. THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN PARAGRAPH 9 HEREIN. THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF APPLYING THE U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES TO THIS NOTE. THE DATE OF THIS NOTE IS MAY 9, 1995, AND THE ISSUE PRICE IS EQUAL TO 100% OF ITS FACE AMOUNT. ASSUMING THAT THE ISSUER EXERCISES ITS RIGHT TO ISSUE ADDITIONAL NOTES IN LIEU OF CASH INTEREST PAYMENTS AT EACH OPPORTUNITY, AND THAT ALL PAYMENTS OF PRINCIPAL AND INTEREST ON THIS NOTE AND SUCH ADDITIONAL NOTES ARE MADE ON THE SCHEDULED MATURITY DATE OF DECEMBER 31, 2003, THE TOTAL AMOUNT OF OID ON THIS NOTE (INCLUDING OID WITH RESPECT TO THE ADDITIONAL NOTES ISSUED IN LIEU OF CASH INTEREST PAYMENTS) WILL BE $__________ PER $1,000 FACE AMOUNT OF THIS NOTE, AND THE YIELD TO MATURITY OF THIS NOTE WILL BE 14%, COMPOUNDED QUARTERLY. PROMISSORY NOTE Dated as of: May 9, 1995 $28,818.00 Delivered: _______________, 1995 THE TRIUMPH GROUP HOLDINGS, INC., a Delaware corporation (the "Company"), hereby promises to pay to John M. Brasch (the Lender"), or its permitted assigns (the Lender and each of its permitted assigns is a "Holder") the principal amount of Twenty Eight Thousand Eight Hundred Eighteen Dollars, together with interest thereon calculated from the date hereof in accordance with the provisions of this Note. This Note is the "Note" issued pursuant to that certain Executive Stock Agreement, dated as of even date herewith (the "Purchase Agreement"), by and among the Company and the Lender. Certain defined terms used herein are set forth in paragraph 11 hereof. 1. PAYMENT OF INTEREST. Interest shall accrue at the rate of fourteen percent (14%) per annum, compounded quarterly, on the unpaid principal amount of this Note outstanding from time to time. Subject to the provisions of subparagraph 2(c) and paragraph 3 hereof, the Company shall pay to the holder of this Note quarterly, in arrears, all accrued interest on each March 31, June 30, September 30 and December 31 during the term of this Note (each such date being hereinafter referred to as an "Interest Payment Date"), beginning on June 30, 1995. The Company, in its sole discretion, in lieu of paying cash interest on any Interest Payment Date, may pay all or any portion of the accrued interest by issuance of a promissory note or notes in an amount or amounts equal to the amount of interest due on such Interest Payment Date (less any cash interest payments), payable to the holder of this Note and otherwise identical to this Note. Any accrued interest which for any reason has not theretofore been paid shall be paid in full on the date on which the remaining principal amount of this Note is paid. Interest shall accrue on any principal payment due under this Note, and, unless otherwise prohibited under applicable law, on any interest which has not been paid on the date on which it is due, until such time as payment therefor is actually delivered to the holder of this Note. 2. PAYMENT OF PRINCIPAL ON NOTE. (a) SCHEDULED PAYMENT. The Company shall repay the entire remaining principal amount of this Note, together with all accrued and unpaid interest thereon, on December 31, 2003 (the "Maturity Date"). (b) OPTIONAL PREPAYMENTS. Subject to the provisions of paragraph 3 hereof, the Company may, at any time and from time to time without premium or penalty, prepay all or a portion of the outstanding principal amount of this Note. (c) TIME OF PAYMENT. If any payment of principal or interest on this Note shall become due on a Saturday, Sunday, or legal holiday under the laws of the State of New York, such payment shall be made on the next succeeding business day and such extension of time shall in such case be included in computing interest in connection with such payment. 3. SUBORDINATION; RESTRICTIONS ON PAYMENT. (a) Notwithstanding anything in this Note to the contrary, the obligations of the Company in respect of the principal, interest, fees and charges on this Note shall be subordinate and junior in right of payment, to the extent and in the manner hereinafter set forth, to all Superior Debt. (b) Upon the occurrence of any Insolvency Event with respect to the Company or upon any acceleration of the Superior Debt, then: (i) the holders of Superior Debt shall be entitled to receive payment in full of all principal, 2 premium, interest, fees and charges then due on all Superior Debt (including interest, fees and charges accruing thereon after the commencement of any such proceedings) before the Holder is entitled to receive any payment on account of principal, interest or other amounts due (or past due) upon this Note, and the holders of Superior Debt shall be entitled to receive for application in payment thereof any payment or distribution of any kind or character, whether in cash, property or securities or by set-off or otherwise, which may be payable or deliverable in any such proceedings in respect of this Note; and (ii) any payment or distribution of assets of the Company, of any kind or character, whether in cash, property or securities, to which the Holder would be entitled except for the provisions of this subparagraph 3(b) shall be paid or delivered by the Company directly to the holders of all Superior Debt in the manner provided in paragraph 3(f) below, for application in payment thereof until all Superior Debt (including interest, fees and charges accrued thereon after the date of commencement of such proceedings) shall have been paid in full. (c) Until all Superior Debt shall have been paid in full, the Company shall not, directly or indirectly, make any payment of any amount payable with respect to this Note if there shall have occurred and be continuing or there would exist as a result of such payment or distribution any default or event of default under any of the terms of any Superior Debt Agreement which (whether with or without notice, lapse of time or both) would permit the holder of such Superior Debt to accelerate all or any portion of such Superior Debt (collectively, the "Blockage Events"); provided that if, immediately prior to the time a particular payment is due hereunder, (x) no Blockage Event is continuing, and (y) payment in full of the amount then due is prohibited by this paragraph 3(c), then the Company shall be permitted to, and shall, pay to the Holder the maximum portion of such amount as would not create a default under any of the terms of any Superior Debt Agreement which would permit the holder of such Superior Debt to accelerate all or any portion of such Superior Debt. The Company shall use reasonable efforts to notify the Holder in writing of the occurrence of a Blockage Event; provided that notwithstanding anything to the contrary in this Note, the failure of the Company to so notify the Holder of the occurrence of a Blockage Event shall have no effect on the obligations of the Company or the Holder during the continuance of such Blockage Event as set forth herein. (d) Any amendment or modification of the terms of paragraph 3 of this Note shall not be effective against any Person who was a holder of Superior Debt prior to or at the time 3 (e) The holders of Superior Debt may, at any time, in their discretion, renew, amend, extend or otherwise modify the terms and provisions of Superior Debt so held or exercise any of their rights under the Superior Debt including, without limitation, the waiver of defaults thereunder and the amendment of any of the terms or provisions thereof (or any notice evidencing or creating the same), all without notice to or assent from the Holder. No compromise, alteration, amendment, renewal or other change of, or waiver, consent or other action in respect of any liability or obligation under or in respect of, any terms, covenants or conditions of the Superior Debt (or any instrument evidencing or creating the same), whether or not such compromise, alteration, amendment, renewal, change, waiver, consent or other action is in accordance with the provisions of the Superior Debt (or any instrument evidencing or creating the same), shall in any way alter or affect any of the subordination provisions of this Note. (f) If, notwithstanding the provisions of paragraph 3 of this Note, any payment or distribution of any character (whether in cash, securities or other property) or any security shall be received by the Holder in contravention of this paragraph 3 before all the Superior Debt shall have been paid in full, such payment, distribution or security shall be held in trust for the benefit of, and shall be immediately paid over or delivered or transferred to, the holders of Superior Debt or their duly appointed agents for application of payment according to the priorities of such Superior Debt and ratably among the holders of any class of Superior Debt. Such payments received by the Holder and delivered to the holders of the Superior Debt shall be deemed not to be a payment on this Note for any reason whatsoever and the indebtedness under this Note shall remain as if such erroneous payment had never been paid by the Company or received by the Holder. In the event of the failure of any Holder to endorse or assign any such payment, distribution or security, each holder of any Superior Debt is hereby irrevocably authorized to endorse or assign the same. (g) No present or future holder of Superior Debt shall be prejudiced in its right to enforce the provisions of paragraph 3 of this Note by any act or failure to act on the part of the Company. (h) If there shall exist any Blockage Event, no Holder shall (other than in connection with a failure by the Company to make a scheduled principal payment) take or continue any action, or exercise or continue to exercise any rights, remedies or powers under the terms of this Note, or exercise or continue to exercise any other right or remedy at law or equity that such holder might otherwise possess, to collect any amount due and payable in respect of this Note, including, without 4 limitation, the acceleration of this Note (and if this Note has already been accelerated, the holder will, immediately upon becoming aware of the occurrence of such Blockage Event, reverse such acceleration), the commencement of any foreclosure on any lien or security interest, the filing of any petition in bankruptcy or the taking advantage of any other insolvency law of any jurisdiction, unless and until the Superior Debt shall have been fully and finally paid (whether in cash or such other form of consideration acceptable to the holders of Superior Debt in their sole discretion) and satisfied, unless one or more of the holders of the Superior Debt shall have commenced any action or taken any judicial action to enforce their rights as provided in their respective agreements relating to, or instruments evidencing, their Superior Debt in connection with an Insolvency Event (other than an action to dismiss a proceeding commenced against the Company). Notwithstanding the foregoing or any permissible action taken by the Holder, the Holder shall not be entitled to receive any payment in contravention of the other provisions of this paragraph 3, including, without limitation, subparagraphs 3(b), 3(c) and 3(f). Notwithstanding anything to the contrary in this subparagraph 3(h), the Holder may take such steps as are necessary to avoid a loss of its rights as a result of the running of any applicable statute of limitations or any other statute or rule which limits the time for filing claims, or making proofs of claims, or would otherwise cause a claim to be time-barred. (i) If any payment or distribution to which the Holder would otherwise have been entitled but for the provisions of this paragraph 3 shall have been applied, pursuant to the provisions of this paragraph 3, to the payment of the Superior Debt, then in such case and to such extent, the Holder (x) shall be entitled to receive from the holders of Superior Debt then outstanding any payments or distributions received by such Persons in excess of the amount sufficient to pay all of the Superior Debt in full (whether or not then due and whether such payment was in cash or such other form of consideration acceptable to the holders of Superior Debt in their sole discretion), (y) following payment in full of the Superior Debt (whether in cash or such other form of consideration acceptable to the holders of Superior Debt in their sole discretion), shall be entitled to receive any and all further payments or distributions applicable to the Superior Debt, and (z) following payment in full of the Superior Debt (whether in cash or such other form of consideration acceptable to the holders of Superior Debt in their sole discretion), shall be subrogated to the rights of the holders of Superior Debt to receive distributions applicable to the Superior Debt, in each case until this Note shall have been paid in full. If the Holder has been subrogated 5 of the holders of Superior Debt to receive distributions applicable to the Superior Debt, in each case until this Note shall have been paid in full. If the Holder has been subrogated to the rights of the holders of Superior Debt due to the operation of this subparagraph 3(i), the Company agrees to take all such actions as are reasonably requested by such Person in order to cause such Person to be able to obtain payments from the Company with respect to such subrogation rights as soon as possible. (j) The provisions of this paragraph 3 are solely for the purpose of defining the relative rights of the holders of Superior Debt, on the one hand, and the Holder on the other, against the Company and its assets, and nothing herein is intended to or shall impair, as between the Company and the Holder, the obligations of the Company which are absolute and unconditional, to pay to the Holder the principal and interest on this Note as and when they become due and payable in accordance with their terms, or is intended to or will affect the relative rights of the Holder and creditors of the Company other than the holders of Superior Debt, nor, except as provided in this paragraph 3, will anything herein or therein prevent the Holder from exercising all remedies otherwise permitted by applicable law upon default under this Note, subject to the rights, if any, under this paragraph 3 of the holders of Superior Debt in respect of cash, property or securities of the Company received upon the exercise of any such remedy and subject to this paragraph 3. 4. EVENTS OF DEFAULT. (a) DEFINITION. For purposes of this Note, an "Event of Default" shall be deemed to have occurred if: (i) the Company shall default in the payment of (A) principal of this Note on the date when due, whether at maturity, by acceleration or otherwise, or (B) the portion of the interest on this Note which is permitted to be paid pursuant to paragraph 3(c) above within 5 days of the date when due; or (ii) an Insolvency Event occurs with respect to the Company. (b) CONSEQUENCES OF EVENTS OF DEFAULT. The provisions of this paragraph 4(b) are expressly subject to paragraph 3 hereof. (i) If an Event of Default of the type described in clause (i) of subparagraph 4(a) has occurred and is continuing, the Holder may declare all or any portion of the outstanding principal amount of this Note due and 6 payable and demand immediate payment of all or any portion of the outstanding principal amount of this Note. If the Holder demands immediate payment of all or any portion of this Note, the Company shall immediately pay to such Holder the principal amount of this Note requested to be paid together with all accrued and unpaid interest thereon. (ii) If an Event of Default of the type described in clause (ii) of subparagraph 4(a) has occurred, all of the outstanding principal amount of this Note shall automatically be immediately due and payable without any notice or other action on the part of the Holder. (iii) Upon the occurrence of an Event of Default, the Holder shall also have any other rights which such Person may have been afforded by the Company under any contract or agreement at any time and any other rights which such Person may have pursuant to applicable law. 5. CHANGE IN OWNERSHIP. Upon a Change in Control, the Company will pay to the Holder the principal amount of this Note then outstanding together with all accrued and unpaid interest thereon. The term "Change in Control" shall have the meaning set forth for such term in the Senior Loan Agreement. 6. TRANSFER RESTRICTIONS. This Note has not been registered under the Securities Act or any comparable state securities law. If the Holder desires to transfer this Note, such Person first must furnish the Company with (i) a written opinion in form and substance reasonably satisfactory to the Company from counsel reasonably satisfactory to the Company to the effect that the Holder may transfer this Note as desired without registration under the Securities Act or any relevant state securities law and (ii) a written undertaking executed by the desired transferee in form and substance reasonably satisfactory to the Company agreeing to be bound by all of the provisions of this Note, including, without limitation, the subordination provisions set forth in paragraph 3 hereof. 7. AMENDMENT AND WAIVER. Except as otherwise expressly provided herein, the provisions of this Note may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Majority Holders. 8. CANCELLATION. After all principal and accrued interest at any time owed on this Note has been paid in full, this Note shall be surrendered to the Company for cancellation and shall not be reissued. 7 9. PLACE OF PAYMENT: NOTICES. Payments of principal and interest and any notice hereunder are to be delivered to the Holder at the following address: John M. Brasch 12093 E. Gold Dust Avenue Scottsdale, AZ 85259 or to such other address as specified in a written notice delivered to the Company by Holder. Notices sent by the Company shall be deemed received when delivered personally or one (1) day after being sent by Federal Express or other overnight carrier or three (3) days after being sent by certified or registered mail. 10. GOVERNING LAWS. The validity, construction, and interpretation of this Note will be governed by the internal laws, and not the laws of conflicts, of the State of Delaware. 11. DEFINITIONS. Unless otherwise indicated herein, capitalized terms used in this Note shall have the meanings given such terms in the Purchase Agreement. "Excess Cash Flow" shall have the meaning assigned to such term in the Senior Loan Agreement. "Indebtedness" shall mean, with respect to any Person at a particular time, without duplication, (a) indebtedness for borrowed money or for the deferred purchase price of property or services in respect of which such Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other current liabilities incurred in the ordinary course of business) or any commitment by which such Person assures a creditor against loss, including contingent reimbursement obligations with respect to letters of credit, (b) indebtedness guaranteed in any manner by such Person, including guarantees in the form of an agreement to repurchase or reimburse, (c) obligations under capitalized leases in respect of which obligations such Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person assures a creditor against loss and (d) any unsatisfied obligation of such Person for "withdrawal liability" to a "multiemployer plan" as such terms are defined under ERISA. "Insolvency Event" means any of the occurrences referred to in Sections 12.01(e) and (f) of the Senior Loan Agreement. "Majority Holders" means the holders of Notes representing a majority of the principal amount then outstanding under all of the Notes. 8 "Notes" means all of the notes issued pursuant to the Purchase Agreement, the other Executive Stock Agreements between the Company and certain members of the management of the Company and its Subsidiaries and the Purchase Agreement dated as of July 22, 1993 between the Company and Citicorp Venture Capital Ltd. "Person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a governmental entity or any department or agency thereof. "Securities Act" means the Securities Act of 1933, as amended. "Senior Loan Agreement" means that certain Financing and Security Agreement, dated as July 22, 1993, by and among the Company and its Subsidiaries and The CIT Group/Business Credit, Inc., as amended from time to time. "Subsidiary" shall mean any Person which the Company has the direct or indirect right to control, direct or cause direction of management and policies of, whether through the ownership of voting securities, by contract or otherwise. "Superior Debt" means all Indebtedness incurred by the Company and its Subsidiaries from time to time which is not by its terms expressly subordinate to the Notes. "Superior Debt Agreement" means any agreement relating to, or instrument evidencing, any Superior Debt. * * * * * IN WITNESS WHEREOF, the Company has executed and delivered this Note on the _____ day of __________ , 1996. THE TRIUMPH GROUP HOLDINGS, INC. By:____________________________ 9 ANNEX A ______________, 1995 ELECTION TO INCLUDE STOCK IN GROSS INCOME PURSUANT TO SECTION 83(b) OF THE INTERNAL REVENUE CODE The undersigned purchased shares of Common Stock, par value $.001 per share (the "Shares"), of The Triumph Group Holdings, Inc. (the "Company") on ______________, 1995. Under certain circumstances, the Company has the right to repurchase the Shares at cost or book value from the undersigned (or from the holder of the Shares, if different from the undersigned) should the undersigned cease to be employed by the Company and its subsidiaries. Hence, the Shares are subject to a substantial risk of forfeiture and are non-transferable. The undersigned desires to make an election to have the Shares taxed under the provision of Code Section 83(b) at the time he purchased the Shares. Therefore, pursuant to Code Section 83(b) and Treasury Regulation Section 1.83-2 promulgated thereunder, the undersigned hereby makes an election, with respect to the Shares (described below), to report as taxable income for calendar year 1995 the excess (if any) of the Shares' fair market value on _____________, 1995 over the purchase price thereof. The following information is supplied in accordance with Treasury Regulation Section 1.83-2(e): 1. The name, address and social security number of the undersigned: John M. Brasch 12093 East Gold Dust Avenue Scottsdale, Arizona 85259 S.S.#: 2. A description of the property with respect to which the election is being made: 400 shares of The Triumph Group Holdings, Inc. Common Stock, par value $.001 per share. 3. The date on which the property was transferred: ________________, 1995. The taxable year for which such election is made: calendar 1995. 4. The restrictions to which the property is subject: If before May 9, 2000, the undersigned ceases to be employed by the Company or any of its subsidiaries, the unvested portion of the Shares will be subject to repurchase by the Company at the lesser of cost or book value, and at any time prior to a public offering by the Company or a sale of the company the undersigned ceases to be employed by the Company or any of its subsidiaries, the vested portion of the Shares will be subject to repurchase by the Company at book value. One-fifth of the Shares will become vested shares on May 9 of each year commencing on May 9, 1996, subject to acceleration in certain circumstances. 5. The fair market value on ____________, 1995 of the property with respect to which the election is being made, determined without regard to any lapse restrictions: $___________ per share of Common Stock. 6. The amount paid for such property: $52.325 per share of Common Stock. A copy of this election has been furnished to the Secretary of the Company pursuant to Treasury Regulations Section 1.83-2(e)(7). Dated: ________________, 1995 _______________________ John M. Brasch 2 EX-11.1 20 EX-11.1 THE TRIUMPH GROUP HOLDINGS, INC. STATEMENT OF COMPUTATION OF EARNINGS PER SHARE FOR EACH OF THE THREE MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended June 30, ------------------------- 1995 1996 ---------- ---------- EARNINGS PER SHARE: Weighted Average Number of Outstanding Common Shares 5,850,455 5,804,955 Dilutive Effect of Outstanding Warrant 649,994 649,994 Dilutive Effect of Options Issued Within One Year of Filing At a Price Below the Estimated IPO Price 35,590 35,590 Dilutive Effect of the Conversion of the Minority Interest in Triumph Controls, Inc. 62,534 62,534 Conversion of Preferred Stock 278,068 320,717 Conversion of 14% Junior Subordinated Promissory Notes 546,892 624,852 ---------- ---------- Weighted Average Number of Outstanding Common Shares and Common Share Equivalents 7,423,532 7,498,642 ---------- ---------- ---------- ---------- Income From Continuing Operations $ 1,014 $ 1,792 Interest related to 14% Junior Subordinated Promissory Notes 271 313 Income Tax Effect (108) (125) ---------- ---------- Income from Continuing Operations Available to Common Shareholders 1,177 1,980 (Loss)/Income from Discontinued Operations 109 -- ---------- ---------- Net Income Available to Common Shareholders $ 1,286 $ 1,980 ---------- ---------- ---------- ---------- Earnings per Share Continuing Operations $ 0.16 $ 0.26 Discontinued Operations 0.01 -- ---------- ---------- Total $ 0.17 $ 0.26 ---------- ---------- ---------- ----------
THE TRIUMPH GROUP HOLDINGS, INC. STATEMENT OF COMPUTATION OF EARNINGS PER SHARE FOR EACH OF THE TWO YEARS ENDED MARCH 31, 1996 AND THE TEN MONTHS ENDED MARCH 31, 1994 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Ten Months Ended Years Ended March 31, March 31, --------------------------------------------- 1994 1995 1996 ----------- ------------ ----------- EARNINGS PER SHARE: Weighted Average Number of Outstanding Common Shares 5,804,955 5,843,955 5,850,455 Dilutive Effect of Outstanding Warrant 649,994 649,994 649,994 Dilutive Effect of Options Issued Within One Year of Filing At a Price Below the Estimated IPO Price 35,590 35,590 35,590 Dilutive Effect of the Conversion of the Minority Interest in Triumph Controls, Inc. 62,534 62,534 62,534 Conversion of Preferred Stock 232,890 268,401 309,496 Conversion of 14% Junior Subordinated Promissory Notes 459,738 526,588 607,681 ----------- ------------ ----------- Weighted Average Number of Outstanding Common Shares and Common Share Equivalents 7,245,700 7,387,062 7,515,750 ----------- ------------ ----------- ----------- ------------ ----------- Income From Continuing Operations $ 4,908 $ 4,364 $ 5,194 Interest related to 14% Junior Subordinated Promissory Notes 614 993 1,146 Income Tax Effect (246) (397) (458) ----------- ------------ ----------- Income from Continuing Operations Available to Common Shareholders 5,276 4,960 5,882 (Loss)/Income from Discontinued Operations (462) (2,852) 4,496 ----------- ------------ ----------- Net Income Available to Common Shareholders $ 4,814 $ 2,108 $ 10,378 ----------- ------------ ----------- ----------- ------------ ----------- Earnings per Share Continuing Operations $ 0.72 $ 0.67 $ 0.78 Discontinued Operations (0.06) (0.39) 0.60 ----------- ------------ ----------- Total $ 0.66 $ 0.29 $ 1.38 ----------- ------------ ----------- ----------- ------------ ----------- ----------- ------------ -----------
EX-21.1 21 EXHIBIT 21.1 271118.001(B&F) Exhibit 21.1 SUBSIDIARIES OF THE REGISTRANT Triumph Group Holdings, Inc. The Triumph Group Operations, Inc. Aerospace Technologies, Inc. Kilroy Structural Steel Co. Kilroy Steel, Inc. Triumph Controls, Inc. Advanced Materials Technologies Inc. Special Processes of Arizona, Inc. EX-23.1 22 EX-23.1 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 July 5, 1996 (except Note 12, as to which the date is July 31, 1996), with respect to the financial statements of Advanced Materials Technologies, Inc. included in the Registration Statement (Form S-1 No. _________) and related Prospectus of Triumph Group, Inc. for the registration of 2,500,000 shares of its common stock. /s/ Ernst & Young LLP Phoenix, Arizona August 22, 1996 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 August 22, 1996, in the Registration Statement (Form S-1 No. _________) and related Prospectus of Triumph Group, Inc. (formerly The Triumph Group Holdings, Inc.) for the registration of 2,500,000 shares of its common stock. /s/ Ernst & Young LLP Philadelphia, Pennsylvania August 22, 1996 EX-23.2 23 EX-23.2 Consent of Independent Accountants We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-1 of our report dated June 25, 1996, relating to the financial statements of North Wales Controls and Quadrants Group, a division of Teleflex Incorporated, which appears in such Prospectus. We also consent to the reference to us under the heading "Experts" in such Prospectus. PRICE WATERHOUSE LLP Philadelphia, PA August 21, 1996 EX-27 24 EXHIBIT 27 FDS
5 1,000 YEAR 3-MOS MAR-31-1996 MAR-31-1996 APR-01-1995 APR-01-1996 MAR-31-1996 JUN-30-1996 539 430 0 0 30,653 33,097 973 1,011 45,098 48,295 105,282 86,646 43,270 44,146 6,718 7,705 161,406 142,297 44,903 37,038 89,963 76,261 2,652 2,854 0 0 6 6 15,059 16,661 161,406 142,297 186,774 55,184 186,774 55,184 139,740 39,146 170,563 49,837 0 0 0 0 7,318 2,286 8,893 3,061 3,699 1,252 5,194 1,809 4,496 0 0 0 0 0 9,690 1,809 1.38 0.26 1.38 0.26
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