-----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, GXrbWXvGehnwc5C6rEtaVh8ugu2zb3HsveQqRJ+ojz5hPaCx11jESml7PSPdnvP6 re0UjVkEOAAfRGcdl2mhFQ== 0000912057-02-025899.txt : 20020628 0000912057-02-025899.hdr.sgml : 20020628 20020628171510 ACCESSION NUMBER: 0000912057-02-025899 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 30 FILED AS OF DATE: 20020628 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZMP INC CENTRAL INDEX KEY: 0001084401 IRS NUMBER: 133733378 STATE OF INCORPORATION: CA FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-91574-03 FILM NUMBER: 02692160 BUSINESS ADDRESS: STREET 1: 8233 IMPERIAL DRIVE CITY: WACO STATE: TX ZIP: 76712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADAMS RITE AEROSPACE INC CENTRAL INDEX KEY: 0001084402 IRS NUMBER: 133733378 STATE OF INCORPORATION: CA FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-91574-04 FILM NUMBER: 02692161 BUSINESS ADDRESS: STREET 1: 8233 IMPERIAL DRIVE CITY: WACO STATE: TX ZIP: 76712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHRISTIE ELECTRIC CORP CENTRAL INDEX KEY: 0001121750 IRS NUMBER: 950987760 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-91574-02 FILM NUMBER: 02692159 BUSINESS ADDRESS: STREET 1: 8301 IMPERIAL DR. CITY: WACO STATE: TX ZIP: 76712-6588 MAIL ADDRESS: STREET 1: 8301 IMPERIAL DR CITY: WACO STATE: TX ZIP: 76712-6588 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHAMPION AEROSPACE INC CENTRAL INDEX KEY: 0001142160 IRS NUMBER: 582623644 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-91574-05 FILM NUMBER: 02692163 BUSINESS ADDRESS: STREET 1: 26380 CURTISS WRIGHT PARKWAY CITY: RICHMOND HEIGHTS STATE: OH ZIP: 44143 BUSINESS PHONE: 2162898900 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSDIGM INC CENTRAL INDEX KEY: 0001077670 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT PART & AUXILIARY EQUIPMENT, NEC [3728] STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-91574 FILM NUMBER: 02692157 BUSINESS ADDRESS: STREET 1: 8233 IMPERIAL DRIVE CITY: WACO STATE: TX ZIP: 76712 BUSINESS PHONE: 2547760650 MAIL ADDRESS: STREET 1: 8233 IMPERIAL DRIVE CITY: WACO STATE: TX ZIP: 76712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARATHON POWER TECHNOLOGIES CO CENTRAL INDEX KEY: 0001077673 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT PART & AUXILIARY EQUIPMENT, NEC [3728] STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-91574-01 FILM NUMBER: 02692158 BUSINESS ADDRESS: STREET 1: 8233 IMPERIAL DRIVE CITY: WACO STATE: TX ZIP: 76712 BUSINESS PHONE: 2547760650 MAIL ADDRESS: STREET 1: 8233 IMPERIAL DRIVE CITY: WACO STATE: TX ZIP: 76712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSDIGM HOLDING CO CENTRAL INDEX KEY: 0001077672 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT PART & AUXILIARY EQUIPMENT, NEC [3728] STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-91574-06 FILM NUMBER: 02692164 BUSINESS ADDRESS: STREET 1: 8233 IMPERIAL DRIVE CITY: WACO STATE: TX ZIP: 76712 BUSINESS PHONE: 2547760650 MAIL ADDRESS: STREET 1: 8233 IMPERIAL DRIVE CITY: WACO STATE: TX ZIP: 76712 S-4 1 a2082596zs-4.txt S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 28, 2002 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------------------------- TRANSDIGM INC. TRANSDIGM HOLDING COMPANY SUBSIDIARY GUARANTORS LISTED ON SCHEDULE A HERETO (Exact names of co-registrants as specified in their charters) ---------------------------------- TRANSDIGM INC. TRANSDIGM HOLDING COMPANY DELAWARE 3728 DELAWARE (State or other jurisdiction of (Primary Standard (State or other jurisdiction of incorporation or organization) Industrial incorporation or organization) Classification Code Number) 34-1750032 13-3733378 (I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
---------------------------------- 26380 CURTISS WRIGHT PARKWAY RICHMOND HEIGHTS, OHIO 44143 (216) 289-4939 (Address, including zip code, and telephone number, including area code, of TransDigm Inc. and TransDigm Holding Company's principal executive offices) ---------------------------------- GREGORY RUFUS VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND ASSISTANT SECRETARY TRANSDIGM INC. 26380 CURTISS WRIGHT PARKWAY RICHMOND HEIGHTS, OHIO 44143 (216) 289-4939 (Name, address, including zip code, and telephone number, including area code, of agent for service) ---------------------------------- COPIES TO: KIRK A. DAVENPORT II, ESQ. LATHAM & WATKINS 885 THIRD AVENUE SUITE 1000 NEW YORK, NEW YORK 10022 (212) 906-1200 ---------------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED EXCHANGE OFFER: 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 in connection with the formation of a holding company and there is compliance with General Instruction G, 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, 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(d) 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. / / ---------------------------------- CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE(1) 10 3/8% Senior Subordinated Notes due 2008(2).................................... $75,000,000 102.675% $77,006,250 $7,085 Guarantees of the 10 3/8% Senior Subordinated Notes due 2008(3).......................... $75,000,000 N/A N/A N/A
(1) The registration fee has been calculated pursuant to Rule 457(f)(2) under the Securities Act of 1933 and reflects the book value of the notes as of June 28, 2002. The Proposed Maximum Aggregate Offering Price is estimated solely for the purpose of calculating the registration fee. (2) The 10 3/8% Senior Subordinated Notes due 2008 will be the obligations of TransDigm Inc. (3) Each of TransDigm Holding Company, ZMP, Inc., Adams Rite Aerospace, Inc., Marathon Power Technologies Company, Christie Electric Corp. and Champion Aerospace Inc. will guarantee on an unconditional basis the obligations of TransDigm Inc. under the 10 3/8% Senior Subordinated Notes due 2008. The guarantees are not traded separately. Pursuant to Rule 457(n), no additional registration fee is due in respect of the guarantees. ---------------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCHEDULE A CHAMPION AEROSPACE INC. ZMP, INC. (Exact name of registrant as specified in its (Exact name of registrant as specified in its charter) charter) DELAWARE CALIFORNIA (State or other jurisdiction of incorporation or (State or other jurisdiction of incorporation or organization) organization) 3722 3728 (Primary Standard Industrial Classification Code (Primary Standard Industrial Classification Code Number) Number) 58-2623644 95-4056651 (I.R.S. Employer Identification Number) (I.R.S. Employer Identification Number) 1230 OLD NORRIS ROAD 4141 NORTH PALM STREET LIBERTY, SC 29657 FULLERTON, CA 92635 (864) 843-1162 (714) 278-6500 (Address, including zip code, and (Address, including zip code, and telephone number, including area code, telephone number, including area code, of registrants principal executive offices) of registrants principal executive offices)
ADAMS RITE AEROSPACE, INC. CHRISTIE ELECTRIC CORP. (Exact name of registrant as specified in its (Exact name of registrant as specified in its charter) charter) CALIFORNIA CALIFORNIA (State or other jurisdiction of incorporation (State or other jurisdiction of incorporation or organization) or organization) 3728 3629 (Primary Standard Industrial Classification (Primary Standard Industrial Classification Code Number) Code Number) 95-4056812 95-0987760 (I.R.S. Employer Identification Number) (I.R.S. Employer Identification Number) 4141 NORTH PALM STREET 8301 IMPERIAL DRIVE FULLERTON, CA 92835 WACO, TX 76712 (714) 278-6500 (254) 776-0650 (Address, including zip code, and (Address, including zip code, and telephone number, including area code, telephone number, including area code, of registrants principal executive offices) of registrants principal executive offices)
MARATHON POWER TECHNOLOGIES COMPANY (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 3691 (Primary Standard Industrial Classification Code Number) 74-2707437 8301 IMPERIAL DRIVE WACO, TX 76712 (254) 776-0650 (Address, including zip code, and telephone number, including area code, of registrants principal executive offices) SUBJECT TO COMPLETION, DATED JUNE 28, 2002. PROSPECTUS THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. TRANSDIGM INC. OFFER TO EXCHANGE $75,000,000 PRINCIPAL AMOUNT OF ITS 10 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, FOR ANY AND ALL OF ITS OUTSTANDING 10 3/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2008. ------------------ We are offering to exchange our registered 10 3/8% Series B Senior Subordinated Notes due 2008, which we refer to as the "exchange notes," for all of our outstanding 10 3/8% Series A Senior Subordinated Notes due 2008 that were issued on June 7, 2002, which we refer to as "old notes." We refer to the old notes and the exchange notes collectively as the "notes." The terms of the exchange notes are identical to the terms of the old notes, except that the exchange notes have been registered under the federal securities laws and, therefore, are freely transferable. The exchange notes will represent the same debt as the old notes, and we will issue the exchange notes under the same indenture. PLEASE CONSIDER THE FOLLOWING: Our offer to exchange old notes for exchange notes will be open until 5:00 p.m., New York City time, on , 2002, unless we extend the offer. You should carefully review the procedures for tendering old notes beginning on page 24 of this prospectus. If you fail to tender your old notes, you will continue to hold unregistered securities and your ability to transfer them could be adversely affected. No public market currently exists for the notes. We do not intend to apply for listing of the exchange notes on any securities exchange or automated quotation system and, therefore, no active public market is anticipated. Broker-dealers receiving exchange notes in exchange for old notes acquired for their own account though market-making or other trading activities must deliver a prospectus in any resale of the exchange notes. INFORMATION ABOUT THE NOTES: The notes will mature on December 1, 2008. We will pay interest on the notes semi-annually in arrears on June 1 and December 1 of each year at the rate of 10 3/8% per annum. We may redeem the notes on or after December 1, 2003 at the rates set forth in this prospectus. The notes are unsecured obligations and are subordinated to all of the existing and future senior indebtedness and other liabilities of the guarantors and us. If we undergo a change of control or sell some of our assets, we may be required to offer to purchase notes from you. -------------------------- YOU SHOULD CAREFULLY REVIEW THE RISK FACTORS BEGINNING ON PAGE 14 OF THIS PROSPECTUS. -------------------------- Neither the U.S. Securities and Exchange Commission nor any other federal or state agency has approved or disapproved of the exchange notes, nor have any of these organizations determined that this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. THE DATE OF THIS PROSPECTUS IS , 2002. Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal delivered with this prospectus states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for old notes where such old notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of up to 195 days after the effectiveness of the exchange offer registration statement, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." ------------------------ TABLE OF CONTENTS
PAGE -------- WHERE YOU CAN FIND MORE INFORMATION......................... ii FORWARD-LOOKING STATEMENTS.................................. ii PROSPECTUS SUMMARY.......................................... 1 RISK FACTORS................................................ 14 THE EXCHANGE OFFER.......................................... 24 USE OF PROCEEDS............................................. 33 CAPITALIZATION.............................................. 34 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION...... 35 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA............. 43 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................. 45 BUSINESS.................................................... 56 MANAGEMENT.................................................. 65 PRINCIPAL STOCKHOLDERS...................................... 72 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 74 DESCRIPTION OF OTHER INDEBTEDNESS........................... 75 DESCRIPTION OF THE EXCHANGE NOTES........................... 78 BOOK-ENTRY; DELIVERY AND FORM............................... 116 PLAN OF DISTRIBUTION........................................ 118 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES....... 119 EXPERTS..................................................... 124 LEGAL MATTERS............................................... 124 INDEX TO FINANCIAL STATEMENTS............................... F-1
i WHERE YOU CAN FIND MORE INFORMATION We have filed with the U.S. Securities and Exchange Commission, which we refer to as the "Commission," a registration statement on Form S-4, which we refer to as the "exchange offer registration statement," which term shall encompass all amendments, exhibits, annexes and schedules thereto, pursuant to the Securities Act of 1933 and the rules and regulations thereunder, which we refer to collectively as the Securities Act, covering the exchange notes being offered. As allowed by the Commission's rules, this prospectus does not contain all the information you can find in the exchange offer registration statement. For further information with respect to us and the exchange offer, reference is made to the exchange offer registration statement. Statements made in this prospectus as to the contents of any contract, agreement or other documents referred to are not necessarily complete. For a more complete understanding and description of each contract, agreement or other document filed as an exhibit to the exchange offer registration statement, we encourage you to read the documents contained in the exhibits. This information is available free of charge to any holders of securities of TransDigm upon written or oral request to Gregory Rufus, TransDigm Inc., 26380 Curtiss Wright Parkway, Richmond Heights, OH, 44143, telephone: (216) 289-4939. In order to obtain timely delivery of such documents, holders must request this information no later than five business days prior to the expiration date of the exchange offer for the notes. We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. In accordance with the Exchange Act, we file annual, quarterly and special reports, proxy statements and other information with the Commission. These documents and other information can be inspected and copied at the public reference rooms that the Commission maintains at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a website at HTTP://WWW.SEC.GOV, which contains reports and other information regarding registrants that file electronically with the Commission. Copies of these materials can be obtained at prescribed rates from the Public Reference Section of the Commission at the principal offices of the Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. WE HAVE NOT AUTHORIZED ANY DEALER, SALESMAN OR OTHER PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IF YOU ARE GIVEN ANY INFORMATION OR REPRESENTATIONS THAT ARE NOT DISCUSSED HEREIN, YOU MUST NOT RELY ON THAT INFORMATION OR REPRESENTATION. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES, NOR DOES THIS PROSPECTUS CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CURRENT ONLY AS OF THE DATE ON THE COVER PAGE OF THIS PROSPECTUS AND MAY CHANGE AFTER THAT DATE. THE DELIVERY OF THIS PROSPECTUS DOES NOT, UNDER ANY CIRCUMSTANCES, MEAN THAT THERE HAS BEEN A CHANGE IN OUR AFFAIRS SINCE THE DATE HEREOF. IT ALSO DOES NOT MEAN THAT THE INFORMATION IN THIS PROSPECTUS IS CORRECT AFTER THIS DATE. FORWARD-LOOKING STATEMENTS This prospectus contains both historical and "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Although we believe that such statements are based on reasonable assumptions, these forward-looking statements are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected. Potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements, including the factors described under the heading "Risk Factors," and are cautioned not to place undue reliance on these forward-looking ii statements. The factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected include, among others, the following: - the impact of general economic conditions in the regions in which we do business; - general industry conditions, including competition and product, raw material and energy prices; - changes in exchange rates and currency values; - capital expenditure requirements; - access to capital markets; and - other factors described in this prospectus. Our actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking statements. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus. We undertake no obligation to publicly update these forward-looking statements to reflect new information, future events or otherwise. iii PROSPECTUS SUMMARY IN THIS PROSPECTUS, THE WORDS "TRANSDIGM," "WE," "US" AND "OUR" REFER TO TRANSDIGM INC., THE ISSUER OF THE NOTES, AND OUR SUBSIDIARIES UNLESS THE CONTEXT OTHERWISE INDICATES. THE TERM "HOLDINGS" REFERS TO TRANSDIGM HOLDING COMPANY, THE PARENT HOLDING COMPANY OF TRANSDIGM, WHICH HAS NO ASSETS OTHER THAN THE CAPITAL STOCK OF TRANSDIGM. THE TERM "CHAMPION AEROSPACE" REFERS TO CHAMPION AVIATION PRODUCTS, A DIVISION OF FEDERAL MOGUL IGNITION COMPANY THAT WE ACQUIRED ON MAY 31, 2001. "THE TERM "PRO FORMA," WHEN USED TO DESCRIBE OUR OPERATIONS, REFERS TO OUR OPERATIONS AFTER GIVING EFFECT TO OUR ACQUISITION OF CHAMPION AEROSPACE AND, WHERE RELEVANT, THE OFFERING OF THE OLD NOTES, AS THOUGH THOSE TRANSACTIONS HAD OCCURRED AT THE BEGINNING OF THE REFERENCED PERIOD. THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS, BUT DOES NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO YOU. THIS PROSPECTUS INCLUDES SPECIFIC TERMS OF THE EXCHANGE OFFER, AS WELL AS INFORMATION REGARDING OUR BUSINESS AND DETAILED FINANCIAL DATA. WE ENCOURAGE YOU TO READ THE DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS AND THE DOCUMENTS WE HAVE REFERRED YOU TO. OVERVIEW We are a leading supplier of highly engineered aircraft components for use on nearly all commercial and military aircraft. Most of our products share three common characteristics: (1) highly engineered and proprietary; (2) significant aftermarket content; and (3) large shares of niche markets. We sell our products to commercial airlines, aircraft maintenance facilities, aircraft and aircraft system original equipment manufacturers, or OEMs, and various agencies of the United States and foreign governments. We generate the majority of our EBITDA from sales of replacement parts in the commercial and defense aftermarkets. Most of our OEM sales are on an exclusive sole source basis; therefore, in most cases, we are the only certified provider of these parts in the aftermarket. Aftermarket parts sales are driven by the size of the worldwide aircraft fleet, are relatively stable and generate recurring revenues over the life of an aircraft that are many times the size of the original OEM purchases. We have over 40 years of experience in most of our product lines, which allows us to benefit from a large and growing installed base of aircraft. For the twelve months ended March 30, 2002, we generated pro forma net sales, operating income and EBITDA, As Defined, of $252.3 million, $70.9 million and $90.2 million, respectively. We focus our businesses on continual value creation. Our business philosophy is centered around three value principles: (1) obtaining profitable new business by applying our technical capabilities to specific engineering problems; (2) striving to continually improve productivity; and (3) pricing our product to fairly reflect the unique value provided. Additionally, we continually seek acquisition opportunities compatible with our value creation philosophy. We have a demonstrated capability to acquire, integrate and improve aerospace businesses. We differentiate ourselves based on our engineering and manufacturing capabilities, and typically will not bid on non-proprietary "build to print" business. Our products have strong brand names within the airline industry and a reputation for high quality, reliability and customer service. We focus on developing highly customized products to solve specific problems of aircraft operators and manufacturers. While aftermarket sales accounted for approximately 60% of our fiscal 2001 pro forma net sales and OEM sales accounted for the remaining 40%, aftermarket sales typically carry a substantially higher gross margin than sales to OEMs. OUR PRODUCTS Our products have a long history in the aircraft component industry and are found on virtually all types of commercial and military aircraft. We estimate that approximately 75% of our net sales are derived from products for which we have achieved sole source designation, and that over 90% of our net sales are derived from products of proprietary design. Our products are organized into two groupings: power system components and airframe system components. 1 Power system components generated 53% of our reported net sales (63% of pro forma net sales) in fiscal 2001 and primarily serve the power requirements of commercial and military aircraft. Our major customers for these products include substantially all worldwide engine/auxiliary power unit, or APU, end users such as American Airlines, British Airways, Delta, Air France, and Lufthansa and engine/APU OEMs such as General Electric, United Technologies, Rolls Royce and Honeywell; regional and business jet end users such as Comair, Mesa and Continental Express, and regional and business jet OEMs such as Bombardier, Cessna, Gulfstream and Raytheon; and various United States and foreign defense agencies and OEMs such as Lockheed Martin. Our major products are ignition system components such as igniters, exciters and spark plugs, used to start and restart turbine and reciprocating aircraft engines; gear pumps used primarily in lubrication and fuel applications; mechanical/electromechanical controls used in numerous actuation applications and batteries/chargers used to provide starting and back-up power. Airframe system components generated 47% of our reported net sales (37% of pro forma net sales) in fiscal 2001 and primarily serve the requirements of various airframe systems used in commercial and military aircraft. Our major customers for these products are the worldwide large commercial transport end users and OEMs such as Boeing and Airbus; the regional and business jet end users and OEMs mentioned above, and the various United States and foreign defense agencies and OEMs. Our major products are engineered connectors used in fuel, pneumatic and hydraulic applications; engineered latches used in various bin, door and other applications on both the interior and exterior of the airframe; and lavatory hardware and components. COMPETITIVE STRENGTHS We believe our key competitive strengths are: - LARGE INSTALLED PRODUCT BASE AND RECURRING REVENUE STREAM. We estimate that approximately 75% of our net sales are derived from products for which we have achieved sole source designation, and that over 90% of our net sales are derived from products of proprietary design. As a result, we have a large and growing installed base of products on large commercial transport aircraft as well as regional, business and military aircraft platforms. This installed base affords us the opportunity to capture a long-term stream of highly profitable aftermarket revenues. Over the life of an aircraft, sales of replacement parts can generate revenues many times the size of the original OEM purchases. Aftermarket sales generate most of our EBITDA because they typically carry gross margins that are significantly higher than those generated from OEM sales. - PROVEN ABILITY TO DEVELOP NEW PRODUCTS. We have a successful record of introducing solutions-oriented products. We work closely with aircraft operators and OEMs to identify their unmet needs, such as a component that fails to meet performance expectations or that requires excessive maintenance. We then utilize our engineering and design capabilities to develop a prototype for a component that increases the value of the product to the customer. After we have fulfilled rigorous testing requirements and obtained necessary regulatory approvals, the product is made available for sale in the aftermarket and to OEMs. We believe that our ability to successfully develop new products has contributed to our significant growth. - DIVERSIFIED BUSINESS MIX. Our business is diversified between sales in the aftermarket and sales to OEMs. In addition, each of these segments is further diversified among the large commercial transport, regional, business and military aircraft markets. As a result, we are not overly dependent on any one segment or platform. The large commercial transport OEM market accounted for approximately 15% of our net sales in fiscal 2001. - LEADING POSITIONS IN NICHE MARKETS. With over 40 years of experience in most of our product lines, we have well-established and highly regarded products and trade names, such as "Adel," "Wiggins," "Controlex," "Marathon" and "Champion Aerospace-Registered Trademark-," and are a leader in many of 2 our product lines. For example, Champion Aerospace-Registered Trademark- has one of the strongest brands in the aerospace industry with a 95-year history as a leader in the aircraft ignitor market. - SUCCESSFUL TRACK RECORD OF INTEGRATING ACQUISITIONS. Our experienced management team has a proven track record of consolidating operations, reducing overhead and rationalizing costs. Management has successfully integrated a number of acquisitions. In each case, management has substantially improved the operating margins through the systematic implementation of our three value generation principles. BUSINESS STRATEGY Key elements of our strategy are: - PROVIDE VALUE ADDED PRODUCTS TO CUSTOMERS. We will continue to focus on marketing and manufacturing highly engineered products to customers that place a premium on our capabilities. We have been effective in communicating to aircraft operators the value of our products in terms of cost savings generated by their greater reliability and performance, as well as reduced maintenance requirements. Our reputation for quality and sole supplier status for many parts has allowed us to capture a significant portion of the value generated by our products. We intend to continue to develop and market high value added products that provide significant benefits to our customers. - GENERATE NEW BUSINESS INITIATIVES. We have been successful in identifying and commercializing new business opportunities to drive revenue growth. We have been particularly effective in creating aftermarket opportunities by developing superior products to retrofit aircraft already in service. For example, in response to the heightened demand for security since the recent terrorist attacks, we developed a highly engineered cockpit door safety mechanism that simultaneously prevents penetration into the cockpit while providing a rapid response in the event of an emergency, such as depressurization. Airbus-Registered Trademark- recently committed to purchase these components to offer as a retrofit to the existing Airbus-Registered Trademark- fleet and to include them on all new deliveries. We intend to continue to aggressively pursue growth opportunities through our new business initiatives. - REALIZE PRODUCTIVITY SAVINGS. We will continue to focus on improving operating margins through manufacturing improvements and increases in employee productivity. We have achieved significant increases in productivity since our formation in 1993. We have rationalized our manufacturing facilities and redesigned our manufacturing and other business practices to maximize efficiency. For example, we encourage our employees through performance incentives to learn to operate multiple manufacturing stations in order to minimize overall labor costs. This initiative and others like it have enabled us to significantly increase sales without material increases in headcount. - PURSUE STRATEGIC ACQUISITIONS. We intend to pursue acquisitions where we believe that we can enhance value, reduce costs and develop new business. The aircraft component industry is highly fragmented, with many of the companies in the industry being small operators or small non-core operations of larger businesses. We believe the industry is experiencing consolidation due to customer requirements that favor more focused and sophisticated suppliers. RECENT DEVELOPMENTS The aerospace industry was hit particularly hard by the events of September 11, 2001. The immediate reduction in air traffic severely impacted the profitability of the airline industry, which began to curtail flights and stretch out or cancel airframe deliveries. Facing this expected downturn, we promptly developed a near term market forecast to use as a basis for fiscal 2002 planning. Based on this forecast, which we believed to be conservative, we implemented a series of actions to significantly 3 reduce our cost structure while maintaining our ability to respond to market dynamics and develop new business. As part of this effort, we significantly reduced our workforce in early October. It currently appears that the overall market forecast we used for planning purposes was somewhat conservative. Although we continue to experience a significant downturn in the commercial aerospace markets, air travel appears to be recovering faster than we initially anticipated and we currently expect the aftermarket sector to recover slowly over the next four to six quarters as improvements in air traffic continue. We expect commercial transport OEM production rates to continue to decline in the near term as new transport delivery schedules are canceled or extended. We also expect regional and business jet operations and production rates to be negatively impacted to a lesser degree. Military activity is difficult to predict, but based upon our broad base of applications, we anticipate a modest increase in military orders over the near term. Sales generation during the first half of fiscal year 2002 was higher than we anticipated compared to our near term market forecast immediately following September 11th. Although we expect full year fiscal 2002 net sales to be below fiscal year 2001 pro forma net sales, we now believe the results will be better than the estimates we made immediately following September 11th. In addition, as a result of our rapid cost reductions, continued productivity efforts, proprietary niche market positions and continued new business generation, we believe pro forma EBITDA, As Defined, for the twelve months ended March 30, 2002 is reasonably indicative of our expected EBITDA, As Defined, for fiscal 2002. This section includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. We cannot assure you that our current outlook will prove to be correct. See "Risk Factors." ODYSSEY INVESTMENT PARTNERS We are controlled by Odyssey Investment Partners, a private equity firm that invests in management-backed leveraged acquisitions, growth financings and recapitalizations of manufacturing, financial services and communications companies. Collectively, the principals of Odyssey have been involved in over 65 private equity transactions including Dresser Inc., Dayton Superior Corporation, TriStar Aerospace Co., Williams Scotsman, Inc., Monarch Marking Systems, Inc., Western Wireless Corp. (the former parent of VoiceStream Communications) and Independent Wireless One Corporation (a Sprint PCS affiliate). Odyssey Investment Partners is the successor firm to the private equity activities of Odyssey Partners, LP, which was founded in 1982. Its current fund has over $760 million of committed capital. On December 3, 1998, Phase II Acquisition Corp., an entity formed by affiliates of Odyssey Investment Partners, LP, and Holdings consummated a definitive agreement and plan of merger, which we refer to as the merger agreement or the merger. Pursuant to the terms of the merger, Phase II Acquisition Corp. was merged with and into Holdings, with Holdings being the surviving corporation in the merger. In connection with the merger, KIA IV-TD, LLC and Kelso Equity Partners II, LP retained approximately 15.4% of the surviving corporation's outstanding common stock. For financial reporting purposes, this merger, which we refer to as the recapitalization, was treated as a recapitalization, which had no impact on the historical basis of Holdings' consolidated assets and liabilities. ------------------------ Our executive offices are located at 26380 Curtiss Wright Parkway, Richmond Heights, Ohio 44143. Our telephone number is (216) 289-4939. 4 THE OFFERING OF THE OLD NOTES On June 7, 2002, we completed an offering of $75.0 million in aggregate principal amount of our 10 3/8% Series A Senior Subordinated Notes due 2008, which was exempt from registration under the Securities Act. We used the proceeds of the offering to repay the Tranche A facility and to ratably repay portions of Tranches B and C of our credit facility and to pay related fees and expenses. Old Notes................................. We sold the old notes to Deutsche Bank Securities Inc. and Credit Suisse First Boston Corporation, the initial purchasers, on June 7, 2002. The initial purchasers subsequently resold the old notes to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act. Registration Rights Agreement............. In connection with the sale of the old notes, we and the guarantors entered into a registration rights agreement with the initial purchasers. Under the terms of that agreement, we each agreed to: - file a registration statement for the exchange offer and the exchange notes within 70 days after the issue date of the old notes; - use our reasonable best efforts to cause the registration statement to become effective under the Securities Act within 160 days after the issue date of the old notes; - use our reasonable best efforts to consummate the exchange offer within 195 days after the issue date of the old notes, and - file a shelf registration statement for the resale of the old notes under certain circumstances and use our reasonable best efforts to cause such shelf registration statement to become effective under the Securities Act. If we do not meet one of these requirements, we must pay additional interest on the old notes until we meet the requirement. The exchange offer is being made pursuant to the registration rights agreement and is intended to satisfy the rights granted under the registration rights agreement, which rights terminate upon completion of the exchange offer.
5 THE EXCHANGE OFFER The following is a brief summary of terms of the exchange offer. For a more complete description of the exchange offer, see "The Exchange Offer." Securities Offered........................ $75,000,000 in aggregate principal amount of 10 3/8% Series B Senior Subordinated Notes due 2008. Exchange Offer............................ We are offering to exchange $1,000 principal amount of our 10 3/8% Series B Senior Subordinated Notes due 2008, which have been registered under the Securities Act, for each $1,000 principal amount of our currently outstanding 10 3/8% Series A Senior Subordinated Notes due 2008, which we refer to as the "old notes". We will accept any and all old notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on , 2002. Holders may tender some or all of their old notes pursuant to the exchange offer. However, notes may be tendered only in integral multiples of $1,000 in principal amount. The form and terms of the exchange notes are the same as the form and terms of the old notes except that: - the exchange notes have been registered under the federal securities laws and will not bear any legend restricting their transfer; - the exchange notes bear a different CUSIP number than the old notes; and - the holders of the exchange notes will not be entitled to certain rights under the registration rights agreement, including the provisions for an increase in the interest rate on the old notes in some circumstances relating to the timing of the exchange offer. See "The Exchange Offer." Together, the old notes and the exchange notes constitute an additional issuance of 10 3/8% Senior Subordinated Notes due 2008 under the indenture, dated as of December 3, 1998, as supplemented on April 23, 1999 and June 26, 2001, under which $125.0 million in aggregate principal amount of notes were previously issued, which we refer to as the "1998 notes." The exchange notes offered hereby are identical to our outstanding 1998 notes. As of the date hereof, $75.0 million in aggregate principal amount of old notes are outstanding and $125.0 million in aggregate principal amount of 1998 notes are outstanding. Transferability of Exchange Notes......... We believe that you will be able to freely transfer the exchange notes without registration or any prospectus delivery requirement so long as you may accurately make the representations listed under "The Exchange Offer-- Transferability of the Exchange Notes." If you are a broker-dealer that acquired old notes as a result of market-making or other trading activities, you must deliver a prospectus in
6 connection with any resale of the exchange notes. See "Plan of Distribution." Expiration Date........................... The exchange offer will expire at 5:00 p.m., New York City time, on , 2002, unless we decide to extend the exchange offer. Conditions to the Exchange Offer.......... The exchange offer is subject to certain customary conditions, some of which may be waived by us. See "The Exchange Offer--Conditions to the Exchange Offer." Procedure for Tendering Old Notes......... If you wish to accept the exchange offer, you must complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal, in accordance with the instructions contained in this prospectus and in the letter of transmittal. You should then mail or otherwise deliver the letter of transmittal, or facsimile, together with the old notes to be exchanged and any other required documentation, to the exchange agent at the address set forth in this prospectus and in the letter of transmittal. By executing the letter of transmittal, you will represent to us that, among other things: - you, or the person or entity receiving the related exchange notes, are acquiring the exchange notes in the ordinary course of business; - neither you nor any person or entity receiving the related exchange notes is engaging in or intends to engage in a distribution of the exchange notes within the meaning of the federal securities laws; - neither you nor any person or entity receiving the related exchange notes has an arrangement or understanding with any person or entity to participate in any distribution of the exchange notes; - neither you nor any person or entity receiving the related exchange notes is an "affiliate" of TransDigm or the guarantors, as that term is defined under Rule 405 of the Securities Act; and - you are not acting on behalf of any person or entity who could not truthfully make these statements. See "The Exchange Offer--Procedures for Tendering Old Notes" and "Plan of Distribution." Effect of Not Tendering................... Any old notes that are not tendered or that are tendered but not accepted will remain subject to the restrictions on transfer. Since the old notes have not been registered under the federal securities laws, they bear a legend restricting their transfer absent registration or the availability of a specific exemption from registration. Upon the completion of the exchange offer, we will have no further obligations, except under limited circumstances, to provide for registration of the old notes
7 under the federal securities laws. See "The Exchange Offer--Effect of Not Tendering." Interest on the Exchange Notes and the Old Notes................................... The exchange notes will bear interest from the most recent interest payment date to which interest has been paid on the old notes or, if no interest has been paid, from June 1, 2002. Interest on the old notes accepted for exchange will cease to accrue upon the issuance of the exchange notes. Withdrawal Rights......................... Tenders of old notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Federal Tax Consequences.................. There should be no federal income tax consequences to you if you exchange your old notes for exchange notes in the exchange offer. See "Certain United States Federal Income Tax Considerations." Use of Proceeds........................... We will not receive any proceeds from the issuance of exchange notes pursuant to the exchange offer. Exchange Agent............................ State Street Bank and Trust Company, the trustee under the indenture, is serving as exchange agent in connection with the exchange offer.
8 TERMS OF THE EXCHANGE NOTES The following is a brief summary of the terms of the exchange notes. The financial terms and covenants of the exchange notes are the same as the old notes. For a more complete description of the terms of the exchange notes, see "Description of the Exchange Notes." Issuer.................................... TransDigm Inc. Securities Offered........................ $75,000,000 in aggregate principal amount of 10 3/8% Series B Senior Subordinated Notes due 2008. Maturity.................................. December 1, 2008. Interest Rate............................. 10 3/8% per year. Interest Payment Dates.................... June 1 and December 1 of each year. The exchange notes will bear interest from the most recent interest payment date to which interest has been paid on the old notes or, if no interest has been paid, from June 1, 2002. Guarantees................................ Holdings, the parent holding company of TransDigm, will unconditionally guarantee the exchange notes. However, you should not rely upon the guarantee by Holdings because Holdings has no assets other than its equity interest in TransDigm. In addition, each of our domestic subsidiaries on the issue date will unconditionally guarantee the exchange notes. If we create or acquire a new domestic subsidiary, it will guarantee the exchange notes unless we designate the subsidiary as an "unrestricted subsidiary" under the indenture or the subsidiary does not have significant assets. Ranking................................... The exchange notes will be our unsecured senior subordinated obligations and will rank junior to our existing and future senior debt. The guarantees by Holdings and our subsidiaries will be subordinated to existing and future senior debt of Holdings and our subsidiaries, respectively. On a pro forma basis as of March 30, 2002, we estimate that we and our subsidiaries would have had $180.0 million of senior debt and Holdings would have had $209.3 million of senior debt, in each case, excluding approximately $30.0 million that we expect to have available to borrow under our credit facility. In addition, pursuant to the amendment to the credit facility, we are permitted to incur $150.0 million either of additional bank borrowings, which would also be senior to the exchange notes, or subordinated debt. This additional debt is permitted under the credit facility; however, there are currently no commitments to provide such funds. The exchange notes will be PARI PASSU with the 1998 notes. The guarantees of the exchange notes will be PARI PASSU with the guarantees of the 1998 notes. See "Description of the Exchange Notes--Brief Description of the Notes and the Guarantees."
9 Optional Redemption....................... We cannot redeem the exchange notes until December 1, 2003. Thereafter, we may redeem some or all of the exchange notes at the redemption prices listed in the "Description of the Exchange Notes" section under the heading "Optional Redemption," plus accrued interest. Change of Control Offer................... If we experience a change of control, we must give holders of the exchange notes the opportunity to sell us their exchange notes at 101% of their face amount, plus accrued and unpaid interest and additional interest, if any. We might not be able to pay you the required price for exchange notes you present to us at the time of a change of control, because: - we might not have enough funds at that time; or - the terms of our senior debt may prevent us from paying. See "Description of the Exchange Notes--Change of Control." Asset Sale Proceeds....................... If we engage in asset sales, we generally must either invest the net cash proceeds from such sales in our business within a period of time, repay senior debt or make an offer to purchase a principal amount of the exchange notes equal to the excess net cash proceeds. The purchase price of the exchange notes will be 100% of their principal amount, plus accrued interest. See "Description of the Exchange Notes--Certain Covenants--Limitation on Asset Sales." Certain Indenture Provisions.............. The indenture governing the exchange notes contains certain covenants limiting our (and most or all of our subsidiaries') ability to: - incur additional debt or enter into sale and leaseback transactions; - pay dividends or distributions on capital stock or repurchase capital stock; - issue stock of subsidiaries; - make certain investments; - create liens on our assets to secure debt; - enter into transactions with affiliates; - merge or consolidate with another company; and - transfer and sell assets. These covenants are subject to a number of important limitations and exceptions. See "Description of the Exchange Notes--Certain Covenants." Risk Factors.............................. Investing in the exchange notes involves substantial risks. See "Risk Factors" for a description of certain of the risks you should consider before investing in the exchange notes.
10 SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA The following table sets forth summary historical consolidated financial information of Holdings for the years ended September 30, 1999, 2000 and 2001 and for the six months ended March 30, 2002. The summary historical consolidated financial data for each of the years in the three-year period ended September 30, 2001 have been derived from Holdings' consolidated financial statements, which have been audited by Deloitte & Touche LLP, independent auditors. The summary historical consolidated financial data as of and for the six months ended March 30, 2002 have been derived from Holdings' unaudited consolidated financial statements included elsewhere in this prospectus, which in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of operations, financial position, and cash flows. The results for the six months ended March 30, 2002 are not necessarily indicative of the results that may be expected for the entire year. Separate historical financial information for TransDigm Inc. is not presented since Holdings has no operations or assets separate from its investment in TransDigm Inc. and since the exchange notes will be guaranteed by Holdings and all direct and indirect subsidiaries of TransDigm Inc. (other than two wholly-owned, non-guarantor subsidiaries that have inconsequential assets, liabilities and equity, and whose only operations are the result of intercompany activity which is immediately dividended to TransDigm Inc.). The following table also sets forth summary pro forma consolidated data for Holdings and, where indicated, TransDigm Inc., as of March 30, 2002, for the fiscal year ended September 30, 2001, for the six months ended March 30, 2002 and for the twelve months ended March 30, 2002. The pro forma data for the fiscal year ended September 30, 2001 and the twelve months ended March 30, 2002 give effect to the offering of the old notes and the Champion Aerospace acquisition as if such transactions had been consummated on October 1, 2000 and April 1, 2001, respectively. The pro forma data for the six months ended March 30, 2002 give effect to the offering of the old notes as if it had been consummated on October 1, 2001. The pro forma consolidated balance sheet data as of March 30, 2002 give effect to the offering of the old notes as if it had occurred as of March 30, 2002. The pro forma financial information is not necessarily indicative of either future results of operations or the results that might have occurred if the foregoing transactions had been consummated on the dates indicated above. We cannot assure you that assumptions used in the preparation of the pro forma financial data will prove to be correct. The Champion Aerospace acquisition was completed on May 31, 2001. We acquired ZMP, Inc. and its wholly-owned subsidiary, Adams Rite Aerospace, Inc. on April 23, 1999 and Christie Electric Corp. on March 8, 2000. On March 26, 2001, we acquired an exclusive, worldwide license to produce and sell products composed of a lubrication and scavenge pump product line along with certain related equipment and inventory. These acquisitions, as well as the Champion Aerospace acquisition, were accounted for as purchases. The results of operations of ZMP, Adams Rite, Christie, Champion Aerospace and the acquired product line are included in Holdings' consolidated financial statements from the date of each of these acquisitions. The following table should be read in conjunction with "Unaudited Pro Forma Consolidated Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of 11 Operations" and the Consolidated Historical Financial Statements and the notes thereto included elsewhere in this prospectus. All amounts are presented in thousands, except ratios.
HISTORICAL PRO FORMA ------------------------------------------------ ------------------------------------- SIX SIX TWELVE MONTHS FISCAL YEAR MONTHS MONTHS FISCAL YEAR ENDED SEPTEMBER 30, ENDED ENDED ENDED ENDED ------------------------------------ MARCH 30, SEPTEMBER 30, MARCH 30, MARCH 30, 1999 2000 2001 2002 2001 2002 2002 ---------- ---------- ---------- --------- ------------- --------- --------- STATEMENT OF OPERATIONS DATA: Net sales......................... $130,818 $150,457 $ 200,773 $117,613 $ 247,761 $117,613 $ 252,337 Gross profit...................... 60,867 68,264 82,248 53,465 99,198 53,465 104,032 Selling and administrative........ 13,620 16,799 20,669 10,475 24,152 10,475 23,642 Amortization of intangibles....... 2,063 1,843 2,966 3,167 5,201 3,167 5,853 Research and development.......... 2,139 2,308 2,943 1,372 4,285 1,372 3,613 Merger expenses................... 40,012 -- -- -- -- -- -- -------- -------- --------- -------- --------- -------- --------- Operating income(1)............... 3,033 47,314 55,670 38,451 65,560 38,451 70,924 Interest expense, net(2).......... 22,722 28,563 31,926 16,885 40,890 18,502 38,757 Pre-tax income (loss)............. (19,689) 18,751 23,744 21,566 24,670 19,949 32,167 Provision (benefit) for income taxes........................... (2,772) 7,972 9,386 9,277 9,533 8,630 13,210 -------- -------- --------- -------- --------- -------- --------- Net income (loss)................. $(16,917) $ 10,779 $ 14,358 $ 12,289 $ 15,137 $ 11,319 $ 18,957 ======== ======== ========= ======== ========= ======== ========= OTHER FINANCIAL DATA: Cash flow provided by (used in): Operating activities............ $(16,219) $ 16,305 $ 22,761 $ 25,456 $ 20,319 $ 24,330 $ 33,870 Investing activities............ (44,599) (5,120) (173,588) (1,056) (174,091) (1,056) (166,359) Financing activities............ 44,061 (9,605) 157,739 (6,646) 157,792 (6,593) 152,762 EBITDA(3)......................... 9,407 53,826 64,316 45,092 77,519 45,092 83,688 EBITDA, As Defined(4)............. 50,562 54,011 70,955 45,092 84,158 45,092 90,171 Capital expenditures.............. 3,043 4,368 4,486 1,056 5,044 1,056 3,904 TransDigm Inc. total debt to EBITDA, As Defined(5)........... 4.8x 4.4x 5.4x 8.4x 4.2x Pro forma TransDigm Inc. net debt to EBITDA, As Defined(6)........ 3.9x
PRO HISTORICAL FORMA --------------------------------------------- --------- AS OF SEPTEMBER 30, AS OF AS OF --------------------------------- MARCH 30, MARCH 30, 1999 2000 2001 2002 2002 --------- --------- --------- --------- --------- BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents................................ $ 2,729 $ 4,309 $ 11,221 $ 28,975 $ 28,975 Working capital.......................................... 35,531 39,437 55,672 64,542 75,557 Total assets............................................. 164,417 168,833 372,898 379,029 380,314 Total debt............................................... 266,557 261,601 413,209 408,204 411,257 TransDigm Inc. total debt(5)............................. 244,557 236,962 385,612 378,982 382,035 TransDigm Inc. net debt(6)............................... 241,828 232,653 374,391 350,007 353,060 Total stockholders' equity (deficiency).................. (127,622) (118,409) (103,388) (92,539) (93,600)
- ------------------------------ (1) Operating income includes the effect of a non-cash charge of $1,143 in fiscal 1999 due to a purchase accounting adjustment to inventory associated with the acquisition of Adams Rite, a non-cash charge of $185 in fiscal 2000 due to a purchase accounting adjustment to inventory associated with the acquisition of Christie, non-cash charges of $3,193 and $3,446 in fiscal 2001 due to purchase accounting adjustments to inventory associated with the acquisitions of Champion Aerospace and a product line, respectively. (2) Includes $2,989, $2,669 and $2,030 of interest expense incurred by Holdings during fiscal 2001, 2000 and 1999, respectively, and $1,642 of interest expense for the six months ended March 30, 2002 relating to the Holdings PIK Notes. Holdings has no other interest expense. TransDigm is not an obligor or a guarantor under the Holdings PIK Notes. (3) EBITDA represents earnings before interest, taxes, depreciation and amortization. EBITDA is presented because management believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of 12 companies in Holdings' industry. However, other companies in Holdings' industry may calculate EBITDA differently than Holdings does. EBITDA is not a measurement of financial performance under accounting principles generally accepted in the United States of America and should not be considered as an alternative to cash flow from operating activities, as a measure of liquidity or an alternative to net income as indicators of Holdings' operating performance or any other measures of performance derived in accordance with accounting principles generally accepted in the United States of America. See Holdings' consolidated statements of cash flows included in Holdings' consolidated financial statements included elsewhere in this prospectus. (4) EBITDA, As Defined, is calculated by adding to EBITDA those merger expenses incurred in fiscal 1999 and the incremental inventory costs associated with the write up of inventory required by the purchase accounting treatment applied to the acquisitions of Adams Rite and ZMP for 1999, Christie for fiscal 2000 and Champion Aerospace and a product line for fiscal 2001 as follows (all amounts in thousands):
HISTORICAL PRO FORMA -------------------------------------------- -------------------------------------------- FISCAL YEAR ENDED SIX MONTHS FISCAL YEAR SIX MONTHS TWELVE MONTHS SEPTEMBER 30, 2001 ENDED ENDED ENDED ENDED ------------------------------ MARCH 30, SEPTEMBER 30, MARCH 30, MARCH 30, 2000 1999 2001 2002 2001 2002 2002 -------- -------- -------- ----------- ------------- ----------- -------------- EBITDA.......................... $ 9,407 $53,826 $64,316 $45,092 $77,519 $45,092 $83,688 Adjustments: Merger Expenses................. 40,012 -- -- -- -- -- -- Inventory Purchase Accounting Adjustments................... 1,143 185 6,639 -- 6,639 -- 6,483 ------- ------- ------- ------- ------- ------- ------- EBITDA, As Defined.............. $50,562 $54,011 $70,955 $45,092 $84,158 $45,092 $90,171 ======= ======= ======= ======= ======= ======= =======
EBITDA, As Defined, is presented herein to provide additional information with respect to the ability of Holdings to satisfy its debt service, capital expenditure and working capital requirements and because certain types of covenants in TransDigm Inc.'s and Holdings' borrowing arrangements are tied to similar measures. While EBITDA-based measures are frequently used as measures of operations and the ability to meet debt service requirements, they are not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. (5) TransDigm Inc. total debt excludes the Holdings PIK Notes as those notes are not an obligation of TransDigm Inc. or any of its subsidiaries. TransDigm Inc. pro forma total debt as of March 30, 2002 includes the $2,006 premium received in connection with the issuance of the old notes. (6) TransDigm Inc. net debt represents TransDigm Inc. total debt less TransDigm Inc. cash and cash equivalents. 13 RISK FACTORS YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND ALL OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER. INVESTING IN THE NOTES INVOLVES A HIGH DEGREE OF RISK. THE OCCURRENCE OF ANY ONE OR MORE OF THE FOLLOWING COULD MATERIALLY ADVERSELY AFFECT YOUR INVESTMENT IN THE NOTES OR OUR BUSINESS AND OPERATING RESULTS. RESTRICTIONS ON TRANSFER--IF YOU DO NOT PROPERLY TENDER YOUR OLD NOTES, YOUR ABILITY TO TRANSFER SUCH OLD NOTES WILL BE ADVERSELY AFFECTED. We will only issue exchange notes in exchange for old notes that are timely received by the exchange agent, together with all required documents, including a properly completed and signed letter of transmittal. Therefore, you should allow sufficient time to ensure timely delivery of the old notes and you should carefully follow the instructions on how to tender your old notes. Neither we nor the exchange agent are required to tell you of any defects or irregularities with respect to your tender of the old notes. If you do not tender your old notes or if we do not accept your old notes because you did not tender your old notes properly, then, after we consummate the exchange offer, you may continue to hold old notes that are subject to the existing transfer restrictions. In addition, if you tender your old notes for the purpose of participating in a distribution of the exchange notes, you will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the exchange notes. If you are a broker-dealer that receives exchange notes for your own account in exchange for old notes that you acquired as a result of market-making activities or any other trading activities, you will be required to acknowledge that you will deliver a prospectus in connection with any resale of such exchange notes. After the exchange offer is consummated, if you continue to hold any old notes, you may have difficulty selling them because there will be less old notes outstanding. In addition, if a large amount of old notes are not tendered or are tendered improperly, the limited amount of exchange notes that would be issued and outstanding after we consummate the exchange offer could lower the market price of such exchange notes. SUBSTANTIAL LEVERAGE--OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES. We have a significant amount of indebtedness. Holdings' ratio of earnings to fixed charges would have been 1.8 to 1.0 on a pro forma basis for the twelve months ended March 30, 2002. The following chart shows certain of our important credit statistics and is presented assuming we had completed the offering of the old notes and the application of the proceeds therefrom as of the date specified below (dollars in millions):
AT MARCH 30, 2002 -------------- Total TransDigm Inc. indebtedness........................... $382.0 TransDigm Inc. stockholders' equity (deficit)............... $(48.1)
In addition, Holdings has an additional $29.2 million of indebtedness represented by the Holdings PIK Notes (all of which will be senior to Holdings' guarantee of the notes) and, on a pro forma basis, Holdings has a stockholders' deficit of approximately $93.6 million. See "Unaudited Pro Forma Consolidated Financial Information." Our substantial indebtedness could have important consequences to you. For example, it could: - make it more difficult for us to satisfy our obligations with respect to the notes; - increase our vulnerability to general adverse economic and industry conditions; 14 - limit our ability to fund future working capital, capital expenditures, research and development costs and other general corporate requirements; - require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts and other general corporate purposes; - limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; - place us at a competitive disadvantage compared to our competitors that have less debt; and - limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds. And, failing to comply with those covenants could result in an event of default which, if not cured or waived, could have a material adverse effect on us. See "Description of the Exchange Notes" and "Description of Other Indebtedness--TransDigm--The Credit Facility." NO ESTABLISHED TRADING MARKET--YOU MAY BE UNABLE TO SELL YOUR EXCHANGE NOTES IF AN ACTIVE TRADING MARKET FOR THE EXCHANGE NOTES DOES NOT DEVELOP. The exchange notes do not have an established trading market, and none may develop. We do not intend to apply for listing of the exchange notes on any securities exchange or for quotation on any automated dealer quotation system. The liquidity of any market for the exchange notes will depend on the number of holders of the exchange notes, the interest of securities dealers in making a market in the exchange notes and other factors. The initial purchasers of the old notes have indicated to us that they intend to make a market in the exchange notes, as permitted by applicable laws and regulations. However, the initial purchasers are under no obligation to do so. At their discretion, the initial purchasers could discontinue their market-making efforts at any time without notice. Accordingly, we cannot assure you as to the development or liquidity of any market for the exchange notes. If an active trading market does not develop, the market price and liquidity of the exchange notes may be adversely affected. If the exchange notes are traded, they may trade at a discount from their initial offering price depending upon prevailing interest rates, the market for similar securities, general economic conditions, our performance and business prospects and certain other factors. ADDITIONAL BORROWINGS AVAILABLE--DESPITE CURRENT INDEBTEDNESS LEVELS, WE AND OUR SUBSIDIARIES MAY STILL BE ABLE TO INCUR SUBSTANTIALLY MORE DEBT. THIS COULD FURTHER EXACERBATE THE RISKS ASSOCIATED WITH OUR SUBSTANTIAL LEVERAGE. We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the indenture do not fully prohibit us or our subsidiaries from doing so. Our credit facility permits additional borrowings of up to $180.0 million, including $30.0 million under our revolving credit facility and $150.0 million of uncommitted additional bank borrowings and all of those borrowings are senior to the notes and the guarantees. If new debt is added to our and our subsidiaries' current debt levels, the related risks that we and they now face could intensify. See "Capitalization," "Selected Historical Consolidated Financial Data," "Description of the Exchange Notes" and "Description of Other Indebtedness--TransDigm--The Credit Facility." 15 ABILITY TO SERVICE DEBT--TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL. Our ability to make payments on and to refinance our indebtedness, including the notes, and to fund planned capital expenditures and research and development efforts will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our current level of operations and anticipated cost savings and operating improvements, we believe our cash flow from operations, available cash and available borrowings under our credit facility, will be adequate to meet our future liquidity needs for at least the next several years. We cannot assure you, however, that our business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized on schedule or at all or that future borrowings will be available to us under our credit facility in an amount sufficient to enable us to pay our indebtedness, including the notes, or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness, including the notes, on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness, including our credit facility and the notes, on commercially reasonable terms or at all. SUBORDINATION--YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES IS JUNIOR TO OUR EXISTING INDEBTEDNESS AND POSSIBLY ALL OF OUR FUTURE BORROWINGS. FURTHER, THE GUARANTEES OF THE NOTES ARE JUNIOR TO ALL OF THE GUARANTORS' EXISTING INDEBTEDNESS AND POSSIBLY TO ALL OF THEIR FUTURE BORROWINGS. The notes and the guarantees rank behind all of our and the guarantors' existing indebtedness (other than trade payables) and all of our and their future borrowings (other than trade payables), except any future indebtedness that expressly provides that it ranks equal with, or junior in right of payment to, the notes and the guarantees. As a result, upon any distribution to our creditors or the creditors of the guarantors in a bankruptcy, liquidation or reorganization or similar proceeding relating to us or the guarantors or our or their property, the holders of our senior debt and the senior debt of the guarantors will be entitled to be paid in full and in cash before any payment may be made with respect to the notes or the guarantees. In addition, all payments on the notes and the guarantees will be blocked in the event of a payment default on senior debt and may be blocked for up to 179 of 360 consecutive days in the event of certain non-payment defaults on senior debt. In the event of a bankruptcy, liquidation or reorganization or similar proceeding relating to us or the guarantors, holders of the notes will participate with trade creditors and all other holders of our subordinated indebtedness and the subordinated indebtedness of the guarantors in the assets remaining after we and the guarantors have paid all of our senior debt. However, because the indenture requires that amounts otherwise payable to holders of the notes in a bankruptcy or similar proceeding be paid to holders of senior debt instead, holders of the notes may receive less, ratably, than holders of trade payables in any such proceeding. In any of these cases, we and the guarantors may not have sufficient funds to pay all of our creditors and holders of notes may receive less, ratably, than the holders of senior debt. Assuming we had completed the offering of the old notes on March 30, 2002, the notes and the guarantees would have been subordinated to $180.0 million of senior debt under our credit facility. In addition, the credit facility would provide for additional senior debt borrowings of up to $180.0 million, including $30.0 million under our revolving credit facility and $150.0 million of uncommitted additional bank borrowings. Holdings' guarantee of the notes would have been subordinated to $209.3 million of senior debt consisting of the guarantee of the credit facility and the Holdings PIK Notes. We will be 16 permitted to borrow substantial additional indebtedness, including senior debt, in the future under the terms of the indenture. LIMITED VALUE OF HOLDINGS GUARANTEE--YOU SHOULD NOT RELY ON THE GUARANTEE BY HOLDINGS IN THE EVENT WE CANNOT MAKE PAYMENTS UPON THE NOTES. The exchange notes will be guaranteed by Holdings, our parent holding company, on a senior subordinated basis. You should not rely on this guarantee because Holdings has no assets other than our capital stock. If we cannot make payments under the notes, Holdings probably cannot make payments either. In addition, this guarantee will be subordinated to all senior debt of Holdings (consisting of Holdings' guarantee of the $180.0 million of borrowings under the credit facility and the $29.2 million of borrowings consisting of the Holdings PIK Notes, in each case, on a pro forma basis at March 30, 2002), whose holders would be paid before you in the event of a liquidation. RISKS RELATED TO TERRORISM--WE MAY NOT YET KNOW THE FULL IMPACT OF THE SEPTEMBER 11TH TERRORIST ATTACKS, AND ANY FUTURE TERRORIST ATTACKS MAY HAVE A MATERIAL ADVERSE IMPACT ON OUR BUSINESS. On September 11, 2001, the United States was subjected to multiple terrorist attacks, which involved the hijacking of four U.S. commercial aircraft. In the aftermath of the terrorist attacks, passenger traffic on commercial flights was significantly lower than prior to the attacks and many commercial airlines reduced their operating schedules. The overall result of the terrorist attacks was billions of dollars in losses to the airlines industry. The full impact of these events and any future terrorist attacks is not yet known and could cause airlines to delay purchases of spare parts and new aircraft. If demand for new aircraft and spare parts decreases, there may be a decrease in demand for certain of our products. DEPENDENCE ON MAJOR CUSTOMERS--WE RELY HEAVILY ON CERTAIN CUSTOMERS FOR MUCH OF OUR SALES. Our two largest customers for the year ended September 30, 2001, were Aviall (a distributor of aftermarket parts to airlines throughout the world) and Boeing (including McDonnell Douglas). These customers accounted for approximately 17% and 8%, respectively, of our consolidated net sales in fiscal 2001. Our top ten customers for the year ended September 30, 2001 accounted for approximately 55% of our consolidated net sales. The loss of any one or more of these key customers could have a material adverse effect on our business. See "Business--Customers" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." CUSTOMER CONTRACTS--WE GENERALLY DO NOT HAVE GUARANTEED FUTURE SALES OF OUR PRODUCTS. FURTHER, WE ARE OBLIGATED UNDER FIXED PRICE CONTRACTS WITH SOME OF OUR CUSTOMERS, SO WE TAKE THE RISK FOR COST OVERRUNS. As is customary in our business, we do not have long-term contracts with most of our aftermarket customers and therefore do not have guaranteed future sales. Although we do have long-term contracts with many of our OEM customers, some of those customers, such as the United States government, may terminate these contracts on short notice and, in many other cases, our customers have not committed to buy any minimum quantity of our products. In addition, we must anticipate the future volume of orders based upon the historic purchasing patterns of customers and upon our discussions with customers as to their anticipated future requirements. Cancellations, reductions or delays in orders by a customer or a group of customers could have a material adverse effect on our business, financial condition and results of operations. We also have entered into fixed-price contracts with some of our customers, where we agree to perform the work for a fixed price and, accordingly, realize all the benefit or detriment resulting from 17 any decreased or increased costs for making these products. Sometimes we accept a fixed-price contract for a product which we have not yet produced, which increases the risks of delays or cost overruns. A number of our contracts do not permit us to recover for increases in input prices, taxes or labor costs, although some contracts provide for renegotiation to address certain material adverse changes. Any such increases are likely to have an adverse effect on our business. AIRCRAFT COMPONENTS SEGMENT RISKS--OUR BUSINESS IS SENSITIVE TO THE NUMBER OF FLIGHT HOURS THAT OUR CUSTOMERS' PLANES SPEND ALOFT AND TO OUR CUSTOMERS' PROFITABILITY. THESE ITEMS ARE, IN TURN, AFFECTED BY GENERAL ECONOMIC CONDITIONS. IN ADDITION, OUR SALES TO MANUFACTURERS OF NEW LARGE AIRCRAFT ARE CYCLICAL. We compete in the aircraft component segment of the aerospace industry. Our business is directly affected by economic factors and other trends that affect our customers, including projected market growth that may not materialize or be sustainable. Specifically, the aircraft component segment is sensitive to changes in the number of miles flown by paying customers of commercial airlines, which we refer to as revenue passenger miles, and, to a lesser extent, to changes in the profitability of the commercial airline industry and the size and age of the worldwide aircraft fleet. Revenue passenger miles and airline profitability have historically been correlated with the general economic environment, although national and international events can also play a key role. For example, revenue passenger miles declined primarily as a result of increased security concerns among airline customers following the events of September 11th. See "--Risks Related to Terrorism." Any future reduction would reduce the use of commercial aircraft and, consequently, the need for spare parts and new aircraft. During periods of reduced airline profitability, some airlines may elect to delay purchases of spare parts, preferring instead to deplete existing inventories. If demand for new aircraft and spare parts decreases, there may be a decrease in demand for certain of our products. Therefore, any future decline in revenue passenger miles, airline profitability or the size of the worldwide aircraft fleet, for any reason, could have a material adverse effect on our business. See "Business--Industry Overview." In addition, sales to manufacturers of large commercial aircraft, which accounted for approximately 15% of our net sales in fiscal 2001, have historically experienced periodic downturns. In the past, these sales have been affected by airline profitability, which is impacted by fuel and labor costs and price competition, and other things. Due in part to these factors, the number of large commercial aircraft delivered has dropped from a peak of 914 aircraft in 1999. As a result of the events of September 11th and a weakened economy, many industry analysts expect aircraft deliveries to trend significantly downward from over 850 aircraft delivered in 2001. Prior downturns have adversely effected our net sales, gross margin and net income. These and certain other factors may cause a downturn in sales to manufacturers of large commercial aircraft in the future which may have a material adverse effect on our business. FLUCTUATIONS IN DEFENSE SPENDING--A DECLINE IN THE U.S. DEFENSE BUDGET MAY ADVERSELY AFFECT OUR SALES OF PARTS USED IN MILITARY AIRCRAFT. Approximately 20% of our sales in fiscal 2001 were related to products used in military aircraft, over half of which were spare parts provided to various governmental agencies. The United States' defense budget has fluctuated in recent years, at times resulting in reduced demand for new aircraft and, to a lesser extent, spare parts. In addition, foreign military sales are affected by U.S. government regulations, regulations by the purchasing foreign government and political uncertainties in the United States and abroad. The United States' defense budget may continue to fluctuate, and may decline, and sales of defense related items to foreign governments may decrease. If there is a decline which reduces demand for our components, our business may be adversely affected. 18 In addition, the terms of defense contracts with the U.S. government generally permit the government to terminate contracts partially or completely, with or without cause, at any time. Any unexpected termination of a significant government contract could have an adverse effect on our business. GOVERNMENT REGULATION AND INDUSTRY OVERSIGHT--OUR BUSINESS WOULD BE ADVERSELY AFFECTED IF WE LOST OUR GOVERNMENT OR INDUSTRY APPROVALS OR IF MORE ONEROUS GOVERNMENT REGULATIONS WERE ENACTED OR INDUSTRY OVERSIGHT INCREASED. The aircraft component industry is highly regulated in the United States and in other countries. In order to sell our components, we and the components we manufacture must be certified by the Federal Aviation Administration, the United States Department of Defense and similar agencies in foreign countries and by individual manufacturers. If new and more stringent government regulations are adopted or if industry oversight increases we might incur significant expenses to comply with any new regulations or heightened industry oversight. If material authorizations or approvals were revoked or suspended, our business would be adversely affected. See "Business--Governmental Regulation." To the extent that we operate outside the United States, we are subject to the Foreign Corrupt Practices Act, or FCPA, which generally prohibits United States companies and their intermediaries from bribing foreign officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment. In particular, we may be held liable for actions taken by our strategic or local partners even though such partners are foreign companies that are not subject to the FCPA. Any determination that we have violated the FCPA could result in sanctions that could have a material adverse effect on our business. RISKS ASSOCIATED WITH OUR WORKFORCE--WE ARE DEPENDENT ON OUR HIGHLY TRAINED EMPLOYEES AND ANY WORK STOPPAGE OR DIFFICULTY HIRING SIMILAR EMPLOYEES WOULD ADVERSELY AFFECT OUR BUSINESS. Because our products are complicated and very detailed, we are highly dependent on an educated and trained workforce. There is substantial competition for skilled personnel in the aircraft component industry and we could be adversely affected by a shortage of skilled employees. We may not be able to fill new positions or vacancies created by expansion or turnover or attract and retain qualified personnel. At March 30, 2002, approximately 9% of our employees were represented by the United Steelworkers Union, and approximately 6% were represented by the United Automobile, Aerospace and Agricultural Implement Workers of America. Our collective bargaining agreements with these labor unions expire in April 2005 and November 2004, respectively. Although we believe that our relations with our employees are good, we cannot assure you that we will be able to negotiate a satisfactory renewal of these collective bargaining agreements or that our employee relations will remain stable. Because we maintain a relatively small inventory of finished goods and operate on relatively short lead times for our products, any work shortage could have a material adverse effect on our business. See "Business--Employees." DEPENDENCE ON KEY PERSONNEL--IF WE LOSE OUR SENIOR MANAGEMENT OR TECHNICAL PERSONNEL, OUR BUSINESS MAY BE ADVERSELY AFFECTED. Our success is dependent upon our senior management, as well as on our ability to attract and retain qualified personnel, including engineers. There is substantial competition for these kinds of personnel in the aircraft component industry. We may not be able to retain our existing senior management or engineering staff, fill new positions or vacancies created by expansion or turnover, or attract additional qualified personnel. Although we have entered into employment agreements with 19 certain executive officers, these agreements may not be renewed. See "Management--Employment Agreements." RISKS ASSOCIATED WITH SUPPLIERS--OUR BUSINESS IS DEPENDENT ON THE AVAILABILITY OF CERTAIN COMPONENTS AND RAW MATERIALS THAT WE BUY FROM SUPPLIERS. Our business is affected by the price and availability of the raw materials and component parts that we use to manufacture our components. Our business, therefore, could be adversely affected by factors affecting our suppliers, or by increased costs of such raw materials or components if we are unable to pass along such price increases to our customers. Because we maintain a relatively small inventory of raw materials and component parts, our business could be adversely affected if we are unable to obtain these raw materials and components from our suppliers in the quantities we require or on favorable terms. Although we believe that we could identify alternative suppliers, or alternative raw materials or component parts, the lengthy and expensive FAA and OEM certification process associated with aerospace products could prevent efficient replacement of a material or supplier and could have a material adverse effect on our business. See "Business--Raw Materials and Patents." POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES--WE MAY BE LIABLE FOR PENALTIES UNDER A VARIETY OF ENVIRONMENTAL LAWS, EVEN IF WE DID NOT CAUSE ANY ENVIRONMENTAL PROBLEMS. CHANGES IN ENVIRONMENTAL LAWS OR UNEXPECTED INVESTIGATIONS COULD ADVERSELY AFFECT OUR BUSINESS. Our business and our facilities are subject to a number of federal, state and local laws and regulations, which govern, among other things, the discharge of hazardous materials into the air and water as well as the handling, storage and disposal of such materials. Pursuant to certain environmental laws, a current or previous owner or operator of land may be liable for the costs of investigation, removal or remediation of hazardous materials at such property. These laws typically impose liability whether or not the owner or operator knew of, or was responsible for, the presence of any hazardous materials. Persons who arrange (as defined under these statutes) for the disposal or treatment of hazardous materials also may be liable for the costs of investigation, removal or remediation of such substances at the disposal or treatment site, regardless of whether the affected site is owned or operated by them. See "Business--Environmental Matters." Because we own and operate a number of facilities, and because we arrange for the disposal of hazardous materials at many disposal sites, we may incur costs for investigation, removal and remediation, as well as capital costs associated with compliance with environmental laws. Although such environmental costs have not been material in the past and are not expected to be material in the future, changes in environmental laws or unexpected investigation and clean-up costs could have a material adverse effect on our business. RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS--OUR INTERNATIONAL BUSINESS EXPOSES US TO RISKS RELATING TO INCREASED REGULATION AND POLITICAL OR ECONOMIC INSTABILITY, GLOBALLY OR WITHIN CERTAIN FOREIGN COUNTRIES. Our export sales to customers were approximately $54.8 million, $36.2 million and $30.7 million in fiscal 2001, fiscal 2000 and fiscal 1999, respectively. In addition, a portion of the products we sell to domestic distributors is resold to foreign end-users. These sales are subject to numerous additional risks, including the impact of foreign government regulations, currency fluctuations, political uncertainties and differences in business practices. Foreign governments could adopt regulations or take other actions that would have a direct or indirect adverse impact on our business or market opportunities abroad. Furthermore, the political, cultural and economic climate outside the United States may not be favorable to our business and growth strategy. 20 RISKS RELATED TO POTENTIAL FUTURE ACQUISITIONS--WE INTEND TO PURSUE FUTURE ACQUISITIONS AND OUR BUSINESS MAY BE ADVERSELY AFFECTED IF WE CANNOT CONSUMMATE ACQUISITIONS ON SATISFACTORY TERMS OR EFFECTIVELY INTEGRATE NEW OPERATIONS. We intend to pursue acquisitions that we believe will present opportunities to realize significant synergies, operating expense reductions or overhead cost savings and increase our market position. This acquisition strategy may require substantial capital, and we may not be able to raise the necessary funds on terms satisfactory to us or at all. Our acquisition strategy is also limited by the availability of suitable acquisition candidates. We cannot assure you that we will be able to consummate any future acquisitions. We regularly engage in discussions with respect to potential acquisition and investment opportunities. If we consummate an acquisition, our capitalization and results of operations may change significantly and you will not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in determining the application of these funds. Future acquisitions would likely result in the incurrence of debt and contingent liabilities and an increase in interest expense and amortization expenses or periodic impairment charges related to goodwill and other intangible assets, which could have a material adverse effect upon our business. Acquisitions involve numerous risks, including difficulties in the assimilation of the operations, technologies, services and products of the acquired companies and the diversion of management's attention from other business concerns. For all of these reasons, if any such acquisitions occur, our business could be adversely affected. COMPETITION--WE FACE SIGNIFICANT COMPETITION. We operate in a highly competitive global industry and compete against a number of companies, including divisions of larger companies, some of which have significantly greater financial, technological and marketing resources than us. Competitors in our product lines are both U.S. and foreign companies and range in size from divisions of large corporations to small privately held entities. We believe that our ability to compete depends on high product performance, consistently high quality, short lead-time and timely delivery, competitive price, superior customer service and support and continued certification under customer quality requirements and assurance programs. Our inability to compete successfully with respect to these or other factors may materially adversely affect our business and financial condition. See "Business--Competition." CONTROL BY ODYSSEY--WE ARE CONTROLLED BY ODYSSEY, WHOSE INTERESTS MAY NOT BE ALIGNED WITH YOURS. Odyssey and its co-investors indirectly own approximately 83.7% of the common equity interests in our parent company, Holdings and, therefore, have the power, subject to certain exceptions, to control Holdings. They also control the appointment of management and the entering into of mergers, sales of substantially all assets and other extraordinary transactions. The interests of Odyssey may not in all cases be aligned with yours. See "Certain Relationships and Related Transactions." PRODUCT LIABILITY; CLAIMS EXPOSURE--WE COULD BE ADVERSELY AFFECTED AS A RESULT OF A LAWSUIT IF ONE OF OUR COMPONENTS CAUSES AN AIRCRAFT TO CRASH AND WE ARE NOT COVERED BY OUR INSURANCE POLICIES. Our operations expose us to potential liabilities for personal injury or death as a result of the failure of an aircraft component that has been designed, manufactured or serviced by us. While we believe that our liability insurance is adequate to protect us from future products liability claims, if claims were to arise, such insurance coverage may not be adequate. 21 Additionally, we may not be able to maintain insurance coverage 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 our business. FINANCING CHANGE OF CONTROL OFFER--WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE. Upon the occurrence of certain specific kinds of change of control events, we will be required to offer to repurchase all outstanding notes at 101% of the principal amount thereof plus accrued and unpaid interest, and additional interest, if any, to the date of repurchase. However, it is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of notes or that restrictions in our credit facility will not allow such repurchases. In addition, certain important corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, would not constitute a "Change of Control" under the indenture. See "Description of the Exchange Notes--Change of Control." FRAUDULENT CONVEYANCE MATTERS--FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN PAYMENTS RECEIVED FROM GUARANTORS. Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee could be voided, or claims in respect of a guarantee could be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the indebtedness evidenced by its guarantee: - received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee; or - was insolvent or rendered insolvent by reason of such incurrence; or - was engaged in a business or transaction for which the guarantor's remaining assets constituted unreasonably small capital; or - intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature. In addition, any payment by that guarantor pursuant to its guarantee could be voided and required to be returned to the guarantor, or to a fund for the benefit of the creditors of us or the guarantor. The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if: - the sum of its debts, including contingent liabilities, were greater than the fair saleable value of all of its assets, or - if the present fair saleable value of its assets were less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature, or - it could not pay its debts as they become due. On the basis of historical financial information, recent operating history and other factors, we believe that each guarantor, after giving effect to its guarantee of the notes, will not be insolvent, will not have unreasonably small capital for the business in which it is engaged and will not have incurred debts beyond its ability to pay such debts as they mature. We cannot assure you, however, as to what 22 standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard. FORWARD-LOOKING STATEMENTS--OUR FORWARD-LOOKING STATEMENTS MAY PROVE TO BE INACCURATE. This prospectus includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, including statements about forecasts, our plans, strategies and prospects in this prospectus. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we can give no assurance that they will be achieved. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this prospectus are set forth above in this "Risk Factors" section and elsewhere in this prospectus. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. 23 THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER We sold the old notes to Deutsche Bank Securities Inc. and Credit Suisse First Boston Corporation, the initial purchasers, on June 7, 2002. The initial purchasers subsequently resold the old notes to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act. In connection with the issuance of the old notes, we and the guarantors entered into a registration rights agreement with the initial purchasers of the old notes. The registration rights agreement requires us to register the exchange notes under the federal securities laws and offer to exchange the exchange notes for the old notes. The exchange notes will be issued without a restrictive legend and generally may be resold without registration under the federal securities laws. We are effecting the exchange offer to comply with the registration rights agreement. The registration rights agreement requires us and the guarantors to: - file a registration statement for the exchange offer and the exchange notes within 70 days after the issue date of the old notes; - use our reasonable best efforts to cause the registration statement to become effective under the Securities Act within 160 days after the issue date of the old notes; - use our reasonable best efforts to consummate the exchange offer within 195 days after the issue date of the old notes; and - file a shelf registration statement for the resale of the old notes under certain circumstances and use our reasonable best efforts to cause such registration statement to become effective under the Securities Act. These requirements under the registration rights agreement will be satisfied when we complete the exchange offer. However, if we fail to meet any of these requirements, we must pay additional interest on the old notes at the rate of 0.50% per year until the applicable requirement has been met. We must pay an additional 0.50% per year for each 90 days that a requirement has not been met. However, we will not be required to pay more than 1.00% per year in additional interest on the old notes. Immediately following the completion of a requirement, any additional interest with respect to that particular requirement will cease to accrue. We have also agreed to keep the registration statement for the exchange offer effective for at least 20 days (or longer, if required by applicable law) after the date on which notice of the exchange offer is mailed to holders. Under the registration rights agreement, our obligations to register the exchange notes will terminate upon the completion of the exchange offer. However, under certain circumstances specified in the registration rights agreement, we may be required to file a "shelf" registration statement for a continuous offer in connection with the old notes pursuant to Rule 415 under the Securities Act. This summary includes only the material terms of the registration rights agreement. For a full description, you should refer to the complete copy of the registration rights agreement, which has been filed as an exhibit to the exchange offer registration statement. See "Where You Can Find More Information." TRANSFERABILITY OF THE EXCHANGE NOTES Based on an interpretation of the Securities Act by the staff of the Commission in several no-action letters issued to third parties unrelated to us, we believe that you, or any other person receiving exchange notes, may offer for resale, resell or otherwise transfer such notes without complying with the registration and prospectus delivery requirements of the federal securities laws, if: - you, or the person or entity receiving such exchange notes, is acquiring such notes in the ordinary course of business; 24 - neither you nor any such person or entity is engaging in or intends to engage in a distribution of the exchange notes within the meaning of the federal securities laws; - neither you nor any such person or entity has an arrangement or understanding with any person or entity to participate in any distribution of the exchange notes; - neither you nor any such person or entity is an "affiliate" of TransDigm or the guarantors, as such term is defined under Rule 405 under the Securities Act; and - you are not acting on behalf of any person or entity who could not truthfully make these statements. To participate in the exchange offer, you must represent as the holder of old notes that each of these statements is true. Any holder of old notes who is our affiliate or who intends to participate in the exchange offer for the purpose of distributing the exchange notes: - will not be able to rely on the interpretation of the staff of the Commission set forth in the no-action letters described above; and - must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the notes, unless the sale or transfer is made pursuant to an exemption from those requirements. Broker-dealers receiving exchange notes in exchange for old notes acquired for their own account through market-making or other trading activities may not rely on this interpretation by the Commission. Such broker-dealers may be deemed to be "underwriters" within the meaning of the Securities Act and must therefore acknowledge, by signing the letter of transmittal, that they will deliver a prospectus meeting the requirements of the Securities Act in connection with resale of the exchange notes. The letter of transmittal states that by acknowledging that it will deliver, and by delivering, a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The Commission has taken the position that participating broker-dealers may fulfill their prospectus delivery requirements with respect to the exchange notes, other than a resale of an unsold allotment from the original sale of the old notes, with the prospectus contained in the exchange offer registration statement. As described above, under the registration rights agreement, we have agreed to allow participating broker-dealers and other persons, if any, subject to similar prospectus delivery requirements to use the prospectus contained in the exchange offer registration statement in connection with the resale of the exchange notes. See "Plan of Distribution." TERMS OF THE EXCHANGE OFFER; ACCEPTANCE OF TENDERED NOTES Upon the terms and subject to the conditions in this prospectus and in the letter of transmittal, we will accept any and all old notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on , 2002. We will issue $1,000 principal amount of exchange notes in exchange for each $1,000 principal amount of old notes accepted in the exchange offer. Holders may tender some or all of their notes pursuant to the exchange offer. However, notes may be tendered only in integral multiples of $1,000 in principal amount. The form and terms of the exchange notes are the same as the form and terms of the old notes except that: - the exchange notes have been registered under the federal securities laws and will not bear any legend restricting their transfer; - the exchange notes bear a different CUSIP number from the old notes; and 25 - the holders of the exchange notes will not be entitled to certain rights under the registration rights agreement, including the provisions for an increase in the interest rate on the old notes in some circumstances relating to the timing of the exchange offer. The exchange notes will evidence the same debt as the old notes. Holders of exchange notes will be entitled to the benefits of the indenture. As of the date of this prospectus, old notes representing $75.0 million in aggregate principal amount were outstanding. We have fixed , 2002 as the date on which this prospectus and the letter of transmittal will be mailed initially. We intend to conduct the exchange offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission under the Exchange Act. We shall be deemed to have accepted validly tendered old notes when and if we have given oral or written notice to the exchange agent of our acceptance. The exchange agent will act as agent for the tendering holders for the purpose of receiving the exchange notes from us. If any tendered notes are not accepted for exchange because of an invalid tender, the occurrence of other events described in this prospectus or otherwise, we will return the certificates for any unaccepted notes, at our expense, to the tendering holder as promptly as practicable after the expiration of the exchange offer. Holders who tender old notes in the exchange offer will not be required to pay brokerage commissions or fees with respect to the exchange of notes or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of notes. We will pay all charges and expenses in connection with the exchange offer as described under the subheading "--Solicitation of Tenders; Fees and Expenses." However, we will not pay any taxes incurred in connection with a holder's request to have exchange notes or non-exchanged notes issued in the name of a person other than the registered holder. See "--Transfer Taxes" in this section below. EXPIRATION DATE; EXTENSIONS; AMENDMENT The exchange offer will expire at 5:00 p.m., New York City time, on , 2002, or the "Expiration Date," unless we extend the exchange offer. To extend the exchange offer, we will notify the exchange agent and each registered holder of any extension before 9:00 a.m. New York City time, on the next business day after the previously scheduled Expiration Date. We reserve the right to extend the exchange offer, delay accepting any tendered notes or, if any of the conditions described below under the heading "--Conditions to the Exchange Offer" have not been satisfied, to terminate the exchange offer. We also reserve the right to amend the terms of the exchange offer in any manner. We will give oral or written notice of such delay, extension, termination or amendment to the exchange agent. INTEREST ON THE EXCHANGE NOTES The exchange notes will bear interest from the most recent interest payment date to which interest has been paid on the old notes or, if no interest has been paid, from June 1, 2002. Interest on the old notes accepted for exchange will cease to accrue upon the issuance of the exchange notes. Interest on the notes is payable semi-annually on each June 1 and December 1 of each year beginning on December 1, 2002. PROCEDURES FOR TENDERING OLD NOTES Only a holder of old notes may tender notes in the exchange offer. To tender in the exchange offer, you must: - complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal; - have the signatures guaranteed if required by the letter of transmittal; and 26 - mail or otherwise deliver the letter of transmittal or such facsimile, together with the old notes and any other required documents, to the exchange agent prior to 5:00 p.m., New York City time, on the Expiration Date. To tender old notes effectively, you must complete the letter of transmittal and other required documents and the exchange agent must receive all the documents prior to 5:00 p.m., New York City time, on the Expiration Date. Delivery of the old notes may be made by book-entry transfer in accordance with the procedures described below. The exchange agent must receive confirmation of book-entry transfer prior to the Expiration Date. By executing the letter of transmittal you will make to us the representations set forth in the first paragraph under the heading "--Transferability of the Exchange Notes." All tenders not withdrawn before the Expiration Date and the acceptance of the tender by us will constitute agreement between you and us under the terms and subject to the conditions in this prospectus and in the letter of transmittal including an agreement to deliver good and marketable title to all tendered notes prior to the Expiration Date free and clear of all liens, charges, claims, encumbrances, adverse claims and rights and restrictions of any kind. THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, YOU SHOULD USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW FOR SUFFICIENT TIME TO ENSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION OF THE EXCHANGE OFFER. YOU MAY REQUEST YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE TO EFFECT THESE TRANSACTIONS FOR YOU. YOU SHOULD NOT SEND ANY NOTE, LETTER OF TRANSMITTAL OR OTHER REQUIRED DOCUMENT TO US. If your notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you desire to tender, you should contact the registered holder promptly and instruct the registered holder to tender on your behalf. See "Instruction to Registered Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner" included with the letter of transmittal. The exchange of notes will be made only after timely receipt by the exchange agent of certificates for old notes, a letter of transmittal and all other required documents, or timely completion of a book-entry transfer. If any tendered notes are not accepted for any reason or if old notes are submitted for a greater principal amount than the holder desires to exchange, the exchange agent will return such unaccepted or non-exchanged notes to the tendering holder promptly after the expiration or termination of the exchange offer. In the case of old notes tendered by book-entry transfer, the exchange agent will credit the non-exchanged notes to an account maintained with The Depository Trust Company. GUARANTEE OF SIGNATURES Holders must obtain a guarantee of all signatures on a letter of transmittal or a notice of withdrawal unless the old notes are tendered: - by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the letter of transmittal; or - for the account of an "eligible guarantor institution." Signature guarantees must be made by a member of or participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program, the Stock Exchange Medallion Program, or by an "eligible guarantor institution" within the meaning of Rule 17Ad-15 promulgated under the Securities Exchange Act (namely, banks; brokers and dealers; credit unions; national securities exchanges; registered securities associations; learning agencies; and savings associations). 27 SIGNATURE ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS If the letter of transmittal is signed by a person other than the registered holder of the old notes, the registered holder must endorse the old notes or provide a properly completed bond power. Any such endorsement or bond power must be signed by the registered holder as that registered holder's name appears on the old notes. Signatures on such old notes and bond powers must be guaranteed by an "eligible guarantor institution." If you sign the letter of transmittal or any old notes or bond power as a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation, fiduciary or in any other representative capacity, you must so indicate when signing. You must submit satisfactory evidence to the exchange agent of your authority to act in such capacity. BOOK-ENTRY TRANSFER We understand that the exchange agent will make a request promptly after the date of this prospectus to establish accounts with respect to the old notes at the book-entry transfer facility, The Depository Trust Company, for the purpose of facilitating the exchange offer. Subject to the establishment of the accounts, any financial institution that is a participant in DTC's system may make book-entry delivery of old notes by causing DTC to transfer the notes into the exchange agent's account in accordance with DTC's procedures for such transfer. However, although delivery of old notes may be effected through book-entry transfer into the exchange agent's account at DTC, the letter of transmittal (or a manually signed facsimile of the letter of transmittal) with any required signature guarantees, or an "agent's message" in connection with a book-entry transfer, and any other required documents, must, in any case, be transmitted to and received by the exchange agent, or the guaranteed delivery procedures set forth below must be complied with, in each case, prior to the Expiration Date. Delivery of documents to DTC does not constitute delivery to the exchange agent. The exchange agent and DTC have confirmed that the exchange offer is eligible for the DTC Automated Tender Offer Program. Accordingly, the DTC participants may electronically transmit their acceptance of the exchange offer by causing the DTC to transfer old notes to the exchange agent in accordance with DTC's Automated Tender Offer Program procedures for transfer. Upon receipt of such holder's acceptance through the Automated Tender Offer Program, DTC will edit and verify the acceptance and send an "agent's message" to the exchange agent for its acceptance. Delivery of tendered notes must be made to the exchange agent pursuant to the book-entry delivery procedures set forth above, or the tendering DTC participant must comply with the guaranteed delivery procedures set forth below. The term "agent's message" means a message transmitted by DTC, and received by the exchange agent and forming part of the confirmation of a book-entry transfer, which states that: - DTC has received an express acknowledgment from the participant in DTC tendering notes subject to the book-entry confirmation; - the participant has received and agrees to be bound by the terms of the letter of transmittal; and - we may enforce such agreement against such participant. In the case of an agent's message relating to guaranteed delivery, the term means a message transmitted by DTC and received by the exchange agent, which states that DTC has received an express acknowledgment from the participant in DTC tendering notes that such participant has received and agrees to be bound by the notice of guaranteed delivery. DETERMINATION OF VALID TENDERS; TRANSDIGM'S RIGHTS UNDER THE EXCHANGE OFFER All questions as to the validity, form, eligibility, time of receipt, acceptance and withdrawal of tendered notes will be determined by us in our sole discretion, which determination will be final and 28 binding on all parties. We expressly reserve the absolute right, in our sole discretion, to reject any or all old notes not properly tendered or any old notes the acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the absolute right in our sole discretion to waive or amend any conditions of the exchange offer or to waive any defects or irregularities of tender for any particular note, whether or not similar defects or irregularities are waived in the case of other notes. Our interpretation of the terms and conditions of the exchange offer will be final and binding on all parties. No alternative, conditional or contingent tenders will be accepted. Unless waived, any defects or irregularities in connection with tenders of old notes must be cured by the tendering holder within such time as we determine. Although we intend to notify holders of defects or irregularities in tenders of old notes, neither we, the exchange agent or any other person shall be under any duty to give notification of defects or irregularities in such tenders or will incur any liability to holders for failure to give such notification. Holders will be deemed to have tendered old notes only when such defects or irregularities have been cured or waived. The exchange agent will return to the tendering holder, after the expiration of the exchange offer, any old notes that are not properly tendered and as to which the defects have not been cured or waived. GUARANTEED DELIVERY PROCEDURES If you desire to tender old notes pursuant to the exchange offer and (1) certificates representing such old notes are not immediately available, (2) time will not permit your letter of transmittal, certificates representing such old notes and all other required documents to reach the exchange agent on or prior to the Expiration Date, or (3) the procedures for book-entry transfer (including delivery of an agent's message) cannot be completed on or prior to the Expiration Date, you may nevertheless tender such notes with the effect that such tender will be deemed to have been received on or prior to the Expiration Date if all the following conditions are satisfied: - you must effect your tender through an "eligible guarantor institution," which is defined above under the heading "--Guarantee of Signatures;" - a properly completed and duly executed notice of guaranteed delivery, substantially in the form provided by us herewith, or an agent's message with respect to guaranteed delivery that is accepted by us, is received by the exchange agent on or prior to the Expiration Date as provided below; and - the certificates for the tendered notes, in proper form for transfer (or a book-entry confirmation of the transfer of such notes into the exchange agent account at DTC as described above), together with a letter of transmittal (or a manually signed facsimile of the letter of transmittal) properly completed and duly executed, with any signature guarantees and any other documents required by the letter of transmittal or a properly transmitted agent's message, are received by the exchange agent within three New York Stock Exchange, Inc. trading days after the date of execution of the notice of guaranteed delivery. The notice of guaranteed delivery may be sent by hand delivery, facsimile transmission or mail to the exchange agent and must include a guarantee by an eligible guarantor institution in the form set forth in the notice of guaranteed delivery. WITHDRAWAL RIGHTS Except as otherwise provided in this prospectus, you may withdraw tendered notes at any time before 5:00 p.m., New York City time, on , 2002. For a withdrawal of tendered notes to be effective, a written or facsimile transmission notice of withdrawal must be received by the exchange agent on or prior to the expiration of the exchange offer. For DTC participants, a written notice of 29 withdrawal may be made by electronic transmission through DTC's Automated Tender Offer Program. Any notice of withdrawal must: - specify the name of the person having tendered the notes to be withdrawn; - identify the notes to be withdrawn, including the certificate number(s) and principal amount of such notes, or, in the case of notes transferred by book-entry transfer, the name and number of the account at DTC; - be signed by the holder in the same manner as the original signature on the letter of transmittal by which such notes were tendered, with any required signature guarantees, or be accompanied by documents of transfer sufficient to have the trustee with respect to the notes register the transfer of such notes into the name of the person withdrawing the tender and a properly completed irrevocable proxy authorizing such person to effect such withdrawal on behalf of such holder; and - specify the name in which any such notes are to be registered, if different from that of the registered holder. Any permitted withdrawal of notes may not be rescinded. Any notes properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the exchange offer. The exchange agent will return any withdrawn notes without cost to the holder promptly after withdrawal of the notes. Holders may retender properly withdrawn notes at any time before the expiration of the exchange offer by following one of the procedures described above under the heading "--Procedures for Tendering Old Notes." CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other term of the exchange offer, we shall not be required to accept for exchange, or issue any exchange notes for, any old notes, and may terminate or amend the exchange offer as provided in this prospectus before the acceptance of the old notes, if we determine that the exchange offer violates any law, statute, rule, regulation or interpretation by the staff of the Commission or any order of any governmental agency or court of competent jurisdiction. These conditions are for the sole benefit of TransDigm and the guarantors and may be asserted or waived by us in whole or in part at any time and from time to time in our sole discretion. Our failure to exercise any of these rights at any time will not be deemed a waiver of such rights and each of such rights shall be deemed an ongoing right which may be asserted by us at any time and from time to time. In addition, we will not accept for exchange any old notes tendered, and no exchange notes will be issued in exchange for those old notes, if at any time any stop order is threatened or issued with respect to the registration statement for the exchange offer and the exchange notes or the qualification of the indenture under the Trust Indenture Act of 1939. In any such event, we must use our reasonable best efforts to obtain the withdrawal or lifting of any stop order at the earliest possible moment. EFFECT OF NOT TENDERING To the extent old notes are tendered and accepted in the exchange offer, the principal amount of old notes will be reduced by the amount so tendered and a holder's ability to sell untendered old notes could be adversely affected. In addition, after the completion of the exchange offer, the old notes will remain subject to restrictions on transfer. Since the old notes have not been registered under the federal securities laws, they bear a legend restricting their transfer absent registration or the availability of a specific exemption from registration. The holders of old notes not tendered will have no further registration rights, except for the limited registration rights described above under the heading "--Purpose of the Exchange Offer." 30 Accordingly, the notes not tendered may be resold only: - to us or our subsidiaries; - pursuant to a registration statement which has been declared effective under the Securities Act; - for so long as the notes are eligible for resale pursuant to Rule 144A under the Securities Act to a person the seller reasonably believes is a qualified institutional buyer that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that the transfer is being made in reliance on Rule 144A; or - pursuant to any other available exemption from the registration requirements of the Securities Act (in which case TransDigm and the trustee shall have the right to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to TransDigm and the trustee), subject in each of the foregoing cases to any requirements of law that the disposition of the seller's property or the property of such investor account or accounts be at all times within its or their control and in compliance with any applicable state securities laws. Upon completion of the exchange offer, due to the restrictions on transfer of the old notes and the absence of such restrictions applicable to the exchange notes, it is likely that the market, if any, for old notes will be relatively less liquid than the market for exchange notes. Consequently, holders of old notes who do not participate in the exchange offer could experience significant diminution in the value of their old notes, compared to the value of the exchange notes. REGULATORY APPROVALS Other than the federal securities laws, there are no federal or state regulatory requirements that we must comply with and there are no approvals that we must obtain in connection with the exchange offer. SOLICITATION OF TENDERS; FEES AND EXPENSES We will bear the expenses of soliciting tenders. We are mailing the principal solicitation. However, our officers and regular employees and those of our affiliates may make additional solicitation by telegraph, telecopy, telephone or in person. We have not retained any dealer-manager in connection with the exchange offer. We will not make any payments to brokers, dealers, or others soliciting acceptances of the exchange offer. However, we may pay the exchange agent reasonable and customary fees for its services and may reimburse it for its reasonable out-of-pocket expenses. We will pay the cash expenses incurred in connection with the exchange offer. These expenses include fees and expenses of the exchange agent and trustee, accounting and legal fees and printing costs, among others. ACCOUNTING TREATMENT The exchange notes will be recorded at the same carrying value as the old notes. The carrying value is face value plus a $2.0 million premium received in connection with the offering of the old notes. Accordingly, we will recognize no gain or loss for accounting purposes. The expenses of the exchange offer will be expensed over the term of the exchange notes. TRANSFER TAXES We will pay all transfer taxes, if any, required to be paid by TransDigm in connection with the exchange of the old notes for the exchange notes. However, holders who instruct us to register exchange notes in the name of, or request that old notes not tendered or not accepted for exchange be 31 returned to, a person other than the registered holder will be responsible for the payment of any transfer tax arising from such transfer. THE EXCHANGE AGENT State Street Bank and Trust Company is serving as the exchange agent for the exchange offer. ALL EXECUTED LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE EXCHANGE AGENT AT THE ADDRESS LISTED BELOW. Questions, requests for assistance and requests for additional copies of this prospectus or the letter of transmittal should be directed to the exchange agent at the address or telephone number listed below. By Registered or Certified Mail: State Street Bank and Trust Company P.O. Box 778 Boston, MA 02102-0078 Attention: Janice Lee By Overnight Courier or By Hand: State Street Bank and Trust Company Two Avenue de Lafayette 5th Floor, Corporate Trust Window Boston, MA 02111-1724 Attention: Janice Lee By Facsimile: (617) 662-1452 Confirm by Telephone: (617) 662-1525
Originals of all documents sent by facsimile should be promptly sent to the exchange agent by registered or certified mail, by hand, or by overnight delivery service. DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. 32 USE OF PROCEEDS We will not receive any proceeds from the issuance of the exchange notes in the exchange offer. We will receive in exchange old notes in like principal amount. We will retire or cancel all of the old notes tendered in the exchange offer. On June 7, 2002 we issued and sold the old notes. The net proceeds from the sale of the old notes were approximately $74.0 million after deducting expenses of the offering and expenses relating to the use of proceeds therefrom, including initial purchasers' discounts and commissions. We used the net proceeds to repay all of our existing indebtedness under the Tranche A facility of our credit facility, the outstanding balance of which was $35.5 million as of March 30, 2002 and to repay portions of our indebtedness under the Tranche B and Tranche C facilities of our credit facility on a pro rata basis, the outstanding balances of which were $104.3 million and $114.1 million as of March 30, 2002, respectively. As of March 30, 2002, the loans under the Tranche A facility, the Tranche B facility and the Tranche C facility bore interest rates of 4.9%, 5.4% and 5.4%, respectively, and these facilities mature on November 15, 2004, May 15, 2006 and May 15, 2007, respectively. 33 CAPITALIZATION The following table sets forth the consolidated capitalization of Holdings as of March 30, 2002, on a historical basis and a pro forma basis after giving effect to the offering of the old notes and the use of proceeds therefrom as if it had occurred on March 30, 2002. This table should be read in conjunction with the information contained in "Use of Proceeds," "Unaudited Pro Forma Consolidated Financial Information" and the notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as the Consolidated Historical Financial Statements and the notes thereto included elsewhere in this prospectus. All amounts are presented in thousands.
MARCH 30, 2002 --------------------- ACTUAL PRO FORMA ------ --------- (UNAUDITED) Cash and cash equivalents................................... $ 28,975 $ 28,975 ========= ========= Total debt (including current maturities): Credit facility:(1) Revolving credit facility............................... $ -- $ -- Tranche A facility(2)................................... 35,547 2,584 Tranche B facility...................................... 104,298 84,762 Tranche C facility...................................... 114,137 92,683 10 3/8%Senior Subordinated Notes due 2008(3).............. 125,000 202,006 --------- --------- Total TransDigm Inc. debt............................... 378,982 382,035 --------- --------- Holdings PIK Notes(4)..................................... 29,222 29,222 --------- --------- Total Holdings debt..................................... 408,204 411,257 --------- --------- Holdings Redeemable Common Stock(4)......................... 1,701 1,701 Holdings 16% Cumulative Redeemable Preferred Stock(4)....... 14,558 14,558 Stockholders' equity (deficit): Common stock $0.01 par value and paid-in capital.......... 102,080 102,080 Other stockholders' equity (deficit)...................... (194,619) (195,680) --------- --------- Total stockholders' equity (deficit).................... (92,539) (93,600) --------- --------- Total capitalization........................................ $ 331,924 $ 333,916 ========= =========
- ------------------------ (1) The credit facility includes a $30.0 million revolving credit facility, of which $30.0 million was available for borrowing by us as of March 30, 2002. The indebtedness under the credit facility is an obligation of TransDigm Inc. and is guaranteed by Holdings and certain subsidiaries of TransDigm Inc. See "Description of Other Indebtedness--TransDigm--The Credit Facility." (2) We used a portion of the proceeds from the offering of the old notes to fully repay the outstanding balance of the Tranche A facility as of June 7, 2002, the closing date of the offering. Prior to June 7, 2002, we repaid $2,584 of the Tranche A facility. Because we do not give pro forma effect to the $2,584 repayment, this amount appears in the pro forma column. (3) This indebtedness represents an obligation of TransDigm Inc. and is guaranteed by Holdings and certain subsidiaries of TransDigm Inc. Pro forma amount includes $75.0 million face value of the old notes and the $2.0 million premium paid in connection with the issuance of the old notes. (4) The Holdings PIK Notes, Holdings Redeemable Common Stock and the Holdings 16% Cumulative Redeemable Preferred Stock, which we refer to as the Holdings 16% Preferred Stock, are each obligations of Holdings and are not obligations of TransDigm Inc. or the obligations of any of its subsidiaries. 34 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION The following pro forma consolidated financial information of Holdings has been derived by the application of pro forma adjustments to Holdings' historical consolidated financial statements for (1) the year ended September 30, 2001, (2) the six months ended March 30, 2002 and (3) the twelve months ended March 30, 2002. The pro forma consolidated statements of operations for the year ended September 30, 2001 and the twelve months ended March 30, 2002 give effect to the offering of the old notes and the use of proceeds therefrom as well as the acquisition of Champion Aerospace, as if such transactions had been consummated on the first day of the periods presented. The pro forma consolidated statement of operations for the six months ended March 30, 2002 gives effect to the offering of the old notes and the use of proceeds therefrom as if it had been consummated on October 1, 2001. The pro forma consolidated balance sheet as of March 30, 2002 gives effect to the offering of the old notes and the use of proceeds therefrom as if it had occurred as of March 30, 2002. The adjustments necessary to fairly present this pro forma consolidated financial information have been made based on available information and, in the opinion of management, are reasonable and are described in the accompanying notes. The pro forma consolidated financial information should not be considered indicative of actual results that would have been achieved had the Champion Aerospace acquisition and the offering of the old notes been consummated on the respective dates indicated and do not purport to indicate balance sheet data or results of operations as of any future date or for any future period. We cannot assure you that the assumptions used in the preparation of the pro forma consolidated financial information will prove to be correct. You should read the pro forma consolidated financial statements together with the "Use of Proceeds" and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections and the Consolidated Historical Financial Statements and the notes thereto, and other financial information included elsewhere in this prospectus. The acquisition of Champion Aerospace has been accounted for as a purchase. The purchase price consideration of $160.1 million in cash and $2.2 million of costs associated with the acquisition was funded through: (1) $147.6 million of new borrowings under our existing credit facility, (2) $14.3 million received (net of fees of $0.7 million) from the issuance of $15.0 million of Holdings 16% Cumulative Redeemable Preferred Stock, which we refer to as the 16% Holdings Preferred Stock, and warrants to purchase 1,381.9 shares of Holdings' common stock and (3) the use of $0.4 million of existing cash balances. We also borrowed an additional $15.0 million under the credit facility to pay $5.0 million of debt issuance costs and provide $10.0 million of working capital for future operations. The purchase price has been allocated to the assets acquired and liabilities assumed of Champion Aerospace based on a preliminary analysis of their fair values. 35 TRANSDIGM HOLDING COMPANY UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FISCAL YEAR ENDED SEPTEMBER 30, 2001 (IN THOUSANDS)
CHAMPION HOLDINGS AEROSPACE PRO FORMA HOLDINGS HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS(3) PRO FORMA ------------- ------------- -------------- --------- Net sales.................................... $ 200,773 $46,988 -- $ 247,761 Cost of sales................................ 118,525 30,038 -- 148,563 --------- ------- ------- --------- Gross profit................................. 82,248 16,950 -- 99,198 --------- ------- ------- --------- Operating expenses: Selling and administrative................. 20,669 3,483 -- 24,152 Amortization of intangibles................ 2,966 572 $ 1,663(a) 5,201 Research and development................... 2,943 1,342 -- 4,285 Federal-Mogul corporate charge............. -- 848 (848)(b) -- --------- ------- ------- --------- Total operating expenses................. 26,578 6,245 815 33,638 --------- ------- ------- --------- Income from operations....................... 55,670 10,705 (815) 65,560 Interest expense--net........................ 31,926 1,381 7,583(c) 40,890 --------- ------- ------- --------- Income before income taxes................... 23,744 9,324 (8,398) 24,670 Income tax provision......................... 9,386 3,506 (3,359)(d) 9,533 --------- ------- ------- --------- Net income................................... $ 14,358 $ 5,818 $(5,039) $ 15,137 ========= ======= ======= ========= EBITDA, As Defined(4)........................ $ 70,955 $12,355 $ 848 $ 84,158 ========= ======= ======= ========= Cash flow provided from (used by): Operating activities....................... $ 22,761 $ 503 $(2,945) $ 20,319 Investing activities....................... (173,588) (503) -- (174,091) Financing activities....................... 157,739 -- 53 157,792
36 TRANSDIGM HOLDING COMPANY UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS SIX MONTHS ENDED MARCH 30, 2002 (IN THOUSANDS)
HOLDINGS PRO FORMA HOLDINGS HISTORICAL(1) ADJUSTMENTS(3) PRO FORMA ------------- -------------- ---------- Net sales............................................... $117,613 -- $117,613 Cost of sales........................................... 64,148 -- 64,148 -------- ------- -------- Gross profit............................................ 53,465 -- 53,465 -------- ------- -------- Operating expenses: Selling and administrative............................ 10,475 -- 10,475 Amortization of intangibles........................... 3,167 -- 3,167 Research and development.............................. 1,372 -- 1,372 -------- ------- -------- Total operating expenses............................ 15,014 -- 15,014 -------- ------- -------- Income from operations.................................. 38,451 -- 38,451 Interest expense--net................................... 16,885 $ 1,617(c) 18,502 -------- ------- -------- Income before income taxes.............................. 21,566 (1,617) 19,949 Income tax provision.................................... 9,277 (647)(d) 8,630 -------- ------- -------- Net income.............................................. $ 12,289 $ (970) $ 11,319 ======== ======= ======== EBITDA, As Defined(4)................................... $ 45,092 $ -- $ 45,092 ======== ======= ======== Cash flow provided by (used in): Operating activities.................................. $ 25,456 $(1,126) $ 24,330 Investing activities.................................. (1,056) -- (1,056) Financing activities.................................. (6,646) 53 (6,593)
37 TRANSDIGM HOLDING COMPANY UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS TWELVE MONTHS ENDED MARCH 30, 2002 (IN THOUSANDS)
CHAMPION HOLDINGS AEROSPACE PRO FORMA HOLDINGS HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS(3) PRO FORMA ------------- ------------- -------------- ---------- Net sales................................... $ 240,522 $11,815 -- $ 252,337 Cost of sales............................... 139,853 8,452 -- 148,305 --------- ------- ------- --------- Gross profit................................ 100,669 3,363 -- 104,032 --------- ------- ------- --------- Operating expenses: Selling and administrative................ 22,605 1,037 -- 23,642 Amortization of intangibles............... 5,294 119 $ 440(a) 5,853 Research and development.................. 3,114 499 -- 3,613 Federal-Mogul corporate charge............ -- 213 (213)(b) -- --------- ------- ------- --------- Total operating expenses................ 31,013 1,868 227 33,108 --------- ------- ------- --------- Income from operations...................... 69,656 1,495 (227) 70,924 Interest expense--net....................... 34,530 345 3,382(c) 38,757 --------- ------- ------- --------- Income before income taxes.................. 35,126 1,150 (4,109) 32,167 Income tax provision........................ 14,394 460 (1,644)(d) 13,210 --------- ------- ------- --------- Net income.................................. $ 20,732 $ 690 $(2,465) $ 18,957 ========= ======= ======= ========= EBITDA, As Defined(4)....................... $ 88,077 $ 1,881 $ 213 $ 90,171 ========= ======= ======= ========= Cash flow provided by (used in): Operating activities...................... $ 35,980 $ 46 $(2,156) $ 33,870 Investing activities...................... (166,313) (46) -- (166,359) Financing activities...................... 152,709 -- 53 152,762
38 TRANSDIGM HOLDING COMPANY NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (1) The amounts in this column represent the reported results for Holdings for the applicable period, which include the acquisition of Champion Aerospace from May 31, 2001 through the end of the applicable period. (2) The amounts in this column represent the results for Champion Aerospace for the applicable period prior to May 31, 2001, the date of the acquisition. (3) The amounts in this column represent the adjustments necessary to give effect to the acquisition of Champion Aerospace, the offering of the old notes and the use of proceeds therefrom as follows: (a) This adjustment reflects Champion Aerospace goodwill amortization. (b) This reflects the reversal of the corporate charge allocated to Champion Aerospace by Federal-Mogul, its former parent company. (c) The adjustment to interest expense reflects the following (amounts in thousands):
TWELVE MONTHS FISCAL YEAR ENDED SIX MONTHS ENDED ENDED SEPTEMBER 30, 2001 MARCH 30, 2002 MARCH 30, 2002 ------------------ ---------------- -------------- Interest expense on the indebtedness related to the Champion Aerospace acquisition.......................... $5,962 -- $1,490 Amortization of debt issuance costs on the indebtedness related to the Champion Aerospace acquisition....... 672 -- 168 Elimination of the Champion Aerospace interest expense allocated by Federal-Mogul for the period prior to May 31, 2001......................... (1,381) -- (345) Elimination of the interest expense related to debt retired in connection with the offering of the old notes... (5,210) $(2,118) (4,913) Elimination of the amortization of debt issuance costs related to the debt retired in connection with the offering of the old notes............ (366) (218) (424) Additional interest expense related to the old notes........................ 7,781 3,891 7,781 Amortization of debt issuance costs on the old notes........................ 425 212 425 Amortization of premium on the notes... (300) (150) (300) ------ ------- ------ Total adjustment....................... $7,583 $ 1,617 $3,882 ====== ======= ======
A 0.125% increase or decrease in the assumed weighted average interest rate applicable to TransDigm Inc.'s indebtedness outstanding under TransDigm Inc.'s credit facility would change the pro forma interest expense and net income after giving effect to the offering of the old notes by $0.2 million and $0.1 million, respectively. 39 TRANSDIGM HOLDING COMPANY NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED) (d) The tax effect of pro forma adjustments to income before income taxes is based on the estimated applicable tax rates. (4) EBITDA, As Defined, represents earnings before interest, taxes, depreciation and amortization plus incremental inventory costs associated with the write up of inventory required by the purchase accounting treatment of the Champion Aerospace acquisition and the acquisition of a product line as follows (the amounts in the Champion Aerospace column represent the reported results for Champion Aerospace prior to May 31, 2001, the date of the acquisition) (all amounts in thousands): FISCAL YEAR ENDED SEPTEMBER 30, 2001
CHAMPION TRANSDIGM HOLDINGS AEROSPACE INC. PRO HOLDINGS HISTORICAL HISTORICAL FORMA PRO FORMA ---------- ---------- --------- --------- Net income.......................................... $14,358 $ 5,818 $17,001 $15,137 Income tax provision................................ 9,386 3,506 10,658 9,533 Interest expense.................................... 31,926 1,381 37,901 40,890 Depreciation and amortization....................... 8,646 1,650 11,959 11,959 Champion Aerospace and product line acquisition inventory purchase accounting adjustments......... 6,639 -- 6,639 6,639 ------- ------- ------- ------- EBITDA, As Defined.................................. $70,955 $12,355 $84,158 $84,158 ======= ======= ======= =======
SIX MONTHS ENDED MARCH 30, 2002
TRANSDIGM HOLDINGS INC. PRO HOLDINGS PRO HISTORICAL FORMA FORMA ---------- --------- ------------ Net income.................................................. $12,289 $12,252 $11,319 Income tax provision........................................ 9,277 9,339 8,630 Interest expense............................................ 16,885 16,860 18,502 Depreciation and amortization............................... 6,641 6,641 6,641 ------- ------- ------- EBITDA, As Defined.......................................... $45,092 $45,092 $45,092 ======= ======= =======
TWELVE MONTHS ENDED MARCH 30, 2002
CHAMPION TRANSDIGM HOLDINGS AEROSPACE INC. PRO HOLDINGS PRO HISTORICAL HISTORICAL FORMA FORMA ---------- ---------- --------- ------------ Net income........................................ $20,732 $ 690 $20,957 $18,957 Income tax provision.............................. 14,394 460 14,553 13,210 Interest expense.................................. 34,530 345 35,414 38,757 Depreciation and amortization..................... 11,938 386 12,764 12,764 Champion Aerospace and product line acquisition inventory purchase accounting adjustments....... 6,483 -- 6,483 6,483 ------- ------ ------- ------- EBITDA, As Defined................................ $88,077 $1,881 $90,171 $90,171 ======= ====== ======= =======
40 TRANSDIGM HOLDING COMPANY UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET(1) MARCH 30, 2002 (IN THOUSANDS)
HOLDINGS PRO FORMA HOLDINGS HISTORICAL ADJUSTMENTS(2) PRO FORMA ---------- -------------- --------- ASSETS Current assets: Cash and cash equivalents.............................. $ 28,975 -- $ 28,975 Accounts receivable, net............................... 32,536 -- 32,536 Inventories............................................ 49,600 -- 49,600 Deferred income taxes.................................. 9,749 -- 9,749 Prepaid expenses and other............................. 1,009 -- 1,009 --------- -------- --------- Total current assets................................. 121,869 -- 121,869 Property, plant and equipment--net....................... 39,677 -- 39,677 Intangible assets--net................................... 201,311 -- 201,311 Debt issue costs--net.................................... 11,230 $ 1,285(a) 12,515 Deferred income taxes and other.......................... 4,942 -- 4,942 --------- -------- --------- TOTAL.................................................... $ 379,029 $ 1,285 $ 380,314 ========= ======== ========= LIABILITIES & STOCKHOLDERS' DEFICIENCY Current liabilities: Current portion of long-term liabilities............... $ 18,965 $(10,308)(b) $ 8,657 Accounts payable....................................... 7,861 -- 7,861 Accrued liabilities.................................... 30,501 (707)(c) 29,794 --------- -------- --------- Total current liabilities............................ 57,327 (11,015) 46,312 Long-term debt--less current portion..................... 391,839 13,361(b) 405,200 Other non-current liabilities............................ 6,143 -- 6,143 --------- -------- --------- Total liabilities.................................... 455,309 2,346 457,655 --------- -------- --------- Cumulative Redeemable Preferred Stock.................... 14,558 -- 14,558 Holdings Redeemable common stock......................... 1,701 -- 1,701 Stockholders' equity (deficit): Common stock........................................... 102,080 -- 102,080 Warrants............................................... 1,934 -- 1,934 Retained earnings (deficit)............................ (196,052) (1,768)(a) (197,113) 707 (c) -- Accumulated other comprehensive loss................... (501) -- (501) --------- -------- --------- Total stockholders' equity (deficit)................. (92,539) (1,061) (93,600) --------- -------- --------- TOTAL.................................................... $ 379,029 $ 1,285 $ 380,314 ========= ======== =========
41 TRANSDIGM HOLDING COMPANY NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (1) The Unaudited Pro Forma Consolidated Balance Sheet assumes the offering of the old notes was consummated on March 30, 2002. We used the net proceeds of the offering of the old notes to repay existing indebtedness under our credit facility, including $33.0 million of indebtedness under our Tranche A facility, $19.5 million under our Tranche B facility and $21.5 million under our Tranche C facility and to pay related fees and expenses of $3.0 million. See "Use of Proceeds." (2) The amounts in this column represent the adjustments necessary to determine Holdings' pro forma consolidated balance sheet after giving effect to the offering of the old notes and the application of the proceeds therefrom. (a) This adjustment represents the recognition of debt issuance costs associated with the offering of the old notes as well as the write-off of debt issuance costs associated with the Tranche A facility, and the portions of the Tranche B and Tranche C facilities being paid off. (b) This adjustment represents the $77.0 million of proceeds from the old notes less the $33.0 million payoff of the Tranche A Facility, the $19.5 million paydown of the Tranche B facility and the $21.5 million paydown of the Tranche C Facility. (c) This adjustment represents the tax benefit of the write-off of debt issuance costs associated with the Tranche A facility, and the portions of the Tranche B and Tranche C facilities being paid off, based on the estimated applicable statutory tax rates. 42 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA The following table sets forth selected historical consolidated financial information of Holdings for each of the years in the five-year period ended September 30, 2001 and as of the end of each of such years and for each of the six-month periods ended March 31, 2001 and March 30, 2002 and as of the end of each such six-month period. The selected historical consolidated financial data for each of the years in the three-year period ended September 30, 2001 have been derived from Holdings' consolidated financial statements included elsewhere in this prospectus, which have been audited by Deloitte & Touche LLP. The selected historical consolidated financial data as of and for the six months ended March 31, 2001 and March 30, 2002 have been derived from Holdings' unaudited consolidated financial statements included elsewhere in this prospectus, which in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of operations, financial position, and cash flows. The results for the six months ended March 30, 2002 are not necessarily indicative of the results that may be expected for the entire year. Separate historical financial information for TransDigm Inc. is not presented since Holdings has no operations or assets separate from its investment in TransDigm Inc. and since the exchange notes will be guaranteed by Holdings and all direct and indirect subsidiaries of TransDigm Inc. (other than two wholly-owned, non-guarantor subsidiaries that have inconsequential assets, liabilities and equity, and whose only operations are the result of intercompany activity which is immediately dividended to TransDigm Inc.). We acquired Marathon Power Technologies Company on August 8, 1997, ZMP, Inc. and its wholly-owned subsidiary, Adams Rite Aerospace, Inc. on April 23, 1999 and Christie Electric Corp. on March 8, 2000. On March 26, 2001, we acquired an exclusive, worldwide license to produce and sell products composed of a lubrication and scavenge pump product line along with certain related equipment and inventory. We completed the Champion Aerospace acquisition on May 31, 2001. These acquisitions were accounted for as purchases. The results of operations of Marathon, ZMP, Adams Rite, Christie, Champion Aerospace and the acquired product line are included in Holdings' consolidated financial statements from the date of each of these acquisitions. You should read the following table together with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section and the Consolidated Historical Financial Statements and the notes thereto included elsewhere in this prospectus. All amounts are presented in thousands, except ratios.
FISCAL YEAR ENDED SEPTEMBER 30, SIX MONTHS ENDED ------------------------------ --------------------- MARCH 31, MARCH 30, 1997 1998 1999 2000 2001 2001 2002 -------- -------- -------- -------- -------- --------- --------- STATEMENT OF OPERATIONS DATA: Net sales......................................... $78,159 $110,868 $130,818 $150,457 $200,773 $77,864 $117,613 Gross profit...................................... 28,856 51,473 60,867 68,264 82,248 35,044 53,465 Selling and administrative........................ 7,561 10,473 13,620 16,799 20,669 8,539 10,475 Amortization of intangibles....................... 2,089 2,438 2,063 1,843 2,966 839 3,167 Research and development.......................... 1,116 1,724 2,139 2,308 2,943 1,201 1,372 Merger expenses................................... -- -- 40,012 -- -- -- -- ------- -------- -------- -------- -------- ------- -------- Operating income(1)............................... 18,090 36,838 3,033 47,314 55,670 24,465 38,451 Interest expense, net(2).......................... 3,463 3,175 22,722 28,563 31,926 14,281 16,885 Warrant put value adjustment...................... 4,800 6,540 -- -- -- -- -- ------- -------- -------- -------- -------- ------- -------- Pre-tax income (loss)............................. 9,827 27,123 (19,689) 18,751 23,744 10,184 21,566 Provision (benefit) for income taxes.............. 5,193 12,986 (2,772) 7,972 9,386 4,269 9,277 ------- -------- -------- -------- -------- ------- -------- Income (loss) before extraordinary item........... 4,634 14,137 (16,917) 10,779 14,358 5,915 12,289 Extraordinary item................................ (1,462) -- -- -- -- -- -- ------- -------- -------- -------- -------- ------- -------- Net income (loss)................................. $ 3,172 $ 14,137 $(16,917) $ 10,779 $ 14,358 $ 5,915 $ 12,289 ======= ======== ======== ======== ======== ======= ======== OTHER FINANCIAL DATA: Ratio of Earnings to Fixed Charges(3)................................ 3.7x 9.0x .1x 1.6x 1.7x 1.7x 2.3x
43
AS OF SEPTEMBER 30, AS OF ------------------------------------------------------- --------------------- MARCH 31, MARCH 30, 1997 1998 1999 2000 2001 2001 2002 -------- -------- --------- --------- --------- --------- --------- BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents..................... $ 5,397 $ 19,486 $ 2,729 $ 4,309 $ 11,221 $ 6,599 $ 28,975 Working capital............................... 16,520 16,654 35,531 39,437 55,672 32,525 64,542 Total assets.................................. 101,969 115,785 164,417 168,833 372,898 191,598 379,029 Long-term debt, including current portion..... 50,000 45,000 266,557 261,601 413,209 261,576 408,204 Total stockholders' equity (deficiency)....... 22,613 36,427 (127,622) (118,409) (103,388) (112,877) (92,539)
- ------------------------------ (1) Operating income includes the effect of a non-cash charge of $666 in fiscal 1997 and $242 in fiscal 1998 due to a purchase accounting adjustment to inventory associated with the acquisition of Marathon, a non-cash charge of $1,143 in fiscal 1999 due to a purchase accounting adjustment to inventory associated with the acquisition of Adams Rite, a non-cash charge of $185 in fiscal 2000 due to a purchase accounting adjustment to inventory associated with the acquisition of Christie, and non-cash charges of $3,193 and $3,446 in fiscal 2001 due to purchase accounting adjustments to inventory associated with the acquisitions of assets and liabilities from Champion Aerospace and a product line, respectively, and non-cash charges of $156 in the six month period ended March 31, 2001 due to purchase accounting adjustments to inventory associated with the acquisition of a product line. (2) All of the interest expense reported for fiscal 1997 and 1998 represents interest expense of TransDigm Inc. Holdings had no interest expense prior to the recapitalization discussed in Note 1 to the consolidated financial statements of Holdings included elsewhere in this prospectus. After the recapitalization, $2,989, $2,669 and $2,030 of interest expense was incurred by Holdings during fiscal 2001, 2000 and 1999, respectively and $1,642 and $1,468 of interest expense for the six months ended March 30, 2002 and March 31, 2001, respectively, relating to the Holdings PIK Notes. Holdings has no other interest expense. TransDigm Inc. is not an obligor or a guarantor under the Holdings PIK Notes. (3) For purposes of computing the ratio of earnings to fixed charges, earnings consist of earnings before income taxes plus fixed charges. Fixed charges consist of interest expense, amortization of debt expense and the portion (approximately 33%) of rental expense that management believes is representative of the interest component of rental expense. Earnings were insufficient to cover fixed charges by $20 for fiscal 1999 due to merger expenses of $40,012. 44 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE STATEMENTS IN THIS DISCUSSION REGARDING THE INDUSTRY OUTLOOK, OUR EXPECTATIONS REGARDING THE FUTURE PERFORMANCE OF OUR BUSINESSES, AND THE OTHER NON-HISTORICAL STATEMENTS IN THIS DISCUSSION ARE FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO NUMEROUS RISKS AND UNCERTAINTIES, INCLUDING BUT NOT LIMITED TO THE RISKS AND UNCERTAINTIES DESCRIBED IN THE "RISK FACTORS" SECTION. YOU SHOULD READ THE FOLLOWING DISCUSSION OF THE RESULTS OF OUR OPERATIONS AND FINANCIAL CONDITION TOGETHER WITH THE SECTIONS ENTITLED "RISK FACTORS" AND "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA" AND WITH OUR CONSOLIDATED HISTORICAL FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. OUR FISCAL YEAR ENDS ON SEPTEMBER 30 OF THE YEARS INDICATED. OVERVIEW We are a leading supplier of highly engineered aircraft components for use on nearly all commercial and military aircraft. Most of our products share three common characteristics: (1) highly engineered and proprietary; (2) significant aftermarket content; and (3) large shares of niche markets. We sell our products to commercial airlines, aircraft maintenance facilities, aircraft and aircraft system original equipment manufacturers, or OEMs, and various agencies of the United States and foreign governments. We generate the majority of our EBITDA from sales of replacement parts in the commercial and defense aftermarkets. Most of our OEM sales are on an exclusive sole source basis; therefore, in most cases, we are the only certified provider of these parts in the aftermarket. Aftermarket parts sales are driven by the size of the worldwide aircraft fleet, are relatively stable and generate recurring revenues over the life of an aircraft that are many times the size of the original OEM purchases. We have over 40 years of experience in most of our product lines, which allows us to benefit from a large and growing installed base of aircraft. For the fiscal year ended September 30, 2001, we generated pro forma net sales, operating income and EBITDA, As Defined, of $247.8 million, $65.6 million and $84.2 million, respectively; for the twelve months ended March 30, 2002, we generated pro forma net sales, operating income and EBITDA, As Defined, of $252.3 million, $70.9 million and $90.2 million, respectively; and for the six months ended March 30, 2002, we generated pro forma net sales, operating income and EBITDA, As Defined, of $117.6 million, $38.5 million and $45.1 million, respectively. In connection with the recapitalization that occurred during fiscal 1999, including the financing and the application of the proceeds thereof, we incurred certain nonrecurring costs and charges, consisting primarily of compensation costs for management bonuses and stock options that were canceled in conjunction with the recapitalization, the cost of terminating a financial advisory services agreement with an affiliate of one of our stockholders, the write-off of deferred financing costs, and professional, advisory and financing fees. We recorded a one-time charge of approximately $40.0 million ($29.0 million after tax) related to the recapitalization during the year ended September 30, 1999. Because the cash costs included in this charge were funded principally through the proceeds of the 1998 notes and borrowings under our credit facility, this cost did not materially impact our liquidity, ongoing operations or market position. For a discussion of the consequences of the incurrence of indebtedness in connection with the recapitalization, see "--Liquidity and Capital Resources." SIGNIFICANT ACQUISITION In the ordinary course of our business, we pursue acquisitions where we believe we can enhance value, reduce costs and develop new business. The following is a summary of a significant acquisition during fiscal 2001. 45 On May 31, 2001, we (through Champion Aerospace) acquired substantially all of the assets and certain liabilities of the Champion Aviation Products business from Federal Mogul Ignition Company, or Federal-Mogul, a wholly-owned subsidiary of Federal-Mogul Corporation, for approximately $160.1 million in cash, subject to adjustment based on the level of acquired working capital as of the closing of the acquisition. Champion Aerospace is engaged in researching, designing, developing, engineering, manufacturing, marketing, distributing and selling ignition systems and related components and other products, including, without limitation, igniters, spark plugs, exciters; for turbine and piston aircraft applications as well as other aerospace engine and industrial applications. RECENT DEVELOPMENTS The aerospace industry was hit particularly hard by the events of September 11, 2001. The immediate reduction in air traffic severely impacted the profitability of the airline industry, which began to curtail flights and stretch out or cancel airframe deliveries. Facing this expected downturn, we promptly developed a near term market forecast to use as a basis for fiscal 2002 planning. Based on this forecast, which we believed to be conservative, we implemented a series of actions to significantly reduce our cost structure while maintaining our ability to respond to market dynamics and develop new business. As part of this effort, we significantly reduced our workforce in early October. It currently appears that the overall market forecast we used for planning purposes was somewhat conservative. Although we continue to experience a significant downturn in the commercial aerospace markets, air travel appears to be recovering faster than we initially anticipated and we currently expect the aftermarket sector to recover slowly over the next four to six quarters as improvements in air traffic continue. We expect commercial transport OEM production rates to continue to decline in the near term as new transport delivery schedules are canceled or extended. We also expect regional and business jet operations and production rates to be negatively impacted to a lesser degree. Military activity is difficult to predict, but based upon our broad base of applications, we anticipate a modest increase in military orders over the near term. Sales generation during the first half of fiscal year 2002 was higher than we anticipated compared to our near term market forecast immediately following September 11th. Although we expect full year fiscal 2002 net sales to be below fiscal year 2001 pro forma net sales, we now believe the results will be better than the estimates we made immediately following September 11th. In addition, as a result of our rapid cost reductions, continued productivity efforts, proprietary niche market positions and continued new business generation, we believe pro forma EBITDA, As Defined, for the twelve months ended March 30, 2002 is reasonably indicative of our expected EBITDA, As Defined, for fiscal 2002. This section includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. We cannot assure you that our current outlook will prove to be correct. See "Risk Factors." SIGNIFICANT ACCOUNTING POLICIES Our consolidated financial statements reflect the selection and application of accounting policies that require management to make significant estimates and assumptions. Our significant accounting policies are described in Note 3 to our consolidated financial statements included elsewhere in this prospectus. Accounting estimates are an integral part of our consolidated financial statements and are based on knowledge and experience about past and current events and on assumptions about future events. Significant accounting estimates reflected in our consolidated financial statements for fiscal years 1999, 2000 and 2001 and for the six-months ended March 31, 2001 and March 30, 2002 include the valuation allowances for inventory obsolescence and uncollectible accounts receivable, accrued liabilities recognized for losses on uncompleted contracts, environmental costs, sales returns and repairs, and 46 preliminary allocations of purchase prices for business combinations along with the pending purchase price adjustment amounts. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, certain of our operating data as a percentage of net sales.
SIX MONTHS ENDED FISCAL YEAR ENDED SEPTEMBER 30, --------------------- --------------------------------- MARCH 31, MARCH 30, 1999 2000 2001 2001 2002 --------- --------- --------- --------- --------- Net sales........................... 100% 100% 100% 100% 100% --- --- --- --- --- Gross profit........................ 47 45 41 45 45 Selling and administrative.......... 10 11 10 11 9 Amortization of intangibles......... 2 1 2 1 3 Research and development............ 2 2 1 2 1 Merger expenses..................... 31 -- -- -- -- --- --- --- --- --- Operating income.................... 2 31 28 31 33 Interest expense--net............... 17 19 16 18 14 Provision (benefit) for income taxes............................. (2) 5 5 5 8 --- --- --- --- --- Net income (loss)................... (13)% 7% 7% 8% 11% === === === === ===
CHANGES IN RESULTS OF OPERATIONS SIX MONTHS ENDED MARCH 30, 2002 COMPARED WITH SIX MONTHS ENDED MARCH 31, 2001. - - NET SALES. Net sales increased by $39.7 million, or 51.0%, to $117.6 million for the six-month period ended March 30, 2002 from $77.9 million for the six-month period ended March 31, 2001, primarily due to the Champion Aerospace acquisition. - - GROSS PROFIT. Gross profit (net sales less cost of sales) increased by $18.4 million, or 52.6%, to $53.5 million for the six-month period ended March 30, 2002 from $35.1 million for the comparable six-month period last year. This increase is attributable to the higher sales discussed above. Gross profit as a percentage of net sales was 45% for both periods. - - SELLING AND ADMINISTRATIVE. Selling and administrative expenses increased by $2.0 million, or 22.7%, to $10.5 million for the six-month period ended March 30, 2002 from $8.5 million for the six-month period ended March 31, 2001 primarily due to the Champion Aerospace acquisition, partially offset by cost saving actions taken as a result of the September 11th terrorist attacks. Selling and administrative expenses decreased as a percentage of net sales to 9.0% for the six-month period ended March 30, 2002 from 11.0% for the six-month period ended March 31, 2001 due to increased selling and administrative efficiencies as a result of the Champion Aerospace acquisition and cost saving actions discussed previously. - - AMORTIZATION OF INTANGIBLES. Amortization of intangibles expense increased by $2.4 million for the six-month period ended March 30, 2002 to $3.2 million from $0.8 million for the six-month period ended March 31, 2001 primarily as a result of amortization of the intangible assets recognized in connection with the Champion Aerospace acquisition. - - RESEARCH AND DEVELOPMENT. Research and development expense increased $0.2 million, or 14.2%, from $1.2 million for the six-month period ended March 31, 2001 to $1.4 million for the six-month period ended March 30, 2002 as a result of additional research and development activities to 47 complement our sales efforts. Research and development expense, as a percentage of net sales, decreased from 2% for the six-month period ended March 31, 2001 to 1% for the six-month period ended March 30, 2002. - - INCOME FROM OPERATIONS. Operating income increased by $14.0 million, or 57.2%, from $24.5 million for the six-month period ended March 31, 2001 to $38.5 million for the six-month period ended March 30, 2002, primarily as a result of the factors referred to above. - - INTEREST EXPENSE. Interest expense increased by $2.6 million, or 18.2%, to $16.9 million for the six-month period ended March 30, 2002 from $14.3 million for the six-month period ended March 31, 2001. This was caused by an increase in the level of outstanding borrowings as a result of the Champion Aerospace acquisition partially offset by a decrease in interest rates. - - INCOME TAXES. Income tax expense as a percentage of income before income taxes was approximately 43% for the six-month period ended March 30, 2002 and was comparable to the 42% effective tax rate for the six-month period ended March 31, 2001. - - NET INCOME. We earned $12.3 million for the six-month period ended March 30, 2002 compared to net income of $5.9 million for the six-month period ended March 31, 2001, primarily as a result of the factors referred to above. FISCAL YEAR ENDED SEPTEMBER 30, 2001 COMPARED WITH FISCAL YEAR ENDED SEPTEMBER 30, 2000. - - NET SALES. Net sales increased by $50.3 million, or 33.4%, to $200.8 million for the year ended September 30, 2001 from $150.5 million for the year ended September 30, 2000. Approximately $34.3 million of the increase was due to the Champion Aerospace and product line acquisitions and the remainder was due to increased pricing and volume on existing products and new business opportunities. - - GROSS PROFIT. Gross profit (net sales less cost of sales) increased by $13.9 million, or 20.5%, to $82.2 million for the year ended September 30, 2001 from $68.3 million for the year ended September 30, 2000. This increase is attributable to higher sales discussed above. Gross profit as a percentage of net sales declined to 41% for the year ended September 30, 2001 from 45% for the year ended September 30, 2000, principally due to $6.6 million of non-cash charges from inventory purchase accounting adjustments related to the Champion Aerospace and product line acquisitions. - - SELLING AND ADMINISTRATIVE. Selling and administrative expenses increased by $3.9 million, or 23%, to $20.7 million for the year ended September 30, 2001 from $16.8 million for the year ended September 30, 2000. Approximately $2.1 million of the increase was due to the Champion Aerospace and product line acquisitions and the remainder was due to additional new business initiatives. Selling and administrative expenses as a percentage of net sales decreased slightly from 11% for the year ended September 30, 2000 to 10% for the year ended September 30, 2001. - - AMORTIZATION OF INTANGIBLES. Amortization of intangibles increased by $1.2 million, or 60.9%, to $3.0 million for the year ended September 30, 2001 from $1.8 million for the year ended September 30, 2000. This increase is primarily the result of amortization of the intangible assets recognized in connection with the Champion Aerospace acquisition. - - RESEARCH AND DEVELOPMENT. Research and development expense increased $0.6 million, or 27.5%, to $2.9 million for the year ended September 30, 2001 compared to $2.3 million for the year ended September 30, 2000, principally due to the Champion Aerospace acquisition and additional research and development activities to complement our sales efforts. Research and development expense as a percentage of net sales decreased slightly from 2% for the year ended September 30, 2000 to 1% for the year ended September 30, 2001. 48 - - OPERATING INCOME. Operating income increased $8.4 million, or 17.7%, from $47.3 million for the year ended September 30, 2000 to $55.7 million for the year ended September 30, 2001, due to the factors described previously. - - INTEREST EXPENSE. Interest expense increased by $3.3 million, or 11.8%, to $31.9 million for the year ended September 30, 2001 from $28.6 million for the year ended September 30, 2000. This was primarily caused by an increase in the average level of outstanding borrowings in connection with the Champion Aerospace acquisition, partially offset by a decrease in interest rates. - - INCOME TAXES. Income tax expense as a percentage of income before income taxes was 39.5% for fiscal 2001 compared to 42.5% for fiscal 2000, primarily due to increased tax benefits generated by foreign sales and less non-deductible expenses. - - NET INCOME. We earned $14.4 million for the year ended September 30, 2001 compared to $10.8 million for the year ended September 30, 2000 primarily as a result of the factors referred to above. FISCAL YEAR ENDED SEPTEMBER 30, 2000 COMPARED WITH FISCAL YEAR ENDED SEPTEMBER 30, 1999. - - NET SALES. Net sales increased by $19.6 million, or 15%, to $150.4 million for the year ended September 30, 2000 from $130.8 million for the year ended September 30, 1999, principally due to the acquisition of ZMP, Inc. and its wholly-owned subsidiary Adams Rite in April 1999 partially offset by declines in the net sales of AeroControlex and AdelWiggins due to an industry-wide spare parts inventory correction. - - GROSS PROFIT. Gross profit (net sales less cost of sales) increased by $7.4 million, or 12.2%, to $68.3 million for the year ended September 30, 2000 from $60.9 million for the year ended September 30, 1999. This increase is attributable to higher sales discussed above. Gross profit as a percentage of net sales was 45% for the year ended September 30, 2000 and 47% for the year ended September 30, 1999. This change was the result of the acquisition of ZMP in April 1999, which has a slightly lower gross profit margin than us as a whole, as well as the decline in sales at AeroControlex and AdelWiggins discussed previously. - - SELLING AND ADMINISTRATIVE. Selling and administrative expenses increased by $3.2 million, or 23.3%, to $16.8 million for the year ended September 30, 2000 from $13.6 million for the year ended September 30, 1999. This increase principally resulted from the acquisition of ZMP and additional new business initiatives. Selling and administrative expenses as a percentage of net sales increased slightly from 10% for the year ended September 30, 1999 to 11% for the year ended September 30, 2000. - - AMORTIZATION OF INTANGIBLES. Amortization of intangibles decreased by $0.3 million, or 10.7%, to $1.8 million for the year ended September 30, 2000 from $2.1 million for the year ended September 30, 1999. This decrease is the result of certain intangibles becoming fully amortized. - - RESEARCH AND DEVELOPMENT. Research and development expense increased $0.2 million, or 7.9%, to $2.3 million for the year ended September 30, 2000 compared to $2.1 million for the year ended September 30, 1999, principally due to the acquisition of ZMP in April 1999. Research and development expense as a percentage of net sales was 2% for each of the years ended September 30, 2000 and September 30, 1999. 49 - - MERGER EXPENSES. Merger costs totaling $40.0 million were incurred during fiscal 1999 in connection with the merger and recapitalization. The nature of the merger-related charges is detailed below:
(IN THOUSANDS) -------------- Compensation expense on stock options....................... $19,437 Management bonuses.......................................... 6,450 Termination of financial advisory services agreement........ 5,850 Professional fees and expenses.............................. 7,201 Write-off of deferred financing costs....................... 552 Other....................................................... 522 ------- $40,012 =======
- - OPERATING INCOME. Operating income increased $44.3 million from $3.0 million for the year ended September 30, 1999 to $47.3 million for the year ended September 30, 2000. Operating income, excluding merger expenses, increased $4.3 million, or 9.9%. This increase is primarily attributable to the acquisition of ZMP. - - INTEREST EXPENSE. Interest expense increased by $5.9 million, or 25.7%, to $28.6 million for the year ended September 30, 2000 from $22.7 million for the year ended September 30, 1999. This increase results from the increase in the average level of outstanding borrowings in connection with the recapitalization and the acquisition of ZMP and an increase in interest rates. - - INCOME TAXES. Income tax expense (benefit) as a percentage of income (loss) before income taxes was 42.5% for fiscal 2000 and (14.1%) for fiscal 1999. The tax provision recorded in fiscal 2000 was significantly impacted by non-deductible goodwill amortization, particularly the amortization of the goodwill recognized in conjunction with the acquisition of ZMP. The tax benefit recorded for fiscal 1999 was significantly impacted by the non-deductible expenses incurred in connection with the recapitalization. - - NET INCOME (LOSS). We earned $10.8 million for the year ended September 30, 2000 compared to a net loss of $16.9 million for the year ended September 30, 1999 primarily as a result of the factors referred to above. LIQUIDITY AND CAPITAL RESOURCES OPERATING ACTIVITIES. We generated approximately $25.5 million of cash from operating activities during the six months ended March 30, 2002 compared to approximately $12.2 million during the six months ended March 31, 2001. The increase is primarily due to increased earnings from the Champion Aerospace acquisition along with the cost saving initiatives we undertook as a result of the September 11th terrorist attacks. We generated approximately $22.7 million of cash from operating activities during the year ended September 30, 2001 and approximately $16.3 million during the year ended September 30, 2000. Approximately $16.2 million of cash was used in operating activities during the year ended September 30, 1999. The increase in cash generated by operating activities from fiscal 2000 to fiscal 2001 is primarily due to increased earnings from the acquisitions and the cost saving initiatives described above. The change from fiscal 1999 to fiscal 2000 is due to the one-time merger expenses of $40.0 million in fiscal 1999 and improved operating results in fiscal 2000, partially offset by an increase in interest expense in fiscal 2000 due to the recapitalization and an increase in interest rates. INVESTING ACTIVITIES. Cash used in investing activities was approximately $1.1 million during the six months ended March 30, 2002 compared to approximately $8.3 million during the six months ended March 31, 2001. The change is mainly due to the product line acquisition in the first six months of 2001 and a decrease in capital expenditures. Cash used in investing activities was approximately 50 $173.6 million during the year ended September 30, 2001, approximately $5.1 million during the year ended September 30, 2000 and approximately $44.6 million during the year ended September 30, 1999. The increase from fiscal 2000 to fiscal 2001 is mainly due to the Champion Aerospace acquisition and the decrease from fiscal 1999 to fiscal 2000 is primarily due to the use of $41.6 million of cash in fiscal 1999 for the ZMP and Adams Rite acquisition. Marathon Power Technologies Company, our wholly-owned subsidiary, used approximately $2.4 million of cash in fiscal 2000 for the acquisition of Christie Electric Corp. FINANCING ACTIVITIES. Cash used in financing activities during the six months ended March 30, 2002 was approximately $6.6 million compared to approximately $1.6 million during the six months ended March 31, 2001. This increase in cash used in financing activities was due to decreased borrowings (in March 2001, borrowings were made to finance the product line acquisition) and an increase in the repayment of debt obligations. Cash provided by (used in) financing activities during the year ended September 30, 2001 was approximately $157.7 million, approximately $(9.6) million during the year ended September 30, 2000 and approximately $44.1 million during the year ended September 30, 1999. The change in financing cash flows from fiscal 2000 to fiscal 2001 was due to our incurrence of substantial indebtedness as a result of the Champion Aerospace acquisition and the change in financing cash flows from fiscal 1999 to fiscal 2000 is due to the incurrence and refinancing of substantial debt as a result of the recapitalization and the ZMP and Adams Rite acquisition. CAPITAL RESOURCES. Our credit facility consists of (1) a $30.0 million revolving credit facility maturing six years from December 3, 1998, which we refer to as the execution date, and (2) a term loan facility in an aggregate principal amount of $263.8 million, consisting of a $43.3 million Tranche A facility maturing six years from the execution date, a $105.5 million Tranche B facility maturing seven and a half years from the execution date and a $115.0 million Tranche C facility maturing eight and a half years from the execution date. As of March 30, 2002, the outstanding balances of our Tranche A, B and C facilities were $35.5 million, $104.3 million and $114.1 million, respectively. In connection with the offering of the old notes, we repaid the Tranche A facility and a portion of each of the Tranche B and Tranche C facilities. The interest rate for the credit facility is, at our option, either (A) a floating rate equal to the base rate plus the applicable margin, as defined in the credit facility, or (B) the Eurodollar rate for fixed periods of one, two, three, or six months, plus the applicable margin. The overall interest rate and applicable margin are determined based on (1) in the case of the Tranche A facility and the revolving credit facility, (A) an interest rate determined by the base rate, plus 2.25%, 2.00%, 1.75% or 1.50% depending on Holdings' ability to achieve the respective debt coverage ratio specified in the credit facility, as amended; or (B) an interest rate determined by the Eurodollar Rate, plus 3.25%, 3.00%, 2.75% or 2.50% depending on Holdings' ability to achieve the respective debt coverage ratio specified in the credit facility, as amended; and (2) in the case of the Tranche B facility and the Tranche C facility, (A) an interest rate determined by the base rate, plus 2.50%; or (B) an interest rate determined by the Eurodollar rate, plus 3.50%. The credit facility is subject to mandatory prepayment with a defined percentage of net proceeds from certain asset sales, insurance proceeds or other awards that are payable in connection with the loss, destruction or condemnation of any assets, certain new debt and equity offerings and 50% of excess cash flow (as defined in the credit facility) in excess of a predetermined amount under the credit facility. The credit facility requires us to repay the outstanding indebtedness on a periodic basis through the various maturity dates. The credit facility also contains restrictive covenants that, among other things, limit the incurrence of additional indebtedness, the payment of dividends, transactions with affiliates, asset sales, acquisitions, mergers and consolidations, liens and encumbrances, and prepayments of other indebtedness. 51 We repaid the Tranche A facility and part of the Tranche B and C facilities with a portion of the proceeds from the offering of the old notes. In addition, we amended our credit facility in connection with the offering of the old notes. The amendments to the credit facility: - allowed us to incur the indebtedness represented by the old notes; - allow us to pay dividends to Holdings for the purpose of retiring the Holdings PIK Notes; - allow us to incur up to $150.0 million of additional bank borrowings or subordinated debt (for which there are currently no commitments to provide such funds), subject to certain restrictions, including a requirement that such debt must be used: - to finance acquisitions permitted by the amended credit facility, or - to pay the dividends to Holdings to retire the Holdings PIK Notes; - allow us to effect permitted acquisitions, with the aggregate amount paid for all such permitted acquisitions not to exceed $225.0 million; - require that at least $10.0 million must remain unused and available under our $30.0 million revolving credit facility immediately following any acquisition; - modified certain existing financial covenants; and - waive any mandatory prepayment from excess cash flow for fiscal 2002. The Chairman of our Board of Directors, Mr. Peacock, holds a presently-exercisable put option enabling him to require us to purchase up to 80% of his common stock (including shares acquired through the exercise of stock options and held at least six months) at fair value, subject to certain restrictions under our long-term debt agreements and subject to his continued service as Chairman of the Board of Holdings and us. As of March 30, 2002, 8,114 shares of common stock that Mr. Peacock can acquire under presently-exercisable stock options are subject to the put. The estimated fair value of such shares, net of the exercise price of the related stock options, totaled approximately $8.6 million at March 30, 2002. Mr. Peacock and other members of management hold put rights that may become exercisable in the future with respect to other shares of common stock, including shares of common stock subject to options. See "Management--Employment Agreements" and "Management--Stock Option Plans." The prepayment provision of the Holdings PIK Notes contains a prepayment penalty that begins to increase on December 4, 2003. We may pay a dividend to Holdings to repurchase the Holdings PIK Notes prior to December 4, 2003. The amendment to our credit facility will permit this dividend. In addition, we anticipate that on the date of its payment, this dividend will be permitted under the restricted payments covenant of the indenture. See "Description of the Exchange Notes--Certain Covenants--Limitation on Restricted Payments." 52 The following table sets forth contractual cash obligations for the next several fiscal years giving effect to (1) the offering of the old notes and (2) the use of the net proceeds from the offering to repay all of the Tranche A facility and a pro rata portion of each of the Tranche B and C facilities under the credit facility (dollars in millions):
2007 AND 2002(1) 2003 2004 2005 2006 THEREAFTER TOTAL -------- -------- -------- -------- -------- ---------- -------- CONTRACTUAL CASH OBLIGATIONS: Long-Term Debt(2)................... $1.5 $4.6 $13.5 $37.7 $56.4 $295.5 $409.2 Operating Leases.................... .6 1.2 1.2 1.1 1.0 5.5 10.6 Redeemable Preferred Stock.......... -- -- -- -- -- 14.6 14.6 Other Long-Term Obligations......... 0.4 2.2 2.2 2.2 -- -- 7.0 ---- ---- ----- ----- ----- ------ ------ Total Contractual Cash Obligations..................... $2.5 $8.0 $16.9 $41.0 $57.4 $317.6 $441.4 ==== ==== ===== ===== ===== ====== ======
- ------------------------ (1) Beginning March 31, 2002. (2) This amount includes $29.2 million relating to the Holdings PIK Notes. As mentioned earlier, TransDigm may pay a dividend to Holdings to be used to prepay the Holdings PIK Notes in fiscal 2004. This amount excludes a $2.0 million premium received in connection with the offering of the old notes which will be amortized over the term of the notes. Our primary future cash needs will consist of debt service and capital expenditures. We incur capital expenditures for the purpose of maintaining and replacing existing equipment and facilities and, from time to time, for facility expansion. Capital expenditures totaled approximately $4.5 million and $4.4 million during fiscal 2001 and 2000, respectively. We expect our capital expenditures will increase moderately in the future. We may from time to time seek to retire our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. In addition, we may issue additional debt if prevailing market conditions are favorable to doing so. We intend to pursue additional acquisitions that present opportunities to realize significant synergies, operating expense economies or overhead cost savings or to increase our market position. We regularly engage in discussions with respect to potential acquisitions and investments. However, there are no binding agreements with respect to any material acquisitions at this time, and there can be no assurance that we will be able to reach an agreement with respect to any future acquisition. Our acquisition strategy may require substantial capital, and no assurance can be given that we will be able to raise any necessary funds on terms acceptable to us or at all. If we incur additional debt to finance acquisitions, our total interest expense will increase. Our ability to make scheduled payments of principal of, or to pay the interest on, or to refinance, our indebtedness, or to fund planned capital expenditures and research and development efforts, will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our current level of operations and anticipated cost savings and operating improvements, we believe our cash flow from operations, available cash and available borrowings under our credit facility, will be adequate to meet our future liquidity needs for at least the next several years. We cannot assure you, however, that our business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized on schedule or at all or that future borrowings will be available to us under our credit facility in an amount sufficient to enable us 53 to pay our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness, including our credit facility and the notes, on commercially reasonable terms or at all. See "Risk Factors." INFLATION Many of our raw materials and operating expenses are sensitive to the effects of inflation, which could result in changing operating costs. The effects of inflation on our businesses during the years ended September 30, 2001, 2000 and 1999 and the six months ended March 30, 2002 and March 31, 2001 were not significant. ADDITIONAL DISCLOSURE REQUIRED BY INDENTURE Separate historical financial information for TransDigm Inc. is not presented since Holdings has no operations or assets separate from its investment in TransDigm Inc. and since the exchange notes will be guaranteed by Holdings and all direct and indirect subsidiaries of TransDigm Inc. (other than two wholly-owned, non-guarantor subsidiaries that have inconsequential assets, liabilities and equity, and whose only operations are the result of intercompany activity which is immediately dividended to TransDigm Inc.). In addition, Holdings' only obligations at March 30, 2002 other than its guarantees of debt under the indenture related to the 1998 notes and the credit facility consist of (1) the Holdings PIK Notes of $29.2 million due 2009; (2) the Holdings 16% Preferred Stock with an aggregate liquidation preference of $15.0 million; and (3) "put" rights held by certain persons to require Holdings to repurchase, at fair market value, shares of Holdings' common stock (including shares that may be acquired through the exercise of stock options) held by such persons. The Holdings PIK Notes bear interest in the form of additional Holdings PIK Notes at 12% annually and the Holdings 16% Preferred Stock accrue dividends in cash, or at Holdings' option, in the form of additional shares of Holdings cumulative redeemable preferred stock, at 16% annually. Interest expense recognized on the Holdings PIK Notes during the six-month periods ended March 30, 2002 and March 31, 2001 was $1.6 million and $1.5 million, respectively. Dividend accrual on the Holdings 16% Preferred Stock (which was issued on May 31, 2001) was $1.2 million during the six-month period ended March 30, 2002. For a discussion of Holdings' obligation to repurchase its common stock pursuant to put rights held by members of management, see "--Liquidity and Capital Resources." Because the common stock subject to put rights is required to be repurchased at fair market value, the value of Holdings' repurchase obligation will increase to the extent the fair market value of Holdings' common stock increases. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK We are subject to interest rate risk with respect to borrowings under our credit facility as the interest rates on such borrowings vary with market conditions and, thus, the amount of outstanding borrowings approximates the fair value of the indebtedness. The weighted average interest rate on the $254.0 million of borrowings outstanding under the credit facility at March 30, 2002 and the $260.6 million of borrowings outstanding under the credit facility at September 30, 2001 were 5.4% and 6.9%, respectively. The effect of a hypothetical one percentage point increase in interest rates would increase our annual interest costs under the credit facility by approximately $2.5 million based on the amount of borrowings outstanding at March 30, 2002. Also outstanding at March 30, 2002 was $125.0 million of our indebtedness in the form of the 1998 notes, $29.2 million of the Holdings PIK Notes and Holdings 16% Preferred Stock with an aggregate liquidation preference of $15.0 million. At September 30, 2001, the recorded amounts of these obligations were $125.0 million, $27.6 million and $13.2 million, respectively. The interest rates on the 1998 notes and the Holdings PIK Notes are fixed at 10 3/8% and 12% per year, respectively, and the 54 dividends accrue on the Holdings 16% Preferred Stock at 16% annually. The fair value of the 1998 notes was approximately $126.3 million at March 30, 2002 and $99.4 million at September 30, 2001, based upon quoted market prices. A determination of the fair value of each of the Holdings PIK Notes and the Holdings 16% Preferred Stock is not considered practicable because they are held by related parties and are not publicly traded. For a discussion of Holdings' obligation to repurchase its common stock pursuant to put rights held by members of management, see "--Liquidity and Capital Resources." Because the common stock subject to put rights is required to be repurchased at fair market value, the value of Holdings' repurchase obligation will increase to the extent the fair market value of Holdings' common stock increases. NEW ACCOUNTING STANDARDS In June 2001, the FASB issued Statements of Financial Accounting Standards ("SFAS") No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141, which is effective for all business combinations initiated after June 30, 2001, requires that the purchase method of accounting be used to account for such transactions. SFAS No. 141 also established two criteria that must be met for intangible assets (other than goodwill) to be recognized in accounting for a business combination, the contractual-legal criterion and the separability criterion. The issuance of SFAS No. 141 had no impact on our consolidated financial statements as of and for the year ended September 30, 2001. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Amortization of goodwill, including goodwill recorded as a result of past business combinations, will cease upon adoption of this statement, which must occur no later than the first quarter of our year ending September 30, 2003. In addition, upon implementation of this statement, the carrying amounts of intangible assets recorded in connection with past business combinations that do not meet the criteria in SFAS No. 141 for recognition apart from goodwill, must be reclassified to goodwill when SFAS No. 142 is implemented. We have not determined the impact that this statement will have on our consolidated financial position or results of operations. In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. This statement requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. The amount recorded as a liability will be capitalized by increasing the carrying amount of the related long-lived asset. Subsequent to initial measurement, the liability is accreted to the ultimate amount anticipated to be paid and is also adjusted for revisions to the timing of the amount of estimated cash flows. The capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The provisions of this statement become effective for our fiscal year ending September 30, 2003. We have not determined the impact, if any, that this statement will have on our financial statements. In August 2001, the FASB issued SFAS No. 144, Accounting for Impairment or Disposals of Long-Lived Assets. This statement specifies the accounting model to be used for long-lived assets to be disposed of by sale (whether previously held and used or newly acquired) and by broadening the presentation of discontinued operations to include more disposal transactions. The provisions of this statement become effective for our fiscal year ending September 30, 2003. We have not determined the impact that this statement will have on our consolidated financial position or results of operations. 55 BUSINESS OVERVIEW We are a leading supplier of highly engineered aircraft components for use on nearly all commercial and military aircraft. Most of our products share three common characteristics: (1) highly engineered and proprietary; (2) significant aftermarket content; and (3) large shares of niche markets. We sell our products to commercial airlines, aircraft maintenance facilities, aircraft and aircraft system original equipment manufacturers, or OEMs, and various agencies of the United States and foreign governments. We generate the majority of our EBITDA from sales of replacement parts in the commercial and defense aftermarkets. Most of our OEM sales are on an exclusive sole source basis; therefore, in most cases, we are the only certified provider of these parts in the aftermarket. Aftermarket parts sales are driven by the size of the worldwide aircraft fleet, are relatively stable and generate recurring revenues over the life of an aircraft that are many times the size of the original OEM purchases. We have over 40 years of experience in most of our product lines, which allows us to benefit from a large and growing installed base of aircraft. For the twelve months ended March 30, 2002, we generated pro forma net sales, operating income and EBITDA, As Defined, of $252.3 million, $70.9 million and $90.2 million, respectively. We focus our businesses on continual value creation. Our business philosophy is centered around three value principles: (1) obtaining profitable new business by applying our technical capabilities to specific engineering problems; (2) striving to continually improve productivity; and (3) pricing our product to fairly reflect the unique value provided. Additionally, we continually seek acquisition opportunities compatible with our value creation philosophy. We have a demonstrated capability to acquire, integrate and improve aerospace businesses. We differentiate ourselves based on our engineering and manufacturing capabilities, and typically will not bid on non-proprietary "build to print" business. Our products have strong brand names within the airline industry and a reputation for high quality, reliability and customer service. We focus on developing highly customized products to solve specific problems of aircraft operators and manufacturers. While aftermarket sales accounted for approximately 60% of our fiscal 2001 pro forma net sales and OEM sales accounted for the remaining 40%, aftermarket sales typically carry a substantially higher gross margin than sales to OEMs. We were formed in 1993 through a management-led buyout of the Aerospace Components Group of IMO Industries Inc. Since our formation, we have successfully established leadership positions in well-defined, profitable niches of the aircraft components market that we believe offer sustainable growth opportunities. INDUSTRY OVERVIEW The aircraft components industry is highly fragmented, consisting of a large number of small, specialized companies and a limited number of well-capitalized companies. We compete in product-specific markets that we estimate range in size from $10 million to $100 million in annual revenues. We believe that the small size of our markets, combined with the industry's stringent regulatory approval and certification requirements and the need to make significant investments in research and development, reduces the risk of new entrants. Specifically, we believe most of our markets are too small to attract large aerospace companies and that the financial resources and technical expertise required to introduce or improve a product, and thereby compete in these markets, are beyond the reach of most small companies. In addition, all potential competitors must meet the certification requirements and qualification approvals required by the FAA as well as aircraft and engine OEMs. The aerospace industry was significantly impacted by the events of September 11th. The immediate reduction in air traffic severely impacted the profitability of the airline industry, which began to curtail 56 flights and stretch out or cancel airframe deliveries. Since the September 11th system shutdown, there has been a slow, but steady, recovery in air traffic trends for the worldwide airlines. According to the Air Transport Association, worldwide revenue passenger miles were down approximately 9% in March 2002 versus the prior year, as compared to a decline of approximately 50% in the second half of September 2001 and a decline of approximately 26% in October 2001 versus the prior year. AFTERMARKET The large worldwide aircraft fleet that must be serviced regularly to meet FAA standards and aircraft reliability requirements creates a large and profitable aftermarket for replacement parts. Demand for aftermarket parts depends on revenue passenger miles and, to a lesser extent, on airline profitability, each of which has historically been correlated with changes in general economic conditions and the size and age of the worldwide aircraft fleet. We believe that aftermarket sales will continue to be an attractive market as a result of the following factors: - Worldwide large commercial transport revenue passenger miles, or RPMs, have increased from approximately 680 billion in 1981 to approximately two trillion in 2001, with 1991 and 2001 representing the only two years in the last twenty in which annual revenue passenger miles decreased. The FAA forecasts that revenue passenger miles will recover to pre-September 11th levels by the end of 2003 and will continue to grow at an average growth rate of approximately 5% through 2013. The aircraft fleet installed base has continued to increase over time despite volatility in aircraft deliveries and retirements. At the end of 2001, the large commercial aircraft fleet of Boeing and Airbus aircraft consisted of approximately 13,700 aircraft, a compound annual increase of approximately 4% from approximately 9,200 aircraft in 1991. Following September 11th, grounded aircraft in storage rose from 1,100 in August 2001 to approximately 2,000 as of December 2001. It is uncertain how many of these aircraft will return to service. - The regional airline industry has been a fast growing sector within recent years as a result of the introduction of regional jets in the late 1980s. RPMs for U.S. carriers grew from 7.8 billion in 1991 to 25.7 billion in 2001, a compound annual increase of approximately 12.5%. The installed base of regional jets has increased since their introduction in the late 1980s to approximately 1,200 aircraft at the end of 2001. The FAA forecasts that regional carriers will continue to experience secular growth and that RPMs for the entire regional airline industry (jets and turboprops) will increase at an average annual growth rate greater than 7% through 2013. - The business jet sector has also experienced rapid growth in recent years with the introduction of fractional ownership programs such as Net Jets and Flight Options. Hours flown by general aviation aircraft operating with turbine-powered engines has increased from 2.3 million in 1994 to 4.7 million in 2000, a compound annual increase of approximately 13%. The FAA forecasts that business jet hours should increase by approximately 4% annually over the next 10 years. - Aircraft capacity utilization remains at high levels. Passenger load factors (measured as the percentage of occupied seats per flight) for U.S. carriers as reported by the Air Transport Association increased from 63% in 1991 to over 70% prior to September 11th. Passenger load factors improved to over 75% in March 2002 from a trough in September 2001 of 59% as airlines have had positive trends in airline traffic and reduced capacity since the September 11th shutdown. Load factors are currently at levels that are significantly higher than prior cycles. OEM Demand for OEM components depends on new aircraft deliveries. Demand for new aircraft is a function of (1) demand for air travel, (2) aircraft operator profitability, (3) fleet age, (4) regulatory 57 mandates such as noise reduction, and (5) the lag time between order and delivery, which causes airlines to order aircraft according to perceived future need. - In the early 1990's, many airlines significantly reduced spending on new aircraft due to weakened financial performance. With the return of airline profitability, commercial OEMs experienced a surge in large aircraft deliveries from fewer than 400 aircraft in 1995 to a peak of 914 aircraft in 1999. As a result of the events of September 11th and a weakened economy, many industry analysts expect aircraft deliveries to trend significantly downward from over 850 aircraft delivered in 2001. - The regional jet aircraft market has grown significantly in recent years as large airlines have realized significant cost savings by passing shorter routes to regional carriers. The new turbine engine aircraft also offers greater comfort and flying range, attracting increasing numbers of passengers. Regional jet deliveries have increased significantly to over 300 in 2001 since their introduction in the late 1980s. - The business jet market is driven by, among other factors, the increasing popularity of fractional ownership and the increasing demand for more expedient and convenient travel. Deliveries of business jets have increased significantly in recent years, growing from approximately 250 aircraft annually in the early 1990s to in excess of 700 deliveries in 2000. - While military spending for new aircraft has significantly declined with the end of the cold war, military parts and repair spending has been relatively stable for the last several years, as existing platforms require parts to remain operational. The recent terrorist attacks and significant concerns over military readiness are driving an increase in defense spending forecasts. COMPETITIVE STRENGTHS We believe our key competitive strengths are: - LARGE INSTALLED PRODUCT BASE AND RECURRING REVENUE STREAM. We estimate that approximately 75% of our net sales are derived from products for which we have achieved sole source designation, and that over 90% of our net sales are derived from products of proprietary design. As a result, we have a large and growing installed base of products on large commercial transport aircraft as well as regional, business and military aircraft platforms. This installed base affords us the opportunity to capture a long-term stream of highly profitable aftermarket revenues. Over the life of an aircraft, sales of replacement parts can generate revenues many times the size of the original OEM purchases. Aftermarket sales generate most of our EBITDA because they typically carry gross margins that are significantly higher than those generated from OEM sales. - PROVEN ABILITY TO DEVELOP NEW PRODUCTS. We have a successful record of introducing solutions-oriented products. We work closely with aircraft operators and OEMs to identify their unmet needs, such as a component that fails to meet performance expectations or that requires excessive maintenance. We then utilize our engineering and design capabilities to develop a prototype for a component that increases the value of the product to the customer. After we have fulfilled rigorous testing requirements and obtained necessary regulatory approvals, the product is made available for sale in the aftermarket and to OEMs. We believe that our ability to successfully develop new products has contributed to our significant growth. - DIVERSIFIED BUSINESS MIX. Our business is diversified between sales in the aftermarket and sales to OEMs. In addition, each of these segments is further diversified among the large commercial transport, regional, business and military aircraft markets. As a result, we are not overly dependent on any one segment or platform. The large commercial transport OEM market accounted for approximately 15% of our net sales in fiscal 2001. 58 - LEADING POSITIONS IN NICHE MARKETS. With over 40 years of experience in most of our product lines, we have well-established and highly regarded products and trade names, such as "Adel," "Wiggins," "Controlex," "Marathon" and "Champion Aerospace-Registered Trademark-," and are a leader in many of our product lines. For example, Champion Aerospace-Registered Trademark- has one of the strongest brands in the aerospace industry with a 95-year history as a leader in the aircraft ignitor market. - SUCCESSFUL TRACK RECORD OF INTEGRATING ACQUISITIONS. Our experienced management team has a proven track record of consolidating operations, reducing overhead and rationalizing costs. Management has successfully integrated a number of acquisitions. In each case, management has substantially improved the operating margins through the systematic implementation of our three value generation principles. BUSINESS STRATEGY Key elements of our strategy are: - PROVIDE VALUE ADDED PRODUCTS TO CUSTOMERS. We will continue to focus on marketing and manufacturing highly engineered products to customers that place a premium on our capabilities. We have been effective in communicating to aircraft operators the value of our products in terms of cost savings generated by their greater reliability and performance, as well as reduced maintenance requirements. Our reputation for quality and sole supplier status for many parts has allowed us to capture a significant portion of the value generated by our products. We intend to continue to develop and market high value added products that provide significant benefits to our customers. - GENERATE NEW BUSINESS INITIATIVES. We have been successful in identifying and commercializing new business opportunities to drive revenue growth. We have been particularly effective in creating aftermarket opportunities by developing superior products to retrofit aircraft already in service. For example, in response to the heightened demand for security since the recent terrorist attacks, we developed a highly engineered cockpit door safety mechanism that simultaneously prevents penetration into the cockpit while providing a rapid response in the event of an emergency, such as depressurization. Airbus-Registered Trademark- recently committed to purchase these components to offer as a retrofit to the existing Airbus-Registered Trademark- fleet and to include them on all new deliveries. We intend to continue to aggressively pursue growth opportunities through our new business initiatives. - REALIZE PRODUCTIVITY SAVINGS. We will continue to focus on improving operating margins through manufacturing improvements and increases in employee productivity. We have achieved significant increases in productivity since our formation in 1993. We have rationalized our manufacturing facilities and redesigned our manufacturing and other business practices to maximize efficiency. For example, we encourage our employees through performance incentives to learn to operate multiple manufacturing stations in order to minimize overall labor costs. This initiative and others like it have enabled us to significantly increase sales without material increases in headcount. - PURSUE STRATEGIC ACQUISITIONS. We intend to pursue acquisitions where we believe that we can enhance value, reduce costs and develop new business. The aircraft component industry is highly fragmented, with many of the companies in the industry being small operators or small non-core operations of larger businesses. We believe the industry is experiencing consolidation due to customer requirements that favor more focused and sophisticated suppliers. 59 PRODUCTS Our products have a long history in the aircraft component industry and are found on virtually all types of commercial and military aircraft. We estimate that approximately 75% of our net sales are derived from products for which we have achieved sole source designation, and that over 90% of our net sales are derived from products of proprietary design. Our products are organized into two groupings: power system components and airframe system components. Power system components generated 53% of our reported net sales (63% of pro forma net sales) in fiscal 2001 and primarily serve the power requirements of commercial and military aircraft. Our major customers for these products include substantially all worldwide engine/auxiliary power unit, or APU, end users such as American Airlines, British Airways, Delta, Air France, and Lufthansa and engine/APU OEMs such as General Electric, United Technologies, Rolls Royce and Honeywell; regional and business jet end users such as Comair, Mesa and Continental Express, and regional and business jet OEMs such as Bombardier, Cessna, Gulfstream and Raytheon; and various United States and foreign defense agencies and OEMs such as Lockheed Martin. Our major products are ignition system components such as igniters, exciters and spark plugs, used to start and restart turbine and reciprocating aircraft engines; gear pumps used primarily in lubrication and fuel applications; mechanical/electromechanical controls used in numerous actuation applications and batteries/chargers used to provide starting and back-up power. Airframe system components generated 47% of our reported net sales (37% of pro forma net sales) in fiscal 2001 and primarily serve the requirements of various airframe systems used in commercial and military aircraft. Our major customers for these products are the worldwide large commercial transport end users and OEMs such as Boeing and Airbus; the regional and business jet end users and OEMs mentioned above, and the various United States and foreign defense agencies and OEMs. Our major products are engineered connectors used in fuel, pneumatic and hydraulic applications; engineered latches used in various bin, door and other applications on both the interior and exterior of the airframe; and lavatory hardware and components. Power system components generated 53% of our reported net sales (63% of pro forma net sales) in fiscal 2001, 45% of our reported net sales in fiscal 2000 and 52% of our reported net sales in fiscal 1999. Airframe system component generated 47% of our reported net sales (37% of pro forma net sales) in fiscal 2001, 55% of our reported net sales in fiscal 2000 and 48% of our reported net sales in fiscal 1999. Our power system components and airframe system components are produced and sold under a number of industry trade names. Our power system components are manufactured by our AeroControlex, Champion Aerospace and Marathon product groups. AeroControlex's major products are gear pumps and mechanical/electromechanical controls. Champion Aerospace produces various ignition system components, including igniters, spark plugs and exciters. Marathon manufactures nickel cadmium batteries/chargers. Our airframe system components are manufactured by our AdelWiggins and Adams Rite Aerospace product groups. AdelWiggins' major product line is an extensive offering of engineered connectors. Adams Rite Aerospace primarily offers engineered latches and lavatory components. SALES AND MARKETING Consistent with our overall strategy, our sales and marketing organization is structured to understand and anticipate the needs of customers in order to continually develop a stream of technical solutions that generate significant value. In particular, we focus on the high-margin, repeatable aftermarket segment. 60 We have structured our sales efforts along our major product lines, assigning a product line manager to each line. The product line managers are expected to grow the sales and profitability of their product line faster than the served market and to achieve the targeted annual level of bookings, sales, new business and profitability for each product. Assisting the product line managers are account managers and sales engineers who are responsible for covering major OEM and airline accounts. Account managers and sales engineers are expected to be familiar with the personnel, organization and needs of specific customers, for achieving total bookings and new business goals at each account, and, in conjunction with the product line managers, for determining when additional resources are required at customer locations. Most of our sales personnel are compensated in part on their bookings and sales and ability to identify and convert new business opportunities. Though the majority are employees, the account manager function may be performed by independent representatives depending on the specific customer, product and geographic location. We also use a limited number of distributors to provide logistical support as well as primary customer contact with certain smaller accounts. Our major distributors are Aviall, Satair and AAR. BACKLOG We believe that sales order backlog (i.e., orders for products that have not yet been shipped) is a useful indicator of future sales. As of March 30, 2002, we estimated our sales order backlog at $117.0 million compared to an estimated $83.2 million (which did not include Champion Aerospace) reported as of March 31, 2001. The majority of the purchase orders outstanding as of March 30, 2002 are scheduled for delivery within the next twelve months. Purchase orders are generally subject to cancellation by the customer prior to shipment. The level of unfilled purchase orders at any given date during the year will be materially affected by the timing of our receipt of purchase orders and the speed with which those orders are filled. Accordingly, our backlog as of March 30, 2002 may not necessarily represent the actual amount of shipments or sales for any future period. FOREIGN OPERATIONS We manufacture all of our products in the United States. However, a portion of our current sales is conducted abroad and a portion of our products are resold to foreign end-users. Our export sales to customers were approximately $54.8 million, $36.2 million and $30.7 million in fiscal 2001, fiscal 2000 and fiscal 1999, respectively. These sales are subject to numerous additional risks, including the impact of foreign government regulations, currency fluctuations, political uncertainties and differences in business practices. We cannot assure you that foreign governments will not adopt regulations or take other action that would have a direct or indirect adverse impact on our business or market opportunities within such governments' countries. Furthermore, we cannot assure you that the political, cultural and economic climate outside the United States will be favorable to our operations and growth strategy. MANUFACTURING AND ENGINEERING We maintain five manufacturing facilities. Each facility serves its respective product lines and comprises manufacturing, distribution, engineering as well as administrative functions, including management, sales and finance. The facilities encompass approximately 105,000, 44,000, 150,000, 50,000 and 169,000 square feet of manufacturing space in Los Angeles, California; Cleveland, Ohio; Waco, Texas; Fullerton, California; and Liberty, South Carolina, respectively. In the last several years, we have taken a number of steps to improve productivity and reduce costs, including consolidating operations, developing improved control systems that allow for accurate product line profit and loss accounting, investing in equipment and tooling, installing modern information systems and implementing a broad-based employee training program. We believe that our manufacturing systems and equipment are critical competitive factors that permit it to meet the rigorous tolerances and cost sensitive price 61 structure of aircraft customers. We focus our manufacturing activities by product line, alternating our equipment among designs as demand requires. We attempt to differentiate ourselves from competitors by efficiently and consistently producing highly engineered products with high quality and timely delivery. Our proprietary products are designed by our engineering staff and intended to serve an unmet need in the aircraft component industry, particularly through our new product initiatives. See "--Products." These proprietary designs must withstand the extraordinary conditions and stresses that will be endured by products during use and meet the rigorous demands of our customers' tolerance and quality requirements. We use sophisticated equipment and procedures to ensure the quality of our products and to comply with military specifications and FAA and OEM certification requirements. We perform a variety of testing procedures, including testing under different temperature, humidity and altitude levels, shock and vibration testing and X-ray fluorescent measurement. These procedures, together with other customer approved techniques for document, process and quality control, are used throughout our manufacturing facilities. CUSTOMERS Our customers include: (A) worldwide commercial airlines, including national and regional airlines, particularly for aftermarket maintenance, repair and overhaul, or MRO, components, (B) large commercial transport and regional and business aircraft OEMs, (C) various agencies of the United States and foreign governments, including the United States military, (D) military OEMs, and (E) various other industrial customers. For the year ended September 30, 2001, our customers Aviall (a distributor of aftermarket parts to airlines throughout the world) and Boeing (including McDonnell Douglas) represented approximately 17% and 8%, respectively, of our net sales. Aviall and Boeing (including McDonnell Douglas) represented approximately 10% and 9%, respectively, of our net sales during the year ended September 30, 2000, and Aviall and Boeing (including McDonnell Douglas) represented approximately 15% and 14% of our net sales for the year ended September 30, 1999. We have strong customer relationships with virtually all important large commercial transport, general aviation and military OEMs. The demand for our aftermarket parts and services is related to our extensive installed base, revenue passenger miles and, to a lesser extent, airline profitability and the size and age of the worldwide aircraft fleet. Some of our business is executed under long-term agreements with customers, which encompass many products under a common agreement. We are also a leading supplier of components used on United States' designed military aircraft. Our products are used on a variety of fighter aircraft and helicopters, including the Boeing F-15 and F-18, Lockheed Martin F-16, the E2C (Hawkeye) and the Blackhawk and Apache helicopters. COMPETITION We compete with a number of established companies, including divisions of larger companies that have significantly greater financial, technological and marketing resources than us. The niche markets within the aerospace industry served by us are relatively fragmented with several competitors for each of the products and services provided by us. Due to the global nature of the commercial aircraft industry, competition in these categories comes from both U.S. and foreign companies. We know of no single competitor, however, that provides the same range of products and services as those provided by us. Competitors in our product lines range in size from divisions of large corporations to small privately held entities, with only one or two components in their entire product line. We believe that our ability to compete depends on high product performance, consistently high quality and timely delivery, competitive price, and superior customer service and support. We cannot assure you that we will be able to compete successfully with respect to these or other factors in the future. 62 GOVERNMENTAL REGULATION The commercial aircraft component industry is highly regulated by both the FAA in the United States and by the Joint Aviation Authorities in Europe, while the military aircraft component industry is governed by military quality specifications. We, and the components we manufacture, are required to be certified by one or more of these entities, 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, our operations would be adversely affected. In the future, new and more stringent government regulations may be adopted, or industry oversight may be heightened, which may have an adverse impact on us. We must also satisfy the requirements of our customers, including OEMs and airlines that are subject to FAA regulations, and provide these customers with products and services that comply with the government regulations applicable to commercial flight operations. In addition, the FAA requires that various maintenance routines be performed on aircraft components, and we currently satisfy or exceed these maintenance standards in our repair and overhaul services. Several of our operating divisions include FAA-approved repair stations. Our operations are also subject to a variety of worker and community safety laws. The Occupational Health and Safety Act, or OHSA, mandates general requirements for safe workplaces for all employees. In addition, OHSA provides special procedures and measures for the handling of certain hazardous and toxic substances. We believe that our operations are in material compliance with OHSA's health and safety requirements. RAW MATERIALS AND PATENTS We use various raw materials, including titanium, aluminum, nickel powder, nickel screen, stainless steel and cadmium, in our manufacturing processes. The availability and prices of such raw materials may fluctuate and we may not be able to recover price increases in these supplies. We also purchase a variety of manufactured component parts from various suppliers. We concentrate our orders, however, among a few suppliers in order to strengthen our supplier relationships. Raw materials and component parts are generally available from multiple suppliers at competitive prices. However, any delay in our ability to obtain necessary raw materials and component parts may affect our ability to meet customer production needs. We have various trade secrets, proprietary information, trademarks, trade names, patents, copyrights and other intellectual property rights, which we believe, in the aggregate but not individually, are important to our business. ENVIRONMENTAL MATTERS Our operations and current and/or former facilities are subject to federal, state and local environmental laws and to regulation by government agencies, including the Environmental Protection Agency. Among other matters, these regulatory authorities impose requirements that regulate the emission, discharge, generation, management, transportation and disposal of hazardous materials and pollutants, govern response actions to hazardous materials which may be or have been released to the environment, and require us to obtain and maintain permits in connection with our operations. The extensive regulatory framework imposes significant compliance burdens and risks on us. Although management believes that our operations and our facilities are in compliance in all material respects with applicable environmental laws, there can be no assurance that future changes in such laws, regulations or interpretations thereof or the nature of our operations will not require us to make significant additional expenditures to ensure compliance in the future. According to some environmental laws, a current or previous owner or operator of real property may be liable for the costs of investigations, removal or remediation of hazardous materials at such property. Those laws 63 typically impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous materials. Persons who arrange, or are deemed to have arranged, for disposal or treatment of hazardous materials also may be liable for the costs of investigation, removal or remediation of those substances at the disposal or treatment site, regardless of whether the affected site is owned or operated by that person. Because we own and/or operate a number of facilities, and because we arrange for the disposal of hazardous materials at many disposal sites, we may incur costs for investigation, removal and remediation, as well as capital costs associated with compliance. Although those environmental costs have not been material in the past and are not expected to be material in the future, there can be no assurance that changes in environmental laws or unexpected investigation and clean-up costs will not be material. We do not currently contemplate material capital expenditures for environmental compliance and remediation for fiscal 2002 or fiscal 2003. We have been addressing contaminated soil and groundwater beneath our facility in Waco, Texas. Although we cannot assure you that material expenditures will not be required in the future to address currently unidentified contamination or to satisfy further requirements of the Texas Natural Resources Conservation Commission, or TNRCC, we believe that the current soil and groundwater remediation at our Waco facility will not require the incurrence of material expenditures. In connection with our acquisition of Marathon, a $2.0 million escrow was created to cover the cost of remediation that TNRCC might require for those contaminants at the Waco facility. During September 1998, the former owner of Marathon filed a lawsuit against us to release the environmental escrow alleging that we had violated the requirements of the stock purchase agreement relating to the investigation of the presence of certain contaminants at the Waco, Texas facility. We have filed counter claims against the seller and we cannot presently determine the ultimate outcome of this matter. PROPERTIES AND FACILITIES We own and operate a 130,000 square foot facility in Los Angeles, California, a 63,000 square foot facility in Cleveland, Ohio, a 219,000 square foot facility in Waco, Texas and a 219,000 square foot facility in Liberty, South Carolina. In addition, we lease and operate a 100,000 square foot facility in Fullerton, California and approximately 17,000 square feet in Richmond Heights, Ohio, which is also our headquarters. We also lease certain of our other non-material facilities. We believe that our machinery, plants and offices are in satisfactory operating condition and will have sufficient capacity to meet foreseeable future needs without incurring significant additional capital expenditures. EMPLOYEES As of March 30, 2002, we had approximately 950 employees. Approximately 9% of our employees were represented by the United Steelworkers Union, and approximately 6% were represented by the United Automobile, Aerospace and Agricultural Implement Workers of America. Our collective bargaining agreements with these labor unions expire in April 2005 and November 2004, respectively. We consider our relationship with our employees generally to be satisfactory. LEGAL PROCEEDINGS During the ordinary course of business, we are from time to time threatened with, or may become a party to, legal actions and other proceedings. While we are currently involved in some legal proceedings, we believe the results of these proceedings will not have a material effect on our financial condition, results of operations, or cash flows. We believe that our potential exposure to those legal actions is adequately covered by our aviation product and general liability insurance. 64 MANAGEMENT EXECUTIVE OFFICERS, DIRECTORS AND OTHER KEY EMPLOYEES The following table sets forth certain information concerning the directors and executive officers of Holdings and us:
NAME AGE POSITION - --------------------------------------- -------- ----------------------------------------------------- Douglas W. Peacock..................... 63 Chairman of the Board of Directors W. Nicholas Howley..................... 50 President, Chief Executive Officer and Director Robert S. Henderson.................... 45 President, AdelWiggins Group Raymond F. Laubenthal.................. 41 President, AeroControlex Group John F. Leary.......................... 55 President, Adams Rite Aerospace, Inc. Albert J. Rodriguez.................... 41 President, Marathon Power Technologies Company W. Todd Littleton...................... 38 President, Champion Aerospace Inc. Gregory Rufus.......................... 45 Vice President and Chief Financial Officer Stephen Berger......................... 62 Director Muzzafar Mirza......................... 44 Director William Hopkins........................ 38 Director Thomas R. Wall, IV..................... 43 Director John W. Paxton......................... 65 Director
MR. PEACOCK has been our Chairman of the Board of Directors since our inception in September 1993 and Chairman of the Board of Directors of Holdings since the consummation of the recapitalization. Prior to December 2001, Mr. Peacock also served as Chief Executive Officer of us and Holdings. He is also a director of Microporous Products, L.P. Prior to joining TransDigm, Mr. Peacock spent six years with IMO Industries Inc. as Executive Vice President of IMO's Instruments and Aerocomponents Group from 1991 to 1993, Executive Vice President of Power Systems from 1989 to 1991, and managed IMO's turbomachinery business from 1987 to 1989. Prior to joining IMO, Mr. Peacock spent 15 years in various managerial positions at Westinghouse Electric Corp. Mr. Peacock received a B.S. degree in chemical engineering from Washington State University and a Ph.D. in physical chemistry from the University of Illinois. MR. HOWLEY has been a Director and President of Holdings and us since the consummation of the recapitalization. He has served as Chief Executive Officer of Holdings and us since December 2001. From the completion of the recapitalization until December 2001, Mr. Howley served as President and Chief Operating Officer of us and Holdings. Mr. Howley served as our Executive Vice President and President of the AeroControlex Group from our inception in September 1993 to the date of the consummation of the recapitalization. Prior to joining us, Mr. Howley served as General Manager of IMO Industries Inc. Aeroproducts Division, and Director of Finance for the 15 divisions of IMO's Turbomachinery, Aerospace, and Power Transmission groups. Mr. Howley received his B.S. in engineering from Drexel University and an MBA from the Harvard University Graduate School of Business. MR. HENDERSON became President of the AdelWiggins Group in August 1999. He previously had served as President of Marathon Power Technologies Company since March 1998. From April 1997 until March 1998, he served as Manager of Operations for the AdelWiggins Group. From 1991 until 1994, Mr. Henderson served as Operations Manager at RainBird Sprinkler. Mr. Henderson received his B.A. in mathematics from Brown University and attended the Harvard University Graduate School of Business. 65 MR. LAUBENTHAL has been President of the AeroControlex Group since November 1998. From December 1996 until November 1998, Mr. Laubenthal served as Director of Manufacturing and Engineering for the AeroControlex Group and had prior extensive experience in manufacturing and engineering at Parker Hannifin Corporation and Textron. From October 1992 to December 1996, Mr. Laubenthal served as Director of Manufacturing for the AeroControlex Group. Mr. Laubenthal received a B.S. degree in mechanical engineering from Case Western Reserve University and an MBA from Northern Illinois University. MR. LEARY has been President of Adams Rite Aerospace, Inc. since June 1999. From 1995 to June 1999, Mr. Leary was a General Operations Manager with Furon Company. From 1991 to 1995, Mr. Leary was the Plant Manager of Emerson Electric, Chromalox Division. Mr. Leary received a B.S. degree in Mechanical Engineering from the New Jersey Institute of Technology. MR. RODRIGUEZ has been President of Marathon Power Technologies Company since September 1999. From January 1998 until September 1999, Mr. Rodriguez served as Director of Commercial Operations for the AeroControlex Group. From 1993 to 1997, Mr. Rodriguez served as Director of Sales and Marketing for the AeroControlex Group. Mr. Rodriguez has prior experience with IMO Industries, Esterline, as well as Kaiser Electro Precision. Mr. Rodriguez received his Bachelor of Engineering with a concentration in Chemical Engineering from Stevens Institute of Technology. MR. LITTLETON has been President of Champion Aerospace Inc. since March 2002. He previously had served as Director of Operations, Engineering for Champion Aerospace Inc. since July 2001. Mr. Littleton came to this position from Robert Bosch Corp. where he was Director of Manufacturing for the Anti-Lock Brakes and Fuel Systems Products in Anderson, S.C. from 1989 to July 2001. Prior to that he was Business Unit Manager with responsibility for Bosch's fuel systems product business. His prior experience also includes various operating management and engineering assignments with WABCO and T&S Brass. Mr. Littleton received a B.S. degree in mechanical engineering from Auburn University and has completed the Executive Leadership Skills Program at the University of South Carolina. MR. RUFUS became Vice President and Chief Financial Officer in August 2000. Prior to joining us, Mr. Rufus spent 19 years at Emerson Electric, including divisional vice president responsibilities at Ridge Tool, Liebert Corp., and Harris Calorific, all part of the Emerson organization. Prior to Emerson, Mr. Rufus spent four years with Ernst & Young. Mr. Rufus received his CPA certification in Ohio in 1980. Mr. Rufus received a B.A. degree in accounting from Baldwin-Wallace College and attended the Weatherhead School of Management at Case Western Reserve University. MR. BERGER has served as one of our Directors and a Director of Holdings since the consummation of the recapitalization. He is also currently serving as Chairman of Odyssey Investment Partners, LLC. Prior to joining Odyssey Investment Partners, LLC, Mr. Berger was a general partner of Odyssey Partners, LP. From 1990 to 1993, Mr. Berger served as Chairman and CEO of FGIC, a wholly-owned subsidiary of GE Capital Corp., and subsequently became Executive Vice President of GE Capital Corp. From 1985 to 1990, Mr. Berger was Executive Director of the Port Authority of New York and New Jersey. Mr. Berger presently serves as a member of the Board of Trustees of Brandeis University and a member of the Board of Directors of Dayton Superior Corporation. MR. MIRZA has served as one of our Directors and a Director of Holdings since the consummation of the recapitalization. Mr. Mirza is also currently a member of Odyssey Investment Partners, LLC and was a principal in the private equity investing group of Odyssey Partners, LP from 1993 to 1997. In addition, Mr. Mirza is currently a member of the Board of Directors of Dresser, Inc. and Velocita Corp. From 1988 to 1993, Mr. Mirza was employed by the merchant banking group of GE Capital Corp. 66 MR. HOPKINS has served as one of our Directors and a Director of Holdings since the consummation of the recapitalization. Mr. Hopkins is also currently a member of Odyssey Investment Partners, LLC and was a principal in the private equity investing group of Odyssey Partners, LP from 1994 to 1997. In addition, Mr. Hopkins is currently a member of the Board of Directors of Dayton Superior Corporation. Prior to joining Odyssey, Mr. Hopkins was a member of the merchant banking group of GE Capital Corp. MR. WALL has served as one of our Directors and a Director of Holdings since our inception in 1993. Mr. Wall joined Kelso & Company in 1983 and has served as a Managing Director of Kelso & Company since 1990. Mr. Wall presently serves as a member of the Board of Directors of AMF Bowling, Inc., Citation Corporation, Consolidated Vision Group, Inc., Key Components, Inc., Mitchell Supreme Fuel Company, Mosler Inc., Peebles, Inc., and 21st Century Newspapers, Inc. MR. PAXTON has served as one of our Directors and a Director of Holdings since the consummation of the recapitalization. Mr. Paxton is also currently President of Zebra Technologies and a member of its Board of Directors, Chairman of the Board of Paxton Associates, and a member of the Board of Directors of Dayton Superior Corporation. Mr. Paxton was Chairman of the Board of Directors, President and Chief Executive Officer of Telxon Corporation from March 1999 to December 2000 and a member of the Board of Directors of Paxar Corporation and President of Paxar's Printing Solution Group from October 1997 to the calendar year end 1998. Mr. Paxton served as President and Chief Executive Officer of Monarch Marking Systems from October 1995 to October 1997. Prior to joining Monarch Marking Systems, Mr. Paxton joined Litton Industries as a Corporate Vice president in 1991 when Litton acquired Intermec Corporation where Paxton was Chairman, President and CEO. During his years at Litton, Mr. Paxton had responsibility for the Industrial Automation Group. He became Corporate Executive Vice President and Chief Operating Officer of the Industrial Automation Systems Group of Western Atlas, Inc. when Western Atlas, Inc. was spun off by Litton in March 1994. Mr. Paxton served as a member of the Board of Directors of AIM, National Association of Manufacturers and the World Economic Forum. Mr. Paxton is a guest lecturer at Ohio University. BOARD COMMITTEES Holdings' Board of Directors has a Compensation Committee and an Audit Committee. The Compensation Committee, which is comprised of Messrs. Berger, Mirza and Hopkins, establishes salaries, incentives and other forms of compensation for executive officers and administers incentive compensation and benefit plans provided for employees. The Audit Committee, which is comprised of Messrs. Mirza and Hopkins, reviews Holdings' and our audit policies and oversees the engagement of Holdings' and our independent auditors. 67 EXECUTIVE COMPENSATION The following table sets forth the aggregate compensation paid or accrued by us for services rendered during fiscal 2001, 2000 and 1999 to our Chief Executive Officer and each of our four other most highly paid executive officers, who we refer to collectively as the named executive officers: SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION AWARDS ANNUAL COMPENSATION SECURITIES FISCAL --------------------- OTHER ANNUAL UNDERLYING ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS/SARS COMPENSATION - --------------------------- -------- -------- ---------- ---------------- ------------- ------------- Douglas W. Peacock................. 2001 $345,000 $ 420,000 -- $17,795(3) Chairman of the Board and 2000 330,000 200,000 -- 18,575 Chief Executive Officer(8) 1999 323,750 2,857,500 4,500 options 19,659 W. Nicholas Howley................. 2001 243,750 335,000 -- 12,641(4) President, Chief Operating 2000 225,000 135,000 -- 12,094 Officer and Director(8) 1999 215,000 2,080,000 4,500 options 10,896 Raymond F. Laubenthal.............. 2001 134,250 90,000 -- 9,020(5) President of AeroControlex 2000 121,998 37,500 -- 8,660 1999 113,000 181,450 700 options 7,910 Robert S. Henderson................ 2001 160,250 87,500 -- 10,595(6) President of AdelWiggins 2000 155,000 45,000 -- 10,583 1999 137,469 450,000 700 options 9,744 Gregory Rufus...................... 2001 137,250 92,500 -- 7,185(7) Vice President and Chief 2000 13,207 40,000 575 options 279 Financial Officer 1999 -- -- -- --
- ------------------------------ (1) Bonus for fiscal year 1999 includes a one-time bonus paid by us in connection with the recapitalization. (2) Does not include perquisites and other personal benefits because the value of these items did not exceed the lesser of $50,000 or 10% of reported salary and bonus of any of the listed executives. (3) Includes $10,200 in contributions by us for calendar year 2001 to a plan established under Section 401(k) of the Internal Revenue Code, which we refer to as the 401(k) plan, and $7,595 of Company-paid life insurance. (4) Includes $10,200 in contributions by us for calendar year 2001 to the 401(k) plan and $2,441 in Company-paid life insurance. (5) Includes $8,460 in contributions by us for calendar year 2001 to the 401(k) plan and $560 in Company-paid life insurance. (6) Includes $9,720 in contributions by us for calendar year 2001 to the 401(k) plan and $875 in Company-paid life insurance. (7) Includes $6,440 in contributions by us for calendar year 2001 to the 401(k) plan and $745 in Company-paid life insurance. (8) Effective December 3, 2001, Mr. Howley was named to the position of President and Chief Executive Officer. Mr. Peacock will remain as Chairman of the Board. 68 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SHARES SHARES UNDERLYING ACQUIRED UNEXERCISED VALUE OF UNEXERCISED IN EXERCISE ON VALUE OPTIONS/SAR AT FISCAL THE MONEY OPTIONS/SARS NAME PRICE EXERCISE REALIZED YEAR-END AT FISCAL YEAR-END(2) - ---- -------- -------- -------- --------------------- ------------------------- Douglas W. Peacock.............. $ 100 -- -- Exercisable 2,992 Exercisable $4,158,880 Chairman of the Board Unexercisable.. -- Unexercisable -- and Chief Executive Officer(1) 335 -- -- Exercisable 3,097 Exercisable 3,577,035 Unexercisable.. -- Unexercisable -- 1,040 -- -- Exercisable 2,025 Exercisable 911,250 Unexercisable 2,475 Unexercisable 1,113,750 W. Nicholas Howley.............. 100 -- -- Exercisable 3,890 Exercisable 5,407,100 President, Chief Operating Unexercisable -- Unexercisable -- Officer and Director(1) 335 -- -- Exercisable 1,900 Exercisable 2,194,500 Unexercisable.. -- Unexercisable -- 1,040 -- -- Exercisable 2,025 Exercisable 911,250 Unexercisable 2,475 Unexercisable 1,113,750 Raymond F. Laubenthal........... 100 -- -- Exercisable 80 Exercisable 111,200 President of AeroControlex Unexercisable -- Unexercisable -- 200 -- -- Exercisable 400 Exercisable 516,000 Unexercisable -- Unexercisable -- 335 -- -- Exercisable 300 Exercisable 346,500 Unexercisable -- Unexercisable -- 1,040 -- -- Exercisable 315 Exercisable 141,750 Unexercisable 385 Unexercisable 173,250 Robert S. Henderson............. 154 -- -- Exercisable 172 Exercisable 229,792 President of AdelWiggins Unexercisable.. -- Unexercisable -- 200 -- -- Exercisable 400 Exercisable 516,000 Unexercisable -- Unexercisable -- 335 -- -- Exercisable 200 Exercisable 231,000 Unexercisable.. -- Unexercisable -- 1,040 -- -- Exercisable 315 Exercisable 141,750 Unexercisable.. 385 Unexercisable 173,250 Gregory Rufus................... 1,180 -- -- Exercisable 259 Exercisable 80,290 Vice President and Chief Unexercisable 316 Unexercisable 97,960 Financial Officer
- ------------------------------ (1) Effective December 3, 2001, Mr. Howley was named to the position of President and Chief Executive Officer. Mr. Peacock will remain as Chairman of the Board. (2) The value of an unexercised option equals the aggregate fair market value of the shares underlying the option (based on an estimated $1,490 per share value at fiscal year end), less the aggregate exercise price of the option. The $1,490 per share value used in this calculation is only an estimate as of September 30, 2001. The actual share value on that date may have been different, and share values are subject to change over time. MANAGEMENT STOCKHOLDERS' AGREEMENT In connection with the recapitalization, Holdings, Odyssey and the employee stockholders of Holdings, including the named executive officers, who we refer to collectively as the management stockholders, entered into a management stockholders' agreement which governs the shares of common stock of Holdings retained by such persons after the recapitalization and any new shares acquired thereafter, including pursuant to the exercise of options. Subsequent to the recapitalization, certain additional management stockholders have been signatories to the management stockholders' agreement. See "--Stock Option Plan." The management stockholders' agreement provides that, except for certain transfers to family members and family trusts, no management stockholder may transfer common stock until the fifth anniversary of the recapitalization, and thereafter, any proposed transfer will be subject to Holdings' right of first refusal. 69 The management stockholders' agreement also provides that upon termination of the employment of a management stockholder under certain circumstances, that management stockholder will have certain put rights and Holdings will have certain call rights regarding any common stock or any options to purchase common stock, in each case, owned by him at that time. Pursuant to his employment agreement, as amended, Mr. Peacock has additional rights to require Holdings to repurchase a portion of his common stock under certain circumstances. See "--Employment Agreements." If the provisions of any law, the terms of credit and financing arrangements or Holdings' financial circumstances would prevent Holdings from making a repurchase of shares pursuant to the management stockholders' agreement, Holdings will not make such purchase until all such prohibitions lapse, and will then pay the management stockholder, in addition to the repurchase price, a specified rate of interest on the repurchase price. The management stockholders' agreement further provides that, in the event of certain types of transfers of common stock by Odyssey, the management stockholders may participate in those transfers and/or Odyssey may require the management stockholders to transfer their shares in those transactions, in each case, on a pro rata basis. Pursuant to the management stockholders' agreement, the management stockholders are entitled to participate on a pro rata basis with, and on the same terms as, Odyssey in any future offering of common stock. Those participation rights will lapse following a public offering of common stock if the common stock so offered is then listed on a national exchange or if the public offering includes 50% or more of the outstanding common stock that will have been issued following the offering. EMPLOYMENT AGREEMENTS In connection with the recapitalization, Holdings entered into an employment agreement with each of Messrs. Peacock and Howley. Effective as of December 3, 2001, Mr. Peacock resigned from his position as Chief Executive Officer of Holdings and us, but continues to serve as Holdings' and our Chairman of the Board. Mr. Howley has succeeded Mr. Peacock to the position of Chief Executive Officer of Holdings and us. In connection with these events, we amended the terms of our employment agreements with Messrs. Peacock and Howley. Pursuant to the amended agreement with Mr. Peacock, Mr. Peacock will serve as Holdings' and our Chairman of the Board through the earlier of December 3, 2006 or the occurrence of a "change in control" (as defined in his employment agreement) during which time he will receive an annual base salary at a rate no less than $100,000. In the event Mr. Peacock's service terminates by reason of death, disability, termination without "cause" or resignation with "good reason" (all as defined in his employment agreement), Holdings will continue payment of base salary, bonus and other perquisites and benefits for 18 months thereafter. In the event Mr. Peacock's services are terminated for any reason (other than for "cause"), Holdings will provide medical coverage for Mr. Peacock and his spouse following such termination for their respective lives. Under Mr. Howley's amended employment agreement, Mr. Howley will serve as Holdings' and our President and Chief Executive Officer for a period of at least five years, during which time he will receive an annual base salary at a rate no less than $335,000. In the event Mr. Howley's employment terminates by reason of death, disability, termination without "cause" or resignation with "good reason" (all as defined in his employment agreement), Holdings will continue payment of base salary, bonus and other perquisites and benefits for 18 months thereafter. Pursuant to these employment agreements, Messrs. Peacock and Howley are also eligible for annual salary increases as determined by our Compensation Committee, and annual cash bonuses based on achievement of performance criteria established by our Board of Directors. Additionally, Mr. Peacock's employment agreement provides that so long as he serves as Chairman of the Board, Mr. Peacock can require Holdings to repurchase up to 80% of his common stock 70 (including certain options to purchase common stock), provided that we satisfy certain financial targets. Mr. Peacock's right to require the repurchase of these shares became exercisable in fiscal 2002 and Mr. Peacock shall have this right so long as he continues to serve as Chairman of the Board for Holdings. Holdings will be permitted to honor this repurchase obligation to Mr. Peacock by issuing notes under certain circumstances. Mr. Peacock may also require repurchase of his common stock under certain circumstances as set forth in the management stockholders' agreement. See "Management Stockholders' Agreement." STOCK OPTION PLAN During fiscal 1999, Holdings adopted the 1998 Stock Option Plan, which we refer to as the option plan, pursuant to which stock options may be granted to "independent directors" (as defined in the option plan), or to employees or consultants of Holdings, us and any subsidiary of us or Holdings, who we refer to collectively as the plan participants. In addition, the option plan governs those options retained pursuant to the recapitalization, which we refer to as the rollover options. A total of 18,990 shares of common stock of Holdings was reserved for issuance under the Option Plan and 1,570, 1,695 and 15,115 of the options were issued during fiscal 2001, 2000 and 1999, respectively. During 2001 and 2000, stock options pertaining to 320 and 1,995 shares of common stock, respectively, were forfeited by employees due to terminations of such employees' employment. Options to purchase these shares may be reissued by Holdings to other plan participants in the future. Holdings' Chief Executive Officer has discretion to select the plan participants and to specify the terms of such options, including the number of shares, the exercise price and the terms of vesting and expiration of options, subject to approval by the Compensation Committee. The Compensation Committee has discretion under the option plan to adjust options to reflect certain specified events such as stock dividends, stock splits, recapitalizations, mergers or reorganizations of, or by Holdings. In addition, the Board of Directors has the right to amend, suspend or terminate the option plan, subject to stockholder approval for certain amendments. The rollover options are fully vested and nonforfeitable. In connection with the recapitalization, and subsequent thereto, Holdings has granted options to certain of our employees, including the named executive officers, for the purchase of shares of common stock of Holdings, which we refer to as the new options. Such new options are intended to qualify as "incentive stock options" to the extent permitted under the Internal Revenue Code, and have an exercise price equal to the price per share paid by Odyssey in connection with the recapitalization (with respect to the new options issued in connection with the recapitalization) or the per-share fair market value of Holdings' common stock at the time of grant (with respect to later grants of new options). The new options generally will expire 10 years after grant and may expire earlier in the event of a holder's earlier termination of employment. Prior to May 31, 2001, the terms of each named executive officer's new options provided that the options would vest upon the passage of time and/or upon Holdings' attainment of certain financial targets. Effective May 31, 2001, the terms of the new options of the named executive officers were modified to provide for the vesting of an additional percentage of each executive's new options so that, as of September 30, 2001, a total of 45% of each named executive officer's new options were vested. Additionally, subject to each executive's continued employment with and, in the case of Mr. Peacock, continued service as Chairman of the Board of Holdings and us, the remaining 55% of each named executive officer's new options will become exercisable upon the earlier of (1) the date which is seven years and nine months after such new option was granted, or (2) a "change of control," if any, on or prior to September 30, 2003, pursuant to which certain investor return targets are satisfied. 71 PRINCIPAL STOCKHOLDERS The following table sets forth certain information regarding the beneficial ownership of the common stock of Holdings as of September 30, 2001 with respect to each beneficial owner of more than 5.0% of the outstanding common stock of Holdings and beneficial ownership of the common stock of Holdings by each director and named executive officer and all directors and executive officers as a group:
COMMON STOCK BENEFICIALLY OWNED --------------------- NAME OF BENEFICIAL OWNER SHARES PERCENTAGE - ------------------------ -------- ---------- Stephen Berger (1).......................................... 100,240 83.7% Robert S. Henderson (2)..................................... 1,087 * William Hopkins (1)......................................... 100,240 83.7 W. Nicholas Howley (3)...................................... 7,815 6.1 Kelso & Company (4)......................................... 18,422 15.4 Raymond F. Laubenthal (5)................................... 1,095 * Muzzafar Mirza (1).......................................... 100,240 83.7 Odyssey Investment Partners, LP (1)......................... 100,240 83.7 John W. Paxton.............................................. -- * Douglas W. Peacock (6)...................................... 8,925 7.0 Gregory Rufus (7)........................................... 259 * Thomas R. Wall, IV (4)...................................... 18,422 15.4 All officers and directors as a group (12 members)(8)....... 138,876 99.8
- ------------------------ * Less than 1.0% (1) Consists of 100,240 shares of common stock owned by Odyssey Investment Partners, LP (the "Fund"), Odyssey Coinvestment, LLC ("Coinvestment"), TD Coinvestment I, LLC ("TD I"), and TD Coinvestment II, LLC ("TD II" and together with the Fund, Coinvestment and TD I, "Odyssey"). Odyssey Capital Partners, LLC is the general partner of the Fund. Odyssey Investment Partners, LLC is the manager of the Fund and the managing member of each of Coinvestment, TD I and TD II. Stephen Berger, Muzzafar Mirza, William Hopkins (directors of Holdings) and Brian Kwait and Paul Barnett are managing members of Odyssey Capital Partners, LLC and Odyssey Investment Partners, LLC and, therefore, may each be deemed to share voting and investment power with respect to such shares deemed to be owned by Odyssey. Each of them disclaims beneficial ownership of such shares. (2) Includes options to purchase 1,087 shares exercisable within 60 days. (3) Includes options to purchase 7,815 shares exercisable within 60 days. (4) KIA IV-TD, LLC ("KIA IV-TD") and Kelso Equity Partners II, L.P. ("KEP II") have beneficial ownership of 17,473 and 949 shares, respectively. Due to their common control, KIA IV-TD, Kelso Partners IV, L.P., the managing member of KIA IV-TD ("KP IV" and, together with KIA IV-TD and KEP II, "Kelso"), and KEP II could be deemed to beneficially own each other's shares, but each disclaims such beneficial ownership. In addition, Mr. Wall, Joseph S. Schuchert, Frank T. Nickell, George E. Matelich, Michael B. Goldberg, David I. Wahrhaftig, Frank K. Bynum, Jr. and Phillip E. Berney may be deemed to share beneficial ownership of shares beneficially owned by KIA IV-TD, KP IV and KEP II by virtue of their status as general partners of KP IV, which is the managing member of KIA IV-TD, and as general partners of KEP II, but each disclaims such beneficial ownership. (5) Includes options to purchase 1,095 shares exercisable within 60 days. 72 (6) Includes options to purchase 8,114 shares exercisable within 60 days and 811 shares and votes owned by TD Equity LLC, of which Mr. Peacock is the managing member. Mr. Peacock disclaims ownership of the 811 shares and votes owned by TD Equity LLC. (7) Includes options to purchase 259 shares exercisable within 60 days. (8) As described in footnotes (1), (2), and (4), Messrs. Berger, Hopkins and Mirza may each be deemed to share investment and voting power with respect to 100,240 shares deemed to be beneficially owned by the General Partner of Odyssey, Mr. Wall may be deemed to share investment and voting power with respect to 18,422 shares owned by Kelso and Mr. Peacock may be deemed to share investment and voting power with respect to 811 shares owned by TD Equity LLC. Each of Messrs. Berger, Hopkins, Mirza, Wall and Peacock disclaims ownership of such shares. Excluding such shares, all officers and directors as a group beneficially own 19,403 shares, or 13.9%, which are purchasable within 60 days upon the exercise of options. 73 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS TAX ALLOCATION AGREEMENT We and Holdings are parties to a tax allocation agreement. Under the terms of the tax allocation agreement, we are obligated to make payments to Holdings equal to the amount of income taxes that we and subsidiaries would have owed for federal and state income taxes if we and subsidiaries were, for tax purposes, a separate consolidated group. ONE-TIME MANAGEMENT BONUSES Following the consummation of the recapitalization, we paid certain members of senior management an aggregate of $5.9 million as a one-time bonus in connection with the recapitalization. See "Management--Executive Compensation." STOCKHOLDERS' AGREEMENTS Pursuant to a merger agreement, Holdings, Odyssey and KIA IV-TD and KEP II entered into a stockholders agreement concurrently with consummation of the recapitalization. The stockholders agreement provides for customary transfer restrictions, tag-along and drag-along rights, registration rights and an agreement among the parties to vote their shares of Common Stock, including the agreement of Odyssey to designate a representative of Kelso to the Board of Directors of Holdings. See also "Management--Management Stockholders' Agreement" and "Management--Employment Agreements" for a description of certain agreements that we and Holdings have entered into with certain members of management in connection with the recapitalization. ODYSSEY FINANCIAL SERVICES As part of the recapitalization, we paid Odyssey a fee of approximately $3.5 million. In addition, in connection with the Champion Aerospace acquisition, we paid Odyssey a fee of approximately $1.7 million. We reimburse Odyssey for all of its reasonable and customary out of pocket expenses that it incurs in connection with advisory services that it provides to us. Odyssey is the majority stockholder of Holdings. In addition, Messrs. Berger, Hopkins and Mirza, each a director of Holdings and us, are managing members of the general partner of Odyssey. 74 DESCRIPTION OF OTHER INDEBTEDNESS TRANSDIGM THE CREDIT FACILITY Our credit facility consists of (1) a $30.0 million revolving credit facility maturing six years from December 3, 1998, which we refer to as the execution date, and (2) a term loan facility in an aggregate principal amount of $263.8 million, consisting of a $43.3 million Tranche A facility maturing six years from the execution date, a $105.5 million Tranche B facility maturing seven and a half years from the execution date and a $115.0 Tranche C facility maturing eight and a half years from the execution date. As of March 30, 2002, the outstanding balances of our Tranche A, B and C facilities were $35.5 million, $104.3 million and $114.1 million, respectively. The interest rate for the credit facility is, at our option, either (A) a floating rate equal to the base rate plus the applicable margin, as defined in the credit facility, or (B) the Eurodollar rate for fixed periods of one, two, three, or six months, plus the applicable margin. The overall interest rate and applicable margin are determined based on (1) in the case of the Tranche A facility and the revolving credit facility, (A) an interest rate determined by the base rate, plus 2.25%, 2.00%, 1.75% or 1.50% depending on Holdings' ability to achieve the respective debt coverage ratio specified in the credit facility, as amended; or (B) an interest rate determined by the Eurodollar rate, plus 3.25%, 3.00%, 2.75% or 2.50% depending on Holdings' ability to achieve the respective debt coverage ratio specified in the credit facility, as amended; and (2) in the case of the Tranche B facility and the Tranche C facility, (A) an interest rate determined by the base rate, plus 2.50%; or (B) an interest rate determined by the Eurodollar rate, plus 3.50%. The credit facility is subject to mandatory prepayment with a defined percentage of net proceeds from certain asset sales, insurance proceeds or other awards that are payable in connection with the loss, destruction or condemnation of any assets, certain new debt and equity offerings and 50% of excess cash flow (as defined in the credit facility) in excess of a predetermined amount under the credit facility. The credit facility requires us to repay the outstanding indebtedness on a periodic basis through the various maturity dates. The credit facility contains various covenants, customary for similar credit facilities or otherwise appropriate under the circumstances, that (1) restrict us, Holdings and our respective subsidiaries from various actions, including, among others, mergers and sales of assets, use of proceeds, granting of liens, incurrence of indebtedness, voluntary prepayment of indebtedness, including the notes, capital expenditures, paying dividends, business activities, investments and acquisitions, transactions with affiliates, certain restrictions affecting subsidiaries, voluntary prepayment of other indebtedness and amendments or modifications to instruments governing such other indebtedness and (2) require us to achieve and maintain certain financial covenants. The credit facility includes events of default provisions that are typical for senior credit facilities or otherwise appropriate under the circumstances. All obligations under the credit facility are guaranteed by Holdings and each of our direct and indirect subsidiaries. The indebtedness under the credit facility is secured by a pledge of our stock and all of the stock of our domestic subsidiaries and a perfected lien and security interest in our assets other than real estate (tangible and intangible) and such assets of our direct and indirect subsidiaries and Holdings. In connection with the offering of the old notes, we repaid the Tranche A facility and repaid a portion of each of the Tranche B and Tranche C facilities. In addition, we amended our credit facility in connection with the offering of the old notes. The amendments to the credit facility: - allowed us to incur the indebtedness represented by the old notes; 75 - allow us to pay dividends to Holdings for the purpose of retiring the Holdings PIK Notes; and - allow us to incur up to $150.0 million of additional bank borrowings or subordinated debt (for which there are currently no commitments to provide such funds), subject to certain restrictions, including a requirement that such debt must be used: - to finance acquisitions permitted by the amended credit facility, or - to pay the dividends to Holdings to retire the Holdings PIK Notes; - allow us to effect permitted acquisitions, with the aggregate amount paid for all such permitted acquisitions not to exceed $225.0 million; - require that at least $10.0 million must remain unused and available under our $30.0 million revolving credit facility immediately following any acquisition; - modified certain existing financial covenants; and - waive any mandatory prepayment from excess cash flow for fiscal 2002. HOLDINGS HOLDINGS PIK NOTES Concurrently with our issuance of the 1998 notes, Holdings issued the Holdings PIK Notes to certain shareholders of Holdings in connection with the recapitalization. The Holdings PIK Notes were issued to investors together with shares of common stock of Holdings. The Holdings PIK Notes are unsecured obligations of Holdings, subordinated to the guarantee of the credit facility by Holdings, but senior to the guarantee of the notes by Holdings. The Holdings PIK Notes mature in 2009. Interest on the Holdings PIK Notes accrues at an annual fixed rate of 12% and is payable semiannually in the form of additional Holdings PIK Notes for five years after their issuance in December 1998. Thereafter, cash interest is payable semi-annually commencing 2004. The Holdings PIK Notes are redeemable at the option of Holdings, in whole or in part, at a price equal to 100% of the principal amount thereof for five years after their issuance in December 1998 and thereafter at the prices set forth in the indenture pursuant to which the Holdings PIK Notes were issued, which we refer to as the Holdings Indenture. If Holdings experiences specific kinds of changes in control, it must offer to repurchase the Holdings PIK Notes at a price equal to 101% of the principal amount thereof. The Holdings PIK Notes contain certain covenants on a consolidated basis, including covenants that limit (1) indebtedness, (2) restricted payments, (3) distributions by subsidiaries, (4) transactions with affiliates, (5) sales of assets and subsidiary stock, (6) dividend and other payment restrictions, and (7) mergers or consolidations. The Holdings PIK Notes contain customary events of default and the holders of the Holdings PIK Notes have customary registration rights that commenced in December 2001. The covenants and default provisions in the Holdings Indenture are substantially similar to those contained in the indenture governing the notes, but are less restrictive in certain respects. HOLDINGS 16% CUMULATIVE REDEEMABLE PREFERRED STOCK Concurrently with the Champion Aerospace acquisition, Holdings issued and sold the Holdings 16% Cumulative Redeemable Preferred Stock, which we refer to as the Holdings 16% Preferred Stock, and warrants to purchase 1,381.87 shares of Holdings' common stock to First Union Investors, Inc. for $15.0 million. Dividends on the Holdings 16% Preferred Stock accrue at 16% annually. Holdings may pay dividends on the Holdings 16% Preferred Stock in cash, or at its option, in the form of additional shares of Holdings 16% Preferred Stock. 76 The Holdings 16% Preferred Stock is mandatorily redeemable on May 31, 2010. If Holdings experiences specific kinds of changes in control, it must offer to redeem the Holdings 16% Preferred Stock at a price equal to 101% of the liquidation preference thereof if such event occurs prior to May 31, 2004, and at a price equal to 100% of the liquidation preference thereof if such event occurs any time thereafter. In addition, Holdings is required to redeem the Holdings 16% Preferred Stock upon the acceleration of Holdings' obligations under the credit agreement. The Holdings 16% Preferred Stock contains certain covenants, including covenants that limit (1) acquisition indebtedness, (2) restricted payments, (3) distributions by subsidiaries, (4) transactions with affiliates, (5) dividend and other payment restrictions, and (6) mergers or consolidations. The Holdings 16% Preferred Stock contain customary events of noncompliance. 77 DESCRIPTION OF THE EXCHANGE NOTES TransDigm issued the old notes pursuant to the indenture, dated as of December 3, 1998, as supplemented on April 23, 1999 and June 26, 2001, among itself, the Guarantors and State Street Bank and Trust Company, as trustee, which we refer to as the indenture. An aggregate of $125.0 million in principal amount of 10 3/8% Senior Subordinated Notes due 2008 were previously issued on December 3, 1998 pursuant to the indenture, which we refer to as the 1998 notes. The old notes, as an additional issuance of 10 3/8% Senior Subordinated Notes due 2008, are "Additional Notes" as defined in the indenture. The old notes are identical to, and are PARI PASSU with and treated identically with, the 1998 notes, except that the old notes are subject to transfer restrictions until we consummate this exchange offer and the old notes are exchanged for exchange notes, or the old notes are resold under a shelf registration statement. You can find definitions of certain capitalized terms used in this description under the subheading "--Certain Definitions." For purposes of this description: - references to "TransDigm" mean TransDigm Inc. and not its Subsidiaries; and - "notes" means the exchange notes, the old notes and the 1998 notes, in each case outstanding at any given time and issued under the indenture. The exchange notes will be issued under the indenture. The terms of the exchange notes are identical in all material respects to the old notes except that, upon completion of the exchange offer, the exchange notes will be: - registered under the Securities Act; and - free of any covenants regarding exchange registration rights. The following is a summary of the material provisions of the indenture. It does not include all of the provisions of the indenture. We urge you to read the indenture because it, and not this description, defines your rights. The terms of the notes include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, or the TIA, as in effect on the date of the indenture. We have filed a copy of the indenture as an exhibit to the registration statement which includes this prospectus. The registered holder of a note (a "Holder") will be treated as the owner of it for all purposes. Only registered Holders will have rights under the indenture. TransDigm will issue the notes in fully registered form in denominations of $1,000 and integral multiples of $1,000. The Trustee will initially act as paying agent and registrar. The notes may be presented for registration of transfer and exchange at the offices of the registrar. TransDigm may change any paying agent and registrar without notice to Holders. TransDigm will pay principal (and premium, if any) on the notes at the Trustee's corporate office in New York, New York. At TransDigm's option, interest also may be paid by mailing a check to the Holders registered address. Any notes that remain outstanding after the completion of this exchange offer, together with the exchange notes issued in connection with this exchange offer and the 1998 notes, will be treated as a single class of securities under the indenture. BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES The notes: - are unsecured obligations of TransDigm; - are subordinated in right of payment to all Senior Debt of TransDigm; and 78 - are guaranteed by Holdings, the parent company of TransDigm, and by each of TransDigm's domestic subsidiaries. Each guarantee of the notes: - is an unsecured obligation of the guarantor; and - is subordinated in right of payment to all Senior Debt of that guarantor. PRINCIPAL, MATURITY AND INTEREST The notes are limited in aggregate principal amount to $200.0 million, of which $125.0 million in aggregate principal amount were issued in December 1998 and the remaining $75.0 million in aggregate principal amount were issued in the offering of the old notes in June 2002. The notes will mature on December 1, 2008. Interest on these notes will accrue at the rate of 10 3/8% per annum and will be payable semiannually in cash on each June 1 and December 1, accruing from the most recent interest date on which interest has been paid on the old notes or, if no interest has been paid, from June 1, 2002. TransDigm will make interest payments to the persons who are registered Holders at the close of business on the May 15 and November 15 immediately preceding the applicable interest payment date. These notes do not contain any mandatory sinking fund. REDEMPTION OPTIONAL REDEMPTION. Except as described below, these notes are not redeemable before December 1, 2003. Thereafter, TransDigm may redeem the notes at its option, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve month period commencing on December 1 of the year set forth below.
YEAR PERCENTAGE - ---- ---------- 2003........................................................ 105.188% 2004........................................................ 103.458% 2005........................................................ 101.729% 2006 and thereafter......................................... 100.000%
In addition, TransDigm must pay all accrued and unpaid interest on the notes redeemed. SELECTION AND NOTICE OF REDEMPTION In the event that TransDigm chooses to redeem less than all of the notes, selection of the notes for redemption will be made by the Trustee either: (1) in compliance with the requirements of the principal national securities exchange, if any, on which such notes are listed; or (2) on a PRO RATA basis, by lot or by such method as the Trustee shall deem fair and appropriate. No notes of a principal amount of $1,000 or less shall be redeemed in part. SUBORDINATION The payment of all Obligations on the notes is subordinated in right of payment to the prior payment in full in cash or Cash Equivalents of all Obligations on Senior Debt of TransDigm including its obligations under the Credit Facility. The holders of Senior Debt will be entitled to receive payment in full in cash of all Obligations due in respect of Senior Debt (including interest after the commencement of any bankruptcy or other 79 like proceeding at the rate specified in the applicable Senior Debt whether or not such interest is an allowed claim in any such proceeding) before the Holders of notes will be entitled to receive any payment with respect to the notes in the event of any distribution to creditors of TransDigm: (1) in a liquidation or dissolution of TransDigm; (2) in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to TransDigm or its property; (3) in an assignment for the benefit of creditors; or (4) in any marshalling of TransDigm's assets and liabilities. TransDigm also may not make any payment in respect of the notes if: (1) a payment default on Designated Senior Debt occurs and is continuing; or (2) any other default occurs and is continuing on Designated Senior Debt that permits holders of the Designated Senior Debt to accelerate its maturity and the Trustee receives a notice of such default (a "Payment Blockage Notice") from the Representative of any Designated Senior Debt. Payments on the notes may and shall be resumed: (1) in the case of a payment default, upon the date on which such default is cured or waived; and (2) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived (so long as no other event of default exists) or 180 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Debt has been accelerated. No new Payment Blockage Notice may be delivered unless and until 360 days have elapsed since the effectiveness of the immediately prior Payment Blockage Notice. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been cured or waived for a period of not less than 90 days. TransDigm must promptly notify holders of Senior Debt if payment of the notes is accelerated because of an Event of Default. As a result of the subordination provisions described above, in the event of a bankruptcy, liquidation or reorganization of TransDigm, Holders of these notes may recover less ratably than creditors of TransDigm who are holders of Senior Debt. See "Risk Factors--Subordination." After giving effect to the offering of the old notes and the application of the net proceeds therefrom, on a pro forma basis, at March 30, 2002, the aggregate principal amount of Senior Debt outstanding of TransDigm and Holdings would have been approximately $180.0 million and $209.3 million, respectively. GUARANTEE The obligations of TransDigm under the notes and the indenture will be guaranteed (the "Guarantees") on a senior subordinated basis by Holdings and the Domestic Restricted Subsidiaries. The Guarantees will be subordinated in right of payment to all Senior Debt of Holdings and the Domestic Restricted Subsidiaries, respectively, to the same extent that the notes are subordinated to Senior Debt of TransDigm. Since Holdings is a holding company with no significant operations, the Guarantee by Holdings provides little, if any, additional credit support for the notes, and investors should not rely on the Guarantee by Holdings in evaluating an investment in the notes. 80 CHANGE OF CONTROL If a Change of Control occurs, each Holder will have the right to require that TransDigm purchase all or a portion of such Holder's notes pursuant to the offer described below (the "Change of Control Offer"), at a purchase price equal to 101% of the principal amount thereof plus accrued interest to the date of purchase. Within 30 days following the date upon which the Change of Control occurred, TransDigm must send, by first class mail, a notice to each Holder, which notice shall govern the terms of the Change of Control Offer. Such notice shall state, among other things, the purchase date, which must be no earlier than 30 days nor later than 60 days from the date such notice is mailed, other than as may be required by law (the "Change of Control Payment Date"). Holders electing to have a note purchased pursuant to a Change of Control Offer will be required to surrender the note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third business day prior to the Change of Control Payment Date. Prior to the mailing of the notice referred to above, but in any event within 30 days following any Change of Control, TransDigm covenants to: (1) repay in full all Indebtedness under the Credit Facility and all other Senior Debt the terms of which require repayment upon a Change of Control; or (2) obtain the requisite consents under the Credit Facility and all such other Senior Debt to permit the repurchase of the notes as provided below. TransDigm's failure to comply with the covenant described in the immediately preceding sentence shall constitute an Event of Default described in clause (3) and not in clause (2) under "Events of Default" below. TransDigm will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner in compliance with the indenture. If a Change of Control Offer is made, there can be no assurance that TransDigm will have available funds sufficient to pay the Change of Control purchase price for all the notes that might be delivered by Holders seeking to accept the Change of Control Offer. In the event TransDigm is required to purchase outstanding notes pursuant to a Change of Control Offer, TransDigm expects that it would seek third party financing to the extent it does not have available funds to meet its purchase obligations. However, there can be no assurance that TransDigm would be able to obtain such financing. You should note that this provision will not protect you from the adverse aspects of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction. TransDigm will comply with the requirements of Rule 14e-1 under the Exchange Act to the extent such laws and regulations are applicable in connection with the repurchase of notes pursuant to a Change of Control Offer. To the extent that TransDigm complies with the provisions of any such securities laws or regulations, TransDigm shall not be deemed to have breached its obligations under the "Change of Control" provisions of the indenture. CERTAIN COVENANTS The indenture contains, among others, the following covenants: LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS. TransDigm will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively "incur") any Indebtedness (other than Permitted Indebtedness); PROVIDED, HOWEVER, that if no Default or Event of Default shall have occurred and be continuing at the time of or as a consequence of the incurrence of any such Indebtedness, TransDigm and the Guarantors may incur 81 Indebtedness (including, without limitation, Acquired Indebtedness) and Restricted Subsidiaries of TransDigm that are not Guarantors may incur Acquired Indebtedness, in each case if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of TransDigm would have been greater than 2.0 to 1.0. LIMITATION ON RESTRICTED PAYMENTS. TransDigm will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock of TransDigm) on or in respect of shares of TransDigm's Capital Stock to holders of such Capital Stock; (2) purchase, redeem or otherwise acquire or retire for value any Capital Stock of TransDigm or any direct or indirect parent of TransDigm or any warrants, rights or options to purchase or acquire shares of any class of such Capital Stock; (3) make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Indebtedness of TransDigm that is subordinate or junior in right of payment to the notes; or (4) make any Investment (other than Permitted Investments) (each of the foregoing actions set forth in clauses (1), (2), (3) and (4) being referred to as a "Restricted Payment"); if at the time of such Restricted Payment or immediately after giving effect thereto: (i) a Default or an Event of Default shall have occurred and be continuing; or (ii) TransDigm is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant; or (iii) the aggregate amount of Restricted Payments (including such proposed Restricted Payment) made subsequent to the Issue Date (other than Restricted Payments made pursuant to clauses (2)(i), (3), (4), (5), (6), (7), (8), (9) and (10) of the following paragraph) shall exceed the sum, without duplication, of: (w) 50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be loss, minus 100% of such loss) of TransDigm earned subsequent to the beginning of the first fiscal quarter commencing after the Issue Date and on or prior to the date the Restricted Payment occurs (the "Reference Date") (treating such period as a single accounting period); plus (x) 100% of the aggregate net cash proceeds (including the fair market value of property other than cash that would constitute Marketable Securities or a Permitted Business) received by TransDigm from any Person (other than a Subsidiary of TransDigm) from the issuance and sale subsequent to the Issue Date and on or prior to the Reference Date of Qualified Capital Stock of TransDigm; plus (y) without duplication of any amounts included in clause (iii)(x) above, 100% of the aggregate net cash proceeds of any equity contribution received by TransDigm from a holder of TransDigm's Capital Stock (excluding, in the case of clauses (iii)(x) and (y), any net cash proceeds from an Equity Offering to the extent used to redeem the notes in compliance with the provisions set forth under "--Redemption--Optional Redemption Upon Equity Offerings"); plus 82 (z) 100% of the aggregate net proceeds (including the fair market value of property other than cash that would constitute Marketable Securities or a Permitted Business) of any (A) sale or other disposition of any Investment (other than a Permitted Investment) made by TransDigm and its Restricted Subsidiaries or (B) dividend from, or the sale of the stock of, an Unrestricted Subsidiary. As of March 30, 2002, TransDigm would have been permitted to make approximately $42.8 million of Restricted Payments in accordance with the foregoing. Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph do not prohibit: (1) the payment of any dividend or the consummation of any irrevocable redemption within 60 days after the date of declaration of such dividend or notice of such redemption if the dividend or payment of the redemption price, as the case may be, would have been permitted on the date of declaration or notice; (2) if no Default or Event of Default shall have occurred and be continuing or shall occur as a consequence thereof, the acquisition of any shares of Capital Stock of TransDigm (the "Retired Capital Stock") either (i) solely in exchange for shares of Qualified Capital Stock of TransDigm (the "Refunding Capital Stock") or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of TransDigm) of shares of Qualified Capital Stock of TransDigm and, in the case of subclause (i) of this clause (2), if immediately prior to the retirement of the Retired Capital Stock the declaration and payment of dividends thereon was permitted under clause (5) of this paragraph, the declaration and payment of dividends on the Refunding Capital Stock in an aggregate amount per year no greater than the aggregate amount of dividends per annum that was declarable and payable on such Retired Capital Stock immediately prior to such retirement; PROVIDED that at the time of the declaration of any such dividends on the Refunding Capital Stock, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (3) if no Default or Event of Default shall have occurred and be continuing, the acquisition of any Indebtedness of TransDigm that is subordinate or junior in right of payment to the notes either (i) solely in exchange for shares of Qualified Capital Stock of TransDigm, or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of TransDigm) of (A) shares of Qualified Capital Stock of TransDigm or (B) Refinancing Indebtedness; (4) if no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof, the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Capital Stock) issued after the Issue Date (including, without limitation, the declaration and payment of dividends on Refunding Capital Stock in excess of the dividends declarable and payable thereon pursuant to clause (2) of this paragraph); PROVIDED that, at the time of such issuance, TransDigm, after giving effect to such issuance on a pro forma basis, would have had a Consolidated Fixed Charge Coverage Ratio of at least 2.0 to 1.0; (5) payments to Holdings for the purpose of permitting, and in an amount equal to the amount required to permit, Holdings to redeem or repurchase Holdings' common equity or options in respect thereof, in each case in connection with the repurchase provisions of employee stock option or stock purchase agreements or other agreements to compensate management employees; PROVIDED that all such redemptions or repurchases pursuant to this clause (5) shall not exceed $2.0 million in any fiscal year (which amount shall be increased by the amount of any net cash proceeds received from the sale since the Issue Date of Capital Stock (other than 83 Disqualified Capital Stock) to members of TransDigm's management team that have not otherwise been applied to the payment of Restricted Payments pursuant to the terms of clause (iii) of the immediately preceding paragraph and by the cash proceeds of any "key-man" life insurance policies which are used to make such redemptions or repurchases) since the Issue Date; PROVIDED, FURTHER, that the cancellation of Indebtedness owing to TransDigm from members of management of TransDigm or any of its Restricted Subsidiaries in connection with any repurchase of Capital Stock of Holdings (or warrants or options or rights to acquire such Capital Stock) will not be deemed to constitute a Restricted Payment under the indenture; (6) the making of distributions, loans or advances to Holdings in an amount not to exceed $1.0 million PER ANNUM in order to permit Holdings to pay the ordinary operating expenses of Holdings (including, without limitation, directors' fees, indemnification obligations, professional fees and expenses); (7) payments to Holdings in respect of taxes pursuant to the terms of the Tax Allocation Agreement as in effect on the Issue Date and as amended from time to time pursuant to amendments that do not increase the amounts payable by TransDigm or any of its Restricted Subsidiaries thereunder; (8) repurchases of Capital Stock deemed to occur upon the exercise of stock options if such Capital Stock represents a portion of the exercise price thereof; (9) other Restricted Payments in an aggregate amount not to exceed $7.5 million; and (10) distributions to Holdings to fund the Transactions (as described under "Use of Proceeds") subsequent to the issuance of the notes. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (iii) of the immediately preceding paragraph, (a) amounts expended pursuant to clauses (1) and (2)(ii) shall be included in such calculation, PROVIDED such expenditures pursuant to clause (5) shall not be included to the extent of the cash proceeds received by TransDigm from any "key-man" life insurance policies and (b) amounts expended pursuant to clauses (2)(i), (3), (4), (5), (6), (7), (8), (9) and (10) shall be excluded from such calculation. LIMITATION ON ASSET SALES. TransDigm will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) TransDigm or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by TransDigm's Board of Directors); (2) at least 75% of the consideration received by TransDigm or the Restricted Subsidiary, as the case may be, from such Asset Sale shall be in the form of cash or Cash Equivalents and is received at the time of such disposition; PROVIDED that the amount of: (a) any liabilities (as shown on TransDigm's or such Restricted Subsidiary's most recent balance sheet) of TransDigm or any such Restricted Subsidiary (other than liabilities that are by their terms subordinated to the notes) that are assumed by the transferee of any such assets; (b) any notes or other obligations received by TransDigm or any such Restricted Subsidiary from such transferee that are converted by TransDigm or such Restricted Subsidiary into cash within 90 days of the receipt thereof (to the extent of the cash received); and 84 (c) any Designated Noncash Consideration received by TransDigm or any of its Restricted Subsidiaries in such Asset Sale having an aggregate fair market value, taken together with all other Designated Noncash Consideration received pursuant to this clause (c) that is at that time outstanding, not to exceed 5% of Total Assets at the time of the receipt of such Designated Noncash Consideration (with the fair market value of each item of Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value), shall be deemed to be cash for the purposes of this provision or for purposes of the second paragraph of this covenant; and (3) upon the consummation of an Asset Sale, TransDigm shall apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within 365 days of receipt thereof either (A) to prepay any Senior Debt, or Indebtedness of a Restricted Subsidiary that is not a Guarantor and, in the case of any such Indebtedness under any revolving credit facility, effect a corresponding reduction in the availability under such revolving credit facility (or effect a permanent reduction in the availability under such revolving credit facility regardless of the fact that no prepayment is required in order to do so (in which case no prepayment should be required)), (B) to reinvest in Productive Assets, or (C) a combination of prepayment and investment permitted by the foregoing clauses (3)(A) and (3)(B). Pending the final application of any such Net Cash Proceeds, TransDigm or such Restricted Subsidiary may temporarily reduce Indebtedness under a revolving credit facility, if any, or otherwise invest such Net Cash Proceeds in Cash Equivalents. On the 366th day after an Asset Sale or such earlier date, if any, as the Board of Directors of TransDigm or of such Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (3)(A), (3)(B) and (3)(C) of the preceding sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which have not been applied on or before such Net Proceeds Offer Trigger Date as permitted in clauses (3)(A), (3)(B) and (3)(C) of the next preceding sentence (each a "Net Proceeds Offer Amount") shall be applied by TransDigm or such Restricted Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor more than 60 days following the applicable Net Proceeds Offer Trigger Date, from all Holders on a PRO RATA basis, the maximum amount of notes that may be purchased with the Net Proceeds Offer Amount at a price equal to 100% of the principal amount of the notes to be purchased, plus accrued and unpaid interest thereon, if any, to the date of purchase; PROVIDED, HOWEVER, that if at any time any non-cash consideration (including any Designated Noncash Consideration) received by TransDigm or any Restricted Subsidiary of TransDigm, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance with this covenant. Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than $10.0 million, the application of the Net Cash Proceeds constituting such Net Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time as such Net Proceeds Offer Amount plus the aggregate amount of all Net Proceeds Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date relating to such initial Net Proceeds Offer Amount from all Asset Sales by TransDigm and its Restricted Subsidiaries aggregates at least $10.0 million, at which time TransDigm or such Restricted Subsidiary shall apply all Net Cash Proceeds constituting all Net Proceeds Offer Amounts that have been so deferred to make a Net Proceeds Offer (the first date the aggregate of all such deferred Net Proceeds Offer Amounts is equal to $10.0 million or more shall be deemed to be a Net Proceeds Offer Trigger Date). 85 Notwithstanding the immediately preceding paragraph, TransDigm and its Restricted Subsidiaries will be permitted to consummate an Asset Sale without complying with such paragraph to the extent that: (1) at least 75% of the consideration for such Asset Sale constitutes Productive Assets, cash, Cash Equivalents and/or Marketable Securities; and (2) such Asset Sale is for fair market value; provided that any consideration consisting of cash, Cash Equivalents and/or Marketable Securities received by TransDigm or any of its Restricted Subsidiaries in connection with any Asset Sale permitted to be consummated under this paragraph shall constitute Net Cash Proceeds subject to the provisions of the preceding paragraph. Each Net Proceeds Offer will be mailed to the record Holders as shown on the register of Holders within 30 days following the Net Proceeds Offer Trigger Date, with a copy to the Trustee, and shall comply with the procedures set forth in the indenture. Upon receiving notice of the Net Proceeds Offer, Holders may elect to tender their notes in whole or in part in integral multiples of $1,000 in exchange for cash. To the extent Holders properly tender notes in an amount exceeding the Net Proceeds Offer Amount, notes of tendering Holders will be purchased on a PRO RATA basis (based on amounts tendered). A Net Proceeds Offer shall remain open for a period of 20 business days or such longer period as may be required by law. To the extent that the aggregate amount of notes tendered pursuant to a Net Proceeds Offer is less than the Net Proceeds Offer Amount, TransDigm may use any remaining Net Proceeds Offer Amount for general corporate purposes or for any other purpose not prohibited by the indenture. Upon completion of any such Net Proceeds Offer, the Net Proceeds Offer Amount shall be reset at zero. TransDigm will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Asset Sale" provisions of the indenture, TransDigm shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the "Asset Sale" provisions of the indenture by virtue thereof. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. TransDigm will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary of TransDigm to: (1) pay dividends or make any other distributions on or in respect of its Capital Stock; (2) make loans or advances or pay any Indebtedness or other obligation owed to TransDigm or any other Restricted Subsidiary of TransDigm; or (3) transfer any of its property or assets to TransDigm or any other Restricted Subsidiary of TransDigm, except for such encumbrances or restrictions existing under or by reason of: (a) applicable law; (b) the indenture; (c) non-assignment provisions of any contract or any lease of any Restricted Subsidiary of TransDigm entered into in the ordinary course of business; (d) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired; 86 (e) the Credit Facility; (f) agreements existing on the Issue Date to the extent and in the manner such agreements are in effect on the Issue Date; (g) restrictions on the transfer of assets subject to any Lien permitted under the indenture imposed by the holder of such Lien; (h) restrictions imposed by any agreement to sell assets or Capital Stock permitted under the indenture to any Person pending the closing of such sale; (i) any agreement or instrument governing Capital Stock of any Person that is acquired; (j) any Purchase Money Note or other Indebtedness or other contractual requirements of a Securitization Entity in connection with a Qualified Securitization Transaction; provided that such restrictions apply only to such Securitization Entity; (k) other Indebtedness or Permitted Subsidiary Preferred Stock outstanding on the Issue Date or permitted to be issued or incurred under the indenture; PROVIDED that any such restrictions are ordinary and customary with respect to the type of Indebtedness being incurred or Preferred Stock being issued (under the relevant circumstances); (l) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; and (m) any encumbrances or restrictions imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (a) through (l) above; PROVIDED that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of TransDigm's Board of Directors (evidenced by a Board Resolution) whose judgment shall be conclusively binding, not materially more restrictive with respect to such dividend and other payment restrictions than those contained in the dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing. LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. TransDigm will not permit any of its Restricted Subsidiaries to issue any Preferred Stock (other than to TransDigm or to a Restricted Subsidiary of TransDigm) or permit any Person (other than TransDigm or a Restricted Subsidiary of TransDigm) to own any Preferred Stock of any Restricted Subsidiary of TransDigm, other than Permitted Subsidiary Preferred Stock. The provisions of this covenant will not apply to any of the Guarantors. LIMITATION ON LIENS. TransDigm will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly create, incur, assume or permit or suffer to exist any Liens of any kind against or upon any property or assets or any proceeds therefrom, of TransDigm or any of its Restricted Subsidiaries whether owned on the Issue Date or acquired after the Issue Date, in each case to secure Indebtedness or trade payables, unless: (1) in the case of Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the notes, the notes are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens; and (2) in all other cases, the notes are equally and ratably secured, except for: (a) Liens existing as of the Issue Date to the extent and in the manner such Liens are in effect on the Issue Date; 87 (b) Liens securing Senior Debt; (c) Liens securing the notes; (d) Liens of TransDigm or a Wholly Owned Restricted Subsidiary of TransDigm on assets of any Restricted Subsidiary of TransDigm; (e) Liens securing Refinancing Indebtedness which is incurred to Refinance any Indebtedness that was secured by a Lien permitted under the indenture and which has been incurred in accordance with the provisions of the indenture; PROVIDED, HOWEVER, that such Liens do not extend to or cover any categories of property or assets of TransDigm or any of its Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (f) Permitted Liens. PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED DEBT. TransDigm will not, and will not permit any Restricted Subsidiary that is a Guarantor to, incur or suffer to exist Indebtedness that is senior in right of payment to the notes or such Guarantor's Guarantee, as the case may be, and subordinate in right of payment to any other Indebtedness of TransDigm or such Guarantor, as the case may be. MERGER CONSOLIDATION AND SALE OF ASSETS. TransDigm will not, in a single transaction or series of related transactions, consolidate or merge with or into any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Restricted Subsidiary of TransDigm to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of TransDigm's assets (determined on a consolidated basis for TransDigm and TransDigm's Restricted Subsidiaries) whether as an entirety or substantially as an entirety to any Person unless: (1) either: (a) TransDigm shall be the surviving or continuing corporation; or (b) the Person (if other than TransDigm) formed by such consolidation or into which TransDigm is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of TransDigm and of TransDigm's Restricted Subsidiaries substantially as an entirety (the "Surviving Entity"): (x) shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia; and (y) shall expressly assume, by supplemental indenture (in form and substance satisfactory to the Trustee), executed and delivered to the Trustee, the due and punctual payment of the principal of, and premium, if any, and interest on all of the notes and the performance of every covenant of the notes, the indenture and the registration rights agreement on the part of TransDigm to be performed or observed; (2) except in the case of a merger of TransDigm with or into a Wholly Owned Restricted Subsidiary of TransDigm and except in the case of a merger entered into solely for the purpose of reincorporating TransDigm in another jurisdiction, immediately after giving effect to such transaction and the assumption contemplated by clause (1)(b)(y) above (including giving effect to any Indebtedness and Acquired Indebtedness incurred in connection with or in respect of such transaction), TransDigm or such Surviving Entity, as the case may be, shall be able to incur at least $1.00 of additional Indebtedness pursuant to the "Limitation on Incurrence of Additional Indebtedness" covenant; (3) except in the case of a merger of TransDigm with or into a Wholly Owned Restricted Subsidiary of TransDigm and except in the case of a merger entered into solely for the purpose of reincorporating TransDigm in another jurisdiction, immediately after giving effect 88 to such transaction and the assumption contemplated by clause (1)(b)(y) above (including, without limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing; and (4) TransDigm or the Surviving Entity shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the applicable provisions of the indenture and that all conditions precedent in the indenture relating to such transaction have been satisfied. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries of TransDigm the Capital Stock of which constitutes all or substantially all of the properties and assets of TransDigm, shall be deemed to be the transfer of all or substantially all of the properties and assets of TransDigm. However, transfer of assets between or among TransDigm and its Restricted Subsidiaries will not be subject to the foregoing covenant. The indenture provides that upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of TransDigm in accordance with the foregoing, in which TransDigm is not the continuing corporation, the successor Person formed by such consolidation or into which TransDigm is merged or to which such conveyance, lease or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, TransDigm under the indenture and the notes with the same effect as if such surviving entity had been named as such and that, in the event of a conveyance, lease or transfer, the conveyor, lessor or transferor will be released from the provisions of the indenture. LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. TransDigm will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to occur any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (an "Affiliate Transaction"), other than Affiliate Transactions on terms that are not materially less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate of TransDigm; PROVIDED, HOWEVER, that for a transaction or series of related transactions with an aggregate value of $2.5 million or more, at TransDigm's option, either: (1) a majority of the disinterested members of the Board of Directors of TransDigm shall determine in good faith that such Affiliate Transaction is on terms that are not materially less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate of TransDigm or (2) the Board of Directors of TransDigm or any such Restricted Subsidiary party to such Affiliate Transaction shall have received an opinion from a nationally recognized investment banking, appraisal or accounting firm that such Affiliate Transaction is on terms not materially less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate of TransDigm; and PROVIDED, FURTHER, that for an Affiliate Transaction with an aggregate value of $10.0 million or more the Board of Directors of TransDigm or any such Restricted Subsidiary party to such Affiliate Transaction shall have received an opinion from a nationally recognized investment banking, appraisal or accounting firm that such Affiliate Transaction is on terms not materially less favorable than those 89 that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate of TransDigm. The restrictions set forth in the first paragraph of this covenant shall not apply to: (1) reasonable fees and compensation paid to, and indemnity provided on behalf of, officers, directors, employees or consultants of TransDigm or any Restricted Subsidiary of TransDigm as determined in good faith by TransDigm's Board of Directors or senior management; (2) transactions exclusively between or among TransDigm and any of its Restricted Subsidiaries or exclusively between or among such Restricted Subsidiaries, provided such transactions are not otherwise prohibited by the indenture; (3) any agreement as in effect as of the Issue Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) in any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Issue Date; (4) Restricted Payments or Permitted Investments permitted by the indenture; (5) transactions effected as part of a Qualified Securitization Transaction; (6) the payment of customary annual management, consulting and advisory fees and related expenses to the Permitted Holders and their Affiliates made pursuant to any financial advisory, financing, underwriting or placement agreement or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures which are approved by the Board of Directors of TransDigm or such Restricted Subsidiary in good faith; (7) payments or loans to employees or consultants that are approved by the Board of Directors of TransDigm in good faith; (8) sales of Qualified Capital Stock; (9) the existence of, or the performance by TransDigm or any of its Restricted Subsidiaries of its obligations under the terms of, any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which it may enter into thereafter; PROVIDED, HOWEVER, that the existence of, or the performance by TransDigm or any of its Restricted Subsidiaries of obligations under, any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause (9) to the extent that the terms of any such amendment or new agreement are not disadvantageous to the Holders of the notes in any material respect; and (10) transactions permitted by and complying with, the provisions of the "Merger, Consolidation and Sale of Assets" covenant. FUTURE GUARANTEES BY RESTRICTED SUBSIDIARIES. TransDigm will not create or acquire another Domestic Restricted Subsidiary unless such Domestic Restricted Subsidiary executes and delivers a supplemental indenture to the indenture, providing for a senior subordinated guarantee of payment of the notes by such Restricted Subsidiary (the "Guarantee"). Notwithstanding the foregoing, any such Guarantee by a Domestic Restricted Subsidiary of the notes shall provide by its terms that it shall be automatically and unconditionally released and discharged, without any further action required on the part of the Trustee or any Holder, upon any sale or other disposition (by merger or otherwise) to any Person which is not a Restricted Subsidiary of 90 TransDigm of all of TransDigm's Capital Stock in, or all or substantially all of the assets of, such Domestic Restricted Subsidiary; PROVIDED that such sale or disposition of such Capital Stock or assets is otherwise in compliance with the terms of the indenture. A form of such Guarantee will be attached as an exhibit to the indenture. CONDUCT OF BUSINESS. The indenture will provide that TransDigm will not, and will not permit any of its Restricted Subsidiaries to, engage in any businesses a majority of whose revenues are not derived from businesses that are the same or reasonably similar, ancillary or related to, or a reasonable extension, development or expansion of, the businesses in which TransDigm and its Restricted Subsidiaries are engaged on the Issue Date. REPORTS TO HOLDERS. The indenture will provide that, whether or not required by the rules and regulations of the Commission, so long as any notes are outstanding, TransDigm will furnish to the Holders of notes: (1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if TransDigm were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of TransDigm and its consolidated Subsidiaries (showing in reasonable detail, either on the face of the financial statements or in the footnotes thereto and in Management's Discussion and Analysis of Financial Condition and Results of Operations, the financial condition and results of operations of TransDigm and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of TransDigm) and, with respect to the annual information only, a report thereon by TransDigm's certified independent accountants and (2) all current reports that would be required to be filed with the Commission on Form 8-K if TransDigm were required to file such reports, in each case, within the time periods specified in the Commission's rules and regulations. For so long as Holdings is a guarantor of the notes, the indenture will permit TransDigm to satisfy its obligations under this covenant by furnishing financial information relating to Holdings; PROVIDED that the same is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to Holdings, on the one hand, and the information relating to TransDigm and its Restricted Subsidiaries on a stand-alone basis, on the other hand. In addition, following the consummation of this exchange offer, whether or not required by the rules and regulations of the Commission, TransDigm will file a copy of all such information and reports with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, TransDigm has agreed that, for so long as any notes remain outstanding, it will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. 91 EVENTS OF DEFAULT The following events are defined in the indenture as "Events of Default": (1) the failure to pay interest on any notes when the same becomes due and payable and the default continues for a period of 30 days (whether or not such payment shall be prohibited by the subordination provisions of the indenture); (2) the failure to pay the principal on any notes, when such principal becomes due and payable, at maturity, upon redemption or otherwise (including the failure to make a payment to purchase notes tendered pursuant to a Change of Control Offer or a Net Proceeds Offer on the date specified for such payment in the applicable offer to purchase) (whether or not such payment shall be prohibited by the subordination provisions of the indenture); (3) a default in the observance or performance of any other covenant or agreement contained in the indenture which default continues for a period of 30 days after TransDigm receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the Holders of at least 25% of the outstanding principal amount of the notes (except in the case of a default with respect to the "Merger, Consolidation and Sale of Assets" covenant, which will constitute an Event of Default with such notice requirement but without such passage of time requirement); (4) the failure to pay at final stated maturity (giving effect to any applicable grace periods and any extensions thereof) the principal amount of any Indebtedness of TransDigm or any Restricted Subsidiary of TransDigm (other than a Securitization Entity) which failure continues for at least 20 days, or the acceleration of the final stated maturity of any such Indebtedness, which acceleration remains uncured or unrescinded for at least 20 days, if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final maturity or which has been accelerated (in each case with respect to which the 20-day period described above has passed), aggregates $5.0 million or more at any time; (5) one or more judgments in an aggregate amount in excess of $5.0 million shall have been rendered against TransDigm or any of its Significant Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and non-appealable; or (6) certain events of bankruptcy affecting TransDigm or any of its Significant Subsidiaries. If an Event of Default (other than an Event of Default specified in clause (6) above with respect to TransDigm) shall occur and be continuing, the Trustee or the Holders of at least 25% in principal amount of outstanding notes may declare the principal of and accrued interest on all the notes to be due and payable by notice in writing to TransDigm and the Trustee specifying the respective Event of Default and that it is a "notice of acceleration" (the "Acceleration Notice"), and the same: (1) shall become immediately due and payable or (2) if there are any amounts outstanding under the Credit Facility, shall become immediately due and payable upon the first to occur of an acceleration under the Credit Facility or 5 business days after receipt by TransDigm and the Representative under the Credit Facility of such Acceleration Notice but only if such Event of Default is then continuing. If an Event of Default specified in clause (6) above with respect to TransDigm occurs and is continuing, then all unpaid principal of, and premium, if any, and accrued and unpaid interest on all of the outstanding notes shall IPSO FACTO become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. 92 The indenture provides that, at any time after a declaration of acceleration with respect to the notes as described in the preceding paragraph, the Holders of a majority in principal amount of the notes may rescind and cancel such declaration and its consequences: (1) if the rescission would not conflict with any judgment or decree; (2) if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration; (3) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid; (4) if TransDigm has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances; and (5) in the event of the cure or waiver of an Event of Default of the type described in clause (6) of the description above of Events of Default, the Trustee shall have received an officers' certificate and an opinion of counsel that such Event of Default has been cured or waived. No such rescission shall affect any subsequent Default or impair any right consequent thereto. The Holders of a majority in principal amount of the notes may waive any existing Default or Event of Default under the indenture, and its consequences, except a default in the payment of the principal of or interest on any notes. Holders of the notes may not enforce the indenture or the notes except as provided in the indenture and under the TIA. Subject to the provisions of the indenture relating to the duties of the Trustee, the Trustee is under no obligation to exercise any of its rights or powers under the indenture at the request, order or direction of any of the Holders, unless such Holders have offered to the Trustee reasonable indemnity. Subject to all provisions of the indenture and applicable law, the Holders of a majority in aggregate principal amount of the then outstanding notes have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. Under the indenture, TransDigm is required to provide an officers' certificate to the Trustee promptly upon any such officer obtaining knowledge of any Default or Event of Default (provided that such officers shall provide such certification at least annually whether or not they know of any Default or Event of Default) that has occurred and, if applicable, describe such Default or Event of Default and the status thereof. LEGAL DEFEASANCE AND COVENANT DEFEASANCE TransDigm may, at its option and at any time, elect to have its obligations discharged with respect to the outstanding notes ("Legal Defeasance"). Such Legal Defeasance means that TransDigm shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding notes, except for: (1) the rights of Holders to receive payments in respect of the principal of, premium, if any, and interest on the notes when such payments are due; (2) TransDigm's obligations with respect to the notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payments; (3) the rights, powers, trust, duties and immunities of the Trustee and TransDigm's obligations in connection therewith; and 93 (4) the Legal Defeasance provisions of the indenture. In addition, TransDigm may, at its option and at any time, elect to have the obligations of TransDigm released with respect to certain covenants that are described in the indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, reorganization and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the notes. In order to exercise either Legal Defeasance or Covenant Defeasance: (1) TransDigm must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders cash in U.S. dollars, non-callable U.S. government obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the notes on the stated date for payment thereof or on the applicable redemption date, as the case may be; (2) in the case of Legal Defeasance, TransDigm shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (a) TransDigm has received from, or there has been published by the Internal Revenue Service a ruling or (b) since the date of the indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (3) in the case of Covenant Defeasance, TransDigm shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (4) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or an Event of Default resulting from the borrowing of funds to be applied to such deposit and the grant of any Lien securing such borrowing) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (5) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the indenture (other than a Default or an Event of Default resulting from the borrowing of funds to be applied to such deposit and the grant of any Lien securing such borrowing) or any other material agreement or instrument to which TransDigm or any of its Subsidiaries is a party or by which TransDigm or any of its Subsidiaries is bound; (6) TransDigm shall have delivered to the Trustee an officers' certificate stating that the deposit was not made by TransDigm with the intent of preferring the Holders over any other creditors of TransDigm or with the intent of defeating, hindering, delaying or defrauding any other creditors of TransDigm or others; 94 (7) TransDigm shall have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with; (8) TransDigm shall have delivered to the Trustee an opinion of counsel to the effect that: (a) the trust funds will not be subject to any rights of holders of Senior Debt, including, without limitation, those arising under the indenture; and (b) after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; and (9) certain other customary conditions precedent are satisfied. Notwithstanding the foregoing, the opinion of counsel required by clause (2) above with respect to a Legal Defeasance need not be delivered if all notes not therefore delivered to the Trustee for cancellation (1) have become due and payable, or (2) will become due and payable on the maturity date within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of TransDigm. SATISFACTION AND DISCHARGE The indenture will be discharged and will cease to be of further effect (except as to surviving rights or registration of transfer or exchange of the notes, as expressly provided for in the indenture) as to all outstanding notes when (1) either: (a) all the notes theretofore authenticated and delivered (except lost, stolen or destroyed notes which have been replaced or paid and notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by TransDigm and thereafter repaid to TransDigm or discharged from such trust) have been delivered to the Trustee for cancellation or (b) all notes not theretofore delivered to the Trustee for cancellation have become due and payable, pursuant to an optional redemption notice or otherwise, and TransDigm has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the notes to the date of deposit together with irrevocable instructions from TransDigm directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; and (2) TransDigm has paid all other sums payable under the indenture by TransDigm, The Trustee will acknowledge the satisfaction and discharge of the indenture if TransDigm has delivered to the Trustee an officers' certificate and an opinion of counsel stating that all conditions precedent under the indenture relating to the satisfaction and discharge of the indenture have been complied with. MODIFICATION OF THE INDENTURE From time to time, TransDigm and the Trustee, without the consent of the Holders, may amend the indenture for certain specified purposes, including curing ambiguities, defects or inconsistencies, so long as such change does not, in the opinion of the Trustee, adversely affect the rights of any of the Holders in any material respect. In formulating its opinion on such matters, the Trustee will be entitled 95 to rely on such evidence as it deems appropriate, including, without limitation, solely on an opinion of counsel. Other modifications and amendments of the indenture may be made with the consent of the Holders of a majority in principal amount of the then outstanding notes issued under the indenture, except that, without the consent of each Holder affected thereby, no amendment may: (1) reduce the amount of notes whose Holders must consent to an amendment; (2) reduce the rate of or change or have the effect of changing the time for payment of interest, including defaulted interest, on any notes; (3) reduce the principal of or change or have the effect of changing the fixed maturity of any notes, or change the date on which any notes may be subject to redemption or reduce the redemption price therefor; (4) make any notes payable in money other than that stated in the notes; (5) make any change in the provisions of the indenture protecting the right of each Holder to receive payment of principal of and interest on such note on or after the due date thereof or to bring suit to enforce such payment, or permitting Holders of a majority in principal amount of notes to waive Defaults or Events of Default; (6) after TransDigm's obligation to purchase notes arises thereunder, amend, change or modify in any material respect the obligation of TransDigm to make and consummate a Change of Control Offer in the event of a Change of Control or modify any of the provisions or definitions with respect thereto after a Change of Control has occurred; or (7) modify or change any provision of the indenture or the related definitions affecting the subordination or ranking of the notes in a manner which adversely affects the Holders. GOVERNING LAW The indenture provides that it and the notes will be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. THE TRUSTEE The indenture provides that, except during the continuance of an Event of Default, the Trustee will perform only such duties as are specifically set forth in the indenture. During the existence of an Event of Default, the Trustee will exercise such rights and powers vested in it by the indenture, and use the same degree of care and skill in its exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. The indenture and the provisions of the TIA contain certain limitations on the rights of the Trustee, should it become a creditor of TransDigm, to obtain payments of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. Subject to the TIA, the Trustee is permitted to engage in other transactions; provided that if the Trustee acquires any conflicting interest as described in the TIA, it must eliminate such conflict or resign. CERTAIN DEFINITIONS Set forth below is a summary of certain of the defined terms used in the indenture. Reference is made to the indenture for the full definition of all such terms, as well as any other terms used herein for which no definition is provided. "ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of TransDigm or at the time it merges or 96 consolidates with or into TransDigm or any of its Subsidiaries or that is assumed in connection with the acquisition of assets from such Person and in each case not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of TransDigm or such acquisition, merger or consolidation. "AFFILIATE" means, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative of the foregoing. Notwithstanding the foregoing, no Person (other than TransDigm or any Subsidiary of TransDigm) in whom a Securitization Entity makes an Investment in connection with a Qualified Securitization Transaction shall be deemed to be an Affiliate of TransDigm or any of its Subsidiaries solely by reason of such Investment. "ASSET ACQUISITION" means (a) an Investment by TransDigm or any Restricted Subsidiary of TransDigm in any other Person pursuant to which such Person shall become a Restricted Subsidiary of TransDigm, or shall be merged with or into TransDigm or any Restricted Subsidiary of TransDigm, or (b) the acquisition by TransDigm or any Restricted Subsidiary of TransDigm of the assets of any Person (other than a Restricted Subsidiary of TransDigm) other than in the ordinary course of business. "ASSET SALE" means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value by TransDigm or any of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than TransDigm or a Restricted Subsidiary of TransDigm of: (1) any Capital Stock of any Restricted Subsidiary of TransDigm, or (2) any other property or assets of TransDigm or any Restricted Subsidiary of TransDigm other than in the ordinary course of business; PROVIDED, HOWEVER, that Asset Sales or other dispositions shall not include: (a) a transaction or series of related transactions for which TransDigm or its Restricted Subsidiaries receive aggregate consideration of less than $1.0 million; (b) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of TransDigm as permitted under "--Certain Covenants--Merger, Consolidation and Sale of Assets" or any disposition that constitutes a Change of Control; (c) the sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof; (d) disposals or replacements of obsolete equipment in the ordinary course of business; (e) the sale, lease, conveyance, disposition or other transfer by TransDigm or any Restricted Subsidiary of assets or property to one or more Restricted Subsidiaries in connection with Investments permitted under the "Limitation on Restricted Payments" covenant or pursuant to any Permitted Investment; and (f) sales of accounts receivable, equipment and related assets (including contract rights) of the type specified in the definition of "Qualified Securitization Transaction" to a Securitization Entity for the fair market value thereof, including cash in an amount at least equal to 75% of the fair market value thereof as determined in accordance with GAAP. For the purposes of this clause (f), Purchase Money Notes shall be deemed to be cash. 97 "BOARD OF DIRECTORS" means, as to any Person, the board of directors of such Person or any duly authorized committee thereof. "BOARD RESOLUTION" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee. "CAPITAL STOCK" means: (1) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock, of such Person and (2) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person. "CAPITALIZED LEASE OBLIGATION" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP. "CASH EQUIVALENTS" means: (1) marketable direct obligations issued by or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (2) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody's; (3) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (4) certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $250.0 million; (5) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (1) above entered into with any bank meeting the qualifications specified in clause (4) above; and (6) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (1) through (5) above. "CHANGE OF CONTROL" means the occurrence of one or more of the following events: (1) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of TransDigm or Holdings to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), other than to the Permitted Holders or their Related Parties or any Permitted Group; (2) the approval by the holders of Capital Stock of TransDigm or Holdings, as the case may be, of any plan or proposal for the liquidation or dissolution of TransDigm or Holdings, as the case may be (whether or not otherwise in compliance with the provisions of the indenture); 98 (3) any Person or Group (other than the Permitted Holders or their Related Parties or any Permitted Group) shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 40% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of TransDigm or Holdings at a time where the Permitted Holders and their Related Parties in the aggregate own a lesser percentage of the aggregate ordinary voting power represented by such issued and outstanding Capital Stock; or (4) the first day on which a majority of the members of the Board of Directors of TransDigm or Holdings are not Continuing Directors. "COMMON STOCK" of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person's common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock. "CONSOLIDATED EBITDA" means, with respect to any Person, for any period, the sum (without duplication) of such Person's: (1) Consolidated Net Income; and (2) to the extent Consolidated Net Income has been reduced thereby: (a) all income taxes and foreign withholding taxes of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP for such period; (b) Consolidated Interest Expense; (c) Consolidated Non-cash Charges less any non-cash items increasing Consolidated Net Income for such period (other than normal accruals in the ordinary course of business), all as determined on a consolidated basis for such Person and its Restricted Subsidiaries in accordance with GAAP; and (d) any cash charges resulting from the Transactions that are incurred prior to the six month anniversary of the Issue Date. "CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the "Four-Quarter Period") ending prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio for which financial statements are available (the "Transaction Date") to Consolidated Fixed Charges of such Person and, in the case of TransDigm and the Guarantors, for the Four-Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving effect on a pro forma basis for the period of such calculation to: (1) the incurrence or repayment of any Indebtedness or the issuance of any Designated Preferred Stock of such Person or any of its Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness or the issuance or redemption of other Preferred Stock (and the application of the proceeds thereof), other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to revolving credit facilities, occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment or issuance or redemption, as the case may be (and the application of the proceeds thereof), had occurred on the first day of the Four-Quarter Period; and (2) any Asset Sales or other dispositions or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or 99 one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA (including any pro forma expense and cost reductions and other operating improvements that have occurred or are reasonably expected to occur, all as determined in accordance with Regulation S-X promulgated under the Securities Act) attributable to the assets which are the subject of the Asset Acquisition or Asset Sale or other disposition and without regard to clause (4) of the definition of Consolidated Net Income) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or other disposition or Asset Acquisition (including the incurrence or assumption of any such Acquired Indebtedness) occurred on the first day of the Four-Quarter Period. If such Person or any of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such Person had directly incurred or otherwise assumed such other Indebtedness that was so guaranteed. Furthermore, in calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio": (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; and (2) notwithstanding clause (1) of this paragraph, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. "CONSOLIDATED FIXED CHARGES" means, with respect to any Person for any period, the sum, without duplication, of: (1) Consolidated Interest Expense; PLUS (2) the product of (x) the amount of all cash dividend payments on any series of Preferred Stock of such Person times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local income tax rate of such Person, expressed as a decimal; PLUS (3) the product of (x) the amount of all dividend payments on any series of Permitted Subsidiary Preferred Stock times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local income tax rate of such Person, expressed as a decimal; PROVIDED that with respect to any series of Preferred Stock that was not paid cash dividends during such period but that is eligible to be paid cash dividends during any period prior to the maturity date of the notes, cash dividends shall be deemed to have been paid with respect to such series of Preferred Stock during such period for purposes of this clause (3). "CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any period, the sum of, without duplication: (1) the aggregate of all cash and non-cash interest expense with respect to all outstanding Indebtedness of such Person and its Restricted Subsidiaries, including the net costs associated with Interest Swap Obligations, for such period determined on a consolidated basis in conformity with GAAP, but excluding amortization or write-off of debt issuance costs; 100 (2) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period; and (3) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED NET INCOME" means, for any period, the aggregate net income (or loss) of TransDigm and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP and without any deduction in respect of Preferred Stock dividends; PROVIDEDthat there shall be excluded therefrom: (1) gains and losses from Assets Sales (without regard to the $1.0 million limitation set forth in the definition thereof) and the related tax effects according to GAAP; (2) gains and losses due solely to fluctuations in currency values and the related tax effects according to GAAP; (3) all extraordinary, unusual or nonrecurring charges, gains and losses (including, without limitation, all restructuring costs and any expense or charge related to the repurchase of Capital Stock or warrants or options to purchase Capital Stock), and the related tax effects according to GAAP; (4) the net income (or loss) of any Person acquired in a pooling of interests transaction accrued prior to the date it becomes a Restricted Subsidiary of TransDigm or is merged or consolidated with or into TransDigm or any Restricted Subsidiary of TransDigm; (5) the net income (but not loss) of any Restricted Subsidiary of TransDigm to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of TransDigm of that income is prohibited by contract, operation of law or otherwise; (6) the net loss of any Person, other than a Restricted Subsidiary of TransDigm; (7) the net income of any Person, other than a Restricted Subsidiary of TransDigm, except to the extent of cash dividends or distributions paid to TransDigm or a Restricted Subsidiary of TransDigm by such Person; (8) in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person's assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets; and (9) any non-cash compensation charges, including any arising from existing stock options resulting from any merger or recapitalization transaction. For purposes of clause (iii)(w) of the first paragraph of the "Limitation on Restricted Payments" covenant, Consolidated Net Income shall be reduced by any cash dividends paid with respect to any series of Designated Preferred Stock. "CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person, for any period, the aggregate depreciation, amortization and other non-cash charges and expenses of such Person and its Restricted Subsidiaries reducing Consolidated Net Income of such Person and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (excluding any such charges that require an accrual of or a reserve for cash payments for any future period other than accruals or reserves associated with mandatory repurchases of equity securities). 101 "CONTINUING DIRECTORS" means, as of any date of determination, any member of the Board of Directors of TransDigm or Holdings who: (1) was a member of such Board of Directors on the Issue Date; or (2) was nominated for election or elected to such Board of Directors by any of the Permitted Holders or with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "CREDIT FACILITIES" means one or more debt facilities (including, without limitation, the Credit Facility) or commercial paper facilities with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) and/or letters of credit or banker's acceptances. "CREDIT FACILITY" means the Credit Agreement dated as of the Issue Date among TransDigm, the lenders party thereto in their capacities as lenders thereunder and Bankers Trust Company, as administrative agent, together with the related documents thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder or adding Restricted Subsidiaries of TransDigm as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders. "CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect TransDigm or any Restricted Subsidiary of TransDigm against fluctuations in currency values. "DEFAULT" means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default. "DESIGNATED NONCASH CONSIDERATION" means any noncash consideration received by TransDigm or one of its Restricted Subsidiaries in connection with an Asset Sale that is designated as Designated Noncash Consideration pursuant to an Officers' Certificate executed by the principal executive officer and the principal financial officer of TransDigm or such Restricted Subsidiary at the time of such Asset Sale. Any particular item of Designated Noncash Consideration will cease to be considered to be outstanding once it has been sold for cash or Cash Equivalents. At the time of receipt of any Designated Noncash Consideration, TransDigm shall deliver an Officers' Certificate to the Trustee which shall state the fair market value of such Designated Noncash Consideration and shall state the basis of such valuation, which shall be a report of a nationally recognized investment banking, appraisal or accounting firm with respect to the receipt in one or a series of related transactions of Designated Noncash Consideration with a fair market value in excess of $10.0 million. 102 "DESIGNATED PREFERRED STOCK" means Preferred Stock that is so designated as Designated Preferred Stock, pursuant to an Officers' Certificate executed by the principal executive officer and the principal financial officer of TransDigm, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in clause (iii)(x) of the first paragraph of the "Limitation on Restricted Payments" covenant. "DESIGNATED SENIOR DEBT" means (1) Indebtedness under or in respect of the Credit Facility and (2) any other Indebtedness constituting Senior Debt which, at the time of determination, has an aggregate principal amount of at least $25.0 million and is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt" by TransDigm. "DISQUALIFIED CAPITAL STOCK" means that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event (other than an event which would constitute a Change of Control), matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof (except, in each case, upon the occurrence of a Change of Control) on or prior to the final maturity date of the notes. "DOMESTIC RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of TransDigm that is incorporated under the laws of the United States or any state thereof or the District of Columbia. "EQUITY OFFERING" means any offering of Qualified Capital Stock of Holdings or TransDigm; provided that: (1) in the event of an offering by Holdings, Holdings contributes to the capital of TransDigm the portion of the net cash proceeds of such offering necessary to pay the aggregate redemption price (plus accrued interest to the redemption date) of the notes to be redeemed pursuant to the provisions described under "--Redemption--Optional Redemption upon Equity Offerings" and, (2) in the event such equity offering is not in the form of a public offering registered under the Securities Act, the proceeds received by TransDigm directly or indirectly from such offering are not less than $10.0 million. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto. "FAIR MARKET VALUE" means, with respect to any asset or property, the price which could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair market value shall be determined by the Board of Directors of TransDigm acting reasonably and in good faith and shall be evidenced by a Board Resolution of the Board of Directors of TransDigm delivered to the Trustee. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect from time to time. "GUARANTEE" means: (1) the guarantee of the notes by Holdings and the Domestic Restricted Subsidiaries of TransDigm; and 103 (2) the guarantee of the notes by any Restricted Subsidiary required under the terms of the "Future Guarantees by Restricted Subsidiaries" covenant. "GUARANTOR" means any Restricted Subsidiary that incurs a Guarantee; provided that upon the release and discharge of such Restricted Subsidiary from its Guarantee in accordance with the indenture, such Restricted Subsidiary shall cease to be a Guarantor. "HEDGING AGREEMENT" means any agreement with respect to the hedging of price risk associated with the purchase of commodities used in the business of TransDigm and its Restricted Subsidiaries, so long as any such agreement has been entered into in the ordinary course of business and not for purposes of speculation. "INDEBTEDNESS" means with respect to any Person, without duplication: (1) all Obligations of such Person for borrowed money; (2) all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (3) all Capitalized Lease Obligations of such Person; (4) all Obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all Obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business); (5) all Obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction; (6) guarantees and other contingent obligations in respect of Indebtedness referred to in clauses (1) through (5) above and clause (8) below; (7) all Obligations of any other Person of the type referred to in clauses (1) through (6) which are secured by any Lien on any property or asset of such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the Obligation so secured; (8) all Obligations under currency agreements and interest swap agreements of such Person; and (9) all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock. For the purposes of calculating the amount of Indebtedness of a Securitization Entity outstanding as of any date, the face or notional amount of any interest in receivables or equipment that is outstanding as of such date shall be deemed to be Indebtedness but any such interests held by Affiliates of such Securitization Entity shall be excluded for purposes of such calculation. 104 "INTEREST SWAP OBLIGATIONS" means the obligations of any Person pursuant to any arrangement with any other Person, whereby directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements. "INVESTMENT" means, with respect to any Person, any direct or indirect loan or other extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any Person. "Investment" shall exclude extensions of trade credit by TransDigm and its Restricted Subsidiaries in accordance with normal trade practices of TransDigm or such Restricted Subsidiary, as the case may be. If TransDigm or any Restricted Subsidiary of TransDigm sells or otherwise disposes of any Common Stock of any direct or indirect Restricted Subsidiary of TransDigm such that, after giving effect to any such sale or disposition, such Restricted Subsidiary is no longer a Restricted Subsidiary of TransDigm (or, in the case of a Restricted Subsidiary that is not Wholly Owned Restricted Subsidiary of TransDigm, such Restricted Subsidiary has a minority interest that is held by an Affiliate of TransDigm that is not a Restricted Subsidiary of TransDigm), TransDigm shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Common Stock of such Restricted Subsidiary not sold or disposed of. "ISSUE DATE" means the date of original issuance of the notes on December 3, 1998. "LIEN" means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest). "MARKETABLE SECURITIES" means publicly traded debt or equity securities that are listed for trading on a national securities exchange and that were issued by a corporation whose debt securities are rated in one of the three highest rating categories by either S&P or Moody's. "MOODY'S" means Moody's Investors Service, Inc. "NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment constituting interest) received by TransDigm or any of its Restricted Subsidiaries from such Asset Sale net of: (1) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions); (2) taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements; and (3) appropriate amounts to be provided by TransDigm or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by TransDigm or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "OBLIGATIONS" means all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. 105 "PERMITTED BUSINESS" means any business (including stock or assets) that derives a majority of its revenues from the business engaged in by TransDigm and its Restricted Subsidiaries on the Issue Date and/or activities that are reasonably similar, ancillary or related to, or a reasonable extension, development or expansion of, the businesses in which TransDigm and its Restricted Subsidiaries are engaged on the Issue Date. "PERMITTED GROUP" means any group of investors that is deemed to be a "person" (as such term is used in Section 13(d)(3) of the Exchange Act) by virtue of the Stockholders Agreements, as the same may be amended, modified or supplemented from time to time, provided that no single Person (together with its Affiliates), other than the Permitted Holders and their Related Parties, is the "beneficial owner" (as such term is used in Section 13(d) of the Exchange Act), directly or indirectly, of more than 50% of the voting power of the issued and outstanding Capital Stock of TransDigm or Holdings (as applicable) that is "beneficially owned" (as defined above) by such group of investors. "PERMITTED HOLDERS" means Odyssey Investment Partners Fund, LP, its Affiliates and any general or limited partners of Odyssey Investment Partners Fund, L.P. "PERMITTED INDEBTEDNESS" means, without duplication, each of the following: (1) Indebtedness under the notes in an aggregate principal amount not to exceed $125.0 million; (2) Indebtedness of TransDigm or any of its Restricted Subsidiaries incurred pursuant to one or more Credit Facilities in an aggregate principal amount at any time outstanding not to exceed $155.0 million, less: (A) the aggregate amount of Indebtedness of Securitization Entities at the time outstanding, less (B) the amount of all mandatory principal payments actually made by TransDigm or any such Restricted Subsidiary since the Issue Date with the Net Proceeds of an Asset Sale in respect of term loans under a credit facility (excluding any such payments to the extent refinanced at the time of payment), and (C) further reduced by any repayments of revolving credit borrowings under a credit facility with the Net Cash Proceeds of an Asset Sale that are accompanied by a corresponding commitment reduction thereunder; PROVIDED that the amount of Indebtedness permitted to be incurred pursuant to the Credit Facilities in accordance with this clause (2) shall be in addition to any Indebtedness permitted to be incurred pursuant to the Credit Facilities in reliance on, and in accordance with, clauses (7), (13) and (14) below; (3) other indebtedness of TransDigm and its Restricted Subsidiaries outstanding on the Issue Date reduced by the amount of any scheduled amortization payments or mandatory prepayments when actually paid or permanent reductions thereon; (4) Interest Swap Obligations of TransDigm or any of its Restricted Subsidiaries covering Indebtedness of TransDigm or any of its Restricted Subsidiaries; PROVIDED that any Indebtedness to which any such Interest Swap Obligations correspond is otherwise permitted to be incurred under the indenture; and PROVIDED, FURTHER, that such Interest Swap Obligations are entered into, in the judgment of TransDigm, to protect TransDigm or any of its Restricted Subsidiaries from fluctuation in interest rates on its outstanding Indebtedness; (5) Indebtedness of TransDigm or any Restricted Subsidiary under Hedging Agreements and Currency Agreements; 106 (6) the incurrence by TransDigm or any of its Restricted Subsidiaries of intercompany Indebtedness between or among TransDigm and any such Restricted Subsidiaries; PROVIDED, HOWEVER, that: (a) if TransDigm is the obligor on such Indebtedness and the payee is a Restricted Subsidiary that is not a Guarantor, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the notes and (b) (1) any subsequent issuance or transfer of Capital Stock that results in any such Indebtedness being held by a Person other than TransDigm or a Restricted Subsidiary thereof and (2) any sale or other transfer of any such Indebtedness to a Person that is not either TransDigm or a Restricted Subsidiary thereof (other than by way of granting a Lien permitted under the indenture or in connection with the exercise of remedies by a secured creditor) shall be deemed, in each case, to constitute an incurrence of such Indebtedness by TransDigm or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); (7) Indebtedness (including Capitalized Lease Obligations) incurred by TransDigm or any of its Restricted Subsidiaries to finance the purchase, lease or improvement of property (real or personal) or equipment (whether through the direct purchase of assets or the Capital Stock of any person owning such assets) in an aggregate principal amount outstanding not to exceed $5.0 million; (8) Refinancing Indebtedness; (9) guarantees by TransDigm and its Restricted Subsidiaries of each other's Indebtedness; PROVIDED that such Indebtedness is permitted to be incurred under the indenture and PROVIDED, FURTHER, that in the event such Indebtedness (other than Acquired Indebtedness) is incurred pursuant to the Consolidated Fixed Charge Coverage Ratio, such guarantees are by TransDigm or a Guarantor only; (10) Indebtedness arising from agreements of TransDigm or a Restricted Subsidiary of TransDigm providing for indemnification, adjustment of purchase price, earn out or other similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Restricted Subsidiary of TransDigm, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition; PROVIDED that the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by TransDigm and its Restricted Subsidiaries in connection with such disposition; (11) obligations in respect of performance and surety bonds and completion guarantees provided by TransDigm or any Restricted Subsidiary of TransDigm in the ordinary course of business; (12) the incurrence by a Securitization Entity of Indebtedness in a Qualified Securitization Transaction that is not recourse to TransDigm or any Subsidiary of TransDigm (except for Standard Securitization Undertakings); (13) Indebtedness incurred by TransDigm or any of the Guarantors in connection with the acquisition of a Permitted Business which Indebtedness is incurred on or prior to September 30, 1999; PROVIDED that on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof and the use of proceeds therefrom, the Consolidated Fixed Charge Coverage Ratio of TransDigm would be greater than the greater of (x) the Consolidated Fixed Charge Coverage Ratio of TransDigm immediately prior to the incurrence of such Indebtedness and (y) the Consolidated Fixed Charge Coverage Ratio of TransDigm on the Issue Date; 107 (14) additional Indebtedness of TransDigm and its Restricted Subsidiaries in an aggregate principal amount does not exceed $10.0 million at any one time outstanding (which amount may, but need not, be incurred in whole or in part under a credit facility); (15) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; PROVIDED, HOWEVER, that such indebtedness is extinguished within five business days of incurrence; and (16) Indebtedness of TransDigm or any of its Restricted Subsidiaries represented by letters of credit for the account of TransDigm or such Restricted Subsidiary, as the case may be, issued in the ordinary course of business of TransDigm or such Restricted Subsidiary, including, without limitation, in order to provide security for workers' compensation claims or payment obligations in connection with self-insurance or similar requirements in the ordinary course of business and other Indebtedness with respect to workers' compensation claims, self-insurance obligations, performance, surety and similar bonds and completion guarantees provided by TransDigm or any Restricted Subsidiary of TransDigm in the ordinary course of business. For purposes of determining compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (16) above or is entitled to be incurred pursuant to the Consolidated Fixed Charge Coverage Ratio provisions of such covenant, TransDigm shall, in its sole discretion, classify (or later reclassify) such item of Indebtedness in any manner that complies with such covenant. Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Capital Stock in the form of additional shares of the same class of Disqualified Capital Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Capital Stock for purposes of the "Limitations on Incurrence of Additional Indebtedness" covenant. "PERMITTED INVESTMENTS" means: (1) Investments by TransDigm or any Restricted Subsidiary of TransDigm in any Restricted Subsidiary of TransDigm (other than a Restricted Subsidiary of TransDigm in which an Affiliate of TransDigm that is not a Restricted Subsidiary of TransDigm holds a minority interest) (whether existing on the Issue Date or created thereafter) or any Person (including by means of any transfer of cash or other property) if as a result of such Investment such Person shall become a Restricted Subsidiary of TransDigm (other than Restricted Subsidiary of TransDigm in which an Affiliate of TransDigm that is not a Restricted Subsidiary of TransDigm holds a minority interest) or that will merge with or consolidate into TransDigm or a Restricted Subsidiary of TransDigm and Investments in TransDigm by any Restricted Subsidiary of TransDigm; (2) investments in cash and Cash Equivalents; (3) loans and advances to employees and officers of TransDigm and its Restricted Subsidiaries for bona fide business purposes in an aggregate principal amount not to exceed $5.0 million at any one time outstanding; (4) Currency Agreements, Hedging Agreements and Interest Swap Obligations entered into in the ordinary course of business and otherwise in compliance with the indenture; (5) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers or in good faith settlement of delinquent obligations of such trade creditors or customers; 108 (6) Investments made by TransDigm or its Restricted Subsidiaries as a result of consideration received in connection with an Asset Sale made in compliance with the "Limitation on Asset Sales" covenant; (7) Investments existing on the Issue Date; (8) accounts receivable created or acquired in the ordinary course of business; (9) guarantees by TransDigm or a Restricted Subsidiary of TransDigm permitted to be incurred under the indenture; (10) additional Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (10) that are at that time outstanding, not to exceed $10.0 million (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); (11) any Investment by TransDigm or a Subsidiary of TransDigm in a Securitization Entity or any Investment by a Securitization Entity in any other Person in connection with a Qualified Securitization Transaction; provided that any Investment in a Securitization Entity is in the form of a Purchase Money Note or an equity interest; and (12) Investments the payment for which consists exclusively of Qualified Capital Stock of TransDigm. "PERMITTED LIENS" means the following types of Liens: (1) Liens for taxes, assessments or governmental charges or claims either: (a) not delinquent; or (b) contested in good faith by appropriate proceedings and as to which TransDigm or its Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP; (2) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen and repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; (3) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (4) judgment Liens not giving rise to an Event of Default; (5) easements, rights-of-way zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of TransDigm or any of its Restricted Subsidiaries; (6) any interest or title of a lessor under any Capitalized Lease Obligation; (7) purchase money Liens to finance property or assets of TransDigm or any Restricted Subsidiary of TransDigm acquired, constructed or improved in the ordinary course of business; PROVIDED, HOWEVER, that 109 (a) the related purchase money Indebtedness shall not exceed the cost of such property or assets and shall not be secured by any property or assets of TransDigm or any Restricted Subsidiary of TransDigm other than the property and assets so acquired and (b) the Lien securing such Indebtedness shall be created within 90 days of such acquisition; (8) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (9) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; (10) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of TransDigm or any of its Restricted Subsidiaries, including rights of offset and set-off; (11) Liens securing Interest Swap Obligations which Interest Swap Obligations relate to Indebtedness that is otherwise permitted under the indenture; (12) Liens securing Indebtedness under Currency Agreements and Hedging Agreements; (13) Liens incurred in the ordinary course of business of TransDigm or any Restricted Subsidiary with respect to obligations that do not in the aggregate exceed $5.0 million at any one time outstanding; (14) Liens on assets transferred to a Securitization Entity or an assets of a Securitization Entity, in either case incurred in connection with a Qualified Securitization Transaction; (15) leases or subleases granted to others that do not materially interfere with the ordinary course of business of TransDigm and its Restricted Subsidiaries; (16) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (17) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties in connection with the importation of goods; (18) Liens securing Acquired Indebtedness incurred in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant; (19) Liens placed upon assets of a Restricted Subsidiary of TransDigm that is not a Guarantor to secure Indebtedness of such Restricted Subsidiary that is otherwise permitted under the indenture; and (20) Liens existing on the Issue Date, together with any Liens securing Indebtedness incurred in reliance on clause (8) of the definition of Permitted Indebtedness in order to refinance the Indebtedness secured by Liens existing on the Issue Date; PROVIDED that the Liens securing the refinancing Indebtedness shall not extend to property other than that pledged under the Liens securing the Indebtedness being refinanced. "PERMITTED SUBSIDIARY PREFERRED STOCK" means any series of Preferred Stock of a Restricted Subsidiary of TransDigm that constitutes Qualified Capital Stock and has a fixed dividend rate, the liquidation value of all series of which, when combined with the aggregate amount of Indebtedness of 110 TransDigm and its Restricted Subsidiaries incurred pursuant to clause (14) of the definition of Permitted Indebtedness, does not exceed $5.0 million. "PERSON" means an individual, partnership, corporation, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. "PREFERRED STOCK" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "PRODUCTIVE ASSETS" means assets (including Capital Stock) that are used or usable by TransDigm and its Restricted Subsidiaries in Permitted Businesses. "PURCHASE MONEY NOTE" means a promissory note of a Securitization Entity evidencing a line of credit, which may be irrevocable, from TransDigm or any Subsidiary of TransDigm in connection with a Qualified Securitization Transaction to a Securitization Entity, which note shall be repaid from cash available to the Securitization Entity other than amounts required to be established as reserves pursuant to agreements, amounts paid to investors in respect of interest and principal and amounts paid in connection with the purchase of newly generated receivables or newly acquired equipment. "QUALIFIED CAPITAL STOCK" means any Capital Stock that is not Disqualified Capital Stock. "QUALIFIED SECURITIZATION TRANSACTION" means any transaction or series of transactions that may be entered into by TransDigm or any of its Restricted Subsidiaries pursuant to which TransDigm or any of its Subsidiaries may sell, convey or otherwise transfer to: (1) a Securitization Entity (in the case of a transfer by TransDigm or any of its Restricted Subsidiaries); and (2) any other Person (in the case of a transfer by a Securitization Entity), or may grant a security interest in any accounts receivable or equipment (whether now existing or arising or acquired in the future) of TransDigm or any of its Restricted Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable and equipment, all contracts and contract rights and all guarantees or other obligations in respect of such accounts receivable and equipment, proceeds of such accounts receivable and equipment and other assets (including contract rights) which are customarily transferred or in respect of which security interests are customarily granted in connection with assets securitization transactions involving accounts receivable and equipment. "RECAPITALIZATION" means the recapitalization of Holdings consummated on the Issue Date. "REFINANCE" means, in respect of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have correlative meanings. "REFINANCING INDEBTEDNESS" means any Refinancing, modification, replacement, restatement, refunding, deferral, extension, substitution, supplement, reissuance or resale of existing or future Indebtedness (other than intercompany Indebtedness), including any additional Indebtedness incurred to pay interest or premiums required by the instruments governing such existing or future Indebtedness as in effect at the time of issuance thereof ("Required Premiums") and fees in connection therewith; PROVIDED that any such event shall not: (1) directly or indirectly result in an increase in the aggregate principal amount of Permitted Indebtedness, except to the extent such increase is a result of a simultaneous incurrence of additional Indebtedness: (a) to pay Required Premiums and related fees; or 111 (b) otherwise permitted to be incurred under the indenture; and (2) create Indebtedness with a Weighted Average Life to Maturity at the time such Indebtedness is incurred that is less than the Weighted Average Life to Maturity at such time of the Indebtedness being refinanced, modified, replaced, renewed, restated, refunded, deferred, extended, substituted, supplemented, reissued or resold. "RELATED PARTY" with respect to any Permitted Holder means: (a)(1) any spouse, sibling, parent or child of such Permitted Holder; or (2) the estate of any Permitted Holder during any period in which such estate holds Capital Stock of TransDigm for the benefit of any Person referred to in clause (a)(1); or (b) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially owning an interest of more than 50% of which consist of, or the sole managing partner or managing member of which is, one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (a). "REPRESENTATIVE" means the indenture trustee or other trustee, agent or representative in respect of any Designated Senior Debt; PROVIDED that if, and for so long as, any Designated Senior Debt lacks such a representative, then the Representative for such Designated Senior Debt shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Debt in respect of any Designated Senior Debt. "RESTRICTED SUBSIDIARY" of any Person means any Subsidiary of such Person which at the time of determination is not an Unrestricted Subsidiary. "S&P" means Standard & Poor's. "SALE AND LEASEBACK TRANSACTION" means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to TransDigm or a Restricted Subsidiary of any property, whether owned by TransDigm or any Restricted Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by TransDigm or such Restricted Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such Property. "SECURITIZATION ENTITY" means a Wholly Owned Subsidiary of TransDigm (or another Person in which TransDigm or any Subsidiary of TransDigm makes an Investment and to which TransDigm or any Subsidiary of TransDigm transfers accounts receivable or equipment and related assets) which engages in no activities other than in connection with the financing of accounts receivable or equipment and which is designated by the Board of Directors of TransDigm (as provided below) as a Securitization Entity: (1) no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which: (a) is guaranteed by TransDigm or any Restricted Subsidiary of TransDigm (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness)) pursuant to Standard Securitization Undertakings; (b) is recourse to or obligates TransDigm or any Restricted Subsidiary of TransDigm in any way other than pursuant to Standard Securitization Undertakings; or (c) subjects any property or asset of TransDigm or any Restricted Subsidiary of TransDigm, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings; 112 (2) with which neither TransDigm nor any Restricted Subsidiary of TransDigm has any material contract, agreement, arrangement or understanding other than on terms no less favorable to TransDigm or such Restricted Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of TransDigm, other than fees payable in the ordinary course of business in connection with servicing receivables of such entity; and (3) to which neither TransDigm nor any Restricted Subsidiary of TransDigm has any obligations to maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors of TransDigm shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution of TransDigm giving effect to such designation and an Officers' Certificate certifying that such designation complied with foregoing conditions. "SENIOR DEBT" means the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of TransDigm or any Guarantor, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the notes. Without limiting the generality of the foregoing, "Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of: (x) all monetary obligations of every nature of TransDigm or any Guarantor under the Credit Facility, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities; (y) all Interest Swap Obligations (and guarantees thereof); and (z) all obligations (and guarantees thereof) under Currency Agreements and Hedging Agreements, in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, "Senior Debt" shall not include: (i) any Indebtedness of TransDigm or a Guarantor to TransDigm or to a Subsidiary of TransDigm; (ii) other than the Holdings PIK Notes, any Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of TransDigm or any Subsidiary of TransDigm (including, without limitation, amounts owed for compensation) other than a shareholder who is also a lender (or an Affiliate of a lender) under the Credit Facilities (including the Credit Facility); (iii) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services; (iv) Indebtedness represented by Disqualified Capital Stock; (v) any liability for federal, state, local or other taxes owed or owing by TransDigm; (vi) that portion of any Indebtedness incurred in violation of the indenture provisions set forth under "Limitation on Incurrence of Additional Indebtedness" (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (vi) if the 113 holder(s) of such obligation or their representative and the Trustee shall have received an Officer's Certificate of TransDigm to the effect that the incurrence of such Indebtedness does not (or in the case of revolving credit indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made) would not violate such provisions of the indenture; (vii) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to TransDigm; and (viii) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of TransDigm. "SIGNIFICANT SUBSIDIARY," with respect to any Person, means any Restricted Subsidiary of such Person that satisfies the criteria for a "significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Securities Act. "STANDARD SECURITIZATION UNDERTAKINGS" means representations, warranties, covenants and indemnities entered into by TransDigm or any subsidiary of TransDigm which are reasonably customary in an accounts receivable or equipment transaction. "STOCKHOLDERS AGREEMENTS" means those certain stockholders agreements entered into in connection with the Recapitalization. "SUBSIDIARY," with respect to any Person, means: (i) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly by such Person; or (ii) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person. "TAX ALLOCATION AGREEMENT" means the tax allocation agreement dated as of the Issue Date between Holdings and TransDigm. "TOTAL ASSETS" means the total consolidated assets of TransDigm and its Restricted Subsidiaries, as set forth on TransDigm's most recent consolidated balance sheet. "U.S. SUBSIDIARY" means any Subsidiary of TransDigm that is incorporated under the laws of the United States or any State thereof or the District of Columbia. "UNRESTRICTED SUBSIDIARY" of any Person means: (1) any Subsidiary of such Person that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the Board of Directors of such Person in the manner provided below; and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, TransDigm or any other Subsidiary of TransDigm that is not a Subsidiary of the Subsidiary to be so designated; PROVIDED that: (1) TransDigm certifies to the Trustee that such designation complies with the "Limitation on Restricted Payments" covenant; and (2) each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become 114 directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of TransDigm or any of its Restricted Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving effect to such designation, TransDigm is able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant and (y) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (1) the then outstanding aggregate principal amount of such Indebtedness; into (2) the sum of the total of the products obtained by multiplying; (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof; by (b) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. "WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means any Wholly Owned Subsidiary of such Person which at the time of determination is a Restricted Subsidiary. "WHOLLY OWNED SUBSIDIARY" of any Person means any Subsidiary of such Person of which all the outstanding voting securities (other than in the case of a Restricted Subsidiary that is incorporated in a jurisdiction other than a State in the United States or the District of Columbia, directors' qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned by such Person or any Wholly Owned Subsidiary of such Person. 115 BOOK-ENTRY; DELIVERY AND FORM Except as described herein under the heading "--Certificated Securities," exchange notes will initially be represented by one or more permanent global exchange notes in fully registered form without interest coupons, which we refer to as the global notes, and will be deposited with the Trustee as custodian for The Depositary Trust Company, which we refer to as DTC, and registered in the name of a nominee of DTC. THE GLOBAL NOTES We expect that pursuant to procedures established by DTC (1) upon the issuance of the global notes, DTC or its custodian will credit, on its internal system, the principal amount at maturity of the individual beneficial interests represented by such global notes to the respective accounts of persons who have accounts with such depositary and (2) ownership of beneficial interests in the global notes will be shown on, and the transfer of such ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants). Such accounts initially will be designated by or on behalf of the initial purchasers and ownership of beneficial interests in the global notes will be limited to persons who have accounts with DTC, or participants, or persons who hold interests through participants. So long as DTC, or its nominee, is the registered owner or holder of the notes, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the notes represented by such global notes for all purposes under the indenture. No beneficial owner of an interest in the global notes will be able to transfer that interest except in accordance with DTC's procedures, in addition to those provided for under the indenture. Payments of the principal of, premium (if any), and interest (including additional interest) on, the global notes will be made to DTC or its nominee, as the case may be, as the registered owner thereof. None of us, the Trustee or any paying agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the global notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. We expect that DTC or its nominee, upon receipt of any payment of principal, premium, if any, or interest (including additional interest) on the global notes, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount at maturity of the global notes as shown on the records of DTC or its nominee. We also expect that payments by participants to owners of beneficial interests in the global notes held through such participants will be governed by standing instructions and customary practice, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants. Transfers between participants in DTC will be effected in the ordinary way through DTC's same-day funds system in accordance with DTC rules and will be settled in same-day funds. If a holder requires physical delivery of a certificated security for any reason, including to sell exchange notes to persons in states that require physical delivery of the exchange notes, or to pledge such securities, such holder must transfer its interest in the global notes, in accordance with the normal procedures of DTC and with the procedures set forth in the indenture. DTC has advised us that it will take any action permitted to be taken by a holder of exchange notes (including the presentation of exchange notes for exchange as described below) only at the direction of one or more participants to whose accounts the DTC interests in the global notes are credited and only in respect of such portion of the aggregate principal amount at maturity of exchange notes as to which such participant or participants has or have given such direction. However, if there is 116 an event of default under the indenture applicable to any global notes, DTC will exchange the global notes for certificated securities, which it will distribute to its participants. Although DTC has agreed to the foregoing procedures in order to facilitate transfers of interests in the global notes among participants of DTC, it is under no obligation to perform such procedures and such procedures may be discontinued at any time. Neither we nor the Trustee will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. CERTIFICATED SECURITIES Certificated securities shall be issued in exchange for the old notes in the exchange offer or for beneficial interests in the global notes, in each case, if requested by a holder of such old note or such beneficial interests, respectively. In addition, certificated securities shall be issued in exchange for beneficial interests in the global notes if DTC is at any time unwilling or unable to continue as a depository for the global notes and a successor depository is not appointed by us within 90 days. 117 PLAN OF DISTRIBUTION Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for old notes where such old notes were acquired as a result of market-making activities or other trading activities. We have agreed that we will, for a period of up to 195 days after the exchange offer registration statement is declared effective by the Commission, make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of exchange notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of up to 195 days after the exchange offer registration statement is declared effective by the Commission, we will promptly send additional copies of the prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such document in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer other than commissions or concessions of any brokers or dealers and will indemnify the holders of the exchange notes, including any broker-dealers, against certain liabilities, including liabilities under the Securities Act. 118 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES The following discussion is a summary of certain material United States federal income tax consequences relevant to the exchange of the old notes pursuant to this exchange offer and the ownership and disposition of the exchange notes, but does not purport to be a complete analysis of all potential tax effects. The discussion is based upon the Internal Revenue Code of 1986, as amended, or the Code, United States Treasury Regulations issued thereunder, Internal Revenue Service rulings and pronouncements and judicial decisions now in effect, all of which are subject to change at any time. Any such change may be applied retroactively in a manner that could adversely affect a holder of the notes. This discussion does not address all of the United States federal income tax consequences that may be relevant to a holder in light of such holder's particular circumstances or to holders subject to special rules, such as financial institutions, banks, partnerships and other pass-through entities, United States expatriates, insurance companies, dealers in securities or currencies, traders in securities, United States Holders (defined below) whose functional currency is not the United States dollar, tax-exempt organizations and persons holding the notes as part of a "straddle," "hedge," "conversion transaction" or other integrated transaction. In addition, this discussion assumes that the notes are properly characterized as debt for United States federal income tax purposes. Moreover, the effect of any applicable state, local or foreign tax laws is not discussed. The discussion deals only with notes held as "capital assets" within the meaning of Section 1221 of the Code. As used herein, "United States Holder" means a beneficial owner of the notes who or that is, for United States federal income tax purposes: - an individual that is a citizen or resident of the United States; - a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or a political subdivision thereof; - an estate, the income of which is subject to United States federal income tax regardless of its source; or - a trust, if a United States court can exercise primary supervision over the administration of the trust and one or more United States persons can control all substantial trust decisions, or, if the trust was in existence on August 20, 1996, it has elected to continue to be treated as a United States person. If a partnership or other entity taxable as a partnership holds the notes, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Such partner should consult its tax advisor as to the tax consequences. We have not sought and will not seek any rulings from the Internal Revenue Service, or the IRS, with respect to the matters discussed below. There can be no assurance that the IRS will not take a different position concerning the tax consequences of the exchange of the old notes pursuant to this exchange offer or the ownership or disposition of the exchange notes or that any such position would not be sustained. HOLDERS OF THE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE APPLICATION OF THE TAX CONSEQUENCES DISCUSSED BELOW TO THEIR PARTICULAR SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS, INCLUDING GIFT AND ESTATE TAX LAWS. FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER The exchange of the old notes for the exchange notes in the exchange offer should not be treated as an "exchange" for federal income tax purposes, because the exchange notes should not be considered to differ materially in kind or extent from the old notes. Accordingly, the exchange of old notes for exchange notes should not be a taxable event to holders for federal income tax purposes. 119 Moreover, the exchange notes should have the same tax attributes as the old notes and the same tax consequences to holders as the old notes have to holders, including without limitation, the same issue price, adjusted issue price, adjusted tax basis and holding period. Therefore, references to "notes" apply equally to the exchange notes and the old notes. UNITED STATES HOLDERS INTEREST Payments of stated interest on the notes generally will be taxable to a United States Holder as ordinary income at the time that such payments are received or accrued, in accordance with such United States Holder's method of accounting for United States federal income tax purposes. We intend to take the position that the notes should not be treated as contingent payment debt instruments because of any premium or similar amounts in excess of the principal and the stated interest that may become payable upon a repurchase of the notes and, therefore, such premium or similar amounts are not taken into account in United States Holders' income until such amounts become payable. However, the IRS may take a different position, which could affect the timing of both a United States Holder's recognition of income and the availability of our deduction with respect to such additional amounts. MARKET DISCOUNT If a United States Holder acquires a note at a cost that is less than the stated redemption price at maturity, the amount of such difference is treated as "market discount" for federal income tax purposes, unless such difference is less than .0025 multiplied by the stated redemption price at maturity multiplied by the number of complete years until maturity (from the date of acquisition). Under the market discount rules of the Code, a United States Holder is required to treat any gain on the sale, exchange, retirement or other disposition of a note as ordinary income to the extent of the accrued market discount that has not been previously included in income. Thus, principal payments and payments received upon the sale or exchange of a note are treated as ordinary income to the extent of accrued market discount that has not been previously included in income. If a United States Holder disposes of a note with market discount in certain otherwise nontaxable transactions, such holder may be required to include accrued market discount as ordinary income as if the holder had sold the note at its then fair market value. In general, the amount of market discount that has accrued is determined on a ratable basis. A United States Holder may, however, elect to determine the amount of accrued market discount on a constant yield to maturity basis. This election is made on a note-by-note basis and is irrevocable. With respect to notes with market discount, a United States Holder may not be allowed to deduct immediately a portion of the interest expense on any indebtedness incurred or continued to purchase or to carry the notes. A United States Holder may elect to include market discount in income currently as it accrues, in which case the interest deferral rule set forth in the preceding sentence will not apply. This election will apply to all debt instruments that a U.S. holder acquires on or after the first day of the first taxable year to which the election applies and is irrevocable without the consent of the IRS. AMORTIZABLE BOND PREMIUM In general, if a United States Holder purchases a note for an amount in excess of the stated principal amount of the note, such excess will constitute bond premium. A United States Holder generally may elect to amortize the premium over the remaining term of the note on a constant yield method (ignoring our option to redeem the notes at 100% of the principal amount) as an offset to interest when includible in income under its regular accounting method. The notes are subject to call 120 provisions at our option at various times, as described in this prospectus under "Description of the Exchange Notes--Redemption." A United States Holder will calculate the amount of amortizable bond premium based on the amount payable at the applicable call date, but only if the use of the call date (in lieu of the stated maturity date) results in a smaller amortizable bond premium for the period ending on the call date. If such holder does not elect to amortize bond premium, that premium will decrease the gain or increase the loss it would otherwise recognize on disposition of the note. An election to amortize premium on a constant yield method will also apply to all debt obligations held or subsequently acquired by the electing United States Holder on or after the first day of the first taxable year to which the election applies. The election may not be revoked without the consent of the IRS. United States Holders should consult their own tax advisors before making this election. THE RULES GOVERNING AMORTIZABLE BOND PREMIUM ARE COMPLICATED, AND UNITED STATES HOLDERS SHOULD CONSULT THEIR TAX ADVISORS CONCERNING THE APPLICATION OF THESE RULES. SALE OR OTHER TAXABLE DISPOSITION OF THE NOTES A United States Holder will recognize gain or loss on the sale, exchange (other than pursuant to a tax-free transaction), redemption, retirement or other taxable disposition of a note equal to the difference between the amount realized upon the disposition (less a portion allocable to any accrued and unpaid interest, which will be taxable as ordinary income if not previously included in such holder's income) and the United States Holder's adjusted tax basis in the note. A United States Holder's adjusted basis in a note generally will be the United States Holder's cost therefor, reduced by the amount of amortized bond premium, if any, and increased by the amount of market discount, if any, previously included in income in respect of the note. This gain or loss generally will be a capital gain or loss, except as described under "Market Discount" above, and if the United States Holder is an individual that has held the note for more than one year, such capital gain will generally be subject to tax at a maximum rate of 20%, or 18% if such holder has held the notes for more than five years. A United States Holder's ability to deduct capital losses may be limited. BACKUP WITHHOLDING A United States Holder may be subject to information reporting and/or backup withholding tax (at a rate of up to 30%) when such holder receives interest and principal payments on the notes held or upon the proceeds received upon the sale or other taxable disposition of such notes. Certain holders (including, among others, corporations and certain tax-exempt organizations) are generally not subject to backup withholding. A United States Holder will be subject to this backup withholding tax if such holder is not otherwise exempt and such holder: - fails to furnish its taxpayer identification number, or TIN, which, for an individual, is ordinarily his or her social security number; - furnishes an incorrect TIN; - is notified by the IRS that it has failed to properly report payments of interest or dividends; or - fails to certify, under penalties of perjury, that it has furnished a correct TIN and that the IRS has not notified the United States Holder that it is subject to backup withholding. United States Holders should consult their personal tax advisors regarding their qualification for an exemption from backup withholding and the procedures for obtaining such an exemption, if applicable. The backup withholding tax is not an additional tax and taxpayers may use amounts withheld as a credit against their United States federal income tax liability or may claim a refund as long as they timely provide certain information to the IRS. 121 NON-UNITED STATES HOLDERS DEFINITION OF NON-UNITED STATES HOLDERS; INTEREST PAYMENTS AND GAINS FROM DISPOSITIONS A "non-United States Holder" is a beneficial owner of the notes who, for United States federal income tax purposes, is a nonresident alien or a corporation, trust or estate that is not a United States Holder. Interest paid to a non-United States Holder will not be subject to United States federal withholding tax of 30% (or, if applicable, a lower treaty rate) under the so-called "portfolio interest exception" provided that such interest is not effectively connected with a trade or business in the United States and: - such holder does not directly or indirectly, actually or constructively, own 10% or more of the total combined voting power of all of our classes of stock that are entitled to vote within the meaning of the Code and the United States Treasury Regulations; - such holder is not a controlled foreign corporation that is related to us directly or constructively through stock ownership and is not a bank that received such notes on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business; and - either (1) the non-United States Holder certifies on IRS Form W-8BEN or other successor form, under penalties of perjury, that it is not a "United States person" within the meaning of the Code and provides its name and address, or (2) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business and holds the notes on behalf of the non-United States Holder certifies to us or our paying agent under penalties of perjury that it, or the financial institution between it and the non-United States Holder, has received IRS Form W-8BEN or other successor form from the non-United States Holder or from another qualifying institutional intermediary and provides us or our paying agent with a copy of such statement. Special rules are applicable to intermediaries and partnerships and holders should consult their tax advisors regarding the certification requirements applicable to intermediaries and partnerships. If the non-United States Holder cannot satisfy the requirements described above, payments of such interest will be subject to the 30% (or lower applicable treaty rate) United States federal withholding tax, unless the non-United States Holder provides us with a properly executed (1) IRS Form W-8BEN (or successor form) claiming an exemption from or reduction in withholding under the benefit of an applicable tax treaty or (2) IRS Form W-8ECI (or successor form) stating that interest paid on a note is not subject to withholding tax because it is effectively connected with the non-United States Holder's conduct of a trade or business in the United States. Any premium or similar amounts in excess of the principal and the stated interest that may become payable upon a repurchase of the notes may be treated as amounts realized with respect to a sale or exchange of the notes, or as income subject to the United States federal withholding tax. A non-United States Holder that is subject to the withholding tax should consult its own tax advisors as to whether it can obtain a refund for all or a portion of the withholding tax. A non-United States Holder will generally not be subject to United States federal income tax or withholding tax on gain recognized on the sale, exchange, redemption, retirement or other taxable disposition of a note that is not effectively connected to a trade or business in the United States. However, a non-United States Holder may be subject to tax on such gain if such holder is an individual who was present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met, in which case such holder may have to pay a United States federal income tax of 30% (or, if applicable, a lower treaty rate) on such gain. 122 If interest or gain from a taxable disposition of the notes is effectively connected with a non-United States Holder's conduct of a United States trade or business, and, if an income tax treaty applies, the non-United States Holder maintains a United States "permanent establishment" to which the interest or gain is generally attributable, the non-United States Holder may be subject to United States federal income tax on the interest or gain on a net basis in the same manner as if it were a United States Holder. If interest income received with respect to the notes is taxable on a net basis, the 30% withholding tax described above will not apply (assuming an appropriate certification is provided). A foreign corporation that is a holder of a note also may be subject to a "branch profits tax" equal to 30% of its effectively connected earnings and profits for the taxable year, subject to certain adjustments, unless it qualifies for a lower rate under an applicable income tax treaty. For this purpose, interest on a note or gain recognized on the taxable disposition of a note will be included in earnings and profits if the interest or gain is effectively connected with the conduct by the foreign corporation of a trade or business in the United States. BACKUP WITHHOLDING AND INFORMATION REPORTING Backup withholding will generally not apply to payments made by us or our paying agents, in their capacities as such, to a non-United States Holder of a note provided that we or our paying agents do not have actual knowledge or reason to know that such holder is a United States person and, if the holder has provided the required certification that it is not a United States person as described above. However, certain information reporting may still apply with respect to interest payments even if certification is provided. Payments of the proceeds from a disposition by a non-United States Holder of a note made to or through a foreign office of a broker will not be subject to information reporting or backup withholding, except that information reporting (but generally not backup withholding) may apply to those payments if the broker is: - a United States person; - a controlled foreign corporation for United States federal income tax purposes; - a foreign person 50% or more of whose gross income is effectively connected with a United States trade or business for a specified three-year period; or - a foreign partnership, if at any time during its tax year, one or more of its partners are United States persons, as defined in Treasury regulations, who in the aggregate hold more than 50% of the income or capital interest in the partnership or if, at any time during its tax year, the foreign partnership is engaged in a United States trade or business. Payment of the proceeds from a disposition by a non-United States Holder of a note made to or through the United States office of a broker is generally subject to information reporting and backup withholding unless the holder or beneficial owner establishes an exemption from information reporting and backup withholding. Non-United States Holders should consult their own tax advisors regarding the application of withholding and backup withholding in their particular circumstances and the availability of and procedure for obtaining an exemption from withholding and backup withholding under current Treasury Regulations. In this regard, the current Treasury Regulations provide that a certification may not be relied on if we or our agent (or other payor) knows or has reasons to know that the certification may be false. Any amounts withheld under the backup withholding rules from a payment to a non-United States Holder will be allowed as a credit against the holder's United States federal income tax liability or may claim a refund, provided the required information is furnished timely to the IRS. 123 EXPERTS The consolidated financial statements of TransDigm Holding Company as of September 30, 2001 and 2000, and for the years ended September 30, 2001, 2000 and 1999, included in this prospectus and the related financial statement schedule included elsewhere in the registration statement have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports appearing herein and elsewhere in the registration statement, and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. The financial statements of Federal-Mogul Aviation Inc., a division of Federal-Mogul Ignition Company that we acquired on May 31, 2001 (which we refer to as Champion Aerospace), as of December 31, 2000 and 1999 and for the years then ended, the period from October 10, 1998 through December 31, 1998 and the financial statements of the Aviation Division of the Cooper Automotive Division of Cooper Industries (the "Predecessor") for the period from January 1, 1998 through October 9, 1998 included in this prospectus have been audited by Ernst & Young LLP, independent auditors, as set forth in their report appearing herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. LEGAL MATTERS The validity of the exchange notes offered hereby will be passed upon for us by Latham & Watkins, New York, New York. Certain partners at Latham & Watkins own equity interests in an entity that owns equity of Holdings. 124 INDEX TO FINANCIAL STATEMENTS
PAGE ---- TRANSDIGM HOLDING COMPANY Report of Deloitte & Touche LLP, Independent Auditors....... F-2 Consolidated Balance Sheets as of September 30, 2001 and 2000...................................................... F-3 Consolidated Statements of Operations for the years ended September 30, 2001, 2000 and 1999......................... F-4 Consolidated Statements of Changes in Stockholders' Equity (Deficiency) for the years ended September 30, 2001, 2000 and 1999.................................................. F-5 Consolidated Statements of Cash Flows for the years ended September 30, 2001, 2000 and 1999............................................. F-6 Notes to Consolidated Financial Statements for the years ended September 30, 2001, 2000 and 1999............................................. F-7 Unaudited Consolidated Balance Sheets as of March 30, 2002 and September 30, 2001.................................... F-32 Unaudited Consolidated Statements of Income for the thirteen and twenty-six week periods ended March 30, 2002 and March 31, 2001............................................ F-33 Unaudited Consolidated Statements of Changes in Stockholders' Equity (Deficiency) for the twenty-six week period ended March 30, 2002............................... F-34 Unaudited Consolidated Statements of Cash Flows for the twenty-six week periods ended March 30, 2002 and March 31, 2001......................... F-35 Notes to the Consolidated Financial Statements for the thirteen and twenty-six week periods ended March 30, 2002 and March 31, 2001........................................ F-36 SUPPLEMENTARY DATA: Report of Deloitte & Touche LLP, Independent Auditors....... F-45 Valuation and Qualifying Accounts for the years ended September 30, 2001, 2000 and 1999......................... F-46 FEDERAL-MOGUL AVIATION, INC. Report of Ernst & Young LLP, Independent Auditors........... F-47 Statements of Operations for the years ended December 31, 2000 and 1999, for the period from October 10, 1998 through December 31, 1998 and for the Aviation Division of the Cooper Automated Division of Cooper Industries (the Predecessor) for the period from January 1, 1998 to October 9, 1998........................................... F-48 Balance Sheets as of December 31, 2000 and 1999............. F-49 Statements of Cash Flows for the years ended December 31, 2000 and 1999, for the period from October 10, 1998 through December 31, 1998 and for the Aviation Division of the Cooper Automated Division of Cooper Industries (the Predecessor) for the period from January 1, 1998 to October 9, 1998........................................... F-50 Notes to Financial Statements as of December 31, 2000 and 1999, for the years ended December 31, 2000 and 1999, for the period from October 10, 1998 through December 31, 1998 and for the Aviation Division of the Cooper Automated Division of Cooper Industries (the Predecessor) for the period from January 1, 1998 to October 9, 1998............ F-51 Unaudited Balance Sheets as of March 31, 2001 and December 31, 2000......................................... F-56 Unaudited Statements of Operations for the thirteen-week periods ended March 31, 2001 and 2000..................... F-57 Unaudited Statements of Cash Flows for the thirteen-week periods ended March 31, 2001 and 2000..................... F-58 Notes to Financial Statements as of March 31, 2001 and December 31, 2000 and for the thirteen-week periods ended March 31, 2001 and 2000................................... F-59
F-1 INDEPENDENT AUDITORS' REPORT To the Shareholders and Board of Directors of TransDigm Holding Company We have audited the accompanying consolidated balance sheets of TransDigm Holding Company and subsidiaries (the "Company") as of September 30, 2001 and 2000, and the related consolidated statements of operations, changes in stockholders' equity (deficiency) and cash flows for each of the three years in the period ended September 30, 2001. 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 auditing standards generally accepted in the United States of America. 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, such consolidated financial statements present fairly, in all material respects, the financial position of TransDigm Holding Company and subsidiaries as of September 30, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2001 in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Cleveland, Ohio December 1, 2001 (except for Notes 19 and 20 for which the date is June 7, 2002) F-2 TRANSDIGM HOLDING COMPANY CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2001 AND 2000 (IN THOUSANDS OF DOLLARS)
2001 2000 --------- --------- ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 11,221 $ 4,309 Accounts receivable--net (Note 4)......................... 40,215 26,796 Inventories (Note 5)...................................... 47,872 32,889 Income taxes refundable................................... 1,796 Deferred income taxes (Note 12)........................... 9,749 5,197 Prepaid expenses and other................................ 447 535 --------- --------- Total current assets.................................... 109,504 71,522 PROPERTY, PLANT AND EQUIPMENT--Net (Note 6)................. 42,095 25,029 INTANGIBLE ASSETS--Net (Note 7)............................. 203,858 56,957 DEBT ISSUE COSTS--Net....................................... 12,494 9,400 DEFERRED INCOME TAXES AND OTHER (Note 12)................... 4,947 5,925 --------- --------- TOTAL ASSETS................................................ $ 372,898 $ 168,833 ========= ========= LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES: Current portion of long-term liabilities (Notes 9 and 11)..................................................... $ 15,822 $ 10,953 Accounts payable.......................................... 9,181 5,672 Accrued liabilities (Note 8).............................. 28,829 15,460 --------- --------- Total current liabilities............................... 53,832 32,085 LONG-TERM DEBT--Less current portion (Note 9)............... 399,587 250,648 OTHER NON-CURRENT LIABILITIES (Note 11)..................... 8,033 3,138 --------- --------- Total liabilities....................................... 461,452 285,871 --------- --------- CUMULATIVE REDEEMABLE PREFERRED STOCK (Note 13)............. 13,222 --------- --------- REDEEMABLE COMMON STOCK (Note 13)........................... 1,612 1,371 --------- --------- STOCKHOLDERS' DEFICIENCY: Common stock, $.01 par value (Note 13).................... 102,080 102,156 Warrants (Note 13)........................................ 1,934 Retained deficit.......................................... (206,901) (220,115) Accumulated other comprehensive loss...................... (501) (450) --------- --------- Total stockholders' deficiency.......................... (103,388) (118,409) --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY.............. $ 372,898 $ 168,833 ========= =========
See notes to consolidated financial statements. F-3 TRANSDIGM HOLDING COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS OF DOLLARS)
YEARS ENDED SEPTEMBER 30, ------------------------------ 2001 2000 1999 -------- -------- -------- NET SALES (Note 4).......................................... $200,773 $150,457 $130,818 COST OF SALES (Including charge of $6,639, $185, and $1,143 in 2001, 2000, and 1999, respectively, due to inventory purchase accounting adjustments) (Note 2)................. 118,525 82,193 69,951 -------- -------- -------- GROSS PROFIT................................................ 82,248 68,264 60,867 -------- -------- -------- OPERATING EXPENSES: Selling and administrative................................ 20,669 16,799 13,620 Amortization of intangibles............................... 2,966 1,843 2,063 Research and development.................................. 2,943 2,308 2,139 Merger expenses (Note 1).................................. 40,012 -------- -------- -------- Total operating expenses................................ 26,578 20,950 57,834 -------- -------- -------- INCOME FROM OPERATIONS...................................... 55,670 47,314 3,033 INTEREST EXPENSE--NET....................................... 31,926 28,563 22,722 -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES........................... 23,744 18,751 (19,689) INCOME TAX PROVISION (BENEFIT) (Note 12).................... 9,386 7,972 (2,772) -------- -------- -------- NET INCOME (LOSS)........................................... $ 14,358 $ 10,779 $(16,917) ======== ======== ========
See notes to consolidated financial statements. F-4 TRANSDIGM HOLDING COMPANY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY) (IN THOUSANDS OF DOLLARS)
ACCUMULATED RETAINED OTHER COMMON EARNINGS COMPREHENSIVE STOCK WARRANTS (DEFICIT) INCOME (LOSS) TOTAL -------- -------- --------- ------------- --------- BALANCE, OCTOBER 1, 1998.............. $ 24,281 $ 12,900 $(754) $ 36,427 --------- Comprehensive Loss: Net loss............................ (16,917) (16,917) Other comprehensive income.......... 272 272 --------- Comprehensive loss................ (16,645) Issuance of common stock.............. 100,652 100,652 Payment of consideration in recapitalization.................... (22,808) (224,356) (247,164) Purchase of common stock.............. (28) (28) Adjustment of redeemable common stock............................... (864) (864) -------- -------- --------- ----- --------- BALANCE, SEPTEMBER 30, 1999........... 102,097 (229,237) (482) (127,622) --------- Comprehensive Income: Net income.......................... 10,779 10,779 Other comprehensive income.......... 32 32 --------- Comprehensive income.............. 10,811 Exercise of stock options............. 274 274 Income tax benefit from stock options............................. 460 460 Adjustment of redeemable common stock............................... (675) (1,657) (2,332) -------- -------- --------- ----- --------- BALANCE, SEPTEMBER 30, 2000........... 102,156 (220,115) (450) (118,409) --------- Comprehensive Income: Net income.......................... 14,358 14,358 Other comprehensive loss............ (51) (51) --------- Comprehensive income.............. 14,307 Issuance of warrants for purchase of common stock........................ $ 1,934 1,934 Purchase of common stock.............. (125) (125) Income tax benefit from stock options............................. 49 49 Adjustment of redeemable common stock............................... (256) (256) Cumulative redeemable preferred stock: Dividends accrued................... (800) (800) Accretion for original issuance discount.......................... (88) (88) -------- -------- --------- ----- --------- BALANCE, SEPTEMBER 30, 2001........... $102,080 $ 1,934 $(206,901) $(501) $(103,388) ======== ======== ========= ===== =========
See notes to consolidated financial statements. F-5 TRANSDIGM HOLDING COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS)
YEARS ENDED SEPTEMBER 30, -------------------------------- 2001 2000 1999 --------- -------- --------- OPERATING ACTIVITIES: Net income (loss)......................................... $ 14,358 $10,779 $ (16,917) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation............................................ 5,680 4,669 4,311 Amortization of intangibles............................. 2,966 1,843 2,063 Amortization of debt issue costs........................ 1,946 1,705 2,165 Interest deferral on Holdings PIK Notes................. 2,958 2,639 2,000 Deferred income taxes................................... 147 1,684 (1,078) Changes in assets and liabilities, net of effects from acquisition of businesses (Note 2): Accounts receivable................................... (13,331) (3,970) (5,234) Inventories........................................... 4,530 (2,337) (842) Refundable income taxes............................... 1,796 1,323 Prepaid expenses and other assets..................... 382 (679) (2,500) Accounts payable...................................... (947) 191 (744) Accrued and other liabilities......................... 2,276 (1,542) 557 --------- ------- --------- Net cash provided by (used in) operating activities....... 22,761 16,305 (16,219) --------- ------- --------- INVESTING ACTIVITIES: Capital expenditures...................................... (4,486) (4,368) (3,043) Acquisition of Champion Aviation (Note 2)................. (162,318) Acquisition of Honeywell product line (Note 2)............ (6,784) Acquisition of ZMP, Inc. (Note 2)......................... 1,648 (41,556) Acquisition of Christie Electric Corp. (Note 2)........... (2,400) --------- ------- --------- Net cash used in investing activities................... (173,588) (5,120) (44,599) --------- ------- --------- FINANCING ACTIVITIES: Borrowings under credit facility, net of fees of $5,040 in 2001 and $5,361 in 1999................................. 157,560 118,639 Proceeds from subordinated notes, net of fees of $6,868... 118,132 Proceeds from exercise of stock options and issuance of common stock, including redeemable common stock......... 295 100,998 Proceeds from Holdings PIK Notes and common stock, net of fees of $341............................................ 19,659 Proceeds from issuance of cumulative redeemable preferred stock and warrants, net of fees of $733 (Note 2)........ 14,267 Payment of consideration in recapitalization -common stock and warrants............................................ (263,896) Repayment of amounts borrowed under credit facility....... (13,949) (7,595) (49,443) Purchase of common stock, including redeemable common stock................................................... (139) (2,305) (28) --------- ------- --------- Net cash provided by (used in) financing activities..... 157,739 (9,605) 44,061 --------- ------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 6,912 1,580 (16,757) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................ 4,309 2,729 19,486 --------- ------- --------- CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 11,221 $ 4,309 $ 2,729 ========= ======= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for interest.................... $ 26,078 $23,955 $ 14,955 ========= ======= ========= Cash paid during the year for income taxes................ $ 6,200 $ 5,004 $ 1,195 ========= ======= =========
See notes to consolidated financial statements. F-6 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 1. DESCRIPTION OF THE BUSINESS AND MERGER DESCRIPTION OF THE BUSINESS--TransDigm Holding Company ("Holdings"), through its wholly-owned operating subsidiary, TransDigm Inc. ("TransDigm"), is a premier supplier of engineered power system and airframe components servicing predominantly the aerospace industry. TransDigm, which includes the AeroControlex and AdelWiggens Groups, along with its wholly-owned subsidiaries, Champion Aerospace Inc. ("Champion"), Marathon Power Technologies Company ("Marathon"), ZMP, Inc. ("ZMP"), and Adams Rite Aerospace, Inc. ("Adams Rite") (collectively, the "Company") offers a broad line of proprietary aerospace components. Major product offerings in the Power System Components categories include ignition system components, fuel and lube pumps, mechanical controls, and batteries and chargers. Major product offerings in the Airframe System Components categories include engineered connectors, engineered latches, and lavatory hardware and components. MERGER--On December 3, 1998, Phase II Acquisition Corp. ("Acquiror"), an entity formed by affiliates of Odyssey Investment Partners, LP ("Odyssey"), and Holdings consummated a definitive agreement and plan of merger (the "Merger Agreement" or the "Merger"). Pursuant to the terms of the Merger, Acquiror was merged with and into Holdings, with Holdings being the surviving corporation in the Merger (the "Surviving Corporation"). In the Merger, owners of Holdings' outstanding common stock received, in exchange for each outstanding share of common stock (except for shares held directly or indirectly by Holdings or the Rolled Shares, as defined below), the "Per Share Merger Consideration," as defined in the Merger Agreement. The aggregate consideration payable pursuant to the Merger, including amounts payable to holders of options and warrants, was approximately $299.7 million. In connection with the Merger, KIA IV-TD, LLC and Kelso Equity Partners II, LP (collectively, "Kelso") retained approximately 15.4% of the Surviving Corporation's outstanding common stock (the "Rolled Shares"). In addition, certain members of management of Holdings agreed, in connection with and as a condition to entering into the Merger Agreement, to roll over stock options with an estimated gross and net value of approximately $17.2 million and $13.7 million, respectively. The Merger was treated as a recapitalization (the "Recapitalization") for financial reporting purposes, which had no impact on the historical basis of Holdings' consolidated assets and liabilities. Simultaneously with the Merger, Holdings and TransDigm refinanced all of their existing debt. The Merger, the refinancing and payment of fees and expenses were funded by (i) existing cash balances, (ii) investments by Odyssey of $100.2 million, (iii) funds from a new $120 million Senior credit facility, (iv) funds from $125 million Senior Subordinated Notes, and (v) Holdings PIK Notes of $20 million issued to certain stockholders. The Senior credit facility has been subsequently increased to $293 million in connection with the Champion Aviation Products acquisition (see Note 2). In connection with the Merger, the Company incurred a one-time charge of approximately $40 million during fiscal 1999 consisting primarily of compensation costs recognized as a result of the cancellation of certain stock options, the costs of terminating a financial advisory services agreement, the write-off of deferred financing costs and professional advisory fees. Separate financial statements of TransDigm are not presented since the Senior Subordinated Notes are guaranteed by Holdings and all direct and indirect subsidiaries of TransDigm and since Holdings has no operations or assets separate from its investment in TransDigm. F-7 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 2. ACQUISITIONS CHAMPION AVIATION--Through a newly-formed, wholly-owned subsidiary, Champion Aerospace Inc., TransDigm acquired substantially all of the assets and certain liabilities of the Champion Aviation Products ("Champion Aviation") business on May 31, 2001 (the "Acquisition"), from Federal Mogul Ignition Company ("Federal-Mogul"), a wholly-owned subsidiary of Federal-Mogul Corporation, for approximately $160.1 million in cash, subject to adjustment based on the level of acquired working capital as of the closing of the Acquisition. Champion Aviation is engaged in researching, designing, developing, engineering, manufacturing, marketing, distributing and selling ignition systems and related components and other products (including, without limitation, igniters, spark plugs, and exciters) for turbine and piston aircraft applications as well as other aerospace engine and industrial applications. The purchase price consideration of $160.1 million in cash and $2.2 million of costs associated with the Acquisition was funded through: (1) $147.6 million of new borrowings under the Company's existing Senior credit facility, (2) $14.3 million received (net of fees of $.7 million) from the issuance of $15 million of Holdings' 16 percent Cumulative Redeemable Preferred Stock (see Note 13) and warrants to purchase 1,381.87 shares of Holdings' common stock (see Note 13), and (3) the use of $.4 million of the Company's existing cash balances. TransDigm also borrowed an additional $15 million under the Senior credit facility to pay $5 million of debt issuance costs and provide $10 million of working capital for future operations. Approximately $2.6 million of the additional borrowings were obtained under the Company's revolving credit line, $45 million was added to the Company's existing Tranche B Facility, and $115 million was borrowed in the form of a new Tranche C Facility maturing in May 2007 under the Senior credit facility. The Company accounted for the Acquisition as a purchase and included the results of operations of the acquired business in its fiscal 2001 consolidated financial statements from the effective date of the Acquisition. The purchase price was allocated based on a preliminary determination, which is subject to adjustment, of estimated fair values at the date of the Acquisition and resulted in goodwill of approximately $134 million being recorded on the Company's consolidated balance sheet. This goodwill is being amortized on a straight-line basis over forty years. The following table summarizes the unaudited, consolidated pro forma results of operations of the Company, as if the Acquisition had occurred at the beginning of the years ended September 30 (in thousands):
2001 2000 -------- -------- Net sales............................................... $247,803 $219,073 Operating income........................................ 65,192 60,879 Net income.............................................. 14,731 10,380
This pro forma information is not necessarily indicative of the results that actually would have been obtained if the operations had been combined as of the beginning of the years presented and is not intended to be a projection of future results. HONEYWELL PRODUCT LINE--During December 2000, the Company entered into agreements with Honeywell International, Inc. ("Honeywell") to purchase certain inventory of Honeywell's lubrication F-8 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 2. ACQUISITIONS (CONTINUED) and scavenge pump product line for $4.5 million, along with an option to enter into an exclusive, worldwide license agreement to produce and sell such products for at least forty years and to buy certain related assets. The cost of the option was not significant. During January 2001, the Company exercised the option and, on March 26, 2001, the Company executed the license agreement, acquired the related assets (including additional inventory of approximately $1.4 million), and entered into a five year supply agreement with Honeywell in return for a cash payment of $6.6 million at closing and a commitment to make future, specified (see Note 11) and variable royalty payments under the license agreement. The Company accounted for the acquisition as a purchase and has included the results of operations of the acquired product line (which were not material through September 30, 2001) in its fiscal 2001 consolidated financial statements from the effective date of the acquisition. The closing of the option transaction was recorded in March 2001 based on a preliminary determination, which is subject to adjustment, of the estimated fair values of the assets and liabilities acquired as a result of the transaction. Intangible assets of $15.7 million, consisting of the license agreement and goodwill that were recorded as a result of the acquisition are being amortized on a straight-line basis over twenty years. The purchase price of the inventory acquired from Honeywell in both December 2000 and March 2001 is subject to adjustment based upon a final determination of the value acquired, as defined. Pro forma net sales and results of operations for this acquisition, had the acquisition occurred at the beginning of the years ended September 30, 2001 and 2000, are not significant and, accordingly, are not provided. CHRISTIE ELECTRIC CORP.--On March 8, 2000, Marathon acquired all of the issued and outstanding common shares of Christie Electric Corp. ("Christie") for $2.4 million. The Company accounted for the acquisition as a purchase and included the results of operations of Christie, which are not material to the Company's consolidated results of operations, in its fiscal 2000 consolidated financial statements from the effective date of acquisition. Goodwill of $1.8 million, which resulted from the acquisition, is being amortized on a straight-line basis over forty years. ZMP, INC. AND ADAMS RITE AEROSPACE, INC.--On April 23, 1999, TransDigm acquired all of the outstanding common stock of ZMP, the corporate parent of Adams Rite, through a merger. Adams Rite manufactures mechanical hardware, fluid controls, lavatory hardware, electromechanical controls and oxygen systems related products. The purchase price for the acquisition was $41 million, subject to adjustment for changes in working capital and other matters as defined in the merger agreement. The acquisition was funded through $36 million of additional borrowings under the Company's credit facility and the use of approximately $5 million of the Company's cash balances. During the year ended September 30, 2000, the Company received a purchase price adjustment of $1.6 million, net of expenses. As a result of the acquisition, ZMP and Adams Rite became wholly-owned subsidiaries of TransDigm. The Company accounted for the acquisition as a purchase and included the results of operations of the acquired companies in the accompanying fiscal 1999 consolidated financial statements from the F-9 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 2. ACQUISITIONS (CONTINUED) effective date of the acquisition. The purchase price (including related expenses) was allocated based on a determination of estimated fair values at the date of the acquisition and resulted in goodwill of approximately $24 million being recorded on the Company's consolidated balance sheet. This goodwill is being amortized on a straight-line basis over forty years. The following table summarizes the unaudited, consolidated pro-forma results of operations, as if the acquisition had occurred at the beginning of the year ended September 30, 1999 (in thousands): Net sales................................................... $151,624 Income from operations...................................... 1,913 Net loss.................................................... (18,646)
The consolidated pro-forma operating loss for the year ended September 30, 1999 includes the following charges recognized by Adams Rite prior to the acquisition: (1) $1.4 million ($.84 million after tax) for compensation expense recognized in connection with a common stock warrant granted to its former chief executive officer and (2) $.8 million ($.8 million after tax) for costs directly related to the acquisition. This pro-forma information is not necessarily indicative of the results that actually would have been obtained if the operations had been combined as of the beginning of the year presented and is not intended to be a projection of future results. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION--The accompanying consolidated financial statements include the accounts of TransDigm Holding Company and subsidiaries. All significant intercompany balances and transactions have been eliminated. REVENUE RECOGNITION--Revenue is recognized when products are shipped to the customer. Any anticipated losses on contracts are charged to earnings when identified. CASH EQUIVALENTS--The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS--The Company reserves for amounts determined to be uncollectible based on specific identification and historical experience. INVENTORIES--Inventories are stated at the lower of cost or market. Cost of inventories is determined by the average cost and the first-in, first-out (FIFO) methods. Provision for potentially obsolete or slow-moving inventory is made based on management's analysis of inventory levels and future sales forecasts. In accordance with industry practice, all inventories are classified as current assets even though a portion of the inventories may not be sold within one year. PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method at rates based on the estimated useful lives of the assets. DEBT ISSUE COSTS AND DISCOUNTS--The cost of obtaining financing as well as debt discounts are amortized using the interest method over the terms of the respective debt issues. F-10 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INTANGIBLE ASSETS--Intangible assets are amortized on a straight-line basis over their respective estimated useful lives ranging from 5 to 40 years. The Company assesses the recoverability of intangibles by determining whether the amortization over the remaining life can be recovered through projected, undiscounted, cash flows from future operations. INCOME TAXES--The Company accounts for income taxes using an asset and liability approach. Deferred taxes are recorded for the difference between the book and tax basis of various assets and liabilities. PRODUCT WARRANTY COSTS--The Company generally provides a one year warranty on certain products beginning on the date the product is installed on an aircraft. A provision for estimated sales returns and the cost of repairs is recorded at the time of sale and periodically adjusted to reflect actual experience. ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. COMPREHENSIVE INCOME (LOSS)--The Company's accumulated other comprehensive income (loss), consisting principally of its minimum pension liability adjustment, is reported separately in the accompanying consolidated balance sheets and statements of changes in stockholders' equity (deficiency), net of taxes of ($404,000), ($317,000), and ($390,000) at September 30, 2001, 2001, and 1999, respectively. SEGMENT REPORTING--The Company's principal business, aircraft component supplier, is reported as one segment. Substantially all of the Company's operations are located within the United States. RECLASSIFICATIONS--Certain reclassifications have been made to the 2000 financial statements to conform to the classifications used in 2001. 4. SALES AND ACCOUNTS RECEIVABLE SALES--The Company's sales and receivables are concentrated in the aerospace industry. The major customers for Power System Components include commercial and defense aftermarket end users of engines and APUs, engine and APU OEMs, and regional and business jet manufacturers and end users. The major customers for Airframe System Components include commercial and defense aftermarket end users, commercial transport OEMs, and regional and business jet manufacturers and end users. F-11 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 4. SALES AND ACCOUNTS RECEIVABLE (CONTINUED) Information concerning the Company's net sales by its major system component categories is as follows for the years ended September 30 (in thousands):
2001 2000 1999 -------- -------- -------- Power System Components....................... $106,811 $ 67,275 $ 68,537 Airframe System Components.................... 93,962 83,182 62,281 -------- -------- -------- Total......................................... $200,773 $150,457 $130,818 ======== ======== ========
For the year ended September 30, 2001, two customers represented approximately 17% and 8%, respectively, of the Company's net sales. Two customers represented approximately 10% and 9%, respectively, of the Company's net sales during the year ended September 30, 2000 and two customers represented approximately 15% and 14% of the Company's net sales for the year ended September 30, 1999. Export sales to customers, primarily in Western Europe, were $54.8 million in fiscal 2001, $36.2 million in fiscal 2000, and $30.7 million in fiscal 1999. ACCOUNTS RECEIVABLE--Accounts receivable consist of the following at September 30 (in thousands):
2001 2000 -------- -------- Due from U.S. government or prime contractors under U.S. government programs..................................... $ 3,798 $ 4,571 Commercial customers...................................... 37,573 22,596 Allowance for uncollectible accounts...................... (1,156) (371) ------- ------- Accounts receivable--net.................................. $40,215 $26,796 ======= =======
Approximately 18% of the Company's receivables at September 30, 2001 were due from two customers. In addition, approximately 24% of the Company's receivables were due from entities which principally operate outside of the United States. Credit is extended based on an evaluation of each customer's financial condition and collateral is generally not required. 5. INVENTORIES Inventories consist of the following at September 30 (in thousands):
2001 2000 -------- -------- Work-in-progress and finished goods....................... $36,787 $20,995 Raw materials and purchased component parts............... 18,380 18,325 ------- ------- Total................................................... 55,167 39,320 Reserve for excess and obsolete inventory................. (7,295) (6,431) ------- ------- Inventories--net.......................................... $47,872 $32,889 ======= =======
F-12 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 6. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following at September 30 (in thousands):
2001 2000 -------- -------- Land and improvements................................... $ 4,881 $ 4,720 Buildings and improvements.............................. 20,869 10,687 Machinery and equipment................................. 39,918 30,437 Furniture and fixtures.................................. 6,091 4,220 Construction in progress................................ 814 1,014 -------- -------- Total................................................. 72,573 51,078 Accumulated depreciation................................ (30,478) (26,049) -------- -------- Property, plant and equipment--net...................... $ 42,095 $ 25,029 ======== ========
7. INTANGIBLE ASSETS Intangible assets, net of accumulated amortization, consist of the following at September 30 (in thousands):
2001 2000 -------- -------- Goodwill................................................. $191,630 $56,176 Honeywell license agreement (Note 2)..................... 11,946 Technology and other..................................... 282 781 -------- ------- Total.................................................... $203,858 $56,957 ======== =======
Accumulated amortization of intangibles was $23.3 million at September 30, 2001 and $20.3 million at September 30, 2000. 8. ACCRUED LIABILITIES Accrued liabilities consist of the following at September 30 (in thousands):
2001 2000 -------- -------- Estimated losses on uncompleted contracts................. $10,233 $ 1,900 Compensation and related benefits......................... 6,650 5,281 Interest.................................................. 5,540 4,857 Sales returns and repairs................................. 2,903 1,467 Income taxes payable...................................... 1,062 Other..................................................... 2,441 1,955 ------- ------- Total..................................................... $28,829 $15,460 ======= =======
F-13 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 9. DEBT SUMMARY--The Company's long-term debt consists of the following at September 30 (in thousands):
2001 2000 -------- -------- Term loans.............................................. $260,612 $111,962 Senior Subordinated Notes............................... 125,000 125,000 Holdings PIK Notes...................................... 27,597 24,639 -------- -------- Total debt............................................ 413,209 261,601 Current maturities...................................... (13,622) (10,953) -------- -------- Long-term portion....................................... $399,587 $250,648 ======== ========
REVOLVING CREDIT AND TERM LOANS--In connection with the acquisition of Champion Aviation (see Note 2), TransDigm increased its Senior credit facility with a group of financial institutions to $293 million, which consists of (1) a $30 million revolving credit line maturing in November 2004 and (2) a term loan facility in the aggregate of $263 million, consisting of a $43 million Tranche A Facility maturing in 2004, a $105 million Tranche B Facility maturing in 2006, and a $115 million Tranche C Facility maturing in 2007. At September 30, 2001, the Company had $30 million of borrowings (the entire revolving credit line) available under the credit facility. The interest rate under the credit facility is, at TransDigm's option, either (A) a floating rate equal to the Base Rate plus the Applicable Margin, as defined in the credit facility; or (B) the Eurodollar Rate for fixed periods of one, two, three, or six months, plus the Applicable Margin. The Credit Facility is subject to mandatory prepayment with a defined percentage of net proceeds from certain asset sales, insurance proceeds or other awards that are payable in connection with the loss, destruction or condemnation of any assets, certain new debt and equity offerings and 50% of excess cash flow (as defined in the credit facility) over a predetermined amount defined in the credit facility. The interest rates on outstanding borrowings at September 30, 2001 ranged from 6.38% to 7.06%. All obligations under the Senior credit facility are guaranteed by Holdings and each of the subsidiaries, direct and indirect, of TransDigm. The indebtedness outstanding under the Senior credit facility is secured by a pledge of the stock of TransDigm and all of its domestic subsidiaries and a perfected lien and security interest in assets other than real estate (tangible and intangible) of TransDigm, its direct and indirect subsidiaries and Holdings. The agreement also contains a number of restrictive covenants that, among other things, restrict Holdings, TransDigm and their subsidiaries from various actions, including mergers and sales of assets, use of proceeds, granting of liens, incurrence of indebtedness, voluntary prepayment of indebtedness, capital expenditures, payment of dividends, business activities, investments and acquisitions, and transactions with affiliates. The agreement also requires the Company to comply with certain financial covenants pertaining to earnings, interest coverage and leverage. The Company was in compliance with all financial covenants of the Senior credit facility as of September 30, 2001. The maturities of the Company's term loans by fiscal year are as follows: $13.6 million in fiscal 2002, $19.4 million in fiscal 2003, $29.4 million in fiscal 2004, $48.6 million in fiscal 2005, $67.7 million in fiscal 2006, and $81.9 million in fiscal 2007. F-14 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 9. DEBT (CONTINUED) SENIOR SUBORDINATED NOTES--TransDigm's Senior Subordinated Notes (the "Notes") bear interest at an annual rate of 10 3/8%, maturing on December 1, 2008, and are unsecured obligations of TransDigm ranking subordinate to the Company's senior debt, as defined in the note agreement. The Notes are redeemable after December 1, 2003, in whole or in part, at specified redemption prices, which decline over the remaining term of the Notes. If a change in control of the Company occurs, the holders of the Notes will have the right to demand that the Company redeem the Notes at a purchase price equal to 101% of the principal amount of the Notes plus accrued interest. The Notes contain many of the same restrictive covenants included in the Senior credit facility. The Company was in compliance with all financial covenants of the Notes as of September 30, 2001. HOLDINGS PIK NOTES--In connection with the Merger (see Note 1), Holdings issued $20 million of pay-in-kind notes due 2009 ("Holdings PIK Notes" or "PIK Notes"). The PIK Notes are unsecured obligations of Holdings, which has no significant assets or operations. Interest on the PIK Notes is accrued at an annual fixed rate of 12% and is payable semi-annually in the form of additional PIK Notes through December 2003. Thereafter, cash interest is payable semi-annually commencing in the year 2004. The PIK Notes are redeemable by Holdings prior to their maturity under certain circumstances and contain many of the same restrictive covenants included in the Notes and Senior credit facility. The Company was in compliance with all financial covenants of the PIK Notes as of September 30, 2001. 10. RETIREMENT PLANS The Company has two non-contributory defined benefit pension plans, which together cover certain union employees. The plans provide benefits of stated amounts for each year of service. The Company's funding policy is to contribute actuarially determined amounts allowable under Internal Revenue Service regulations. The plans' assets consist primarily of guaranteed investment contracts with an insurance company. Financial information for the defined benefit plans is provided below (in thousands):
YEARS ENDED SEPTEMBER 30, ------------------- 2001 2000 -------- -------- CHANGE IN BENEFIT OBLIGATION: Benefit obligation, beginning of year..................... $5,034 $4,841 Service cost.............................................. 82 87 Interest cost............................................. 359 333 Benefits paid............................................. (298) (261) Change in actuarial assumptions........................... 217 34 ------ ------ Benefit obligation, end of year........................... $5,394 $5,034 ====== ======
F-15 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 10. RETIREMENT PLANS (CONTINUED)
2001 2000 -------- -------- CHANGE IN PLAN ASSETS: Fair value of plan assets, beginning of year.............. $3,846 $3,381 Actual return on plan assets.............................. 239 220 Employer contribution..................................... 635 506 Benefits paid............................................. (298) (261) ------ ------ Fair value of plan assets, end of year.................... $4,422 $3,846 ====== ======
2001 2000 -------- -------- AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 30 CONSIST OF: Intangible assets......................................... $ (311) $ (267) Accrued liabilities....................................... 551 500 Other non-current liabilities............................. 421 688 Accumulated other comprehensive loss...................... (880) (793) ------ ------ Net amount recognized..................................... $ (219) $ 128 ====== ======
2001 2000 -------- -------- WEIGHTED-AVERAGE ASSUMPTIONS AS OF SEPTEMBER 30: Discount rate............................................. 7.0% 7.0% Expected return on plan assets............................ 6.0% 6.0%
YEARS ENDED SEPTEMBER 30, ------------------------------ 2001 2000 1999 -------- -------- -------- COMPONENTS OF NET PERIODIC BENEFIT COST: Service cost........................................ $ 82 $ 87 $ 83 Interest cost....................................... 359 333 319 Expected return on plan assets...................... (236) (210) (177) Net amortization and deferral....................... 83 71 70 ----- ----- ----- Net periodic pension cost........................... $ 288 $ 281 $ 295 ===== ===== =====
The Company also sponsors certain defined contribution employee savings plans that cover substantially all of the Company's non-union employees. Under the plans, the Company contributes a percentage of employee compensation and matches a portion of employee contributions. The cost recognized for such contributions under these plans for the years ended September 30, was approximately $1.0 million, $1.2 million, and $.7 million in fiscal 2001, 2000, and 1999, respectively. F-16 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 11. OTHER NON-CURRENT LIABILITIES Other non-current liabilities consist of the following at September 30 (in thousands):
2001 2000 -------- -------- Obligation under Honeywell license agreement (net of imputed interest of $1,043) (Note 2).................... $ 7,757 Accrued pension costs (Note 10)........................... 421 $ 688 Other..................................................... 2,055 2,450 -------- ------ Total................................................... 10,233 3,138 Current portion of Honeywell license agreement obligation.............................................. (2,200) -------- ------ Other non-current liabilities............................. $ 8,033 $3,138 ======== ======
The Honeywell license agreement obligation is non-interest bearing and is due in annual installments of $2.2 million during each of the next four fiscal years. The obligation has been recorded at its present value using an imputed interest rate of 8%. 12. INCOME TAXES The provision (benefit) for income taxes consists of the following for the years ended September 30 (in thousands):
2001 2000 1999 -------- -------- -------- Current............................................ $9,239 $6,288 $(1,694) Deferred........................................... 186 1,545 (481) Net operating loss carryforward--state and local income taxes..................................... (39) 139 (597) ------ ------ ------- Total.............................................. $9,386 $7,972 $(2,772) ====== ====== =======
The difference between the provision (benefit) for income taxes at the federal statutory income tax rate and the tax shown in the consolidated statements of operations for the years ended September 30 are as follows (in thousands):
2001 2000 1999 -------- -------- -------- Tax at statutory rate of 35% (34% in 1999)......... $8,310 $6,563 $(6,694) State and local income taxes....................... 650 700 (56) Nondeductible merger expenses...................... 4,290 Benefit from foreign sales corporation............. (483) (363) (615) Nondeductible goodwill amortization and interest expense.......................................... 746 711 526 Other--net......................................... 163 361 (223) ------ ------ ------- Provision (benefit) for income taxes............... $9,386 $7,972 $(2,772) ====== ====== =======
F-17 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 12. INCOME TAXES (CONTINUED) The components of the deferred tax assets at September 30 consist of the following (in thousands):
2001 2000 -------- -------- CURRENT ASSET: Estimated losses on uncompleted contracts............... $ 3,991 $ 741 Inventory............................................... 1,844 1,921 Employee benefits....................................... 1,723 1,343 Sales returns and repairs............................... 1,012 456 Other accrued liabilities............................... 1,179 736 ------- ------- Total..................................................... $ 9,749 $ 5,197 ======= ======= NON-CURRENT ASSET: Holdings PIK Notes interest............................. $ 2,761 $ 1,689 Intangible assets....................................... 1,910 3,202 Retirement and other accrued obligations................ 870 1,120 Property, plant and equipment........................... (1,785) (1,562) Net operating loss carryforwards--state and local income taxes (expiring from 2005 through 2016)............... 499 460 ------- ------- Total..................................................... $ 4,255 $ 4,909 ======= =======
13. CAPITAL STOCK, WARRANTS, AND OPTIONS COMMON STOCK--Authorized common stock of the Company consists of 900,000 shares of common stock (voting), par value $.01 per share and 100,000 shares of Class A (non-voting) common stock. The total number of shares of voting common stock outstanding at September 30, 2001 and 2000 was 119,814 and 119,824, respectively. No shares of Class A (non-voting) common stock were outstanding at September 30, 2001 and 2000. Common stock issued to management personnel is subject to certain agreements, which provide management shareholders the right (a "put") to require the Company to repurchase their shares of common stock under certain conditions at fair market value. Accordingly, the estimated put value of the outstanding shares of voting common stock held by management (1,152 and 1,162 shares at September 30, 2001 and 2000, respectively) has been classified as redeemable common stock in the accompanying consolidated balance sheets. During fiscal 2002, the necessary conditions are expected to be met with respect to 649 shares of the Company's redeemable common stock, which will enable a management shareholder to require the Company to repurchase the shares. In connection with the Merger (see Note 1) in 1999, the Company issued 101,503 shares of common stock (voting) principally to Odyssey and also repurchased 231,448 shares of common stock (voting and non-voting Class A) for $247.2 million. COMMON STOCK OPTIONS--The Company has certain stock option plans for its employees. The options generally vest and enable the employee to purchase a certain number of the Company's common shares at a specified price upon the earlier of: (1) the occurrence of certain events such as the achievement of certain earnings targets or a change in the control of the Company or (2) certain specified dates in the option agreements. The options are not exercisable more than ten years after the date the options are granted. F-18 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 13. CAPITAL STOCK, WARRANTS AND OPTIONS (CONTINUED) A summary of the status of the Company's stock option plans as of September 30, 2001, 2000, and 1999 and changes during the years then ended is presented below:
2001 2000 1999 -------------------- -------------------- -------------------- WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE -------- --------- -------- --------- -------- --------- Outstanding at beginning of year............... 29,531 $ 634 30,399 $ 623 37,467 $ 158 Granted........................................ 1,570 1,400 1,695 1,180 15,115 1,040 Exercised/cancelled (see Note 1)............... (320) 1,128 (2,563) 864 (22,183) 121 ------ ------ ------- Outstanding at end of year..................... 30,781 668 29,531 634 30,399 623 ====== ====== ======= Exercisable at end of year..................... 21,428 477 16,516 300 17,084 298 ====== ====== =======
The following table summarizes information about stock options outstanding at September 30, 2001:
OPTIONS OUTSTANDING -------------------------------------------- WEIGHTED- AVERAGE EXERCISE NUMBER REMAINING NUMBER PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISABLE - ---------------------------------------- ----------- ---------------- ----------- $ 100.................................. 7,002 2.2 7,002 154.................................. 172 3.5 172 200.................................. 1,245 4.5 1,245 335.................................. 6,297 5.7 6,297 1,040................................. 13,000 7.6 5,850 1,180................................. 1,495 8.8 673 1,400................................. 1,570 9.7 189 ------ ------ 30,781 21,428 ====== ======
At September 30, 2001, 2,925 remaining options were available for award under the Company's stock option plans. In addition, 10,589 of the exercisable stock options at September 30, 2001, with exercise prices of $100 (2,992 options), $335 (3,097 options), and $1,040 (4,500 options), provide the holder a right under certain conditions, to require the Company to purchase the shares that can be acquired from the exercise of the options. It is expected that the conditions will be met during fiscal 2002 that will enable the holder to exercise this right with respect to eighty percent of the options. The Company applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its stock option plans. No compensation cost has been recognized for its stock option plans. Had compensation cost for the Company's stock option plans been determined based on the fair value at the grant dates for awards under those plans consistent with the method specified in Statement No. 123 of the Financial Accounting Standards Board ("FASB"), the Company's net income for the year ended September 30, 2001 would have been reduced by approximately $204,000; the Company's net income for the year ended September 30, 2000 would have been reduced by approximately F-19 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 13. CAPITAL STOCK, WARRANTS AND OPTIONS (CONTINUED) $205,000; and the Company's net loss for the year ended September 30, 1999 would have increased by $634,000. The weighted average fair value of options granted during the years ended September 30, 2001, 2000, and 1999 was $411, $399, and $383, respectively. The fair value of the options granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: risk-free interest rates ranging from 4.53% to 5.99%, expected life of approximately seven years, expected volatility and dividend yield of 0%. WARRANTS TO PURCHASE COMMON STOCK--At September 30, 2001, warrants to purchase 1,381.87 shares of Holdings' common stock were issued and outstanding. The warrants were issued in connection with the acquisition of Champion Aviation (see Note 2) and are exercisable through May 2011 at an exercise price per share of $0.01. CUMULATIVE REDEEMABLE PREFERRED STOCK--The authorized preferred stock of Holdings consists of 75,000 shares of 16% cumulative redeemable preferred stock with a par value of $.01 per share. As of September 30, 2001, 15,000 shares of the preferred stock were issued and outstanding. The preferred stock has a stated liquidation preference of $1,000 per share and dividends are payable in cash or delivery of additional shares of preferred stock. The preferred stock, including all accumulated and unpaid dividends, is also subject to mandatory redemption in 2010. Prior to the date of mandatory redemption, under certain circumstances (including a change in control), the preferred stock is subject to optional redemption. The terms of the preferred stock require the Company to comply with certain financial covenants pertaining to earnings, interest coverage, and leverage. 14. LEASES The Company leases office space for its corporate headquarters and two of its divisions. The Company also leases a manufacturing facility. The office space lease requires rental payments of approximately $200,000 per year through 2004. TransDigm may also be required to share in the operating costs of the facility under certain conditions. The facility lease requires rental payments ranging from $540,000 to $780,000 through December 2012. TransDigm also has commitments under operating leases for vehicles and equipment. Rental expense was $1,106,000 in 2001, $978,000 in 2000, and $688,000 in 1999. Future, minimum rental commitments at September 30, 2001 under operating leases having initial or remaining non-cancelable lease terms exceeding one year are $1,235,000 in 2002, $1,236,000 in 2003, $1,182,000 in 2004, $1,136,000 in 2005, $985,000 in 2006, and $5,473,000 thereafter. 15. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company has various financial instruments, including cash and cash equivalents, accounts receivable and payable, accrued liabilities and long-term debt. The carrying value of the Company's cash and cash equivalents, accounts receivable and payable, and accrued liabilities approximates their fair value due to the short-term maturities of these assets and liabilities. The Company also believes that the aggregate fair value of its term loans approximates its carrying amount because the interest rates on the debt are reset on a frequent basis to reflect current market rates. The fair value of the Company's Senior Subordinated Notes approximated $99.4 million at September 30, 2001 based upon quoted market prices. A determination of the fair value of the Holdings PIK Notes is not considered practicable because they are held by a related party (see Note 1) and are not publicly traded. F-20 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 16. CONTINGENCIES ENVIRONMENTAL--The soil and groundwater beneath the Company's facility in Waco, Texas have been impacted by releases of hazardous materials. The resulting contaminants of concern have been delineated and characterized. Because the majority of these contaminants are presently below action levels prescribed by the Texas Natural Resources Conservation Commission ("TNRCC"), and because a $2 million escrow was previously funded in connection with the Company's acquisition of Marathon to cover the cost of remediation that TNRCC might require for those contaminants currently in excess of action limits, the Company does not believe the condition of the soil and groundwater at the Waco facility will require incurrence of material expenditures; however, there can be no assurance that additional contamination will not be discovered or that the remediation required by the TNRCC will not be material to the financial condition, results of operations, or cash flows of the Company. During September 1998, the former owner of Marathon filed a lawsuit against the Company to release the environmental escrow alleging that the Company had violated the requirements of the Stock Purchase Agreement relating to the investigation of the presence of certain contaminants at the Waco, Texas facility. The Company has filed counter claims against the seller and the ultimate outcome of this matter cannot presently be determined. OTHER--While the Company is currently involved in certain legal proceedings, management believes the results of these proceedings will not have a material effect on the financial condition, results of operations or cash flows of the Company. During the ordinary course of business, the Company is from time to time threatened with, or may become a party to, legal actions and other proceedings. The Company believes that its potential exposure to such legal actions is adequately covered by its aviation product and general liability insurance. 17. QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- (IN THOUSANDS) YEAR ENDED SEPTEMBER 30, 2001 Net sales............................................. $35,780 $42,084 $54,201 $68,708 Gross profit.......................................... 15,787 19,257 21,088 26,116 Net income............................................ 1,986 3,929 3,582 4,861 YEAR ENDED SEPTEMBER 30, 2000 Net sales............................................. $33,734 $36,434 $40,233 $40,056 Gross profit.......................................... 15,599 16,609 18,179 17,877 Net income............................................ 2,100 2,717 3,429 2,533
F-21 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 18. NEW ACCOUNTING STANDARDS In June 2001, the FASB issued Statements of Financial Accounting Standards ("SFAS") No. 141, BUSINESS COMBINATIONS, and No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. SFAS No. 141, which is effective for all business combinations initiated after June 30, 2001, requires that the purchase method of accounting be used to account for such transactions. SFAS No. 141 also established two criteria that must be met for intangible assets (other than goodwill) to be recognized in accounting for a business combination, the contractual-legal criterion and the separability criterion. The issuance of SFAS No. 141 had no impact on the Company's consolidated financial statements as of and for the year ended September 30, 2001. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Amortization of goodwill, including goodwill recorded as a result of past business combinations, will cease upon adoption of this statement, which must occur no later than the first quarter of the Company's year ending September 30, 2003. In addition, upon implementation of this statement, the carrying amounts of intangible assets recorded in connection with past business combinations that do not meet the criteria in SFAS No. 141 for recognition apart from goodwill, must be reclassified to goodwill when SFAS No. 142 is implemented. The Company has not determined the impact that this statement will have on its consolidated financial position or results of operations. In June 2001, the FASB issued SFAS No. 143, ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS. This statement requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. The amount recorded as a liability will be capitalized by increasing the carrying amount of the related long-lived asset. Subsequent to initial measurement, the liability is accreted to the ultimate amount anticipated to be paid and is also adjusted for revisions to the timing of the amount of estimated cash flows. The capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The provisions of this statement become effective for the Company's fiscal year ending September 30, 2003. The Company has not determined the impact, if any, that this statement will have on its financial statements. In August 2001, the FASB issued SFAS No. 144, ACCOUNTING FOR IMPAIRMENT OR DISPOSALS OF LONG-LIVED ASSETS. This statement specifies the accounting model to be used for long-lived assets to be disposed of by sale (whether previously held and used or newly acquired) and by broadening the presentation of discontinued operations to include more disposal transactions. The provisions of this statement become effective for the Company's fiscal year ending September 30, 2003. The Company has not determined the impact that this statement will have on its consolidated financial position or results of operations. 19. SUPPLEMENTAL GUARANTOR INFORMATION The Company's Senior Subordinated Notes, including the additional notes issued on June 7, 2002 (see Note 20) are unconditionally guaranteed by Holdings and each of TransDigm's domestic subsidiaries on a senior subordinated basis. The Holdings guarantee of the Senior Subordinated Notes is subordinated to Holdings' repayment of the Holdings PIK Notes, as well as the Holdings' guarantee of TransDigm's borrowings under its Senior credit facility. The guarantee of the Senior Subordinated Notes by TransDigm's domestic subsidiaries is subordinated to the subsidiaries' guarantee of TransDigm's Senior credit facility. The following supplemental consolidating condensed financial information presents the balance sheets of the Company as of September 30, 2001 and 2000 and its statements of operations and cash flows for each of the three years in the period ended September 30, 2001. F-22 TRANSDIGM HOLDING COMPANY CONDENSED CONSOLIDATING BALANCE SHEET AS OF SEPTEMBER 30, 2001 (IN THOUSANDS OF DOLLARS)
SUBSIDIARY TOTAL HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED --------- --------- ---------- ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents........... $ 12,294 $ (1,073) $ 11,221 Accounts receivable--net............ 17,481 22,734 40,215 Inventories......................... 19,353 28,519 47,872 Deferred income taxes............... 9,749 9,749 Prepaid expenses and other.......... 132 315 447 -------- --------- -------- Total current assets.......... 59,009 50,495 109,504 INVESTMENTS IN SUBSIDIARIES AND INTERCOMPANY BALANCES............. $(144,774) 395,987 (141,163) $(110,050) PROPERTY, PLANT AND EQUIPMENT--Net.................... 10,954 31,141 42,095 INTANGIBLE ASSETS--Net.............. 19,384 184,474 203,858 DEBT ISSUE COSTS--Net............... 255 12,239 12,494 DEFERRED INCOME TAXES AND OTHER..... 4,947 4,947 --------- -------- --------- --------- -------- TOTAL ASSETS........................ $(144,519) $502,520 $ 124,947 $(110,050) $372,898 ========= ======== ========= ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) CURRENT LIABILITIES: Current portion of long-term liabilities..................... $ 15,822 $ 15,822 Accounts payable.................. 4,909 $ 4,272 9,181 Accrued liabilities............... 17,836 10,993 28,829 -------- --------- -------- Total current liabilities..... 38,567 15,265 53,832 LONG-TERM DEBT--Less current portion........................... $ 27,597 371,990 399,587 OTHER NON-CURRENT LIABILITIES....... 6,671 1,362 8,033 --------- -------- --------- -------- Total liabilities............. 27,597 417,228 16,627 461,452 --------- -------- --------- -------- CUMULATIVE REDEEMABLE PREFERRED STOCK............................. 13,222 13,222 --------- -------- REDEEMABLE COMMON STOCK............. 1,612 1,612 --------- -------- TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY)...................... (186,950) 85,292 108,320 $(110,050) (103,388) --------- -------- --------- --------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)............... $(144,519) $502,520 $ 124,947 $(110,050) $372,898 ========= ======== ========= ========= ========
F-23 TRANSDIGM HOLDING COMPANY CONDENSED CONSOLIDATING BALANCE SHEET AS OF SEPTEMBER 30, 2000 (IN THOUSANDS OF DOLLARS)
SUBSIDIARY TOTAL HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED --------- --------- ---------- ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents............... $ 4,554 $ (245) $ 4,309 Accounts receivable--net................ 16,491 10,305 26,796 Inventories............................. 16,985 15,904 32,889 Income taxes refundable................. 1,796 1,796 Deferred income taxes................... 5,197 5,197 Prepaid expenses and other.............. 318 217 535 -------- -------- --------- Total current assets................ 45,341 26,181 71,522 INVESTMENT IN SUBSIDIARIES AND INTERCOMPANY BALANCES................... $(158,803) 250,197 16,338 $(107,732) PROPERTY, PLANT AND EQUIPMENT--Net.......................... 10,866 14,163 25,029 INTANGIBLE ASSETS--Net.................... 5,903 51,054 56,957 DEBT ISSUE COSTS--Net..................... 286 9,114 9,400 DEFERRED INCOME TAXES AND OTHER........... 5,925 5,925 --------- -------- -------- --------- --------- TOTAL ASSETS.............................. $(158,517) $327,346 $107,736 $(107,732) $ 168,833 ========= ======== ======== ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) CURRENT LIABILITIES: Current portion of long-term liabilities........................... $ 10,953 $ 10,953 Accounts payable........................ 3,788 $ 1,884 5,672 Accrued liabilities..................... 10,566 4,894 15,460 -------- -------- --------- Total current liabilities........... 25,307 6,778 32,085 LONG-TERM DEBT--Less current portion...... $ 24,640 226,008 250,648 OTHER NON-CURRENT LIABILITIES............. 1,701 1,437 3,138 --------- -------- -------- --------- Total liabilities................... 24,640 253,016 8,215 285,871 --------- -------- -------- --------- REDEEMABLE COMMON STOCK................... 1,371 1,371 --------- --------- STOCKHOLDERS' EQUITY (DEFICIENCY)......... (184,528) 74,330 99,521 $(107,732) (118,409) --------- -------- -------- --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)............................ $(158,517) $327,346 $107,736 $(107,732) $ 168,833 ========= ======== ======== ========= =========
F-24 TRANSDIGM HOLDING COMPANY CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 2001 (IN THOUSANDS OF DOLLARS)
SUBSIDIARY TOTAL HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED --------- --------- ---------- ------------ ------------ NET SALES................................. $108,650 $92,123 $200,773 COST OF SALES............................. 61,554 56,971 118,525 -------- ------- -------- GROSS PROFIT.............................. 47,096 35,152 82,248 -------- ------- -------- OPERATING EXPENSES: Selling and administrative.............. 14,867 5,802 20,669 Amortization of intangibles............. 480 2,486 2,966 Research and development................ 1,983 960 2,943 -------- ------- -------- Total operating expenses............ 17,330 9,248 26,578 -------- ------- -------- INCOME FROM OPERATIONS.................... 29,766 25,904 55,670 INTEREST EXPENSE--NET..................... $ 2,988 24,656 4,282 31,926 ------- -------- ------- -------- INCOME (LOSS) BEFORE INCOME TAXES......... (2,988) 5,110 21,622 23,744 INCOME TAX PROVISION (BENEFIT)............ (1,181) 2,020 8,547 9,386 ------- -------- ------- ------- -------- NET INCOME (LOSS)......................... $(1,807) $ 3,090 $13,075 $ -- $ 14,358 ======= ======== ======= ======= ========
F-25 TRANSDIGM HOLDING COMPANY CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 2000 (IN THOUSANDS OF DOLLARS)
SUBSIDIARY TOTAL HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED --------- --------- ---------- ------------ ------------ NET SALES........................... $88,824 $61,633 $150,457 COST OF SALES....................... 46,125 36,068 82,193 ------- ------- -------- GROSS PROFIT........................ 42,699 25,565 68,264 ------- ------- -------- OPERATING EXPENSES: Selling and administrative........ 12,120 4,679 16,799 Amortization of intangibles....... 450 1,393 1,843 Research and development.......... 1,550 758 2,308 ------- ------- -------- Total operating expenses...... 14,120 6,830 20,950 ------- ------- -------- INCOME FROM OPERATIONS.............. 28,579 18,735 47,314 INTEREST EXPENSE -- NET............. $ 2,670 25,925 (32) 28,563 ------- ------- ------- -------- INCOME (LOSS) BEFORE INCOME TAXES... (2,670) 2,654 18,767 18,751 INCOME TAX PROVISION (BENEFIT)...... (1,135) 1,131 7,976 7,972 ------- ------- ------- ------- -------- NET INCOME (LOSS)................... $(1,535) $ 1,523 $10,791 $ -- $ 10,779 ======= ======= ======= ======= ========
F-26 TRANSDIGM HOLDING COMPANY CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1999 (IN THOUSANDS OF DOLLARS)
SUBSIDIARY TOTAL HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED --------- --------- ---------- ------------ ------------ NET SALES................................. $ 95,010 $35,808 $130,818 COST OF SALES............................. 49,008 20,943 69,951 -------- ------- -------- GROSS PROFIT.............................. 46,002 14,865 60,867 -------- ------- -------- OPERATING EXPENSES: Selling and administrative.............. 10,540 3,080 13,620 Amortization of intangibles............. 1,072 991 2,063 Research and development................ 1,423 716 2,139 Merger expenses......................... $ 40,012 40,012 -------- -------- ------- -------- Total operating expenses............ 40,012 13,035 4,787 57,834 -------- -------- ------- -------- INCOME FROM OPERATIONS.................... (40,012) 32,967 10,078 3,033 INTEREST EXPENSE -- NET................... 2,025 20,676 21 22,722 -------- -------- ------- -------- INCOME (LOSS) BEFORE INCOME TAXES......... (42,037) 12,291 10,057 (19,689) INCOME TAX PROVISION (BENEFIT)............ (11,711) 4,916 4,023 (2,772) -------- -------- ------- ------- -------- NET INCOME (LOSS)......................... $(30,326) $ 7,375 $ 6,034 $ -- $(16,917) ======== ======== ======= ======= ========
F-27 TRANSDIGM HOLDING COMPANY CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 2001 (IN THOUSANDS OF DOLLARS)
SUBSIDIARY TOTAL HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED --------- --------- ---------- ------------ ------------ OPERATING ACTIVITIES: Net income (loss)....................... $ (1,807) $ 3,090 $13,075 $ 14,358 Adjustments to reconcile net income (loss) to net cash provided by operating activities.................. 2,988 5,869 (454) 8,403 --------- --------- ------- --------- Net cash provided by operating activities............................ 1,181 8,959 12,621 22,761 --------- --------- ------- --------- INVESTING ACTIVITIES: Capital expenditures.................... (919) (3,567) (4,486) Business acquisitions................... (169,102) (169,102) --------- --------- ------- --------- Net cash used in investing activities... (170,021) (3,567) (173,588) --------- --------- ------- --------- FINANCING ACTIVITIES: Changes in intercompany activities...... (15,309) 25,191 (9,882) Borrowings under credit facility........ 157,560 157,560 Proceeds from issuance of cumulative redeemable preferred stock and warrants.............................. 14,267 14,267 Repayment of amounts borrowed under credit facility....................... (13,949) (13,949) Purchase of common stock, including redeemable common stock............... (139) (139) --------- --------- ------- --------- Net cash provided by (used in) financing activities............................ (1,181) 168,802 (9,882) 157,739 --------- --------- ------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................. 7,740 (828) 6,912 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.................................... 4,554 (245) 4,309 --------- --------- ------- ------- --------- CASH AND CASH EQUIVALENTS, END OF YEAR.... $ -- $ 12,294 $(1,073) $ -- $ 11,221 ========= ========= ======= ======= =========
F-28 TRANSDIGM HOLDING COMPANY CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 2000 (IN THOUSANDS OF DOLLARS)
SUBSIDIARY TOTAL HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED --------- --------- ---------- ------------ ------------ OPERATING ACTIVITIES: Net income (loss)....................... $(1,535) $ 1,523 $10,791 $10,779 Adjustments to reconcile net income (loss) to net cash provided by operating activities.................. 2,670 3,431 (575) 5,526 ------- ------- ------- ------- Net cash provided by operating activities............................ 1,135 4,954 10,216 16,305 ------- ------- ------- ------- INVESTING ACTIVITIES: Capital expenditures.................... (1,781) (2,587) (4,368) Business acquisitions................... (752) (752) ------- ------- ------- ------- Net cash used in investing activities... (2,533) (2,587) (5,120) ------- ------- ------- ------- FINANCING ACTIVITIES: Changes in intercompany activities...... 875 7,510 (8,385) Proceeds from exercise of stock options and issuance of common stock, including redeemable common stock..... 295 295 Repayment of amounts borrowed under credit facility....................... (7,595) (7,595) Purchase of common stock, including redeemable common stock............... (2,305) (2,305) ------- ------- ------- ------- ------- Net cash used in financing activities... (1,135) (85) (8,385) (9,605) ------- ------- ------- ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................. 2,336 (756) 1,580 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.................................... 2,218 511 2,729 ------- ------- ------- ------- ------- CASH AND CASH EQUIVALENTS, END OF YEAR.... $ -- $ 4,554 $ (245) $ -- $ 4,309 ======= ======= ======= ======= =======
F-29 TRANSDIGM HOLDING COMPANY CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 1999 (IN THOUSANDS OF DOLLARS)
SUBSIDIARY TOTAL HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED --------- --------- ---------- ------------ ------------ OPERATING ACTIVITIES: Net income (loss)......................... $(30,326) $ 7,375 $ 6,034 $ (16,917) Adjustments to reconcile net income to net cash provided by (used in) operating activities.............................. 2,025 (17) (1,310) 698 --------- --------- ------- --------- Net cash provided by (used in) operating activities.............................. (28,301) 7,358 4,724 (16,219) --------- --------- ------- --------- INVESTING ACTIVITIES: Capital expenditures...................... (1,851) (1,192) (3,043) Acquisition of business................... (41,556) (41,556) --------- --------- ------- --------- Net cash used in investing activities..... (43,407) (1,192) (44,599) --------- --------- ------- --------- FINANCING ACTIVITIES: Changes in intercompany activities........ 171,568 (168,535) (3,033) Borrowings under credit facility.......... 118,639 118,639 Proceeds from subordinated notes.......... 118,132 118,132 Proceeds from exercise of stock options and issuance of common stock, including redeemable common stock................. 100,998 100,998 Proceeds from Holdings PIK Notes and common stock............................ 19,659 19,659 Payment of consideration in recapitalization........................ (263,896) (263,896) Repayment of amounts borrowed under credit facility................................ (49,443) (49,443) Purchase of common stock, including redeemable common stock................. (28) (28) --------- --------- ------- --------- Net cash provided by (used in) financing activities.............................. 34,094 15,720 (5,753) 44,061 --------- --------- ------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (17,256) 499 (16,757) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR...................................... 19,474 12 19,486 --------- --------- ------- --------- CASH AND CASH EQUIVALENTS, END OF YEAR...... $ -- $ 2,218 $ 511 $ -- $ 2,729 ========= ========= ======= ====== =========
20. SUBSEQUENT EVENTS On June 7, 2002, the Company issued $75 million of additional 10 3/8% Senior Subordinated Notes, due December 1, 2008, at a premium of approximately $2 million. The proceeds of the notes, net of fees and expenses of approximately $3 million, were used to repay $74 million of the borrowings outstanding under the Company's Senior credit facility ($33 million under the Tranche A facility, $19.5 million under the Tranche B facility, and $21.5 million under the Tranche C facility). In conjunction with the issuance of the Senior Subordinated Notes, TransDigm's Senior credit facility was amended to, among other things, permit TransDigm to: (1) incur up to $150 million of additional bank borrowings or subordinated debt to finance acquisitions or pay dividends to Holdings F-30 TRANSDIGM HOLDING COMPANY CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 1999 (IN THOUSANDS OF DOLLARS) (CONTINUED) 20. SUBSEQUENT EVENTS (CONTINUED) to retire the Holdings PIK Notes and (2) make future acquisitions as long as the aggregate purchase price of all such acquisitions does not exceed $225 million and certain other conditions are met. The amendment also modified certain financial covenants and waived any mandatory prepayment of amounts owed under the Senior credit facility from excess cash flow, if any, generated by TransDigm during fiscal 2002. * * * * * * F-31 TRANSDIGM HOLDING COMPANY CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF DOLLARS)
MARCH 30, 2002 SEPTEMBER 30, (UNAUDITED) 2001 ----------- ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 28,975 $ 11,221 Accounts receivable, net.................................. 32,536 40,215 Inventories (Note 3)...................................... 49,600 47,872 Deferred income taxes..................................... 9,749 9,749 Prepaid expenses and other................................ 1,009 447 ---------- ---------- Total current assets.................................... 121,869 109,504 PROPERTY, PLANT AND EQUIPMENT--Net.......................... 39,677 42,095 INTANGIBLE ASSETS--Net...................................... 201,311 203,858 DEBT ISSUE COSTS--Net....................................... 11,230 12,494 DEFERRED INCOME TAXES AND OTHER............................. 4,942 4,947 ---------- ---------- TOTAL....................................................... $ 379,029 $ 372,898 ========== ========== LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES: Current portion of long-term liabilities.................. $ 18,965 $ 15,822 Accounts payable.......................................... 7,861 9,181 Accrued liabilities....................................... 30,501 28,829 ---------- ---------- Total current liabilities............................... 57,327 53,832 LONG-TERM DEBT--Less current portion........................ 391,839 399,587 OTHER NON-CURRENT LIABILITIES............................... 6,143 8,033 ---------- ---------- Total liabilities....................................... 455,309 461,452 ---------- ---------- CUMULATIVE REDEEMABLE PREFERRED STOCK....................... 14,558 13,222 REDEEMABLE COMMON STOCK (Note 4)............................ 1,701 1,612 STOCKHOLDERS' DEFICIENCY: Common stock.............................................. 102,080 102,080 Warrants.................................................. 1,934 1,934 Retained deficit.......................................... (196,052) (206,901) Accumulated other comprehensive loss...................... (501) (501) ---------- ---------- Total stockholders' deficiency.......................... (92,539) (103,388) ---------- ---------- TOTAL....................................................... $ 379,029 $ 372,898 ========== ==========
See notes to consolidated financial statements. F-32 TRANSDIGM HOLDING COMPANY CONSOLIDATED STATEMENTS OF INCOME FOR THE THIRTEEN AND TWENTY-SIX WEEK PERIODS ENDED MARCH 30, 2002 AND MARCH 31, 2001 (IN THOUSANDS OF DOLLARS) (UNAUDITED)
THIRTEEN WEEK TWENTY-SIX WEEK PERIODS ENDED PERIODS ENDED --------------------- --------------------- MARCH 30, MARCH 31, MARCH 30, MARCH 31, 2002 2001 2002 2001 --------- --------- --------- --------- NET SALES................................................ $ 59,888 $ 42,084 $117,613 $ 77,864 COST OF SALES (Including charge of $156 during the periods ending March 31, 2001 due to inventory purchase accounting adjustments)................................ 32,450 22,827 64,148 42,820 -------- -------- -------- -------- GROSS PROFIT............................................. 27,438 19,257 53,465 35,044 -------- -------- -------- -------- OPERATING EXPENSES: Selling and administrative............................. 5,135 4,283 10,475 8,539 Amortization of intangibles............................ 1,774 420 3,167 839 Research and development............................... 692 688 1,372 1,201 -------- -------- -------- -------- Total operating expenses............................. 7,601 5,391 15,014 10,579 -------- -------- -------- -------- INCOME FROM OPERATIONS................................... 19,837 13,866 38,451 24,465 INTEREST EXPENSE--Net.................................... 8,281 7,250 16,885 14,281 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES............................... 11,556 6,616 21,566 10,184 INCOME TAX PROVISION..................................... 4,970 2,687 9,277 4,269 -------- -------- -------- -------- NET INCOME............................................... $ 6,586 $ 3,929 $ 12,289 $ 5,915 ======== ======== ======== ========
See notes to consolidated financial statements. F-33 TRANSDIGM HOLDING COMPANY CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY FOR THE TWENTY-SIX WEEK PERIOD ENDED MARCH 30, 2002 (IN THOUSANDS OF DOLLARS) (UNAUDITED)
ACCUMULATED OTHER COMMON RETAINED COMPREHENSIVE STOCK WARRANTS DEFICIT LOSS TOTAL -------- -------- --------- ------------- --------- BALANCE, OCTOBER 1, 2001............... $102,080 $1,934 $(206,901) $(501) $(103,388) Net income............................. 12,289 12,289 Accretion of redeemable common stock... (104) (104) Cumulative redeemable preferred stock: Dividends accrued.................... (1,200) (1,200) Amortization of original issue discount........................... (136) (136) -------- ------ --------- ----- --------- BALANCE, MARCH 30, 2002................ $102,080 $1,934 $(196,052) $(501) $ (92,539) ======== ====== ========= ===== =========
See notes to consolidated financial statements. F-34 TRANSDIGM HOLDING COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE TWENTY-SIX WEEK PERIODS ENDED MARCH 30, 2002 AND MARCH 31, 2001 (IN THOUSANDS OF DOLLARS) (UNAUDITED)
TWENTY-SIX WEEK PERIODS ENDED --------------------- MARCH 30, MARCH 31, 2002 2001 --------- --------- OPERATING ACTIVITIES: Net income................................................ $12,289 $ 5,915 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation............................................ 3,474 2,510 Amortization of intangibles............................. 3,167 839 Amortization of debt issue costs........................ 1,264 804 Interest deferral on Holdings PIK Notes................. 1,626 1,452 Changes in assets and liabilities, net of effects from acquisition of business: Accounts receivable................................... 7,679 2,890 Inventories........................................... (1,728) (2,740) Other assets.......................................... (1,177) 1,233 Accounts payable...................................... (1,320) 617 Accrued liabilities and other......................... 182 (1,283) ------- ------- Net cash provided by operating activities............... 25,456 12,237 ------- ------- INVESTING ACTIVITIES: Capital expenditures...................................... (1,056) (1,691) Acquisition of product line (Note 5)...................... -- (6,640) ------- ------- Net cash used in investing activities................... (1,056) (8,331) ------- ------- FINANCING ACTIVITIES: Net borrowings under revolving credit loans................. -- 4,000 Repayment of term loans..................................... (6,631) (5,477) Purchase of capital stock................................... (15) (139) ------- ------- Net cash used in financing activities................... (6,646) (1,616) ------- ------- INCREASE IN CASH AND CASH EQUIVALENTS....................... 17,754 2,290 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 11,221 4,309 ------- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $28,975 $ 6,599 ======= ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest.................. $13,891 $12,074 ======= ======= Cash paid during the period for income taxes.............. $ 8,574 $ 2,710 ======= =======
See notes to consolidated financial statements. F-35 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THIRTEEN AND TWENTY-SIX WEEK PERIODS ENDED MARCH 30, 2002 AND MARCH 31, 2001 1. DESCRIPTION OF THE BUSINESS TransDigm Holding Company ("Holdings"), through its wholly-owned operating subsidiary, TransDigm Inc. ("TransDigm"), is a leading supplier of highly engineered power system and airframe components servicing predominantly the aerospace industry. TransDigm, which includes the AeroControlex and AdelWiggins Groups, along with its wholly-owned subsidiaries, Champion Aerospace Inc. ("Champion"), Marathon Power Technologies Company ("Marathon"), ZMP, Inc. ("ZMP"), and Adams Rite Aerospace, Inc. ("Adams Rite") (collectively, the "Company") offers a broad line of proprietary aerospace components. Major product offerings in the Power System Components category include ignition system components, fuel and lube pumps, mechanical controls, and batteries and chargers. Major product offerings in the Airframe System Components category include engineered connectors, engineered latches, and lavatory hardware and components. 2. UNAUDITED INTERIM FINANCIAL INFORMATION Except for the September 30, 2001 consolidated balance sheet, which was derived from the Company's audited financial statements, the financial information included herein is unaudited; however, the information reflects all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company's financial position and results of operations and cash flows for the interim periods presented. The results of operations for the thirteen and twenty-six week periods ended March 30, 2002 are not necessarily indicative of the results to be expected for the full year. 3. INVENTORIES Inventories are stated at the lower of cost or market. Cost of inventories is determined by the average cost and the first-in, first-out (FIFO) methods. Inventories consist of the following (in thousands):
MARCH 30, SEPTEMBER 30, 2002 2001 --------- ------------- Work-in-progress and finished goods......................... $32,060 $36,787 Raw materials and purchased component parts................. 24,920 18,380 ------- ------- Total..................................................... 56,980 55,167 Reserve for excess and obsolete inventory................... (7,380) (7,295) ------- ------- Inventories--net............................................ $49,600 $47,872 ======= =======
4. CONTINGENCIES ENVIRONMENTAL--The Company has been addressing contaminated soil and groundwater beneath its facility in Waco, Texas. Although there can be no assurance that material expenditures will not be required in the future to address currently unidentified contamination or to satisfy further requirements of the Texas Natural Resources Conservation Commission ("TNRCC"), the Company believes that the current soil and groundwater remediation at the Waco facility will not require the incurrence of material expenditures. F-36 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THIRTEEN AND TWENTY-SIX WEEK PERIODS ENDED MARCH 30, 2002 AND MARCH 31, 2001 (CONTINUED) 4. CONTINGENCIES (CONTINUED) In connection with the Company's acquisition of Marathon, a $2.0 million escrow was created to cover the cost of remediation that TNRCC might require at the facility. During September 1998, the former owner of Marathon filed a lawsuit against the Company to release the environmental escrow alleging that the Company had violated the requirements of the stock purchase agreement relating to the investigation of the presence of certain contaminants at the Waco, Texas facility. The Company has filed counter claims against the seller and the ultimate outcome of this matter cannot presently be determined. PUT OPTION--During the thirteen-week period ended March 30, 2002, a put option ("put") became exercisable enabling the holder to require the Company to purchase up to 80% of his Common Stock (including shares acquired through the exercise of stock options and held at least six months) at fair value, subject to certain restrictions under the Company's long-term debt agreements and his continued service as Chairman of the Board of Holdings and TransDigm). As of March 30, 2002, there were no outstanding shares of Common Stock subject to the put; however, 8,114 shares of Common Stock that can be acquired under exercisable stock options at March 30, 2002 are subject to the put. The estimated fair value of such shares, net of the exercise price of the related stock options, totaled approximately $8.6 million at March 30, 2002. An additional 2,475 shares of Common Stock that are issuable in the future if certain stock options become exercisable upon the occurrence of certain events (change in control, achievement of certain earnings targets, etc.) or certain specified dates in the option agreements are also subject to the put. The estimated fair value of such shares, net of the exercise price of the related stock options, totaled approximately $1.1 million at March 30, 2002. OTHER--During the ordinary course of business, the Company is from time to time threatened with, or may become a party to, legal actions and other proceedings. While the Company is currently involved in some legal proceedings, it believes the results of these proceedings will not have a material effect on its financial condition, results of operations, or cash flows. The Company believes that its potential exposure to such legal actions s adequately covered by its aviation product and general liability insurance. 5. ACQUISITION CHAMPION AEROSPACE--Through a newly-formed, wholly-owned subsidiary, Champion Aerospace Inc., TransDigm acquired substantially all of the assets and certain liabilities of the Champion Aviation Products ("Champion Aerospace") business on May 31, 2001 (the "Acquisition") from Federal Mogul Ignition Company ("Federal-Mogul"), a wholly-owned subsidiary of Federal-Mogul Corporation, for approximately $160.1 million in cash, subject to adjustment based on the level of acquired working capital as of the closing of the Acquisition. Champion Aerospace is engaged in researching, designing, developing, engineering, manufacturing, marketing, distributing and selling ignition systems and related components and other products (including, without limitation, igniters, spark plugs, and exciters) for turbine and piston aircraft applications as well as other aerospace engine and industrial applications. The purchase price consideration of $160.1 million in cash and $2.2 million of costs associated with the Acquisition was funded through: (1) $147.6 million of new borrowings under the Company's existing Senior Credit Facility, (2) $14.3 million received (net of fees of $.7 million) from the issuance F-37 TRANSDIGM HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THIRTEEN AND TWENTY-SIX WEEK PERIODS ENDED MARCH 30, 2002 AND MARCH 31, 2001 (CONTINUED) 5. ACQUISITION (CONTINUED) of $15 million of Holdings' 16 percent Cumulative Redeemable Preferred Stock and warrants to purchase 1,381.87 shares of Holdings' common stock, and (3) the use of $.4 million of the Company's existing cash balances. TransDigm also borrowed an additional $15 million under the Senior Credit Facility to pay $5 million of debt issuance costs and provide $10 million of working capital for future operations. Approximately $2.6 million of the additional borrowings were obtained under the Company's revolving credit line, $45 million was added to the Company's existing Tranche B Facility, and $115 million was borrowed in the form of a new Tranche C Facility maturing in May 2007 under the Senior Credit Facility. The Company accounted for the Acquisition as a purchase and included the results of operations of the acquired business in its fiscal 2001 consolidated financial statements from the effective date of the Acquisition. The purchase price was allocated based on a preliminary determination, which is subject to adjustment, of estimated fair values at the date of the Acquisition and resulted in goodwill of approximately $134 million being recorded on the Company's consolidated balance sheet. This goodwill is being amortized on a straight-line basis over forty years. The following table summarizes the unaudited, consolidated pro forma results of operations of the Company, as if the Acquisition had occurred at the beginning of the twenty-six week period ended March 31, 2001 (in thousands): Net sales................................................... $113,037 Operating income............................................ $ 33,087 Net income.................................................. $ 8,188
This pro forma information is not necessarily indicative of the results that actually would have been obtained if the operations had been combined as of the beginning of the period presented and is not intended to be a projection of future results. 6. SUPPLEMENTAL GUARANTOR INFORMATION The Company's Senior Subordinated Notes, including the additional notes issued on June 7, 2002 (see Note 7) are unconditionally guaranteed by Holdings and each of TransDigm's domestic subsidiaries on a senior subordinated basis. The Holdings guarantee of the Senior Subordinated Notes is subordinated to Holdings' repayment of the Holdings PIK Notes, as well as the Holdings' guarantee of TransDigm's borrowings under its Senior credit facility. The guarantees of The Senior Subordinated Notes by TransDigm's domestic subsidiaries is subordinated to the subsidiaries' guarantee of TransDigm's Senior credit facility. The following supplemental consolidating condensed financial information presents the balance sheets of the Company as of March 30, 2002 and September 30, 2001 and its statements of income and cash flows for the twenty-six week periods ended March 30, 2002 and March 31, 2001. F-38 TRANSDIGM HOLDING COMPANY CONDENSED CONSOLIDATING BALANCE SHEET AS OF MARCH 30, 2002 (IN THOUSANDS OF DOLLARS)
SUBSIDIARY TOTAL HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED --------- --------- ---------- ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents.......... $ 30,416 $ (1,441) $ 28,975 Accounts receivable, net........... 14,960 17,576 32,536 Inventories........................ 19,580 30,020 49,600 Deferred income taxes.............. 9,749 9,749 Prepaid expenses and other......... 153 856 1,009 -------- --------- -------- Total current assets............. 74,858 47,011 121,869 INVESTMENT IN SUBSIDIARIES AND INTERCOMPANY BALANCES.............. $(144,725) 396,438 (141,545) $(110,168) PROPERTY, PLANT AND EQUIPMENT--Net... 10,057 29,620 39,677 INTANGIBLE ASSETS--Net............... 19,158 182,153 201,311 DEBT ISSUE COSTS--Net................ 240 10,990 11,230 DEFERRED INCOME TAXES AND OTHER...... 4,942 4,942 --------- -------- --------- --------- -------- TOTAL................................ $(144,485) $516,443 $ 117,239 $(110,168) $379,029 ========= ======== ========= ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) CURRENT LIABILITIES: Current portion of long-term liabilities...................... $ 18,965 $ 18,965 Accounts payable................... 4,644 $ 3,217 7,861 Accrued liabilities................ 18,525 11,976 30,501 -------- --------- -------- Total current liabilities........ 42,134 15,193 57,327 LONG-TERM DEBT--Less current portion............................ $ 29,223 362,616 391,839 OTHER NON-CURRENT LIABILITIES........ 4,781 1,362 6,143 --------- -------- --------- -------- Total liabilities.............. 29,223 409,531 16,555 455,309 CUMULATIVE REDEEMABLE PREFERRED STOCK.............................. 14,558 14,558 REDEEMABLE COMMON STOCK.............. 1,701 1,701 STOCKHOLDERS' EQUITY (DEFICIENCY).... (189,967) 106,912 100,684 $(110,168) (92,539) --------- -------- --------- --------- -------- TOTAL................................ $(144,485) $516,443 $ 117,239 $(110,168) $379,029 ========= ======== ========= ========= ========
F-39 TRANSDIGM HOLDING COMPANY CONDENSED CONSOLIDATING BALANCE SHEET AS OF SEPTEMBER 30, 2001 (IN THOUSANDS OF DOLLARS)
SUBSIDIARY TOTAL HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED --------- --------- ---------- ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents........... $ 12,294 $ (1,073) $ 11,221 Accounts receivable -- net.......... 17,481 22,734 40,215 Inventories......................... 19,353 28,519 47,872 Deferred income taxes............... 9,749 9,749 Prepaid expenses and other.......... 132 315 447 -------- -------- --------- Total current assets.............. 59,009 50,495 109,504 INVESTMENTS IN SUBSIDIARIES AND INTERCOMPANY BALANCES............... $(144,774) 395,987 (141,163) $(110,050) PROPERTY, PLANT AND EQUIPMENT -- Net................................. 10,954 31,141 42,095 INTANGIBLE ASSETS -- Net.............. 19,384 184,474 203,858 DEBT ISSUE COSTS -- Net............... 255 12,239 12,494 DEFERRED INCOME TAXES AND OTHER....... 4,947 4,947 --------- -------- -------- --------- --------- TOTAL ASSETS.......................... $(144,519) $502,520 $124,947 $(110,050) $ 372,898 ========= ======== ======== ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) CURRENT LIABILITIES: Current portion of long-term liabilities....................... $ 15,822 $ 15,822 Accounts payable.................... 4,909 $ 4,272 9,181 Accrued liabilities................. 17,836 10,993 28,829 -------- -------- --------- Total current liabilities......... 38,567 15,265 53,832 LONG-TERM DEBT -- Less current portion............................. $ 27,597 371,990 399,587 OTHER NON-CURRENT LIABILITIES......... 6,671 1,362 8,033 --------- -------- -------- --------- Total liabilities................. 27,597 417,228 16,627 461,452 CUMULATIVE REDEEMABLE PREFERRED STOCK............................... 13,222 13,222 REDEEMABLE COMMON STOCK............... 1,612 1,612 TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY)........................ (186,950) 85,292 108,320 $(110,050) (103,388) --------- -------- -------- --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)................. $(144,519) $502,520 $124,947 $(110,050) $ 372,898 ========= ======== ======== ========= =========
F-40 TRANSDIGM HOLDING COMPANY CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE TWENTY-SIX WEEK PERIOD ENDED MARCH 30, 2002 (IN THOUSANDS OF DOLLARS)
SUBSIDIARY TOTAL HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED --------- --------- ---------- ------------ ------------ NET SALES........................... $56,422 $61,191 $117,613 COST OF SALES....................... 28,676 35,472 64,148 ------- ------- -------- GROSS PROFIT........................ 27,746 25,719 53,465 ------- ------- -------- OPERATING EXPENSES: Selling and administrative........ 6,650 3,825 10,475 Amortization of intangibles....... 667 2,500 3,167 Research and development.......... 826 546 1,372 ------- ------- -------- Total operating expenses........ 8,143 6,871 15,014 ------- ------- -------- INCOME FROM OPERATIONS.............. 19,603 18,848 38,451 INTEREST EXPENSE--Net............... $ 1,641 10,188 5,056 16,885 ------- ------- ------- -------- INCOME (LOSS) BEFORE INCOME TAXES... (1,641) 9,415 13,792 21,566 INCOME TAX PROVISION (BENEFIT)...... (706) 4,050 5,933 9,277 ------- ------- ------- ------- -------- NET INCOME (LOSS)................... $ (935) $ 5,365 $ 7,859 $ -- $ 12,289 ======= ======= ======= ======= ========
F-41 TRANSDIGM HOLDING COMPANY CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE TWENTY-SIX WEEK PERIOD ENDED MARCH 31, 2001 (IN THOUSANDS OF DOLLARS)
SUBSIDIARY TOTAL HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED --------- --------- ---------- ------------ ------------ NET SALES........................... $43,870 $33,994 $77,864 COST OF SALES....................... 23,297 19,523 42,820 ------- ------- ------- GROSS PROFIT........................ 20,573 14,471 35,044 ------- ------- ------- OPERATING EXPENSES: Selling and administrative........ 6,493 2,046 8,539 Amortization of intangibles....... 839 839 Research and development.......... 818 383 1,201 ------- ------- ------- Total operating expenses........ 8,150 2,429 10,579 ------- ------- ------- INCOME FROM OPERATIONS.............. 12,423 15,676 24,465 INTEREST EXPENSE--Net............... $ 1,506 12,611 164 14,281 ------- ------- ------- ------- INCOME (LOSS) BEFORE INCOME TAXES... (1,506) (188) 11,878 10,184 INCOME TAX PROVISION (BENEFIT)...... (631) (79) 4,979 4,269 ------- ------- ------- ------ ------- NET INCOME (LOSS)................... $ (875) $ (109) $ 6,899 $ -- $ 5,915 ======= ======= ======= ====== =======
F-42 TRANSDIGM HOLDING COMPANY CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE TWENTY-SIX WEEK PERIOD ENDED MARCH 30, 2002 (IN THOUSANDS OF DOLLARS)
SUBSIDIARY TOTAL HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED --------- --------- ---------- ------------ ------------ OPERATING ACTIVITIES: Net income (loss)................. $ (935) $ 5,365 $ 7,859 $ 12,289 Adjustments to reconcile net income (loss) to net cash provided by operating activities...................... 1,641 4,160 7,366 13,167 ------ -------- -------- -------- Net cash provided by operating activities...................... 706 9,525 15,225 25,456 ------ -------- -------- -------- INVESTING ACTIVITIES--Capital expenditures...................... (579) (477) (1,056) ------ -------- -------- -------- FINANCING ACTIVITIES: Changes in intercompany activities...................... (691) 15,807 (15,116) Repayment of term loans........... (6,631) (6,631) Purchase of capital stock......... (15) (15) ------ -------- -------- -------- Net cash provided by (used in) financing activities............ (706) 9,176 (15,116) (6,646) ------ -------- -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................... 18,122 (368) 17,754 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD......................... 12,294 (1,073) 11,221 ------ -------- -------- ------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD............................ $ -- $ 30,416 $ (1,441) $ -- $ 28,975 ====== ======== ======== ======= ========
F-43 TRANSDIGM HOLDING COMPANY CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE TWENTY-SIX WEEK PERIOD ENDED MARCH 31, 2001 (IN THOUSANDS OF DOLLARS)
SUBSIDIARY TOTAL HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED --------- --------- ---------- ------------ ------------ OPERATING ACTIVITIES: Net income (loss)....................... $ (875) $ (109) $ 6,899 $ 5,915 Adjustments to reconcile net income (loss) to net cash provided by operating activities.................. 1,468 4,961 (107) 6,322 ------ ------- ------- ------- Net cash provided by operating activities............................ 593 4,852 6,792 12,237 ------ ------- ------- ------- INVESTING ACTIVITIES: Capital expenditures.................... (762) (929) (1,691) Acquisition of product line............. (6,640) (6,640) ------ ------- ------- ------- Net cash used in investing activities... (7,402) (929) (8,331) ------ ------- ------- ------- FINANCING ACTIVITIES: Changes in intercompany activities...... (454) 7,044 (6,590) Net borrowings under revolving credit loans................................. 4,000 4,000 Repayment of term loans................. (5,477) (5,477) Purchase of capital stock............... (139) (139) ------ ------- ------- ------- Net cash provided by (used in) financing activities............................ (593) 5,567 (6,590) (1,616) ------ ------- ------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................. 3,017 (727) 2,290 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.................................. 4,554 (245) 4,309 ------ ------- ------- ------ ------- CASH AND CASH EQUIVALENTS, END OF PERIOD.................................. $ -- $ 7,571 $ (972) $ -- $ 6,599 ====== ======= ======= ====== =======
7. SUBSEQUENT EVENTS On June 7, 2002, the Company issued $75 million of additional 10 3/8% Senior Subordinated Notes, due December 1, 2008, at a premium of approximately $2 million. The proceeds of the notes, net of fees and expenses of approximately $3 million, were used to repay $74 million of the borrowings outstanding under the Company's Senior credit facility ($33 million under the Tranche A facility, $19.5 million under the Tranche B facility, and $21.5 million under the Tranche C facility). In conjunction with the issuance of the Senior Subordinated Notes, TransDigm's Senior credit facility was amended to, among other things, permit TransDigm to: (1) incur up to $150 million of additional bank borrowings or subordinated debt to finance acquisitions or pay dividends to Holdings to retire the Holdings PIK Notes and (2) make future acquisitions as long as the aggregate purchase price of all such acquisitions does not exceed $225 million and certain other conditions are met. The amendment also modified certain financial covenants and waived any mandatory prepayment of amounts owed under the Senior credit facility from excess cash flow, if any, generated by TransDigm during fiscal 2002. * * * * * F-44 INDEPENDENT AUDITORS' REPORT To the Shareholders and Board of Directors of TransDigm Holding Company We have audited the consolidated balance sheets of TransDigm Holding Company and subsidiaries (the "Company") as of September 30, 2001 and 2000, and the related consolidated statements of operations, changes in stockholders' equity (deficiency) and cash flows for each of the three years in the period ended September 30, 2001 and have issued our report thereon dated December 1, 2001 (June 7, 2002 as to Notes 19 and 20); such consolidated financial statements and report are included in this prospectus. Our audits also included the consolidated financial statement schedule of the Company, shown on page F-46. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ DELOITTE & TOUCHE LLP Cleveland, Ohio December 1, 2001 F-45 TRANSDIGM HOLDING COMPANY VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 (IN THOUSANDS)
COLUMN C ADDITIONS COLUMN B ---------------------------------------------------- BALANCE AT CHARGED TO CHAMPION COLUMN A BEGINNING COSTS AND CHRISTIE ZMP AVIATION DESCRIPTION OF PERIOD EXPENSES ACQUISITION ACQUISITION ACQUISITION - ---------------------------------------------------- ---------- ---------- ----------- ----------- ----------- Year Ended September 30, 2001: Allowance for doubtful accounts................... $ 371 $ 839 Reserve for excess and and obsolete inventory..... 6,431 504 $ 841 Sales returns and repairs......................... 1,467 599 1,676 Environmental..................................... 47 Year Ended September 30, 2000: Allowance for doubtful accounts................... 441 60 $ 20 Reserve for excess and and obsolete inventory..... 7,110 684 100 Sales returns and repairs......................... 1,841 (267) 100 Environmental..................................... 157 35 17 Year Ended September 30, 1999: Allowance for doubtful accounts................... 265 35 $ 150 Reserve for excess and and obsolete inventory..... 4,335 (437) 2,583 Sales returns and repairs......................... 1,391 392 828 Environmental..................................... 280 (42) COLUMN C ADDITIONS ----------- COLUMN D COLUMN E DEDUCTIONS BALANCE COLUMN A HONEYWELL FROM AT END OF DESCRIPTION ACQUISITION RESERVE (1) PERIOD - ---------------------------------------------------- ----------- ----------- --------- Year Ended September 30, 2001: Allowance for doubtful accounts................... $ 54 $1,156 Reserve for excess and and obsolete inventory..... $ 350 831 7,295 Sales returns and repairs......................... 839 2,903 Environmental..................................... 14 33 Year Ended September 30, 2000: Allowance for doubtful accounts................... 150 371 Reserve for excess and and obsolete inventory..... 1,463 6,431 Sales returns and repairs......................... 207 1,467 Environmental..................................... 162 47 Year Ended September 30, 1999: Allowance for doubtful accounts................... 9 441 Reserve for excess and and obsolete inventory..... (629) 7,110 Sales returns and repairs......................... 770 1,841 Environmental..................................... 81 157
- ------------------------ (1) For the allowance for doubtful accounts and reserve for excess and obsolete inventory, the amounts in this column represent charge-offs net of recoveries. For the sales returns and repairs and environmental accrued liabilities, the amounts primarily represent expenditures charged against liabilities. F-46 REPORT OF INDEPENDENT AUDITORS The Board of Directors Federal-Mogul Corporation: We have audited the accompanying balance sheets of Federal-Mogul Aviation, Inc. as of December 31, 2000 and 1999 and the related statements of operations and cash flows for the years then ended, the period from October 10, 1998 through December 31, 1998 and for the Aviation Division of the Cooper Automotive Division of Cooper Industries (the Predecessor) for the period from January 1, 1998 through October 9, 1998. These financial statements are the responsibility of the respective 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 auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Federal-Mogul Aviation, Inc. at December 31, 2000 and 1999 and the results of its operations and its cash flows for the years then ended, the period from October 10, 1998 through December 31, 1998 and for the Predecessor for the period from January 1, 1998 through October 9, 1998, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Detroit, Michigan March 1, 2001, except for Note 7, as to which the date is May 31, 2001 F-47 FEDERAL-MOGUL AVIATION, INC. STATEMENTS OF OPERATIONS (THOUSANDS OF DOLLARS)
PREDECESSOR YEAR ENDED ----------- DECEMBER 31, OCTOBER 10- JANUARY 1- ------------------- DECEMBER 31, OCTOBER 9, 2000 1999 1998 1998 -------- -------- ------------ ----------- Net sales.......................................... $68,616 $64,584 $13,628 $47,034 Cost of products sold.............................. 41,392 38,977 8,641 30,298 Selling, general and administrative expenses....... 7,146 7,228 1,380 5,446 Amortization expense............................... 2,219 2,092 289 309 Other expense, net................................. 1,986 1,858 1,618 12 ------- ------- ------- ------- Earnings before income taxes..................... 15,873 14,429 1,700 10,969 Income taxes....................................... 6,875 6,278 776 4,314 ------- ------- ------- ------- Net Earnings..................................... $ 8,998 $ 8,151 $ 924 $ 6,655 ======= ======= ======= =======
See accompanying Notes to Financial Statements. F-48 FEDERAL-MOGUL AVIATION, INC. BALANCE SHEETS (THOUSANDS OF DOLLARS)
DECEMBER 31, ------------------- 2000 1999 -------- -------- ASSETS Cash........................................................ $ 1 $ 1 Other receivables........................................... 25 378 Inventories................................................. 10,805 11,454 Perishable tooling and supplies............................. 1,942 1,710 -------- -------- Total current assets...................................... 12,773 13,543 Property, plant and equipment, less accumulated depreciation.............................................. 18,223 19,073 Goodwill, less accumulated amortization..................... 81,938 84,097 Other intangibles, less accumulated amortization............ 759 818 Other assets................................................ 6 51 -------- -------- Total Assets.............................................. $113,699 $117,582 ======== ======== LIABILITIES AND NET PARENT INVESTMENT Accounts payable............................................ $ 1,743 $ 4,598 Accrued compensation........................................ 90 125 Other accrued liabilities................................... 751 1,517 -------- -------- Total current liabilities................................... 2,584 6,240 Net parent investment....................................... 111,115 111,342 -------- -------- Total Liabilities and Net Parent Investment............... $113,699 $117,582 ======== ========
See accompanying Notes to Financial Statements. F-49 FEDERAL-MOGUL AVIATION, INC. STATEMENTS OF CASH FLOWS (THOUSANDS OF DOLLARS)
PREDECESSOR ----------- YEAR ENDED OCTOBER 10- JANUARY 1- DECEMBER 31, THROUGH THROUGH ------------------- DECEMBER 31, OCTOBER 9, 2000 1999 1998 1998 -------- -------- ------------ ----------- Cash flows from operating activities: Net Earnings....................................... $8,998 $ 8,151 $ 924 $6,655 Adjustments to reconcile to net cash provided by operating activities: Depreciation expense............................... 1,509 1,286 519 2,122 Amortization expense............................... 2,219 2,092 289 309 Changes in assets and liabilities: Other receivables................................ 353 (378) 600 (1,618) Inventories...................................... 649 5,120 300 (4,883) Accounts payable and accrued liabilities......... (3,621) 660 (795) (1,624) Other assets and liabilities, net................ (3) 523 -- 23 ------ ------- ------ ------ Net cash provided by operating activities...... 10,104 17,454 1,837 984 Cash flows from investing activities: Capital expenditures............................... (879) (799) (275) (420) Cash flows from financing activities: Net inter-company activity with parent............. (9,225) (16,655) (1,562) (564) ------ ------- ------ ------ Change in cash....................................... -- -- -- -- Cash at beginning of period...................... 1 1 1 1 ------ ------- ------ ------ Cash at end of period............................ $ 1 $ 1 $ 1 $ 1 ====== ======= ====== ======
See accompanying Notes to Financial Statements. F-50 FEDERAL-MOGUL AVIATION, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1: BASIS OF PRESENTATION The accompanying financial statements reflect the assets, liabilities and operations of Federal-Mogul Aviation, Inc. ("Aviation"). Aviation is a wholly owned subsidiary of Federal-Mogul Corporation ("Federal-Mogul"). Aviation was previously an operating unit included in the Cooper Automotive Division of Cooper Industries, Inc. ("Cooper"). Federal-Mogul purchased the automotive divisions of Cooper, including Aviation, on October 9, 1998. Aviation operates with complete financial and operations staff on a decentralized basis. Its parent provides certain centralized services for employee benefits administration, cash management, risk management, legal services, public relations, domestic tax reporting and internal and external audit. Its parent bills Aviation for all direct costs incurred on behalf of Aviation. General corporate, accounting, tax, legal and other administrative costs that are not directly attributable to the operations of Aviation have been allocated to Aviation in the accompanying financial statements. The accompanying financial statements are presented as if Aviation had existed as an entity separate from its parent during the period presented and include the assets, liabilities, revenues and expenses that are directly related to Aviation's operations. Since the date of Federal-Mogul's acquisition of Aviation, the financial statements include the push-down of fair value adjustments to assets and liabilities, including goodwill, other intangible assets and property, plant and equipment and their related amortization and depreciation adjustments. Because Aviation is fully integrated into its parent's worldwide cash management system, all of its cash requirements are provided by its parent and any excess cash generated by Aviation is transferred to its parent. Aviation participates in Federal-Mogul's accounts receivable securitization program. On an ongoing basis, Aviation sells certain accounts receivable to Federal-Mogul Funding Corporation ("FMFC"), a wholly owned subsidiary of Federal-Mogul, which then sells such receivables, without recourse, to a financial conduit. The transfers of these receivables are charged to the net parent investment account. Aviation does not retain any interest in these receivables and the accounts receivable are sold at carrying value. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INVENTORIES: Inventories are carried at cost or, if lower, net realizable value. Prior to Federal-Mogul's acquisition of Aviation, cost was determined using the first-in, first-out ("FIFO") method. Subsequent to Federal-Mogul's acquisition of Aviation, cost was determined using the last-in, first-out ("LIFO") method, which approximated FIFO for all years presented. F-51 FEDERAL-MOGUL AVIATION, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) At December 31, inventories consisted of the following (in thousands):
2000 1999 -------- -------- Raw materials............................................. $ 3,382 $ 3,067 Work-in-process........................................... 6,136 6,795 Finished goods............................................ 1,287 1,592 ------- ------- Net inventories......................................... $10,805 $11,454 ======= =======
REVENUE RECOGNITION: Aviation recognizes revenues and the related customer incentives when there is evidence of a sales agreement, the delivery of the goods has occurred, the sales price is fixed or determinable and the ability to collect the revenue is reasonably assured. Aviation generally records revenue upon shipment of product to the customer, which coincides with the transfer of title under standard commercial terms. RESEARCH AND DEVELOPMENT COSTS: Aviation expenses research and development costs when incurred. Research and development costs were $1.6 million and $1.9 million for the years ended December 31, 2000 and 1999 and $1.4 million and $0.4 million for the period from January 1, 1998 through October 9, 1998 and October 10, 1998 through December 31, 1998, respectively. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at Federal-Mogul's cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method, which in general are depreciated over the following lives: buildings--10 to 40 years and machinery and equipment--3 to 20 years. At December 31, property, plant and equipment consisted of the following (in thousands):
2000 1999 -------- -------- Property, Plant and equipment: Land.................................................... $ 110 $ 110 Buildings............................................... 9,288 8,656 Machinery and equipment................................. 11,270 11,390 Construction-in-progress................................ 869 722 ------- ------- 21,537 20,878 Accumulated depreciation................................ (3,314) (1,805) ------- ------- $18,223 $19,073 ======= =======
F-52 FEDERAL-MOGUL AVIATION, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) GOODWILL AND OTHER INTANGIBLE ASSETS: At December 31, goodwill and other intangible assets, which resulted from Federal-Mogul's acquisition of Aviation, consisted of the following (in thousands):
ESTIMATED USEFUL LIFE 2000 1999 ----------- -------- -------- Goodwill........................................ 40 years $86,406 $86,406 Accumulated amortization........................ (4,468) (2,309) ------- ------- Net goodwill.................................... $81,938 $84,097 ======= ======= Assembled workforce............................. 15 years $ 891 $ 891 Accumulated amortization........................ (132) (73) ------- ------- Net assembled workforce......................... $ 759 $ 818 ======= =======
Intangible assets are periodically reviewed for impairment indicators. If impairment indicators exist, an assessment of undiscounted future cash flows related to assets held for use or fair value for assets held for sale are evaluated accordingly. Intangible assets are amortized on a straight-line basis over their estimated useful lives. NET PARENT INVESTMENT: The Net Parent Investment account includes Aviation's historical earnings, intercompany amounts, income taxes deferred and payable, postemployment benefit liabilities and other transactions between Aviation and its parent. FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying amounts of certain financial instruments such as other receivables and accounts payable approximate their fair value for all years presented. NOTE 3: NET PARENT INVESTMENT Changes in net parent investment during the three years ended December 31, were as follows (in thousands): Balance at January 1, 1998.................................. $ 42,904 Net inter-company transactions with parent................ (1,927) Net income for period from January 1, 1998 to October 9, 1998.................................................... 6,655 -------- Balance at October 9, 1998.................................. $ 47,632 ======== Federal-Mogul's initial investment in Aviation.............. $ 81,979 Net inter-company transactions with parent................ 1,290 Net income for period from October 10, 1998 to December 31, 1998................................................ 924 -------- Balance at December 31, 1998................................ 84,193 Net inter-company transactions with parent................ 18,998 Net income................................................ 8,151 -------- Balance at December 31, 1999................................ 111,342 Net inter-company transactions with parent................ (9,225) Net income................................................ 8,998 -------- Balance at December 31, 2000................................ $111,115 ========
F-53 FEDERAL-MOGUL AVIATION, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 3: NET PARENT INVESTMENT (CONTINUED) Intercompany transactions are principally cash transfers and non-cash charges between Aviation and its parent. Aviation has an inter-company loan with Federal-Mogul in the amount of $30.5 million, which is included in the net parent investment balance at December 31, 2000, 1999 and 1998. In 2000, 1999 and 1998 Federal-Mogul charged interest on this balance based on the stated rate of 6.9%. Federal-Mogul has pledged 100% of Aviation's capital stock and also provided collateral in the form of a pledge of inventories, property, plant and equipment, real property and intellectual properties to secure certain outstanding debt of Federal-Mogul. In addition, Aviation has guaranteed fully and unconditionally, on a joint and several basis, the obligation to pay principal and interest under Federal-Mogul's Senior Credit Agreements and its publicly traded registered debt. Such pledges and guarantees have also been made by certain other subsidiaries of Federal-Mogul. NOTE 4: INCOME TAXES Aviation files a consolidated return with its parent for U.S. federal income tax purposes. Federal income tax expense is calculated on a separate-return basis for financial reporting purposes. A reconciliation between Aviation's statutory federal income tax rate and its effective tax rate is summarized below:
YEAR ENDED PERIOD FROM PERIOD FROM DECEMBER 31, JANUARY 1, 1998 OCTOBER 10, 1998 ----------------------- THROUGH THROUGH 2000 1999 OCTOBER 9, 1998 DECEMBER 31, 1998 -------- -------- --------------- ----------------- Effective tax rate reconciliation: U.S. Federal statutory rate............ 35% 35% 35% 35% Non-deductible goodwill................ 5 6 8 1 State and Local Taxes.................. 3 3 3 3 -- -- -- -- Effective Tax Rate..................... 43% 44% 46% 39% == == == ==
Deferred taxes and income taxes payable are a component of the net investment in parent. NOTE 5: PENSION PLANS In 1998, prior to Federal-Mogul's acquisition of Aviation, the various pension plans of Aviation were merged into one plan of Cooper. As such, the related pension liabilities were recorded to net parent investment. This plan was assumed by Federal-Mogul in its acquisition of the automotive divisions of Cooper. This plan was required to be fully funded by Cooper prior to the acquisition by Federal-Mogul. In 2000, Federal-Mogul consolidated all domestic qualified defined benefit plans into one plan, the Federal Mogul Corporation Pension Plan. The expense charged to Aviation was $0.2 million and $0.2 million for the years ended December 31, 2000 and 1999 and $0.3 million for the period from January 1, 1998 through October 8, 1998. There was no expense recorded for the period from October 9, 1998 through December 31, 1998. At December 31, 2000 and 1999, the Federal-Mogul Corporation Pension Plan's projected benefit obligation was $721.8 million and $345.6 million based on discount rates of 8% and 7.75%, and the fair value of plan assets were $852.5 million and $327.0 million, respectively. F-54 FEDERAL-MOGUL AVIATION, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6: CONCENTRATION OF CREDIT RISK AND OTHER Aviation grants credit to their customers, which are primarily in the aerospace industry. Credit risk with respect to trade receivables is generally diversified due to the large number of entities comprising Aviation's customer base. Aviation performs periodic credit evaluations of their customers and generally do not require collateral. Aviation operates in a single business segment, manufacturing primarily engine ignition systems and related parts for the aerospace industry. Aviation manufactures and distributes these products for use in the aerospace aftermarket and original equipment segments of the industry. Two distributors accounted for approximately 25% and 12%, 27% and 10%, and 31% and 11% of net sales for the years ended December 31, 2000, 1999 and 1998, respectively. No other customer accounted for 10% or more of revenues in 2000, 1999 or 1998. All of Aviation's operations are conducted in the United States. Net sales to customers outside the United States, principally to European customers, were 22%, 20%, and 22% of the total net sales for the years ended December 31, 2000, 1999 and 1998, respectively. NOTE 7: SUBSEQUENT EVENT On May 31, 2001, a corporation formed by TransDigm Inc. acquired substantially all of the assets and assumed certain liabilities of Aviation for approximately $160.1 million in cash. The purchase price is subject to adjustment for changes in working capital as defined in the Asset Purchase Agreement. F-55 FEDERAL-MOGUL AVIATION, INC. BALANCE SHEETS (DOLLARS IN THOUSANDS)
MARCH 31, DECEMBER 31, 2001 2000 ----------- ------------ (UNAUDITED) ASSETS Cash...................................................... $ 1 $ 1 Other receivables......................................... 10 25 Inventories (Note 3)...................................... 12,282 10,805 Perishable tooling and supplies........................... 2,021 1,942 -------- -------- Total current assets.................................... 14,314 12,773 -------- -------- Property, plant and equipment, less accumulated depreciation............................................ 17,881 18,223 Goodwill, less accumulated amortization................... 81,362 81,938 Other intangibles, less accumulated amortization.......... 726 759 Other assets.............................................. 6 -------- -------- TOTAL ASSETS................................................ $114,283 $113,699 ======== ======== LIABILITIES AND NET PARENT INVESTMENT Accounts payable.......................................... $ 3,410 $ 1,743 Accrued compensation...................................... 93 90 Other accrued liabilities................................. 1,205 751 -------- -------- Total current liabilities............................... 4,708 2,584 -------- -------- Net parent investment..................................... 109,575 111,115 -------- -------- TOTAL LIABILITIES AND NET PARENT INVESTMENT................. $114,283 $113,699 ======== ========
See accompanying Notes to Financial Statements. F-56 FEDERAL-MOGUL AVIATION, INC. STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS) (UNAUDITED)
THIRTEEN WEEK PERIOD ENDED MARCH 31, ------------------- 2001 2000 -------- -------- NET SALES................................................... $18,458 $17,473 COST OF SALES............................................... 11,325 9,875 ------- ------- GROSS PROFIT................................................ 7,133 7,598 ------- ------- OPERATING EXPENSES: Selling and administrative................................ 1,574 1,369 Amortization of intangibles............................... 609 449 Research and development.................................. 387 477 Federal-Mogul corporate charge............................ 318 318 ------- ------- Total operating expenses................................ 2,888 2,613 ------- ------- INCOME FROM OPERATIONS...................................... 4,245 4,985 INTEREST EXPENSE--NET....................................... 518 518 ------- ------- INCOME BEFORE INCOME TAXES.................................. 3,727 4,467 INCOME TAX PROVISION........................................ 1,691 1,917 ------- ------- NET INCOME.................................................. $ 2,036 $ 2,550 ======= =======
See accompanying Notes to Financial Statements. F-57 FEDERAL-MOGUL AVIATION, INC. STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) (UNAUDITED)
THIRTEEN WEEK PERIOD ENDED MARCH 31, ------------------- 2001 2000 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income................................................ $ 2,036 $ 2,550 Adjustments to reconcile to net cash provided by operating activities: Depreciation expense.................................... 407 435 Amortization expense.................................... 609 449 Changes in assets and liabilities: Other receivables..................................... 15 345 Inventories........................................... (1,477) 305 Accounts payable and accrued liabilities.............. 2,124 (734) Other assets and liabilities, net..................... (73) 44 ------- ------- Net cash provided by operating activities........... 3,641 3,394 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures...................................... (65) (125) CASH FLOWS FROM FINANCING ACTIVITIES: Net inter-company activity with parent.................... (3,576) (3,269) ------- ------- CHANGE IN CASH.............................................. -- -- CASH, BEGINNING OF PERIOD................................... 1 1 ------- ------- CASH, END OF PERIOD......................................... $ 1 $ 1 ======= =======
See accompanying Notes to Financial Statements. F-58 FEDERAL-MOGUL AVIATION, INC. NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2001 AND DECEMBER 31, 2000 AND FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 31, 2001 AND 2000 1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION The accompanying financial statements reflect the assets, liabilities and operations of Federal-Mogul Aviation, Inc. ("Aviation"). Aviation is a wholly-owned subsidiary of Federal-Mogul Corporation ("Federal-Mogul"). Aviation was previously an operating unit included in the Cooper Automotive Division of Cooper Industries, Inc. ("Cooper"). Federal-Mogul purchased the automotive divisions of Cooper, including Aviation, on October 9, 1998. Prior to the transaction described in Note 4, Aviation operated with complete financial and operations staff on a decentralized basis. Its parent provided certain centralized services for employee benefits administration, cash management, risk management, legal services, public relations, domestic tax reporting and internal and external audit. Its parent billed Aviation for all direct costs incurred on behalf of Aviation. General corporate, accounting, tax, legal and other administrative costs that were not directly attributable to the operations of Aviation have been allocated to Aviation in the accompanying financial statements. The accompanying financial statements are presented as if Aviation had existed as an entity separate from its parent during the period presented and include the assets, liabilities, revenues and expenses that are directly related to Aviation's operations. The financial statements include the push-down of fair value adjustments resulting from Federal-Mogul's acquisition of Aviation to Aviation's assets and liabilities, including goodwill, other intangible assets and property, plant and equipment, as well as the related adjustments of amortization and depreciation. 2. UNAUDITED FINANCIAL INFORMATION The unaudited financial statements included herein reflect all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of Aviation's financial position and results of operations and cash flows for the interim periods presented in accordance with accounting principles generally accepted in the United States of America and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all the information and footnotes required under accounting principles generally accepted in the United States of America for complete financial statements. The results of operations for the thirteen week period ended March 31, 2001 are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and footnotes included in this document for the year ended December 31, 2000. F-59 FEDERAL-MOGUL AVIATION, INC. NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 2001 AND DECEMBER 31, 2000 AND FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 31, 2001 AND 2000 (CONTINUED) 3. INVENTORIES Inventories are carried at cost, or if lower, net realizable value. Cost of inventories is determined by the first-in, first-out (FIFO) method. Inventories consist of the following (in thousands):
MARCH 31, DECEMBER 31, 2001 2000 --------- ------------ Raw materials......................................... $ 4,171 $ 3,382 Work-in-progress...................................... 6,398 6,136 Finished goods........................................ 1,713 1,287 ------- ------- Inventories--net...................................... $12,282 $10,805 ======= =======
4. SUBSEQUENT EVENT On May 31, 2001, a corporation formed by TransDigm Inc. acquired substantially all of the assets and assumed certain liabilities of Aviation for approximately $160.1 million in cash. The purchase price is subject to adjustment for changes in working capital as defined in the Asset Purchase Agreement. F-60 [LOGO] TRANSDIGM INC. OFFER TO EXCHANGE 75,000,000 PRINCIPAL AMOUNT OF ITS 10 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, FOR ANY AND ALL OF ITS OUTSTANDING 10 3/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2008. ------------------ PROSPECTUS ------------------------ , 2002 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. We, Holdings, Marathon Power Technologies Company, and Champion Aerospace Inc. are incorporated under the laws of the State of Delaware. Section 145 of the Delaware General Corporation Law provides that a Delaware corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement in connection with specified actions, suits and proceedings, whether civil, criminal, administrative or investigative (other than action by or in the right of the corporation--a "derivative action"), if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with the defense or settlement of such action, and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation's certificate of incorporation, bylaws, disinterested director vote, stockholder vote, agreement, or otherwise. ZMP, Inc., Adams Rite Aerospace and Christie Electric Corp. are incorporated under the laws of the State of California. Section 317 of the California General Corporation Law provides that a California corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than in certain derivative actions as described below, by reason of the fact that he or she is or was a director, officer, employee or other agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or was a director, officer, employee or agent of a corporation that was a predecessor corporation of the corporation or of another enterprise at the request of the predecessor corporation, against expenses, including attorneys' fees, judgments, fines, settlements and other amounts actually or reasonably incurred by such person in connection with this action, suit or proceeding if such person acted in good faith and in a manner he or she reasonably believed to be in the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was unlawful. In the case of a derivative action, no indemnification shall be made in respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation in the performance of his or her duty to the corporation and its shareholders unless and only to the extent that the court in which this action or suit is or was pending shall determine that, in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnify for these expenses which this court shall deem proper. Section 317 further provides that to the extent that this director, officer, employee or agent of a corporation has been successful on the merits in defense of any action, suit or proceeding referred to above or in the defense of any claim, issue or matter, such person shall be indemnified against expenses, including attorneys' fees, actually and reasonably incurred by him or her in connection with such defense. Our Certificate of Incorporation and by-laws and the Certificates of Incorporation and by-laws of Holdings, Marathon Power Technologies Company, and Champion Aerospace Inc. generally provide for the indemnification of our and their respective officers and directors to the fullest extent permitted under Delaware law. Similarly, the Articles of Incorporation and by-laws of ZMP, Inc., Adams Rite Aerospace and Christie Electric Corp. generally provide for the indemnification of their respective officers and directors to the fullest extent permitted under California law. II-1 Holdings maintains an insurance policy that pays on behalf of the co-registrants' respective directors and officers all losses for which the directors and officers are not indemnified by the co-registrants and for which the directors and officers are legally liability on account of claims made as a result of any error, misstatement, misleading statement, act, omission, neglect, or breach of duty committed, attempted, or allegedly committed or attempted, in such person's capacity as a director or officer, or any matter claimed against such person solely by reason of such person's service as a director or officer (a "wrongful act"). The policy also pays on behalf of the co-registrants all losses for which the co-registrants grant indemnification as permitted or required by law for claims made and as a result of a wrongful act for which such co-registrants' directors and officers are legally liable. Holdings has agreed (1) to indemnify its Chairman of the Board and its President and Chief Executive Officer to the fullest extent permitted under Delaware law; (2) to advance to such persons their reasonable attorneys' fees and expenses; and (3) to maintain Directors and Officers insurance protecting such persons during the term of their employment, in each case subject to certain exceptions. ITEM 21. EXHIBITS AND FINANCIAL DATA SCHEDULES. (A) Exhibits The following is a list of all the exhibits filed as part of the Registration Statement.
NUMBER DESCRIPTION OF EXHIBIT ------ ------------------------------------------------------------ *2.1 Agreement and Plan of Merger, dated August 3, 1998, between Phase II Acquisition Corp. and TransDigm Holding Company. *2.2 Amendment One, dated November 9, 1998, to the Agreement and Plan of Merger between Phase II Acquisition Corp. and TransDigm Holding Company. *2.3 Agreement and Plan of Reorganization, dated as of March 31, 1999, by and among TransDigm Inc., ARA Acquisition Corporation, ZMP, Inc. and TCW Special Placements Fund II. 2.4 Asset Purchase Agreement, dated as of April 29, 2001, by and between Aviation Acquisition Corporation and Federal-Mogul Ignition Company. (Incorporated herein by reference to Exhibit 2.1 to Holdings' Form 10-Q for the period ended March 31, 2001). (File No. 1631079). 3.1 Restated Certificate of Incorporation, filed on May 31, 2001, of TransDigm Holding Company. (Incorporated herein by reference to Exhibit 3.1 to Holdings' Form 8-K dated May 31, 2001). (File No. 1658668). 3.2 Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof of 16% Cumulative Redeemable Preferred Stock of TransDigm Holding Company. (Incorporated herein by reference to Exhibit 4.1 to Holdings' Form 8-K dated May 31, 2001). (File No. 1658668). *3.3 Certificate of Ownership and Merger, filed on December 3, 1998, merging Phase II Acquisition Corp. with and into TransDigm Holding Company. *3.4 Certificate of Incorporation, filed on July 2, 1993, of NovaDigm Acquisition, Inc. (TransDigm Inc.).
II-2
NUMBER DESCRIPTION OF EXHIBIT ------ ------------------------------------------------------------ *3.5 Certificate of Amendment, filed on July 22, 1993, of the Certificate of Incorporation of NovaDigm Acquisition, Inc. (TransDigm Inc.). *3.6 Certificate of Ownership and Merger, filed on September 13, 1993, merging IMO Aerospace Company with and into TransDigm Inc. *3.7 Certificate of Incorporation, filed on March 28, 1994, of MPT Acquisition Corp. (Marathon Power Technologies Company). *3.8 Certificate of Amendment, filed on May 18, 1994, of the Certificate of Incorporation of MPT Acquisition Corp. (Marathon Power Technologies Company). *3.9 Certificate of Amendment, filed on May 24, 1994, of the Certificate of Incorporation of MPT Acquisition Corp. (Marathon Power Technologies Company). *3.10 Amended and Restated Articles of Incorporation, filed on April 23, 1999, of ZMP, Inc. *3.11 Certificate of Ownership and Merger, filed on April 23, 1999, merging ARA Acquisition Corporation with and into ZMP, Inc. *3.12 Articles of Incorporation, filed on July 30, 1986, of ARP Acquisition Corporation (Adams Rite Aerospace, Inc.). *3.13 Certificate of Amendment, filed on September 12, 1986, of the Articles of Incorporation of ARP Acquisition Corporation (Adams Rite Aerospace, Inc.). *3.14 Certificate of Amendment, filed on January 27, 1992, of the Articles of Incorporation of Adams Rite Aerospace Products, Inc. (Adams Rite Aerospace, Inc.). *3.15 Certificate of Amendment, filed on December 31, 1992, of the Articles of Incorporation of Adams Rite Aerospace Products, Inc. (Adams Rite Aerospace, Inc.). *3.16 Certificate of Amendment, filed on August 11, 1997, of the Articles of Incorporation of Adams Rite Aerospace Sabre International, Inc. (Adams Rite Aerospace, Inc.). 3.17+ Articles of Incorporation, filed on April 16, 2001, of Aviation Acquisition Corporation (Champion Aerospace Inc.). 3.18+ Certificate of Amendment, filed on June 1, 2001, of the Articles of Incorporation of Aviation Acquisition Corporation (Champion Aerospace Inc.). 3.19+ Articles of Incorporation, filed on December 6, 1929, of McColpin--Christie Electric Corporation, LTD. (Christie Electric Corp.). 3.20+ Certificate of Amendment, filed on November 3, 1947, of the Articles of Incorporation of McColpin--Christie Corporation, LTD. (Christie Electric Corp.). 3.21+ Certificate of Amendment, filed on May 26, 1952, of the Articles of Incorporation of McColpin--Christie Corporation, LTD. (Christie Electric Corp.). 3.22+ Certificate of Amendment, filed on May 1, 1956, of the Articles of Incorporation of McColpin--Christie Corp. (Christie Electric Corp.) 3.23+ Certificate of Amendment, filed on May 1, 1979, of the Articles of Incorporation of Christie Electric Corp. 3.24+ Certificate of Ownership, filed on April 16, 1985, of Christie Electric Corp. 3.25+ Certificate of Amendment, filed on September 29, 1993, of the Articles of Incorporation of Christie Electric Corp.
II-3
NUMBER DESCRIPTION OF EXHIBIT ------ ------------------------------------------------------------ *3.26 Bylaws of TransDigm Holding Company. *3.27 Bylaws of NovaDigm Acquisition, Inc. (TransDigm Inc.). *3.28 Bylaws of MPT Acquisition Corp. (Marathon Power Technologies Company). *3.29 Amended and Restated Bylaws of ZMP, Inc. *3.30 Amended and Restated Bylaws of Adams Rite Aerospace, Inc. 3.31+ Bylaws of Aviation Acquisition Corporation (Champion Aerospace Inc.). 3.32+ Bylaws of Christie Electric Corp. *4.1 Indenture, dated December 3, 1998, among TransDigm Inc., TransDigm Holding Company and Marathon Power Technologies Company and State Street Bank and Trust Company, as trustee, relating to the 10 3/8% Senior Subordinated Notes due 2008 and the registered 10 3/8% Senior Subordinated Notes due 2008. *4.2 Supplemental Indenture, dated April 23, 1999, among ZMP, Inc. and Adams Rite Aerospace, Inc. and State Street Bank and Trust Company, as trustee. *4.3 Specimen Certificate of 10 3/8% Senior Subordinated Notes due 2008 (the "old notes") (included in Exhibit 4.1 hereto). *4.4 Specimen Certificate of the registered 10 3/8% Senior Subordinated Notes due 2008 (the "exchange notes") (included in Exhibit 4.1 hereto). *4.5 Registration Rights Agreement, dated December 3, 1998, among TransDigm Inc., TransDigm Holding Company and Marathon Power Technologies Company and BT Alex. Brown Incorporated and Credit Suisse First Boston Corporation. 4.6+ Registration Rights Agreement, dated June 7, 2002, among TransDigm Inc., the Guarantors and the Initial Purchasers (each as defined therein), relating to the $75 million of 10 3/8% Senior Subordinated Notes due 2008. *4.7 Indenture, dated December 3, 1998, between TransDigm Holding Company and State Street Bank and Trust Company, as trustee, relating to $20,000,000 aggregate principal amount of 12% Pay-in-Kind Senior Notes due 2009. *4.8 Specimen Certificate of 12% Pay-in-Kind Senior Notes due 2009 (included in Exhibit 4.7 hereto). *4.9 Registration Rights Agreement, dated December 3, 1998, among TransDigm Holding Company and Kelso Investment Associates IV, L.P. and Kelso Equity Partners II, L.P. 4.10 Investment Agreement, dated as of May 31, 2001, by and between TransDigm Holding Company and First Union Investors, Inc. (Incorporated herein by reference to Exhibit 4.3 to Holdings' Form 8-K dated May 31, 2001). (File No. 1658668). 5.1+ Opinion of Latham & Watkins as to the legality of the securities, dated June 28, 2002. *10.1 Stockholders' Agreement, dated December 3, 1998, by and among TransDigm Holding Company, Odyssey Investment Partners Fund, LP, Odyssey Coinvestors, LLC, TD-Equity LLC, KIA IV-TD, LLC and Kelso Equity Partners II, L.P. *10.2 Stockholders' Agreement, dated December 3, 1998, by and among TransDigm Holding Company, Odyssey Investment Partners Fund and certain employee stockholders of TransDigm Holding Company.
II-4
NUMBER DESCRIPTION OF EXHIBIT ------ ------------------------------------------------------------ *10.3 Tax Allocation Agreement, dated December 3, 1998, between TransDigm Holding Company and TransDigm Inc. **10.4 Employment Agreement dated May 19, 1999, between TransDigm Holding Company and Douglas W. Peacock. 10.5+ Employment Agreement Amendment, dated January 17, 2002, between TransDigm Holding Company and Douglas W. Peacock. **10.6 Employment Agreement dated May 19, 1999, between TransDigm Holding Company and W. Nicholas Howley. 10.7+ Employment Agreement Amendment, dated January 17, 2002, between TransDigm Holding Company and W. Nicholas Howley. *10.8 TransDigm Inc. Senior Executive Benefits Plan. *10.9 Summary of Annual Incentive Compensation Plan for Key Management Employees of TransDigm Inc. 10.10+ Purchase Agreement, dated June 4, 2002, by and among TransDigm Inc., the Guarantors and the Initial Purchasers (each as defined therein), with respect to the $75 million of 10 3/8% Senior Subordinated Notes due 2008. 10.11 Amended and Restated Credit Agreement, dated as of December 3, 1998 and amended and restated as of May 31, 2001, by and among TransDigm Holding Company, TransDigm Inc., various lending institutions party thereto, Credit Suisse First Boston, as Syndication Agent and Bankers Trust Company, as Administrative Agent. (Incorporated herein by reference to Exhibit 4.2 to Holdings' Form 8-K dated May 31 2001). (File No. 1658668). 10.12+ First Amendment and Consent, dated as of May 14, 2002, to the Amended and Restated Credit Agreement. 12.1+ Statement of Computation of Ratio of Earnings to Fixed Charges. 12.2+ Statement of Computation of Ratio of TransDigm Inc. Total Debt to EBITDA (as defined). 12.3+ Statement of Computation of Ratio of Pro Forma TransDigm Inc. Net Debt to EBITDA (as defined). 21.1+ Subsidiaries of TransDigm Holding Company. 23.1+ Consent of Ernst & Young LLP. 23.2+ Consent of Deloitte & Touche LLP. 23.3+ Consent of Latham & Watkins (included in exhibit 5.1 hereto). 24.1 Powers of Attorney (included in the signature pages to this Registration Statement). 25.1+ 0 Statement of Eligibility and Qualification of Trustee on Form T-1 under the Trust Indenture Act of 1939 of State Street Bank and Trust Company. 99.1+ Form of Letter of Transmittal, with respect to old notes and exchange notes. 99.2+ Form of Notice of Guaranteed Delivery, with respect to old notes and exchange notes. 99.3+ Form of Letter to Registered Holders and Depository Trust Company Participants and Instructions from Beneficial Owners to Registered Holders and Depository Trust Company Participants.
II-5
NUMBER DESCRIPTION OF EXHIBIT ------ ------------------------------------------------------------ 99.4+ Form of Letter to Clients. 99.5+ Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
- ------------------------ + Filed herewith. * (Incorporated by reference to same titled exhibit to our Registration Statement on Form S-4 dated January 29, 1999 File No. 333-71397, as amended.) ** (Incorporated by reference to same titled exhibit to our Form 10-K dated December 23, 1999 File No. 333-71397.) (B) Financial Statement Schedules Schedules are omitted since the information required to be submitted has been included in Holdings' Consolidated Financial Statements or the notes thereto. ITEM 22. UNDERTAKINGS The Registrant hereby undertakes: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. II-6 (5) to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. (6) that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 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 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-7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, TransDigm Inc. has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Richmond Heights, State of Ohio, on June 28, 2002. TRANSDIGM INC. By: /s/ GREGORY RUFUS ----------------------------------------- Gregory Rufus Vice President, Chief Financial Officer and Assistant Secretary
The undersigned directors and officers of TransDigm Inc. hereby constitute and appoint W. Nicholas Howley and Gregory Rufus and each of them with full power to act without the other and with full power of substitution and resubstitution, our true and lawful attorneys-in-fact with full power to execute in our name and behalf in the capacities indicated below this Registration Statement on Form S-4 and any and all amendments thereto, including post-effective amendments to this Registration Statement and to sign any and all additional registration statements relating to the same offering of securities as this Registration Statement that are filed pursuant to Rule 462(b) of the Securities Act of 1933, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission and hereby ratify and confirm that all such attorneys-in-fact, or any of them, or their substitutes shall lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ W. NICHOLAS HOWLEY ------------------------------------------- President, Chief Executive June 28, 2002 W. Nicholas Howley Officer and Director /s/ GREGORY RUFUS Vice President, Chief ------------------------------------------- Financial Officer and June 28, 2002 Gregory Rufus Assistant Secretary /s/ DOUGLAS W. PEACOCK ------------------------------------------- Chairman of the Board of June 28, 2002 Douglas W. Peacock Directors /s/ STEPHEN BERGER ------------------------------------------- Director June 28, 2002 Stephen Berger /s/ WILLIAM HOPKINS ------------------------------------------- Director June 28, 2002 William Hopkins
II-8
SIGNATURE TITLE DATE --------- ----- ---- /s/ MUZZAFAR MIRZA ------------------------------------------- Director June 28, 2002 Muzzafar Mirza /s/ JOHN W. PAXTON ------------------------------------------- Director June 28, 2002 John W. Paxton /s/ THOMAS R. WALL, IV ------------------------------------------- Director June 28, 2002 Thomas R. Wall, IV
II-9 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, TransDigm Holding Company has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Richmond Heights, State of Ohio, on June 28, 2002. TRANSDIGM HOLDING COMPANY By: /s/ GREGORY RUFUS ----------------------------------------- Gregory Rufus Vice President, Chief Financial Officer and Assistant Secretary
The undersigned directors and officers of TransDigm Holding Company hereby constitute and appoint W. Nicholas Howley and Gregory Rufus and each of them with full power to act without the other and with full power of substitution and resubstitution, our true and lawful attorneys-in-fact with full power to execute in our name and behalf in the capacities indicated below this Registration Statement on Form S-4 and any and all amendments thereto, including post-effective amendments to this Registration Statement and to sign any and all additional registration statements relating to the same offering of securities as this Registration Statement that are filed pursuant to Rule 462(b) of the Securities Act of 1933, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission and hereby ratify and confirm that all such attorneys-in-fact, or any of them, or their substitutes shall lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ W. NICHOLAS HOWLEY ------------------------------------------- President, Chief Executive June 28, 2002 W. Nicholas Howley Officer and Director /s/ GREGORY RUFUS Vice President, Chief ------------------------------------------- Financial Officer and June 28, 2002 Gregory Rufus Assistant Secretary /s/ DOUGLAS W. PEACOCK ------------------------------------------- Chairman of the Board of June 28, 2002 Douglas W. Peacock Directors /s/ STEPHEN BERGER ------------------------------------------- Director June 28, 2002 Stephen Berger /s/ WILLIAM HOPKINS ------------------------------------------- Director June 28, 2002 William Hopkins
II-10
SIGNATURE TITLE DATE --------- ----- ---- /s/ MUZZAFAR MIRZA ------------------------------------------- Director June 28, 2002 Muzzafar Mirza /s/ JOHN W. PAXTON ------------------------------------------- Director June 28, 2002 John W. Paxton /s/ THOMAS R. WALL, IV ------------------------------------------- Director June 28, 2002 Thomas R. Wall, IV
II-11 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Champion Aerospace Inc. has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Richmond Heights, State of Ohio, on June 28, 2002. CHAMPION AEROSPACE INC. By: /s/ GREGORY RUFUS ----------------------------------------- Gregory Rufus Treasurer and Assistant Secretary
The undersigned directors and officers of Champion Aerospace Inc. hereby constitute and appoint W. Nicholas Howley and Gregory Rufus and each of them with full power to act without the other and with full power of substitution and resubstitution, our true and lawful attorneys-in-fact with full power to execute in our name and behalf in the capacities indicated below this Registration Statement on Form S-4 and any and all amendments thereto, including post-effective amendments to this Registration Statement and to sign any and all additional registration statements relating to the same offering of securities as this Registration Statement that are filed pursuant to Rule 462(b) of the Securities Act of 1933, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission and hereby ratify and confirm that all such attorneys-in-fact, or any of them, or their substitutes shall lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ W. NICHOLAS HOWLEY Chairman of the Board of ------------------------------------------- Directors, Chief Executive June 28, 2002 W. Nicholas Howley Officer and Director /s/ W. TODD LITTLETON ------------------------------------------- President June 28, 2002 W. Todd Littleton /s/ GREGORY RUFUS ------------------------------------------- Treasurer, Assistant Secretary June 28, 2002 Gregory Rufus and Director
II-12 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Marathon Power Technologies Company has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Richmond Heights, State of Ohio, on June 28, 2002. MARATHON POWER TECHNOLOGIES COMPANY By: /s/ GREGORY RUFUS ----------------------------------------- Gregory Rufus Treasurer and Assistant Secretary
The undersigned directors and officers of Marathon Power Technologies Company hereby constitute and appoint W. Nicholas Howley and Gregory Rufus and each of them with full power to act without the other and with full power of substitution and resubstitution, our true and lawful attorneys-in-fact with full power to execute in our name and behalf in the capacities indicated below this Registration Statement on Form S-4 and any and all amendments thereto, including post-effective amendments to this Registration Statement and to sign any and all additional registration statements relating to the same offering of securities as this Registration Statement that are filed pursuant to Rule 462(b) of the Securities Act of 1933, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission and hereby ratify and confirm that all such attorneys-in-fact, or any of them, or their substitutes shall lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ W. NICHOLAS HOWLEY Chairman of the Board of ------------------------------------------- Directors, Chief Executive June 28, 2002 W. Nicholas Howley Officer and Director /s/ ALBERT J. RODRIGUEZ ------------------------------------------- President June 28, 2002 Albert J. Rodriguez /s/ GREGORY RUFUS ------------------------------------------- Treasurer, Assistant Secretary June 28, 2002 Gregory Rufus and Director
II-13 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, ZMP, Inc. has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Richmond Heights, State of Ohio, on June 28, 2002. ZMP, INC. By: /s/ GREGORY RUFUS ----------------------------------------- Gregory Rufus Treasurer and Assistant Secretary
The undersigned directors and officers of ZMP, Inc. hereby constitute and appoint W. Nicholas Howley and Gregory Rufus and each of them with full power to act without the other and with full power of substitution and resubstitution, our true and lawful attorneys-in-fact with full power to execute in our name and behalf in the capacities indicated below this Registration Statement on Form S-4 and any and all amendments thereto, including post-effective amendments to this Registration Statement and to sign any and all additional registration statements relating to the same offering of securities as this Registration Statement that are filed pursuant to Rule 462(b) of the Securities Act of 1933, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission and hereby ratify and confirm that all such attorneys-in-fact, or any of them, or their substitutes shall lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ W. NICHOLAS HOWLEY Chairman of the Board of ------------------------------------------- Directors, Chief Executive June 28, 2002 W. Nicholas Howley Officer and Director /s/ JOHN F. LEARY ------------------------------------------- President June 28, 2002 John F. Leary /s/ GREGORY RUFUS ------------------------------------------- Treasurer, Assistant Secretary June 28, 2002 Gregory Rufus and Director
II-14 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Adams Rite Aerospace, Inc. has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Richmond Heights, State of Ohio, on June 28, 2002. ADAMS RITE AEROSPACE, INC. By: /s/ GREGORY RUFUS ----------------------------------------- Gregory Rufus Treasurer and Assistant Secretary
The undersigned directors and officers of Adams Rite Aerospace, Inc. hereby constitute and appoint W. Nicholas Howley and Gregory Rufus and each of them with full power to act without the other and with full power of substitution and resubstitution, our true and lawful attorneys-in-fact with full power to execute in our name and behalf in the capacities indicated below this Registration Statement on Form S-4 and any and all amendments thereto, including post-effective amendments to this Registration Statement and to sign any and all additional registration statements relating to the same offering of securities as this Registration Statement that are filed pursuant to Rule 462(b) of the Securities Act of 1933, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission and hereby ratify and confirm that all such attorneys-in-fact, or any of them, or their substitutes shall lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ W. NICHOLAS HOWLEY Chairman of the Board of ------------------------------------------- Directors, Chief Executive June 28, 2002 W. Nicholas Howley Officer and Director /s/ JOHN F. LEARY ------------------------------------------- President June 28, 2002 John F. Leary /s/ GREGORY RUFUS ------------------------------------------- Treasurer, Assistant Secretary June 28, 2002 Gregory Rufus and Director
II-15 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Christie Electric Corp. has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Richmond Heights, State of Ohio, on June 28, 2002. CHRISTIE ELECTRIC CORP. By: /s/ GREGORY RUFUS ----------------------------------------- Gregory Rufus Treasurer and Assistant Secretary
The undersigned directors and officers of Christie Electric Corp. hereby constitute and appoint W. Nicholas Howley and Gregory Rufus and each of them with full power to act without the other and with full power of substitution and resubstitution, our true and lawful attorneys-in-fact with full power to execute in our name and behalf in the capacities indicated below this Registration Statement on Form S-4 and any and all amendments thereto, including post-effective amendments to this Registration Statement and to sign any and all additional registration statements relating to the same offering of securities as this Registration Statement that are filed pursuant to Rule 462(b) of the Securities Act of 1933, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission and hereby ratify and confirm that all such attorneys-in-fact, or any of them, or their substitutes shall lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ W. NICHOLAS HOWLEY Chairman of the Board of ------------------------------------------- Directors, Chief Executive June 28, 2002 W. Nicholas Howley Officer and Director /s/ ALBERT J. RODRIGUEZ ------------------------------------------- President June 28, 2002 Albert J. Rodriguez /s/ GREGORY RUFUS ------------------------------------------- Treasurer, Assistant Secretary June 28, 2002 Gregory Rufus and Director
II-16 EXHIBIT INDEX
NUMBER DESCRIPTION OF EXHIBIT - --------------------- ------------------------------------------------------------ *2.1 Agreement and Plan of Merger, dated August 3, 1998, between Phase II Acquisition Corp. and TransDigm Holding Company. *2.2 Amendment One, dated November 9, 1998, to the Agreement and Plan of Merger between Phase II Acquisition Corp. and TransDigm Holding Company. *2.3 Agreement and Plan of Reorganization, dated as of March 31, 1999, by and among TransDigm Inc., ARA Acquisition Corporation, ZMP, Inc. and TCW Special Placements Fund II. 2.4 Asset Purchase Agreement, dated as of April 29, 2001, by and between Aviation Acquisition Corporation and Federal-Mogul Ignition Company. (Incorporated herein by reference to Exhibit 2.1 to Holdings' Form 10-Q for the period ended March 31, 2001). (File No. 1631079). 3.1 Restated Certificate of Incorporation, filed on May 31, 2001, of TransDigm Holding Company. (Incorporated herein by reference to Exhibit 3.1 to Holdings' Form 8-K dated May 31, 2001). (File No. 1658668). 3.2 Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof of 16% Cumulative Redeemable Preferred Stock of TransDigm Holding Company. (Incorporated herein by reference to Exhibit 4.1 to Holdings' Form 8-K dated May 31, 2001). (File No. 1658668). *3.3 Certificate of Ownership and Merger, filed on December 3, 1998, merging Phase II Acquisition Corp. with and into TransDigm Holding Company. *3.4 Certificate of Incorporation, filed on July 2, 1993, of NovaDigm Acquisition, Inc. (TransDigm Inc.). *3.5 Certificate of Amendment, filed on July 22, 1993, of the Certificate of Incorporation of NovaDigm Acquisition, Inc. (TransDigm Inc.). *3.6 Certificate of Ownership and Merger, filed on September 13, 1993, merging IMO Aerospace Company with and into TransDigm Inc. *3.7 Certificate of Incorporation, filed on March 28, 1994, of MPT Acquisition Corp. (Marathon Power Technologies Company). *3.8 Certificate of Amendment, filed on May 18, 1994, of the Certificate of Incorporation of MPT Acquisition Corp. (Marathon Power Technologies Company). *3.9 Certificate of Amendment, filed on May 24, 1994, of the Certificate of Incorporation of MPT Acquisition Corp. (Marathon Power Technologies Company). *3.10 Amended and Restated Articles of Incorporation, filed on April 23, 1999, of ZMP, Inc. *3.11 Certificate of Ownership and Merger, filed on April 23, 1999, merging ARA Acquisition Corporation with and into ZMP, Inc. *3.12 Articles of Incorporation, filed on July 30, 1986, of ARP Acquisition Corporation (Adams Rite Aerospace, Inc.). *3.13 Certificate of Amendment, filed on September 12, 1986, of the Articles of Incorporation of ARP Acquisition Corporation (Adams Rite Aerospace, Inc.).
II-17
NUMBER DESCRIPTION OF EXHIBIT - --------------------- ------------------------------------------------------------ *3.14 Certificate of Amendment, filed on January 27, 1992, of the Articles of Incorporation of Adams Rite Aerospace Products, Inc. (Adams Rite Aerospace, Inc.). *3.15 Certificate of Amendment, filed on December 31, 1992, of the Articles of Incorporation of Adams Rite Aerospace Products, Inc. (Adams Rite Aerospace, Inc.). *3.16 Certificate of Amendment, filed on August 11, 1997, of the Articles of Incorporation of Adams Rite Aerospace Sabre International, Inc. (Adams Rite Aerospace, Inc.). 3.17+ Articles of Incorporation, filed on April 16, 2001, of Aviation Acquisition Corporation (Champion Aerospace Inc.). 3.18+ Certificate of Amendment, filed on June 1, 2001, of the Articles of Incorporation of Aviation Acquisition Corporation (Champion Aerospace Inc.). 3.19+ Articles of Incorporation, filed on December 6, 1929, of McColpin -- Christie Electric Corporation, LTD. (Christie Electric Corp.). 3.20+ Certificate of Amendment, filed on November 3, 1947, of the Articles of Incorporation of McColpin -- Christie Corporation, LTD. (Christie Electric Corp.). 3.21+ Certificate of Amendment, filed on May 26, 1952, of the Articles of Incorporation of McColpin -- Christie Corporation, LTD. (Christie Electric Corp.). 3.22+ Certificate of Amendment, filed on May 1, 1956, of the Articles of Incorporation of McColpin -- Christie Corp. (Christie Electric Corp.) 3.23+ Certificate of Amendment, filed on May 1, 1979, of the Articles of Incorporation of Christie Electric Corp. 3.24+ Certificate of Ownership, filed on April 16, 1985, of Christie Electric Corp. 3.25+ Certificate of Amendment, filed on September 29, 1993, of the Articles of Incorporation of Christie Electric Corp. *3.26 Bylaws of TransDigm Holding Company. *3.27 Bylaws of NovaDigm Acquisition, Inc. (TransDigm Inc.). *3.28 Bylaws of MPT Acquisition Corp. (Marathon Power Technologies Company). *3.29 Amended and Restated Bylaws of ZMP, Inc. *3.30 Amended and Restated Bylaws of Adams Rite Aerospace, Inc. 3.31+ Bylaws of Aviation Acquisition Corporation (Champion Aerospace Inc.). 3.32+ Bylaws of Christie Electric Corp. *4.1 Indenture, dated December 3, 1998, among TransDigm Inc., TransDigm Holding Company and Marathon Power Technologies Company and State Street Bank and Trust Company, as trustee, relating to the 10 3/8% Senior Subordinated Notes due 2008 and the registered 10 3/8% Senior Subordinated Notes due 2008. *4.2 Supplemental Indenture, dated April 23, 1999, among ZMP, Inc. and Adams Rite Aerospace, Inc. and State Street Bank and Trust Company, as trustee. *4.3 Specimen Certificate of 10 3/8% Senior Subordinated Notes due 2008 (the "old notes") (included in Exhibit 4.1 hereto).
II-18
NUMBER DESCRIPTION OF EXHIBIT - --------------------- ------------------------------------------------------------ *4.4 Specimen Certificate of the registered 10 3/8% Senior Subordinated Notes due 2008 (the "exchange notes") (included in Exhibit 4.1 hereto). *4.5 Registration Rights Agreement, dated December 3, 1998, among TransDigm Inc., TransDigm Holding Company and Marathon Power Technologies Company and BT Alex. Brown Incorporated and Credit Suisse First Boston Corporation. 4.6+ Registration Rights Agreement, dated June 7, 2002, among TransDigm Inc., the Guarantors and the Initial Purchasers (each as defined therein), relating to the $75 million of 10 3/8% Senior Subordinated Notes due 2008. *4.7 Indenture, dated December 3, 1998, between TransDigm Holding Company and State Street Bank and Trust Company, as trustee, relating to $20,000,000 aggregate principal amount of 12% Pay-in-Kind Senior Notes due 2009. *4.8 Specimen Certificate of 12% Pay-in-Kind Senior Notes due 2009 (included in Exhibit 4.7 hereto). *4.9 Registration Rights Agreement, dated December 3, 1998, among TransDigm Holding Company and Kelso Investment Associates IV, L.P. and Kelso Equity Partners II, L.P. 4.10 Investment Agreement, dated as of May 31, 2001, by and between TransDigm Holding Company and First Union Investors, Inc. (Incorporated herein by reference to Exhibit 4.3 to Holdings' Form 8-K dated May 31, 2001). (File No. 1658668). 5.1+ Opinion of Latham & Watkins as to the legality of the securities, dated June 28, 2002. *10.1 Stockholders' Agreement, dated December 3, 1998, by and among TransDigm Holding Company, Odyssey Investment Partners Fund, LP, Odyssey Coinvestors, LLC, TD-Equity LLC, KIA IV-TD, LLC and Kelso Equity Partners II, L.P. *10.2 Stockholders' Agreement, dated December 3, 1998, by and among TransDigm Holding Company, Odyssey Investment Partners Fund and certain employee stockholders of TransDigm Holding Company. *10.3 Tax Allocation Agreement, dated December 3, 1998, between TransDigm Holding Company and TransDigm Inc. **10.4 Employment Agreement dated May 19, 1999, between TransDigm Holding Company and Douglas W. Peacock. 10.5+ Employment Agreement Amendment, dated January 17, 2002, between TransDigm Holding Company and Douglas W. Peacock. **10.6 Employment Agreement dated May 19, 1999, between TransDigm Holding Company and W. Nicholas Howley. 10.7+ Employment Agreement Amendment, dated January 17, 2002, between TransDigm Holding Company and W. Nicholas Howley. *10.8 TransDigm Inc. Senior Executive Benefits Plan. *10.9 Summary of Annual Incentive Compensation Plan for Key Management Employees of TransDigm Inc. 10.10+ Purchase Agreement, dated June 4, 2002, by and among TransDigm Inc., the Guarantors and the Initial Purchasers (each as defined therein), with respect to the $75 million of 10 3/8% Senior Subordinated Notes due 2008.
II-19
NUMBER DESCRIPTION OF EXHIBIT - --------------------- ------------------------------------------------------------ 10.11 Amended and Restated Credit Agreement, dated as of December 3, 1998 and amended and restated as of May 31, 2001, by and among TransDigm Holding Company, TransDigm Inc., various lending institutions party thereto, Credit Suisse First Boston, as Syndication Agent and Bankers Trust Company, as Administrative Agent. (Incorporated herein by reference to Exhibit 4.2 to Holdings' Form 8-K dated May 31 2001). (File No. 1658668). 10.12+ First Amendment and Consent, dated as of May 14, 2002, to the Amended and Restated Credit Agreement. 12.1+ Statement of Computation of Ratio of Earnings to Fixed Charges. 12.2+ Statement of Computation of Ratio of TransDigm Inc. Total Debt to EBITDA (as defined). 12.3+ Statement of Computation of Ratio of Pro Forma TransDigm Inc. Net Debt to EBITDA (as defined). 21.1+ Subsidiaries of TransDigm Holding Company. 23.1+ Consent of Ernst & Young LLP. 23.2+ Consent of Deloitte & Touche LLP. 23.3+ Consent of Latham & Watkins (included in exhibit 5.1 hereto). 24.1 Powers of Attorney (included in the signature pages to this Registration Statement). 25.1+ Statement of Eligibility and Qualification of Trustee on Form T-1 under the Trust Indenture Act of 1939 of State Street Bank and Trust Company. 99.1+ Form of Letter of Transmittal, with respect to old notes and exchange notes. 99.2+ Form of Notice of Guaranteed Delivery, with respect to old notes and exchange notes. 99.3+ Form of Letter to Registered Holders and Depository Trust Company Participants and Instructions from Beneficial Owners to Registered Holders and Depository Trust Company Participants. 99.4+ Form of Letter to Clients. 99.5+ Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
- ------------------------ + Filed herewith. * (Incorporated by reference to same titled exhibit to our Registration Statement on Form S-4 dated January 29, 1999 File No. 333-71397, as amended.) ** (Incorporated by reference to same titled exhibit to our Form 10-K dated December 23, 1999 File No. 333-71397.) II-20 EX-3.17 3 a2082596zex-3_17.txt EXHIBIT 3.17 EXHIBIT 3.17 CERTIFICATE OF INCORPORATION OF AVIATION ACQUISITION CORPORATION FIRST: The name of the Corporation is Aviation Acquisition Corporation. SECOND: The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, Wilmington, County of New Castle, Delaware, 19801, and the name of its registered agent at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware as it now exists or may hereafter be amended and supplemented. FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is 1,000 having a par value of $0.01 per share. All such shares are Common Stock. FIFTH: The name and mailing address of the incorporator is: Gabriel B.K. Jacobson Latham & Watkins 885 Third Avenue New York, New York 10022 SIXTH: The personal liability of the directors of the Corporation is hereby eliminated to the fullest extent permitted by paragraph (7) of subsection (b) of Section 102 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented. Any repeal or modification of this Article Sixth shall not adversely affect any right or protection of a director of the Corporation existing immediately prior to such repeal or modification. SEVENTH From time to time any of the provisions of this certificate of incorporation may be amended, altered or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this certificate of incorporation are granted subject to the provisions of this Article Eighth. EIGHTH: In furtherance and not in limitation of the rights, powers, privileges and discretionary authority granted or conferred by the General Corporation Law of the State of Delaware or other statutes or laws of the state of Delaware, the Board of Directors is expressly authorized to make, alter, amend or repeal the By-Laws of the Corporation, without any action on the part of the Stockholders, but the Stockholders may make additional By-Laws and may alter, amend or repeal any By-Law whether adopted by them or otherwise. The Corporation may in its By-Laws confer powers upon its Board of Directors in addition to the foregoing and in addition to the powers and authorities expressly conferred upon the Board of Directors by applicable law. I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, herein declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 16th day of April, 2001. /s/ Gabriel B.K. Jacobson ---------------------------- Gabriel B.K. Jacobson 2 EX-3.18 4 a2082596zex-3_18.txt EXHIBIT 3.18 EXHIBIT 3.18 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF AVIATION ACQUISITION CORPORATION --------------------------------------------- Adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware -------------------------------------------- I, the undersigned, Secretary of Aviation Acquisition Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (hereinafter referred to as the "Corporation"), do hereby certify as follows: FIRST: That the Board of Directors of said corporation by the unanimous written consent of its members, filed with the minutes of the Board, adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said corporation: RESOLVED, that the Certificate of Incorporation of Aviation Acquisition Corporation be amended by changing Article FIRST thereof so that, as amended, said Article shall be and read as follows: The name of the corporation is "Champion Aerospace Inc.". SECOND: That in lieu of a meeting and vote of stockholders, the sole stockholder has given written consent to said amendment in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, I have subscribed this document on the date set forth below and do hereby affirm, under the penalties of perjury, that the statements contained herein have been examined by me and are true and correct. Date: June 1, 2001 By: /s/ Gregory Rufus -------------------------------------- Name: Gregory Rufus Title: Vice President EX-3.19 5 a2082596zex-3_19.txt EXHIBIT 3.19 EXHIBIT 3.19 ARTICLES OF INCORPORATION * OF * McCOLPIN-CHRISTIE CORPORATION, LTD. --oo000oo-- KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, residents of the State of California, have this day voluntarily associated ourselves together for the purpose of forming a corporation under the laws of the State of California, AND WE HEREBY CERTIFY: FIRST: That the name of this corporation is McCOLPIN-CHRISTIE CORPORATION, LTD. SECOND: That the purposes for which it is formed are as follows: 1. To manufacture, buy, sell, deal in automobile supplies and equipment for battery shop, garage and service stations and materials and merchandise incidental thereto. 2. To engage in and carry on a general merchandise business. 3. To buy, or otherwise acquire, to hold, own, manage, lease, operate, improve and sell such real estate as is necessary, auxiliary or incidental to said business. 4. To own, control and operate wholesale and retail stores, offices and agencies. 5. To borrow and loan money and hypothecate its assets and property of every kind and to buy, sell and in every way deal in bonds, stocks and securities of other corporations. 6. To do a general jobbing, wholesale and commission business. 7. To buy, sell and deal in merchandise and to buy, sell and deal in new and manufactured products and merchandise of all kinds, both at wholesale and retail. 8. And generally to engage in and carry on any and every kind of business, occupation or enterprise subordinate to or connected with any of the foregoing lines of business and to do and perform all acts necessary or incidental to the objects and purposes hereinbefore set forth. The foregoing clauses shall be construed as objects, purposes and powers and it is hereby expressly provided that the foregoing enumeration of specific objects and purposes shall not be held to limit or restrict in any manner the powers of the corporation. THIRD: That the place where the principal office for the transaction of the business of the corporation is to be located is the County of Los Angeles, State of California. FOURTH: The board of directors of this corporation shall not have the power to levy assessments upon the shares of the corporation. FIFTH: That the number of directors shall be four, and the names and residences of those who are appointed to act until the selection and qualification of their successors are: J. W. McColpin Los Angeles, Cal. D. M. McColpin " S. L. Christie " Sigrid Christie " SIXTH: That the amount of the capital stock of this corporation shall be twenty-five thousand ($25,000) dollars, divided into twenty-five hundred (2,500) shares of the par value of Ten ($10) dollars each. SEVENTH: That the number of shares actually subscribed is four, and the name of the subscribers and the number of shares respectively for which they have subscribed and the amount to be paid by them for such shares, is as follows: J. W. McColpin one share $10 D. M. McColpin " 10 S. L. Christie " 10 Sigrid Christie " 10
all of which said shares so subscribed are of the capital stock of said corporation. IN WITNESS WHEREOF, we have hereunto set out hands this _____ day of December, A.D. 1929. /s/ J.W. McColpin ----------------------------------- J.W. McColpin /s/ D.M. McColpin ----------------------------------- D.M. McColpin /s/ Sigrid Christie ----------------------------------- Sigrid Christie STATE OF CALIFORNIA ss COUNTY OF LOS ANGELES On this 4 day of December, A.D., 1929, before me, Blache Brown, a Notary Public in and for said County and State, duly commissioned and sworn, personally appeared J. W. McColpin, D. M. McColpin, S. L. Christie and Sigrid Christie personally known to me to be the persons whose names are subscribed to the within instrument and they severally acknowledged to me that they executed the same. IN WITNESS WHEREOF, I have hereunto affixed my official seal and signature the day and year last above written. /s/ Blanche Brown -------------------------------------- Notary Public in and for said County and State. (Seal) EX-3.20 6 a2082596zex-3_20.txt EXHIBIT 3.20 EXHIBIT 3.20 [Stock increased from $25,000 to $300,000 (30,000 sh. of $10 par)]. CERTIFICATE OF AMENDMENT OF THE ARTICLES OF INCORPORATION OF McCOLPIN-CHRISTIE CORPORATION, LTD. The undersigned, S. L. CHRISTIE and D. G. DINSMORE, hereby do certify that they are, and at all times herein mentioned have been, respectively, the duly elected, qualified, and acting president and secretary of McCOLPIN-CHRISTIE CORPORATION, LTD., a California corporation; and, further, they do certify as follows: First: At a special meeting of the board of directors of McColpin-Christie Corporation, Ltd., duly held at the office of the corporation, 4922 south Figueroa Street, Los Angeles, California, on October 24, 1947, at which meeting all of the directors were present and acting, the following resolutions duly were adopted by unanimous vote: WHEREAS, the board of directors of this corporation deems it to be for the best interests of this corporation and of its shareholders that the articles of incorporation of this corporation be amended to increase the number of shares of stock which this corporation may be authorized to issue: NOW, THEREFORE, IT HEREBY IS RESOLVED, that Article SIXTH of the articles of incorporation of this corporation be, and said Article SIXTH hereby is, amended to read as follows: "SIXTH: The total number of shares which this corporation may issue is thirty thousand (30,000); the aggregate par value of said shares is three hundred thousand dollars ($300,000.00); and the par value of each share is ten dollars ($10.00)." RESOLVED, FURTHER, that the board of directors of this corporation hereby adopts said amendment of the articles of incorporation of this corporation. RESOLVED, FURTHER, that the president and secretary of this corporation be, and they hereby are, and each of them hereby is, authorized and directed to present the foregoing amendment to the shareholders of this corporation for their approval. - 1 - RESOLVED, FURTHER, that the president and secretary of this corporation be, and they hereby are, authorized and directed to sign, verify, and file or cause to be filed, a certificate of amendment of the articles of incorporation of this corporation all in conformity with the laws of the State of California. RESOLVED, FURTHER, that the president and secretary of this corporation be, and they hereby are, authorized and directed to do such acts as may be necessary to make the foregoing resolutions fully effective. Second: Shareholders of McColpin-Christie Corporation, Ltd. holding at least a majority of the voting power of said corporation consented in writing that the articles of incorporation of said corporation should be amended in the manner stated in said resolutions adopted by the board of directors of said corporation. The following is a copy of the form of written consent signed by said shareholders of said corporation. "CONSENT OF SHAREHOLDERS TO THE AMENDMENT OF THE ARTICLES OF INCORPORATION OF McCOLPIN-CHRISTIE CORPORATION, LTD. "Each of the undersigned hereby certifies as follows: "1. I own the number of shares of stock of McColpin-Christie Corporation, Ltd., a California corporation, set down opposite my signature at the end of this certificate. "2. I hereby adopt and approve resolutions adopted by the board of directors of McColpin-Christie Corporation, Ltd. at a meeting held on October 24, 1947, of which resolutions the following is a copy: `WHEREAS, the board of directors of this corporation deems it to be for the best interests of this corporation and of its shareholders that the articles of incorporation of this corporation be amended to increase the number of shares of stock which this corporation may be authorized to issue. `NOW, THEREFORE, IT HEREBY IS RESOLVED, that Article SIXTH of the articles of incorporation of this corporation be, and said Article SIXTH hereby is, amended to read as follows: "SIXTH: The total number of shares which this corporation may issue is thirty thousand (30,000); the aggregate par value of said shares is three hundred thousand dollars ($300,000.00); and the par value of each share is ten dollars ($10.00)." - 2 - `RESOLVED, FURTHER, that the board of directors of this corporation hereby adopts said amendment of the articles of incorporation of this corporation. `RESOLVED, FURTHER, that the president and secretary of this corporation be, and they hereby are, and each of them hereby is, authorized and directed to present the foregoing amendment to the shareholders of this corporation for their approval. `RESOLVED, FURTHER, that the president and secretary of this corporation be, and they hereby are, authorized and directed to sign, verify, and file or cause to be filed, a certificate of amendment of the articles of incorporation of this corporation all in conformity with the laws of the State of California. `RESOLVED, FURTHER, that the president and secretary of this corporation be, and they hereby are, authorized and directed to do such acts as may be necessary to make the foregoing resolutions fully effective.' "3. I hereby consent that Article SIXTH of the articles of incorporation of McColpin-Christie Corporation, Ltd. be amended to read as follows: `SIXTH: The total number of shares which this corporation may issue is thirty thousand (30,000); the aggregate par value of said shares is three hundred thousand dollars ($300,000.00); and the par value of each share is ten dollars ($10.00).'
"Signatures of shareholders Number of Date of Shares Owned Signing --------------------------- ------------ ------- /s/ S. L. CHRISTIE ) ------------------------ ) S. L. Christie ) ) 800 Oct. 25, 1947 /s/ SIGRID CHRISTIE ) ------------------------ ) Sigrid Christie ) /s/ S. L. CHRISTIE ------------------------ S. L. Christie 1176 Oct. 25, 1947 /s/ D. G. DINSMORE 78 Oct. 25, 1947 ------------------------ D. G. Dinsmore /s/ E. E. HUGHES ) ------------------------ ) E. E. Hughes ) ) 100 Oct. 27, 1947 /s/ FLORA HUGHES ) ------------------------ ) Flora Hughes )
- 3 -
"Signatures of shareholders Number of Date of Shares Owned Signing --------------------------- ------------ ------- /s/ G. J. FOSTER ) 60 Oct. 30, 1947 ------------------------ ) G. J. Foster ) ) /s/ MARGARET J. FOSTER ) ------------------------ ) Margaret J. Foster ) /s/ H. R. JAENECKE 185 Oct. 29, 1947 ------------------------ H. R. Jaenecke ----- 2399
- - - - - - - - "CERTIFICATE OF SECRETARY "I, D. G. DINSMORE, hereby do certify as follows: "1. On each of the dates set down opposite the signatures of the persons who signed the foregoing certificate, I was, and I still am, the duly elected, qualified, and acting secretary of McColpin-Christie Corporation, Ltd., a California corporation. "2. The records of said McColpin-Christie Corporation, Ltd. show that each of the persons who signed the foregoing certificate owned, on the date set down opposite his signature, and still owns, the number of shares of capital stock of said corporation set down opposite his signature. "Dated: October 30, 1947. " /s/ D. G. DINSMORE -------------------------------- D. G. Dinsmore" Third: The total number of shares of McColpin-Christie Corporation, Ltd. adopting and approving resolutions adopted by the board of directors of said corporation that the articles of incorporation of said corporation should be amended, and consenting to the amendment of the articles of incorporation of said corporation, all as stated and set forth above, is 2,399. Fourth: The total number of shares of McColpin-Christie Corporation, Ltd. entitled to adopt and approve resolutions adopted by the board of directors that the articles of incorporation of said corporation is amended, and entitled to consent to the amendment of the articles of incorporation of said corporation, is 2,400. - 4 - IN WITNESS WHEREOF, the undersigned have executed this certificate of amendment this 30th day of October, 1947. /s/ S. L. Christie -------------------------------- S. L. Christie, President /s/ D. G. Dinsmore -------------------------------- (SEAL) D. G. Dinsmore, Secretary STATE OF CALIFORNIA ) ) ss. COUNTY OF LOS ANGELES ) S. L. CHRISTIE and. D. G. DINSMORE, being first duly sworn, each for himself deposes and says: S. L. Christie is, and at all tines mentioned in the foregoing certificate of amendment was, the president of McColpin-Christie Corporation, Ltd., the California corporation therein named. D. G. Dinsmore is, and at all times mentioned in the foregoing certificate of amendment was, the secretary of said corporation. Each of us has read said certificate of amendment. The statements contained in said certificate of amendment are true of our own knowledge. The signatures of S. L. Christie and D. G. Dinsmore affixed to said certificate of amendment are the genuine signatures of the president and the secretary, respectively, of said corporation. /s/ S. L. Christie -------------------------------- S. L. Christie, President /s/ D. G. Dinsmore -------------------------------- D. G. Dinsmore, Secretary Subscribed and sworn to before me this 30th day of October, 1947 /s/ Harold S. Nutter - -------------------------------------------- Notary Public in and for the County of Los Angeles, State of California (SEAL) EX-3.21 7 a2082596zex-3_21.txt EXHIBIT 3.21 EXHIBIT 3.21 Name changed to McCOLPIN-CHRISTIE CORP. CERTIFICATE OF AMENDMENT OF THE ARTICLES OF INCORPORATION OF McCOLPIN-CHRISTIE CORPORATION, LTD. [To change name to McColpin-Christie Corp.] The undersigned, S. L. CHRISTIE and D. G. DINSMORE, hereby do certify that they are, and at all times herein mentioned have been, respectively, the duly elected, qualified, and acting president and secretary of McCOLPIN-CHRISTIE CORPORATION, LTD., a California corporation; and, further, they do certify as follows: FIRST: At a meeting of the board of directors of McColpin-Christie Corporation, Ltd., duly held on February 20, 1952, at the principal office of the corporation at 3410 West 67th Street, Los Angeles, California, at which meeting a quorum consisting of two of the three directors of this corporation was present and acting, the following resolutions duly were adopted by unanimous vote: "WHEREAS, the board of directors of this corporation deems it to be for the best interests of this corporation and of its shareholders that its corporate name be changed to McColpin-Christie Corp., "NOW, THEREFORE, IT HEREBY IS RESOLVED, that Article FIRST of the articles of incorporation of this corporation hereby is amended to read as follows: -1- "'FIRST: That the name of this corporation shall be McCOLPIN-CHRISTIE CORP.' "RESOLVED, FURTHER, that the board of directors hereby adopts and approves said amendment to the articles of incorporation; "RESOLVED, FURTHER, that the president and secretary of this corporation be, and they hereby are, and each of them hereby is, authorized to procure the adoption and approval of said amendment by the vote or written consent of the shareholders of this corporation; "RESOLVED, FURTHER, that the president and secretary be, and they hereby are, authorized and directed to sign, verify, and cause to be filed a certificate of the amendment of the articles of incorporation of this corporation, all in conformity with the laws of the State of California; "RESOLVED, FURTHER, that the president and secretary of this corporation be, and they hereby are, and each of them hereby is, authorized and directed to perform such acts and to execute such instruments as may be necessary or convenient to make the foregoing resolutions fully effective." SECOND: Shareholders of McColpin-Christie Corporation, Ltd. holding at least a majority of the voting power of said corporation consented in writing that the articles of incorporation of said corporation should be amended in the manner stated in said resolutions adopted by the board of directors of said corporation. The following is a copy of the form of written consent signed by said shareholders of said corporation: -2- "CONSENT OF SHAREHOLDERS TO THE AMENDMENT OF THE ARTICLES OF INCORPORATION OF McCOLPIN-CHRISTIE CORPORATION, LTD. "WHEREAS, at a meeting of the board of directors of McColpin-Christie Corporation, Ltd., a California corporation, duly held on February 20, 1952, at the principal office for the transaction of the business of said corporation at 3410 West 67th Street, Los Angeles, California, at which meeting a quorum consisting of two of the three directors of said corporation was at all times present and acting, an amendment of the articles of incorporation of said corporation was adopted and approved by resolutions of said board of directors amending Article FIRST of said articles of incorporation to read as follows: 'FIRST: That the name of this corporation shall be McCOLPIN-CHRISTIE CORP.' "NOW, THEREFORE, each of the undersigned, being the owner of the number of shares of stock of said corporation set down opposite his or her signature at the end of this certificate, hereby does adopt, approve, and consent to the foregoing amendment of said articles of incorporation, and hereby does consent that Article FIRST of said articles of incorporation be amended to read as follows: 'FIRST: That the name of this corporation shall be McCOLPIN-CHRISTIE CORP.' "Witness the signature of each of the undersigned, and following the signature, the date of signing and the number of shares of said corporation held of -3- record on the date of signing, all of which shares are entitled to vote upon amendments of said articles of incorporation of the character of the foregoing amendment.
"Signatures of Share- Date of Number of Holders Signing Shares Owned ---------------------- ------- ------------ /s/ S. L. CHRISTIE May 3, 1952 2,276 ------------------------------- S. L. Christie /s/ S. L. CHRISTIE ) May 3, 1952 ------------------------------- ) S. L. Christie ) 800 and ) /s/ SIGRID CHRISTIE ) May 3, 1952 ------------------------------- ) Sigrid Christie ) /s/ E. E. HUGHES ) May 5, 1952 ------------------------------- ) E. E. Hughes ) 660 and ) /s/ FLORA HUGHES ) May 6, 1952 ------------------------------- ) Flora Hughes ) /s/ GLENFORD J. FOSTER ) May 2, 1952 ------------------------------- ) Glenford J. Foster ) and ) 324 /s/ MARGARET J. FOSTER ) May 7, 1952 ------------------------------- ) Margaret J. Foster ) /s/ D. G. DINSMORE May 2, 1952 128" ------------------------------- D. G. Dinsmore
THIRD: The total number of shares of McColpin-Christie Corporation, Ltd. adopting and approving said resolutions of the board of directors that the articles of incorporation should be amended as stated in said resolutions, and consenting to the amendment of the articles of incorporation of said corporation, all as stated and set forth above, is 4,188. FOURTH: The total number of shares of McColpin-Christie Corporation, Ltd. entitled to adopt and approve resolutions of the board of directors that the articles of incorporation be -4- amended as set forth herein, and entitled to consent to the amendment of the articles of incorporation as set forth herein is 4,842. Dated: May 22, 1952. /s/ S. L. Christie ----------------------------------- S. L. Christie, President /s/ D. G. Dinsmore ----------------------------------- D. G. Dinsmore, Secretary -5- STATE OF CALIFORNIA ) ) ss. County of Los Angeles ) S. L. CHRISTIE and. D. G. DINSMORE, first being duly sworn, each for himself deposes and says: S. L. Christie is, and at all tines mentioned in the foregoing certificate of amendment was, the president of McColpin-Christie Corporation, Ltd., the California corporation therein named. D. G. Dinsmore is, and at all times mentioned in the foregoing certificate of amendment was, the secretary of said corporation. Each of us has read said certificate of amendment. The statements contained in said certificate are true of our own knowledge. The signatures of S. L. Christie and D. G. Dinsmore affixed to said certificate of amendment are the genuine signatures of the president and the secretary, respectively, of said corporation. /s/ S. L. Christie ----------------------------------- S. L. Christie, President /s/ D. G. Dinsmore ----------------------------------- D. G. Dinsmore, Secretary Subscribed and sworn to before me me this 22nd day of May, 1952. /s/ Harold S. Nutter - -------------------------------------------- Notary Public in and for the County of Los Angeles, State of California. NOTARY PUBLIC (SEAL) My Commission Expires Mar. 20, 1995 -6- EX-3.22 8 a2082596zex-3_22.txt EXHIBIT 3.22 EXHIBIT 3.22 Name changed to: CHRISTIE ELECTRIC CORP. CERTIFICATE OF AMENDMENT OF THE ARTICLES OF INCORPORATION OF McCOLPIN-CHRISTIE CORP. (To change name to Christie Electric Corp.) The undersigned, S. L. CHRISTIE and D. G. DINSMORE, hereby do certify as follows: 1. They now are, and during all of the times herein mentioned have been, the duly elected and acting president and secretary, respectively, of McColpin-Christie Corp., a California corporation. 2. The board of directors of McColpin-Christie Corp., at a meeting duly held on April 18, 1956, at which meeting a quorum at all times was present and acting, duly adopted the following resolutions: WHEREAS, the board of directors of this corporation deems it to be for the best interests of this corporation and of its shareholders that its corporate name be changed to Christie Electric Corp.; NOW, THEREFORE, IT HEREBY IS RESOLVED, that Article FIRST of the articles of incorporation of this corporation, as amended by a certificate of amendment filed in the office of the Secretary of State of California on or about May 26, 1952, be, and it hereby is, amended to read as follows: FIRST: That the name of this corporation shall be CHRISTIE ELECTRIC CORP. RESOLVED, FURTHER, that the board of directors hereby adopts and approves said amendment to the articles of incorporation. -1- RESOLVED, FURTHER, that the officers be, and they hereby are, authorized to submit said amendment to the shareholders and to obtain the adoption and approval of said amendment by the vote or written consent of shareholders holding at least a majority of the voting power of this corporation. RESOLVED, FURTHER, that the president and secretary be, and they hereby are, authorized and directed to sign, verify, and cause to be filed a certificate of amendment of the articles of incorporation of this corporation, all in conformity with the laws of the State of California. RESOLVED, FURTHER, that the officers be, and they hereby are, and each of them hereby is, authorized and directed to perform such acts and to execute such instruments as may be necessary or convenient to make the foregoing resolutions fully effective. 3. Shareholders of McColpin-Christie Corp. holding more than a majority of the voting power of said corporation consented in writing that the articles of incorporation of said corporation be amended in the manner stated in the resolutions adopted by the board of directors of said corporation, as set forth above. The following is a copy of the written consent signed by said shareholders. CONSENT OF SHAREHOLDERS TO AMENDMENT OF THE ARTICLES OF INCORPORATION OF McCOLPIN-CHRISTIE CORP. Each of the undersigned shareholders of McColpin-Christie Corp, a California corporation, hereby 1. Deems it to be for the best interests of said corporation and of its shareholders that the articles of incorporation of said corporation be amended as stated in this certificate; 2. Consents that Article FIRST of the articles of incorporation of said corporation, as amended by a certificate of amendment filed in the office of the Secretary of State of California on or about May 26, 1952, shall be amended to read as follows; FIRST: That the name of the corporation shall be: CHRISTIE ELECTRIC CORP. -2- 3. Adopts and approves said amendment of the articles of incorporation of said corporation; 4. Certifies that on the date of this certificate he held the number of shares of said corporation stated after his signature.
Number of Signature of Shareholder Date of Signing Shares Held ------------------------ --------------- ----------- /s/ S. L. Christie April 25, 1956 2,394 ----------------------------- S. L. Christie /s/ D. G. Dinsmore April 25, 1956 132 ----------------------------- D. G. Dinsmore /s/ S. L. Christie April 25, 1956 ----------------------------- S. L. Christie /s/ Sigrid Christie April 25, 1956 ----------------------------- Sigrid Christie
4. The total number of shares of McColpin-Christie Corp. adopting, approving, and consenting to said amendment of the articles of incorporation, all as stated above, is 3,326. 5. The total number of shares of McColpin-Christie Corp. entitled to adopt, approve, and consent to the amendment of its articles of incorporation is 5,292. Dated: April 25, 1956. /s/ S. L. Christie ------------------------------- S. L. Christie, President /s/ D. G. Dinsmore ------------------------------- D. G. Dinsmore, Secretary -3- STATE OF CALIFORNIA ) ) ss. County of Los Angeles ) S. L. CHRISTIE and. D. G. DINSMORE, being first duly sworn, each for himself deposes and says: S. L. Christie is, and at all tines mentioned in the foregoing certificate of amendment was, the president of McColpin-Christie Corp., the California corporation therein named. D. G. Dinsmore is, and at all times mentioned in the foregoing certificate of amendment was, the secretary of said corporation. I have read the foregoing certificate of amendment. The statements contained in said certificate are true of my own knowledge. The signatures of S. L. Christie and D. G. Dinsmore affixed to said certificate are the genuine signatures of the president and the secretary, respectively, of said corporation. /s/ S. L. Christie ------------------------------- S. L. Christie /s/ D. G. Dinsmore ------------------------------- D. G. Dinsmore Subscribed and sworn to before me me this 25th day of April, 1956. /s/ Harold S. Nutter - -------------------------------------------- Notary Public in and for the County of Los Angeles, State of California My Commission Expires March 20, 1959 (SEAL) -4- EX-3.23 9 a2082596zex-3_23.txt EXHIBIT 3.23 EXHIBIT 3.23 CERTIFICATE OF AMENDMENT OF THE ARTICLES OF INCORPORATION OF CHRISTIE ELECTRIC CORP. T. E. Christie and H. S. Nutter, the undersigned, hereby certify that: 1. They are the president and secretary, respectively, of Christie Electric, Corp., a California corporation, 2. The board of directors of Christie Electric Corp., at a meeting duly held on February 9, 1979 at the principal office of the corporation in Los Angeles, California, duly adopted the amendment of articles of incorporation herein set forth. 3. Article SIXTH of the articles of incorporation is amended to read: "SIXTH: This corporation is authorized to issue sixty thousand shares of common stock of the par value of $10.00 per share and 60,000 shares of preferred stock without par value. On amendment of this Article to read as set forth above, each outstanding share of capital stock is split up and reconstituted as ten shares of common stock. A statement of the rights, preferences, privileges, and restrictions granted to or imposed upon the respective classes of shares or on the holders thereof is as follows: 1. COMMON STOCK: The holders of common shares shall have convey is on rights as follows: a. Each share of common stock shall be convertible, at the option of the holder, into one share of preferred stock at any time on or prior to March 30, 1979. b. If, at any time prior to March 30, 1979, any change is made in the corporation's common stock by reason of stock dividend, stock split, combination, or reclassification, the number of preferred shares into which the common shares are convertible shall be proportionately adjusted. c. Each share of preferred stock issued upon such conversion shall be deemed to have been issued for a consideration equal to the value of the common share surrendered. d. To exercise such conversion right, the holder of common shares shall surrender the certificate or certificates therefor, duly endorsed or accompanied by proper instruments of transfer to the office of the corporation, together with a written notice that the holder elects to convert the same into such preferred shares. The corporation shall, as soon as practicable thereafter, issue and deliver to such holder one share of preferred stock for each share of common stock so surrendered. 2. PREFERRED STOCK: The holders of preferred shares shall have rights, preferences, privileges, and restrictions as follows: a. DIVIDENDS: The holders of outstanding preferred shares shall be entitled to receive, when and as declared by the board of directors, out of any assets at the time legally available therefor, dividends in cash at the rate of $9.00 per preferred share per annum, payable quarterly on the 1st day of March, June, September, and December of each year, commencing June 1, 1979. Such dividends shall accrue on each share commencing March 1, 1979, and shall accrue from day to day, whether or not earned or declared. Such dividends shall be cumulative so that if such dividend with respect to any quarterly dividend period shall not have been paid or declared and set apart for payment, the deficiency shall be fully paid on or declared and set apart for such shares before the corporation makes any distribution to holders of common shares. The term "distribution" as used in this paragraph means the transfer of cash or property without consideration, whether by way of dividend or otherwise [except a dividend in shares of the corporation] or the purchase or redemption of shares of the corporation for cash or property. The time of any distribution by way of dividend shall be the date of declaration thereof and the time of any distribution by purchase or redemption of shares shall be the day cash or property is transferred by the corporation. After all cumulative dividends on the preferred shares have been paid or declared and set apart, for payment, if the board of directors shall elect to make farther distribution of dividends, such dividends shall be made to all shares, preferred and common, in a like amount. b. LIQUIDATION PREFERENCE: In the event of a voluntary or involuntary liquidation, dissolution, or winding up of the corporation, the holders of preferred shares shall be entitled to receive out of the assets of the corporation, whether such assets are capital or surplus of any nature, an amount equal to $100 per preferred share and a further amount equal to any dividends accrued and unpaid thereon, as provided in paragraph 2.a. of this Article SIXTH, to the date that payment is made available to the holders of preferred shares, whether earned or declared or not, and no more, before any payment shall be made or any assets distributed to the holders of common shares. If upon such liquidation, dissolution, or winding up, the assets thus distributed among the holders of the preferred shares shall be insufficient to permit the payment to such shareholders of the full preferential amounts aforesaid, then the entire assets of the corporation to be distributed shall be distributed ratably among the holders of preferred shares. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the corporation, subject to all of the preferential rights of the holders of preferred shares on distribution or otherwise, the holders of common shares shall be entitled to receive, ratably, all remaining assets of the corporation. 2 A consolidation or merger of the corporation with or into any other corporation or corporations, or a sale of all or substantially all of the assets of the corporation, shall not be deemed to be a liquidation, dissolution, or winding up within the meaning of this paragraph b." 4. The foregoing amendment was approved by the required vote of the shareholders of the corporation in accordance with section 902 of the California Corporations Code. The total number of outstanding shares entitled to vote with respect to the foregoing amendment was 3,812 capital shares, and the percentage vote required to approve the amendment was more than 50%. The number of such shares voting in favor of the amendment exceeded the vote required. Dated: February 22, 1979. /s/ T. E. Christie ----------------------------------- T. E. Christie, President /s/ H. S. Nutter ----------------------------------- H. S. Nutter, Secretary Each of the undersigned declares under penalty of perjury that the matters set forth in the foregoing certificate are true and correct. Executed at Los Angeles, California on February 22, 1979. /s/ T. E. Christie ----------------------------------- T. E. Christie, President /s/ H. S. Nutter ----------------------------------- H. S. Nutter, Secretary 3 EX-3.24 10 a2082596zex-3_24.txt EXHIBIT 3.24 EXHIBIT 3.24 CERTIFICATE OF OWNERSHIP T. E. CHRISTIE and Harlan Snyder certify that: 1. They are the president and secretary, respectively, of CHRISTIE ELECTRIC CORP., a California corporation. 2. This corporation owns all of the outstanding shares of CHRISTIE EXPORT CORP., a California corporation. 3. On February 1, 1985, the board of directors of this corporation duly adopted the following resolutions: RESOLVED, that CHRISTIE EXPORT CORP., a wholly owned subsidiary of CHRISTIE ELECTRIC CORP., be merged into CHRISTIE ELECTRIC CORP. pursuant to the provisions of California Corporations Code Section 1110; RESOLVED, FURTHER, that CHRISTIE ELECTRIC CORP. hereby assumes all of the liabilities of CHRISTIE EXPORT CORP.; RESOLVED, FURTHER, that the President and Secretary of this corporation are authorized and directed to file with the Secretary of State, on behalf of CHRISTIE ELECTRIC CORP. and CHRISTIE EXPORT CORP., a certificate of ownership and such other document or documents as may be necessary to effect the merger. We declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge, and that this declaration is signed in Torrance, California, on February 28, 1985. /s/ T. E. Christie ------------------------------------- T. E. Christie, President /s/ Harlan Snyder ------------------------------------- Harlan Snyder, Secretary 2 EX-3.25 11 a2082596zex-3_25.txt EXHIBIT 3.25 EXHIBIT 3.25 CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF CHRISTIE ELECTRIC CORP. Michael J. Fourticq and Kenton Van Harten hereby certify that: 1. They are the chairman of the board and the secretary, respectively, of Christie Electric Corp., a California corporation (the "Corporation"). 2. The Articles of Incorporation of the Corporation are amended to revise Article IV to read in its entirety as follows: "IV The corporation is authorized to issue two classes of shares designated as 'Common Stock' and 'Preferred Stock,' respectively. The number of shares of Common Stock authorized to be issued is 100,000,000 and the number of shares of Preferred Stock authorized to be issued is 2,000,000. Upon the filing of this amendment to the corporation's articles of incorporation, each outstanding share of Common Stock shall be split up and converted into ten shares of Common Stock." 3. The foregoing amendment has been duly approved by the board of directors. 4. Because the foregoing amendment to the Articles of Incorporation effects a stock split and the Corporation. has only one class of stock outstanding, shareholder approval of the foregoing amendment of the Articles of Incorporation is not required pursuant to Section 902(c) of the California Corporations Code. We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge. DATE: September 29, 1993 /s/ Michael J. Fourticq -------------------------------- Michael J. Fourticq Chairman of the Board /s/ Kenton Van Harten -------------------------------- Kenton Van Harten Secretary 2 EX-3.31 12 a2082596zex-3_31.txt EXHIBIT 3.31 EXHIBIT 3.31 BY-LAWS OF AVIATION ACQUISITION CORPORATION BY-LAWS OF AVIATION ACQUISITION CORPORATION April 16, 2001 ARTICLE I. OFFICES 1. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. 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 1. Meetings of stockholders shall be held at any place within or outside the State of Delaware designated by the Board of Directors. In the absence of any such designation, stockholders' meetings shall be held at the principal executive office of the Corporation. 2. The annual meeting of stockholders shall be held each year on a date and a time designated by the Board of Directors. At each annual meeting directors shall be elected and any other proper business may be transacted. 3. A majority of the stock issued and outstanding and entitled to vote at any meeting of stockholders, the holders of which are present in person or represented by proxy, shall constitute a quorum for the transaction of business except as otherwise provided by law, by the Certificate of Incorporation, or by these By-Laws. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum and the votes present may continue to transact business until adjournment. If, however, such quorum shall not be present or represented at any meeting of the stockholders, a majority of the voting stock represented in person or by proxy may adjourn the meeting from time to time, 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 thereat. 4. 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 the Certificate of Incorporation, or these By-Laws, a different vote is required in which case such express provision shall govern and control the decision of such question. 5. At each meeting of the stockholders, each stockholder having the right to vote may vote in person or may authorize another person or persons to act for him by proxy appointed by an instrument in writing subscribed by such stockholder and bearing a date not more than three years prior to said meeting, unless said instrument provides for a longer period. All proxies must be filed with the Secretary of the Corporation at the beginning of each meeting in order to be counted in any vote at the meeting. Each stockholder shall have one vote for each share of stock having voting power, registered in his name on the books of the Corporation on the record date set by the Board of Directors as provided in Article V, Section 6 hereof. All elections shall be had and all questions decided by a plurality vote. 6. 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 the 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. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. 7. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which notice shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. The written notice of any 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. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. 8. 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. 9. Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action 2 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 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 1. The number of directors which shall constitute the whole Board shall be not less than one (1) nor more than nine (9). The number of directors shall be fixed from time to time by the Board and the first Board shall consist of three (3) directors. The directors need not be stockholders. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified; provided, however, that unless otherwise restricted by the Certificate of Incorporation or by law, any director or the entire Board of Directors may be removed, either with or without cause, from the Board of Directors at any meeting of stockholders by a majority of the stock represented and entitled to vote thereat. 2. Vacancies on the Board of Directors by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. The directors so chosen shall hold office until the next annual election of directors 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 (10) 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. 3. The property and business of the Corporation shall be managed by or under the direction of its Board of Directors. In addition to the powers and authorities by these By-Laws expressly conferred upon them, the Board 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. 3 MEETINGS OF THE BOARD OF DIRECTORS 4. The directors may hold their meetings and have one or more offices, and keep the books of the Corporation outside of the State of Delaware. 5. Regular meetings of the Board of Directors may be held without notice at such time and place as shall from time to time be determined by the Board. 6. Special meetings of the Board of Directors may be called by the President on forty-eight hours' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the President or the 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 or on like notice on the written request of the sole director. 7. At all meetings of the Board of Directors a majority of the authorized number of directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the vote 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, by the Certificate of Incorporation or by these By-Laws. 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. If only one director is authorized, such sole director shall constitute a quorum. 8. 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. 9. 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 such meeting. COMMITTEES OF DIRECTORS 10. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each such 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 4 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, 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 provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. 11. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. COMPENSATION OF DIRECTORS 12. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, the Board of 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. ARTICLE IV. OFFICERS 1. The officers of the Corporation shall be chosen by the Board of Directors and shall include a President, a Secretary, and a Treasurer. The Corporation may also have at the discretion of the Board of Directors such other officers as are desired, including a Chairman of the Board, one or more Vice Presidents, one or more Assistant Secretaries and Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 hereof. In the event there are two or more Vice Presidents, then one or more may be designated as Executive Vice President, Senior Vice President, or other similar or dissimilar title. At the time of the election of officers, the directors may by resolution determine the order of their rank. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these By-Laws otherwise provide. 2. The Board of Directors, at its first meeting after each annual meeting of stockholders, shall choose the officers of the Corporation. 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. 4. The salaries of all officers and agents of the Corporation shall be fixed by the Board of Directors. 5 5. The officers of the Corporation shall hold office until their successors are chosen and qualify in their stead. 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. If the office of any officer or officers becomes vacant for any reason, the vacancy shall be filled by the Board of Directors. CHAIRMAN OF THE BOARD 6. The Chairman of the Board, if such an officer be elected, shall, if present, preside at all meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by these By-Laws. If there is no President, the Chairman of the Board shall in addition be the Chief Executive Officer of the Corporation and shall have the powers and duties prescribed in Section 7 of this Article IV. PRESIDENT 7. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there be such an officer, the President shall be the Chief Executive Officer of the Corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the Corporation. He shall preside at all meetings of the stockholders and, in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board of Directors. He shall be an ex-officio member of all committees and shall have the general powers and duties of management usually vested in the office of President and Chief Executive Officer of corporations, and shall have such other powers and duties as may be prescribed by the Board of Directors or these By-Laws. VICE PRESIDENTS 8. In the absence or disability of the President, the Vice Presidents in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform all 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 have such other duties as from time to time may be prescribed for them, respectively, by the Board of Directors. 6 SECRETARY AND ASSISTANT SECRETARY 9. The Secretary shall attend all sessions of the Board of Directors and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for the standing committees when required by the Board of Directors. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or these By-Laws. He shall keep in safe custody the seal of the Corporation, and when authorized by the Board, affix the same to any instrument requiring it, and when so affixed it shall be attested by his signature or by the signature of an 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. 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, the Assistant Secretary designated by the Board of Directors, shall, in the absence or disability of the Secretary, 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. TREASURER AND ASSISTANT TREASURER 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. 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 Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, he shall give the Corporation a bond, 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 his 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. 12. 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, the Assistant Treasurer designated by the Board of Directors, shall, in the absence or disability of the Treasurer, 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. 7 ARTICLE V. CERTIFICATES OF STOCK 1. Every holder of stock of the Corporation shall be entitled to have a certificate 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 by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer of the Corporation, certifying the number of shares represented by the certificate owned by such stockholder in the Corporation. 2. Any or all of the signatures on the certificate may be a 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. 3. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, 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. LOST, STOLEN OR DESTROYED CERTIFICATES 4. The Board of Directors may direct a new certificate or certificates 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, 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. 8 TRANSFERS OF STOCK 5. 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. FIXING RECORD DATE 6. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of the 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 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 7. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware. ARTICLE VI. GENERAL PROVISIONS DIVIDENDS 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. 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 fund 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 the interests of the Corporation, and the directors may abolish any such reserve. 9 CHECKS 3. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers as the Board of Directors may from time to time designate. FISCAL YEAR 4. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. SEAL 5. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware". Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. NOTICES 6. 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 such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail or with an overnight courier service. Notice to directors may also be given personally or by telephone, telegram, telex or facsimile. 7. 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 to be equivalent. ANNUAL STATEMENT 8. 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. ARTICLE VII. INDEMNIFICATION 1. Except as provided in Section 3 of this Article VII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer or employee of the Corporation, or is or was serving at the request 10 of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. 2. Except as provided in Section 3 of this Article VII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer or employee of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no such indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such Court of Chancery or such other court shall deem proper. 3. Notwithstanding anything to the contrary in this Article VII, (a) except as provided in Section 7 with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any officer, director or employee in connection with any action, suit or proceeding (or part thereof) initiated by such person only if such action, suit or proceeding (or part thereof) was authorized by the Board of Directors and (b) any indemnification by reason of the fact that such person is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise shall be reduced by the amount of any such expenses, judgments, fines and amounts paid in settlement for which such person has otherwise received payment (under any insurance policy, charter or by-law provision or otherwise). In the event of any payment by the Corporation to any person pursuant to this Article VII by reason of the fact that such person was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of such person, who shall, as a condition to payment under this Article VII, execute all papers required and do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Corporation effectively to bring suit to enforce such rights. 11 4. Any indemnification under Sections 1 or 2 or this Article VII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 1 or 2, as applicable. Such determination shall be made with respect to a person who is a director or officer at the time of such determination (a) by the Board of Directors by a majority vote of directors who were not parties to such action, suit or proceeding, even though less than a quorum, or (b) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (c) by the stockholders. 5. To the extent that a present or former director, officer or employee of the Corporation shall be successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 or 2 of this Article VII, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. 6. Expenses (including attorneys' fees) incurred by a present or former director, officer or employee in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding; provided, however, that if the Delaware General Corporation Law so requires, an advance of expenses incurred by any such person in his capacity as a present director or officer (and not in any other capacity in which service was or is rendered by such person, including without limitation any employee benefit plan) shall be made only upon receipt by the Corporation of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VII. 7. If a claim for indemnification under Section 1, 2 or 5 or for advancement of expenses under Section 6 is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the present or former director, officer or employee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the present or former director, officer or employee shall also be entitled to be paid the expense of prosecuting or defending such suit. In any suit brought by such person to enforce a right to indemnification hereunder (but not in a suit brought by such person to enforce a right to an advancement of expenses) it shall be a defense that such person has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or stockholders) to have made a determination prior to the commencement of such suit that indemnification of such person is proper in the circumstances because such person has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or stockholders) that such person has not met such applicable standard of conduct, shall create a presumption that such person has not met the applicable standard of conduct or, in the case of such a suit brought by such person, be a defense to such suit. In any suit brought by such person to enforce a right hereunder, or by the Corporation to recover an advancement of 12 expenses pursuant to the terms of an undertaking, the burden of proving that such person is not entitled to be indemnified or to such advancement of expenses under this Article VII or otherwise shall be on the Corporation. 8. The rights to indemnification and to the advancement of expenses provided by this Article VII shall not be exclusive of, and shall be in addition to, any other rights to which any person may have or hereafter acquire under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer or employee and shall inure to the benefit of the heirs, executors and administrators of such a person. 9. The Corporation may, to the extent authorized from time to time by the Board of Directors (and, with respect to advancement of expenses, upon such terms and conditions, if any, as the Board deems appropriate), grant rights to indemnification, and to the advancement of expenses, to any present or former agent of the Corporation to the fullest extent of the provisions hereof with respect to the indemnification and advancement of expense of present and former directors, officers and employees of the Corporation. 10. The Board of Directors may authorize, by a vote of a majority of a quorum of the Board of Directors, the Corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article VII. 11. For purposes of this Article VII, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article VII. 12. If any part of this Article VII shall be found, in any action, suit or proceeding or appeal therefrom or in any other circumstances or as to any particular officer, director, employee or agent to be unenforceable, ineffective or invalid for any reason, the enforceability, effect and validity of the remaining parts or of such parts in other circumstances shall not be affected, except as otherwise required by applicable law. 13. The foregoing provisions of this Article VII shall be deemed to constitute an agreement between the Corporation and each of the persons entitled to indemnification hereunder, for as long as such provisions remain in effect. Any amendment to the foregoing 13 provisions of this Article VII which limits or otherwise adversely affects the scope of indemnification or rights of any such persons hereunder shall, as to such persons, apply only to claims arising, or causes of action based on actions or events occurring, after such amendment and delivery of notice of such amendment is given to the person or persons whose rights hereunder are adversely affected. Any person entitled to indemnification under the foregoing provisions of this Article VII shall, as to any act or omission occurring prior to the date of receipt of such notice, be entitled to indemnification to the same extent as had such provisions continued as By-laws of the Corporation without such amendment. ARTICLE VIII. AMENDMENTS 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. 14 EX-3.32 13 a2082596zex-3_32.txt EXHIBIT 3.32 EXHIBIT 3.32 BYLAWS OF CHRISTIE ELECTRIC CORP. ARTICLE I. OFFICES SECTION 1. PRINCIPAL OFFICES. The Board of Directors shall fix the location of the principal executive office of the corporation at any place within or outside the State of California. If the principal executive office is located outside this state, and the corporation has one or more business offices in this state, the Board of Directors shall fix and designate a principal business office in the State of California. SECTION 2. OTHER OFFICES. The Board of Directors may at any time establish, or may designate an officer of the corporation to establish, branch or subordinate offices at any place or places where the corporation is qualified to do business. ARTICLE II. MEETINGS OF SHAREHOLDERS SECTION 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at any place within or outside the State of California designated by the Board of Directors. In the absence of any such designation, shareholders' meetings shall be held at the principal executive office of the corporation. SECTION 2. ANNUAL MEETINGS. The annual meeting of shareholders shall be held each year on a date and at a time designated by the Board of Directors. At each annual meeting directors shall be elected, and any other proper business may be transacted. SECTION 3. SPECIAL MEETING. A special meeting of the shareholders may be called at any time by the Board of Directors, or by the Chairman of the Board, or by the President, or by one or more shareholders holding shares in the aggregate entitled to cast not less than 10% of the votes at that meeting. If a special meeting is called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the Chairman of the Board, the President, any Vice President, or the Secretary of the corporation. The officer receiving the request shall cause notice to be promptly given to the shareholders entitled to vote, in accordance with the provisions of Sections 4 and 5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 3 shall be construed as limiting, fixing or affecting the time when a meeting of shareholders called by action of the Board of Directors may be held. SECTION 4. NOTICE OF SHAREHOLDERS' MEETINGS. All notices of meetings of shareholders shall be sent or otherwise given in accordance with Section 5 of this Article II not less than ten (10) nor more than sixty (60) days before the date of the meeting. The notice shall specify the place, date and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted, or (ii) in the case of the annual meeting, those matters which the Board of Directors, at the time of giving the notice, intends to present for action by the shareholders. The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees whom, at the time of the notice, management intends to present for election. If action is proposed to be taken at any meeting for approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the California Corporations Code, (ii) an amendment of the articles of incorporation, pursuant to Section 902 of that Code, (iii) a reorganization of the corporation, pursuant to 1201 of that Code, (iv) a voluntary dissolution of the corporation, pursuant to Section 1900 of that Code, or (v) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of that Code, the notice shall also state the general nature of that proposal. SECTION 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any meeting of shareholders shall be given either personally or by first-class mail or telegraphic or other written communication, charges prepaid, addressed to the shareholder at the address of that shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice. If no such address appears on the corporation's books or is given, notice shall be deemed to have been given if sent to that shareholder by first-class mail or telegraphic or other written communication to the corporation's principal executive office, or if published at least once in a newspaper of general circulation in the county where that office is located. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication. If any notice addressed to a shareholder at the address of that shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at that address, all future notices or reports shall be deemed to have been duly given without further mailing if these shall be available to the shareholder on written demand of the shareholder at the principal executive office of the corporation for a period of one year from the date of the giving of the notice. An affidavit of the mailing or other means of giving any notice of any shareholders' meeting shall be executed by the secretary, assistant secretary, or any transfer 2 agent of the corporation giving the notice, and shall be filed and maintained in the minute book of the corporation. SECTION 6. QUORUM. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting of shareholders shall constitute a quorum for the transaction of business. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if, any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum. SECTION 7. ADJOURNED MEETING; NOTICE. Any shareholders' meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy, but in the absence of a quorum, no other business may be transacted at that meeting, except as provided in Section 6 of this Article II. When any meeting of shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place are announced at a meeting at which the adjournment is taken, unless a new record date for the adjourned meeting is fixed, or unless the adjournment is for more than forty-five (45) days from the date set for the original meeting, in which case the Board of Directors shall set a new record date. Notice of any such adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 4 and 5 of this Article II. At any adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. SECTION 8. VOTING. The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of Section 11 of this Article II, subject to the provisions of Sections 702 to 704, inclusive, of the California Corporations Code (relating to voting shares held by a fiduciary, in the name of a corporation, or in joint ownership). The shareholders' vote may be by voice vote or by ballot; provided, however, that any election for directors must be by ballot if demanded by any shareholder before the voting has begun. On any matter other than elections of directors, any shareholder may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, but, if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the shareholder's approving vote is with respect to all shares that the shareholder is entitled to vote. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on any matter (other than the election of directors) shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by California Corporations Code or by the Articles of Incorporation. At a shareholders' meeting at which directors are to be elected, no shareholder shall be entitled to cumulate votes (i.e., cast for any one or more candidates a number of votes greater than the number of the shareholder's shares) unless the candidates' names have been placed in nomination prior to commencement of the voting and a shareholder has given notice prior to commencement of the voting of the shareholder's intention to cumulate votes. If any 3 shareholder has given such a notice, then every shareholder entitled to vote may cumulate votes for candidates in nomination and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which that shareholder's shares are entitled, or distribute the shareholder's votes on the same principle among any or all of the candidates, as the shareholder thinks fit. The candidates receiving the highest number of votes, up to the number of directors to be elected, shall be elected. SECTION 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The transactions of any meeting of shareholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though a meeting had been duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a Written Waiver of Notice or a Consent to a holding of the meeting, or an approval of the minutes. The Waiver of Notice or Consent need not specify either the business to be transacted or the purpose of any annual or special meeting of shareholders, except that, if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 4 of this Article II, the Waiver of Notice or Consent shall state the general nature of the proposal. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance by a person at a meeting shall also constitute a waiver of notice of that meeting, except when the person objects, at the beginning of the meeting, to the trans action of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice of the meeting if that objection is expressly made at the meeting. SECTION 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all shares entitled to vote thereon were present and voted. In the case of election of directors, such a consent shall be effective only if signed by the holders of all outstanding shares entitled to vote for the election of directors; provided, however, that a director may be elected at any time to fill a vacancy on the Board of Directors that has not been filled by the directors, by the written consent of the holders of a majority of the outstanding shares entitled to vote for the election of directors. All such consents shall be filed with the Secretary of the corporation and shall be maintained in the corporate records. Any shareholder giving a written consent, or the shareholder's proxy holders, or a transferee of the shares or a personal representative of the shareholder or their respective proxy holders, may revoke the consent by a writing received by the secretary of the corporation before written consents of the number of shares required to authorize the proposed action have been filed with the secretary. If the consents of all shareholders entitled to vote have not been solicited in writing, and if the Unanimous Written Consent of all such shareholders shall not have been received, the Secretary shall give prompt notice of the corporate action approved by the shareholders without a meeting. This notice shall be given in the manner specified in Section 5 4 of this Article II. In the case of approval of (i) contracts or transactions in which a director has a direct or indirect financial interest, pursuant to Section 310 of the California Corporations Code, (ii) indemnification of agents of the corporation, pursuant to Section 317 of that Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of that Code, and (iv) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of that Code, the notice shall be given at least ten (10) days before the consummation of any action authorized by that approval. SECTION 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND GIVING CONSENTS. For purposes of determining the shareholders entitled to notice of any meeting or to vote or entitled to give consent to corporate action without a meeting, the Board of Directors may fix, in advance, a record date which shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting nor more than sixty (60) days before any such action without a meeting, and in this event only shareholders of record on the date so fixed are entitled to notice and to vote or to give consents, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the California Corporations Code. If the Board of Directors does not so fix a record date: (a) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. (b) The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, (i) when no prior action by the board has been taken, shall be the day on which the first written consent is given, or (ii) when prior action of the board has been taken, shall be at the close of business on the day on which the board adopts the resolution relating to such prior action, or the sixtieth (60th) day before the date of such prior action, whichever is later. SECTION 12. PROXIES. Every person entitled to vote for directors or on any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the Secretary of the corporation. A proxy shall be deemed signed if the shareholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission, or otherwise) by the shareholder or the shareholder's attorney-in-fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) revoked by the person executing it, before the vote pursuant to that proxy, by a writing delivered to the corporation stating that the proxy is revoked, or by a subsequent proxy executed by, or attendance at the meeting and voting in person by, the person executing the proxy; or (ii) written notice of the death or incapacity of the maker of that proxy is received by the corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, unless otherwise provided in the proxy. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of the California Corporations Code. 5 SECTION 13. INSPECTORS OF ELECTION. Before any meeting of shareholders, the Board of Directors may appoint any persons other than nominees for office to act as Inspectors of Election at the meeting or its adjournment. If no Inspectors of Election are so appointed, the Chairman of the meeting may, and on the request of any shareholder or a shareholder's proxy shall, appoint Inspectors of Election at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting on the request of one or more shareholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, the Chairman of the meeting may, and upon the request of any shareholder or a shareholder's proxy shall, appoint a person to fill that vacancy. These inspectors shall: (a) Determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies; (b) Receive votes, ballots, or consents; (c) Hear and determine all challenges and questions in any way arising in connection with the right to vote; (d) Count and tabulate all votes or consents; (e) Determine when the polls shall close; (f) Determine the result; and (g) Do any other acts that may be proper to conduct the election or vote with fairness to all shareholders. ARTICLE III. DIRECTORS SECTION 1. POWERS. Subject to the provisions of the California Corporations Code and any limitations in the Articles of Incorporation and these bylaws relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors. Without prejudice to these general powers, and subject to the same limitations, the Board of Directors shall have the power to: (a) Select and remove all officers, agents, and employees of the corporation; present any powers and duties for them that are consistent with law, with the articles of 6 incorporation, and with these bylaws; fix their compensation; and require from them security for faithful service. (b) Change the principal executive office or the principal business office in the State of California from one location to another; cause the corporation to be qualified to do business in any other state, territory, dependency, or country and conduct business within or without the State of California; and designate any place within or without the State of California for the holding of any shareholders' meeting, or meetings, including annual meetings. (c) Adopt, make, and use a corporate seal; prescribe the forms of certificates of stock; and alter the form of the seal and certificates. (d) Authorize the issuance of shares of stock of the corporation on any lawful terms, in consideration of money paid, labor done, services actually rendered, debts or securities cancelled, or tangible property actually received. (e) Borrow money and incur indebtedness on behalf of the corporation, and cause to be executed and delivered for the corporation's purposes, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations, and other evidences of debt and securities. SECTION 2. NUMBER AND QUALIFICATION OF DIRECTORS. The number of directors of the corporation may be fixed or changed at a meeting of the Shareholders called for the purpose of electing Directors at which a quorum is present, by the affirmative vote of the holders of a majority of the shares represented at the meeting and entitled to vote on such proposal. The number of Directors elected shall be deemed to be the number of Directors fixed unless otherwise fixed by resolution adopted at the meeting at which such Directors are elected. SECTION 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be elected at each annual meeting of the shareholders to hold office until the next annual meeting. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified. SECTION 4. VACANCIES. Vacancies in the Board of Directors may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, except that a vacancy created by the removal of a director by the vote or written consent of the shareholders or by court order may be filled only by the vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the written consent of holders of all shares entitled to vote for the election of directors. Each director so elected shall hold office until the next annual meeting of the shareholders and until a successor has been elected and qualified. A vacancy or vacancies in the Board of Directors shall be deemed to exist in the event of the death, resignation, or removal of any director, or if the Board of Directors by resolution declares vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony, or if the shareholders fail, at any meeting of shareholders 7 at which any director or directors are elected, to elect the number of directors to be voted for at that meeting. The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election by written consent shall require the consent of a majority of the outstanding shares entitled to vote. Any director may resign effective on giving written notice to the chairman of the Board, the President, the Secretary, or the Board of Directors, unless the notice specifies a later time for that resignation to become effective. If the resignation of a director is effective at a future time, the Board of Directors may elect a successor t take office when the resignation becomes effective. No reduction of the authorized number of directors shall have the effect of removing any director before that directors term of office expires. SECTION 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular meetings of the Board of Directors may be held at any place within or outside the State of California that has been designated from time to time by resolution of the board. In the absence of such a designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board shall be held at any place within or outside the State of California that has not been designated in the notice of the meeting or, if not stated in the notice or there is no notice, at the principal executive office of the corporation. Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in the meeting can hear one another, and all such directors shall be deemed to be present in person at the meeting. SECTION 6. ANNUAL MEETING. Immediately following each annual meeting of shareholders, the Board of Directors shall hold a regular meeting for the purpose of organization, any desired election of officers, and the transaction of other business. Notice of this meeting shall not be required. SECTION 7. OTHER REGULAR MEETINGS. Other regular meetings of the Board of Directors shall be held without call at such time as shall from time to time be fixed by the Board of' Directors. Such regular meetings may be held without notice. SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the Chairman of the Board or the President or any Vice President or the Secretary or any two directors. Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that directors address as it is shown on the records of the corporation. In case the notice is mailed, it shall be deposited in the United States Postal Service at least four (4) days before the time of the holding of the meeting. In case the notice is delivered personally, or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a 8 person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose of the meeting nor the place if the meeting is to be held at the principal executive office of the corporation. SECTION 9. QUORUM. A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as provided in section 11 of this Article III. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors, subject to the provisions of Section 310 of the California Corporations Code (as to approval of contracts or transactions in which a director has a direct or indirect material financial interest), Section 311 of that Code (as to appointment of committees), and Section 317 (e) of that Code (as to indemnification of directors). A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting. SECTION 10. WAIVER OF NOTICE. The transactions of any meeting of the Board of Directors, however called and noticed or wherever held, shall be as valid as though a meeting had been duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes. The waiver of notice or consent need not specify the purpose of the meeting. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Notice of a meeting shall also be deemed given to any director who attends the meeting without protesting before or at its commencement, the lack of notice to that director. SECTION 11. ADJOURNMENT. A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place. SECTION 12. NOTICE OF ADJOURNMENT. Notice of the time and place of holding an adjourned meeting need not be given, unless the meeting is adjourned for more than twenty four hours, in which case notice of the time and place shall be given before the time of the adjourned meeting, in the manner specified in Section 8 of this Article III, to the directors who were not present at the time of the adjournment. SECTION 13. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the Board of Directors may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to that action. Such action by written consent shall have the same force and effect as a unanimous vote of the Board of Directors. Such written consent or consents shall be filed with the minutes of the proceedings of the board. SECTION 14. FEES AND COMPENSATION OF DIRECTORS. Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement of expenses, as may be fixed or determined by resolution of the Board of Directors. This Section 14 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation for those services. 9 ARTICLE IV. COMMITTEES SECTION 1. COMMITTEES OF DIRECTORS. The Board of Directors may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of two or more directors, to serve at the pleasure of the board. The board may designate one or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. Any committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with respect to: (a) The approval of any action which, under the California Corporations Code, also requires shareholders' approval or approval of the outstanding shares; (b) The filling of vacancies on the Board of Directors or in any committee; (c) The fixing of compensation of the directors for serving on the board or on any committee; (d) the amendment or repeal of bylaws or the adoption of new bylaws. (e) the amendment or repeal of any resolutions of the Board of Directors which by its express terms is not so amendable or repealable; (f) a distribution to the shareholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the Board of Directors; (g) the appointment of any other committees of the Board of Directors or the members of these committees. SECTION 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Sections 5 (place of meetings), 7 (regular meetings), 8 (special meetings and notice), 9 (quorum), 10 (waiver of notice), 11 (adjournment), 12 (notice of adjournment), and 13 (action without meetings), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board of Directors and its members, except that the time of regular meetings of committees may be determined either by resolution of the Board of Directors or by resolution of the committee; special meetings of committees may also be called by resolution of the Board of Directors; and notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board of Directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws. 10 ARTICLE V. OFFICERS SECTION 1. OFFICERS. The officers of the corporation shall be a President, a Secretary, and a Chief Financial Officer. The corporation may also have, at the discretion of the Board of Directors, a Chairman of the Board, one or more Vice Presidents, one or more Assistant Secretaries, one or more Assistant Financial Officers, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article V. Any number of offices may be held by the same person. SECTION 2. ELECTION OF OFFICERS. The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article V, shall be chosen by the Board of Directors, and each shall serve at the pleasure of the board, subject to the rights, if any, of an officer under any contract of employment. SECTION 3. SUBORDINATE OFFICERS. The Board of Directors may appoint, and may empower the President to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the bylaws or as the Board of Directors may from time to time determine. SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board of Directors, at any regular or special meeting of the board, or, except in case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors. Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. SECTION 5. VACANCIES IN OFFICES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to that office. SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board shall, if present, preside at meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by the bylaws. The Chairman of the Board shall in addition be the Chief Executive Officer of the corporation until otherwise designated by the Board of Directors and shall, subject to the control of the Board of Directors, have general supervision, direction, and control of the business and the officers of the corporation. 11 SECTION 7. PRESIDENT. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there be such an officer, the President shall be the Chief Operating Officer of the corporation until otherwise designated by the Board of Directors and, in the absence of the Chairman of the Board, shall preside at all meetings of the Board of Directors. He shall have the general powers and duties of management usually vested in the office of president and chief operating officer of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or the bylaws. SECTION 8. VICE PRESIDENTS. In the absence or disability of the President, the Vice Presidents, if any, in order of their rank as fixed by the Board of Directors or, if not ranked, a Vice President designated by the Board of Directors, shall perform all the duties of the President, subject to all the restrictions upon the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or the bylaws, and the President, or the Chairman of the Board. SECTION 9. SECRETARY. The Secretary shall keep or cause to be kept, at the principal executive office or such other place as the Board of Directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and shareholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice given, the names of those present at directors' meetings or committee meetings, the number of shares present or represented at shareholders' meetings, and the proceedings. The Secretary shall keep, or cause to be kept, at the principal executive office or at the office of the corporation's transfer agent or registrar, as determined by resolution of the Board of Directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation The Secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the Board of Directors required by the bylaws or by law to be given, and he shall keep the seal of the corporation if one be adopted, in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by the bylaws. SECTION 10. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earning, and shares. The books of account shall at all. reasonable times be open to inspection by any director. The Chief Financial Officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, shall render to the President and directors, whenever they request it, an 12 account of all of his transactions as Chief Financial Officer and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the Board of Directors or the bylaws. ARTICLE VI. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS The corporation shall, to the maximum extent permitted by the California Corporations Code, indemnify each of its directors against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding arising by reason of the fact that any such person is or was a director of the corporation. Expenses incurred by any director in defending any proceedings shall be advanced by the corporation to the maximum extent permitted by the California Corporations Code. The corporation shall have the authority to the maximum extent permitted by the California Corporations Code, to indemnify each of its agents other than directors against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding arising by reason of the fact that any such person is or was an agent of the corporation. The corporation shall also have the authority, to the maximum extent permitted by the California Corporations Code, to advance expenses incurred by any agent of the corporation other than a director in defending any proceeding. The corporation shall have the authority to purchase and maintain insurance on behalf of agents of the corporation against any liability asserted against or incurred by any agent in such capacity or arising out of the agent's status as agent. For the purposes of this Article, an "agent" of the corporation includes any person who is or was a director, officer, employee, or other agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, or was a director, officer, employee, or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. For purposes of this Article, "proceeding" means any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative. For purposes of this Article, "expenses" includes, without limitation, attorneys' fees and any expenses of establishing a right to indemnification. ARTICLE VII. RECORDS AND REPORTS SECTION 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The corporation shall keep at its principal executive office, or at the office of its 13 transfer agent or registrar, if either be appointed and as determined by resolution of the Board of Directors, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each shareholder. A shareholder or shareholders of the corporation holding at least five percent (5%) in the aggregate of the outstanding voting shares of the corporation may (i) inspect and copy the records of shareholders' names and addresses and shareholdings during usual business hours on five (5) days prior written demand on the corporation, and (ii) obtain from the transfer agent of the corporation, on written demand and on the tender of such transfer agent's usual charges for such list, a list of the shareholders' names and addresses, who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which that list has been compiled or as of the date specified by the shareholder after the date of demand. This list shall be made available to any such shareholder by the transfer agent on or before the later of five (5) days after the demand is received or the date specified in the demand as the date as of which the list is to be compiled. The record of shareholders shall also be open to inspection on the written demand of any shareholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to the holder's interests as a shareholder or as the holder of a voting trust certificate. Any inspection and copying under this Section 1 may be made in person or by an agent or attorney of the shareholder or holder of a voting trust certificate making the demand. SECTION 2. MAINTENANCE AND INSPECTION OF BYLAWS. The corporation shall keep at its principal executive office, or if its principal executive office is not in the State of California, at its principal business office in this state, the original or a copy of the bylaws as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside the State of California and the corporation has no principal business office in this state, the Secretary shall, upon the written request of any shareholder, furnish to that shareholder a copy of the bylaws as amended to date. SECTION 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The accounting books and records and minutes of proceedings of the shareholders and the Board of Directors and any committee or committees of the Board of Directors shall be kept at such place or places designated by the Board of Directors, or, in the absence of such designation, at the principal executive office of the corporation. The minutes shall be kept either in written form or any other form capable of being converted into written form. The minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to the holder's interests as a shareholder or as the holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney, and shall include the right to copy and make extracts. These rights of inspection shall extend to the records of each subsidiary corporation of the corporation. SECTION 4. INSPECTION BY DIRECTORS. Every director shall have the absolute right at any reasonable time to inspect all books, records, and documents of every kind and the physical properties of the corporation and each of its subsidiary corporations. This 14 inspection by a director may be made in person or by an agent or attorney and the right of inspection includes the right to copy and make extracts of documents. SECTION 5. ANNUAL REPORT TO SHAREHOLDERS. The annual report to shareholders referred to in Section 1501 of the California Corporations Code is expressly dispensed with, but nothing herein shall be interpreted as prohibiting the Board of Directors from issuing annual or other periodic reports to the shareholders of the corporation as they consider appropriate. SECTION 6. FINANCIAL STATEMENTS. A copy of any annual financial statement and any income statement of the corporation for each quarterly period of each fiscal year, and any accompanying balance sheet of the corporation as of the end of each such period, that has been prepared by the corporation shall be kept on file in the principal executive office of the corporation for twelve (12) months and each such statement shall be exhibited at all reasonable times to any shareholder demanding an examination of any such statement or a copy shall be mailed to any such shareholder. If a shareholder or shareholders holding at least five percent (5%) of the outstanding shares of any class of stock of the corporation makes a written request to the corporation for an income statement of the corporation for the three-month, six (6) month or nine (9) month period of the then current fiscal year ended more than thirty (30) days before the date of the request, and a balance sheet of the corporation as of the end of that period, the Chief Financial Officer shall cause that statement to be prepared, if not already prepared, and shall deliver personally or mail that statement or statements to the person making the request within thirty (30) days after the receipt of the request. If the corporation has not sent to the shareholders its annual report for the last fiscal year, this report shall likewise be delivered or mailed to the shareholder or shareholders within thirty (30) days after the request. The corporation shall also, on the written request of any shareholder, mail to the shareholder a copy of the last annual, semi-annual, or quarterly income statement which it has prepared, and a balance sheet as of the end of that period. The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report, if any, of any independent accountants engaged by the corporation or the certificate of an authorized officer of the corporation that the financial statements were prepared without audit from the books and records of the corporation. SECTION 7. ANNUAL STATEMENT OF GENERAL INFORMATION. The corporation shall, during the period commencing on October 29 of each year and ending on January 29 of the immediately following year, file with the Secretary of State of the State of California, on the prescribed form, a statement setting forth the authorized number of directors, the names and complete business or residence addresses of all incumbent directors, the names and complete business or residence addresses of the Chief Executive Officer, Secretary, and Chief Financial Officer, the street address of its principal executive office or principal business office in this state, and the general type of business constituting the principal business activity of the corporation, together with a designation of the agent of the corporation for the purpose of service of process, all in compliance with Section 1502 of the California Corporations Code. 15 ARTICLE VIII. GENERAL CORPORATE MATTERS SECTION 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For purposes of determining the shareholders 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 other lawful action (other than Action by Shareholders by Written Consent Without a Meeting), the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days before any such action, and in that case only shareholders of record on the date so fixed are entitled to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided in the California Corporations Code. If the Board of Directors does not so fix a record date, the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the board adopts the applicable resolution or the sixtieth (60th) day before the date of that action, whichever is later. SECTION 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks, drafts, or other orders for payment of money, notes, or other evidences of indebtedness, issued in the name or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board of Directors. SECTION 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board of Directors, except as otherwise provided in these bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation, and this authority may be general or confined to specific instances; and, unless so authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent, or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. SECTION 4. CERTIFICATES FOR SHARES. A certificate or certificates for shares of the capital stock of the corporation shall be issued to each shareholder when any of these shares are fully paid, and the Board of Directors may authorize the issuance of certificates or shares as partly paid provided that these certificates shall state the amount of the consideration to be paid for them and the amount paid. All certificates shall be signed in the name of the corporation by the Chairman of the Board or Vice Chairman of the Board or the President or Vice President and by the Chief Financial Officer or an Assistant Financial Officer or the Secretary or any Assistant Secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed on a certificate shall have ceased to be that officer, transfer agent, or 16 registrar before that certificate is issued, it may be issued by the corporation with the same effect as if that person were an officer, transfer agent or registrar at the date of issue. SECTION 5. LOST CERTIFICATES. Except as provided in this Section 5, no new certificates for shares shall be issued to replace an old certificate unless the latter is surrendered to the corporation and cancelled at the same time. The Board of Directors may, in case any share certificate or certificate for any other security is lost, stolen, or destroyed, authorize the issuance of a replacement certificate on such terms and conditions as the board may require, including provision for indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft, or destruction of the certificate or the issuance of the replacement certificate. SECTION 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The Chairman of the Board, the President, or any Vice President, or any other person authorized by resolution of the Board of Directors or by any of the foregoing designated officers, is authorized to vote on behalf of the corporation any and all shares of any other corporation or corporations, foreign or domestic, standing in the name of the corporation. The authority granted to these officers to vote or represent on behalf of the corporation any and all shares held by the corporation in any other corporation or corporations may be exercised by any of these officers in person or by any person authorized to do so by a proxy duly executed by these officers. SECTION 7. CONSTRUCTION AND DEFINITIONS. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the California Corporations Code shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person. ARTICLE IX. AMENDMENTS SECTION 1. AMENDMENT BY SHAREHOLDERS. New bylaws may be adopted or these bylaws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that if the Articles of Incorporation of the corporation set forth the number of authorized directors of the corporation, the authorized number of directors may be changed only by an amendment of the Articles of Incorporation. SECTION 2. AMENDMENT BY DIRECTORS. Subject to the rights of the shareholders as provided in Section 1 of this Article IX, to adopt, amend, or repeal bylaws, bylaws may be adopted, amended, or repealed by the Board of Directors, provided, however, that the Board of Directors may adopt a bylaw or amendment of a bylaw changing the authorized number of directors only for the purpose of fixing the exact number of directors within the limits specified, if any, in the Articles of Incorporation or in Section 2 of Article III of these bylaws. 17 EX-4.6 14 a2082596zex-4_6.txt EXHIBIT 4.6 EXHIBIT 4.6 ================================================================================ REGISTRATION RIGHTS AGREEMENT Dated as of June 7, 2002 Among TRANSDIGM INC. and THE GUARANTORS NAMED HEREIN, as Issuers, and THE INITIAL PURCHASERS NAMED HEREIN, 10 3/8% Senior Subordinated Notes due 2008 ================================================================================ REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "AGREEMENT") is dated as of June 7, 2002, among TRANSDIGM INC., a Delaware corporation (the "COMPANY"), as issuer, and the other entities listed on the signature page hereto, as guarantors (the "GUARANTORS" and, together with the Company, the "ISSUERS"), and the Initial Purchasers named herein, as initial purchasers (the "INITIAL PURCHASERS"). This Agreement is entered into in connection with the Purchase Agreement, dated as of June 4, 2002, among the Issuers and the Initial Purchasers (the "PURCHASE AGREEMENT"), which provides for, among other things, the sale by the Company to the Initial Purchasers of $75,000,000 aggregate principal amount of the Company's 10 3/8% Senior Subordinated Notes due 2008 (the "NOTES"), guaranteed by the Guarantors (the "GUARANTEES"). The Notes and the Guarantees are collectively referred to herein as the "SECURITIES". In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Issuers have agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchasers and any subsequent holder or holders of the Securities. The execution and delivery of this Agreement is a condition to the Initial Purchasers' obligation to purchase the Securities under the Purchase Agreement. The parties hereby agree as follows: 1. DEFINITIONS As used in this Agreement, the following terms shall have the following meanings: ADDITIONAL INTEREST: See Section 4 hereof. ADVICE: See the last paragraph of Section 5 hereof. APPLICABLE PERIOD: See Section 2 hereof. COMPANY: See the introductory paragraphs hereto. EFFECTIVENESS DATE: The 160th day after the Issue Date; PROVIDED, HOWEVER, that with respect to any Shelf Registration, the Effectiveness Date shall be the 160th day after the delivery of a Shelf Notice as required pursuant to Section 2(c) hereof. EFFECTIVENESS PERIOD: See Section 3 hereof. EVENT DATE: See Section 4 hereof. -2- EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. EXCHANGE NOTES: See Section 2 hereof. EXCHANGE OFFER: See Section 2 hereof. EXCHANGE OFFER REGISTRATION STATEMENT: See Section 2 hereof. FILING DATE: (A) If no Exchange Offer Registration Statement has been filed by the Issuers pursuant to this Agreement, the 70th day after the Issue Date; and (B) with respect to a Shelf Registration Statement, the 70th day after the delivery of a Shelf Notice as required pursuant to Section 2(c) hereof. GUARANTEES: See the introductory paragraphs hereto. GUARANTORS: See the introductory paragraphs hereto. HOLDER: Any holder of a Registrable Note or Registrable Notes. INDEMNIFIED PERSON: See Section 7(c) hereof. INDEMNIFYING PERSON: See Section 7(c) hereof. INDENTURE: The Indenture, dated as of December 3, 1998, as supplemented on April 23, 1999 and June 26, 2001, by and among the Issuers and State Street Bank and Trust Company, as trustee, pursuant to which the Securities are being issued, as the same may be amended or supplemented from time to time in accordance with the terms thereof. INITIAL PURCHASERS: See the introductory paragraphs hereto. INITIAL SHELF REGISTRATION: See Section 3(a) hereof. INSPECTORS: See Section 5(m) hereof. ISSUE DATE: June 7, 2002, the date of original issuance of the Notes. ISSUERS: See the introductory paragraphs hereto. NASD: See Section 5(r) hereof. NOTES: See the introductory paragraphs hereto. -3- OFFERING MEMORANDUM: The final offering memorandum of the Company dated June 4, 2002, in respect of the offering of the Securities. PARTICIPANT: See Section 7(a) hereof. PARTICIPATING BROKER-DEALER: See Section 2 hereof. PERSON: An individual, trustee, corporation, partnership, limited liability company, joint stock company, trust, unincorporated association, union, business association, firm or other legal entity. PRIVATE EXCHANGE: See Section 2 hereof. PRIVATE EXCHANGE NOTES: See Section 2 hereof. PROSPECTUS: The prospectus included in any Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act and any term sheet filed pursuant to Rule 434 under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. PURCHASE AGREEMENT: See the introductory paragraphs hereof. RECORDS: See Section 5(m) hereof. REGISTRABLE NOTES: Each Security upon its original issuance and at all times subsequent thereto, each Exchange Note (and the related Guarantee) as to which Section 2(c)(iv) hereof is applicable upon original issuance and at all times subsequent thereto and each Private Exchange Note (and the related Guarantee) upon original issuance thereof and at all times subsequent thereto, until (i) a Registration Statement (other than, with respect only to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the Exchange Offer Registration Statement) covering such Security, Exchange Note or Private Exchange Note has been declared effective by the SEC and such Security, Exchange Note or such Private Exchange Note (and the related Guarantees), as the case may be, has been disposed of in accordance with such effective Registration Statement, (ii) such Security has been exchanged pursuant to the Exchange Offer for an Exchange Note or Exchange Notes (and the related Guarantees) that may be resold without restriction under state and federal securities laws, (iii) such Security, Exchange Note or Private Exchange Note (and the related Guarantees), as the case may be, ceases to be outstanding for purposes of the Indenture or (iv) such Security, -4- Exchange Note or Private Exchange Note (and the related Guarantees), as the case may be, may be resold without restriction pursuant to Rule 144 (or any similar provision then in force) under the Securities Act. REGISTRATION STATEMENT: Any registration statement of the Issuers that covers any of the Notes, the Exchange Notes or the Private Exchange Notes (and the related Guarantees) filed with the SEC under the Securities Act, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. RULE 144: Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of the issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. RULE 144A: Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC. RULE 415: Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. SEC: The Securities and Exchange Commission. SECURITIES: See the introductory paragraphs hereto. SECURITIES ACT: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. SHELF NOTICE: See Section 2 hereof. SHELF REGISTRATION: See Section 3(b) hereof. SUBSEQUENT SHELF REGISTRATION: See Section 3(b) hereof. TIA: The Trust Indenture Act of 1939, as amended. TRUSTEE: The trustee under the Indenture and the trustee (if any) under any indenture governing the Exchange Notes and Private Exchange Notes (and the related Guarantees). -5- UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in which securities of one or more of the Issuers are sold to an underwriter for reoffering to the public. 2. EXCHANGE OFFER (a) To the extent not prohibited by any applicable law or applicable interpretation of the staff of the SEC, the Issuers shall file with the SEC, no later than the Filing Date, a Registration Statement (the "EXCHANGE OFFER REGISTRATION STATEMENT") on an appropriate registration form with respect to a registered offer (the "EXCHANGE OFFER") to exchange any and all of the Registrable Notes for a like aggregate principal amount of notes of the Company, guaranteed by the Guarantors, that are identical in all material respects to the Securities (the "EXCHANGE NOTES"), except that (i) the Exchange Notes shall contain no restrictive legend thereon and (ii) interest thereon shall accrue from the last date on which interest was paid on the Notes or, if no such interest has been paid, from the Issue Date, and which are entitled to the benefits of the Indenture or a trust indenture which is identical in all material respects to the Indenture (other than such changes to the Indenture or any such identical trust indenture as are necessary to comply with the TIA) and which, in either case, has been qualified under the TIA. The Exchange Offer shall comply with all applicable tender offer rules and regulations under the Exchange Act and other applicable law. The Issuers shall use their reasonable best efforts to (x) cause the Exchange Offer Registration Statement to be declared effective under the Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer open for at least 20 days (or longer if required by applicable law) after the date that notice of the Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer on or prior to the 195th day after the Issue Date. If, after the Exchange Offer Registration Statement is initially declared effective by the SEC, the Exchange Offer or the issuance of the Exchange Notes thereunder is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, the Exchange Offer Registration Statement shall be deemed not to have become effective for purposes of this Agreement during the period of such interference, until the Exchange Offer may legally resume. Each Holder that participates in the Exchange Offer will be required, as a condition to its participation in the Exchange Offer, to represent to the Issuers in writing (which may be contained in the applicable letter of transmittal) that: (i) any Exchange Notes to be received by it will be acquired in the ordinary course of its business, (ii) at the time of the consummation of the Exchange Offer such Holder will have no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes in violation of the provisions of the Securities Act, (iii) such Holder is not an affiliate of the Company within the meaning of the Securities Act (iv) if such Holder is not a broker-dealer, such Holder is not engaged in, and does not intend to engage in, the distribution of Exchange Notes, (v) if such Holder is a broker-dealer that will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market-making or other trading activities, such Holder will deliver a prospectus in connection with any resale of such Exchange Notes and -6- (vi) the Holder is not acting on behalf of any persons or entities who could not truthfully make the foregoing representations. Such Holder will also be required to make such other representations as may be necessary under applicable SEC rules, regulations or interpretations to render available the use of Form S-4 or any other appropriate form under the Securities Act. Upon consummation of the Exchange Offer in accordance with this Section 2, the provisions of this Agreement shall continue to apply solely with respect to Registrable Notes that are Private Exchange Notes, Exchange Notes as to which Section 2(c)(iv) is applicable and Exchange Notes held by Participating Broker-Dealers (as defined), and the Issuers shall have no further obligation to register Registrable Notes (other than Private Exchange Notes and other than in respect of any Exchange Notes as to which clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof. No securities other than the Exchange Notes shall be included in the Exchange Offer Registration Statement. (b) The Issuers shall include within the Prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange Offer (a "PARTICIPATING BROKER-DEALER"), whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies represent the prevailing views of the staff of the SEC. Such "Plan of Distribution" section shall also expressly permit, to the extent permitted by applicable policies and regulations of the SEC, the use of the Prospectus by all Persons subject to the prospectus delivery requirements of the Securities Act, including, to the extent permitted by applicable policies and regulations of the SEC, all Participating Broker-Dealers, and include a statement describing the means by which Participating Broker-Dealers may resell the Exchange Notes in compliance with the Securities Act. The Issuers shall use their best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the Prospectus contained therein in order to permit such Prospectus to be lawfully delivered by all Persons subject to the prospectus delivery requirements of the Securities Act for such period of time as is necessary to comply with applicable law in connection with any resale of the Exchange Notes covered thereby, PROVIDED, HOWEVER, that such period shall not be required to exceed 195 days, or such longer period if extended pursuant to the last sentence of Section 5 (the "APPLICABLE PERIOD"). If, prior to consummation of the Exchange Offer, the Initial Purchasers hold any Notes acquired by them that have the status of an unsold allotment in the initial distribution, the Issuers upon the request of the Initial Purchasers shall simultaneously with the delivery -7- of the Exchange Notes in the Exchange Offer, issue and deliver to the Initial Purchasers, in exchange (the "PRIVATE EXCHANGE") for such Notes held by the Initial Purchasers, a like principal amount of notes (the "PRIVATE EXCHANGE NOTES") of the Issuers, guaranteed by the Guarantors, that are identical in all material respects to the Exchange Notes except for the placement of a restrictive legend on such Private Exchange Notes. The Private Exchange Notes shall be issued pursuant to the same indenture as the Exchange Notes and bear the same CUSIP number as the Exchange Notes. In connection with the Exchange Offer, the Issuers shall: (1) mail, or cause to be mailed, to each Holder of record entitled to participate in the Exchange Offer a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (2) use their best efforts to keep the Exchange Offer open for not less than 20 days after the date that notice of the Exchange Offer is mailed to Holders (or longer if required by applicable law); (3) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York; (4) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last business day on which the Exchange Offer shall remain open; and (5) otherwise comply in all material respects with all applicable laws, rules and regulations. As soon as practicable after the close of the Exchange Offer and the Private Exchange, if any, the Issuers shall: (1) accept for exchange all Registrable Notes validly tendered and not validly withdrawn pursuant to the Exchange Offer and the Private Exchange, if any; (2) deliver to the Trustee for cancellation all Registrable Notes so accepted for exchange; and (3) cause the Trustee to authenticate and deliver promptly to each Holder of Securities, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Securities of such Holder so accepted for exchange. -8- The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than that (i) the Exchange Offer or the Private Exchange, as the case may be, does not violate applicable law or any applicable interpretation of the staff of the SEC, (ii) no action or proceeding shall have been instituted or threatened in any court or by any governmental agency which might materially impair the ability of the Issuers to proceed with the Exchange Offer or the Private Exchange, (iii) all governmental approvals shall have been obtained, which approvals the Issuers deem necessary for the consummation of the Exchange Offer or the Private Exchange, (iv) there has not been any material change, or development involving a prospective material change, in the business or financial affairs of the Issuers which, in the reasonable judgment of the Issuers, would materially impair the Issuers' ability to consummate the Exchange Offer or the Private Exchange, and (v) there has not been proposed, adopted or enacted any law, statute, rule or regulation which, in the reasonable judgment of the Issuers, would materially impair the Issuers' ability to consummate the Exchange Offer or the Private Exchange or have a material adverse effect on the Issuers if the Exchange Offer or the Private Exchange was consummated. In the event that the Issuers are unable to consummate the Exchange Offer or the Private Exchange due to any event listed in clauses (i) through (v) above, the Issuers shall not be deemed to have breached any covenant under this Section 2. The Exchange Notes and the Private Exchange Notes shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture and which, in either case, has been qualified under the TIA or is exempt from such qualification and shall provide that the Exchange Notes shall not be subject to the transfer restrictions set forth in the Indenture. The Indenture or such indenture shall provide that the Exchange Notes, the Private Exchange Notes and the Securities shall vote and consent together on all matters as one class and that none of the Exchange Notes, the Private Exchange Notes or the Securities will have the right to vote or consent as a separate class on any matter. (c) If (i) because of any change in law or in currently prevailing interpretations of the staff of the SEC, the Issuers are not permitted to effect the Exchange Offer, (ii) the Exchange Offer is not consummated within 195 days of the Issue Date, (iii) the holder of Private Exchange Notes so requests in writing to the Issuers within 60 days after the consummation of the Exchange Offer, or (iv) in the case of any Holder that participates in the Exchange Offer, such Holder does not receive Exchange Notes on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such Holder as an affiliate of one of the Issuers within the meaning of the Securities Act), then in the case of each of clauses (i) to and including (iv) of this sentence, the Issuers shall promptly deliver to the Holders and the Trustee written notice thereof (the "SHELF NOTICE") and shall file a Shelf Registration pursuant to Section 3 hereof. -9- 3. SHELF REGISTRATION If at any time a Shelf Notice is delivered as contemplated by Section 2(c) hereof, then: (a) SHELF REGISTRATION. The Issuers shall file with the SEC a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is applicable (the "INITIAL SHELF REGISTRATION"). The Issuers shall use their best efforts to file with the SEC the Initial Shelf Registration on or before the applicable Filing Date. The Initial Shelf Registration shall be on Form S-1 or another appropriate form permitting registration of such Registrable Notes for resale by Holders in the manner or manners designated by them (including, without limitation, one or more underwritten offerings). The Issuers shall not permit any securities other than the Registrable Notes to be included in the Initial Shelf Registration or any Subsequent Shelf Registration (as defined below). The Issuers shall, subject to applicable law or applicable interpretation of the staff of the SEC, use their reasonable best efforts to cause the Initial Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date and to keep the Initial Shelf Registration continuously effective under the Securities Act until the date which is two years from the Issue Date or such shorter period ending when (i) all Registrable Notes covered by the Initial Shelf Registration have been sold in the manner set forth and as contemplated in the Initial Shelf Registration or cease to be outstanding or (ii) a Subsequent Shelf Registration covering all of the Registrable Notes covered by and not sold under the Initial Shelf Registration or an earlier Subsequent Shelf Registration has been declared effective under the Securities Act (the "EFFECTIVENESS PERIOD"), PROVIDED, HOWEVER, that the Effectiveness Period in respect of the Initial Shelf Registration shall be extended to the extent required to permit dealers to comply with the applicable prospectus delivery requirements of Rule 174 under the Securities Act and as otherwise provided herein. No holder of Registrable Notes may include any of its Registrable Notes in any Shelf Registration Statement pursuant to this Agreement unless and until such holder furnishes to the Company in writing, within 15 business days after receipt of a request therefor, such information concerning such Holder required to be included in any Shelf Registration Statement or Prospectus or preliminary prospectus included therein. No holder of Registrable Notes shall be entitled to Additional Interest pursuant to Section 4 hereof unless and until such holder shall have provided all such information. Each holder of Registrable Notes as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make information previously furnished to the Company by such Holder not materially misleading. -10- (b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf Registration or any Subsequent Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the securities registered thereunder), the Issuers shall use their reasonable best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 30 days of such cessation of effectiveness amend the Initial Shelf Registration in a manner to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional "shelf" Registration Statement pursuant to Rule 415 covering all of the Registrable Notes covered by and not sold under the Initial Shelf Registration or an earlier Subsequent Shelf Registration (each, a "SUBSEQUENT SHELF REGISTRATION"). If a Subsequent Shelf Registration is filed, the Issuers shall use their best efforts to cause the Subsequent Shelf Registration to be declared effective under the Securities Act as soon as practicable after such filing and to keep such subsequent Shelf Registration continuously effective for a period equal to the number of days in the Effectiveness Period less the aggregate number of days during which the Initial Shelf Registration or any Subsequent Shelf Registration was previously continuously effective. As used herein the term "SHELF REGISTRATION" means the Initial Shelf Registration and any Subsequent Shelf Registration. (c) SUPPLEMENTS AND AMENDMENTS. The Issuers shall promptly supplement and amend any Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, if required by the Securities Act, or if reasonably requested by the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement or by any underwriter of such Registrable Notes. 4. ADDITIONAL INTEREST (a) The Issuers and the Initial Purchasers agree that the Holders will suffer damages if the Issuers fail to fulfill their obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Issuers agree to pay, as liquidated damages, additional interest on the Notes ("ADDITIONAL INTEREST") under the circumstances and to the extent set forth below (each of which shall be given independent effect): (i) if (A) neither the Exchange Offer Registration Statement nor the Initial Shelf Registration has been filed on or prior to the applicable Filing Date or (B) notwithstanding that the Issuers have consummated or will consummate the Exchange Offer, the Issuers are required to file a Shelf Registration and such Shelf Registration is not filed on or prior to the Filing Date applicable thereto, then, commencing on the day after any such Filing Date, Additional Interest shall accrue on the principal amount of the Securities at a rate of 0.50% per annum for the first 90 days immediately following each such Filing Date, and such Additional Interest rate shall increase -11- by an additional 0.50% per annum at the beginning of each subsequent 90-day period; or (ii) if (A) neither the Exchange Offer Registration Statement nor the Initial Shelf Registration is declared effective by the SEC on or prior to the relevant Effectiveness Date or (B) notwithstanding that the Issuers have consummated or will consummate the Exchange Offer, the Issuers are required to file a Shelf Registration and such Shelf Registration is not declared effective by the SEC on or prior to the Effectiveness Date in respect of such Shelf Registration, then, commencing on the day after such Effectiveness Date, Additional Interest shall accrue on the principal amount of the Securities at a rate of 0.50% per annum for the first 90 days immediately following the day after such Effectiveness Date, and such Additional Interest rate shall increase by an additional 0.50% per annum at the beginning of each subsequent 90-day period; or (iii) if (A) the Issuers have not exchanged Exchange Notes for all Securities validly tendered in accordance with the terms of the Exchange Offer on or prior to the 195th day after the Issue Date or (B) if applicable, a Shelf Registration has been declared effective and such Shelf Registration ceases to be effective at any time during the Effectiveness Period, then Additional Interest shall accrue on the principal amount of the Securities at a rate of 0.50% per annum for the first 90 days commencing on the (x) 196th day, as the case may be, after such effective date, in the case of (A) above, or (y) the day such Shelf Registration ceases to be effective in the case of (B) above, and such Additional Interest rate shall increase by an additional 0.50% per annum at the beginning of each such subsequent 90-day period; PROVIDED, HOWEVER, that the Additional Interest rate on the Notes may not accrue under more than one of the foregoing clauses (i)-(iii) at any one time and at no time shall the aggregate amount of Additional Interest exceed 1.00% per annum; PROVIDED, FURTHER, HOWEVER, that (1) upon the filing of the applicable Exchange Offer Registration Statement or the applicable Shelf Registration Statement as required hereunder (in the case of clause (i) above of this Section 4), (2) upon the effectiveness of the Exchange Offer Registration Statement or the applicable Shelf Registration Statement as required hereunder (in the case of clause (ii) of this Section 4), or (3) upon the exchange of the applicable Exchange Notes for all Securities tendered (in the case of clause (iii)(A) of this Section 4), or upon the effectiveness of the applicable Shelf Registration Statement which had ceased to remain effective (in the case of (iii)(B) of this Section 4), Additional Interest on the Notes in respect of which such events relate as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. (b) The Issuers shall notify the Trustee within three business days after each and every date on which an event occurs in respect of which Additional Interest is required -12- to be paid (an "EVENT DATE"). Any amounts of Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable in cash semiannually on each June 1 and December 1, (to the holders of record on the May 15 and November 15 immediately preceding such dates), commencing with the first such date occurring after any such Additional Interest commences to accrue. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the principal amount of the Registrable Notes, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed), and the denominator of which is 360. 5. REGISTRATION PROCEDURES In connection with the filing of any Registration Statement pursuant to Sections 2 or 3 hereof, the Issuers shall effect such registrations to permit the sale of the securities covered thereby in accordance with the intended method or methods of disposition thereof, and pursuant thereto and in connection with any Registration Statement filed by the Issuers hereunder each of the Issuers shall: (a) Prepare and file with the SEC prior to the applicable Filing Date, a Registration Statement or Registration Statements as prescribed by Sections 2 or 3 hereof, and use their reasonable best efforts to cause each such Registration Statement to become effective and remain effective as provided herein; PROVIDED, HOWEVER, that, if (1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period relating thereto, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Issuers shall furnish to and afford the Holders of the Registrable Notes included in such Registration Statement or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed (in each case at least five days prior to such filing, or such later date as is reasonable under the circumstances). The Issuers shall not file any Registration Statement or Prospectus or any amendments or supplements thereto if the Holders of a majority in aggregate principal amount of the Registrable Notes included in such Registration Statement, or any such Participating Broker-Dealer, as the case may be, their counsel, or the managing underwriters, if any, shall reasonably object on a timely basis. (b) Prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration Statement or Exchange Offer Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously -13- effective for the Effectiveness Period or the Applicable Period, as the case may be; cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act applicable to each of them with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus. The Issuers shall be deemed not to have used their reasonable best efforts to keep a Registration Statement effective during the Effectiveness Period or the Applicable Period, as the case may be, relating thereto if any Issuer voluntarily takes any action that would result in selling Holders of the Registrable Notes covered thereby or Participating Broker-Dealers seeking to sell Exchange Notes not being able to sell such Registrable Notes or such Exchange Notes during that period unless such action is required by applicable law or permitted by this Agreement. (c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period relating thereto from whom the Issuers have received written notice that it will be a Participating Broker-Dealer in the Exchange Offer, notify the selling Holders of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, if any, promptly (but in any event within two business days), and confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any applicable Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request in writing, obtain, at the sole expense of the Issuers, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose, (iii) if at any time when a prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Notes or resales of Exchange Notes by Participating Broker-Dealers the representations and warranties of the Issuers contained in any agreement (including any underwriting agreement) contemplated by Section 5(l) hereof cease to be true and correct in all material respects, (iv) of the receipt by any Issuer of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (v) of the happening of any event, the existence of any condition or -14- any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in or amendments or supplements to such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the Issuers' determination that a post-effective amendment to a Registration Statement would be appropriate. (d) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use its reasonable best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued, to use its reasonable best efforts to obtain the withdrawal of any such order at the earliest possible moment. (e) If a Shelf Registration is filed pursuant to Section 3 and if requested by the managing underwriter or underwriters (if any), the Holders of a majority in aggregate principal amount of the Registrable Notes being sold in connection with an underwritten offering or any Participating Broker-Dealer, (i) as promptly as practicable incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters (if any), such Holders, any Participating Broker-Dealer or counsel for any of them reasonably request to be included therein, (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after an Issuer has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment, and (iii) supplement or make amendments to such Registration Statement. (f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, furnish to each selling Holder of Registrable Notes and to each such Participating Broker-Dealer who so requests and to their respective counsel and each managing underwriter, if any, at the sole expense of the Issuers, one conformed copy of the Registration Statement or Registration Statements and each -15- post-effective amendment thereto, including financial statements and schedules, and, if requested in writing, all documents incorporated or deemed to be incorporated therein by reference and all exhibits. (g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, deliver to each selling Holder of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their respective counsel, and the underwriters, if any, at the sole expense of the Issuers, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and if requested in writing, any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, the Issuers hereby consent to the use of such Prospectus and each amendment or supplement thereto (provided the manner of such use complies with any limitations resulting from any applicable state securities "Blue Sky" laws as provided in writing to such Holders by the Company and subject to the provisions of this Agreement) each of the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Registrable Notes covered by, or the sale by Participating Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Notes or any delivery of a Prospectus contained in the Exchange Offer Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use its best efforts to register or qualify, and to cooperate with the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, the managing underwriter or underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Notes for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer, or the managing underwriter or underwriters reasonably request in writing; PROVIDED, HOWEVER, that where Exchange Notes held by Participating Broker-Dealers or Registrable Notes are offered other than through an underwritten offering, the Issuers agree to cause their counsel to perform Blue Sky investigations and file registrations and qualifications required to be filed pursuant to this Section 5(h), keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Exchange Notes held by Participating Broker-Dealers or the Registrable Notes covered by the applicable Registration Statement; PROVIDED, HOWEVER, that no Issuer shall be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action -16- that would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction where it is not then so subject. (i) If a Shelf Registration is filed pursuant to Section 3 hereof, cooperate with the selling Holders of Registrable Notes and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Notes to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or selling Holders may reasonably request. (j) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, upon the occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and (subject to Section 5(a) hereof) file with the SEC, at the sole expense of the Issuers, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes being sold thereunder or to the purchasers of the Exchange Notes to whom such Prospectus will be delivered by a Participating Broker-Dealer, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, the Issuers shall not be required to amend or supplement a Registration Statement, any related Prospectus or any document incorporated therein by reference, in the event that, and for a period not to exceed an aggregate of 60 days in any calendar year if, (i) an event occurs and is continuing as a result of which the Shelf Registration would, in the Issuers' good faith judgment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (ii) (a) the Issuers determine in their good faith judgment that the disclosure of such event at such time would have a material adverse effect on the business, operations or prospects of the Issuers or (b) the disclosure otherwise relates to a pending material business transaction that has not yet been publicly disclosed. (k) Prior to the effective date of the first Registration Statement relating to the Registrable Notes, (i) provide the Trustee with certificates for the Registrable Notes in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Registrable Notes. -17- (l) In connection with any underwritten offering of Registrable Notes pursuant to a Shelf Registration, enter into an underwriting agreement as is customary in underwritten offerings of debt securities similar to the Securities in form and substance reasonably satisfactory to the Issuers and take all such other actions as are reasonably requested by the managing underwriter or underwriters in order to expedite or facilitate the registration or the disposition of such Registrable Notes and, in such connection, (i) make such representations and warranties to, and covenants with, the underwriters with respect to the business of the Issuers and the subsidiaries of the Issuers (including any acquired business, properties or entity, if applicable) and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings of debt securities similar to the Securities, and confirm the same in writing if and when requested in form and substance reasonably satisfactory to the Issuers; (ii) upon the request of Holders of 10% of the Registrable Notes, obtain the written opinions of counsel to the Issuers and written updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters, addressed to the underwriters covering the matters customarily covered in opinions reasonably requested in underwritten offerings and such other matters as may be reasonably requested by the managing underwriter or underwriters; (iii) upon the request of Holders of 10% of the Registrable Notes, use its reasonable best efforts to obtain "cold comfort" letters and updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters from the independent public accountants of the Issuers (and, if necessary, any other independent public accountants of the Issuers, any subsidiary of the Issuers or of any business acquired by the Issuers for which financial statements and financial data are, or are required to be, included or incorporated by reference in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings of debt securities similar to the Securities and such other matters as reasonably requested by the managing underwriter or underwriters as permitted by the Statement on Auditing Standards No. 72; and (iv) if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable to the sellers and underwriters, if any, than those set forth in Section 7 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Notes covered by such Registration Statement and the managing underwriter or underwriters or agents, if any). The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder. (m) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, make available for inspection by any selling Holder of such Registrable Notes being sold, or each such Participating Broker- -18- Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Notes, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "INSPECTORS"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and instruments of the Issuers and subsidiaries of the Issuers (collectively, the "RECORDS") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Issuers and any of their subsidiaries to supply all information reasonably requested by any such Inspector in connection with such Registration Statement and Prospectus. The foregoing inspection and information gathering shall be coordinated on behalf of the other parties by one counsel designated by such parties as described in Section 6(b) hereof. Each Inspector shall agree in writing that it will keep the Records confidential and that it will not disclose any of the Records that the Issuers determine, in good faith, to be confidential (i) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, or (ii) the information in such Records has been made generally available to the public; PROVIDED, HOWEVER, that prior notice shall be provided as soon as practicable to the Issuers of the potential disclosure of any information by such Inspector pursuant to clause (i) of this sentence to permit the Issuers to obtain a protective order or take other appropriate action to prevent the disclosure of such information at the Company's sole expense (or waive the provisions of this paragraph (m)) and that such Inspector shall take such actions as are reasonably necessary to protect the confidentiality of such information (if practicable) to the extent such action is otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of the Holder or any Inspector. (n) Provide an indenture trustee for the Registrable Notes or the Exchange Notes, as the case may be, and cause the Indenture or the trust indenture provided for in Section 2(a) hereof, as the case may be, to be qualified under the TIA not later than the effective date of the first Registration Statement relating to the Registrable Notes; and in connection therewith, cooperate with the trustee under any such indenture and the Holders of the Registrable Notes to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use its best efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable such indenture to be so qualified in a timely manner. (o) Comply with all applicable rules and regulations of the SEC and make generally available to its securityholders with regard to any applicable Registration Statement, a consolidated earnings statement satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 60 days after the end of any fiscal quarter (or 120 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Notes are sold to underwriters in a firm commitment or best efforts underwritten -19- offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Issuers after the effective date of a Registration Statement, which statements shall cover said 12-month periods. (p) Upon consummation of the Exchange Offer or a Private Exchange, obtain an opinion of counsel to the Issuers, in a form customary for underwritten transactions, addressed to the Trustee for the benefit of all Holders of Registrable Notes participating in the Exchange Offer or the Private Exchange, as the case may be, that the Exchange Notes or Private Exchange Notes, as the case may be, the related Guarantee and the related indenture constitute legal, valid and binding obligations of the Issuers, enforceable against them in accordance with their respective terms, subject to customary exceptions and qualifications. (q) If the Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Notes by Holders to the Issuers (or to such other Person as directed by the Issuers) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Issuers shall mark, or cause to be marked, on such Registrable Notes that such Registrable Notes are being cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall such Registrable Notes be marked as paid or otherwise satisfied. (r) Cooperate with each seller of Registrable Notes covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Notes and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"). (s) Use their reasonable best efforts to take all other steps reasonably necessary to effect the registration of the Registrable Notes covered by a Registration Statement contemplated hereby. The Issuers may require each seller of Registrable Notes as to which any registration is being effected to furnish to the Issuers such information regarding such seller and the distribution of such Registrable Notes as the Issuers may, from time to time, reasonably request. The Issuers may exclude from such registration the Registrable Notes of any seller so long as such seller fails to furnish such information within a reasonable time after receiving such request. Each seller as to which any Shelf Registration is being effected agrees to furnish promptly to the Issuers all information required to be disclosed in order to make the information previously furnished to the Issuers by such seller not materially misleading. Each Holder of Registrable Notes and each Participating Broker-Dealer agrees by its acquisition of such Registrable Notes or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, that, upon actual receipt of any notice from the Issuers of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or -20- 5(c)(vi) hereof, such Holder will forthwith discontinue disposition of such Registrable Notes covered by such Registration Statement or Prospectus or Exchange Notes to be sold by such Holder or Participating Broker-Dealer, as the case may be, until such Holder's or Participating Broker-Dealer's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(j) hereof, or until it is advised in writing (the "ADVICE") by the Issuers that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto. In the event that the Issuers shall give any such notice, the Applicable Period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each seller of Registrable Notes covered by such Registration Statement or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(j) hereof or (y) the Advice. 6. REGISTRATION EXPENSES (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Issuers (other than any underwriting discounts or commissions) shall be borne by the Issuers including, without limitation, (i) all registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with an underwritten offering and (b) reasonable fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, fees and disbursements of counsel in connection with Blue Sky qualifications of the Registrable Notes or Exchange Notes and determination of the eligibility of the Registrable Notes or Exchange Notes for investment under the laws of such jurisdictions (x) where the holders of Registrable Notes are located, in the case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange Notes to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses, including, without limitation, expenses of printing certificates for Registrable Notes or Exchange Notes in a form eligible for deposit with The Depository Trust Company and of printing prospectuses if the printing of prospectuses is requested by the managing underwriter or underwriters, if any, by the Holders of a majority in aggregate principal amount of the Registrable Notes included in any Registration Statement or in respect of Registrable Notes or Exchange Notes to be sold by any Participating Broker-Dealer during the Applicable Period, as the case may be, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Issuers, (v) fees and disbursements of all independent certified public accountants referred to in Section 5(l)(iii) hereof (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance), (vi) Securities Act liability insurance, if the Issuers desire such insurance, (vii) fees and expenses of all other Persons retained by the Issuers, (viii) internal expenses of the Issuers (including, without limitation, all salaries and expenses of officers and employees of the Issuers performing legal or accounting duties), (ix) the expense of any annual audit, (x) any fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, and -21- the obtaining of a rating of the securities, in each case, if applicable, and (xi) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, indentures and any other documents necessary in order to comply with this Agreement. (b) The Issuers shall (i) reimburse the Holders of the Registrable Notes being registered in a Shelf Registration or the reasonable fees and disbursements of not more than one counsel (in addition to appropriate local counsel) chosen by the Holders of a majority in aggregate principal amount of the Registrable Notes to be included in such Registration Statement and (ii) reimburse reasonable out-of-pocket expenses (other than legal expenses and other sale commissions or similar costs) of Holders of Registrable Notes incurred in connection with the registration and sale of Registrable Notes pursuant to a Shelf Registration or in connection with exchange of the Registrable Notes in connection with the Exchange Offer. In addition, the Issuers shall reimburse the Initial Purchasers for the reasonable fees and expenses of one counsel in connection with the Exchange Offer, which shall be Cahill Gordon & Reindel, and shall not be required to pay any other legal expenses in connection therewith. 7. INDEMNIFICATION (a) Each of the Issuers, jointly and severally, agrees to indemnify and hold harmless each Holder of Registrable Notes and each Participating Broker-Dealer selling Exchange Notes during the Applicable Period, the affiliates, officers, directors, representatives, employees and agents of each such Person, and each Person, if any, who controls any such Person within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a "PARTICIPANT"), from and against any and all losses, claims, damages, judgments, liabilities and expenses (including, without limitation, the reasonable legal fees and other expenses actually incurred in connection with any suit, action or proceeding or any claim asserted) caused by, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if the Issuers shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by, arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the case of the Prospectus in light of the circumstances under which they were made, not misleading, EXCEPT insofar as such losses, claims, damages or liabilities are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Participant furnished to the Issuers in writing by such Participant expressly for use therein and with respect to any preliminary Prospectus, to the extent that any such loss, claim, damage or liability arises solely from the fact that any Participant sold Notes to a person to whom there was not sent or given a copy of the Prospectus (as amended or supplemented) at or prior to the written confirmation of such sale if the Issuers shall have previously -22- furnished copies thereof to the Participant in accordance herewith and the Prospectus (as amended or supplemented) would have corrected any such untrue statement or omission. (b) Each Participant agrees, severally and not jointly, to indemnify and hold harmless the Issuers, their respective affiliates, officers, directors, representatives, employees and agents of each Issuer and each Person who controls each Issuer within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent (but on a several, and not joint, basis) as the foregoing indemnity from the Issuers to each Participant, but only with reference to information relating to such Participant furnished to the Issuers in writing by such Participant expressly for use in any Registration Statement or Prospectus, any amendment or supplement thereto, or any preliminary prospectus. The liability of any Participant under this paragraph shall in no event exceed the proceeds received by such Participant from sales of Registrable Notes or Exchange Notes giving rise to such obligations. (c) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such Person (the "INDEMNIFIED PERSON") shall promptly notify the Persons against whom such indemnity may be sought (the "INDEMNIFYING PERSONS") in writing, and the Indemnifying Persons, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others the Indemnifying Person may reasonably designate in such proceeding and shall pay the reasonable fees and expenses actually incurred by such counsel related to such proceeding; PROVIDED, HOWEVER, that the failure to so notify the Indemnifying Persons will not relieve it from any liability under paragraph (a) or (b) above unless and to the extent such failure results in the forfeiture by the Indemnifying Person of substantial rights and defenses and the Indemnifying Person was not otherwise aware of such action or claim. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Persons and the Indemnified Person shall have mutually agreed to the contrary, (ii) the Indemnifying Persons shall have failed within a reasonable period of time to retain counsel reasonably satisfactory to the Indemnified Person or (iii) the named parties in any such proceeding (including any impleaded parties) include both any Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Indemnifying Persons shall not, in connection with such proceeding or separate but substantially similar related proceeding in the same jurisdiction arising out of the same general allegations, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed promptly as they are incurred. Any such separate firm for the Participants and such control Persons of Participants shall be designated in writing by Participants who sold a majority in interest of Registrable Notes and Exchange Notes sold by all such Participants and shall be reasonably acceptable to -23- the Issuers, and any such separate firm for the Issuers, their affiliates, officers, directors, representatives, employees and agents and such control Persons of such Issuer shall be designated in writing by such Issuer and shall be reasonably acceptable to the Holders. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its prior written consent (which consent shall not be unreasonably withheld or delayed), but if settled with such consent or if there be a final non-appealable judgment for the plaintiff for which the Indemnified Person is entitled to indemnification pursuant to this Agreement, each Indemnifying Person agrees to indemnify and hold harmless each Indemnified Person from and against any loss or liability by reason of such settlement or judgment. No Indemnifying Person shall, without the prior written consent of the Indemnified Person (which consent shall not be unreasonably withheld or delayed), effect any settlement or compromise of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party, or indemnity could have been sought hereunder by such Indemnified Person, unless such settlement (A) includes an unconditional written release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of such Indemnified Person. (d) If the indemnification provided for in the first and second paragraphs of this Section 7 is for any reason unavailable to, or insufficient to hold harmless, an Indemnified Person in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties 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 Issuers on the one hand or such Participant or such other Indemnified Person, as the case may be, on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances. (e) The parties agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by PRO RATA allocation (even if the Participants were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. -24- The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages, judgments, liabilities and expenses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses actually incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall a Participant be required to contribute any amount in excess of the amount by which proceeds received by such Participant from sales of Registrable Notes or Exchange Notes, as the case may be, exceeds the amount of any damages that such Participant has otherwise been required to pay or has paid by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (f) Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 7 shall be paid by the Indemnifying Person to the Indemnified Person as such losses, claims, damages, liabilities or expenses are incurred. The indemnity and contribution agreements contained in this Section 7 and the representations and warranties of the Issuers 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 Holder or any person who controls a Holder, the Issuers, their directors, officers, employees or agents or any person controlling an Issuer, and (ii) any termination of this Agreement. (g) The indemnity and contribution agreements contained in this Section 7 will be in addition to any liability which the Indemnifying Persons may otherwise have to the Indemnified Persons referred to above. 8. RULES 144 AND 144A Each of the Issuers covenants and agrees that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder in a timely manner in accordance with the requirements of the Securities Act and the Exchange Act and, for so long as any Registrable Notes remain outstanding, and if such Issuer is not required to file such reports, such Issuer will, upon the request of any Holder or beneficial owner of Registrable Notes, make available such information of the type specified in Sections 13 and 15(d) of the Exchange Act. Each of the Issuers further covenants and agrees, for so long as any Registrable Notes remain outstanding, to make available to any Holder or beneficial owner of Registrable Notes in connection with any sale thereof and any prospective purchaser of such Registrable Notes from such Holder or beneficial owner the information required by Rule 144A(d)(4) and 144(c) under the Securities Act in order to permit resales of such Registrable Notes pursuant to Rule 144A and Rule 144(k). -25- 9. UNDERWRITTEN REGISTRATIONS If any of the Registrable Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Notes included in such offering and shall be reasonably acceptable to the Issuers. No Holder of Registrable Notes may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Notes on the basis provided in any underwriting arrangements approved by the 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. 10. MISCELLANEOUS (a) NO INCONSISTENT AGREEMENTS. The Issuers have not, as of the date hereof, and the Issuers shall not, after the date of this Agreement, enter into any agreement with respect to any of their securities that is inconsistent with the rights granted to the Holders of Registrable Notes in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Issuers' other issued and outstanding securities under any such agreements. The Issuers will not enter into any agreement with respect to any of their securities which will grant to any Person piggy-back registration rights with respect to any Registration Statement. (b) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Issuers shall not, directly or indirectly, take any action with respect to the Registrable Notes as a class that would adversely affect the ability of the Holders of Registrable Notes to include such Registrable Notes in a registration undertaken pursuant to this Agreement. (c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of (I) the Issuers and (II)(A) the Holders of not less than a majority in aggregate principal amount of the then outstanding Registrable Notes and (B) in circumstances that would adversely affect the Participating Broker-Dealers, the Participating Broker-Dealers holding not less than a majority in aggregate principal amount of the Exchange Notes held by all Participating Broker-Dealers; PROVIDED, HOWEVER, that Section 7 and this Section 10(c) may not be amended, modified or supplemented without the prior written consent of each Holder and each Participating Broker-Dealer (including any person who was a Holder or Participating Broker-Dealer of Registrable -26- Notes or Exchange Notes, as the case may be, disposed of pursuant to any Registration Statement) affected by any such amendment, modification or supplement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Notes whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Notes may be given by Holders of at least a majority in aggregate principal amount of the Registrable Notes being sold pursuant to such Registration Statement. (d) NOTICES. All notices and other communications (including, without limitation, any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or facsimile: (i) if to a Holder of the Registrable Notes or any Participating Broker-Dealer, at the most current address of such Holder or Participating Broker-Dealer, as the case may be, set forth on the records of the registrar under the Indenture. (ii) if to the Issuers, at the address as follows: TransDigm Inc. 26380 Curtiss Wright Parkway, Suite 304 Richmond Heights, Ohio 44143 Facsimile No.: (216) 289-8900 Attention: Chief Financial Officer with copies to: Latham & Watkins 885 Third Avenue, Suite 1000 New York, New York 10022 Facsimile No.: (212) 751-4864 Attention: Kirk Davenport All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; one business day after being timely delivered to a next-day air courier; and when transmission is confirmed, if sent by facsimile. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address and in the manner specified in such Indenture. -27- (e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, the Holders and the Participating Broker-Dealers; PROVIDED, HOWEVER, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Notes in violation of the terms of the Purchase Agreement or the Indenture. (f) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. (i) SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (j) SECURITIES HELD BY THE ISSUERS OR THEIR AFFILIATES. Whenever the consent or approval of Holders of a specified percentage of Registrable Notes is required hereunder, Registrable Notes held by the Issuers or their affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. -28- (k) THIRD-PARTY BENEFICIARIES. Holders of Registrable Notes and Participating Broker-Dealers are intended third-party beneficiaries of this Agreement, and this Agreement may be enforced by such Persons. (l) ENTIRE AGREEMENT. This Agreement, together with the Purchase Agreement and the Indenture, is intended by the parties as a final and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein and any and all prior oral or written agreements, representations, or warranties, contracts, understandings, correspondence, conversations and memoranda between the Holders on the one hand and the Issuers on the other, or between or among any agents, representatives, parents, subsidiaries, affiliates, predecessors in interest or successors in interest with respect to the subject matter hereof and thereof are merged herein and replaced hereby. S-1 WITNESS the due execution hereof by the respective duly authorized officers of the undersigned as of the date first written above. TRANSDIGM INC., as Issuer By: /s/ Gregory Rufus -------------------------------------------- Name: Gregory Rufus Title: Vice President, Chief Financial Officer and Assistant Secretary TRANSDIGM HOLDING COMPANY, as Guarantor By: /s/ Gregory Rufus -------------------------------------------- Name: Gregory Rufus Title: Vice President, Chief Financial Officer and Assistant Secretary MARATHON POWER TECHNOLOGIES COMPANY, as Guarantor By: /s/ Gregory Rufus -------------------------------------------- Name: Gregory Rufus Title: Treasurer and Assistant Secretary ZMP, INC., as Guarantor By: /s/ Gregory Rufus -------------------------------------------- Name: Gregory Rufus Title: Treasurer and Assistant Secretary S-2 ADAMS RITE AEROSPACE, INC., as Guarantor By: /s/ Gregory Rufus -------------------------------------------- Name: Gregory Rufus Title: Treasurer and Assistant Secretary CHAMPION AEROSPACE INC., as Guarantor By: /s/ Gregory Rufus -------------------------------------------- Name: Gregory Rufus Title: Treasurer and Assistant Secretary CHRISTIE ELECTRIC CORP., as Guarantor By: /s/ Gregory Rufus -------------------------------------------- Name: Gregory Rufus Title: Treasurer and Assistant Secretary S-3 The foregoing Agreement is hereby confirmed and accepted as of the date first above written. DEUTSCHE BANK SECURITIES INC. as Initial Purchaser By: /s/ Larry Zimmerman ------------------------------- Name: Larry Zimmerman Title: Managing Director By: /s/ Tobias Lewis ------------------------------- Name: Tobias Lewis Title: Vice President CREDIT SUISSE FIRST BOSTON CORPORATION, as Initial Purchaser By: /s/ Brent Patry ------------------------------- Name: Brent Patry Title: Managing Director EX-5.1 15 a2082596zex-5_1.txt EXHIBIT 5.1 Exhibit 5.1 [LATHAM & WATKINS LETTERHEAD] June 28, 2002 File No. 027584-0016 TransDigm Inc. 26380 Curtiss Wright Parkway, Suite #304 Richmond Heights, OH 44143 Re: Registration Statement on Form S-4 Relating to $75,000,000 Aggregate Principal Amount of 10 3/8% Senior Subordinated Notes Due 2008 -------------------------------------------------------------- Ladies and Gentlemen: In connection with the registration of $75,000,000 aggregate principal amount of 10 3/8% Senior Subordinated Notes due 2008 (the "Exchange Notes") by TransDigm Inc., a Delaware corporation (the "Company"), and the guarantees of the Exchange Notes (the "Guarantees") by TransDigm Holding Company, a Delaware corporation ("Holdings"), Champion Aerospace Inc., a Delaware corporation ("Champion"), Marathon Power Technologies Company, a Delaware corporation ("Marathon"), ZMP, Inc., a California corporation ("ZMP"), Adams Rite Aerospace, Inc., a California corporation ("Adams Rite"), and Christie Electric Corp., a California corporation ("Christie" and together with Holdings, Champion Aerospace, Marathon, ZMP and Adams Rite, the "Guarantors"), under the Securities Act of 1933, as amended (the "Act"), on Form S-4 (the "Registration Statement") filed with the Securities and Exchange Commission on June 28, 2002, you have requested our opinion with respect to the matters set forth below. The Exchange Notes and Guarantees will be issued pursuant to an indenture, dated as of December 3, 1998, as supplemented on April 23, 1999 and June 26, 2001 (the "Indenture"), among the Company, the Guarantors and State Street Bank and Trust Company, as trustee (the "Trustee"). The Exchange Notes will be issued in exchange for the Company's outstanding 10 3/8% Senior Subordinated Notes due 2008 (the "Old Notes") on the terms set forth in the prospectus contained in the Registration Statement and the Letter of Transmittal filed as an exhibit thereto. In our capacity as your special counsel in connection with such registration, we are familiar with the proceedings taken by the Company and the Guarantors in connection with the authorization and issuance of the Exchange Notes and the Guarantees, respectively. In addition, we have made such legal and factual examinations and inquiries, including an examination of originals or copies certified or otherwise identified to our satisfaction of such documents, corporate records and instruments, as we have deemed necessary or appropriate for purposes of this opinion. - -------------------------------------------------------------------------------- 53rd at Third o 885 Third Avenue o New York, New York 10022-4802 TELEPHONE: (212) 906-1200 o FAX: (212) 751-4864 LATHAM & WATKINS TransDigm Inc. Page 2 In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as copies. As to facts material to the opinions, statements and assumptions expressed herein, we have, with your consent, relied upon oral or written statements and representations of officers and other representatives of the Company, the Guarantors and others. We are opining herein as to the effect on the subject transaction only of the federal laws of the United States, the internal laws of the State of New York, the General Corporation Law of the State of Delaware and the General Corporation Law of the State of California, and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or, in the case of Delaware and California, any other laws, or as to any matters of municipal law or the laws of any local agencies within any state. Subject to the foregoing and the other matters set forth herein, it is our opinion that as of the date hereof: 1. The Exchange Notes have been duly authorized by all necessary corporate action of the Company, and, when executed, authenticated and delivered by or on behalf of the Company against the due tender and delivery to the Trustee of the Old Notes in an aggregate principal amount equal to the aggregate principal amount of the Exchange Notes, the Exchange Notes will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. 2. Each of the Guarantees has been duly authorized by all necessary corporate action of the respective Guarantor, and, when executed in accordance with the terms of the Indenture and upon the due execution, authentication and delivery of the Exchange Notes against the due tender and delivery to the Trustee of the Old Notes in an aggregate principal amount equal to the aggregate principal amount of the Exchange Notes, the Guarantees will be the valid and binding obligation of the respective Guarantor, enforceable against such Guarantor in accordance with its terms. The opinions rendered in the foregoing paragraphs relating to the enforceability of the Exchange Notes and the Guarantees are subject to the following exceptions, limitations and qualifications: (i) the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights and remedies of creditors; (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or at law, and the discretion of the court before which any proceeding therefor may be brought; (iii) we express no opinion concerning the enforceability of the waiver of rights or defenses contained in Section 4.06 of the Indenture; and (iv) the enforceability of any provisions requiring the payment of attorney's fees except to the extent that a court determines such fees to be reasonable. LATHAM & WATKINS TransDigm Inc. Page 3 We have not been requested to express, and with your knowledge and consent, do not render any opinion as to the applicability to the obligations of the Company under the Indenture and the Exchange Notes or the Guarantors under the Indenture or the Guarantees of Section 548 of the United States Bankruptcy Code or applicable state law (including, without limitation, Article 10 of the New York Debtor and Creditor Law) relating to fraudulent transfers and obligations. To the extent that the obligations of the Company and each of the Guarantors under the Indenture, the Exchange Notes and the Guarantees (collectively, the "Operative Documents") may be dependent upon such matters, we have assumed for purposes of this opinion that: (i) the Trustee (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (b) has the requisite organizational and legal power and authority to perform its obligations under each of the Operative Documents to which it is a party; (c) is duly qualified to engage in the activities contemplated by each of the Operative Documents to which it is a party; and (d) the duly authorized, executed and delivered each of the Operative Documents to which it is a party; (ii) the Indenture is the legal, valid, binding agreement of the Trustee, enforceable against the Trustee in accordance with its terms; and (iii) that the Trustee is in compliance, generally and with respect to acting as a trustee under the Indenture, with all applicable laws and regulations. We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm contained under the heading "Legal Matters" in the prospectus contained therein. Very truly yours, /s/ Latham & Watkins EX-10.5 16 a2082596zex-10_5.txt EXHIBIT 10.5 EXHIBIT 10.5 EXECUTION COPY EMPLOYMENT AGREEMENT AMENDMENT FOR DOUGLAS W. PEACOCK THIS EMPLOYMENT AGREEMENT AMENDMENT, dated as of January 17, 2002 (this "AMENDMENT"), is made by and between TransDigm Holding Company, a Delaware corporation (the "COMPANY"), and Douglas W. Peacock (the "EXECUTIVE"). WHEREAS, the Company and the Executive are parties to an employment agreement, dated as of May 19, 1999 and effective as of December 3, 1998 (the "EMPLOYMENT AGREEMENT"); WHEREAS, pursuant to Section 18 of the Employment Agreement, the parties thereto may amend such agreement from time to time by an instrument in writing that is executed by the Executive and the Chairman of the Compensation Committee of the Board of Directors of the Company; and WHEREAS, the Company and the Executive now desire to amend the Employment Agreement as provided herein. NOW THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the parties hereto agree as follows: 1. The third "WHEREAS" clause of the Employment Agreement shall be amended to delete the phrase "(the "Effective Date")" at the end thereof. 2. Section 1(h) of the Employment Agreement shall be amended to revise subpart (ii) of the definition of Date of Termination as follows: (ii) if the Executive's employment is terminated pursuant to Sections 5(a)(ii)-5(a)(vii), the date specified in the Notice of Termination; 3. Section 1(k) of the Employment Agreement shall be amended to revise the definition of Effective Date as follows: "EFFECTIVE DATE" shall mean December 3, 2001. 4. Section 1(p) of the Employment Agreement shall be amended to read as follows: "GOOD REASON" shall mean the occurrence of any of the following: (i) a material diminution in the Executive's title, duties or responsibilities, without his prior written consent, (ii) a reduction of the Executive's aggregate cash compensation (including bonus opportunities), benefits or perquisites, without his prior written consent or (iii) W. Nicholas Howley's termination of employment with the Company for "Good Reason" as defined in subsections (i) and (ii) of this subsection. 5. Section 1(s) of the Employment Agreement shall be amended to delete the definition of Non-Executive Term and to renumber the remaining subsections of Section 1 accordingly. 6. Section 1(y) of the Employment Agreement shall be amended to read as follows: "RETIREMENT" shall mean the termination of the Executive's services with the Company as a result of his retirement from active service as the Chairman of the Board during the Term; PROVIDED, HOWEVER, that as set forth in Section 4(l)(i), for purposes of the Management Stockholders' Agreement, the Executive shall not be deemed to have incurred a "Retirement" until the termination of his service as Chairman of the Board on or after attaining age 65. 7. Section 1(z) of the Employment Agreement shall be amended to revise the definition of Term as follows: "TERM" shall have the meaning set forth in Section 2. 8. Section 2 of the Employment Agreement shall be amended by removing the reference to Subsection "(a)" at the beginning thereof and by deleting Subsection 2(b) in its entirety. 9. Section 2 of the Employment Agreement shall be further amended by inserting the phrase ", or upon the occurrence of a Change in Control, if sooner," following the word "thereof" in the fifth line. 10. Section 3(a) of the Employment Agreement shall be amended to delete the phrase "and Chief Executive Officer of each" from the first sentence thereof. 11. Section 3(a) of the Employment Agreement shall be further amended to delete the second sentence thereof in its entirety. 12. The first two sentences of Section 3(b) of the Employment Agreement shall be deleted and replaced with the following: During the Term, the Board shall propose the Executive for re-election to the Board and the Principal Stockholders shall vote all of their shares of Common Stock in favor of such re-election. 13. Section 4(a) of the Employment Agreement shall be amended to delete the figure "$330,000" in the first sentence thereof and replace it with "$100,000." 14. Section 4(l) of the Employment Agreement shall be amended to restate subpart (i) and the first two sentences of subpart (ii) thereof as follows: (i) The date on which the Executive ceases to serve as Chairman of the Board shall be deemed to be the date of his termination of employment for purposes of the Management Stockholders' Agreement and the reason for his termination of 2 such service (i.e., death, Disability, for Cause, Retirement) shall be deemed to be the reason for his termination of employment for purposes of the Management Stockholders' Agreement. (ii) Subject to Section 7 of the Management Stockholders' Agreement, for so long as the Executive continues to serve as the Chairman of the Board (the "Put Period"), the Executive shall have the right to sell to Holdings, and Holdings shall have the obligation to purchase from the Executive, at their Fair Market Value, that number of shares of Common Stock not to exceed in the aggregate 80% of the sum of (A) the number of shares of Common Stock held by the Executive at the Effective Date, and (B) the number of shares of Common Stock that could be acquired by the Executive at the Effective Date upon the exercise of Options that are Exercisable Options (the "Aggregate Stock"), in accordance with the provisions of this Section 4(l)(ii) (the "Additional Put"). The Executive shall have the right to exercise the Additional Put at any time during the Put Period as of which the Executive is then serving as Chairman of the Board; PROVIDED, HOWEVER, that (x) the Executive may not exercise the Additional Put within six months following a prior exercise of the Additional Put; (y) the Additional Put may not be exercised for less than 10% of the Aggregate Stock; and (z) the Additional Put may only be exercised with respect to shares that the Executive has held for at least six months. 15. Section 5(a) of the Employment Agreement shall be amended by deleting Subsection 5(a)(vii) and to renumber the remaining subsections thereof accordingly. 16. Section 6(a) of the Employment Agreement shall be amended by adding the following to the end thereof. Notwithstanding any other provision of this Agreement, in the event that Executive's employment is terminated due to the expiration of the Term as described in Section 2(a), Executive shall be entitled only to the payments and benefits set forth in Section 6(a) and Section 6(c) and such termination shall not be considered a Termination without Cause or Resignation for Good Reason (or without Good Reason). 17. Section 6(b)(i) of the Employment Agreement shall be amended by deleting the proviso at the end thereof. 18. Section 6(c) of the Employment Agreement shall be amended by deleting the phrase "on or after the third anniversary of the Effective Date." 19. Section 8(a) of the Employment Agreement shall be amended by deleting the phrase "and during the Non-Executive Term." 20. Section 15(a) of the Employment Agreement shall be amended by changing the notice provision for the Company's counsel to be delivered to the attention of Bradd L. Williamson. 3 21. Section 15(b) of the Employment Agreement shall be amended by changing the notice provision for the Executive's counsel to read as follows: Shearman & Sterling 555 California Street San Francisco, CA 94104 22. In all other respects, the Employment Agreement shall remain in full force and effect. 23. This Amendment may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Amendment. IN WITNESS WHEREOF, the parties have executed this Amendment on the date and year first above written. TRANSDIGM HOLDING COMPANY By: /s/ Stephen Berger ---------------------------------------- Stephen Berger Chairman of the Compensation Committee EXECUTIVE /s/ Douglas W. Peacock ---------------------------------------- Douglas W. Peacock Accepted and agreed to for purposes of Section 3(b) of the Employment Agreement ODYSSEY INVESTMENT PARTNERS FUND, LP By: ODYSSEY CAPITAL PARTNERS, LLC, its general partner By: /s/ Stephen Berger ---------------------------------- Name: Title: 4 EX-10.7 17 a2082596zex-10_7.txt EXHIBIT 10.7 EXHIBIT 10.7 EXECUTION COPY EMPLOYMENT AGREEMENT AMENDMENT FOR W. NICHOLAS HOWLEY THIS EMPLOYMENT AGREEMENT AMENDMENT, dated as of January 17, 2002 (this "AMENDMENT"), is made by and between TransDigm Holding Company, a Delaware corporation (the "COMPANY"), and W. Nicholas Howley (the "EXECUTIVE"). WHEREAS, the Company and the Executive are parties to an employment agreement, dated as of May 19, 1999 and effective as of December 3, 1998 (the "EMPLOYMENT AGREEMENT"); and WHEREAS, pursuant to Section 18 of the Employment Agreement, the parties thereto may amend such agreement from time to time by an instrument in writing that is executed by the Executive and the Chairman of the Compensation Committee of the Board of Directors of the Company; and WHEREAS, the Company and the Executive now desire to amend the Employment Agreement as provided herein. NOW THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the parties hereto agree as follows: 1. The third "WHEREAS" clause of the Employment Agreement shall be amended to delete the phrase "(the "Effective Date") at the end thereof. 2. Section 1(j) of the Employment Agreement shall be amended to revise the definition of Effective Date as follows: "Effective Date" shall mean December 3, 2001. 3. Section 1(m)(v) of the Employment Agreement shall be amended to change the reference to "Chief Executive Officer" to "Chairman." 4. Section 3(a) of the Employment Agreement shall be amended to change the reference to "Chief Operating Officer" to "Chief Executive Officer." 5. Section 4(a) of the Employment Agreement shall be amended to delete the figure "$225,000" and replace it with "$335,000." 6. Section 6(b)(i) of the Employment Agreement shall be amended to change the reference to "fifteen" in the last line thereof to "eighteen." 7. Section 15(a) of the Employment Agreement shall be amended by changing the notice provision for the Company's counsel to be delivered to the attention of Bradd L. Williamson. 8. Section 15(b) of the Employment Agreement shall be amended by changing the notice provision for the Executive's counsel to read as follows: Shearman & Sterling 555 California Street San Francisco, CA 94104 9. In all other respects, the Employment Agreement shall remain in full force and effect. 10. This Amendment may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Amendment. IN WITNESS WHEREOF, the parties have executed this Amendment on the date and year first above written. TRANSDIGM HOLDING COMPANY By: /s/ Stephen Berger ---------------------------------------- Stephen Berger Chairman of the Compensation Committee EXECUTIVE /s/ W. Nicholas Howley ---------------------------------------- W. Nicholas Howley Accepted and agreed to for purposes of Section 3(b) of the Employment Agreement ODYSSEY INVESTMENT PARTNERS FUND, LP By: ODYSSEY CAPITAL PARTNERS, LLC, its general partner By: /s/ Stephen Berger ---------------------------------- Name: Title: EX-10.10 18 a2082596zex-10_10.txt EXHIBIT 10.10 EXHIBIT 10.10 TRANSDIGM INC. 10 3/8% SENIOR SUBORDINATED NOTES DUE 2008 PURCHASE AGREEMENT June 4, 2002 DEUTSCHE BANK SECURITIES INC. CREDIT SUISSE FIRST BOSTON CORPORATION c/o Deutsche Bank Securities Inc. 31 West 52nd Street New York, New York 10019 Ladies and Gentlemen: TransDigm Inc., a Delaware corporation (the "COMPANY"), and TransDigm Holdings Company, a Delaware corporation which owns 100% of the outstanding capital stock of the Company ("HOLDINGS" together with the Company and the Guarantors (as defined in Section 1 below), the "ISSUERS"), hereby confirm their agreement with you (the "INITIAL PURCHASERS"), as set forth below (the "PURCHASE AGREEMENT" or this "AGREEMENT"). 1. THE SECURITIES. Subject to the terms and conditions herein contained, the Company proposes to issue and sell to the Initial Purchasers $75,000,000 aggregate principal amount of its 10 3/8% Senior Subordinated Notes due 2008 (the "NOTES"). The Notes will be unconditionally guaranteed ( the "GUARANTEES", and together with the Notes, the "SECURITIES") on a senior subordinated basis by Holdings, Adams Rite Aerospace, Inc., Champion Aerospace Inc., Christie Electric Corp., Marathon Power Technologies Company and ZMP, Inc. (collectively, the "GUARANTORS"). The Securities are to be issued under an indenture (the "INDENTURE") dated as of December 3, 1998 as supplemented on April 23, 1999 and June 26, 2001 by and among the Company, the Guarantors and State Street Bank and Trust Company, as trustee (the "TRUSTEE"). The Securities will be offered and sold to the Initial Purchasers without being registered under the Securities -2- Act of 1933, as amended (the "ACT"), in reliance on exemptions therefrom. In connection with the sale of the Securities, the Issuers have prepared a preliminary offering memorandum dated May 29, 2002 (the "PRELIMINARY MEMORANDUM"), and a final offering memorandum dated June 4, 2002 (the "FINAL MEMORANDUM"; the Preliminary Memorandum and the Final Memorandum each herein being referred to as a "MEMORANDUM") setting forth or including, among other things, a description of the terms of the Securities, a description of the terms of the offering of the Securities, and a description of the Issuers and any material developments relating to the Issuers occurring after the date of the most recent historical financial statements included therein. The Initial Purchasers and their direct and indirect transferees of the Securities will be entitled to the benefits of the Registration Rights Agreement, substantially in the form attached hereto as EXHIBIT A (the "REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company and the Guarantors have agreed, among other things, to file a registration statement (the "REGISTRATION STATEMENT") with the Securities and Exchange Commission (the "COMMISSION") registering the Securities, or the Exchange Notes (as defined in the Registration Rights Agreement) under the Act. 2. REPRESENTATIONS AND WARRANTIES. Each of the Issuers, jointly and severally, represents and warrants to and agrees with the Initial Purchasers that: (a) Neither the Preliminary Memorandum as of the date thereof nor the Final Memorandum nor any amendment or supplement thereto as of the date thereof and at all times subsequent thereto up to the Closing Date (as defined in Section 3 below) contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this Section 2(a) do not apply to statements or omissions made in reliance upon and in conformity with information relating to the Initial Purchasers furnished to the Issuers in writing by -3- the Initial Purchasers expressly for use in the Preliminary Memorandum, the Final Memorandum or any amendment or supplement thereto. (b) The only subsidiary of Holdings is the Company and the only subsidiaries of the Company are those entities listed on Schedule II attached hereto (such subsidiaries of the Company, collectively the "Subsidiaries"); all of the outstanding shares of capital stock of the Company and the Subsidiaries have been, and as of the Closing Date will be, duly authorized and validly issued, are fully paid and nonassessable and were not issued in violation of any preemptive or similar rights; except as set forth in the Final Memorandum, all of the outstanding shares of capital stock of the Company and the Subsidiaries will be free and clear of all liens, encumbrances, equities and claims or restrictions on transferability (other than those imposed by the Act and the securities or "Blue Sky" laws of certain jurisdictions) or voting; except as set forth in the Final Memorandum there are no (i) options, warrants or other rights to purchase, (ii) agreements or other obligations to issue or (iii) other rights to convert any obligation into, or exchange any securities for, shares of capital stock of or ownership interests in the Company and the Subsidiaries outstanding. Except for the Company (with respect to Holdings) and the Subsidiaries, neither Holdings nor the Company own, directly or indirectly, any shares of capital stock or any other equity or long-term debt securities or have any equity interest in any firm, partnership, joint venture or other entity. (c) Each of the Issuers is duly incorporated, validly existing and in good standing under the laws of its respective jurisdiction of incorporation and has all requisite corporate power and authority to own its properties and conduct its business as now conducted and as described in the Final Memorandum; each of the Issuers is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions where the ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to be so qualified would not, individually or in the aggregate, have a material adverse effect on the business, condition (financial or otherwise), prospects or results of operations of the Issuers, Marathon Power Technologies Limited and TranDigm Export, Inc. taken as a whole (any such event, a "MATERIAL ADVERSE EFFECT"). -4- (d) The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under the Notes, the Exchange Notes and the Private Exchange Notes (as defined in the Registration Rights Agreement). Each of the Guarantors has all requisite corporate power and authority to execute, deliver and perform its obligations under the Guarantees and the guarantees of the Exchange Notes and the Private Exchange Notes. The Notes and the Guarantees, when issued, will be in the form contemplated by the Indenture. The Notes, the Exchange Notes and the Private Exchange Notes, have each been duly and validly authorized by the Company and the Guarantees and the guarantees of the Exchange Notes and the Private Exchange Notes have been duly and validly authorized by the Guarantors, and, when executed by the Company and the Guarantors, respectively, and authenticated by the Trustee in accordance with the provisions of the Indenture and when the Notes are delivered to and paid for by the Initial Purchasers in accordance with the terms of this Agreement or the Exchange Notes or the Private Exchange Notes are issued in accordance with the Registration Rights Agreement, will constitute valid and legally binding obligations of each of the Company and the Guarantors, entitled to the benefits of the Indenture, and enforceable against each of the Company and the Guarantors in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought. (e) Each of the Issuers has all requisite corporate power and authority to perform its obligations under the Indenture. The Indenture meets the requirements for qualification under the Trust Indenture Act of 1939, as amended (the "TIA"). The Indenture has been duly and validly authorized, executed and delivered by the Issuers (assuming the due authorization execution and delivery by the Trustee) and constitutes a valid and legally binding agreement of each of the Issuers, enforceable against the Issuers in accordance with its terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and -5- (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought. (f) Each of the Issuers has all requisite corporate power and authority to execute, deliver and perform its obligations under the Registration Rights Agreement. The Registration Rights Agreement has been duly and validly authorized by the Issuers and, when executed and delivered by the Issuers, will constitute a valid and legally binding agreement of the Issuers, enforceable against the Issuers in accordance with its terms, except that (A) the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought and (B) any rights to indemnity or contribution thereunder may be limited by federal and state securities laws and public policy considerations. (g) Each of the Issuers has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. This Agreement and the consummation by the Issuers of the transactions contemplated hereby have been duly and validly authorized by each of the Issuers. This Agreement has been duly executed and delivered by each of the Issuers. (h) No consent, approval, authorization or order of any court or governmental agency or body, or third party is required for the issuance and sale by the Issuers of the Securities to the Initial Purchasers or the consummation by the Issuers of the other transactions contemplated hereby, except (i) such as have been obtained (ii) such as would not have a Material Adverse Effect and (iii) such as may be required under state securities or "Blue Sky" laws in connection with the purchase and resale of the Securities by the Initial Purchasers and except with respect to the registration of the Exchange Notes and Private Exchange Notes, if applicable, pursuant to the Registration Rights Agreement and the qualification of the Indenture under the TIA. None of the Issuers is (i) in violation of its respective certificate of incorporation or -6- bylaws (or similar organizational document), (ii) in breach or violation of any statute, judgment, decree, order, rule or regulation applicable to any of them or any of their respective properties or assets, except as disclosed in the Final Memorandum and except for any such breach or violation which would not, individually or in the aggregate, have a Material Adverse Effect, or (iii) in breach of or default under (nor has any event occurred which, with notice or passage of time or both, would constitute a default under) or in violation of any of the terms or provisions of any indenture, mortgage, deed of trust, loan agreement, note, lease, license, franchise agreement, permit, certificate, contract or other agreement or instrument to which any of them is a party or to which any of them or their respective properties or assets is subject (collectively, "CONTRACTS"), except for any such breach, default, violation or event which would not, individually or in the aggregate, have a Material Adverse Effect. (i) The execution, delivery and performance by the Issuers of this Agreement, the Indenture and Registration Rights Agreement and the consummation by the Issuers of the transactions contemplated hereby and thereby (including, without limitation, the issuance and sale of the Securities to the Initial Purchasers) has not, in the case of the Indenture only, and will not conflict with or constitute or result in a breach of or a default under (or an event which with notice or passage of time or both would constitute a default under) or violation of any of (i) the terms or provisions of any Contract, except for any such conflict, breach, violation, default or event which would not, individually or in the aggregate, have a Material Adverse Effect, (ii) the certificate of incorporation or bylaws (or similar organizational document) of any of the Issuers, or (iii) (assuming compliance with all applicable state securities or "Blue Sky" laws and assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 8 hereof and except with respect to the registration of the Exchange Notes and Private Exchange Notes, if applicable, pursuant to the Registration Rights Agreement and the qualification of the Indenture under the TIA) any statute, judgment, decree, order, rule or regulation applicable to any of the Issuers or any of their respective properties or assets, except for any such conflict, breach or violation which -7- would not, individually or in the aggregate, have a Material Adverse Effect. (j) The audited consolidated financial statements of Holdings included in the Final Memorandum present fairly in all material respects the financial position, results of operations and cash flows of Holdings at the dates and for the periods to which they relate and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis, except as otherwise stated therein. The unaudited summary and selected financial and statistical data in the Final Memorandum present fairly in all material respects the information shown therein and have been prepared and compiled on a basis consistent with the audited financial statements included therein, except as otherwise stated therein. Deloitte & Touche LLP is an independent public accounting firm within the meaning of the Act and the rules and regulations promulgated thereunder. (k) The audited consolidated financial statements of Federal-Mogul Aviation, Inc. included in the Final Memorandum present fairly in all material respects the financial position, results of operations and cash flows of Federal Mogul Aviation, Inc. at the dates and for the periods to which they relate and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis, except as otherwise stated therein. Ernst & Young LLP is an independent public accounting firm within the meaning of the Act and the rules and regulations promulgated thereunder. (l) The pro forma financial statements (including the notes thereto) and the other pro forma financial information included in the Final Memorandum (i) comply as to form in all material respects with the applicable requirements of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), (ii) except as stated therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements, and (iii) have been properly computed on the bases described therein; the assumptions used in the preparation of the pro forma financial data and other pro forma financial information included in the Final Memorandum are reasonable and -8- the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein. (m) Except as set forth in the Final Memorandum, there is not pending or, to the knowledge of the Issuers, threatened any action, suit, proceeding, inquiry or investigation to which any of the Issuers is a party, or to which the property or assets of any of the Issuers are subject, before or brought by any court, arbitrator or governmental agency or body which, if determined adversely to or any of the Issuers, would, individually or in the aggregate, have a Material Adverse Effect or which seeks to restrain, enjoin, prevent the consummation of or otherwise challenge the issuance or sale of the Securities to be sold hereunder or the consummation of the other transactions described in the Final Memorandum. (n) Each of the Issuers possesses all licenses, permits, certificates, approvals and other authorizations from, and has made all declarations and filings with, all federal, state, local and other governmental authorities and all courts, presently required or necessary to own or lease, as the case may be, and to operate its respective properties and to carry on its respective businesses as now or proposed to be conducted as set forth in the Final Memorandum ("PERMITS"), except where the failure to obtain such Permits would not, individually or in the aggregate, have a Material Adverse Effect; each of the Issuers has fulfilled and performed all of its obligations with respect to such Permits and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other impairment of the rights of the holder of any such Permit except, in each case as would not have a Material Adverse Effect. (o) Since the date of the most recent financial statements appearing in the Final Memorandum, except as described therein or contemplated thereby, none of the Issuers has incurred any liabilities or obligations, direct or contingent, or entered into or agreed to enter into any transactions or contracts (written or oral) not in the ordinary course of business which liabilities, obligations, transactions or contracts would, individually or in the aggregate, be material to the business, condition (financial or otherwise), -9- prospects or results of operations of the Issuers, taken as a whole. (p) Each of the Issuers has filed all necessary federal, state and foreign income and franchise tax returns, and has paid all taxes shown as due thereon except where the failure to so file such returns would not, individually or in the aggregate, have a Material Adverse Effect; and other than tax deficiencies which any of the Issuers is contesting in good faith and for which any of the Issuers has provided adequate reserves, there is no tax deficiency that has been asserted against any of the Issuers that would have, individually or in the aggregate, a Material Adverse Effect. (q) The statistical and market-related data included in the Final Memorandum are based on or derived from sources which the Issuers believe to be reliable and accurate. (r) None of the Issuers or any agent acting on their behalf has taken or will take any action that might cause this Agreement or the sale of the Securities to violate Regulation T, U or X of the Board of Governors of the Federal Reserve System, in each case as in effect, or as the same may hereafter be in effect, on the Closing Date. (s) Each of the Issuers has good and marketable title to all real property and good title to all personal property described in the Final Memorandum as being owned by it and good and marketable title to a leasehold estate in the real and personal property described in the Final Memorandum as being leased by it free and clear of all liens, charges, encumbrances or restrictions, except as described in the Final Memorandum or to the extent the failure to have such title or the existence of such liens, charges, encumbrances or restrictions would not, individually or in the aggregate, have a Material Adverse Effect. All leases, contracts and agreements to which any of the Issuers is a party or by which any of them is bound are valid and enforceable against such Issuer, and are in full force and effect with only such exceptions as would not, individually or in the aggregate, have a Material Adverse Effect. The Issuers own or possess adequate licenses or other rights to use all patents, trademarks, service marks, trade names, copyrights and know-how necessary -10- to conduct the businesses now or proposed to be operated by them as described in the Final Memorandum, and none of Issuers has received any notice of infringement of or conflict with (or knows of any such infringement of or conflict with) asserted rights of others with respect to any patents, trademarks, service marks, trade names, copyrights or know-how which, if such assertion of infringement or conflict were sustained, would have a Material Adverse Effect. (t) There are no legal or governmental proceedings involving or affecting the Issuers or any of their respective properties or assets which would be required to be described in a prospectus pursuant to the Act that are not described in the Final Memorandum, nor are there any material contracts or other documents which would be required to be described in a prospectus pursuant to the Act that are not described in the Final Memorandum. (u) Except as described in the Final Memorandum, or as would not, individually or in the aggregate, have a Material Adverse Effect (A) each of the Issuers is in compliance with and not subject to liability under applicable Environmental Laws (as defined below), (B) each of the Issuers has made all filings and provided all notices required under any applicable Environmental Law, and has and is in compliance with all Permits required under any applicable Environmental Laws and each of them is in full force and effect, (C) there is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, notice or demand letter or request for information pending or, to the knowledge of the Issuers, threatened against any of the Issuers under any Environmental Law, (D) no lien, charge, encumbrance or restriction has been recorded under any Environmental Law with respect to any assets, facility or property owned, operated, leased or controlled by any of the Issuers, (E) none of the Issuers has received notice that it has been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA") or any comparable state law, (F) no property or facility of any of the Issuers is (i) listed or proposed for listing on the National Priorities List under CERCLA or is (ii) listed in the Comprehensive Environmental Response, Compensation, Liability Information System List -11- promulgated pursuant to CERCLA, or on any comparable list maintained by any state or local governmental authority. For purposes of this Agreement, "Environmental Laws" means the common law and all applicable federal, state and local laws or regulations, codes, orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder, relating to pollution or protection of public or employee health and safety or the environment, including, without limitation, laws relating to (i) emissions, discharges, releases or threatened releases of hazardous materials into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata), (ii) the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of hazardous materials, and (iii) underground and above ground storage tanks and related piping, and emissions, discharges, releases or threatened releases therefrom. (v) There is no strike, labor dispute, slowdown or work stoppage with the employees of any of the Issuers which is pending or, to the knowledge of the Issuers, threatened, which would have a Material Adverse Effect. (w) To the Issuers knowledge, each of the Issuers carries insurance in such amounts and covering such risks as is adequate for the conduct of its business and the value of its properties. (x) None of the Issuers has any liability for any prohibited transaction or accumulated funding deficiency or any complete or partial withdrawal liability with respect to any pension, profit sharing or other plan which is subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), to which any of the Issuers makes or since January 1, 1992 has made a contribution and in which any employee of any Issuers is or has been a participant. With respect to such plans, each Issuer is in compliance in all material respects with all applicable provisions of ERISA. (y) Each of the Issuers (i) makes and keeps accurate books and records and (ii) maintains internal accounting controls which provide reasonable assurance that (A) transactions are executed in accordance with management's -12- authorization, (B) transactions are recorded as necessary to permit preparation of its financial statements and to maintain accountability for its assets, (C) access to its assets is permitted only in accordance with management's authorization and (D) the reported accountability for its assets is compared with existing assets at reasonable intervals. (z) None of the Issuers will be an "investment company" or "promoter" or "principal underwriter" for an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended, and the rules and regulations thereunder. (aa) The Indenture conforms, and the Securities and the Registration Rights Agreement will conform, in all material respects to the descriptions thereof in the Final Memorandum. (bb) No holder of securities of any of the Issuers will be entitled to have such securities registered under the registration statement required to be filed by the Issuers pursuant to the Registration Rights Agreement other than as expressly permitted thereby. (cc) Immediately after the consummation of the transactions contemplated by this Agreement, the fair value and present fair saleable value of the assets of the Company (on a consolidated basis) will exceed the sum of its stated liabilities and identified contingent liabilities; the Company (on a consolidated basis) is not, nor will it be, after giving effect to the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, (a) left with unreasonably small capital with which to carry on its business as it is proposed to be conducted, (b) unable to pay its debts (contingent or otherwise) as they mature or (c) otherwise insolvent. (dd) None of the Issuers or any of their respective Affiliates (as defined in Rule 501(b) of Regulation D under the Act) has directly, or through any agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any "security" (as defined in the Act) which is or could be integrated with the sale of the Securities in a manner that would require the registration under the Act of the -13- Securities or (ii) engaged in any form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) in connection with the offering of the Notes or in any manner involving a public offering within the meaning of Section 4(2) of the Act. Assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 8 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers in the manner contemplated by this Agreement to register any of the Securities under the Act or to qualify the Indenture under the TIA. (ee) No securities of any of the Issuers are of the same class (within the meaning of Rule 144A under the Act) as the Securities and listed on a national securities exchange registered under Section 6 of the Exchange Act, or quoted in a U.S. automated inter-dealer quotation system. (ff) None of the Issuers has taken, nor will any of them take, directly or indirectly, any action designed to, or that might be reasonably expected to, cause or result in stabilization or manipulation of the price of the Notes. (gg) None of the Issuers, any of their respective Affiliates or any person acting on its or their behalf (other than the Initial Purchasers) has engaged in any directed selling efforts (as that term is defined in Regulation S under the Act ("REGULATION S")) with respect to the Notes; the Issuers and their respective Affiliates and any person acting on its or their behalf (other than the Initial Purchasers) have complied with the offering restrictions requirement of Regulation S. Any certificate signed by any officer of any of the Issuers and delivered to the Initial Purchasers or to counsel for the Initial Purchasers shall be deemed a joint and several representation and warranty by each of the Issuers to the Initial Purchasers as to the matters covered thereby. 3. PURCHASE, SALE AND DELIVERY OF THE SECURITIES. On the basis of the representations, warranties, agreements and covenants herein contained and subject to the terms and conditions herein set forth, the Issuers agree to issue and -14- sell to the Initial Purchasers, and the Initial Purchasers, acting severally and not jointly, agree to purchase the Securities in the respective amounts set forth on SCHEDULE 1 hereto from the Issuers at 100.425% of the principal amount of the Notes. One or more certificates in definitive form for the Securities that the Initial Purchasers have agreed to purchase hereunder, and in such denomination or denominations and registered in such name or names as the Initial Purchasers request upon notice to the Company at least 36 hours prior to the Closing Date, shall be delivered by or on behalf of the Issuers to the Initial Purchasers, against payment by or on behalf of the Initial Purchasers of the purchase price therefor by wire transfer (same day funds), to such account or accounts as the Issuers shall specify prior to the Closing Date, or by such means as the parties hereto shall agree prior to the Closing Date. Such delivery of and payment for the Securities shall be made at the offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New York at 10:00 A.M., New York time, on June 7, 2002, or at such other place, time or date as the Initial Purchasers, on the one hand, and the Issuers, on the other hand, may agree upon, such time and date of delivery against payment being herein referred to as the "CLOSING DATE." The Issuers will make such certificate or certificates for the Securities available for checking and packaging by the Initial Purchasers at the offices of Deutsche Bank Securities Inc. in New York, New York, or at such other place as Deutsche Bank Securities Inc. may designate, at least 24 hours prior to the Closing Date. 4. OFFERING BY THE INITIAL PURCHASERS. The Initial Purchasers propose to make an offering of the Securities at the prices and upon the terms set forth in the Final Memorandum, as soon as practicable after this Agreement is entered into and as in the judgment of the Initial Purchasers is advisable. 5. COVENANTS OF THE ISSUERS. Each of the Issuers covenants and agrees with the Initial Purchasers that: (a) The Issuers will not amend or supplement the Final Memorandum or any amendment or supplement thereto of which the Initial Purchasers shall not previously have been advised and furnished a copy for a reasonable period of time -15- prior to the proposed amendment or supplement and as to which the Initial Purchasers shall not have given their consent which consent shall not be unreasonably withheld. The Issuers will promptly, upon the reasonable request of the Initial Purchasers or counsel for the Initial Purchasers, make any reasonable amendments or supplements to the Preliminary Memorandum or the Final Memorandum that may be necessary or advisable in connection with the resale of the Securities by the Initial Purchasers. (b) The Issuers will cooperate with the Initial Purchasers in arranging for the qualification of the Notes for offering and sale under the securities or "Blue Sky" laws of such jurisdictions as the Initial Purchasers may designate and will continue such qualifications in effect for as long as may be necessary to complete the resale of the Notes; PROVIDED, HOWEVER, that in connection therewith, the Issuers shall not be required to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction or subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction where it is not then so qualified or subject. (c) If, at any time prior to the completion of the distribution by the Initial Purchasers of the Securities or the Private Exchange Notes, any event occurs or information becomes known as a result of which the Final Memorandum as then amended or supplemented would include any untrue statement of a material fact, or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if for any other reason it is necessary at any time to amend or supplement the Final Memorandum to comply with applicable law, the Issuers will promptly notify the Initial Purchasers thereof and will prepare, at the expense of the Issuers, an amendment or supplement to the Final Memorandum that corrects such statement or omission or effects such compliance. (d) The Issuers will, without charge, provide to the Initial Purchasers and to counsel for the Initial Purchasers as many copies of the Preliminary Memorandum and the Final Memorandum or any amendment or supplement thereto as the Initial Purchasers may reasonably request. -16- (e) The Issuers will apply the net proceeds from the sale of the Securities as set forth under "Use of Proceeds" in the Final Memorandum. (f) For so long as any of the Notes remain outstanding, the Issuers will furnish to the Initial Purchasers copies of all reports and other communications (financial or otherwise) furnished by the Issuers to the Trustee or to the holders of the Notes and, as soon as available, copies of any reports or financial statements furnished to or filed by any of the Issuers with the Commission or any national securities exchange on which any class of securities of either of the Issuers may be listed. (g) Prior to the Closing Date, the Issuers will furnish to the Initial Purchasers, as soon as they have been prepared, a copy of any unaudited interim financial statements of the Issuers for any period subsequent to the period covered by the most recent financial statements appearing in the Final Memorandum. (h) None of the Issuers or any of their Affiliates will sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any "security" (as defined in the Act) that could be integrated with the sale of securities in a manner which would require the registration under the Act of the Securities. (i) None of the Issuers will engage in any form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) in connection with the offering of the Notes or in any manner involving a public offering within the meaning of Section 4(2) of the Act. (j) For so long as any of the Securities remain outstanding, the Issuers will make available at their expense, upon request, to any holder of such Securities and any prospective purchasers thereof the information specified in Rule 144A(d)(4) under the Act, unless the Issuers are then subject to Section 13 or 15(d) of the Exchange Act. (k) The Issuers will use their best efforts to (i) permit the Securities to be designated PORTAL securities in -17- accordance with the rules and regulations adopted by the NASD relating to trading in the NASD's Portal Market (the "PORTAL MARKET") and (ii) permit the Securities to be eligible for clearance and settlement through The Depository Trust Company. (l) In connection with Securities offered and sold in an off shore transaction (as defined in Regulation S) the Issuers will not register any transfer of such Securities not made in accordance with the provisions of Regulation S and will not, except in accordance with the provisions of Regulation S, if applicable, issue any such Securities in the form of definitive securities. 6. EXPENSES. The Issuers, jointly and severally agree to pay all costs and expenses incident to the performance of their obligations under this Agreement, whether or not the transactions contemplated herein are consummated or this Agreement is terminated pursuant to Section 11 hereof, including all costs and expenses incident to (i) the printing, word processing or other production of documents with respect to the transactions contemplated hereby, including any costs of printing the Preliminary Memorandum and the Final Memorandum and any amendment or supplement thereto, and any "Blue Sky" memoranda, (ii) all arrangements relating to the delivery to the Initial Purchasers of copies of the foregoing documents, (iii) the fees and disbursements of the counsel, the accountants and any other experts or advisors retained by the Issuers, (iv) preparation (including printing), issuance and delivery to the Initial Purchasers of the Securities, (v) the qualification of the Securities under state securities and "Blue Sky" laws, including filing fees and fees and disbursements of counsel for the Initial Purchasers relating thereto (which will not exceed $5,000), (vi) expenses of the Company in connection with any meetings with prospective investors in the Securities, including one-half of any airplane rental expenses, (vii) fees and expenses of the Trustee including fees and expenses of counsel, (viii) all expenses and listing fees incurred in connection with the application for quotation of the Securities on the PORTAL Market and (ix) any fees charged by investment rating agencies for the rating of the Securities. If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Initial Purchasers set forth in Section 7 hereof is not satisfied, because this Agreement is terminated or because of any failure, refusal or inability on the part of the Issuers to perform all obligations and satisfy all conditions on their part to be -18- performed or satisfied hereunder (other than solely by reason of a default by the Initial Purchasers of their obligations hereunder after all conditions hereunder have been satisfied in accordance herewith), the Issuers agree to promptly reimburse the Initial Purchasers upon demand for all out-of-pocket expenses (including fees, disbursements and charges of Cahill Gordon & Reindel, counsel for the Initial Purchasers) that shall have been incurred by the Initial Purchasers in connection with the proposed purchase and sale of the Securities. 7. CONDITIONS OF THE INITIAL PURCHASERS' OBLIGATIONS. The obligation of the Initial Purchasers to purchase and pay for the Securities shall, in their sole discretion, be subject to the satisfaction or waiver of the following conditions on or prior to the Closing Date: (a) On the Closing Date, the Initial Purchasers shall have received the opinion, dated as of the Closing Date and addressed to the Initial Purchasers, of Latham & Watkins, special counsel for the Issuers, in form and substance satisfactory to counsel for the Initial Purchasers, as set forth in Exhibit B hereto. (b) On the Closing Date, the Initial Purchasers shall have received the opinion, in form and substance satisfactory to the Initial Purchasers, dated as of the Closing Date and addressed to the Initial Purchasers, of Cahill Gordon & Reindel, counsel for the Initial Purchasers, with respect to certain legal matters relating to this Agreement and such other related matters as the Initial Purchasers may reasonably require. In rendering such opinion, Cahill Gordon & Reindel shall have received and may rely upon such certificates and other documents and information as it may reasonably request to pass upon such matters. (c) The Initial Purchasers shall have received from Deloitte & Touche LLP a comfort letter or letters dated the date hereof and the Closing Date, in form and substance satisfactory to counsel for the Initial Purchasers. (d) The Initial Purchasers shall have received from Ernst & Young LLP a comfort letter or letters dated the date -19- hereof and the Closing Date, in form and substance satisfactory to counsel for the Initial Purchasers. (e) The representations and warranties of the Issuers contained in this Agreement shall be true and correct on and as of the date hereof and on and as of the Closing Date as if made on and as of the Closing Date; the statements of each Issuers' officers made pursuant to any certificate delivered in accordance with the provisions hereof shall be true and correct on and as of the Closing Date; the Issuers shall have performed all covenants and agreements and satisfied all conditions on their part to be performed or satisfied hereunder at or prior to the Closing Date; and, except as described in the Final Memorandum (exclusive of any amendment or supplement thereto after the date hereof), subsequent to the date of the most recent financial statements in such Final Memorandum, there shall have been no event or development, and no information shall have become known, that, individually or in the aggregate, has or would be reasonably likely to have a Material Adverse Effect. (f) The sale of the Securities hereunder shall not be enjoined (temporarily or permanently) on the Closing Date. (g) Subsequent to the date of the most recent financial statements in the Final Memorandum (exclusive of any amendment or supplement thereto after the date hereof), none of the Issuers shall have sustained any loss or interference with respect to its business or properties from fire, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any strike, labor dispute, slow down or work stoppage or from any legal or governmental proceeding, order or decree, which loss or interference, individually or in the aggregate, has or would be reasonably likely to have a Material Adverse Effect. (h) The Initial Purchasers shall have received a certificate of each of the Issuers, dated the Closing Date, signed on behalf of each such Issuer by its Chief Executive Officer, President or any Senior Vice President and the Chief Financial Officer or Treasurer, to the effect that: -20- (i) The representations and warranties of such Issuer contained in this Agreement are true and correct as if made on and as of the Closing Date, and such Issuer has performed in all material respects all covenants and agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date; (ii) At the Closing Date, since the date hereof or since the date of the most recent financial statements in the Final Memorandum (exclusive of any amendment or supplement thereto after the date hereof), no event or development has occurred, and no information has become known, that, individually or in the aggregate, has or would be reasonably likely to have a Material Adverse Effect; and (iii) The sale of the Securities hereunder has not been enjoined (temporarily or permanently). (i) On the Closing Date, the Initial Purchasers shall have received the Registration Rights Agreement executed by the Issuers and such agreement shall be in full force and effect at all times from and after the Closing Date. (j) The Initial Purchasers shall have received on or before the Closing Date from the Company a true and correct copy of an amendment to the Credit Facility (as defined in the Final Memorandum) (the "Amendment"), which Amendment shall have been executed by all necessary parties thereto and shall be in full force and effect, and there shall have been no material amendments, alterations, modifications or waivers of any of the provisions of the Amendment as described in the Final Memorandum. On or before the Closing Date, the Initial Purchasers and counsel for the Initial Purchasers shall have received such further documents, opinions, certificates, letters and schedules or instruments relating to the business, corporate, legal and financial affairs of Holdings and the Subsidiaries as they shall have heretofore reasonably requested from the Issuers. -21- All such documents, opinions, certificates, letters, schedules or instruments delivered pursuant to this Agreement will comply with the provisions hereof only if they are reasonably satisfactory in all material respects to the Initial Purchasers and counsel for the Initial Purchasers. The Issuers shall furnish to the Initial Purchasers such conformed copies of such documents, opinions, certificates, letters, schedules and instruments in such quantities as the Initial Purchasers shall reasonably request. 8. OFFERING OF SECURITIES; RESTRICTIONS ON TRANSFER. (a) Each Initial Purchaser, severally and not jointly, represents and warrants that it is a QIB. Each of the Initial Purchasers agrees with the Issuers (as to itself only) that (i) it has not and will not solicit offers for, or offer or sell, the Securities by any form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Act; and (ii) it has and will solicit offers for the Securities only from, and will offer the Securities only to (A) in the case of offers inside the United States, persons whom the Initial Purchasers reasonably believe to be QIBs or, if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to the Initial Purchasers that each such account is a QIB, to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A, and, in each case, in transactions under Rule 144A and (B) in the case of offers outside the United States, to persons other than U.S. persons ("non-U.S. purchasers," which term shall include dealers or other professional fiduciaries in the United States acting on a discretionary basis for non-U.S. beneficial owners (other than an estate or trust)); PROVIDED, HOWEVER, that, in the case of this clause (B), in purchasing such Securities such persons are deemed to have represented and agreed as provided under the caption "Notice to Investors" contained in the Final Memorandum (or, if the Final Memorandum is not in existence, in the most recent Memorandum). (b) Each of the Initial Purchasers represents and warrants (as to itself only) with respect to offers and sales outside the United States that (i) it has and will comply with all applicable laws and regulations in each jurisdiction in which it acquires, offers, sells or delivers Securities or has -22- in its possession or distributes any Memorandum or any such other material, in all cases at its own expense; (ii) the Securities have not been and will not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the Act or pursuant to an exemption from the registration requirements of the Act; (iii) it has offered the Securities and will offer and sell the Securities (A) as part of its distribution at any time and (B) otherwise until 40 days after the later of the commencement of the offering and the Closing Date, only in accordance with Rule 903 of Regulation S and, accordingly, neither it nor any persons acting on its behalf have engaged or will engage in any directed selling efforts (within the meaning of Regulation S) with respect to the Securities, and any such persons have complied and will comply with the offering restrictions requirement of Regulation S; and (iv) they agree that, at or prior to confirmation of sales of the Securities, they will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from them during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the United States Securities Act of 1933 (the "Securities Act") and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of the distribution of the Securities at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date of the offering, except in either case in accordance with Regulation S (or Rule 144A if available) under the Securities Act. Terms used above have the meaning given to them in Regulation S." Terms used in this Section 8 and not defined in this Agreement have the meanings given to them in Regulation S. 9. INDEMNIFICATION AND CONTRIBUTION. (a) The Issuers, jointly and severally, agree to indemnify and hold harmless the Initial Purchasers, and each person, if any, who controls the Initial Purchasers within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, against any losses, claims, damages or liabilities to which the Initial Purchasers or such controlling person may become subject under the Act, the Exchange Act or otherwise, insofar as any such -23- losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of any material fact contained in any Memorandum or any amendment or supplement thereto; or (ii) the omission or alleged omission to state, in any Memorandum or any amendment or supplement thereto, a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse, as incurred, the Initial Purchasers and each such controlling person for any legal or other expenses incurred by the Initial Purchasers or such controlling person in connection with investigating, defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, the Issuers 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 any untrue statement or alleged untrue statement or omission or alleged omission made in any Memorandum or any amendment or supplement thereto in reliance upon and in conformity with written information concerning any Initial Purchasers furnished to the Issuers by such Initial Purchasers specifically for use therein. The indemnity provided for in this Section 9 will be in addition to any liability that the Issuers may otherwise have to the indemnified parties. The Issuers shall not be liable under this Section 9 for any settlement of any claim or action effected without its prior written consent, which shall not be unreasonably withheld; PROVIDED FURTHER, that with respect to any such untrue statement or omission made in the Preliminary Memorandum, the indemnity contained in this Section 9(a) (to the extent and only to the extent that such losses, claims, damages or liabilities resulted from the untrue statement or omission described in (B) below) shall not inure to the benefit of an Initial Purchaser if it shall be established that both (A) a copy of the amended or supplemented Memorandum was not sent or given by such Initial Purchaser to the person asserting any such losses, claims, damages or liabilities at or prior to the delivery of the Notes to such person, and (B) the untrue statement or omission in the Preliminary Memorandum was corrected -24- in the amended or supplemented Memorandum unless, in either case, such failure to deliver the amended or supplemented Memorandum was a result of noncompliance by the Company with Section 5(c). (b) Each Initial Purchaser, severally and not jointly, agrees to indemnify and hold harmless each of the Issuers, its directors, its officers and each person, if any, who controls such Issuer within the meaning of Section 15 of the Act or Section 20 of the Exchange Act against any losses, claims, damages or liabilities to which such Issuer or any such director, officer or controlling person may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any Memorandum or any amendment or supplement thereto, or (ii) the omission or the alleged omission to state therein a material fact required to be stated in any Memorandum or any amendment or supplement thereto, or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Initial Purchaser, furnished to the Issuers by such Initial Purchaser specifically for use therein; and subject to the limitation set forth immediately preceding this clause, will reimburse, as incurred, any legal or other expenses incurred by each such Issuer or any such director, officer or controlling person in connection with investigating or defending against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action in respect thereof. The indemnity provided for in this Section 9 will be in addition to any liability that the Initial Purchasers may otherwise have to the indemnified parties. The Initial Purchasers shall not be liable under this Section 9 for any settlement of any claim or action effected without their consent, which shall not be unreasonably withheld. The Issuers shall not, without the prior written consent of the Initial Purchasers, effect any settlement or compromise of any pending or threatened proceeding in respect of which the Initial Purchasers are or could have been a party, or indemnity could have been sought hereunder by the Initial Purchasers, unless -25- such settlement (A) includes an unconditional written release of the Initial Purchasers, in form and substance reasonably satisfactory to the Initial Purchasers, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of the Initial Purchasers. (c) Promptly after receipt by an indemnified party under this Section 9 of notice of the commencement of any action for which such indemnified party is entitled to indemnification under this Section 9, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 9, notify the indemnifying party of the commencement thereof in writing; but the omission to so notify the indemnifying party (i) will not relieve it from any liability under paragraph (a) or (b) above unless and to the extent such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraphs (a) and (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; PROVIDED, HOWEVER, that if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it and/or other indemnified parties that are different from or additional to those available to the indemnifying party, or (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after receipt by the indemnifying party of notice of the institution of such action, then, in each such case, the indemnifying party shall not have the right -26- to direct the defense of such action on behalf of such indemnified party or parties and such indemnified party or parties shall have the right to select separate counsel to defend such action on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof and approval by such indemnified party of counsel appointed to defend such action, the indemnifying party will not be liable to such indemnified party under this Section 9 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof, unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the immediately preceding sentence (it being understood, however, that in connection with such action the indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel) in any one action or separate but substantially similar actions in the same jurisdiction arising out of the same general allegations or circumstances, designated by Deutsche Bank Securities Inc. on behalf of the Initial Purchasers in the case of paragraph (a) of this Section 9 or Holdings on behalf of the Issuers in the case of paragraph (b) of this Section 9, representing the indemnified parties under such paragraph (a) or paragraph (b), as the case may be, who are parties to such action or actions) or (ii) the indemnifying party has authorized in writing the employment of counsel for the indemnified party at the expense of the indemnifying party. After such notice from the indemnifying party to such indemnified party, the indemnifying party will not be liable for the costs and expenses of any settlement of such action effected by such indemnified party without the prior written consent of the indemnifying party (which consent shall not be unreasonably withheld), unless such indemnified party waived in writing its rights under this Section 9, in which case the indemnified party may effect such a settlement without such consent. (d) In circumstances in which the indemnity agreement provided for in the preceding paragraphs of this Section 9 is unavailable to, or insufficient to hold harmless, an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof), each indemnifying -27- party, in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect (i) the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the offering of the Notes or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof). The relative benefits received by the Issuers on the one hand and the Initial Purchasers on the other shall be deemed to be in the same proportion as the total proceeds from the offering of the Notes (before deducting expenses) received by the Issuers bear to the total discounts and commissions received by the Initial Purchasers. The relative fault of the parties 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 Issuers on the one hand, or the Initial Purchasers on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission or alleged statement or omission, and any other equitable considerations appropriate in the circumstances. The Issuers and the Initial Purchasers agree that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the first sentence of this paragraph (d). Notwithstanding any other provision of this paragraph (d), the Initial Purchasers shall not be obligated to make contributions hereunder that in the aggregate exceed the total discounts, commissions and other compensation received by the Initial Purchasers under this Agreement, less the aggregate amount of any damages that the Initial Purchasers has otherwise been required to pay by reason of the untrue or alleged untrue statements or the omissions or alleged omissions to state a material fact, and no person guilty of fraudulent misrepresentation (within the meaning of Sec- -28- tion 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls the Initial Purchasers within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Initial Purchasers, and each director of either of the Issuers, each officer of either of the Issuers and each person, if any, who controls either of the Issuers within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, shall have the same rights to contribution as the Issuers. 10. SURVIVAL CLAUSE. The respective representations, warranties, agreements, covenants, indemnities and other statements of each of the Issuers, its officers and the Initial Purchasers set forth in this Agreement or made by or on behalf of them pursuant to this Agreement shall remain in full force and effect, regardless of (i) any investigation made by or on behalf of either of the Issuers, any of their officers or directors, the Initial Purchasers or any controlling person referred to in Section 9 hereof and (ii) delivery of and payment for the Notes. The respective agreements, covenants, indemnities and other statements set forth in Sections 6, 9, 10 and 15 hereof shall remain in full force and effect, regardless of any termination or cancellation of this Agreement. 11. TERMINATION. (a) This Agreement may be terminated in the sole discretion of the Initial Purchasers by notice to the Issuers given prior to the Closing Date in the event that the Issuers shall have failed, refused or been unable to perform in all material respects all obligations and satisfy all conditions on its part to be performed or satisfied hereunder at or prior thereto or, if at or prior to the Closing Date: (i) any of the Issuers shall have sustained any loss or interference with respect to its businesses or properties from fire, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any strike, labor dispute, slow down or work stoppage or any legal or governmental proceeding, which loss or interference, in the sole judgment of the Initial Purchasers, has had or has a Material Adverse Effect, or there -29- shall have been, in the sole judgment of the Initial Purchasers, any event or development that, individually or in the aggregate, has or could be reasonably likely to have a Material Adverse Effect (including without limitation a change in control of the Issuers), except in each case as described in the Final Memorandum (exclusive of any amendment or supplement thereto); (ii) trading in securities of the Issuers or in securities generally on the New York Stock Exchange, American Stock Exchange or the NASDAQ National Market shall have been suspended or materially limited or minimum or maximum prices shall have been established on any such exchange or market; (iii) a banking moratorium shall have been declared by New York or United States authorities or a disruption in securities settlement or clearance services in the United States that would prevent the consummation of the transactions contemplated hereby on the Closing Date; (iv) there shall have been (A) an outbreak or escalation of hostilities between the United States and any foreign power, or (B) an outbreak or escalation of any other insurrection or armed conflict involving the United States or any other national or international calamity or emergency, or (C) any material change in the financial markets of the United States which, in the case of (A), (B) or (C) above and in the sole judgment of the Initial Purchasers, makes it impracticable or inadvisable to proceed with the offering or the delivery of the Notes as contemplated by the Final Memorandum; or (v) any securities of the Issuers shall have been downgraded or placed on any "watch list" for possible downgrading by any nationally recognized statistical rating organization. (b) Termination of this Agreement pursuant to this Section 11 shall be without liability of any party to any other party except as provided in Section 10 hereof. -30- 12. INFORMATION SUPPLIED BY THE INITIAL PURCHASERS. The statements set forth in the third paragraph, second and fourth through eighth sentences of the sixth paragraph and the third and fourth sentences of the seventh paragraph under the heading "Private Placement" in the Final Memorandum (to the extent such statements relate to the Initial Purchasers) constitute the only information furnished by the Initial Purchasers to the Issuer for the purposes of Sections 2(a) and 9 hereof. 13. NOTICES. All communications hereunder shall be in writing and, if sent to the Initial Purchasers, shall be mailed or delivered to (i) c/o Deutsche Bank Securities Inc., 31 West 52nd Street, New York, New York 10019, Attention: Corporate Finance Department; if sent to the Issuers, shall be mailed or delivered to the Issuers at TransDigm Inc., 26380 Curtiss Wright Parkway, Suite 304, Richmond Heights, OH 44143, Attention: Chief Financial Officer; with a copy to Latham & Watkins, 885 Third Avenue, Suite 1000, New York, New York 10022, Attention: Kirk Davenport. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; and one business day after being timely delivered to a next-day air courier. 14. SUCCESSORS. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Issuers and their respective successors and legal representatives, and nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained; this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person except that (i) the indemnities of the Issuers contained in Section 9 of this Agreement shall also be for the benefit of any person or persons who control the Initial Purchasers within the meaning of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the indemnities of the Initial Purchasers contained in Section 9 of this Agreement -31- shall also be for the benefit of the directors of either of the Issuers, their officers and any person or persons who control either of the Issuers within the meaning of Section 15 of the Act or Section 20 of the Exchange Act. No purchaser of Notes from the Initial Purchasers will be deemed a successor because of such purchase. 15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW. 16. COUNTERPARTS. 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. If the foregoing correctly sets forth our understanding, please indicate your acceptance thereof in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between the Issuers and the Initial Purchasers. Very truly yours, WITNESS the due execution hereof by the respective duly authorized officers of the undersigned as of the date first written above. TRANSDIGM INC., as Issuer By: /s/ Gregory Rufus ---------------------------------------- Name: Gregory Rufus Title: Vice President, Chief Financial Officer & Assistant Secretary. TRANSDIGM HOLDING COMPANY, as Guarantor By: /s/ Gregory Rufus ---------------------------------------- Name: Gregory Rufus Title: Vice President, Chief Financial Officer & Assistant Secretary. MARATHON POWER TECHNOLOGIES COMPANY, as Guarantor By: /s/ Gregory Rufus ---------------------------------------- Name: Gregory Rufus Title: Treasurer and Assistant Secretary ZMP, INC., as Guarantor By: /s/ Gregory Rufus ------------------------------------- Name: Gregory Rufus Title: Treasurer and Assistant Secretary ADAMS RITE AEROSPACE, INC., as Guarantor By: /s/ Gregory Rufus ------------------------------------- Name: Gregory Rufus Title: Treasurer and Assistant Secretary CHAMPION AEROSPACE INC., as Guarantor By: /s/ Gregory Rufus ------------------------------------- Name: Gregory Rufus Title: Treasurer and Assistant Secretary CHRISTIE ELECTRIC CORP., as Guarantor By: /s/ Gregory Rufus ------------------------------------- Name: Gregory Rufus Title: Treasurer and Assistant Secretary The foregoing Agreement is hereby confirmed and accepted as of the date first above written. DEUTSCHE BANK SECURITIES INC., as Initial Purchaser By: /s/ Larry Zimmerman ------------------------ Name: Larry Zimmerman Title: Managing Director By: /s/ Tobias Lewis ------------------------ Name: Tobias Lewis Title: Vice President CREDIT SUISSE FIRST BOSTON CORPORATION, as Initial Purchaser By: /s/ Brent Patry ------------------------ Name: Brent Patry Title: Managing Director SCHEDULE I
Principal Amount of Senior Subordinated Notes ------------------- DEUTSCHE BANK SECURITIES INC.............................. $ 45,00,000 CREDIT SUISSE FIRST BOSTON CORPORATION.................... 30,000,000 ------------- Total $ 75,000,000
SCHEDULE II Adams Rite Aerospace, Inc. Champion Aerospace Inc. Christie Electric Corp. Marathon Power Technologies Company Marathon Power Technologies Limited TransDigm Export, Inc. ZMP, Inc. EXHIBIT A [Registration Rights Agreement] -2- EX-10.12 19 a2082596zex-10_12.txt EXHIBIT 10.12 EXHIBIT 10.12 FIRST AMENDMENT AND CONSENT FIRST AMENDMENT AND CONSENT (this "First Amendment"), dated as of May 14, 2002, among TRANSDIGM HOLDING COMPANY, a Delaware corporation ("Holdings"), TRANSDIGM INC., a Delaware Corporation (the "Borrower") the lenders from time to time party to the Credit Agreement referred to below (each a "Lender," and collectively, the "Lenders"), CREDIT SUISSE FIRST BOSTON CORPORATION, as Syndication Agent (in such capacity, the "Syndication Agent"), and DEUTSCHE BANK TRUST COMPANY AMERICAS (formerly known as Bankers Trust Company), as Administrative Agent (in such capacity, the "Administrative Agent"). Unless otherwise defined herein, capitalized terms used herein and defined in the Credit Agreement are used herein as therein defined. W I T N E S S E T H : WHEREAS, Holdings, the Borrower, the Lenders, the Syndication Agent and the Administrative Agent have entered into an Amended and Restated Credit Agreement, dated as of December 3, 1998, and amended and restated as of May 31, 2001 (the "Credit Agreement"); WHEREAS, the Borrower desires to issue up to $75,000,000 in aggregate principal amount of additional 10-3/8% senior subordinated notes due 2008 (the "New Senior Subordinated Notes") under the Senior Subordinated Note Indenture; WHEREAS, in conjunction with the issuance of the New Senior Subordinated Notes, the Borrower has requested certain amendments and modifications to the Credit Agreement as provided herein; and WHEREAS, subject to the terms and conditions set forth below, the parties hereto wish to amend and/or modify certain provisions of the Credit Agreement as provided herein; NOW, THEREFORE, it is agreed; A. CONSENT AND AMENDMENTS TO THE CREDIT AGREEMENT 1. Notwithstanding anything to the contrary contained in Sections 4.02(j) and 9.04 of the Credit Agreement, the Borrower may issue on the First Amendment Effective Date (as hereinafter defined), and the Guarantors may guaranty, up to $75,000,000 in aggregate principal amount of the New Senior Subordinated Notes, so long as (i) such New Senior Subordinated Notes (and the related guaranties) are issued under the Senior Subordinated Note Indenture and otherwise have the identical terms, conditions and provisions that are applicable to the Senior Subordinated Notes (and related guaranties) and (ii) 100% of the cash proceeds therefrom (net of all underwriting discounts, fees and commissions and other costs and expenses associated therewith and net of the amount (if any) of interest accrued thereon through the issuance date thereof) are applied on the date of receipt thereof (1) first, to repay outstanding A Term Loans and (2) second, to the extent in excess thereof, to repay outstanding B Term Loans and C Term Loans on a PRO RATA basis (based on the then outstanding principal amount of B Term Loans and C Term Loans), and with all such repayments otherwise to be applied in accordance with the last sentence of Section 4.02(j) of the Credit Agreement and Section 4.02(k) of the Credit Agreement. 2. Section 1.01(c) of the Credit Agreement is hereby amended by inserting the text ", the Incremental Term Loans" immediately after the text "the A Term Loans" appearing therein. 3. Section 1.01 of the Credit Agreement is hereby amended by inserting the following new clause (g) at the end thereof. "(g) Subject to Section 1.15 and the other terms and conditions set forth herein, each Lender with an Incremental Term Loan Commitment severally agrees to make, at any time and from time to time on and after the date that such Incremental Term Loan Commitment is obtained pursuant to Section 1.15 and prior to the Incremental Term Loan Commitment Termination Date, a term loan or term loans (each, an "Incremental Term Loan" and, collectively, the "Incremental Term Loans") to the Borrower, which Incremental Term Loans: (i) shall be incurred on an Incremental Term Loan Borrowing Date; (ii) shall be denominated in U.S. Dollars; (iii) except as hereinafter provided, shall, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, PROVIDED that, all Incremental Term Loans comprising the same Borrowing shall consist of Incremental Term Loans of the same Type; and (iv) shall not exceed for any such Lender at the time of any incurrence thereof that aggregate principal amount which equals the Incremental Term Loan Commitment of such Lender at such time (before giving effect to any reduction thereof at such time pursuant to Section 3.03(g)). Once repaid, Incremental Term Loans incurred hereunder may not be reborrowed." 4. Section 1.03(a) of the Credit Agreement is hereby amended by inserting the text ", Incremental Term Loans" immediately following the text "C Term Loans" appearing in subclause (iii) thereof. 5. Section 1.05(a) of the Credit Agreement is hereby amended by (i) redesignating subclause (iv) thereof as subclause (v), (ii) redesignating subclause (v) thereof as subclause (vi) and (iii) inserting the following new subclause (iv) immediately following subclause (iii) thereof: "(iv) if Incremental Term Loans, by a promissory note substantially in the form of Exhibit B-6 with blanks appropriately completed in conformity herewith (each an "Incremental Term Note," and, collectively, the "Incremental Term Notes"),". 6. Section 1.05 of the Credit Agreement is hereby further amended by (i) redesignating clause (g) thereof as clause (h) and (ii) inserting the following new clause (g) immediately following clause (f) thereof: "(g) The Incremental Term Note issued to each Lender with an Incremental Term Loan Commitment or with outstanding Incremental Term Loans under a given Tranche shall (i) be executed by the Borrower, (ii) be payable to such Lender or its registered -2- assigns and be dated the date of issuance thereof, (iii) be in a stated principal amount equal to the Incremental Term Loan Commitment of such Lender on the effective date of the respective Incremental Term Loan Commitment Agreement (prior to the incurrence of any Incremental Term Loans pursuant thereto on such date) (or, if issued thereafter, be in a stated principal amount equal to the sum of the then remaining amount of the Incremental Term Loan Commitment of such Lender plus the outstanding Incremental Term Loans of such Lender on the date of issuance thereof), (iv) mature on the respective Incremental Term Loan Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided in Section 4.01, and mandatory repayment as provided in Section 4.02, and (vii) be entitled to the benefits of this Agreement and the other Credit Documents." 7. Section 1.09 of the Credit Agreement is hereby amended by (i) deleting the word "and" appearing at the end of subclause (viii) thereof, (ii) deleting the period appearing at the end of subclause (ix) thereof and inserting "; and" in lieu thereof and (iii) inserting the following new subclause (x) immediately following subclause (ix) thereof: "(x) no Interest Period in respect of any Borrowing of Incremental Term Loans under a given Tranche shall be elected which extends beyond any date upon which an Incremental Term Loan Scheduled Repayment will be required to be made under Section 4.02(n) in respect of such Tranche if, after giving effect to the election of such Interest Period, the aggregate principal amount of such Incremental Term Loans which have Interest Periods which will expire after such date will be in excess of the aggregate principal amount of such Incremental Term Loans then outstanding less the aggregate amount of such required Incremental Term Loan Scheduled Repayment." 8. Section 1.13 of the Credit Agreement is hereby amended by deleting clause (i) of the proviso thereof and inserting the following new clause (i) in lieu thereof: "(i) at the time of any replacement pursuant to this Section 1.13, the Replacement Lender shall enter into one or more Assignment and Assumption Agreements pursuant to Section 13.04(b) (and with all fees payable pursuant to said Section 13.04(b) to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the Commitments and outstanding Loans (or, in the case of the replacement of only (a) the Revolving Loan Commitment, the Revolving Loan Commitment and outstanding Revolving Loans and participations in Letter of Credit Outstandings, (b) A Term Loans, the outstanding A Term Loans, (c) B Term Loans, the outstanding B Term Loans, (d) C Term Loans, the outstanding C Term Loans and (e) Incremental Term Loans under a given Tranche, the then remaining Incremental Term Loan Commitment and the outstanding Incremental Term Loans of such Tranche) of, and in each case (except for the replacement of only outstanding Term Loans of the respective Lender) participations in Letters of Credit by, the Replaced Lender and, in connection therewith, shall pay to (x) the Replaced Lender in respect thereof an amount equal to the sum of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans (or, in the case of the replacement of only (I) the Revolving Loan Commitment, the outstanding Revolving Loans, (II) the A Term Loan, the outstanding A -3- Term Loans, (III) the B Term Loans, the outstanding B Term Loans, (IV) the C Term Loans, the outstanding C Term Loans or (V) the Incremental Term Loan Commitments and Incremental Term Loans under a given Tranche, the outstanding Incremental Term Loans of such Tranche) of the Replaced Lender, (B) except in the case of the replacement of only outstanding Term Loans of a Replaced Lender, an amount equal to all Unpaid Drawings that have been funded by (and not reimbursed to) such Replaced Lender, together with all then unpaid interest with respect thereto at such time and (C) an amount equal to all accrued, but theretofore unpaid, Fees owing to the Replaced Lender (but only with respect to the relevant Tranche, in the case of the replacement of less than all Tranches of Loans then held by the respective Replaced Lender) pursuant to Section 3.01, (y) except in the case of the replacement of only outstanding Term Loans of a Replaced Lender, each Letter of Credit Issuer an amount equal to such Replaced Lender's Percentage of any Unpaid Drawing relating to Letters of Credit issued by such Letter of Credit Issuer (which at such time remains an Unpaid Drawing) to the extent such amount was not theretofore funded by such Replaced Lender and (z) in the case of any replacement of Revolving Loan Commitments, BTCo an amount equal to such Replaced Lender's Percentage of any Mandatory Borrowing to the extent such amount was not theretofore funded by such Replaced Lender; and". 9. Section 1 of the Credit Agreement is hereby further amended by inserting the following new Section 1.15 at the end thereof: "1.15 INCREMENTAL TERM LOAN COMMITMENTS. (a) The Borrower shall have the right, in consultation and coordination with the Agents as to all of the matters set forth below in this Section 1.15, to request at any time and from time to time after the First Amendment Effective Date and prior to the Incremental Term Loan Commitment Termination Date for the respective Tranche of Incremental Term Loans that one or more Lenders (and/or one or more other Persons which will become Lenders as provided below) provide Incremental Term Loan Commitments under such Tranche of Incremental Term Loans as designated in the respective Incremental Term Loan Commitment Agreement and, subject to the terms and conditions contained in this Agreement and in the respective Incremental Term Loan Commitment Agreement, to incur Incremental Term Loans pursuant thereto, so long as (i) no Default or Event of Default then exists or would result therefrom and all of the representations and warranties contained herein and in the other Credit Documents are true and correct in all material respects at such time (unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date), (ii) Holdings and its Subsidiaries will be in compliance with Sections 9.09 through 9.11, inclusive, in each case, on a PRO FORMA Basis and after giving effect to each incurrence of Incremental Term Loans hereunder, (iii) at the time of each incurrence of Incremental Term Loans, each of Holdings and the Borrower shall have delivered to the Administrative Agent separate certificates of their respective chief financial officers certifying which provisions of the Senior Subordinated Note Indenture and, to the extent same will remain in effect, the Seller Subordinated Note Indenture that the respective incurrence of Incremental Term Loans will be justified under and demonstrating in reasonable detail that the full amount of such Incremental Term Loans may be incurred in accordance with, and will not violate the provisions of, Section 4.09 of the Senior -4- Subordinated Note Indenture and, to the extent same will remain in effect, Section 4.09 of the Seller Subordinated Note Indenture, and (iv) at the time of each incurrence of Incremental Term Loans, each of Holdings and the Borrower also shall have delivered to the trustee under the Senior Subordinated Note Indenture and, to the extent same will remain in effect, the Seller Subordinated Note Indenture and to the Administrative Agent the officers' certificate referred to in clause (vi) of the second paragraph of the definition of "Senior Debt" contained in the Senior Subordinated Note Indenture and in clause (i) of the second paragraph of the definition of "Senior Debt" contained in the Seller Subordinated Note Indenture. Furthermore, it is understood and agreed that (i) no Lender shall be obligated to provide an Incremental Term Loan Commitment, and until such time, if any, as such Lender has agreed in its sole discretion to provide an Incremental Term Loan Commitment and executed and delivered to the Borrower and the Administrative Agent an Incremental Term Loan Commitment Agreement as provided in clause (b) of this Section 1.15, such Lender shall not be obligated to fund any Incremental Term Loans, (ii) any Lender (or, in the circumstances contemplated by clause (xii) below, any other Person which will qualify as an Eligible Transferee) may so provide an Incremental Term Loan Commitment without the consent of either Agent or any Lender (and, so long as the provisions of this Section 1.15 are satisfied and except as otherwise provided in clause (vi) below, neither the consent of either Agent nor the consent of any Lender shall be required in connection with obtaining Incremental Term Loan Commitments), (iii) the amount of each Tranche of Incremental Term Loan Commitments shall be in a minimum aggregate amount for all Lenders which provide an Incremental Term Loan Commitment under such Tranche of Incremental Term Loans (including, in the circumstances contemplated by clause (xii) below, Eligible Transferees who will become Lenders)) of at least $25,000,000, (iv) the aggregate amount of all Incremental Term Loan Commitments permitted to be provided pursuant to this Section 1.15 and the aggregate principal amount of all Incremental Term Loans permitted to be made pursuant to this Section 1.15 shall not, in either case, exceed the remainder of (x) $150,000,000 less (y) the aggregate principal amount of all Additional Subordinated Debt theretofore or then being issued or incurred, (v) the up-front commitment fees and, if applicable, any unutilized commitment fees and/or other fees, payable in respect of each Incremental Term Loan Commitment shall be separately agreed to by the Borrower and each Incremental Term Loan Lender (and with all such fees to be disclosed by the Borrower to the Administrative Agent, which information the Administrative Agent agrees to treat confidentially in accordance with the terms of this Agreement), (vi) the terms required to be set forth in items 2, 4, 5 and 6 of Annex I to the respective Incremental Term Loan Commitment Agreement shall be required to be reasonably satisfactory to the Administrative Agent, (vii) the proceeds of all Incremental Term Loans shall be used only for the purposes set forth in Section 7.05, (viii) any Incremental Term Loans being incurred under any single Incremental Term Loan Commitment Agreement only shall be incurred on the date of the consummation of a Permitted Acquisition or the date of the redemption, repayment or defeasance of the Seller Subordinated Notes, as the case may be (or such other date as is agreed to by the parties to the applicable Incremental Term Loan Commitment Agreement), (ix) each Incremental Term Loan Commitment Agreement shall specifically designate the Tranche of the Incremental Term Loan Commitments being provided -5- thereunder (which Tranche shall be a new Tranche (i.e., not the same as any existing Tranche of Incremental Term Loans, Incremental Term Loan Commitments or other Term Loans) unless the requirements of Section 1.15(c) are satisfied); (x) all Incremental Term Loans (and all interest, fees and other amounts payable thereon or with respect thereto) shall be Obligations under this Agreement and the other Credit Documents and shall be secured by the Collateral, and guaranteed under the Guaranties, on a PARI PASSU basis with all other Loans; (xi) each Lender (or, in the circumstances contemplated by clause (xii) below, any other Person which will qualify as an Eligible Transferee) agreeing to provide an Incremental Term Loan Commitment pursuant to an Incremental Term Loan Commitment Agreement shall, subject to the satisfaction of the relevant conditions set forth in this Agreement, make Incremental Term Loans under the Tranche specified in such Incremental Term Loan Commitment Agreement as provided in Section 1.01(g) and such Loans shall thereafter be deemed to be Incremental Term Loans under such Tranche for all purposes of this Agreement and the other Credit Documents, and (xii) if, within 10 Business Days after the Borrower has requested the then existing Lenders (other than Defaulting Lenders) to provide Incremental Term Loan Commitments pursuant to this Section 1.15 the Borrower has not received Incremental Term Loan Commitments in an aggregate amount equal to that amount of Incremental Term Loan Commitments which the Borrower desires to obtain pursuant to such request (as set forth in the notice provided by the Borrower as provided below), then the Borrower may solicit and accept Incremental Term Loan Commitments from Persons which are Eligible Transferees in an aggregate final allocated amount equal to such deficiency. If the commitment fee payable to any Eligible Transferee for its Incremental Term Loan Commitment (based on the commitment amount offered by such Eligible Transferee and expressed as a percentage of the commitment amount finally allocated to such Eligible Transferee) is greater than the comparable commitment fee offered to a then existing Lender, each such existing Lender shall be: (1) offered the opportunity by the Borrower to deliver an additional commitment in respect of such deficiency when and as commitments are due from such Eligible Transferee and offered an opportunity to participate in such Incremental Term Loan Commitments on a basis reasonably determined by the Borrower and the arranger of such Commitments; and (2) paid the same commitment fee by the Borrower as the commitment fee (based on offered commitment amounts and expressed as a percentage of the final allocated commitment amount) payable to such Eligible Transferee, based on the combined amount of the Incremental Term Loan Commitment initially delivered by such existing Lender and the final allocated amount of any such additional commitment delivered by such existing Lender. For these purposes, "commitment fee" means compensation paid (whether in the same percentage amount or in tiered percentage amounts based on the commitment amount offered or funded) at the time of commitment, closing or funding of an Incremental Term Loan to all of the lenders participating in the funding of that Incremental Term Loan and does not include any incremental fees or compensation associated with arranging, syndicating or underwriting the aggregate Incremental Term Loan Commitments of such Tranche of Incremental Term Loans as requested by the Borrower pursuant to this Section 1.15. (b) At the time of the provision of Incremental Term Loan Commitments pursuant to this Section 1.15, the Borrower, each Guarantor, the Administrative Agent -6- and each such Lender or other Eligible Transferee which agrees to provide an Incremental Term Loan Commitment (each, an "Incremental Term Loan Lender") shall execute and deliver to the Borrower and the Administrative Agent an Incremental Term Loan Commitment Agreement, appropriately completed (with the effectiveness of the Incremental Term Loan Commitment(s) provided therein to occur on the date set forth in such Incremental Term Loan Commitment Agreement, the payment of any fees (including, without limitation, any fees payable pursuant to clause (II) of the immediately succeeding sentence) required in connection therewith, the satisfaction of the conditions set forth in this Section 1.15 and the satisfaction of any other conditions precedent that may be set forth in such Incremental Term Loan Commitment Agreement). In addition, (x) on or prior to the effective date of the respective Incremental Term Loan Commitment Agreement, (I) Holdings and its Subsidiaries shall have delivered such technical amendments, modifications and/or supplements to the Security Documents as are reasonably requested by the Administrative Agent to ensure that the additional Obligations to be incurred pursuant to the Incremental Term Loan Commitments are secured by, and entitled to the benefits of, the Security Documents, and each of the Lenders hereby agrees to, and authorizes the Collateral Agent to enter into, any such technical amendments, modifications and/or supplements, (II) unless waived by the Administrative Agent, the Administrative Agent shall have received from the Borrower (or, to the extent agreed to by the Borrower and the respective Incremental Term Loan Lender, from such respective Incremental Term Loan Lender) the payment of a non-refundable fee of $3,500 for each Eligible Transferee which becomes a Lender pursuant to this Section 1.15, (III) the Administrative Agent shall have received from an Authorized Officer of Holdings and the Borrower a certificate stating that the conditions set forth in clause (i) of the first sentence of Section 1.15(a) have been satisfied, (IV) the Borrower shall have delivered to the Administrative Agent an opinion or opinions, in form and substance reasonably satisfactory to the Administrative Agent, from counsel to the Credit Parties reasonably satisfactory to the Administrative Agent and dated such date, covering such of the matters set forth in the opinions of counsel delivered to the Administrative Agent on the Restatement Effective Date pursuant to Section 5.03 as may be reasonably requested by the Administrative Agent, and such other matters as the Administrative Agent may reasonably request, (V) the Borrower and the Guarantors shall have delivered to the Administrative Agent such other officers' certificates, resolutions and evidence of good standing as the Administrative Agent shall reasonably request, and (VI) to the extent requested by such Incremental Term Loan Lenders, Incremental Term Notes will be issued, at the Borrower's expense, to such Incremental Term Loan Lenders, to be in conformity with the requirements of Section 1.05 (with appropriate modifications) to the extent needed to reflect the Incremental Term Loan Commitments and outstanding Incremental Term Loans made by such Incremental Term Loan Lenders, and (y) on or prior to each Incremental Term Loan Borrowing Date, in addition to the applicable conditions precedent set forth in Section 6, the Administrative Agent shall have received from an Authorized Officer of Holdings and the Borrower a certificate stating that the conditions set forth in clauses (ii), (iii) and (iv) of the first sentence of Section 1.15(a) have been satisfied (together with calculations demonstrating same (where applicable) in reasonable detail and copies of the certificates set forth in such clauses (ii) and (iii)). The Administrative Agent shall promptly notify each Lender as to -7- the effectiveness of each Incremental Term Loan Commitment Agreement and, at such time, Annex I shall be deemed modified to reflect the Incremental Term Loan Commitments of such Incremental Term Loan Lenders. (c) Notwithstanding anything to the contrary contained above in this Section 1.15, the Incremental Term Loan Commitments provided by an Incremental Term Loan Lender or Incremental Term Loan Lenders, as the case may be, pursuant to each Incremental Term Loan Commitment Agreement shall constitute a new Tranche, which shall be separate and distinct from the existing Tranches pursuant to this Agreement (with a designation which may be made in letters (i.e., A, B, C, etc.), numbers (1, 2, 3, etc.) or a combination thereof (i.e., A-1, A-2, B-1, B-2, C-1, C-2, etc.), provided that the parties to a given Incremental Term Loan Commitment Agreement may specify therein that the respective Incremental Term Loans made pursuant thereto shall constitute part of, and be added to, an existing Tranche of Incremental Term Loans or one of the other existing Tranches of Term Loans (i.e., the B Term Loans or the C Term Loans), so long as the following requirements are satisfied: (i) the Incremental Term Loans to be made pursuant to such Incremental Term Loan Commitment Agreement shall have the same Maturity Date as the Tranche of Term Loans to which the new Incremental Term Loans are being added, and shall have the same Applicable Base Rate Margin and Applicable Eurodollar Rate Margin applicable to such Tranche; (ii) the new Incremental Term Loans shall have the same Scheduled Repayment dates as then remain with respect to the Tranche to which such new Incremental Term Loans are being added (with the amount of each Scheduled Repayment applicable to such new Incremental Term Loans to be the same (on a proportionate basis) as is theretofore applicable to the Tranche to which such new Incremental Term Loans are being added, thereby increasing the amount of each then remaining Scheduled Repayment of the respective Tranche proportionately; and (iii) on the date of the making of such new Incremental Term Loans, and notwithstanding anything to the contrary set forth in Section 1.09, such new Incremental Term Loans shall be added to (and form part of) each Borrowing of outstanding Term Loans of the respective Tranche on a pro rata basis (based on the relative sizes of the various outstanding Borrowings), so that each Lender will participate proportionately in each then outstanding Borrowing of Term Loans of the respective Tranche, and so that the existing Lenders with respect to such Tranche continue to have the same participation (by amount) in each Borrowing as they had before the making of the new Term Loans of such Tranche. To the extent the provisions of preceding clause (iii) require that Lenders making new Incremental Term Loans add same to then outstanding Borrowings of Eurodollar Loans, it is acknowledged that the effect thereof may result in such new Incremental Term Loans having short Interest Periods (i.e., an Interest Period that began during an Interest Period then applicable to outstanding Eurodollar Loans and which will end on the -8- last day of such Interest Period). In connection therewith, the Borrower may agree, in the respective Incremental Term Loan Commitment Agreement, to compensate the Lenders making the new Incremental Term Loans of the respective Tranche for funding Eurodollar Loans during an existing Interest Period on such basis as may be agreed by the Borrower and the respective Lender or Lenders." 10. Section 3.01 of the Credit Agreement is hereby amended by inserting the following new clause (h) at the end thereof: "(h) The Borrower agrees to pay to the Incremental Term Loan Lenders, for their own accounts, such fees as may be separately agreed to with such Incremental Term Loan Lenders pursuant to Section 1.15." 11. Section 3.02(a) of the Credit Agreement is hereby amended by (i) inserting the text "(I)" immediately before the first word "Upon" appearing therein, (ii) deleting the text "Section 3.02(a)" appearing therein and inserting the text "Section 3.02(a)(I)" in lieu thereof and (iii) inserting the following new clause (II) at the end of such Section 3.02(a): "(II) Upon at least three Business Days' prior notice to the Administrative Agent at the Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), the Borrower shall have the right, without premium or penalty, to terminate or partially reduce the Total Incremental Term Loan Commitment under a given Tranche, PROVIDED that (x) any such termination or partial reduction shall apply to proportionately and permanently reduce the Incremental Term Loan Commitment of each of the Lenders with such a Commitment under such Tranche and (y) any partial reduction pursuant to this Section 3.02(a)(II) shall be in integral multiples of $1,000,000." 12. Section 3.03 of the Credit Agreement is hereby amended by (i) inserting the following new clause (g) at the end thereof: "(g) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Incremental Term Loan Commitment under a given Tranche shall (i) be permanently reduced (x) on each Incremental Term Loan Borrowing Date in respect of such Tranche in an amount equal to the aggregate principal amount of Incremental Term Loans of such Tranche incurred on each such date, (ii) terminate in its entirety (to the extent not theretofore terminated) on the earlier of (x) the Incremental Term Loan Commitment Termination Date for such Tranche of Incremental Term Loans (after giving effect to any Incremental Term Loans of such Tranche to be made on such date) and (y) the date on which a Change of Control occurs, and (iii) prior to the termination of the Total Incremental Term Loan Commitment in respect of such Tranche, be permanently reduced from time to time to the extent required by Section 4.02(j)."; and inserting the following new sentence at the end of clause (f) thereof: "Each reduction and/or termination of the Total Incremental Term Loan Commitment under a given Tranche pursuant to Section 3.03(g) shall be applied to proportionately and permanently reduce and/or terminate the Incremental Term Loan Commitment of each Lender with such a Commitment under such Tranche." -9- 13. Section 4.01(a) of the Credit Agreement is hereby amended by restating clause (iv) thereof in its entirety as follows: "(iv) each voluntary prepayment of Term Loans pursuant to this Section 4.01(a) must consist of a prepayment of each Tranche of Term Loans on a PRO RATA basis (based on the principal amount of the respective Term Loans then outstanding);". 14. Section 4.02(d) of the Credit Agreement is hereby amended by inserting the text ", the Incremental Term Loan Scheduled Repayments" immediately following the text "the Tranche A Scheduled Repayments" appearing therein. 15. Section 4.02(i) of the Credit Agreement is hereby amended by (i) deleting the word "and" appearing at the end of clause (A) of the proviso thereof and (ii) inserting the following new clause (C) at the end of such proviso: "and (C) no mandatory repayment of Term Loans shall be required pursuant to this Section 4.02(i) in respect of the Excess Cash Flow Payment Period ending on September 30, 2002." 16. Section 4.02(j) of the Credit Agreement is hereby restated in its entirety as follows: "(j) Each amount required to be applied to Term Loans pursuant to Sections 4.02 (e), (f), (g), (h) and (i) shall be applied PRO RATA to each Tranche of Term Loans based upon the then outstanding principal amount of each Tranche of Term Loans and the aggregate amount of the Incremental Term Loan Commitments for the respective Tranche of Term Loans (although the Incremental Term Loan Commitments of a given Tranche only shall be reduced after all Incremental Term Loans of such Tranche have been repaid in full). The amount of each principal repayment of Term Loans made as required by Sections 4.02(e), (f), (g), (h) and (i), shall be applied to reduce the then remaining Scheduled Repayments of the respective Tranche PRO RATA based upon the then remaining principal amounts of the Scheduled Repayments of the respective Tranche after giving effect to all prior reductions thereto." 17. Section 4.02(m) of the Credit Agreement is hereby amended by inserting the text "prior to the First Amendment Effective Date and" immediately after the text "Section 4.01(a) or above in this Section 4.02," appearing therein. 18. Section 4.02 of the Credit Agreement is hereby further amended by inserting the following new clause (n) at the end thereof: "(n) In addition to any other mandatory repayments pursuant to this Section 4.02, the Borrower shall be required to make, with respect to each Tranche of Incremental Term Loans, to the extent then outstanding, scheduled amortization payments of such Tranche of Incremental Term Loans on the dates and in the principal amounts set forth in the respective Incremental Term Loan Commitment Agreement (each such repayment, as the same may be reduced as provided in Sections 4.01(a) and 4.02(j), an "Incremental Term Loan Scheduled Repayment"); PROVIDED that, if any -10- Incremental Term Loans are incurred which will be added to (and form part of) an existing Tranche of Incremental Term Loans, the amount of the then remaining Incremental Term Loan Scheduled Repayments of the respective Tranche shall be proportionally increased (with the aggregate amount of increases to the then remaining Incremental Term Loan Scheduled Repayments to equal the aggregate principal amount of such new Incremental Term Loans then being incurred) in accordance with the requirements of Section 1.15(c)." 19. Section 6 of the Credit Agreement is hereby amended by inserting the following new Section 6.03 at the end thereof: "6.03 INCREMENTAL TERM LOANS. Prior to the incurrence of any Incremental Term Loans, the Borrower shall have satisfied all of the applicable conditions set forth in Section 1.15." 20. Section 7.05 of the Credit Agreement is hereby amended by (i) inserting the following new sentence at the end of clause (a) thereof: "All proceeds of Incremental Term Loans shall be used by the Borrower to finance Permitted Acquisitions (and related fees and expenses) or for the purposes set forth in Section 9.06(ix)."; and (ii) deleting clause (b) thereof and inserting the following new clause (b) in lieu thereof: "(b) The proceeds of all Revolving Loans and Swingline Loans shall be utilized for the general corporate and working capital purposes of the Borrower and its Subsidiaries (including to effect Permitted Acquisitions, make Capital Expenditures and for the purposes set forth in Section 9.06(ix), in each case to the extent permitted by this Agreement), PROVIDED that not more than $4,000,000 of proceeds of Revolving Loans in the aggregate may be used to finance the Transaction and to pay the fees and expenses incurred in connection therewith." 21. Section 8.14(a) of the Credit Agreement is hereby deleted and the following new Section 8.14(a) is inserted in lieu thereof: "8.14 PERMITTED ACQUISITIONS. (a) Subject to the provisions of this Section 8.14 and the requirements contained in the definition of Permitted Acquisition, the Borrower and the Subsidiary Guarantors may from time to time effect Permitted Acquisitions, so long as (in each case except to the extent the Required Lenders otherwise specifically agree in writing in the case of a specific Permitted Acquisition): (i) no Default or Event of Default shall be in existence at the time of the consummation of the proposed Permitted Acquisition or immediately after giving effect thereto; (ii) the Borrower shall have given the Administrative Agent and the Lenders at least 10 Business Days' prior written notice of any Permitted Acquisition; (iii) calculations are made by the Borrower of compliance with the covenants contained in Sections 9.09, 9.10 and 9.11 for the Test Period (taken as one accounting period) most recently ended prior to the date of such Permitted Acquisition for which financial statements are available (each, a "Calculation Period"), on a PRO FORMA Basis as if the respective Permitted Acquisition (as well as all -11- other Permitted Acquisitions theretofore consummated after the first day of such Calculation Period) had occurred on the first day of such Calculation Period, and such recalculations shall show that (x) such financial covenants would have been complied with if the Permitted Acquisition had occurred on the first day of such Calculation Period and (y) the Total Leverage Ratio for such Calculation Period also would have been less than the Total Leverage Ratio then required to be maintained under Section 9.11 so that no Default or Event of Default exists thereunder by at least 0.25:1.00; (iv) based on good faith projections prepared by the Borrower for the period from the date of the consummation of the Permitted Acquisition to the date which is one year thereafter, the level of financial performance measured by the covenants set forth in Sections 9.09, 9.10 and 9.11 shall be better than or equal to such level as would be required to provide that no Default or Event of Default would exist under the financial covenants contained in Sections 9.09, 9.10 and 9.11 as compliance with such covenants would be required through the date which is one year from the date of the consummation of the respective Permitted Acquisition; (v) the Borrower shall certify, and the Administrative Agent shall have been satisfied in its reasonable discretion, that the proposed Permitted Acquisition could not reasonably be expected to result in increased tax, ERISA, environmental or other contingent liabilities with respect to Holdings or any of its Subsidiaries that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; (vi) all representations and warranties contained herein and in the other Credit Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Permitted Acquisition (both before and after giving effect thereto), unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material aspects as of such earlier date; (vii) the Borrower provides to the Administrative Agent and the Lenders as soon as available but not later than 5 Business Days after the execution thereof, a copy of any executed purchase agreement or similar agreement with respect to such Permitted Acquisition; (viii) the aggregate consideration (including, without limitation, (I) the aggregate principal amount of any Indebtedness assumed, incurred or issued in connection therewith, (II) the fair market value (as determined in good faith by the Board of Directors of Holdings) of any common stock of Holdings, Qualified Preferred Stock of Holdings or 16% Redeemable Preferred Stock of Holdings issued as part of the purchase price therefor (provided that no Default or Event of Default under Section 9.13(a) or 10.10 would result therefrom) and (III) the aggregate amount paid and to be paid pursuant to any earn-out non-compete or deferred compensation or purchase price arrangements for any such proposed Permitted Acquisition and for all other Permitted Acquisitions consummated after the First Amendment Effective Date and prior to such Permitted Acquisition shall not exceed $225,000,000; (ix) no more than $170,000,000 of the aggregate consideration paid in connection with all such Permitted Acquisitions consummated after the First Amendment Effective Date shall be funded with Indebtedness (including Incremental Term Loans, Revolving Loans, Swingline Loans and/or Additional Subordinated Debt); (x) after giving effect to each Permitted Acquisition (and all payments to be made in connection therewith), the Total Unutilized Revolving Loan Commitment shall equal or exceed $10,000,000; and (xi) the Borrower shall have delivered to the Administrative Agent an officer's certificate executed by an Authorized Officer of the Borrower, certifying to the -12- best of such officer's knowledge, compliance with the requirements of preceding clauses (i) through (vi), inclusive, (viii), (ix) and (x) and containing the calculations (in reasonable detail)(A) required by the preceding clauses (iii), (iv), (viii), (ix) and (x) and (B) necessary to establish the Acquired EBITDA of the Acquired Entity or Business acquired pursuant to each Permitted Acquisition for the most recently ended 12 month period for which financial statements are available for such Acquired Entity or Business, which calculations shall be reasonably approved by the Administrative Agent." 22. Section 8.19(a) of the Credit Agreement is hereby amended by inserting the following text immediately after the text "(a)" appearing therein: "Except as expressly permitted by Section 9.06(ix),". 23. Section 9.04(vii) of the Credit Agreement is hereby amended by deleting the amount "$125,000,000" appearing therein and inserting the amount "$200,000,000" in lieu thereof. 24. Section 9.04(xv) of the Credit Agreement is hereby deleted and the following new Section 9.04(xv) is inserted in lieu thereof: "(xv) so long as no Default or Event of Default then exists or would result therefrom, subordinated Indebtedness of Holdings or the Borrower issued to finance a Permitted Acquisition (and to pay related fees and expenses) as, and to the extent, permitted to be issued at such time pursuant to clause (ix) of Section 8.14(a) or for the purposes set forth in Section 9.06(ix) in either case so long as (i) all of the terms and conditions of, and the documentation for, such subordinated Indebtedness (including any related subordinated guaranties) is on substantially similar terms and conditions, and evidenced by substantially similar documentation, as the Senior Subordinated Notes to the extent that such Indebtedness is issued by the Borrower or the Seller Subordinated Notes to the extent that such Indebtedness is issued by Holdings or is otherwise in form and substance reasonably satisfactory to the Administrative Agent and (ii) the aggregate outstanding principal amount of all such subordinated Indebtedness does not exceed the remainder of (A) $150,000,000 less (B) the aggregate principal amount of all Incremental Term Loans theretofore or then being incurred (all such subordinated Indebtedness issued pursuant to this clause (xv) is referred to as "Additional Subordinated Debt"); and". 25. Section 9.06 of the Credit Agreement is hereby amended by (i) deleting the word "and" appearing at the end of the clause (vii) thereof, (ii) deleting the period appearing at the end of clause (viii) thereof and inserting "; and" in lieu thereof and (iii) inserting the following new clause (ix) at the end thereof: "(ix) so long as no Default or Event of Default then exists or would result therefrom, the Borrower may pay cash Dividends to Holdings to enable Holdings to redeem, repay, defease or repurchase Seller Subordinated Notes (including accrued but unpaid interest thereon) in accordance with the terms thereof." 26. Section 9.10 of the Credit Agreement is hereby deleted and the following new Section 9.10 is inserted in lieu thereof: -13- "9.10 CONSOLIDATED INTEREST COVERAGE RATIO. Holdings and the Borrower will not permit the Consolidated Interest Coverage Ratio for any Test Period ending on the last day of a fiscal quarter of Holdings set forth below to be less than the ratio set forth opposite such fiscal quarter below:
Fiscal Quarter Ending Closest to Ratio ----------------- ----- June 30, 2001 2.00:1.00 September 30, 2001 2.00:1.00 December 31, 2001 2.00:1.00 March 31, 2002 2.00:1.00 June 30, 2002 2.00:1.00 September 30, 2002 2.00:1.00 December 31, 2002 2.00:1.00 March 31, 2003 2.00:1.00 June 30, 2003 2.00:1.00 September 30, 2003 2.00:1.00 December 31, 2003 2.00:1.00 March 31, 2004 2.15:1.00 June 30, 2004 2.15:1.00 September 30, 2004 2.25:1.00 December 31, 2004 2.25:1.00 March 31, 2005 and the last day of each fiscal quarter of Holdings ending thereafter 2.50:1.00".
27. Section 9.11 of the Credit Agreement is hereby deleted and the following new Section 9.11 is inserted in lieu thereof: "9.11 TOTAL LEVERAGE RATIO. Holdings and the Borrower will not permit the Total Leverage Ratio at any time during a period set forth below to exceed the respective ratio set forth opposite such period below:
Period Ratio ------ ----- The Restatement Effective Date through and including the day before the last day of Holdings' fiscal quarter ending closest to March 31, 2003 5.25:1.00 The last day of Holdings' fiscal quarter ending closest to March 31, 2003 through and including the day before the last day of Holdings' fiscal quarter
-14- ending closest to March 31, 2004 5.00:1.00 The last day of Holdings' fiscal quarter ending closest to March 31, 2004 through and including the day before the last day of Holdings' fiscal quarter ending closest to September 30, 2004 4.75:1.00 The last day of Holdings' fiscal quarter ending closest to September 30, 2004 through and including the day before the last day of Holdings' fiscal quarter ending closest to December 31, 2004 4.25:1.00 Thereafter 3.75:1.00".
28. Section 9.12 of the Credit Agreement is hereby amended by (i) deleting the text "Section 8.19 or 9.06(ii)" appearing in clause (ii) thereof and inserting the text "Section 8.19, 9.06(ii), 9.06(iv) or 9.06(ix)" in lieu thereof and (ii) inserting the parenthetical "(other than as contemplated by the First Amendment)" immediately after the words "any Senior Subordinated Note Document" appearing in clause (iii) thereof. 29. The definition of "Applicable Base Rate Margin" appearing in Section 11 of the Credit Agreement is hereby amended by inserting the following new paragraph at the end thereof: "Notwithstanding anything to the contrary contained herein, with respect to each Tranche of Incremental Term Loans (to the extent then outstanding), the Applicable Base Rate Margin shall be that percentage set forth in, or calculated in accordance with, Section 1.15 and the relevant Incremental Term Loan Commitment Agreement." 30. The definition of "Applicable Eurodollar Rate Margin" appearing in Section 11 of the Credit Agreement is hereby amended by inserting the following new paragraph at the end thereof: "Notwithstanding anything to the contrary contained herein, with respect to each Tranche of Incremental Term Loans (to the extent then outstanding), the Applicable Eurodollar Rate Margin shall be that percentage set forth in, or calculated in accordance with, Section 1.15 and the relevant Incremental Term Loan Commitment Agreement." 31. The definition of "Commitment" appearing in Section 11 of the Credit Agreement is hereby amended by inserting the text "each Incremental Loan Commitment" immediately following the text "the C Term Loan Commitment" appearing therein. 32. The definition of "Credit Documents" appearing in Section 11 of the Credit Agreement is hereby amended by deleting the text "and each Security Document" appearing therein and inserting the text ", each Security Document and, after the execution and delivery -15- thereof pursuant to the terms hereof, each Incremental Term Loan Commitment Agreement" in lieu thereof. 33. The definition of "Loan" appearing in Section 11 of the Credit Agreement is hereby amended by inserting the text "each Incremental Term Loan," immediately after the text "each C Term Loan," appearing therein. 34. The definition of "Maturity Date" appearing in Section 11 of the Credit Agreement is hereby amended by inserting the text "each Incremental Term Loan Maturity Date," immediately after the text "the C Term Loan Maturity Date," appearing therein. 35. The definition of "Note" appearing in Section 11 of the Credit Agreement is hereby amended by inserting the text "each Incremental Term Note," immediately after the text "each C Term Note," appearing therein. 36. The definition of "Required Lenders" appearing in Section 11 of the Credit Agreement is hereby amended to read in its entirety as follows: "Required Lenders" shall mean collectively (and not individually) Non-Defaulting Lenders the sum of whose outstanding Term Loans, Incremental Term Loan Commitments and Revolving Loan Commitments (or, if after the Total Revolving Loan Commitment has been terminated, outstanding Revolving Loans and Percentages of outstanding Swingline Loans and Letter of Credit Outstandings) constitute at least 50.1% of the sum of (i) the total outstanding Term Loans of Non-Defaulting Lenders, (ii) the Total Incremental Term Loan Commitment for each Tranche of Incremental Term Loans less the aggregate Incremental Term Loan Commitments of Defaulting Lenders and (iii) the Total Revolving Loan Commitment less the aggregate Revolving Loan Commitments of Defaulting Lenders (or, if after the Total Revolving Loan Commitment has been terminated, the total outstanding Revolving Loans of Non-Defaulting Lenders and the aggregate Percentages of all Non-Defaulting Lenders of the total outstanding Swingline Loans and Letter of Credit Outstandings at such time). 37. The definition of "Senior Subordinated Notes" appearing in Section 11 of the Credit Agreement is hereby amended by inserting the following parenthetical at the end thereof: "(including all such Senior Subordinated Notes issued under the Senior Subordinated Note Indenture on the First Amendment Effective Date)". 38. The definition of "Total Commitment" appearing in Section 11 of the Credit Agreement is hereby amended by inserting the text ", the Total Incremental Term Loan Commitment for each Tranche of Incremental Term Loans" immediately following the text "the Total C Term Loan Commitment" appearing therein. 39. The definition of "Tranche" appearing in Section 11 of the Credit Agreement is hereby amended by inserting the following new sentence at the end thereof: "In addition, and notwithstanding the foregoing, any Incremental Term Loans extended after the First Amendment Effective Date shall, except to the extent provided in -16- Section 1.15(c), be made pursuant to one or more additional Tranches which shall be designated pursuant to the respective Incremental Term Loan Commitment Agreements in accordance with the relevant requirements specified in Section 1.15." 40. Section 11 of the Credit Agreement is hereby further amended by inserting the following new definitions in the appropriate alphabetical order: "First Amendment" shall mean the First Amendment and Consent, dated as of May 14, 2002, to this Agreement. "First Amendment Effective Date" shall have the meaning provided in the First Amendment. "Incremental Term Loan" shall have the meaning provided in Section 1.01(g). "Incremental Term Loan Borrowing Date" shall mean, with respect to each Tranche of Incremental Term Loans, each date on which Incremental Term Loans of such Tranche are incurred pursuant to Section 1.01(g) and as otherwise permitted by Section 1.15. "Incremental Term Loan Commitment" shall mean, for each Lender, any commitment to make Incremental Term Loans provided by such Lender pursuant to Section 1.15, in such amount as agreed to by such Lender in the respective Incremental Term Loan Commitment Agreement and as set forth opposite such Lender's name in Annex I (as modified in accordance with Section 1.15) directly below the column entitled "Incremental Term Loan Commitment", as the same may be reduced or terminated from time to time pursuant to Sections 3.02, 3.03 and/or 10. "Incremental Term Loan Commitment Agreement" shall mean and include each Incremental Term Loan Commitment Agreement in the form of Exhibit O executed in accordance with Section 1.15. "Incremental Term Loan Commitment Termination Date" shall mean, with respect to any Tranche of Incremental Term Loans, the last date by which Incremental Term Loans under such Tranche may be incurred under this Agreement, which date shall be set forth in the respective Incremental Term Loan Commitment Agreement but may be no later than December 31, 2005. "Incremental Term Loan Lender" shall have the meaning provided in Section 1.15(b). "Incremental Term Loan Maturity Date" shall mean, for any Tranche of Incremental Term Loans, the final maturity date set forth for such Tranche of Incremental Term Loans in the respective Incremental Term Loan Commitment Agreement relating thereto, provided that the final maturity date for all Incremental Term Loans of a given Tranche shall be the same date. "Incremental Term Loan Scheduled Repayment" shall have the meaning provided in Section 4.02(n). "Incremental Term Note" shall have the meaning provided in Section 1.05(a). -17- "Total Incremental Term Loan Commitment" shall mean, for any Tranche of Incremental Term Loans, the sum of the Incremental Term Loan Commitments of such Tranche of each of the Lenders. 41. Section 13.12(a) of the Credit Agreement is hereby amended by (i) deleting the text "and 4.02(d)" appearing in clause (y) of the further proviso thereof and inserting the text ", 402(d) and 4.02(n)" in lieu thereof and (ii) inserting the text ", Incremental Term Loan Scheduled Repayment" immediately after the text "Tranche B Scheduled Repayment" appearing in subclause (z) of the further proviso thereof. 42. Exhibit L to the Credit Agreement is hereby replaced in its entirety with the form of Exhibit L attached to this First Amendment. 43. The Credit Agreement is hereby further amended by attaching thereto as Exhibits B-6 and O the forms of Exhibits B-6 and O attached to this First Amendment, respectively. B. MISCELLANEOUS PROVISIONS 1. In order to induce the Lenders to enter into this First Amendment, each of Holdings and the Borrower hereby represents and warrants to each of the Lenders that (i) all of the representations and warranties contained in the Credit Agreement and in the other Credit Documents are true and correct in all material respects on and as of the First Amendment Effective Date, both before and after giving effect to this First Amendment (unless such representations and warranties relate to a specific earlier date, in which case such representations and warranties shall be true and correct as of such earlier date) and (ii) there exists no Default or Event of Default on the First Amendment Effective Date, both before and after giving effect to this First Amendment. 2. This First Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Credit Document. 3. This First Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts executed by all the parties hereto shall be lodged with Holdings, the Borrower and the Administrative Agent. 4. THIS FIRST AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 5. This First Amendment shall become effective on the date (the "First Amendment Effective Date") when: (i) each of Holdings, the Borrower, each Subsidiary Guarantor, the Required Lenders, the Majority Lenders holding outstanding B Term Loans and the Majority Lender holding outstanding C Term Loans shall have signed a counterpart hereof -18- (whether the same or different counterparts) and shall have delivered (including by way of facsimile transmission) the same to the Administrative Agent at the Notice Office; (ii) there shall have been delivered to the Administrative Agent a true and correct fully executed copy of the Supplemental Indenture (if any) to the Senior Subordinated Note Indenture in connection with the issuance of the New Senior Subordinated Notes, which Supplemental Indenture shall be in form and substance reasonably satisfactory to the Administrative Agent; (iii) the New Senior Subordinated Notes shall have been issued in accordance with the terms of this First Amendment resulting in gross cash proceeds of at least $75,000,000 plus the amount (if any) of accrued interest thereon through the date of issuance thereof; (iv) the Administrative Agent shall have received from each Credit Party certified copies of resolutions of the Board of Directors or statements of unanimous written consent in lieu thereof of such Credit Party with respect to the matters set forth in this First Amendment and the transactions contemplated herein (including the issuance and guaranties or the New Senior Subordinated Notes) and such resolutions shall be in form and substance reasonably satisfactory to the Administrative Agent; (v) the Administrative Agent shall have received a certificate, dated the First Amendment Effective Date and signed on behalf of Holdings and the Borrower by the President or any Vice President of each such Credit Party, certifying as to the matters set forth in clause B.1 above in this First Amendment and that all of the conditions in this Section 5 have been satisfied; (vi) each of Holdings and the Borrower shall have delivered to the Administrative Agent separate certificates of their respective chief financial officers demonstrating in reasonable detail that the full amount of the New Senior Subordinated Notes may be incurred in accordance with, and will not violate the provisions of, Section 4.09 of the Senior Subordinated Note Indenture and Section 4.09 of the Seller Subordinated Note Indenture; (vii) the Borrower shall have paid to the Administrative Agent all costs, fees and expenses (including, without limitation, reasonable legal fees and expenses) payable to the Administrative Agent to the extent then due; (viii) all corporate and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this First Amendment shall be reasonably satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received all information and copies of all documents and papers, including records of corporate proceedings or governmental approvals, good standing certificates and bring-down telegrams or facsimiles, if any, which the Administrative Agent may have reasonably requested in connection therewith, such documents and papers where appropriate to be certified by proper corporate or governmental authorities; -19- (ix) the Administrative Agent shall have received, and shall be reasonably satisfied with both the form and substance of, an opinion of Latham & Watkins, counsel to Holdings and the Borrower, with respect to the matters contemplated by this First Amendment; and (x) the Borrower shall have paid to the Administrative Agent for the account of each Lender which has executed a counterpart hereof and delivered same to the Administrative Agent at the Notice Office by 3:00 p.m. (New York City time) on May 23, 2002 a fee equal to 0.15% of the sum of (I) such Lender's Revolving Loan Commitment on the First Amendment Effective Date and (II) the aggregate principal amount of such Lender's outstanding Term Loans on the First Amendment Effective Date (determined after giving effect to the issuance of the New Senior Subordinated Notes and the application of the proceeds therefrom). 6. From and after the Amendment Effective Date, all references in the Credit Agreement and in the other Credit Documents to the Credit Agreement shall be deemed to be referenced to the Credit Agreement as modified hereby. * * * -20- IN WITNESS WHEREOF, the undersigned have caused this First Amendment to be duly executed and delivered as of the date first above written. TRANSDIGM HOLDINGS COMPANY By:/s/ Gregory Rufus ------------------------------------- Name: Gregory Rufus Title: Chief Financial Officer TRANSDIGM INC. By:/s/ Gregory Rufus ------------------------------------- Name: Gregory Rufus Title: Chief Financial Officer DEUTSCHE BANK TRUST COMPANY AMERICAS, Individually and as Administrative Agent By:/s/ Marguerite Sutton ------------------------------------- Name: Marguerite Sutton Title: Vice President CREDIT SUISSE FIRST BOSTON CORPORATION, Individually and as Syndication Agent By:/s/ Bill O'Daly ------------------------------------- Name: Bill O'Daly Title: Director By:/s/ Ian W. Nalitt ------------------------------------- Name: Ian W. Nalitt Title: Associate BANK ONE, MICHIGAN By:/s/ Glenn A. Currin ------------------------------------- Name: Glenn A. Currin Title: Managing Director Goldman Sachs Credit Partners L.P. By:/s/ Robert S. Fanelli ------------------------------------- Name: Robert S. Fanelli Title: Authorized Signatory AIMCO CLO, 2001-A, as a Lender By:/s/ Jerry D. Zinkula ------------------------------------- Name: Jerry D. Zinkula Title: Authorized Signatory By:/s/ Ronald Mendel ------------------------------------- Name: Ronald Mendel Title: Authorized Signatory ALLSTATE LIFE INSURANCE COMPANY, as a Lender By:/s/ Jerry D. Zinkula ------------------------------------- Name: Jerry D. Zinkula Title: Authorized Signatory By:/s/ Ronald Mendel ------------------------------------- Name: Ronald Mendel Title: Authorized Signatory MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By:/s/ Steven J. Katz ------------------------------------- Name: Steven J. Katz Title: Second Vice President and Associate General Counsel BILL & MELINDA GATES FOUNDATION By: DAVID L. BABSON & CO., INC., as Investment Adviser By:/s/ Richard McGauley ------------------------------------- Name: Richard McGauley Title: Managing Director SUFFIELD CLO, LIMITED By: DAVID L. BABSON & CO., INC., as Collateral Manager By:/s/ Richard McGauley ------------------------------------- Name: Richard McGauley Title: Managing Director Dryden Leverage Loan CDO 2002-II By: Prudential Investment Management, Inc., as Attorney-in-fact. By:/s/ B. Ross Smead ------------------------------------- Name: B. Ross Smead Title: Vice President Prudential Insurance Company of America By:/s/ B. Ross Smead ------------------------------------- Name: B. Ross Smead Title: Vice President Citadel Hill 2000, Ltd. By:/s/ Nicholas A. Karsiotis ------------------------------------- Name: Nicholas A. Karsiotis Title: Authorized Signatory KZH CNC LLC By:/s/ Joyce Fraser-Bryant ------------------------------------- Name: Joyce Fraser-Bryant Title: Authorized Agent FLEET NATIONAL BANK By:/s/ Christopher S. Alba ------------------------------------- Name: Christopher S. Alba Title: Managing Director TORONTO DOMINION (NEW YORK), INC. By:/s/ Stacey L. Malek ------------------------------------- Name: Stacey L. Malek Title: Vice President EMERALD ORCHARD LIMITED By:/s/ Stacey L. Malek ------------------------------------- Name: Stacey L. Malek Title: Attorney in Fact Restoration Funding CLO, Ltd. By: Highland Capital Management, L.P., as Collateral Manager By:/s/ Louis Koven ------------------------------------- Name: Louis Koven Title: Executive Vice President CFO Highland Capital Management, L.P. Highland Loan Funding V By: Highland Capital Management, L.P., as Collateral Manager By:/s/ Louis Koven ------------------------------------- Name: Louis Koven Title: Executive Vice President - CFO Highland Capital Management, L.P. Black Diamond CLO 2000-1, Ltd. By:/s/ Alan Corkish ------------------------------------- Name: Alan Corkish Title: Director LONG LANE MASTER TRUST IV By: Fleet National Bank as Trust Administrator By:/s/ Darcey F. Bartel ------------------------------------- Name: Darcey F. Bartel Title: Vice President Heller Financial, Inc. By:/s/ Diane L. Burton ------------------------------------- Name: Diane L. Burton Title: Duly Authorized Signatory General Electric Capital Corporation By:/s/ Diane L. Burton ------------------------------------- Name: Diane L. Burton Title: Duly Authorized Signatory AMARA 1 FINANCE, LTD. By: INVESCO Senior Secured Management, Inc., as Sub-Advisor By:/s/ Gregory Stoeckle ------------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory AMARA-2 FINANCE, LTD. By: INVESCO Senior Secured Management, Inc., as Sub-Advisor By:/s/ Gregory Stoeckle ------------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory AVALON CAPITAL LTD. By: INVESCO Senior Secured Management, Inc., as Portfolio Advisor By:/s/ Gregory Stoeckle ------------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory AVALON CAPITAL LTD. 2 By: INVESCO Senior Secured Management, Inc., as Portfolio Advisor By:/s/ Gregory Stoeckle ------------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory OASIS COLLATERALIZED HIGH INCOME PORTFOLIOS-1, LTD. By: INVESCO Senior Secured Management, Inc., as Sub-Advisor By:/s/ Gregory Stoeckle ------------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory CHARTER VIEW PORTFOLIO By: INVESCO Senior Secured Management, Inc., as Investment Advisor By:/s/ Gregory Stoeckle ------------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory DIVERSIFIED CREDIT PORTFOLIO LTD. By: INVESCO Senior Secured Management, Inc., as Investment Advisor By:/s/ Gregory Stoeckle ------------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory AIM FLOATING RATE FUND By: INVESCO Senior Secured Management, Inc., as Attorney-in-fact By:/s/ Gregory Stoeckle ------------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory INVESCO CBO 2000-1 LTD. By: INVESCO Senior Secured Management, Inc., as Portfolio Advisor By:/s/ Gregory Stoeckle ------------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory TRITON CBO III, LIMITED By: INVESCO Senior Secured Management, Inc., as Investment Advisor By:/s/ Gregory Stoeckle ------------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory TRITON CDO IV, LIMITED By: INVESCO Senior Secured Management. Inc., as Investment Advisor By:/s/ Gregory Stoeckle ------------------------------------- Name: Gregory Stoeckle Title: Authorized Signatory PROTECTIVE LIFE INSURANCE COMPANY By:/s/ Diane S. Griswold ------------------------------------- Name: Diane S. Griswold Title: Assistant Vice President ELF FUNDING TRUST III By: New York Life Investment Management, LLC, as Attorney-in-fact By:/s/ Robert H. Dial ------------------------------------- Name: Robert H. Dial Title: Vice President NYLIM HIGH YIELD CDO 2001, LTD. By: New York Life Investment Management, LLC, as Investment Manager and Attorney-in-fact By:/s/ Robert H. Dial ------------------------------------- Name: Robert H. Dial Title: Vice President LANDMARK CDO By: Aladdin Asset Management, LLC By:/s/ Thomas Eggenschwiler ------------------------------------- Name: Thomas Eggenschwiler Title: Vice President SENIOR DEBT PORTFOLIO By: Boston Management and Research, as Investment Advisor By:/s/ Scott H. Page ------------------------------------- Name: Scott H. Page Title: Vice President EATON VANCE SENIOR INCOME TRUST By: Eaton Vance Management, as Investment Advisor By:/s/ Scott H. Page ------------------------------------- Name: Scott H. Page Title: Vice President EATON VANCE INSTITUTIONAL SENIOR LOAN FUND By: Eaton Vance Management, as Investment Advisor By:/s/ Scott H. Page ------------------------------------- Name: Scott H. Page Title: Vice President OXFORD STRATEGIC INCOME FUND By: Eaton Vance Management, as Investment Advisor By:/s/ Scott H. Page ------------------------------------- Name: Scott H. Page Title: Vice President EATON VANCE CDO III, LTD. By: Eaton Vance Management, as Investment Advisor By:/s/ Scott H. Page ------------------------------------- Name: Scott H. Page Title: Vice President EATON VANCE CDO IV, LTD. By: Eaton Vance Management, as Investment Advisor By:/s/ Scott H. Page ------------------------------------- Name: Scott H. Page Title: Vice President COSTANTINUS EATON VANCE CDO V, LTD. By: Eaton Vance Management, as Investment Advisor By:/s/ Scott H. Page ------------------------------------- Name: Scott H. Page Title: Vice President GRAYSON & CO By: Boston Management and Research, as Investment Advisor By:/s/ Scott H. Page ------------------------------------- Name: Scott H. Page Title: Vice President TRYON CLO Ltd. 2000-I By:/s/ Adrienne Musgnug ------------------------------------- Name: Adrienne Musgnug Title: Director ELC (Cayman) Ltd. CDO Series 1999-I By:/s/ Adrienne Musgnug ------------------------------------- Name: Adrienne Musgnug Title: Director APEX (IDM) CDO, I, Ltd. By:/s/ Adrienne Musgnug ------------------------------------- Name: Adrienne Musgnug Title: Director KATONAH, I, LTD. By: Katonah Capital L.L.C., as Manager By:/s/ Ralph Della Rocca ------------------------------------- Name: Ralph Della Rocca Title: Authorized Officer KATONAH, II, LTD. By: Katonah Capital L.L.C., as Manager By:/s/ Ralph Della Rocca ------------------------------------- Name: Ralph Della Rocca Title: Authorized Officer KATONAH III, LTD. By: Katonah Capital, L.L.C., as Manager By:/s/ Ralph Della Rocca ------------------------------------- Name: Ralph Della Rocca Title: Authorized Officer Flagship CLO 2001-1 By:/s/ Mark S. Pelletier ------------------------------------- Name: Mark S. Pelletier Title: Director NOMURA BOND & LOAN FUND By: UFJ Trust Company of New York, as Trustee By: Nomura Corporate Research and Asset Management Inc., Attorney-in-fact By:/s/ Elizabeth Maclean -- ---------------------------------- Name: Elizabeth Maclean Title: Vice President CLYDESDALE CLO 2001-1, LTD. By: Nomura Corporate Research and Asset Management Inc., as Collateral Manager By: /s/ Elizabeth Maclean --------------------------------- Name: Elizabeth Maclean Title: Vice President Indosuez Capital Funding IV, L.P., By: RBC Leveraged Capital, as Portfolio Advisor By:/s/ Melissa Marano ------------------------------------- Name: Melissa Marano Title: Director INDOSUEZ CAPITAL FUNDING IV, L.P. ADMINISTRATIVE DETAILS FORM ADMINISTRATIVE CONTACTS (for interest, fees, paydown and rollover notices)
ORIGINAL TO: COPY TO: - ------------------------------------------------------------------------------- JP Morgan Chase RBC Leveraged Capital 600 Travis Street One Liberty Plaza Houston, TX 77002 165 Broadway, 5th Floor New York, NY 10006 - ------------------------------------------------------------------------------- Contact: Martin Reimer Contact: Isabelle Pradel/Alice James - ------------------------------------------------------------------------------- Phone: (713) 216-8348 Phone: (212) 858-8325/8351 - ------------------------------------------------------------------------------- Fax: (713) 437-8172 Fax: (212) 858-8384 - ------------------------------------------------------------------------------- Email: Martin.C.Reimer@chase.com Email: Isabelle.Pradel@rbccm.com Alice.James@rbccm.com - -------------------------------------------------------------------------------
CREDIT CONTACT (for credit agreements, amendments and waivers) Melissa Marano Director RBC Leveraged Capital One Liberty Plaza 165 Broadway, 5th Floor New York, NY 10006 Phone: (212) 858-8320 Fax: (212) 858-8384 Email: Melissa.Marano@rbccm.com SIGNATURE BLOCK
- ------------------------------------------------------------------------------------------------- FOR PRIMARY SYNDICATIONS FOR AMENDMENTS AND SECONDARY TRADES - ------------------------------------------------------------------------------------------------- Indosuez Capital Funding IV, L.P., Indosuez Capital Funding IV, L.P., By RBC Finance B.V. as Collateral Manager By RBC Leveraged Capital as Portfolio Advisor By: By: ---------------------------------- ---------------------------------- - -------------------------------------------------------------------------------------------------
PAYMENT INSTRUCTIONS Chase Manhattan Bank - Texas Houston, Texas ABA #113000609 A/C: 00102619468 BNF Name: Wires Clearing - Asset Backed Securities BNF Address: Chase Tower Houston, Houston, TX FFC: Indosuez IV A/C# 5503001-2002501 OBI: Martin C. Reimer/ [description] ARES Leveraged Investment Fund II, L.P. By: ARES Management II, L.P., its General Partner By:/s/ Seth J. Brufsky ------------------------------------- Name: Seth J. Brufsky Title: Vice President ARES III CLO Ltd. By: ARES CLO Management LLC, Investment Manager By:/s/ Seth J. Brufsky ------------------------------------- Name: Seth J. Brufsky Title: Vice President Arcs IV CLO Ltd. By: Ares CLO Management IV, L.P., Investment Manager By: Ares CLO GP IV, LLC, its Managing Member By:/s/ Seth J. Brufsky ------------------------------------- Name: Seth J. Brufsky Title: Vice President Ares V CLO Ltd. By: Ares CLO Management V, L.P., Investment Manager By: Ares CLO GP V, LLC, its Managing Member By:/s/ Seth J. Brufsky ------------------------------------- Name: Seth J. Brufsky Title: Vice President Ares VI CLO Ltd. By: Ares CLO Management VI, L.P., Investment Manager By: Ares CLO GP VI, LLC, its Managing Member By:/s/ Seth J. Brufsky ------------------------------------- Name: Seth J. Brufsky Title: Vice President National City Bank By:/s/ John Platek ------------------------------------- Name: John Platek Title: Assistant Vice President JUPITER FUNDING TRUST By:/s/ Diana L. Mushill ------------------------------------- Name: Diana L. Mushill Title: Authorized Agent RIVIERA FUNDING LLC By:/s/ Diana L. Mushill ------------------------------------- Name: Diana L. Mushill Title: Authorized Agent WINGED FOOT FUNDING TRUST By:/s/ Diana L. Mushill ------------------------------------- Name: Diana L. Mushill Title: Assistant Vice President OLYMPIC FUNDING TRUST, SERIES 1999-1 By:/s/ Diana L. Mushill ------------------------------------- Name: Diana L. Mushill Title: Authorized Agent MUIRFIELD TRADING LLC By:/s/ Diana L. Mushill ------------------------------------- Name: Diana L. Mushill Title: Authorized Agent SEQUILS - Cumberland I, Ltd. By: Deerfield Capital Management LLC, as its Collateral Manager By:/s/ Mark E. Wittnebel ------------------------------------- Name: Mark E. Wittnebel Title: Senior Vice President ROSEMONT CLO, Ltd. By: Deerfield Capital Management LLC, as its Collateral Manager By:/s/ Mark E. Wittnebel ------------------------------------- Name: Mark E. Wittnebel Title: Senior Vice President METROPOLITAN LIFE INSURANCE COMPANY By:/s/ James R. Dingler ------------------------------------- Name: James R. Dingler Title: Director MADISON AVENUE CDO I, LIMITED By: Metropolitan Life Insurance Company, as Collateral Manager By:/s/ James R. Dingler ------------------------------------- Name: James R. Dingler Title: Director INDOSUEZ CAPITAL FUNDING IIA, LIMITED By: Indosuez Capital, as Portfolio Advisor By:/s/ Charles Kobayashi ------------------------------------- Name: Charles Kobayashi Title: Principal and Portfolio Manager Franklin CLO II, LTD. By:/s/ Madeline Lam ------------------------------------- Name: Madeline Lam Title: Vice President Franklin Floating Rate Daily Access Fund By:/s/ Madeline Lam ------------------------------------- Name: Madeline Lam Title: Asst. Vice President Sankaty High Yield Partners III, L.P. By:/s/ D.J. Exter ------------------------------------- Name: Diane J. Exter Title: Managing Director Portfolio Manager Sankaty High Yield Asset Partners II, L.P. By:/s/ D.J. Exter ------------------------------------- Name: Diane J. Exter Title: Managing Director Portfolio Manager Sankaty High Yield Asset Partners, L.P. By:/s/ D.J. Exter ------------------------------------- Name: Diane J. Exter Title: Managing Director Portfolio Manager Sankaty Advisors, LLC, as Collateral Manager for Great Point CLO 1999-1 LTD., as Term Lender By:/s/ D.J. Exter ------------------------------------- Name: Diane J. Exter Title: Managing Director Portfolio Manager Sankaty Advisors, LLC, as Collateral Manager for Brant Point CBO 1999-1 LTD., as Term Lender By:/s/ D.J. Exter ------------------------------------- Name: Diane J. Exter Title: Managing Director Portfolio Manager INCREMENTAL TERM NOTE $________ New York, New York [Date] FOR VALUE RECEIVED, TRANSDIGM INC., a Delaware corporation (the "Borrower"), hereby promises to pay to ____________ or its registered assigns (the "Lender"), in lawful money of the United States of America in immediately available funds, at the office of Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company) (the Administrative Agent") located at [90 Hudson Street, Fifth Floor, Jersey City, NJ 07302] on [Insert Maturity Date as set forth in the relevant Incremental Term Loan Commitment Agreement pursuant to which the Incremental Term Loans evidenced by this Note were incurred] the principal sum of _____________ DOLLARS ($_____) or, if less, the aggregate unpaid principal amount of all _____(1) Incremental Term Loans (as defined in the Credit Agreement) made by the Lender pursuant to the Credit Agreement. The Borrower also promises to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.08 of the Credit Agreement. This Note is one of the Incremental Term Notes referred to in the Credit Agreement, dated as of December 3, 1999 and amended and restated as of May 31, 2001, among TransDigm Holding Company, the Borrower, the lenders from time to time party thereto (including the Lender), Credit Suisse First Boston Corporation, as Syndication Agent, and the Administrative Agent (as amended, modified or supplemented from time to time, the "Credit Agreement") and is entitled to the benefits thereof and of the other Credit Documents (as defined in the Credit Agreement). This Note is secured by the Security Documents (as defined in the Credit Agreement) and is entitled to the benefits of the Guaranties (as defined in the Credit Agreement). This Note is subject to voluntary prepayment and mandatory repayment prior to [Insert Maturity Date as set forth in the relevant Incremental Term Loan Commitment Agreement pursuant to which the Incremental Term Loans evidenced by this Note were incurred], in whole or in part, as provided in the Credit Agreement. In case an Event of Default (as defined in the Credit Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may become or be declared to be due and payable in the manner and with the effect provided in the Credit Agreement. The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. - ---------- (1) Designate Tranche of applicable Incremental Term Loans. Exhibit B-6 2 THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. TRANSDIGM INC. By ------------------------------------ Name: Title: EXHIBIT L FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT This Assignment and Assumption Agreement (the "Assignment"), is dated as of the Effective Date set forth below and is entered into by and between the Assignor identified in item 1 below (the "Assignor") and the Assignee identified in item 2 below (the "Assignee"). Capitalized terms used herein but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 hereto (the "Standard Terms and Conditions") are hereby agreed to and incorporated herein by reference and made a part of this Assignment as if set forth herein in full. For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below, the interest in and to all of the Assignor's rights and obligations under the Credit Agreement and any other documents or instruments delivered pursuant thereto that represents the amount and percentage interest identified below of all of the Assignor's outstanding rights and obligations under the respective facilities identified below (including, to the extent included in any such facilities, Letters of Credit and Swingline Loans) (the "Assigned Interest"). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment, without representation or warranty by the Assignor. 1. Assignor: ----------------------------------- 2. Assignee: ----------------------------------- 3. Credit Agreement: Credit Agreement, dated as of December 3, 1998 and amended and restated as of May 31, 2001, among TransDigm Holding Company, TransDigm Inc., various lenders from time to time party thereto, Credit Suisse First Boston Corporation, as Syndication Agent, and Deutsche Bank Trust Company Americas, as Administrative Agent (such Credit Agreement, as in effect on the date of this Assignment, being herein called the "Credit Agreement"). Exhibit L Page 2 4. Assigned Interest:
- ------------------------------------------------------------------------------------------------------------------------------------ AGGREGATE AMOUNT OF AMOUNT OF PERCENTAGE ASSIGNED COMMITMENT/LOANS FOR ALL COMMITMENT/LOANS OF LENDERS ASSIGNED COMMITMENT/LOANS(2) FACILITY ASSIGNED - ------------------------------------------------------------------------------------------------------------------------------------ Revolving Loan Commitment/ $ $ % Revolving Loans - ------------------------------------------------------------------------------------------------------------------------------------ A Term Loans $ $ % - ------------------------------------------------------------------------------------------------------------------------------------ B Term Loans $ $ % - ------------------------------------------------------------------------------------------------------------------------------------ C Term Loans $ $ % - ------------------------------------------------------------------------------------------------------------------------------------ Relevant Tranche or Tranches of Incremental Term Loan Commitments (if not theretofore terminated) and related Incremental Term $ $ % Loans - ------------------------------------------------------------------------------------------------------------------------------------
Effective Date ___________, ____, 200__. The terms set forth in this Assignment are hereby agreed to: ASSIGNOR ASSIGNEE [NAME OF ASSIGNOR] [NAME OF ASSIGNEE] By: By: ------------------------------ ------------------------------------ Name: Name: Title: Title: Payment Instructions: ---------------------------------------- ---------------------------------------- ---------------------------------------- Attention: ----------------------------- Reference: ----------------------------- - ---------- (2) Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder. Exhibit L Page 3 Address for Notices: ---------------------------------------- ---------------------------------------- ---------------------------------------- Relationship Contact: ------------------ Exhibit L Page 4 [Consented to and](3) Accepted: DEUTSCHE BANK TRUST COMPANY AMERICAS, as Administrative Agent By: ----------------------------------- Name: Title: [CONSENTED TO: NAME OF LETTER OF CREDIT ISSUER](4) By: ----------------------------------- Name: Title: [CONSENTED TO: TRANSDIGM INC.](5) By: ----------------------------------- Name: Title: - ---------- (3) Insert only if assignment is being made pursuant to Section 13.04(b)(y) of the Credit Agreement. (4) Insert only if assignment of any portion of the Total Revolving Loan Commitment is being made pursuant to Section 13.04(b)(y) of the Credit Agreement. (5) Insert only if assignment is being made pursuant to Section 13.04(b)(y) of the Credit Agreement and no Default or Event of Default exists. ANNEX I TO EXHIBIT L TRANSDIGM INC. CREDIT AGREEMENT STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT AND ASSUMPTION AGREEMENT 1. REPRESENTATIONS AND WARRANTIES. 1.1. ASSIGNOR. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with any Credit Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other Credit Document or any other instrument or document delivered pursuant thereto, other than this Assignment, or any collateral thereunder, (iii) the financial condition of Holdings, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Credit Document or (iv) the performance or observance by Holdings, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Credit Documents. 1.2. ASSIGNEE. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all requirements of an Eligible Transferee under the Credit Agreement, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 8.01 thereof, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and to purchase the Assigned Interest on the basis of which it has made such analysis and decision and (v) if it is organized under the laws of a jurisdiction outside the United States, attached to this Assignment is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Credit Documents are required to be performed by it as a Lender. Annex I to Exhibit L 2 2. PAYMENT. From and after the Effective Date, the Administrative Agent shall make all payment in respect to the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date. 3. GENERAL PROVISIONS. This Assignment shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment by telecopy shall be effective as delivery of a manually executed counterpart of the Assignment. THIS ASSIGNMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. * * * EXHIBIT O INCREMENTAL TERM LOAN COMMITMENT AGREEMENT [Name(s) of Lender(s)] _____________, ______ TransDigm Inc. 26380 Curtiss Wright Parkway Richmond Heights, Ohio 44143 re INCREMENTAL TERM LOAN COMMITMENTS Ladies and Gentlemen: Reference is hereby made to the Amended and Restated Credit Agreement, dated as of December 3, 1998 and amended and restated as of May 31, 2001 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among TransDigm Holding Company, TransDigm Inc. (the "Borrower" or "you"), the lenders from time to time party thereto (the "Lenders"), Credit Suisse First Boston Corporation, as Syndication Agent (in such capacity, the "Syndication Agent"), and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), as Administrative Agent (in such capacity, the "Administrative Agent"). Unless otherwise defined herein, capitalized terms used herein shall have the respective meanings set forth in the Credit Agreement. Each Lender (each an "Incremental Term Loan Lender") party to this letter agreement (this "Agreement") hereby severally agrees to provide the Incremental Term Loan Commitment set forth opposite its name on Annex I attached hereto (for each such Incremental Term Loan Lender, its "Incremental Term Loan Commitment"). Each Incremental Term Loan Commitment provided pursuant to this Agreement shall be subject to all of the terms and conditions set forth in the Credit Agreement, including, without limitation, Sections 1.01(g) and 1.15 thereof. Each Incremental Term Loan Lender, the Borrower and the Administrative Agent acknowledge and agree that the Incremental Term Loan Commitments provided pursuant to this Agreement shall constitute Incremental Term Loan Commitments of the respective Tranche specified in Annex I attached hereto and, upon the incurrence of Incremental Term Loans pursuant to such Incremental Term Loan Commitments, shall constitute Incremental Term Loans under such specified Tranche for all purposes of the Credit Agreement and the other Credit Documents. Each Incremental Term Loan Lender, the Borrower and the Administrative Agent further agree that, with respect to the Incremental Term Loan Commitment provided by each Incremental Term Loan Lender pursuant to this Agreement, such Incremental Term Loan Lender shall receive from the Borrower such upfront fees, unutilized commitment fees and/or other fees, if any, as may be separately agreed to in writing with the Borrower and acknowledged by the Exhibit O Page 2 Administrative Agent, all of which fees shall be due and payable to such Incremental Term Loan Lender on the terms and conditions set forth in each such separate agreement. Furthermore, each of the parties to this Agreement hereby agree to the terms and conditions set forth on Annex I hereto in respect of each Incremental Term Loan Commitment provided pursuant to this Agreement. Each Incremental Term Loan Lender party to this Agreement, to the extent not already a party to the Credit Agreement as a Lender thereunder, (i) confirms that it has received a copy of the Credit Agreement and the other Credit Documents, together with copies of the financial statements referred to therein and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement and to become a Lender under the Credit Agreement, (ii) agrees that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement and the other Credit Documents, (iii) appoints and authorizes the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Credit Documents as are delegated to the Administrative Agent and the Collateral Agent, as the case may be, by the terms thereof, together with such powers as are reasonably incidental thereto, (iv) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement and the other Credit Documents are required to be performed by it as a Lender, and (v) in the case of each Incremental Term Loan Lender organized under the laws of a jurisdiction outside the United States, attaches the forms and/or Certificates referred to in Section 4.04(b) of the Credit Agreement, certifying as to its entitlement to a complete exemption from United States withholding taxes with respect to all payments to be made under the Credit Agreement and the other Credit Documents. Upon the date of (i) the execution of a counterpart of this Agreement by each Incremental Term Loan Lender, the Administrative Agent, the Borrower and each Guarantor, (ii) the delivery to the Administrative Agent of a fully executed counterpart (including by way of facsimile) hereof, (iii) the payment of any fees then due and payable in connection herewith and (iv) the satisfaction of any other conditions precedent set forth in Section 8 of Annex I hereto (such date, the "Agreement Effective Date"), each Incremental Term Loan Lender party hereto (i) shall be obligated to make the Incremental Term Loans provided to be made by it as provided in this Agreement on the terms, and subject to the conditions, set forth in the Credit Agreement and in this Agreement and (ii) to the extent provided in this Agreement, shall have the rights and obligations of a Lender thereunder and under the other Credit Documents. The Borrower acknowledges and agrees that (i) it shall be liable for all Obligations with respect to the Incremental Term Loan Commitments provided hereby including, without limitation, all Incremental Term Loans made pursuant thereto and (ii) all such Obligations (including all such Incremental Term Loans) shall be entitled to the benefits of the Security Documents and the Guaranties. Each Guarantor acknowledges and agrees that all Obligations with respect to the Incremental Term Loan Commitments provided hereby and all Incremental Term Loans made pursuant thereto shall (i) be fully guaranteed pursuant to the respective Guaranty in accordance Exhibit O Page 3 with the terms and provisions thereof and (ii) be secured by all Liens granted by, and be entitled to the benefits, of the Security Documents. Attached hereto as Annex II are true and correct copies of officer's certificates, board of director resolutions and good standing certificates of the Credit Parties required to be delivered pursuant to Section 1.15(b)(x)(V) of the Credit Agreement. Attached hereto as Annex III is an opinion of _________, special counsel to the Credit Parties, delivered as required pursuant to Section 1.15(b)(x)(IV) of the Credit Agreement. Attached hereto as Annex IV is the officer's certificate required to be delivered pursuant to Section 1.15(b)(x)(III) of the Credit Agreement stating that the conditions set forth in clause (i) of the first sentence of Section 1.15(a) have been satisfied. [Attached hereto as Annex V is the officer's certificate required to be delivered pursuant to Section 1.15(b)(y) of the Credit Agreement stating that the conditions set forth in clauses (ii), (iii) and (iv) of the first sentence of Section 1.15(a) of the Credit Agreement have been satisfied (together with calculations demonstrating same (where applicable) in reasonable detail and copies of the certificates set forth in such clauses (ii) and (iii)).](6) The Obligations to be incurred pursuant to the Incremental Term Loan Commitments provided hereunder are in accordance with, will not violate the provisions of, and will constitute "Senior Debt" under, and as defined in, the Senior Subordinated Note Indenture and, to the extent same is in effect or will remain in effect after giving effect to the application of the proceeds of the Incremental Term Loans to be made pursuant to such Incremental Term Loan Commitments and the Seller Subordinated Note Indenture. You may accept this Agreement by signing the enclosed copies in the space provided below, and returning one copy of same to the Administrative Agent before the close of business on ____________, _____. If you do not so accept this Agreement by such time, our Incremental Term Loan Commitments set forth in this Agreement shall be deemed canceled. After the execution and delivery to the Administrative Agent of a fully executed copy of this Agreement (including by way of counterparts and by facsimile transmission) by the parties hereto, this Agreement may only be changed, modified or varied by written instrument in accordance with the requirements for the modification of Credit Documents pursuant to Section 13.12 of the Credit Agreement. In the event of any conflict between the terms of this Agreement and those of the Credit Agreement, the terms of the Credit Agreement shall control. * * * - ---------- (6) Insert this paragraph if any Incremental Term Loans are to be incurred on the Agreement Effective Date. In addition, this condition needs to be satisfied for each Incremental Term Loan Borrowing Date. Exhibit O Page 4 THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Very truly yours, [NAME OF INCREMENTAL TERM LOAN LENDERS] By ------------------------------------ Name: Title Agreed and Accepted this ___ day of __________, ____: TRANSDIGM INC. By: -------------------------------- Name: Title: DEUTSCHE BANK TRUST COMPANY AMERICAS, as Administrative Agent By: -------------------------------- Name: Title: Each Guarantor acknowledges and agrees to each the foregoing provisions of this Incremental Term Loan Commitment Agreement and to the incurrence of the Incremental Term Loans to be made pursuant thereto. [Insert signature blocks for each Guarantor] ANNEX I TO EXHIBIT O TERMS AND CONDITIONS FOR INCREMENTAL TERM LOAN COMMITMENT AGREEMENT DATED AS OF _____________, ____ 1. Incremental Term Loan Commitment Amounts (as of the Agreement Effective Date): AMOUNT OF INCREMENTAL TERM LOAN NAME OF INCREMENTAL TERM LOAN LENDER COMMITMENT Total 2. Designation of Tranche of Incremental Term Loan Commitments (and Incremental Term Loans to be funded thereunder)(7): 3. Indicate whether the Incremental Term Loan Commitments to be provided hereunder are to be single draw commitments or multiple draw commitments and the Incremental Term Loan Commitment Termination Date:(8) 4. Incremental Term Loan Maturity Date:(9) - ---------- (7) Designate the respective Tranche for such Incremental Term Loan Commitments or indicate that it is to be added to (and form a part of) an existing Tranche of Term Loans. (8) Date cannot be later than December 31, 2005. (9) Insert Maturity Date for the Incremental Term Loans to be incurred pursuant to the Incremental Term Loan Commitments provided hereunder, provided that in the event the Incremental Term Loan Commitments to be provided pursuant to this Agreement are to be added to (and form a part of ) an existing Tranche of Term Loans, the Incremental Term Loan Maturity Date for the Incremental Term Loans to be incurred pursuant to such Incremental Term Loan Commitments shall be the same Maturity Date as for such existing Tranche of Term Loans. Annex I to Exhibit O Page 2 5. Dates for, and amounts of, Incremental Term Loan Scheduled Repayments:(10) 6. Applicable Base Rate Margin and Applicable Eurodollar Rate Margin:(11) 7. The proceeds of the Incremental Term Loans to be provided hereunder are to be used for:(12) 8. Other Conditions Precedent:(13) - ---------- (10) Set forth the dates for Incremental Term Loan Scheduled Repayments and the principal amount (expressed as a dollar amount or as a percentage of the aggregate amount of Incremental Term Loans to be incurred pursuant to the Incremental Term Loan Commitments provided hereunder), PROVIDED that, in the event the Incremental Term Loan Commitments to be provided hereunder are to be added to (and form a part of ) an existing Tranche of Term Loans, (x) the Incremental Term Loan Scheduled Repayments for such Incremental Term Loans shall be the same (on a proportionate basis) as the then remaining Scheduled Repayments with respect to the Tranche of Term Loans to which such new Incremental Term Loans are being added and (y) such Incremental Term Loans shall have the same Incremental Term Loan Scheduled Repayment Dates. (11) Insert the Applicable Base Rate Margin and the Applicable Eurodollar Rate Margin that shall apply the Incremental Term Loans being provided hereunder, PROVIDED that in the event the Incremental Term Loan Commitments to be provided hereunder are to be made under (and form a part of) an existing Tranche of Term Loans, the Incremental Term Loans to be incurred pursuant to such Incremental Term Loan Commitments shall have the same Applicable Base Rate Margin and Applicable Eurodollar Rate Margin applicable to such Tranche of Term Loans. (12) Designate the specific use of the proceeds of the applicable Incremental Term Loans as provided in Section 7.05(a) of the Credit Agreement. (13) Insert any additional conditions precedent which may be required to be satisfied prior to the Agreement Effective Date. EX-12.1 20 a2082596zex-12_1.txt EXHIBIT 12.1 EXHIBIT 12.1 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in Thousands)
---------------------------------------------------- -------------------- Fiscal Year Ended September 30, Six Months Ended ---------------------------------------------------- -------------------- March 31, March 30, 1997 1998 1999 2000 2001 2001 2002 ---- ---- ---- ---- ---- ---- ---- Earnings: Total earnings (loss) $ 3,172 $ 14,137 $(16,917) $ 10,779 $ 14,358 $ 5,915 $ 12,289 Income tax provision (credit) 5,193 12,986 (2,772) 7,972 9,386 4,269 9,277 Extraordinary item 1,462 -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- -------- Pre-tax earnings (loss) 9,827 27,123 (19,689) 18,751 23,744 10,184 21,566 -------- -------- -------- -------- -------- -------- -------- Fixed charges: Interest charges 3,463 3,175 22,722 28,563 31,926 14,281 16,885 Interest factor of operating rents 178 197 227 323 365 182 204 -------- -------- -------- -------- -------- -------- -------- Total fixed charges 3,641 3,372 22,949 28,886 32,291 14,463 17,089 -------- -------- -------- -------- -------- -------- -------- Earnings as adjusted $ 13,468 $ 30,495 $ 3,260 $ 47,637 $ 56,035 $ 24,647 $ 38,655 ======== ======== ======== ======== ======== ======== ======== Ratio of earnings to fixed charges 3.7 9.0 0.1 1.6 1.7 1.7 2.3 ======== ======== ======== ======== ======== ======== ========
EX-12.2 21 a2082596zex-12_2.txt EXHIBIT 12.2 EXHIBIT 12.2 COMPUTATION OF RATIO OF TRANSDIGM INC. TOTAL DEBT TO EBITDA (AS DEFINED) (DOLLARS IN THOUSANDS)
Historical Pro Forma ---------------------------------------------------------- ---------------- Fiscal Year ended September 30, Six Months Ended Twelve March 30, 2002 Months Ended March 30, 2002 --------------------------------------- ---------------- ---------------- 1999 2000 2001 ---------- ---------- ---------- TransDigm Inc. Total Debt $ 244,557 $ 236,962 $ 385,612 $ 378,982 $ 382,035 EBITDA (as defined) 50,562 54,011 70,955 45,092 90,171 ---------- ---------- ---------- ----------- ----------- Ratio 4.8 4.4 5.4 8.4 4.2 ========== ========== ========== =========== ===========
EX-12.3 22 a2082596zex-12_3.txt EXHIBIT 12.3 EXHIBIT 12.3 COMPUTATION OF RATIO OF PRO FORMA TRANSDIGM INC. NET DEBT TO EBITDA (AS DEFINED) (DOLLARS IN THOUSANDS)
Pro Forma Twelve Months Ended March 30, 2002 TransDigm Inc. Net Debt $ 353,060 EBITDA (as defined) 90,171 ----------- Ratio 3.9 ===========
EX-21.1 23 a2082596zex-21_1.txt EXHIBIT 21.1 Exhibit 21.1 SUBSIDIARIES OF TRANSDIGM HOLDING COMPANY TransDigm Inc. is a wholly-owned subsidiary of TransDigm Holding Company. TransDigm Inc. wholly-owns the following subsidiaries: State or Jurisdiction of Name of Subsidiary Incorporation or Organization ------------------ ----------------------------- Champion Aerospace Inc. Delaware Marathon Power Technologies Company Delaware ZMP, Inc. California Adams Rite Aerospace, Inc. California Christie Electric Corp. California TransDigm Export, Inc. United States Virgin Islands Marathon Power Technologies Limited England EX-23.1 24 a2082596zex-23_1.txt EXHIBIT 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 March 1, 2001, except for Note 7, as to which the date is May 31, 2001, with respect to the financial statements of Federal-Mogul Aviation, Inc. included in the Registration Statement (Form S-4) and related Prospectus of TransDigm Inc. for the registration of $75,000,000 of TransDigm Inc.'s 10 3/8% Senior Subordinated Notes due 2008. /s/ Ernst & Young LLP Detroit, Michigan June 28, 2002 EX-23.2 25 a2082596zex-23_2.txt EX-23.2 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Registration Statement, relating to $75,000,000 of 10 3/8% Senior Subordinated Notes due 2008, of TransDigm Inc. on Form S-4 of our report dated December 1, 2001 (June 7, 2002 as to Notes 19 and 20), appearing in the Prospectus, which is part of this Registration Statement, and of our report dated December 1, 2001 relating to the financial statement schedule appearing elsewhere in this Registration Statement. We also consent to the reference to us under the headings "Summary Consolidated Historical and Pro Forma Financial Data", "Selected Historical Consolidated Financial Data" and "Experts" in such Prospectus. DELOITTE & TOUCHE LLP Cleveland, Ohio June 28, 2002 EX-25.1 26 a2082596zex-25_1.txt EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM T-1 --------- STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) STATE STREET BANK AND TRUST COMPANY (EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER) Massachusetts 04-1867445 (JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER ORGANIZATION IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.) 225 Franklin Street, Boston, Massachusetts 02110 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel 225 Franklin Street, Boston, Massachusetts 02110 (617) 654-3253 (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE) TRANSDIGM, INC. TRANSDIGM HOLDING COMPANY SUBSIDIARY GUARANTORS LISTED ON SCHEDULE A HERETO (EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER) Delaware 34-1750032/13-3733378 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 26380 CURTISS WRIGHT PARKWAY RICHMOND HEIGHTS, OH 44143 (Address of principal executive offices) (Zip Code) 10 3/8% Senior Subordinated Notes due 2008 (TITLE OF INDENTURE SECURITIES) GENERAL ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS SUBJECT. Department of Banking and Insurance of The Commonwealth of Massachusetts, 100 Cambridge Street, Boston, Massachusetts. Board of Governors of the Federal Reserve System, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C. (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. The obligor is not an affiliate of the trustee or of its parent, State Street Corporation. (See note on page 2.) ITEM 3. THROUGH ITEM 15. NOT APPLICABLE. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY. 1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT. A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION. A copy of a Statement from the Commissioner of Banks of Massachusetts that no certificate of authority for the trustee to commence business was necessary or issued is on file with the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE. A copy of the authorization of the trustee to exercise corporate trust powers is on file with the Securities and Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS CORRESPONDING THERETO. A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Senior Housing Properties Trust (File No. 333-60392) and is incorporated herein by reference thereto. 1 5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN DEFAULT. Not applicable. 6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY SECTION 321(b) OF THE ACT. The consent of the trustee required by Section 321(b) of the Act is annexed hereto as Exhibit 6 and made a part hereof. 7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is annexed hereto as Exhibit 7 and made a part hereof. NOTES In answering any item of this Statement of Eligibility which relates to matters peculiarly within the knowledge of the obligor or any underwriter for the obligor, the trustee has relied upon information furnished to it by the obligor and the underwriters, and the trustee disclaims responsibility for the accuracy or completeness of such information. The answer furnished to Item 2. of this statement will be amended, if necessary, to reflect any facts which differ from those stated and which would have been required to be stated if known at the date hereof. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, State Street Bank and Trust Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Hartford and The State of Connecticut, on the 14th day of June, 2002. STATE STREET BANK AND TRUST COMPANY By: /s/ Michael M. Hopkins ---------------------- NAME MICHAEL M. HOPKINS TITLE VICE PRESIDENT 2 EXHIBIT 6 CONSENT OF THE TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by TransDigm, Inc. of its 10 3/8% Senior Subordinated Notes due 2008, we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. STATE STREET BANK AND TRUST COMPANY By: /s/ Michael M. Hopkins ---------------------- NAME MICHAEL M. HOPKINS TITLE VICE PRESIDENT DATED: JUNE 14, 2002 3 EXHIBIT 7 Consolidated Report of Condition of State Street Bank and Trust Company, Massachusetts and foreign and domestic subsidiaries, a state banking institution organized and operating under the banking laws of this commonwealth and a member of the Federal Reserve System, at the close of business DECEMBER 31, 2001 published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act and in accordance with a call made by the Commissioner of Banks under General Laws, Chapter 172, Section 22(a).
Thousands of ASSETS Dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin .................................................. 1,638,539 Interest-bearing balances ........................................................................... 20,306,291 Securities ..................................................................................................... 20,724,659 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge subsidiary ................................................................. 12,360,932 Loans and lease financing receivables: Loans and leases, net of unearned income ............................................................ 5,979,937 Allowance for loan and lease losses ................................................................. 58,361 Allocated transfer risk reserve ..................................................................... 0 Loans and leases, net of unearned income and allowances ............................................. 5,921,576 Assets held in trading accounts ................................................................................ 1,781,781 Premises and fixed assets ...................................................................................... 574,101 Other real estate owned ........................................................................................ 0 Investments in unconsolidated subsidiaries ..................................................................... 35,121 Customers' liability to this bank on acceptances outstanding ................................................... 54,569 Intangible assets .............................................................................................. 579,993 Other assets ................................................................................................... 1,432,028 ---------- Total assets ................................................................................................... 65,409,590 ---------- LIABILITIES Deposits: In domestic offices ................................................................................. 12,137,037 Noninterest-bearing ....................................................................... 9,384,247 Interest-bearing .......................................................................... 2,752,790 In foreign offices and Edge subsidiary .............................................................. 26,718,438 Noninterest-bearing ....................................................................... 48,768 Interest-bearing .......................................................................... 26,669,670 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge subsidiary ................................................................. 18,959,275 Demand notes issued to the U.S. Treasury ....................................................................... 0 Trading liabilities ............................................................................................ 1,059,907 Other borrowed money ........................................................................................... 512,153 Subordinated notes and debentures .............................................................................. 0 Bank's liability on acceptances executed and outstanding ....................................................... 54,569 Other liabilities .............................................................................................. 1,732,217 Total liabilities .............................................................................................. 61,173,596 ---------- Minority interest in consolidated subsidiaries ................................................................. 48,038 EQUITY CAPITAL Perpetual preferred stock and related surplus .................................................................. 0 Common stock ................................................................................................... 29,931 Surplus ........................................................................................................ 581,840 Retained Earnings .............................................................................................. 3,502,793 Accumulated other comprehensive income ........................................................ 73,392 Other equity capital components ................................................................................ 0 Undivided profits and capital reserves/Net unrealized holding gains (losses) ................................... 0 Net unrealized holding gains (losses) on available-for-sale securities ........................ 0 Cumulative foreign currency translation adjustments ............................................................ 0 Total equity capital ........................................................................................... 4,187,956 ---------- Total liabilities, minority interest and equity capital......................................................... 65,409,590 ----------
4 I, Frederick P. Baughman, Senior Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Frederick P. Baughman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Ronald E. Logue David A. Spina Truman S. Casner 5 EX-99.1 27 a2082596zex-99_1.txt EXHIBIT 99.1 LETTER OF TRANSMITTAL TO TENDER FOR EXCHANGE 10 3/8% SENIOR SUBORDINATED NOTES DUE 2008 OF TRANSDIGM INC. PURSUANT TO THE PROSPECTUS DATED , 2002 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2002, UNLESS EXTENDED (THE "EXPIRATION DATE"). - -------------------------------------------------------------------------------- THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: STATE STREET BANK AND TRUST COMPANY BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND/OVERNIGHT State Street Bank and (for eligible institutions only) DELIVERY: Trust Company (617) 662-1452 State Street Bank and P.O. Box 778 Confirm by Telephone: Trust Company Boston, MA 02102-0078 (617) 662-1544 Two Avenue de Lafayette Attn: Janice Lee 5th Floor, Corporate Trust Window Boston, MA 02111-1724 Attn. Janice Lee
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. The undersigned hereby acknowledges receipt of the prospectus, dated , 2002, of TransDigm Inc., a Delaware corporation ("TransDigm"), which, together with this letter of transmittal, constitute TransDigm's offer to exchange $1,000 principal amount of its 10?% Series B Senior Subordinated Notes due 2008 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended, for each $1,000 principal amount of its outstanding 10?% Series A Senior Subordinated Notes due 2008 (the "Old Notes"), of which $75,000,000 aggregate principal amount is outstanding. IF YOU DESIRE TO EXCHANGE YOUR 10 3/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2008 FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF 10 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008, YOU MUST VALIDLY TENDER (AND NOT VALIDLY WITHDRAW) YOUR NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. YOU MUST SIGN THIS LETTER OF TRANSMITTAL WHERE INDICATED BELOW. PLEASE READ THE INSTRUCTIONS SET FORTH BELOW CAREFULLY BEFORE COMPLETING THIS LETTER OF TRANSMITTAL. This letter of transmittal is to be completed by holders of TransDigm's Old Notes either if certificates representing such notes are to be forwarded herewith or, unless an agent's message is utilized, tenders of such notes are to be made by book-entry transfer to an account maintained by the exchange agent at The Depository Trust Company pursuant to the procedures set forth in the prospectus under the heading "The Exchange Offer--Book-Entry Transfer." The undersigned has completed, executed and delivered this letter of transmittal to indicate the action the undersigned desires to take with respect to the exchange offer. Holders that are tendering by book-entry transfer to the exchange agent's account at DTC can execute the tender though the DTC Automated Tender Offer Program, for which the exchange offer is eligible. DTC participants that are tendering pursuant to the exchange offer must transmit their acceptance through the Automated Tender Offer Program to DTC, which will edit and verify the acceptance and send an agent's message to the exchange agent for its acceptance. In order to properly complete this letter of transmittal, a holder of Old Notes must: - complete the box entitled "Description of Notes," - if appropriate, check and complete the boxes relating to guaranteed delivery, "Special Issuance Instructions" and "Special Delivery Instructions," - sign the letter of transmittal, and - complete Substitute Form W-9. If a holder desires to tender notes pursuant to the exchange offer and (1) certificates representing such notes are not immediately available, (2) time will not permit this letter of transmittal, certificates representing such notes or other required documents to reach the exchange agent on or prior to the expiration date, or (3) the procedures for book-entry transfer (including delivery of an agent's message) cannot be completed on or prior to the expiration date, such holder may nevertheless tender such notes with the effect that such tender will be deemed to have been received on or prior to the expiration date if the guaranteed delivery procedures described in the prospectus under "The Exchange Offer--Guaranteed Delivery Procedures" are followed. See Instruction 1 below. PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING THE INSTRUCTIONS, AND THE PROSPECTUS CAREFULLY BEFORE COMPLETING THIS LETTER OF TRANSMITTAL OR CHECKING ANY BOX BELOW. The instructions included with this letter of transmittal must be followed. Questions and requests for assistance or for additional copies of the prospectus and this letter of transmittal, the Notice of Guaranteed Delivery and related documents may be directed to State Street Bank and Trust Company, at the address and telephone number set forth on the cover page of this letter of transmittal. See instruction 11 below. 2 List below the Old Notes to which this letter of transmittal relates. If the space provided is inadequate, list the certificate numbers and principal amounts on a separately executed schedule and affix the schedule to this letter of transmittal. Tenders of Old Notes will be accepted only in principal amounts equal to $1,000 or integral multiples of $1,000.
- -------------------------------------------------------------------------------------------------------- DESCRIPTION OF NOTES - -------------------------------------------------------------------------------------------------------- AGGREGATE NAME(S) AND ADDRESS(ES) OF PRINCIPAL PRINCIPAL REGISTERED HOLDER(S) CERTIFICATE AMOUNT AMOUNT (PLEASE FILL IN) NUMBER(S)* REPRESENTED** TENDERED** - -------------------------------------------------------------------------------------------------------- ------------------------------------------------ ------------------------------------------------ ------------------------------------------------ ------------------------------------------------ - -------------------------------------------------------------------------------------------------------- TOTAL PRINCIPAL AMOUNT OF NOTES - --------------------------------------------------------------------------------------------------------
* Need not be completed by holders delivering by book-entry transfer (see below). ** Unless otherwise indicated in the column "Principal Amount Tendered" and subject to the terms and conditions of the exchange offer, the holder will be deemed to have tendered the entire aggregate principal amount represented by each note listed above and delivered to the exchange agent. See Instruction 4. 3 PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING THE BOXES BELOW / / CHECK HERE IF CERTIFICATES FOR TENDERED OLD NOTES ARE ENCLOSED HEREWITH. / / CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK- ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution: _____________________________________________ Account Number with DTC: ___________________________________________________ Transaction Code Number: ___________________________________________________ / / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): ___________________________________________ Window Ticket Number(s) (if any): __________________________________________ Date of Execution of the Notice of Guaranteed Delivery: ____________________ Name of Eligible Institution that Guaranteed Delivery: _____________________ IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING: Name of Tendering Institution: _____________________________________________ Account Number at DTC: _____________________________________________________ Transaction Code Number: ___________________________________________________ / / CHECK HERE IF YOU ARE A BROKER-DEALER THAT ACQUIRED YOUR TENDERED NOTES FOR YOUR OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ______________________________________________________________________ Address: ___________________________________________________________________ NOTE: SIGNATURES MUST BE PROVIDED BELOW 4 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the exchange offer, the undersigned hereby tenders to TransDigm the principal amount of Old Notes described above. Subject to, and effective upon, the acceptance for exchange of the Old Notes tendered herewith, the undersigned hereby sells, assigns and transfers to, or upon the order of, TransDigm all right, title and interest in and to such Old Notes. The undersigned hereby irrevocably constitutes and appoints the exchange agent as the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that the exchange agent also acts as the agent of TransDigm and as trustee under the indenture relating to the Old Notes) with respect to such tendered notes, with full power of substitution and resubstitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), subject only to the right of withdrawal described in the prospectus, to (1) deliver certificates representing such tendered notes, or transfer ownership of such notes, on the account books maintained by DTC, and to deliver all accompanying evidence of transfer and authenticity to, or upon the order of, TransDigm upon receipt by the exchange agent, as the undersigned's agent, of the Exchange Notes to which the undersigned is entitled upon the acceptance by TransDigm of such Old Notes for exchange pursuant to the exchange offer, (2) receive all benefits and otherwise to exercise all rights of beneficial ownership of such Old Notes, all in accordance with the terms and conditions of the exchange offer, and (3) present such Old Notes for transfer, and transfer such Old Notes, on the relevant security register. The undersigned hereby represents and warrants that the undersigned (1) owns the notes tendered and is entitled to tender such notes, and (2) has full power and authority to tender, sell, exchange, assign and transfer the Old Notes and to acquire Exchange Notes issuable upon the exchange of such tendered notes, and that, when the same are accepted for exchange, TransDigm will acquire good, marketable and unencumbered title to the tendered notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim or right or restriction or proxy of any kind. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the exchange agent or TransDigm to be necessary or desirable to complete the sale, exchange, assignment and transfer of tendered notes or to transfer ownership of such notes on the account books maintained by DTC. The undersigned has read and agrees to all of the terms of the exchange offer. The undersigned understands that tenders of the Old Notes pursuant to any one of the procedures described in the prospectus under the caption "The Exchange Offer--Procedures for Tendering Old Notes" and in the instructions to this letter of transmittal will, upon TransDigm's acceptance of the notes for exchange, constitute a binding agreement between the undersigned and TransDigm in accordance with the terms and subject to the conditions of the exchange offer. The exchange offer is subject to the conditions set forth in the prospectus under the caption "The Exchange Offer--Conditions to the Exchange Offer." The undersigned recognizes that as a result of these conditions (which may be waived, in whole or in part, by TransDigm) as more particularly set forth in the prospectus, TransDigm may not be required to exchange any of the Old Notes tendered by this letter of transmittal and, in such event, the Old Notes not exchanged will be returned to the undersigned at the address shown below the signature of the undersigned. Unless a box under the heading "Special Issuance Instructions" is checked, by tendering Old Notes and executing this letter of transmittal, the undersigned hereby represents and warrants that:0 (i) the undersigned or any beneficial owner of the Old Notes is acquiring the offered notes in the ordinary course of business of the undersigned (or such other beneficial owner); (ii) neither the undersigned nor any beneficial owner is engaging in or intends to engage in a distribution of the offered notes within the meaning of the federal securities laws; (iii) neither the undersigned nor any beneficial owner has an arrangement or understanding with any person or entity to participate in a distribution of the offered notes; 5 (iv) neither the undersigned nor any beneficial owner is an "affiliate," as such term is defined under Rule 405 promulgated under the Securities Act of 1933, of TransDigm. Upon request by TransDigm, the undersigned or such beneficial owner will deliver to TransDigm a legal opinion confirming it is not such an affiliate; (v) if the undersigned or any beneficial owner is a resident of the State of California, if falls under the self-executing institutional investor exemption set forth under Section 25102(i) of the Corporate Securities Law of 1968 and Rules 260.102.10 and 260.105.14 of the California Blue Sky Regulations; (vi) if the undersigned or any beneficial owner is a resident of the Commonwealth of Pennsylvania, it falls under the self-executing institutional investor exemption set forth under Sections 203(c), 102(d) and (k) of the Pennsylvania Securities Act of 1972, Section 102.111 of the Pennsylvania Blue Sky Regulations and an interpretive opinion dated November 16, 1985; (vii) the undersigned and each beneficial owner acknowledges and agrees that any person who is a broker-dealer registered under the Securities Exchange Act of 1934, as amended, or is participating in the exchange offer for the purpose of disturbing the Exchange Notes, must comply with the registration and delivery requirements of the Securities Act in connection with a secondary resale transaction of the Exchange Notes or interests therein acquired by such person and cannot rely on the position of the staff of the Securities and Exchange Commission (the "SEC") set forth in certain no-action letters; (viii) the undersigned and each beneficial owner understands that a secondary resale transaction described in clause (vii) above and any resales of Exchange Notes or interests therein obtained by such holder in exchange for Old Notes or interests therein originally acquired by such holder directly from TransDigm should be covered by an effective registration statement containing the selling security holder information required by Item 507 or Item 508, as applicable, of Regulation S-K or the SEC; and (ix) the undersigned is not acting on behalf of any person or entity who could not truthfully make the foregoing representations. The undersigned may, IF AND ONLY IF UNABLE TO MAKE ALL OF THE REPRESENTATIONS AND WARRANTIES CONTAINED IN (i)-(ix) ABOVE, elect to have its Old Notes registered in the shelf registration described in the Registration Rights Agreement, dated as of June 7, 2002, by and among TransDigm, the guarantors and Deutsche Bank Securities Inc. and Credit Suisse First Boston Corporation, in the form filed as an exhibit to the registration statement of which the prospectus is a part. Such election may be made by checking a box under "Special Issuance Instructions" below. By making such election, the undersigned agrees, jointly and severally, as a holder of transfer restricted securities participating in a shelf registration, to indemnify and hold harmless TransDigm, the guarantors, their respective agents, employees, directors and officers and each Person who controls TransDigm or any of the guarantors, within the meaning of Section 15 of the Securities Act or Section 20(a) of the Securities Exchange Act of 1934, as amended, against any and all losses, claims, judgments, damages and liabilities whatsoever (including, without limitation, the reasonable legal and other expenses incurred in connection with any matter, including any action that could give rise to such losses, claims, judgments, damages or liabilities) arising out of or based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the shelf registration statement filed with respect to such Old Notes or the prospectus or in any amendment thereof 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, in each case to the extent, but only to the extent, that any such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made therein based on information relating to the undersigned furnished to TransDigm in writing by or on behalf of the undersigned expressly for use therein. Any such indemnification shall be governed by the terms and subject to the conditions set forth in the Registration Rights Agreement, including, without limitation, the provisions regarding notice, retention of counsel, contribution and payment of expenses set forth therein. The above summary of the indemnification provision of the Registration Rights Agreement is not intended to be exhaustive and is qualified in its entirety by reference to the Registration Rights Agreement. If the undersigned is a broker-dealer that will receive offered notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such offered notes, however, by so acknowledging and delivering a prospectus, the undersigned will not be deemed to 6 admit that it is an "underwriter" within the meaning of the Securities Act. If the undersigned is a broker-dealer and Old Notes held for its own account were not acquired as a result of market-making or other trading activities, such Old Notes cannot be exchange pursuant to the exchange offer. All authority herein conferred or agreed to be conferred shall not be affected by, and shall survive the death, bankruptcy or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. Tendered Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time on ______, 2002 or on such later date or time to which TransDigm may extend the exchange offer. Unless otherwise indicated herein under the box entitled "Special Issuance Instructions" below, Exchange Notes, and Old Notes not tendered or accepted for exchange, will be issued in the name of the undersigned. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, Exchange Notes, and Old Notes not tendered or accepted for exchange, will be delivered to the undersigned at the address shown below the signature of the undersigned. In the case of a book-entry delivery of notes, the exchange agent will credit the account maintained by DTC with any notes not tendered. The undersigned recognizes that TransDigm has no obligation pursuant to the "Special Issuance Instructions" to transfer any Old Notes from the name of the registered holder thereof if TransDigm does not accept for exchange any of the principal amount of such Old Notes so tendered. The Exchange Notes will bear interest from the most recent interest payment date to which interest has been paid on the Old Notes, or if no interest has been paid, from June 1, 2002. Interest on the Old Notes accepted for exchange will cease to accrue upon the issuance of the Exchange Notes. 7 - -------------------------------------------------------------------------------- PLEASE SIGN HERE (To Be Completed By All Tendering Holders of Old Notes) This letter of transmittal must be signed by the registered holder(s) of Old Notes exactly as their name(s) appear(s) on certificate(s) for Old Notes or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsements and documents transmitted with this letter of transmittal, including such opinions of counsel, certifications and other information as may be required by TransDigm or the trustee for the Old Notes to comply with the restrictions on transfer applicable to the Old Notes. If the signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below under "Capacity" and submit evidence satisfactory to the exchange agent of such person's authority to so act. See Instruction 5 below. If the signature appearing below is not of the registered holder(s) of the Old Notes, then the registered holder(s) must sign a valid power of attorney. X __________________________________________________________________________ X __________________________________________________________________________ Signature(s) of Holder(s) or Authorized Signatory Dated: _____, 2002 Name(s): ___________________________________________________________________ Capacity: __________________________________________________________________ Address: ___________________________________________________________________ ____________________________________________________________________________ (Zip Code) Area Code and Telephone No.: _______________________________________________ GUARANTEE OF SIGNATURE(S) (IF REQUIRED--SEE INSTRUCTIONS 2 AND 5 BELOW) Certain Signatures Must be Guaranteed by a Signature Guarantor ____________________________________________________________________________ (Name of Signature Guarantor Guaranteeing Signatures) ____________________________________________________________________________ (Address (including zip code) and Telephone Number (including area code) of Firm) ____________________________________________________________________________ (Authorized Signature) ____________________________________________________________________________ (Printed Name) ____________________________________________________________________________ (Title) Dated:______, 2002 ---------------------------------------------------------------------------- 8 ---------------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 4 THROUGH 7) To be completed ONLY if (i) certificates for Old Notes in a principal amount not tendered are to be issued in the name of, or Exchange Notes issued pursuant to the exchange offer are to be issued in the name of, someone other than the person or persons whose name(s) appear(s) within this letter of transmittal or issued to an address different from that shown in the box entitled "Description of Notes" within this letter of transmittal, (ii) Old Notes not tendered, but represented by certificates tendered by this letter of transmittal, are to be returned by credit to an account maintained at DTC other than the account indicated above or (iii) Exchange Notes issued pursuant to the exchange offer are to be issued by book-entry transfer to an account maintained at DTC other than the account indicated above. Issue: / / Exchange Notes, to: / / Old Notes, to: Name(s) ____________________________________________________________________ Address ____________________________________________________________________ Telephone Number: __________________________________________________________ ____________________________________________________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) DTC Account Number: ________________________________________________________ - ------------------------------------------------ - ------------------------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 4 THROUGH 7) To be completed ONLY if certificates for Old Notes in a principal amount not tendered, or Exchange Notes, are to be sent to someone other than the person or persons whose name(s) appear(s) within this letter of transmittal to an address different from that shown in the box entitled "Description of Notes" within this letter of transmittal. Deliver: / / Exchange Notes, to: / / Old Notes, to: Name(s) ____________________________________________________________________ Address ____________________________________________________________________ Telephone Number: __________________________________________________________ ____________________________________________________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) Is this a permanent address change? (check one box) / / Yes / / No --------------------------------------------------- 9 INSTRUCTIONS TO LETTER OF TRANSMITTAL (FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER) 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES. This letter of transmittal is to be completed by holders of Old Notes if certificates representing such notes are to be forwarded herewith, or, unless an agent's message is utilized, if tender is to be made by book-entry transfer to the account maintained by DTC, pursuant to the procedures set forth in the prospectus under "The Exchange Offer--Procedures for Tendering Old Notes." For a holder to properly tender notes pursuant to the exchange offer, a properly completed and duly executed letter of transmittal (or a manually signed facsimile thereof), together with any signature guarantees and any other documents required by these Instructions, or a properly transmitted agent's message in the case of a book entry transfer, must be received by the exchange agent at its address set forth herein on or prior to the expiration date, and either (1) certificates representing such notes must be received by the exchange agent at its address, or (2) such notes must be transferred pursuant to the procedures for book-entry transfer described in the prospectus under "The Exchange Offer--Book-Entry Transfer" and a book-entry confirmation must be received by the exchange agent on or prior to the expiration date. A holder who desires to tender notes and who cannot comply with procedures set forth herein for tender on a timely basis or whose notes are not immediately available must comply with the guaranteed delivery procedures discussed below. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE HOLDER AND DELIVERY WILL BE DEEMED TO BE MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, HOLDERS SHOULD USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, HOLDERS SHOULD ALLOW FOR SUFFICIENT TIME TO ENSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION OF THE EXCHANGE OFFER AND PROPER INSURANCE SHOULD BE OBTAINED. HOLDERS MAY REQUEST THEIR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE TO EFFECT THESE TRANSACTIONS FOR SUCH HOLDER. HOLDERS SHOULD NOT SEND ANY NOTE, LETTER OF TRANSMITTAL OR OTHER REQUIRED DOCUMENT TO TRANSDIGM. If a holder desires to tender notes pursuant to the exchange offer and (1) certificates representing such notes are not immediately available, (2) time will not permit such holder's letter of transmittal, certificates representing such notes or other required documents to reach the exchange agent on or prior to the expiration date, or (3) the procedures for book-entry transfer (including delivery of an agent's message) cannot be completed on or prior to the expiration date, such holder may nevertheless tender such notes with the effect that such tender will be deemed to have been received on or prior to the expiration date if the guaranteed delivery procedures set forth in the prospectus under "The Exchange Offer--Guaranteed Delivery Procedures" are followed. Pursuant to such procedures, (1) the tender must be made by or through an eligible guarantor institution (as defined below), (2) a properly completed and duly executed notice of guaranteed delivery, substantially in the form provided by TransDigm herewith, or an agent's message with respect to a guaranteed delivery that is accepted by TransDigm, must be received by the exchange agent on or prior to the expiration date, and (3) the certificates for the tendered notes, in proper form for transfer (or a book-entry confirmation of the transfer of such notes into the exchange agent's account at DTC as described in the prospectus) together with a letter of transmittal (or manually signed facsimile thereof) properly completed and duly executed, with any required signature guarantees and any other documents required by the letter of transmittal, or a properly transmitted agent's message, must be received by the exchange agent within three New York Stock Exchange, Inc. trading days after the execution of the notice of guaranteed delivery. 10 The notice of guaranteed delivery may be delivered by hand or transmitted by facsimile or mail to the exchange agent and must include a guarantee by an eligible guarantor institution in the form set forth in the notice of guaranteed delivery. For Old Notes to be properly tendered pursuant to the guaranteed delivery procedure, the exchange agent must receive a notice of guaranteed delivery prior to the expiration date. As used herein and in the prospectus, "eligible guarantor institution" means a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution," including (as such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association. 2. GUARANTEE OF SIGNATURES. Signatures on this letter of transmittal must be guaranteed by a member of or participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange, Inc. Medallion Signature Program or the Stock Exchange Medallion Program or by an eligible guarantor institution unless the notes tendered hereby are tendered (1) by a registered holder of notes (or by a participant in DTC whose name appears on a security position listing as the owner of such notes) who has signed this letter of transmittal and who has not completed any of the boxes entitled "Special Issuance Instructions" or "Special Delivery Instructions," on the letter of transmittal, or (2) for the account of an eligible guarantor institution. If the notes are registered in the name of a person other than the signer of the letter of transmittal or if notes not tendered are to be returned to, or are to be issued to the order of, a person other than the registered holder or if notes not tendered are to be sent to someone other than the registered holder, then the signature on this letter of transmittal accompanying the tendered notes must be guaranteed as described above. Beneficial owners whose notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if they desire to tender notes. See "The Exchange Offer--Procedures for Tendering Old Notes," in the prospectus. 3. WITHDRAWAL OF TENDERS. Except as otherwise provided in the prospectus, tenders of notes may be withdrawn at any time on or prior to the expiration date. For a withdrawal of tendered notes to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be received by the exchange agent on or prior to the expiration date at its address set forth on the cover of this letter of transmittal. Any such notice of withdrawal must (1) specify the name of the person who tendered the notes to be withdrawn, (2) identify the notes to be withdrawn, including the certificate number or numbers shown on the particular certificates evidencing such notes (unless such notes were tendered by book-entry transfer), the aggregate principal amount represented by such notes and the name of the registered holder of such notes, if different from that of the person who tendered such notes, (3) be signed by the holder of such notes in the same manner as the original signature on the letter of transmittal by which such notes were tendered (including any required signature guarantees), or be accompanied by (i) documents of transfer sufficient to have the trustee register the transfer of the notes into the name of the person withdrawing such notes, and (ii) a properly completed irrevocable proxy authorizing such person to effect such withdrawal on behalf of such holder (unless the notes were tendered by book entry transfer), and (4) specify the name in which any such notes are to be registered, if different from that of the registered holder. If the notes were tendered pursuant to the procedures for book-entry transfer sent forth in "The Exchange Offer--Procedures for Tendering Old Notes," the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawal of Old Notes and must otherwise comply with the procedures of DTC. If the notes to be withdrawn have been delivered or otherwise identified to the exchange agent, a signed notice of withdrawal is effective immediately upon written or facsimile notice of such withdrawal even if physical release is not yet effected. 11 Any permitted withdrawal of notes may not be rescinded. Any notes properly withdrawn will thereafter be deemed not validly tendered for purposes of the exchange offer. However, properly withdrawn notes may be retendered by following one of the procedures described in the prospectus under the caption "The Exchange Offer--Procedures for Tendering Old Notes" at any time prior to the expiration date. All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by TransDigm, in its sole discretion, which determination shall be final and binding on all parties. Neither TransDigm, any affiliates of TransDigm, the exchange agent or any other person shall be under any duty to give any notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 4. PARTIAL TENDERS. Tenders of notes pursuant to the exchange offer will be accepted only in principal amounts equal to $1,000 or integral multiples of $1,000. If less than the entire principal amount of any notes evidenced by a submitted certificate is tendered, the tendering holder must fill in the principal amount tendered in the last column of the box entitled "Description of Notes" herein. The entire principal amount represented by the certificates for all notes delivered to the exchange agent will be deemed to have been tendered unless otherwise indicated. If the entire principal amount of all notes held by the holder is not tendered, new certificates for the principal amount of notes not tendered and Exchange Notes issued in exchange for any notes tendered and accepted will be sent (or, if tendered by book-entry transfer, returned by credit to the account at DTC designated herein) to the holder unless otherwise provided in the appropriate box on this letter of transmittal (see Instruction 6), as soon as practicable following the expiration date. 5. SIGNATURE ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this letter of transmittal is signed by the registered holder(s) of the Old Notes tendered hereby, the signature must correspond exactly with the name(s) as written on the face of certificates without alteration, enlargement or change whatsoever. If this letter of transmittal is signed by a participant in DTC whose name is shown as the owner of the notes tendered hereby, the signature must correspond with the name shown on the security position listing the owner of the notes. If any of the notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this letter of transmittal. If any tendered notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many copies of this letter of transmittal and any necessary accompanying documents as there are different names in which certificates are held. If this letter of transmittal is signed by the holder, and the certificates for any principal amount of notes not tendered are to be issued (or if any principal amount of notes that is not tendered is to be reissued or returned) to or, if tendered by book-entry transfer, credited to the account of DTC of the registered holder, and Exchange Notes exchanged for Old Notes in connection with the exchange offer are to be issued to the order of the registered holder, then the registered holder need not endorse any certificates for tendered notes nor provide a separate bond power. In any other case (including if this letter of transmittal is not signed by the registered holder), the registered holder must either properly endorse the certificates for notes tendered or transmit a separate properly completed bond power with this letter of transmittal (in either case, executed exactly as the name(s) of the registered holder(s) appear(s) on such notes, and, with respect to a participant in DTC whose name appears on a security position listing as the owner of notes, exactly as the name(s) of the participant(s) appear(s) on such security position listing), with the signature on the endorsement or bond power guaranteed by a signature guarantor or an eligible guarantor institution, unless such certificates or bond powers are executed by an eligible guarantor institution, and must also be accompanied by such opinions of 12 counsel, certifications and other information as TransDigm or the trustee for the original notes may require in accordance with the restrictions on transfer applicable to the Old Notes. See Instruction 2. Endorsements on certificates for notes and signatures on bond powers provided in accordance with this Instruction 5 by registered holders not executing this letter of transmittal must be guaranteed by an eligible institution. See Instruction 2. If this letter of transmittal or any certificates representing notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the exchange agent, in its sole discretion, of their authority so to act must be submitted with this letter of transmittal. 6. SPECIAL ISSUANCE AND SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate in the applicable box or boxes the name and address to which notes for principal amounts not tendered or Exchange Notes exchanged for Old Notes in connection with the exchange offer are to be issued or sent, if different from the name and address of the holder signing this letter of transmittal. In the case of issuance in a different name, the taxpayer-identification number of the person named must also be indicated. Holders tendering by book-entry transfer may request that Old Notes not exchanged be credited to such accounted maintained at DTC as such holder may designate. If no instructions are given, notes not tendered will be returned to the registered holder of the notes tendered. For holders of notes tendered by book-entry transfer, notes not tendered will be returned by crediting the account at DTC designated above. 7. TAXPAYER IDENTIFICATION NUMBER AND SUBSTITUTE FORM W-9. Federal income tax law generally requires that each tendering holder is required to provide the exchange agent with its correct taxpayer identification number, which, in the case of a holder who is an individual, is his or her social security number. If the exchange agent is not provided with the correct taxpayer identification number or an adequate basis for an exemption, the holder may be subject to backup withholding in an amount equal to up to 30% of the reportable payments made with respect to the notes and a $50 penalty imposed by the Internal Revenue Service. If withholding results in an over-payment of taxes, a refund may be obtained. Certain holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional instructions. To prevent backup withholding, each holder tendering Old Notes must provide such holder's correct taxpayer identification number by completing the Substitute Form W-9 set forth herein, certifying that the taxpayer identification number provided is correct (or that such holder is awaiting a taxpayer identification number), and that (i) such holder is exempt from backup withholding, (ii) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of failure to report all interest or dividends or (iii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding and that such holder is a U.S. person. Holders awaiting a taxpayer identification number may be subject to backup withholding until a taxpayer identification number is provided. If the holder tending Old Notes does not have a taxpayer identification number, such holder should consult the "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for instructions on applying for a taxpayer identification number, check the "Awaiting TIN" box on part 3 of the Substitute Form W-9, and sign and date the Substitute Form W-9 and the Certification of Awaiting Taxpayer Identification Number set forth herein. 13 If the Old Notes are registered in more than one name or are not in the name of the actual owner, consult the "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for information on which taxpayer identification number to report. Exempt holders tendering Old Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. To prevent possible erroneous backup withholding, an exempt holder tendering Old Notes must enter its correct taxpayer identification number in Part I of the Substitute Form W-9 and sign and date the form. See the "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional instructions. In order for a nonresident alien or foreign entity to qualify as exempt, such person must submit a completed Form W-8, "Certificate of Foreign Status," signed under penalty of perjury attesting to such exempt status. Such form may be obtained from the exchange agent. TransDigm reserves the right in its sole discretion to take whatever steps are necessary to comply with its obligation regarding backup withholding. 8. TRANSFER TAXES. TransDigm will pay all transfer taxes, if any, required to be paid by TransDigm in connection with the exchange of the Old Notes for the Exchange Notes. If, however, Exchange Notes, or Old Notes for principal amounts not tendered or accepted for exchange, are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Old Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of the Old Notes in connection with the exchange offer, then the amount of any transfer tax (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of the transfer taxes or exemption therefrom is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to the tendering holder. 9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. If any certificate representing Old Notes has been mutilated, lost, stolen or destroyed, the holder should promptly contact the exchange agent at the address indicated above. The holder will then be instructed as to the steps that must be taken in order to replace the certificate. This letter of transmittal and related documents cannot be processed until the procedures for replacing mutilated, lost, stolen or destroyed certificates have been followed. 10. IRREGULARITIES. All questions as to the validity, form, eligibility, time of receipt, acceptance and withdrawal of any tenders of notes pursuant to the procedures described in the prospectus and the form and validity of all documents will be determined by TransDigm, in its sole discretion, which determination shall be final and binding on all parties. TransDigm reserves the absolute right, in its sole and absolute discretion, to reject any or all tenders of any notes determined by it not to be in proper form or the acceptance of which may, in the opinion of TransDigm's counsel, be unlawful. TransDigm also reserves the absolute right, in its sole discretion subject to applicable law, to waive or amend any of the conditions of the exchange offer or to waive any defect or irregularity in the tender of any particular notes, whether or not similar defects or irregularities are waived in the case of other tenders. TransDigm's interpretations of the terms and conditions of the exchange offer (including, without limitation, the instructions in this letter of transmittal) shall be final and binding. No alternative, conditional or contingent tenders will be accepted. Unless waived, any irregularities in connection with tenders must be cured within such time as TransDigm shall determine. Each tendering holder, by execution of a letter of transmittal (or a manually signed facsimile thereof), waives any right to receive any notice of the acceptance of such tender. Tenders of such notes shall not be deemed to have been made until such irregularities have been cured or waived. Any notes received by the exchange agent that are not properly tendered and as to which the irregularities have not been cured or waived will be returned by the exchange agent to the tendering holders, unless such holders have otherwise provided herein, promptly following the expiration date. None of TransDigm, any of its affiliates, the exchange agent or any other person will be under any duty to give notification of any 14 defects or irregularities in such tenders or will incur any liability to holders for failure to give such notification. 11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for assistance or additional copies of the prospectus, this letter of transmittal and the notice of guaranteed delivery may be directed to the exchange agent at the address and telephone number set forth above. Holders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the exchange offer. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH CERTIFICATES FOR OLD NOTES OR A BOOK ENTRY-CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO 5:00 P.M., NEW YORK CITY TIME ON THE EXPIRATION DATE. 15 PAYER'S NAME: STATE STREET BANK AND TRUST COMPANY. - ------------------------------------------------------------------------------------------------------------ SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND ------------------- FORM W-9 CERTIFY BY SIGNING AND DATING BELOW. Social Security Number(s) OR ------------------- Employer Identification Number(s) --------------------------------------------------------------------------------- DEPARTMENT OF THE PART 2-- PART 3-- TREASURY INTERNAL CERTIFICATION -- Under Penalties of Perjury, I certify Awaiting TIN REVENUE SERVICE that: / / (1) Awaiting TIN Revenue Service The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued for me), (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and (3) I am a U.S. person (including a U.S. resident alien). ------------------------------------------------------------------------------ PAYER'S REQUEST FOR CERTIFICATION INSTRUCTIONS -- You must cross out item (2) in Part 2 if you have TAXPAYER been notified by the IRS that you are currently subject to backup withholding IDENTIFICATION NUMBER because of underreporting interest or dividends on your tax return. ("TIN") AND Name Address CERTIFICATIONS (include zip code) SIGNATURE DATE - ------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO PROPERLY COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 30% OF ANY REPORTABLE PAYMENTS MADE TO YOU. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. NOTE: YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9. CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration office or (2) I intend to mail or deliver an application in the near future. I understand that until I provide a taxpayer identification number to the payer, 30% of all reportable payments made to me thereafter by the payer may be withheld and remitted to the IRS as backup withholding. SIGNATURE ________________________________ DATE _______________________________ 16 EX-99.2 28 a2082596zex-99_2.txt EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF ANY AND ALL OUTSTANDING SERIES A 10 3/8% SENIOR SUBORDINATED NOTES DUE 2008 OF TRANSDIGM INC. PURSUANT TO THE PROSPECTUS DATED ____________, 2002 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2002, UNLESS EXTENDED (THE "EXPIRATION DATE"). - -------------------------------------------------------------------------------- THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: STATE STREET BANK AND TRUST COMPANY BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND/OVERNIGHT DELIVERY: State Street Bank and Trust Company (for eligible institutions State Street Bank and Trust Company P.O. Box 778 only) Two Avenue de Lafayette Boston, MA 02102-0078 (617) 662-1452 5th Floor, Corporate Trust Window Attn: Janice Lee Boston, MA 02111-1724 Confirm by Telephone: Attn. Janice Lee (617) 662-1544
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. As set forth in the prospectus, dated ____________, 2002, of TransDigm Inc., a Delaware corporation ("TransDigm"), under "The Exchange Offer--Guaranteed Delivery Procedures," and in the accompanying letter of transmittal and instructions thereto, this form or one substantially equivalent hereto or an agent's message relating to guaranteed delivery must be used to accept TransDigm's offer to exchange $1,000 principal amount of its 10?% Series B Senior Subordinated Notes due 2008 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended, for each $1,000 principal amount of its outstanding 10?% Series A Senior Subordinated Notes due 2008 (the "Old Notes"), if certificates representing such notes are not immediately available, time will not permit the letter of transmittal, certificates representing such notes or other required documents to reach the exchange agent, or the procedures for book-entry transfer (including a properly transmitted agent's message with respect thereto) cannot be completed, on or prior to the expiration date. This form is not to be used to guarantee signatures. If a signature on the letter of transmittal is required to be guaranteed by signature guarantor under the instructions thereto, such signature guarantee must appear in the applicable space provided in the letter of transmittal. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to TransDigm, upon the terms and subject to the conditions set forth in the prospectus and the letter of transmittal, receipt of which is hereby acknowledged, the aggregate principal amount of Old Notes set forth below pursuant to the guaranteed delivery procedures set forth in the prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." The undersigned hereby authorizes the exchange agent to deliver this notice of guaranteed delivery to TransDigm with respect to the Old Notes tendered pursuant to the exchange offer. The undersigned understands that tenders of the Old Notes will be accepted only in principal amounts equal to $1,000 or integral multiples thereof. The undersigned also understands that tenders of the Old Notes pursuant to the exchange offer may be withdrawn at any time prior to the expiration date. For a withdrawal of a tender of notes to be effective, it must be made in accordance with the procedures set forth in the prospectus under "The Exchange Offer--Withdrawal Rights." The undersigned understands that the exchange of any Exchange Notes for Old Notes will be made only after timely receipt by the exchange agent of (i) the certificates of the tendered notes, in proper form for transfer (or a book-entry confirmation of the transfer of such notes into the exchange agent's account at The Depository Trust Company), and (ii) a letter of transmittal (or a manually signed facsimile thereof) properly completed and duly executed with any required signature guarantees, together with any other documents required by the letter of transmittal (or a properly transmitted agent's message), within three New York Stock Exchange, Inc. trading days after the execution hereof. All authority herein conferred or agreed to be conferred by this notice of guaranteed delivery shall not be affected by, and shall survive, the death or incapacity of the undersigned, and every obligation of the undersigned under this notice of guaranteed delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. 2 PLEASE SIGN AND COMPLETE - ------------------------------------------------ X __________________________________________________________________________ X __________________________________________________________________________ Signature(s) of Registered Holder(s) or Authorized Signatory Name(s) of Registered Holder(s): ____________________________________________________________________________ Principal Amount of Notes Tendered*: ____________________________________________________________________________ Certificate No.(s) of Notes (if available): ____________________________________________________________________________ * Must be in denominations of $1,000 and any integral multiple thereof. - ------------------------------------------------ - ------------------------------------------------ Date: ______________________________________________________________________ Address: ___________________________________________________________________ Area Code and Telephone No.: _______________________________________________ If Notes will be delivered by book-entry transfer, provide information below: Name of Tendering Institution: _____________________________________________ Depositary Account No. with DTC: ___________________________________________ Transaction Code Number: ___________________________________________________ - ----------------------------------------------- DO NOT SEND NOTES WITH THIS FORM. NOTES SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL OR PROPERLY TRANSMITTED AGENT'S MESSAGE. - -------------------------------------------------------------------------------- This notice of guaranteed delivery must be signed by the holder(s) exactly as their name(s) appear(s) on certificate(s) for notes or on a security position listing as the owner of notes, or by person(s) authorized to become holder(s) by endorsements and documents transmitted with this notice of guaranteed delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information: PLEASE PRINT NAME(S) AND ADDRESS(ES) Name(s): ___________________________________________________________________ ____________________________________________________________________________ Capacity: __________________________________________________________________ Address(es): _______________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ---------------------------------------------------------------------------- 3 THE GUARANTEE BELOW MUST BE COMPLETED GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or a correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended, hereby guarantees that the notes to be tendered hereby are in proper form for transfer (pursuant to the procedures set forth in the prospectus under "The Exchange Offer--Guaranteed Delivery Procedures"), and that the exchange agent will receive (a) such notes, or a book-entry confirmation of the transfer of such notes into the exchange agent's account at The Depository Trust Company, and (b) a properly completed and duly executed letter of transmittal (or facsimile thereof) with any required signature guarantees and any other documents required by the letter of transmittal, or a properly transmitted agent's message, within three New York Stock Exchange, Inc. trading days after the date of execution hereof. The eligible guarantor institution that completes this form must communicate the guarantee to the exchange agent and must deliver the letter of transmittal, or a properly transmitted agent's message, and notes, or a book-entry confirmation in the case of a book-entry transfer, to the exchange agent within the time period described above. Failure to do so could result in a financial loss to such eligible guarantor institution. Name of Firm: __________________________________________________________________ Authorized Signature: __________________________________________________________ Title: _________________________________________________________________________ Address: _______________________________________________________________________ ________________________________________________________________________________ Area Code and Telephone Number: ________________________________________________ Dated: _______________, 2002 4 EX-99.3 29 a2082596zex-99_3.txt EXHIBIT 99.3 LETTER TO REGISTERED HOLDERS AND DTC PARTICIPANTS REGARDING THE TENDER OF ANY AND ALL OUTSTANDING SERIES A 10 3/8% SENIOR SUBORDINATED NOTES DUE 2008 OF TRANSDIGM INC. PURSUANT TO THE PROSPECTUS DATED , 2002 THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2002, UNLESS EXTENDED (THE "EXPIRATION DATE"). , 2002 To Registered Holders and DTC Participants: TransDigm Inc., a Delaware corporation ("TransDigm") is offering to exchange, upon and subject to the terms and conditions set forth in the prospectus, dated , 2002, and the letter of transmittal, $1,000 principal amount of its 10 3/8% Series B Senior Subordinated Notes due 2008 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended, for each $1,000 principal amount of its outstanding 10 3/8% Series A Senior Subordinated Notes due 2008 (the "Old Notes"), of which $75,000,000 aggregate principal amount is outstanding. In connection with the exchange offer, we are requesting that you contact your clients for whom you hold Old Notes registered in your name or in the name of your nominee, or who hold Old Notes registered in their own names. TransDigm will not pay any fees or commissions to any broker, dealer or other person in connection with the solicitation of tenders pursuant to the exchange offer. However, you will, upon request, be reimbursed for reasonable out-of-pocket expenses incurred in connection with soliciting acceptances of the exchange offer. TransDigm will pay or cause to be paid all transfer taxes applicable to the exchange of Old Notes pursuant to the exchange offer, except as set forth in the prospectus and the letter of transmittal. For your information and for forwarding to your clients, we are enclosing the following documents: 1. The prospectus dated , 2002; 2. The letter of transmittal for your use in connection with the tender of the Old Notes and for the information of your clients; 3. The notice of guaranteed delivery to be used to accept the exchange offer if the Old Notes and all other required documents cannot be delivered to the exchange agent prior to the Expiration Date; and 4. A form of letter which may be sent to your clients for whose account you hold Old Notes registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the exchange offer. To participate in the exchange offer, a beneficial holder must either: - cause to be delivered to State Street Bank and Trust Company (the "exchange agent"), at the address set forth in the letter of transmittal, definitive certificated notes representing Old Notes in proper form for transfer together with a duly executed and properly completed letter of transmittal, with any required signature guarantees and any other required documents; or - cause a DTC Participant to tender such holder's Old Notes to the Exchange Agent's account maintained at the Depository Trust Company ("DTC") for the benefit of the Exchange Agent through DTC's Automated Tender Offer Program ("ATOP"), including transmission of a computer-generated message that acknowledges and agrees to be bound by the terms of the letter of transmittal. By complying with DTC's ATOP procedures with respect to the exchange offer, the DTC Participant confirms on behalf of itself and the beneficial owners of tendered Old Notes all provisions of the letter of transmittal applicable to it and such beneficial owners as fully as if it completed, executed and returned the letter of transmittal to the exchange agent. You will need to contact those of your clients for whose account you hold definitive certificated notes or book-entry interests representing Old Notes and seek their instructions regarding the exchange offer. If holders of Old Notes wish to tender, but it is impracticable for them to forward their certificates for Old Notes prior to the expiration of the exchange offer or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the prospectus and the letter of transmittal. Any inquiries you may have with respect to the exchange offer, or requests for additional copies of the enclosed materials, should be directed to the exchange agent for the Old Notes, at its address and telephone number set forth on the front of the letter of transmittal. Very truly yours, TransDigm Inc. NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF TRANSDIGM OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL. 2 EX-99.4 30 a2082596zex-99_4.txt EXHIBIT 99.4 LETTER TO BENEFICIAL HOLDERS REGARDING THE OFFER TO EXCHANGE ANY AND ALL OUTSTANDING SERIES A 10 3/8% SENIOR SUBORDINATED NOTES DUE 2008 OF TRANSDIGM INC. PURSUANT TO THE PROSPECTUS DATED , 2002 THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2002, UNLESS EXTENDED (THE "EXPIRATION DATE"). , 2002 To Our Clients: Enclosed for your consideration is a prospectus, dated , 2002, of TransDigm Inc., a Delaware corporation ("TransDigm"), and a letter of transmittal, that together constitute TransDigm's offer to exchange $1,000 principal amount of its 10 3/8% Series B Senior Subordinated Notes due 2008 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended, for each $1,000 principal amount of its outstanding 10 3/8% Series A Senior Subordinated Notes due 2008 (the "Old Notes"), of which $75,000,000 aggregate principal amount is outstanding. The materials relating to the exchange offer are being forwarded to you as the beneficial owner of Old Notes carried by us for your account or benefit but not registered in your name. A tender of any Old Notes may only be made by us as the registered holder and pursuant to your instructions. Therefore, we urge beneficial owners of Old Notes registered in the name of a broker, dealer, commercial bank, trust company or any other nominee to contact such registered holder promptly if they wish to tender Old Notes in the exchange offer. Accordingly, we request instructions as to whether you wish us to tender any or all such Old Notes held by us for your account or benefit pursuant to the terms and conditions set forth in the prospectus and the letter of transmittal. We urge you to read carefully the prospectus and the letter of transmittal and other material provided herewith before instructing us to tender your Old Notes. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO EXCHANGE OLD NOTES HELD BY US FOR YOUR ACCOUNT OR BENEFIT. Your instructions to us should be forwarded as promptly as possible in order to permit us to tender Old Notes on your behalf in accordance with the provisions of the exchange offer. Your attention is directed to the following: 1. The exchange offer will expire at 5:00 p.m., New York City time, on , 2002, unless extended. Tendered Old Notes may be withdrawn, subject to the procedures described in the prospectus, at any time prior to 5:00 p.m. New York City time, on the Expiration Date. 2. The Old Notes will be exchanged for the Exchange Notes at the rate of $1,000 principal amount of Exchange Notes for each $1,000 principal amount of Old Notes validly tendered and not validly withdrawn prior to the expiration date. The Exchange Notes will bear interest from the most recent interest payment date to which interest has been paid on the Old Notes or, if no interest has been paid, from June 1, 2002. The form and terms of the Exchange Notes are identical in all material respects to the form and terms of the Old Notes, except that the Exchange Notes have been registered under the Securities Act of 1933, as amended. 3. Notwithstanding any other term of the exchange offer, TransDigm may terminate or amend the exchange offer as provided in the prospectus and will not be required to accept for exchange, or exchange any Exchange Notes for, any Old Notes not accepted for exchange prior to such termination. 4. Any transfer taxes applicable to the exchange of the Old Notes pursuant to the exchange offer will be paid by TransDigm, except as otherwise provided in the prospectus and in Instruction 8 of the letter of transmittal. 5. Based on an interpretation of the Securities Act by the staff of the Securities and Exchange Commission, TransDigm believes that Exchange Notes issued pursuant to the exchange offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by holders thereof without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the holder: (a) is acquiring Exchange Notes in its ordinary course of business; (b) is not engaging in and does not intend to engage in a distribution of the Exchange Notes; (c) is not participating, and has no arrangement or understanding with any person to participate, in a distribution of the Exchange Notes; (d) is not an "affiliate" of TransDigm or the guarantors, as such term is defined under Rule 405 of the Securities Act; and (e) the holder is not acting on behalf of any person who could not truthfully make these statements. To participate in the exchange offer, holders must represent to TransDigm that each of these statements is true. If the holder is a broker-dealer that will receive Exchange Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. If you wish to have us tender any or all of your Old Notes, please so instruct us by completing and returning to us the form entitled "Instruction to Registered Holders and DTC Participants From Beneficial Owner" that appears below. An envelope to return your instructions is enclosed. If you authorize a tender of your Old Notes, the entire principal amount of Old Notes held for your account will be tendered unless otherwise specified on the instruction form. Your instructions should be forwarded to us in ample time to permit us to submit a tender on your behalf by the Expiration Date. 2 INSTRUCTION TO REGISTERED HOLDERS AND DTC PARTICIPANTS FROM BENEFICIAL OWNER OF SERIES A 10 3/8% SENIOR SUBORDINATED NOTES DUE 2008 OF TRANSDIGM INC. The undersigned hereby acknowledges receipt of the prospectus, dated , 2002, of TransDigm Inc., a Delaware corporation ("TransDigm"), and the letter of transmittal, that together constitute TransDigm's offer to exchange $1,000 principal amount of its Series B 10 3/8% Senior Subordinated Notes due 2008 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended, for each $1,000 principal amount of its outstanding Series A 10 3/8% Senior Subordinated Notes due 2008 (the "Old Notes"), of which $75,000,000 aggregate principal amount is outstanding. This will instruct you, the registered holder and/or book-entry transfer facility participant, as to the action to be taken by you relating to the exchange offer with respect to the Old Notes held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the prospectus and the letter of transmittal. The aggregate face amount of the Old Notes held by you for the account of the undersigned is (FILL IN AMOUNT): $ of Series A 10 3/8% Senior Subordinated Notes due 2008. With respect to the exchange offer, the undersigned hereby instructs you (check appropriate box): / / To TENDER ALL of the Old Notes held by you for the account of the undersigned. / / To TENDER the following Old Notes held by you for the account of the undersigned (INSERT PRINCIPAL AMOUNT OF OLD NOTES TO BE TENDERED, IF ANY): / / $ of Series A 10 3/8% Senior Subordinated Notes due 2008. / / NOT to TENDER any Old Notes held by you for the account of the undersigned. - If the undersigned instructs you to tender Old Notes held by you for the account of the undersigned, it is understood that you are authorized: - to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties and agreements contained in the letter of transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations, that: - the Exchange Notes acquired pursuant to the exchange offer are being acquired in the ordinary course of business of the undersigned; - the undersigned is not engaging in and does not intend to engage in a distribution of the Exchange Notes; - the undersigned does not have an arrangement or understanding with any person to participate in the distribution of such Exchange Notes; - the undersigned is not an "affiliate" of TransDigm or the guarantors within the meaning of Rule 405 under the Securities Act of 1933, as amended; 3 - if the undersigned is a resident of the State of California, if falls under the self-executing institutional investor exemption set forth under Section 25102(i) of the Corporate Securities Law of 1968 and Rules 260.102.10 and 260.105.14 of the California Blue Sky Regulations; - if the undersigned is a resident of the Commonwealth of Pennsylvania, it falls under the self-executing institutional investor exemption set forth under Sections 203(c), 102(d) and (k) of the Pennsylvania Securities Act of 1972, Section 102.111 of the Pennsylvania Blue Sky Regulations and an interpretive opinion dated November 16, 1985; - the undersigned acknowledges and agrees that any person who is a broker-dealer registered under the Securities Exchange Act of 1934, as amended, or is participating in the exchange offer for the purpose of disturbing the Exchange Notes, must comply with the registration and delivery requirements of the Securities Act in connection with a secondary resale transaction of the Exchange Notes or interests therein acquired by such person and cannot rely on the position of the staff of the Securities and Exchange Commission (the "SEC") set forth in certain no-action letters; - the undersigned and each beneficial owner understands that a secondary resale transaction described in the previous bullet point and any resales of Exchange Notes or interests therein obtained by such holder in exchange for Old Notes or interests therein originally acquired by such holder directly from TransDigm should be covered by an effective registration statement containing the selling security holder information required by Item 507 or Item 508, as applicable, of Regulation S-K or the SEC; - if the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. By acknowledging that it will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes, the undersigned is not deemed to admit that it is an "underwriter" within the meaning of the Securities Act; and - the undersigned is not acting on behalf of any person who could not truthfully make the foregoing representations; - to agree, on behalf of the undersigned, as set forth in the letter of transmittal; and - to take such other action as necessary under the prospectus or the letter of transmittal to effect the valid tender of Old Notes. a The undersigned acknowledges that if an executed copy of this letter of transmittal is returned, the entire principal amount of Old Notes held for the undersigned's account will be tendered unless otherwise specified above. The undersigned hereby represents and warrants that the undersigned (1) owns the notes tendered and is entitled to tender such notes, and (2) has full power and authority to tender, sell, exchange, assign and transfer the Old Notes and to acquire Exchange Notes issuable upon the exchange of such tendered notes, and that, when the same are accepted for exchange, TransDigm will acquire good, marketable and unencumbered title to the tendered notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim or right or restriction or proxy of any kind. 4 SIGN HERE Name of beneficial owner(s) (please print): __________________________________ Signature(s): ________________________________________________________________ Address: _____________________________________________________________________ Telephone Number. ____________________________________________________________ Taxpayer Identification Number or Social Security Number: ____________________ Date: ________________________________________________________________________ 5 EX-99.5 31 a2082596zex-99_5.txt EXHIBIT 99.5 PAYER'S NAME: STATE STREET BANK AND TRUST COMPANY. - ------------------------------------------------------------------------------------------------------------ SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND ------------------- FORM W-9 CERTIFY BY SIGNING AND DATING BELOW. Social Security Number(s) OR ------------------- Employer Identification Number(s) --------------------------------------------------------------------------------- DEPARTMENT OF THE PART 2-- PART 3-- TREASURY INTERNAL CERTIFICATION -- Under Penalties of Perjury, I certify Awaiting TIN REVENUE SERVICE that: / / (1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued for me), (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and (3) I am a U.S. person (including a U.S. resident alien). ------------------------------------------------------------------------------ PAYER'S REQUEST FOR CERTIFICATION INSTRUCTIONS -- You must cross out item (2) in Part 2 if you have TAXPAYER been notified by Taxpayer Identification the IRS that you are currently subject IDENTIFICATION NUMBER to backup withholding because of underreporting interest or Number ("TIN") and ("TIN") AND dividends on your tax return. Certifications CERTIFICATIONS Name Address (include zip code) SIGNATURE DATE - ------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO PROPERLY COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 30% OF ANY REPORTABLE PAYMENTS MADE TO YOU. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. NOTE: YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9. CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration office or (2) I intend to mail or deliver an application in the near future. I understand that until I provide a taxpayer identification number to the payer, 30% of all reportable payments made to me thereafter by the payer may be withheld and remitted to the IRS as backup withholding. SIGNATURE ________________________________ DATE _______________________________ GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER Social Security Numbers have nine digits separated by two hyphens: I.E., 000-00-0000. Employer Identification Numbers have nine digits separated by only one hyphen: I.E., 00-0000000. The table below will help determine the type of number to give the payer.
- -------------------------------------------------- GIVE THE FOR THIS TYPE OF SOCIAL SECURITY ACCOUNT: NUMBER OF-- - -------------------------------------------------- 1. Individual The individual 2. Two or more The actual owner of the individuals (joint account or, if combined account) funds, the first individual on the account (1) 3. Custodian account of The minor (2) a minor (Uniform Gift to Minors Act) 4. a. The usual The grantor-trustee (1) revocable savings trust (grantor is also trustee) b. So-called trust The actual owner (1) account that is not a legal or valid trust under state law 5. Sole proprietorship The owner (3) 6. Sole proprietorship The owner (3) 7. A valid trust, The legal entity (Do not estate, or pension furnish the identifying trust number of the personal representative or trustee unless the legal entity itself is not designated in the account title.) (4) - -------------------------------------------------- GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - -------------------------------------------------- 8. Corporate The corporation 9. Association, club, The organization religious, charitable, educational or other tax-exempt organization 10. Partnership The partnership 11. A broker or The broker or nominee registered nominee 12. Account with the The public entity Department of Agriculture in the name of a public entity (such as a state or local government, school district or prison) that receives agriculture program payments
- -------------------------------------------------------------------------------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Show the name of the owner. The name of the business or the "doing business as" name may also be entered. Either the social security number or the employer identification number may be used. (4) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you do not have a taxpayer identification number or if you do not know your number, obtain Form SS-5, Application for Social Security Number Card (for individuals), or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service (the "IRS") and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on all dividend and interest payments and on broker transactions include the following: - An organization exempt from a tax under Section 501(a), or an individual retirement plan or a custodial account under Section 403(b)(7) if the account satisfies the requirements of Section 401(f)(2). - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency or instrumentality thereof. Other payees that may be exempt from backup withholding include the following: - A corporation. - A financial institution. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under Section 584(a). - An entity registered at all times during the tax year under the Investment Company Act of 1940. - A foreign central bank of issue. - A futures commission merchant registered with the Commodity Futures Trading Commission. - A middleman known in the investment community as a nominee or custodian. - A trust exempt from tax under Section 664 or described in Section 4947. PAYMENTS EXEMPT FROM BACKUP WITHHOLDING Payments that are not subject to information reporting also are not subject to backup withholding. For details, see sections 6041, 6041A, 6042, 6045, 6049, 6050A, and 6050N, and the regulations thereunder. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under Section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Section 404(k) distributions made by an ESOP. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under Section 852). - Payments described in Section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under Section 1451. - Payments made by certain foreign organizations. - Mortgage or student loan interest paid by you. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER AND SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. PRIVACY ACT NOTICE. Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of tax returns. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 30% (in 2002) of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail to furnish your correct taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you make a false statement with no reasonable basis that results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. (4) MISUSE OF TAXPAYER IDENTIFICATION NUMBERS If the payer discloses or uses taxpayer identification numbers in violation of Federal law, the payer may be subject to civil and criminal penalties. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. -----END PRIVACY-ENHANCED MESSAGE-----