Securities Purchase Agreement by and among Transtechnology Corporation and Multiple Investors (August 29, 2000)
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This agreement is between Transtechnology Corporation and several institutional investors, including J.H. Whitney Mezzanine Fund, L.P., Albion Alliance Mezzanine Funds I & II, The Equitable Life Assurance Society, Fleet Corporate Finance, Inc., and Citizens Capital, Inc. It outlines the terms for the purchase and sale of securities, including representations, warranties, and obligations of both the company and the purchasers. The agreement also covers conditions for closing, indemnification, and ongoing covenants. The transaction is subject to certain approvals and compliance with applicable laws, with specific provisions for financial reporting and board representation.
EX-10.37 2 l83871aex10-37.txt EXHIBIT 10.37 1 Exhibit 10.37 - -------------------------------------------------------------------------------- SECURITIES PURCHASE AGREEMENT BY AND AMONG TRANSTECHNOLOGY CORPORATION, AND J. H. WHITNEY MEZZANINE FUND, L.P. ALBION ALLIANCE MEZZANINE FUND I, L.P. ALBION ALLIANCE MEZZANINE FUND II, L.P. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES FLEET CORPORATE FINANCE, INC. AND CITIZENS CAPITAL, INC. ---------------------------------- DATED AS OF AUGUST 29, 2000 ---------------------------------- - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
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iii 5 SECURITIES PURCHASE AGREEMENT AGREEMENT, dated as of August 29, 2000, by and among TRANSTECHNOLOGY CORPORATION (the "COMPANY"), a Delaware corporation, and J. H. WHITNEY MEZZANINE FUND, L.P. ("WMF"), a Delaware limited partnership, ALBION ALLIANCE MEZZANINE FUND I, L.P. ("ALBION I"), a Delaware limited partnership, ALBION ALLIANCE MEZZANINE FUND II, L.P. ("ALBION II"), a Delaware limited partnership, THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES ("EQUITABLE"), a New York corporation, FLEET CORPORATE FINANCE, INC. ("FLEET"), a Massachusetts corporation, and CITIZENS CAPITAL, INC. ("CITIZENS"; and together with WMF, Albion I, Albion II, Equitable and Fleet, the "PURCHASERS" and, individually, a "PURCHASER"), a Massachusetts corporation. W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Company wishes to sell to the Purchasers, and the Purchasers wish to purchase from the Company (i) subordinated promissory notes due August 29, 2005, in the aggregate principal amount of $75,000,000, and (ii) warrants to purchase an aggregate of 427,602 shares of common stock, $.01 par value per share, of the Company (the "COMMON STOCK"), in each case upon the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS ----------- 1.1 DEFINITIONS. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "ACQUISITION CLOSING DATE" shall mean the date of completion of any Approved Acquisition. "AFFILIATE" shall mean any Person (a) directly or indirectly controlling, controlled by, or under common control with, the Company, (b) directly or indirectly owning or holding five percent (5%) or more of any equity interest in the Company, or (c) five percent (5%) or more of whose voting stock or other equity interest is directly or indirectly owned or held by the Company. For purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by" and under "common control with") 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. 2 6 "AGREEMENT" shall mean this Agreement, including the exhibits and schedules attached hereto, as the same may be amended, supplemented or modified in accordance with the terms hereof. "ALBION/EQUITABLE NOTES" shall mean the Notes purchased pursuant to Sections 2.1(b), (c) and (d) hereof. "APPROVED ACQUISITION" shall mean any acquisition ("ACQUISITION") by the Company or any of its Subsidiaries of all of the shares or all or substantially all of the assets of a corporation or business, as the case may be, whose operations are substantially concentrated in the Business (such corporation or business, the "TARGET"), PROVIDED THAT either (i) the aggregate consideration, whether in cash, property or shares of capital stock of the Company or any of its Subsidiaries payable by the Company or any of its Subsidiaries (including the full amount of any contingent payment potentially payable by the Company or any of its Subsidiaries pursuant to any post-closing adjustment to the purchase price, earn-out, or otherwise) does not, when aggregated with the amount of Indebtedness being assumed by the Company or any of its Subsidiaries or remaining outstanding immediately after the closing date of such acquisition, exceed $10,000,000 on such closing date or, when combined with the aggregate consideration received and Indebtedness assumed or outstanding in respect of all Acquisitions consummated within the twelve months immediately preceding such closing date, does not exceed $25,000,000 or (ii) such acquisition is approved in writing prior to the closing date thereof by the Requisite Noteholders, and PROVIDED FURTHER that in each case, each of the following conditions, if applicable, are either fulfilled or are waived in writing by the Requisite Noteholders: (a) the acquisition of the Target is to be concluded pursuant to negotiated agreements with the Target or its owners or other controlling interests and approved by the Target's board of directors or other governing body, and not as a result of a hostile tender or otherwise without the Target's acquiescence; (b) upon completion of the proposed acquisition, the assets of the Target shall be subject to no lien, encumbrance, mortgage, pledge, charge, restriction or other security other than liens which would be Permitted Encumbrances hereunder and lessor's interests under the Capitalized Lease Obligations of the Target being assumed by the purchaser; (c) no Default or Event of Default shall have occurred and be continuing at the time of completion of the proposed acquisition, and no Default or Event of Default would result therefrom; (d) without limiting the requirement in clause (c) above, (i) upon completion of the proposed acquisition, the Company and its Subsidiaries (including the Target from and after the proposed date of completion of such acquisition) shall be in compliance with the financial covenants set forth in Section 9.8 immediately following acquisition of the Target, and (ii) in the event that the total consideration payable in connection with such acquisition exceeds $5,000,000, the Company shall have delivered to the Purchasers prior to the applicable Acquisition Closing Date PRO FORMA financial statements in form and substance satisfactory to the Requisite Noteholders evidencing such compliance, certified by the principal financial or accounting officer of the Company; 3 7 (e) upon completion of any proposed acquisition by purchase of the shares or other equity interests of the Target, the Target shall either be the Company or one of its Subsidiaries, with the Company or such Subsidiary as the surviving entity, or, if the Target continues in existence as a Subsidiary of the Company or one of its Subsidiaries, it shall do so in compliance with and subject to the conditions set forth herein; (f) the Target's operating income, determined in accordance with generally accepted accounting principles, for the twelve (12) months immediately preceding the proposed Acquisition Closing Date shall be greater than zero; and (g) the Purchasers shall have received reasonably detailed written notice of the proposed acquisition at least fifteen (15) Business Days' prior to the proposed Acquisition Closing Date. "ASSET DISPOSITION" shall mean the disposition, whether by sale, lease, transfer, loss, damage, destruction, condemnation or otherwise of any of the following: (a) any of the stock of or equity interests in the Company or any of its Subsidiaries or (b) any or all of the assets of the Company or any of its Subsidiaries other than sales of inventory in the ordinary course of business. "NET PROCEEDS" of any Asset Disposition means Cash proceeds received by the Company or any of its Subsidiaries from any Asset Disposition (including insurance proceeds, awards of condemnation, and payments under notes or other debt securities received in connection with any Asset Disposition), net of (x) the costs of such sale, lease, transfer or other disposition (including Taxes attributable to such sale, lease or transfer), and (y) amounts applied to repayment of Indebtedness secured by a Lien on the asset or property disposed. "BUSINESS" shall mean businesses engaged in by Company and its Subsidiaries at the Closing Date, and businesses reasonably related or incidental thereto. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law or executive order to close. "BY-LAWS" shall mean, unless the context in which such term is used otherwise requires, the By-laws of the Company or any of its Subsidiaries as in effect on the Closing Date. "CAPITAL ASSETS" shall mean fixed assets, both tangible (such as land, buildings, fixtures, machinery and equipment) and intangible (such as patents, copyrights, trademarks, franchises and good will); PROVIDED that Capital Assets shall not include any item customarily charged directly to expenses or depreciated over a useful life of twelve (12) months or less in accordance with GAAP. "CAPITAL EXPENDITURES" shall mean as to any Person, amounts paid or indebtedness incurred by such Person in connection with the purchase or lease by such Person of Capital Assets that would be required to be capitalized and shown on the balance sheet of such Person in accordance with GAAP. 4 8 "CAPITALIZED LEASE" shall mean any lease (unless otherwise stated, under which the Company or any of its Subsidiaries is the lessee or obligor), the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with generally accepted accounting principles. "CAPITAL LEASE OBLIGATIONS" of any Person shall mean the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP consistently applied and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP consistently applied. The determination of Capital Lease Obligations at the relevant time of determination with respect to the Company and its Subsidiaries shall be made on a consolidated basis in accordance with GAAP consistently applied. "CASH" shall mean the currency of the United States of America. "CASH EQUIVALENTS" shall mean: (i) marketable direct obligations issued 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 (1) year from the date of acquisition thereof; (ii) commercial paper maturing no more than one (1) year from the date issued and, at the time of acquisition, having a rating of at least A-1 from Standard & Poor's rating service or a least P-1 from Moody's Investors Service, Inc., (iii) certificates of deposit or bankers' acceptances maturing within one (1) year from the date of issuance thereof issued by, or overnight reverse repurchase agreements from, any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia having combined capital and surplus of not less than $500,000,000; (iv) time deposits maturing no more than thirty (30) days from the date of creation thereof with commercial banks having membership in the Federal Deposit Insurance Corporation in amounts not exceeding the lesser of $100,000 or the maximum amount of insurance applicable to the aggregate amount of the Company's and its Subsidiaries, deposits at such institution; and (v) deposits or investments in mutual or similar funds offered or sponsored by brokerage or other companies having membership in the Securities Investor Protection Corporation in amounts not exceeding the lesser of $100,000 or the maximum amount of insurance applicable to the aggregate amount of the Company's and its Subsidiaries, deposits at such institution. "CERCLA" has the meaning set forth in the definition of "Environmental Laws" below. "CERTIFICATE OF INCORPORATION" shall mean, unless the context in which it is used shall otherwise require, the Certificate of Incorporation of the Company or any of its Subsidiaries as in effect on the Closing Date. "CLOSING" shall have the meaning assigned to that term in Section 2.3. "CLOSING DATE" shall have the meaning assigned to that term in Section 2.3. 5 9 "CODE" shall mean the Internal Revenue Code of 1986, as amended, or any successor statute thereto. "COMMISSION" shall mean the Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Securities Act. "COMMON STOCK" shall have the meaning assigned to that term in the second Whereas clause hereof, or any other capital stock of the Company into which such stock is reclassified or reconstituted. "COMPLIANCE CERTIFICATE" shall have the meaning given in Section 8.1(c). "CONDITION OF THE COMPANY" shall mean the assets, business, properties, prospects operations, or financial condition of the Company and its Subsidiaries, taken as a whole. "CONSOLIDATED" or "CONSOLIDATED" shall mean with reference to any term defined herein, that term as applied to the accounts of the Company and its Subsidiaries, consolidated in accordance with GAAP. "CONSOLIDATED ADJUSTED EBITDA" shall mean with respect to any period, Consolidated EBITDA PLUS to the extent that during such period any Approved Acquisition shall have been completed, the Earnings Before Interest and Taxes, before provision for any depreciation or amortization, attributable to the operations of the applicable Target during the period prior to the applicable Acquisition Closing Date included in such period, but only to the extent evidenced by audited financial statements of the Target or as otherwise approved in writing by the Requisite Noteholders prior to such Acquisition Closing Date, PROVIDED that such Earnings before Interest and Taxes may include the amount of any cost savings directly attributable to such Approved Acquisition, to the extent that such savings are either (i) recognized by Regulation S-X under the Exchange Act, or (ii) approved in writing by the Requisite Noteholders prior to such Acquisition Closing Date, all as determined in accordance with GAAP. "CONSOLIDATED EBITDA" shall mean with respect to any period, Earnings Before Interest and Taxes for such period, before provision for any depreciation and amortization, as determined in accordance with GAAP. "CONSOLIDATED NET INCOME (OR DEFICIT)" shall mean the consolidated net income (or deficit) or the Company and its Subsidiaries, after deduction of all expenses, taxes and other proper charges, determined in accordance with GAAP. "CONSOLIDATED NET WORTH" shall mean the excess of Consolidated Total Assets over Consolidated Total Liabilities, LESS, to the extent otherwise includable in the computation of Consolidated Net Worth, any subscriptions receivable. "CONSOLIDATED TOTAL ASSETS" shall mean all assets of the Company and its Subsidiaries determined on a consolidated basis in accordance with GAAP. 6 10 "CONSOLIDATED TOTAL INTEREST EXPENSE" shall mean for any period, the aggregate amount of interest required to be paid by the Company and its Subsidiaries during such period on all Indebtedness of the Company and its Subsidiaries outstanding during all or any part of such period, whether such interest was or is required to be reflected as an item of expense or capitalized, including payments consisting of cash interest in respect of Subordinated Debt or Capitalized Leases and including commitment fees, agency fees, facility fees and similar fees or expenses in connection with the borrowing of money, but EXCLUDING all non-cash payments, including without limitation the payment-in-kind of interest on any Subordinated Debt of the Company or the non-cash amortization of fees paid with respect to the Senior Credit Agreement. "CONSOLIDATED TOTAL LIABILITIES" shall mean all liabilities of the Company and its Subsidiaries determined on a consolidated basis in accordance with GAAP and all Indebtedness of the Company and its Subsidiaries, whether or not so classified. "CONTINGENT OBLIGATION" as applied to any Person, shall mean any direct or indirect liability, contingent or otherwise, of that Person: (i) with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; or (iii) under any foreign exchange contract, currency swap agreement, interest rate swap agreement or other similar agreement or arrangement designed to alter the risks of that Person arising from fluctuations in currency values or interest rates. Contingent Obligations shall include (a) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (b) the obligation to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement, and (c) any liability of such Person for the obligations of another through any agreement to purchase, repurchase or otherwise acquire such obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed. "CONTRACTUAL OBLIGATIONS" shall mean as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument or arrangement (whether in writing or otherwise) to which such Person is a party or by which it or any of such Person's property is bound. "DEFINED BENEFIT PLAN" shall mean a defined benefit plan within the meaning of Section 3(35) of ERISA or Section 414(j) of the Code, whether funded or unfunded, qualified or non-qualified (whether or not subject to ERISA or the Code). 7 11 "EARNINGS BEFORE INTEREST AND TAXES" shall mean the consolidated earnings (or loss) from the operations of the Company and its Subsidiaries for any period, after all expenses and other proper charges but before payment or provision for any income taxes or interest expense for such period, determined in accordance with GAAP, after eliminating therefrom (a) all non-cash items of income (or loss), other than depreciation and amortization otherwise included in consolidated earnings (or loss), and (b) without duplication, all non-recurring items of income (or loss) resulting from the discontinuation of operations but only to the extent that all assets characterized as belonging to or being employed in such operations are also excluded from Consolidated Total Assets pursuant to the definition thereof. "ENVIRONMENTAL LAWS" shall mean any applicable past, present or future federal, state, territorial, provincial, foreign or local law, common law doctrine, rule, order, decree, judgment, injunction, license, permit or regulation relating to environmental matters, including those pertaining to land use, air, soil, surface water, ground water (including the protection, cleanup, removal, remediation or damage thereof), public or employee health or safety or any other environmental matter, together with any other laws (federal, state, territorial, provincial, foreign or local) relating to emissions, discharges, releases or threatened releases of any pollutant or contaminant including, without limitation, medical, chemical, biological, biohazardous or radioactive waste and materials, into ambient air, land, surface water, groundwater, personal property or structures, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, discharge or handling of any contaminant, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. 9601 ET SEQ.) ("CERCLA"), the Hazardous Material Transportation Act (49 U.S.C. 1801 ET SEQ.), the Resource Conservation and Recovery Act (42 U.S.C. 6901 ET SEQ.) ("RCRA"), the Federal Water Pollution Control Act (33 U.S.C. 1251 ET SEQ.), the Clean Air Act (42 U.S.C. 1251 ET SEQ.), the Toxic Substances Control Act (15 U.S.C. 2601 ET SEQ.), and the Occupational Safety and Health Act (29 U.S.C. 651 ET SEQ.), as such laws have been, or are, amended, modified or supplemented heretofore or from time to time hereafter and any analogous future federal, or present or future state or local laws, statutes and regulations promulgated thereunder. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended and the rules and regulations promulgated thereunder. "ERISA AFFILIATE" shall mean a corporation that is or was a member of a controlled group of corporations with the Company within the meaning of section 4001(a) or (b) of ERISA or section 414(b) of the Code, a trade or business (including a sole proprietorship, partnership, trust, estate or corporation) that is under common control with Company within the meaning of section 414(m) of the Code, or a trade or business which together with Company is treated as a single employer under section 414(o) of the Code. "EVENT OF DEFAULT" shall have the meaning assigned to that term in the Notes. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder. 8 12 "EXERCISABLE SHARES" shall have the meaning assigned to that term in Section 8.5 hereof. "FUNDED INDEBTEDNESS" shall mean at any time of determination, the aggregate principal amount of all funded Indebtedness for borrowed money whether classified as short term or long term (including, for the avoidance of doubt, all amounts outstanding under the Senior Credit Agreement and all Subordinated Debt of the Company and any of its Subsidiaries), PLUS all obligations, contingent and otherwise, to reimburse the issuer in respect of any letter of credit, performance bonds, bankers' acceptances, guarantees or other similar instruments, PLUS Capital Lease Obligations, of the Company and its Subsidiaries. "GAAP" shall mean generally accepted accounting principles in effect within the United States, consistently applied. "GOVERNMENTAL AUTHORITY" shall mean the government of any nation, state, city, locality or other political subdivision of any thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, regulation or compliance, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "HAZARDOUS MATERIALS" shall mean (i) any chemical pollutant, contaminant, pesticide, petroleum or petroleum product or byproduct radioactive substance, solid waste (hazardous or extremely hazardous), special, dangerous or toxic waste, hazardous or toxic substance, chemical or material regulated, listed, referred to, limited or prohibited under any Environmental Law, including without limitation: (i) friable or damaged asbestos, asbestos-containing material, polychlorinated biphenyls (PCBs), solvents and waste oil; (ii) any "hazardous substance" as defined under CERCLA or any environmental law, statute, regulation or rule; and (iii) any hazardous waste defined under RCRA or any Environmental Law. "INDEBTEDNESS" shall mean as to any Person (a) all obligations of such Person for borrowed money (including, without limitation, reimbursement and all other obligations with respect to surety bonds, unfunded credit commitments, letters of credit and bankers' acceptances, whether or not matured), (b) all indebtedness, obligations or liability of such Person (whether or not evidenced by notes, bonds, debentures or similar instruments) whether matured or unmatured, liquidated or unliquidated, direct or indirect, absolute or contingent, or joint or several, that should be classified as liabilities in accordance with GAAP consistently applied, including, without limitation, any items so classified on a balance sheet and any reimbursement obligations in respect of letters of credit or obligations in respect of bankers acceptances, (c) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable and accrued commercial or trade liabilities arising in the ordinary course of business, (d) all interest rate and currency swaps, caps, collars and similar agreements or hedging devices under which payments are obligated to be made by such Person, whether periodically or upon the happening of a contingency, other than such agreements or hedging device, required under the Senior Credit Agreement, as in effect on the date hereof, (e) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such 9 13 property), (f) all obligations of such Person under leases which have been or should be, in accordance with GAAP consistently applied, recorded as capital leases, (g) all indebtedness secured by any Lien (other than Liens in favor of lessors under leases other than leases included in clause (f) above) on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non-recourse to the credit of that Person, and (h) any Contingent Obligation of such Person. The determination of the amount of the Indebtedness at the relevant time of determination with respect to the Company and its Subsidiaries shall be made on a consolidated basis in accordance with GAAP consistently applied. "INTERCREDITOR AGREEMENT" shall mean the Subordinated Indebtedness Intercreditor Agreement, dated as of the date hereof, among the Company and the Purchasers. "INTEREST EXPENSE" shall mean, with respect to the Company and its Subsidiaries on a consolidated basis for any period, the sum of (a) gross interest expense of the Company and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP consistently applied, including (i) the amortization of debt discounts, (ii) the amortization of all fees payable in connection with the incurrence of Indebtedness to the extent included in interest expense, (iii) the portion of any payments or accruals with respect to Capital Lease Obligations allocable to interest expense and (iv) all commissions paid to factors during such period, and (b) any other capitalized interest of the Company and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP consistently applied. "INVESTMENT" shall mean (i) any direct or indirect purchase or other acquisition by the Company or any of its Subsidiaries of any beneficial interest in, including stock, partnership interest, membership interest or other equity securities of, any other Person (other than a Person that prior to the relevant purchase or acquisition was a Subsidiary Guarantor) or (ii) any direct or indirect loan, advance or capital contribution by the Company or any of its Subsidiaries to any other Person (other than a Subsidiary Guarantor), including all Indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales to that other Person in the ordinary course of business. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. "LIEN" shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or other), charge, claim, restriction or preference, priority, right or other security interest or preferential arrangement of any kind or nature whatsoever (excluding preferred stock and equity related preferences) including, without limitation, those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a Capital Lease Obligation, or any financing lease having substantially the same economic effect as any of the foregoing. "MULTIEMPLOYER PLAN" shall mean a multiemployer plan within the meaning of Section 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code. 10 14 "NOTES" shall mean the senior subordinated promissory notes in the aggregate principal amount of $75,000,000 referred to in the Whereas clause hereof, which notes are substantially in the form attached hereto as EXHIBIT A and shall include all payment-in-kind promissory notes issued by the Company as contemplated therein. "OUTSTANDING NOTES" shall mean Notes not held by the Company or any of its Affiliates. "OUTSTANDING BORROWINGS" shall mean all Indebtedness of the Company and its Subsidiaries for money borrowed that is outstanding at the relevant time of determination. "PERSON" shall mean any individual, firm, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. "PLANS" shall have the meaning assigned to that term in Section 5.22 of this Agreement. "PRO FORMA BALANCE SHEET" shall mean the pro forma consolidated balance sheet of the Company and its Subsidiaries delivered pursuant to Section 3.1. "PURCHASERS" shall have the meaning set forth in the preamble of this Agreement. "RCRA" has the meaning set forth in the definition of "Environmental Laws." "REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights Agreement substantially in the form attached hereto as EXHIBIT C. "REQUIREMENTS OF LAW" shall mean as to any Person, provisions of the Certificate of Incorporation and By-laws or other organizational or governing documents of such Person, or any law, treaty, code, rule, regulation, right, privilege, qualification, license or franchise or determination of an arbitrator or a court or other Governmental Authority, in each case applicable or binding upon such Person or any of such Person's property or to which such Person or any of such Person's property is subject or pertaining to any or all of the transactions contemplated or referred to herein. "REQUISITE NOTEHOLDERS" shall have the meaning assigned to such term in Section 11.4(c). "RESTRICTED PAYMENT" shall mean: (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock, limited liability company interest, or partnership interest of the Company or any of its Subsidiaries now or hereafter outstanding, except a dividend payable solely in shares of that class of stock, limited liability company interest, or partnership interest to the holders of that class; (ii) any redemption, conversion, exchange, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock, limited liability company interest or partnership interest of the Company or any of its Subsidiaries now or hereafter outstanding; (iii) 11 15 any payment or prepayment of interest on, principal of, premium, if any, redemption, conversion, exchange, purchase, retirement, defeasance, sinking fund or similar payment with respect to, any Indebtedness subordinated to the Indebtedness existing pursuant to the Note and this Agreement; (iv) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock, limited liability company interest, or partnership interest of the Company or any of its Subsidiaries now or hereafter outstanding; and (v) any payment under any noncompete agreement. "SEC REPORTS" with respect to any Person shall mean all forms, reports, statements and other documents (including exhibits, annexes, supplements and amendments to such documents) required to be filed by it, or sent or made available by it to its security holders, under the Exchange Act, the Securities Act, any national securities exchange or quotation system or comparable Governmental Authority since the date of such Person's initial public offering. "SECURITIES" shall mean, collectively, the Notes and the Warrants. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations thereunder as the same shall be in effect at the time. "SENIOR CREDIT AGREEMENT" shall mean the Second Amended and Restated Credit Agreement dated as of June 30, 1995, and amended and restated as of July 24, 1998 and further amended and restated as of August 31, 1999, among the Company, TransTechnology Seeger-Orbis GmbH, TransTechnology (GB) Limited, the Agent referred to herein, and the Lenders referred to therein. "SENIOR CREDIT DOCUMENTS" shall mean the Senior Credit Agreement and the other instruments and documents referred to therein or executed in connection therewith by the Company, any Guarantor or any other Subsidiary of the Company. "SENIOR FUNDED INDEBTEDNESS" shall mean at any time of determination, the aggregate principal amount of all Funded Indebtedness (other than Subordinated Debt). "SENIOR INDEBTEDNESS" shall mean all Indebtedness of the Company and its Subsidiaries which is currently outstanding or incurred in the future pursuant to the Senior Credit Agreement. "SOLVENT" shall mean, with respect to the Company and its Subsidiaries considered as a whole, based on the Pro Forma Balance Sheet, that (i) the assets and the property of the Company and its Subsidiaries, considered as a whole, exceed the aggregate liabilities (including contingent and unliquidated liabilities) of the Company and its Subsidiaries, considered as a whole, (ii) after giving effect to the transactions contemplated by this Agreement and the other Transaction Documents, the Company and its Subsidiaries, considered as a whole, will not be left with unreasonably small capital, and (iii) after giving effect to the transactions contemplated by this Agreement, the Company and its Subsidiaries, considered as a whole, are able to both service and pay their liabilities as they mature. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities will be computed as the amount 12 16 that, in light of all the facts and circumstances existing at such time, represents the amount that is likely to become an actual or matured liability. "SUBORDINATED DEBT" shall mean unsecured Indebtedness of the Company or any of its Subsidiaries in an amount, containing other terms and conditions, and expressly subordinated and made junior to the payment and performance in full of the obligations under the Senior Credit Agreement, including, without limitation, Indebtedness under the Notes. "SUBORDINATION AGREEMENT" shall mean the Intercreditor and Subordination Agreement, dated the date hereof, among the Company, the Purchasers and Fleet National Bank, as Administrative Agent. "SUBSIDIARY" shall mean, with respect to any Person, a corporation or other entity of which more than 50% of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company. "SUBSIDIARY GUARANTOR" shall have the meaning assigned to that term in Section 3.14. "SUBSIDIARY GUARANTY" shall have the meaning assigned to that term in Section 3.14. "TAX" shall mean any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Sec. 59A), customs duties, capital stock, franchise profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on-minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. "TAX RETURN" shall mean any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "TRANSACTION DOCUMENTS" shall mean collectively, this Agreement, the Notes, the Warrants, the Registration Rights Agreement, the Intercreditor Agreement, the Subordination Agreement, and the Subsidiary Guaranty. "WARRANTS" shall mean the warrants referred to in the Whereas clause hereof, which warrants are substantially in the form attached hereto as EXHIBIT B. "WHITNEY" shall mean Whitney & Co. "WHOLLY OWNED SUBSIDIARY" shall mean any Subsidiary, all of the capital stock or other voting equity interest of which is owned by the Company directly and/or through other Wholly Owned Subsidiaries. 13 17 "WHOLLY OWNED SUBSIDIARY GUARANTOR" shall mean any Subsidiary Guarantors, all of the capital stock or other voting equity interest of which is owned by the Company directly and/or through other Wholly Owned Subsidiary Guarantors. "WMF NOTE" shall mean the Note purchased pursuant to Section 2.1(a) hereof. "WMF PLEDGE" shall mean any pledge of the WMF Note, the WMF Warrant or the shares of stock issued upon exercise of the WMF Warrant pursuant to the terms of the partnership agreement or other agreement of WMF, pursuant to which WMF issued any bonds, promissory notes or other evidence or undebtedness. 1.2 ACCOUNTING TERMS: FINANCIAL STATEMENTS. All accounting terms used herein and not expressly defined in this Agreement shall have the respective meanings given to them in conformance with GAAP. Financial statements and other information furnished after the date hereof pursuant to the Agreement or the other Transaction Documents shall be prepared in accordance with GAAP as in effect at the time of such preparation, PROVIDED, HOWEVER, that no "Accounting Changes" (as defined below) shall be taken into account in determining compliance with the financial covenants, standards or terms in this Agreement. The Company shall prepare footnotes to each Compliance Certificate and the financial statements required to be delivered hereunder that show the differences between the basis for calculating financial covenant compliance (the calculation of financial covenant compliance shall not be based upon nor reflect such Accounting Changes) and the financial statements delivered (which shall reflect such Accounting Changes). "ACCOUNTING CHANGES" means: (a) changes in accounting principles required by GAAP and implemented by the Company; (b) changes in accounting principles recommended by the Company's certified public accountants and implemented by the Company; (c) changes in carrying value of the Company's or any of its Subsidiaries' assets, liabilities or equity accounts resulting from (i) the application of purchase accounting principles (A.P.B. 16 and/or 17 and EITF 88-16 and FASB 109) to the purchase and sale of the Securities or the other transactions described in the Transaction Documents, or (ii) as the result of any other adjustments that, in each case, were applicable to, but not included in, the Pro Forma Balance Sheet. All such adjustments resulting from expenditures made subsequent to the Closing Date (including, but not limited to, capitalization of costs and expenses or payment of pre-Closing Date liabilities) shall be treated as expenses in the period the expenditures are made; and (d) changes in the calculation of the estimated life of the assets of the Company's or of any of its Subsidiaries. 1.3 KNOWLEDGE OF THE COMPANY. All references to the knowledge of the Company or to facts known by the Company shall mean actual knowledge or notice of the Chairman, Chief Executive Officer, President, Chief Financial Officer, Treasurer or other executive officer of the Company, including, without limitation, Robert White, Robert Tunno, Gerald Harvey, and their respective successors, or knowledge which such Person could reasonably have acquired through the exercise of due inquiry. 14 18 ARTICLE 2 PURCHASE AND SALE OF THE SECURITIES ----------------------------------- 2.1 PURCHASE AND SALE OF THE NOTES. (a) Subject to the terms and conditions herein set forth, the Company agrees that they will issue and sell to WMF, and WMF agrees that it will acquire from the Company on the Closing Date, (i) a Note in the principal amount of $30,000,000, for a purchase price of $29,914,479.50, and (ii) a Warrant to purchase 171,041 shares of Common Stock, for a purchase price of $85,520.50. (b) Subject to the terms and conditions herein set forth, the Company agrees that they will issue and sell to Albion I, and Albion I agrees that it will acquire from the Company on the Closing Date, (i) a Note in the principal amount of $4,000,000, for a purchase price of $3,988,597.50, and (ii) a Warrant to purchase 22,805 shares of Common Stock, for a purchase price of $11,402.50. (c) Subject to the terms and conditions herein set forth, the Company agrees that they will issue and sell to Albion II, and Albion II agrees that it will acquire from the Company on the Closing Date, (i) a Note in the principal amount of $8,500,000, for a purchase price of $8,475,769.00, and (ii) a Warrant to purchase 48,462 shares of Common Stock, for a purchase price of $24,231.00. (d) Subject to the terms and conditions herein set forth, the Company agrees that they will issue and sell to Equitable, and Equitable agrees that it will acquire from the Company on the Closing Date, (i) a Note in the principal amount of $12,500,000, for a purchase price of $12,464,366.50, and (ii) a Warrant to purchase 71,267 shares of Common Stock, for a purchase price of $35,633.50. (e) Subject to the terms and conditions herein set forth, the Company agrees that they will issue and sell to Fleet, and Fleet agrees that it will acquire from the Company on the Closing Date, (i) a Note in the principal amount of $12,500,000, for a purchase price of $12,464,366.50, and (ii) a Warrant to purchase 71,267 shares of Common Stock, for a purchase price of $35,633.50. (f) Subject to the terms and conditions herein set forth, the Company agrees that they will issue and sell to Citizens, and Citizens agrees that it will acquire from the Company on the Closing Date, (i) a Note in the principal amount of $7,500,000, for a purchase price of $7,478,620, and (ii) a Warrant to purchase 42,760 shares of Common Stock, for a purchase price of $21,380.00. (g) The Notes shall be substantially in the form attached hereto as EXHIBIT A, appropriately completed in conformity herewith, and the Warrants shall be substantially in the form attached hereto as EXHIBIT B, appropriately completed in conformity herewith. 15 19 2.2 FEES AT CLOSING [INTENTIONALLY OMITTED]. 2.3 CLOSING. The purchase and issuance of the Securities shall take place at the closing (the "CLOSING") to be held at the offices of Morrison Cohen Singer & Weinstein, LLP, 750 Lexington Avenue, New York, New York 10022, at 10:00 a.m., Local Time, on August 29, 2000 (the "CLOSING DATE"). At the Closing, the Company shall deliver the Notes, and the Warrants to the Purchasers, in each case against delivery by the Purchasers of the purchase prices therefor. In each case, payment of such purchase prices shall be by wire transfer. 2.4 FINANCIAL ACCOUNTING POSITIONS; TAX REPORTING. Each of the parties hereto agrees to take reporting and other positions with respect to the Securities which are consistent with the purchase price of the Securities set forth herein for all financial accounting purposes, unless otherwise required by applicable GAAP or Commission rules (in which case the parties shall take positions as so required by applicable GAAP or Commission rules). Each of the parties to this Agreement agrees to take reporting and other positions with respect to the Securities which are consistent with the purchase price of the Securities set forth herein for all other purposes, including without limitation, for all federal, state and local tax purposes. ARTICLE 3 CONDITIONS TO THE RESPECTIVE OBLIGATIONS OF THE PURCHASERS TO PURCHASE THE SECURITIES ----------------------------- The obligation of the Purchasers to purchase the Notes and the Warrants, to pay the purchase prices therefor at the Closing and to perform any obligations hereunder shall be subject to the satisfaction as determined by, or waived by, the Purchasers of the following conditions on or before the Closing Date; PROVIDED, HOWEVER, that any waiver of a condition shall not be deemed a waiver of any breach of any representation, warranty, agreement, term or covenant or of any misrepresentation by the Company, except to the extent expressly so waived. No Purchasers shall be obligated to purchase any securities to be purchased by it pursuant to this Agreement unless the purchase and sale of all other securities occurs simultaneously. 3.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company contained in Article 5 hereof shall be true and correct at and as of the date hereof and the Closing Date as if made at and as of such date, and the Purchasers shall have received at the Closing a certificate to the foregoing effect, dated the Closing Date, and executed by the Chief Executive Officer, President or a Vice President of the Company. 3.2 COMPLIANCE WITH THIS AGREEMENT. The Company and each of its Subsidiaries shall have performed and complied with all of its agreements and conditions set forth or contemplated herein that are required to be performed or complied with by the Company or such subsidiary on or before the Closing Date, and the Purchasers shall have received at the Closing a certificate to the foregoing effect, dated the Closing Date, and executed by the Chief Executive Officer, President or a Vice President of the Company. 16 20 3.3 SECRETARY'S CERTIFICATES. The Purchasers shall have received certificates from the Company and each Subsidiary Guarantor, dated the Closing Date and signed by the Secretary or an Assistant Secretary of the Company or Subsidiary Guarantor, certifying (a) that the attached copies of the Certificate of Incorporation and By-laws of the Company or Subsidiary Guarantor, and resolutions of the Board of Directors of the Company or Subsidiary Guarantor approving the Transaction Documents to which it is a party and the transactions contemplated hereby and thereby are all true, complete and correct and remain unamended and in full force and effect, and (b) the incumbency and specimen signature of each officer of the Company or Subsidiary Guarantor executing any Transaction Document to which it is a party or any other document delivered in connection herewith and therewith on behalf of the Company or Subsidiary Guarantor. 3.4 DOCUMENTS. The Purchasers shall have received true, complete and correct copies of (i) the SEC Reports of the Company and (ii) such agreements, schedules, exhibits, certificates, documents, financial information and filings as they may request in connection with or relating to the transactions contemplated hereby, all in form and substance satisfactory to the Purchasers. 3.5 PURCHASE OF SECURITIES PERMITTED BY APPLICABLE LAWS. The acquisition of and payment for the Securities to be acquired by the Purchasers hereunder and the consummation of the transactions contemplated hereby and by the Transaction Documents (a) shall not be prohibited by any Requirement of Law, (b) shall not subject the Purchasers to any penalty under or pursuant to any Requirement of Law, and (c) shall be permitted by all Requirements of Law to which any Purchaser or the transactions contemplated by or referred to herein or in the Transaction Documents are subject; and the Purchasers shall have received such certificates or other evidence as they may reasonably request to establish compliance with this condition. 3.6 OPINION OF COUNSEL. The Purchasers shall have received an opinion of outside counsel to the Company and its Subsidiaries, dated as of the Closing Date, relating to the transactions contemplated by or referred to herein, in form and substance acceptable to the Purchasers. 3.7 APPROVAL OF COUNSEL TO THE PURCHASERS. All actions and proceedings hereunder and all agreements, schedules, exhibits, certificates, financial information, filings and other documents required to be delivered by the Company and each of its Subsidiaries hereunder or in connection with the consummation of the transactions contemplated hereby, and all other related matters, shall have been in form and substance acceptable to Morrison Cohen Singer & Weinstein, LLP, counsel to the Purchasers, in its reasonable judgment (including, without limitation, the opinion of counsel referred to in Section 3.6 hereof). 3.8 CONSENTS AND APPROVALS. All consents, exemptions, authorizations, or other actions by, or notices to, or filings with, Governmental Authorities and other Persons in respect of all Requirements of Law and with respect to those Contractual Obligations of the Company and each of its Subsidiaries necessary, desirable, or required in connection with the execution, delivery or performance (including, without limitation, the payment of interest on the Notes and the issuance of Common Stock upon the exercise of the Warrants) by the Company 17 21 and its Subsidiaries or the enforcement against the Company of the Transaction Documents to which it is a party shall have been obtained and be in full force and effect, and the Purchasers shall have been furnished with appropriate evidence thereof, and all waiting periods shall have lapsed without extension or the imposition of any conditions or restrictions. 3.9 REGISTRATION RIGHTS AGREEMENT. The Company shall have duly executed and delivered the Registration Rights Agreement. 3.10 NO MATERIAL JUDGMENT OR ORDER. There shall not be on the Closing Date any judgment or order of a court of competent jurisdiction or any ruling of any Governmental Authority or any condition imposed under any Requirement of Law which, in the reasonable judgment of the Purchasers, would prohibit the purchase of the Securities hereunder or subject the Purchasers to any penalty or other onerous condition under or pursuant to any Requirement of Law if the Securities were to be purchased hereunder. 3.11 PRO FORMA BALANCE SHEET. The Company shall have delivered to the Purchasers as of July 30, 2000 a pro forma consolidated balance sheet of the Company and its Subsidiaries, certified by the chief financial officer of the Company that it presents fairly the pro forma adjustments reflecting the consummation of the transactions contemplated by the Transaction Documents, including all material fees and expenses in connection therewith. 3.12 GOOD STANDING CERTIFICATES. The Company shall have delivered to the Purchasers good standing certificates for the Company and each of its Subsidiaries for each of their respective jurisdictions of incorporation and all other jurisdictions where they do business, dated as of no more than thirty (30) days before the Closing. 3.13 NO LITIGATION. No action, suit or proceeding before any court or any Governmental Authority shall have been commenced or threatened, no investigation by any Governmental Authority shall have been commenced and no action, suit or proceeding by any Governmental Authority shall have been threatened against any Purchaser, the Company or Subsidiary (i) seeking to restrain, prevent or change the transactions contemplated hereby or questioning the validity or legality of any of such transactions, or (ii) which would, if resolved adversely to such Purchaser, Company or Subsidiary, severally or in the aggregate, materially and adversely affect the Condition of the Company. 3.14 GUARANTIES. Purchasers shall have received a guaranty (a "SUBSIDIARY GUARANTY") duly executed and delivered by each Subsidiary of the Company organized under the laws of any state or the District of Columbia of the United States of America, Canada or Puerto Rico, as identified on SCHEDULE 5.17 (each, a "SUBSIDIARY GUARANTOR"). 3.15 BRIDGE FINANCING. Contemporaneously with the Closing, (i) the Bridge Notes and all other obligations under the Senior Subordinated Note Purchase Agreement dated as of August 31, 1999, among the Company and the Lenders and Holders referred to therein, and Fleet National Bank (formerly known as BankBoston, N.A.) as Administrative Agent, shall be satisfied in full and canceled (the "BRIDGE REPAYMENT"), (ii) all conditions for the release of all Warrants issued under the Warrant Agreement dated as of August 31, 1999, by and between the Company and State Street Bank and Trust Company to the Company for cancellation have been 18 22 met (the "RELEASE") and (iii) the Purchasers shall receive evidence, to their reasonable satisfaction, of the Bridge Repayment and the Release. 3.16 SUBORDINATION AGREEMENT. Purchaser shall have received the Subordination Agreement duly executed and delivered by Fleet National Bank, as Administrative Agent, and the Company. ARTICLE 4 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY TO ISSUE AND SELL THE SECURITIES ----------------------------------------------- The obligations of the Company to issue and sell the Securities and to perform its other obligations hereunder relating thereto shall be subject to the satisfaction as determined by, or waived by, the Company of the following conditions on or before the Closing Date: 4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Purchasers contained in Article 6 hereof shall be true and correct at and as of the date hereof and the Closing Date as if made at and as of such date. 4.2 COMPLIANCE WITH THIS AGREEMENT. The Purchasers shall have performed and complied with all of their respective agreements and conditions set forth or contemplated herein that are required to be performed or complied with by the Purchasers on or before the Closing Date. 4.3 SUBORDINATION AGREEMENT. The Company shall have received the Subordination Agreement duly executed and delivered by Fleet National Bank, as Administrative Agent, and the Purchasers. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY --------------------------------------------- The Company hereby represents and warrants to the Purchasers as follows: 5.1 CORPORATE EXISTENCE AND POWER. The Company and each of its Subsidiaries: (a) is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization; (b) has all requisite corporate or limited liability company power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently, or is currently proposed to be, engaged; (c) is, duly qualified as a foreign entity, licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify would not have a material adverse effect on the Condition of the Company; and (d) has the corporate or limited liability company power and authority to execute, deliver and perform its obligations under each Transaction Document to which it is or 19 23 will be a party and to borrow hereunder, SCHEDULE 5.1 contains a true, complete and correct list of the Company and each Subsidiary and each jurisdiction where its ownership, lease or operation of property or the conduct of its business would require it to be qualified to do business as a foreign entity. 5.2 CORPORATE AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and performance by the Company of this Agreement and each other Transaction Document to which such it is or will be a party and the consummation of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Securities: (a) have been duly authorized by all necessary corporate or limited liability company, and if required, stockholder or member action; (b) do not and will not contravene the terms of the Certificate of Incorporation, By-Laws or other organizational document of the Company or any Subsidiary, or any amendment thereof or any Requirement of Law applicable to such Person or such Person's assets, business or properties; (c) do not and will not (i) conflict with, contravene, result in any violation or breach of or default under (with or without the giving of notice or the lapse of time or both), (ii) create in any other Person a right or claim of termination or amendment, or (iii) require modification, acceleration or cancellation of any Contractual Obligation of the Company or any of its Subsidiaries; and (d) do not and will not result in the creation of any Lien (or obligation to create a Lien) against any property, asset or business of the Company or any of its Subsidiaries. 5.3 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS. Except as set forth on SCHEDULE 5.3, no approval, consent, compliance, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Requirement of Law or Contractual Obligation, and no lapse of a waiting period under a Requirement of Law or Contractual Obligation, is necessary or required in connection with the execution, delivery or performance by (including, without limitation, the payment of interest on the Notes and the issuance of shares of capital stock upon the exercise of the Warrants), or enforcement against, the Company or any of its Subsidiaries of the Transaction Documents to which it is a party or the consummation of the transactions contemplated hereby or thereby. 5.4 BINDING EFFECT. This Agreement has been, and each of the Transaction Documents to which the Company and each of its Subsidiaries will be a party to will be, duly executed and delivered by the Company or such Subsidiary, and this Agreement constitutes, and such Transaction Documents will constitute, the legal, valid and binding obligation of the Company or such Subsidiary enforceable against the Company or such Subsidiary in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity relating to enforceability. 5.5 NO LEGAL BAR. Neither the Company nor any of its Subsidiaries has previously entered into any agreement which is currently in effect or to which the Company or any of its Subsidiaries is currently bound, granting any rights to any Person which are inconsistent with the rights to be granted by the Company in the Transaction Documents. 20 24 5.6 COMPLIANCE WITH LAWS. The Company and each of its Subsidiaries are in compliance with all Requirements of Law, except when the failure to so comply would not, either singly or in the aggregate, materially adversely affect the Condition of the Company. 5.7 NO DEFAULT OR BREACH. No event has occurred and is continuing or would result from the incurring of obligations by the Company and its Subsidiaries under the Transaction Documents which constitutes or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Neither the Company nor any of its Subsidiaries is in default under or with respect to any Contractual Obligation in any material respect. 5.8 TITLE TO PROPERTIES. (a) The Company and/or its Subsidiaries have good, indefeasible and marketable title in and to all real property and good title to all other properties reflected on the Pro Forma Balance Sheet or used in connection with their respective businesses, in each case, free and clear of all Liens, liabilities and rights except as provided on SCHEDULE 5.8. (b) The Company and/or its Subsidiaries hold all of the right, title and interest of the tenant under the leases reflected on the Pro Forma Balance Sheet or used in connection with their respective businesses free and clear of all Liens, liabilities and rights except as provided on SCHEDULE 5.8. 5.9 USE OF REAL PROPERTY. Except as set forth on SCHEDULE 5.9, the owned and leased real properties reflected on the Pro Forma Balance Sheet or used in connection with the respective businesses of the Company and its Subsidiaries, are used and operated in compliance and conformity with all Contractual Obligations and Requirements of Law, except to the extent that the failure so to comply would not, in the aggregate, materially adversely affect the Condition of the Company; neither the Company nor any of its Subsidiaries has received notice of violation of any applicable zoning or building regulation, ordinance or other law, order, regulation or other Requirements of Law relating to the operations of either the Company or any of its Subsidiaries; and there is no such violation which, individually or in the aggregate, will have a material adverse effect on the Condition of the Company. Except as set forth on SCHEDULE 5.9, all structures, improvements and other buildings that are owned or covered by leases reflected on the Pro Forma Balance Sheet or used in connection with the business of the Company and its Subsidiaries, are in material compliance with all applicable ordinances, codes, regulations and other Requirements of Law, have, where required a valid and subsisting certificate of occupancy for their present use, and neither the Company nor any Subsidiary thereof has received any written notice from any Governmental Authority which is still outstanding of any failure to obtain any certificate, permit, license or approval with respect to the real property, or any intended revocation, modification or cancellation of same, and no law or regulation presently in effect or condition precludes or materially restricts continuation of the present use of such properties. Each lease relating to leased real property reflected on the Pro Forma Balance Sheet or used in connection with the business of the Company or any of its Subsidiaries is in full force and effect and the Company enjoys peaceful and undisturbed possession thereunder. The Company has not received a notice of default and, to the knowledge of the Company, there is no default on the part of the Company or any of its Subsidiaries or event or condition which (with notice or lapse of time, or both) would constitute a default on the 21 25 part of the Company or any of its Subsidiaries under any such lease. There are no service contracts, maintenance contracts, union contracts, concession agreements, licenses, agency agreements or any other Contractual Obligations affecting the real property or the leased property reflected on the Pro Forma Balance Sheet or used in connection with the business of the Company and its Subsidiaries, or the operation thereof, other than those listed on SCHEDULE 5.9, except for Contractual Obligations which are cancelable on no more than thirty (30) days' notice. There are no pending or, to the knowledge of the Company, threatened condemnation or eminent domain proceedings that would affect any part of the real property or the leased property reflected on the Pro Forma Balance Sheet or used in connection with the business of the Company and its Subsidiaries. There are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against the real property or the leased property on the Pro Forma Balance Sheet or used in connection with the business of the Company and its Subsidiaries, at law or in equity, before any federal, state, municipal or governmental department, commission, board, bureau, agency or instrumentality which would in any way affect title to such real property or the leased property. 5.10 TAXES (a) Each of the Company and its Subsidiaries has filed all Tax Returns that it was required to file. All such Tax Returns were correct and complete in all material respects. Other than taxes due and owing in an immaterial amount, all Taxes owed by the Company or any of its Subsidiaries (whether or not shown on any Tax Return) have been paid or will be paid in the ordinary course of business. Except as set forth in SCHEDULE 5.10, neither the Company nor any of its Subsidiaries currently is the beneficiary of any extension of time within which to file any Tax Return. Except as set forth on SCHEDULE 5.10, since March 31, 1997 no claim has been made by a Governmental Authority in a jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns that the Company or any of its Subsidiaries is or may be subject to taxation by that jurisdiction. There are no Liens on any of the assets of the Company or any of its Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax. (b) Except as set forth on SCHEDULE 5.10, each of the Company and its Subsidiaries has withheld and paid, or will pay in the ordinary course of business, all Taxes that are material in amount required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractors, creditor, stockholder, or other third party. (c) Except as set forth on SCHEDULE 5.10, neither the Company nor any of its Subsidiaries expects any Governmental Authority to assess any additional Taxes that are material in amount for any period for which Tax Returns have been filed. There is no dispute or claim concerning any Tax liability of the Company or any of its Subsidiaries either (i) claimed or raised by any Governmental Authority in writing or (ii) as to which the Company has knowledge based upon personal contact with any agent of such authority. (d) Except as set forth on SCHEDULE 5.10, neither the Company nor any of its Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. 22 26 (e) Neither the Company nor any of its Subsidiaries has any liability for the Taxes of any person or entity other than the Company and its Subsidiaries (i) under Reg. Section 1.1502-6 (or any similar provision of state, local or foreign law), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise. 5.11 SEC REPORTS; FINANCIAL CONDITION. (a) The Company has filed all SEC Reports and has made available to the Purchasers each SEC Report. The SEC Reports of the Company, including, without limitation, any financial statements or schedules included or incorporated therein by reference, (i) comply in all material respects with the requirements of the Exchange Act or the Securities Act or both, as the case may be, applicable to those SEC Reports and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated or necessary in order to make the statements made in those SEC Reports, in light of the circumstances under which they were made, not misleading. No Subsidiary of the Company is subject to the periodic reporting requirements of the Exchange Act or is otherwise required to file any documents with the Commission or any national securities exchange or quotation service or comparable Governmental Authority. (b) Each of the consolidated balance sheets of the Company and its Subsidiaries and the related consolidated statements of income, stockholders' equity and cash flow, together with the notes thereto, which are included in or incorporated by reference into the SEC Reports of the Company fairly present, in all material respects, the financial position of the Company and each of its Subsidiaries as of the respective dates thereof, and the results of operations and cash flows of the Company and each of its Subsidiaries as of the respective dates or for the respective periods set forth therein, all in conformity with GAAP consistently applied during the periods involved, except as otherwise set forth in the notes thereto and subject, in the case of unaudited quarterly financial statements, to normal year-end audit adjustments. As of the dates of the financial statements which are included in or incorporated by reference into the SEC Reports, the Company had no obligation, indebtedness or liability (whether accrued, absolute, contingent or otherwise, known or unknown, and whether due or to become due), which was not reflected or reserved against in the balance sheets or the notes thereto which are part of the financial statements, except for those incurred in the ordinary course of business and which are fully reflected on the Company's books of account and which, individually or in the aggregate, would not materially and adversely affect the Condition of the Company. (c) The Pro Forma Balance Sheet delivered to the Purchasers sets forth the assets and liabilities of the Company and each of its Subsidiaries on a pro forma consolidated basis after taking into account the consummation of the transactions contemplated in this Agreement as of July 30, 2000. The Pro Forma Balance Sheet has been prepared by the Company in accordance with GAAP, consistently applied, and fairly presents in all material respects the assets and liabilities of the Company and its Subsidiaries on a consolidated basis, reflecting the consummation of the transactions contemplated in this Agreement and based on the assumptions set forth therein as of the Closing Date. 23 27 (d) The projections of the Company and its Subsidiaries on a consolidated basis heretofore delivered to the Purchasers (i) were prepared by the Company in the ordinary course of its operations consistent with past practice, (ii) are the most current projections prepared by the Company relating to the periods covered thereby, and (iii) are based on assumptions which were reasonable when made and such assumptions and projections are reasonable on the date hereof except for the changes in the principal amount of the Notes. Neither the Company nor any of its Subsidiaries has delivered to any Person any later dated projections. 5.12 ERISA -- PROHIBITED TRANSACTIONS. The execution and delivery of the Transaction Documents, the purchase and sale of the Securities hereunder and the consummation of the transactions contemplated hereby and thereby will not result in any prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. 5.13 DISCLOSURE. (a) AGREEMENT AND OTHER DOCUMENTS. This Agreement, together with all exhibits and schedules hereto, and the agreements, certificates and other documents furnished to the Purchasers by the Company and its Subsidiaries at the Closing, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which they were made, not misleading. (b) MATERIAL ADVERSE EFFECTS. There is no fact known to the Company, which the Company has not disclosed to the Purchasers in writing which materially adversely affects or, insofar as the Company can reasonably foresee, could materially adversely affect, the Condition of the Company or the ability of the Company or any of its Subsidiaries to perform its obligations under the Transaction Documents, or any agreement or other document contemplated thereby to which it is a party. 5.14 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 2000, except as set forth on SCHEDULE 5.14, neither the Company nor any of its Subsidiaries has (i) issued any stock, bonds or other corporate securities, (ii) borrowed any amount or incurred any liabilities (absolute or contingent), other than in the ordinary course of business, in excess of $200,000, (iii) discharged or satisfied any Lien or incurred or paid any obligation or liability (absolute or contingent), other than in the ordinary course of business, in excess of $200,000, (iv) declared or made any payment or distribution to stockholders or purchased or redeemed any shares of its capital stock or other securities, except for the payment of regular quarterly common stock dividends, (v) mortgaged, pledged or subjected to Lien any of its assets, tangible or intangible, (vi) sold, assigned or transferred any of its tangible assets other than in the ordinary course of business, or canceled any debts or claims, (vii) sold, assigned or transferred any patents, trademarks, trade names, copyrights, trade secrets or other intangible assets, (viii) suffered any material losses of property, or waived any rights of substantial value, (ix) suffered any material adverse change in the Condition of the Company, (x) expended any material amount, granted any extraordinary bonuses or salary increases, (xi) entered into any transaction involving consideration in excess of $200,000 other than purchase orders consistent with the Company's business practices in the ordinary course of business, except as otherwise contemplated hereby or 24 28 (xii) entered into any agreement or transaction, or amended or terminated any agreement, with an Affiliate. To the knowledge of the Company, no material adverse change in the Condition of the Company is threatened or reasonably likely to occur. 5.15 ENVIRONMENTAL MATTERS. Except as described on SCHEDULE 5.15: (a) The property, assets and operations of the Company and its Subsidiaries are and have been in compliance, in all material respects, with all applicable Environmental Laws; there are no Hazardous Materials stored or otherwise located in, on or under any of the property or assets of the Company or its Subsidiaries, including, without limitation, the groundwater, except in compliance with applicable Environmental Laws; and there have been no releases or threatened releases of Hazardous Materials in, on or under any property adjoining any of the property or assets of the Company or its Subsidiaries which have not been remediated to the satisfaction of the appropriate Governmental Authorities and in compliance with Environmental Laws as currently in effect. (b) None of the property, assets or operations of the Company or its Subsidiaries is the subject of any federal, state or local investigation evaluating whether (i) any remedial action is needed to respond to a release or threatened release of any Hazardous Materials into the environment or (ii) any release or threatened release of any Hazardous Materials into the environment is in contravention of any Environmental Law. (c) Neither the Company nor any of its Subsidiaries has received any notice or claim, nor are there pending, nor, to the Knowledge of the Company, threatened, lawsuits or proceedings against any of them, with respect to violations of an Environmental Law or in connection with the presence of or exposure to any Hazardous Materials in the environment or any release or threatened release of any Hazardous Materials into the environment, and neither the Company nor its Subsidiaries is or was the owner or operator of any property which (i) pursuant to any Environmental Law has been placed on any list of Hazardous Materials disposal sites, including, without limitation, the "National Priorities List" or "CERCLIS List," (ii) has, or had, any subsurface storage tanks located thereon, or (iii) has ever been used as or for a waste disposal facility, a mine, a gasoline service station or, other than for petroleum substances stored in the ordinary course of business, a petroleum products storage facility. (d) Neither the Company nor any of its Subsidiaries has any present or contingent liability in connection with the presence either on or off the property or assets of the Company or its Subsidiaries of any Hazardous Materials in the environment or any release or threatened release of any Hazardous Materials into the environment. 5.16 INVESTMENT COMPANY/GOVERNMENT REGULATIONS. The Company is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Neither the Company nor its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, as amended, the Federal Power Act, the Interstate Commerce Act, or any federal or state statute or regulation limiting its ability to incur Indebtedness. 5.17 SUBSIDIARIES. 25 29 (a) SCHEDULE 5.17 sets forth a complete and accurate list of all of the Subsidiaries of the Company together with their respective jurisdictions of incorporation or organization. All of the outstanding shares of capital stock of, or other equity interests in, the Subsidiaries are validly issued, fully paid and nonassessable. Except as set forth on SCHEDULE 5.17, as of the Closing Date, all of the outstanding shares of capital stock of, or other ownership interests in, each of the Subsidiaries are owned by the Company or by a Wholly Owned Subsidiary, free and clear of any Liens. No Subsidiary has outstanding options, warrants, subscriptions, calls, rights, convertible securities or other agreements or commitments obligating the Subsidiary to issue, transfer or sell any securities of the Subsidiary. (b) Except for the Subsidiaries of the Company, the Company does not own of record or beneficially, directly or indirectly, (i) any shares of outstanding capital stock or securities convertible into capital stock of any other corporation, and (ii) any equity, voting or participating interest in any limited liability company, partnership, joint venture or other non-corporate business enterprises. 5.18 CAPITALIZATION. (a) As of the Closing Date, the authorized capital stock of the Company consists of 14,700,000 shares of Common Stock, of which 6,150,884 shares are issued and outstanding, and 300,000 shares of Preferred Stock, of which no shares are issued and outstanding. The Company has 546,628 shares of capital stock held in treasury. As of the Closing Date, after giving effect to the transactions contemplated by the Transaction Documents, there will be (i) 6,150,884 shares of Common Stock issued and outstanding, (ii) no shares of Preferred Stock issued and outstanding, (iii) a maximum of 427,602 shares of Common Stock reserved by appropriate corporate action for issuance upon exercise of the Warrants, (iv) a maximum of 800,000 shares of Common Stock reserved by appropriate corporate action for issuance upon the exercise of stock options issuable in accordance with the terms of the Company's amended and Restated 1992 Long-Term Incentive Plan (the "1992 PLAN OPTIONS"), (v) a maximum of 150,000 shares of Common Stock reserved by appropriate corporate action for issuance upon the exercise of the stock options issuable in accordance with the terms of the Company's 1998 Non-Employee Directors Stock Option Plan (the "1998 PLAN OPTIONS"), (vi) a maximum of 300,000 shares of Common Stock reserved by appropriate corporate action for issuance upon the exercise of the stock options issuable in accordance with the terms of the Company's 1999 Long-Term Incentive Plan (the "1999 PLAN OPTIONS"). All outstanding shares of capital stock of the Company are, and the shares of Common Stock issuable upon exercise of the Warrants, the 1992 Options, the 1998 Options and the 1999 Options when issued will be, duly authorized, validly issued, fully paid and nonassessable and shall be free and clear of all Liens and the issuance of foregoing has not been or will not be, as the case may be, subject to preemptive rights in favor of any Person and will not result in the issuance of any additional shares of capital stock of the Company or the triggering of any anti-dilution or similar rights contained in any options, warrants, debentures or other securities or agreements of the Company. SCHEDULE 5.18 provides an accurate list as of the Closing Date, after giving effect to the transactions contemplated hereby and the other Transaction Documents of all of the holders of warrants, options, rights and securities convertible into capital stock, together with the number of shares of capital stock to be issued upon the exercise or conversion of such warrants, options, rights and convertible securities. 26 30 (b) Except as set forth in SCHEDULE 5.18, on the Closing Date, except for the Warrants, the 1992 Plan Options, the 1998 Plan Options and the 1999 Plan Options, there will be no outstanding securities convertible into or exchangeable for capital stock of the Company or any of its Subsidiaries or options, warrants or other rights to purchase or subscribe to capital stock of the Company or any of its Subsidiaries or contracts, commitments, agreements, understandings or arrangements of any kind to which the Company or any of its Subsidiaries is a party relating to the issuance of any capital stock of the Company or any of its Subsidiaries, any such convertible or exchangeable securities or any such options, warrants or rights. 5.19 PRIVATE OFFERING. No form of general solicitation or general advertising was used by the Company or any of its Subsidiaries, or their respective representatives in connection with the offer or sale of the Securities. No registration of the Securities or Common Stock issuable upon the exercise of the Warrants pursuant to the provisions of the Securities Act or the state securities or "blue sky" laws will be required for the offer, sale or issuance of the Securities pursuant to this Agreement or of the Common Stock issuable upon the exercise of the Warrants. The Company agrees that neither it, nor anyone acting on its behalf, will offer or sell the Securities or any other security so as to requires the registration of the Securities or Common Stock issuable upon the exercise of the Warrants pursuant to the provisions of the Securities Act or any state securities or "blue sky" laws, unless such Securities or Common Stock issuable upon the exercise of the Warrants are so registered. 5.20 BROKER'S, FINDER'S OR SIMILAR FEES. Except as provided in Section 2.4 or as set forth on SCHEDULE 5.20 there are no brokerage commissions, finder's fees or similar fees or commissions payable in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with the Company or any of its Subsidiaries, or any action taken by any such Person. 5.21 LABOR RELATIONS. SCHEDULE 5.21 lists all collective bargaining agreements to which the Company or any of its Subsidiaries is a party. Except as set forth in SCHEDULE 5.21, there is (a) no unfair labor practice complaint pending or, to the Company's knowledge, threatened against the Company or any of its Subsidiaries before the National Labor Relations Board and no grievance or arbitration proceeding arising out of or under collective bargaining agreements is so pending or threatened, (b) no strike, labor dispute, slowdown or stoppage pending or threatened against the Company or any of its Subsidiaries, (c) no union representation question existing with respect to the employees of the Company or any of its Subsidiaries and no union organizing activities are taking place, and (d) no employment contract with any employee or independent contractor of the Company or any Subsidiary. The Company and each Subsidiary is in compliance in all material respects with all federal, state or other applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours. 5.22 EMPLOYEE BENEFIT PLANS. (a) EMPLOYEE BENEFIT PLANS AND LIABILITIES. Neither the Company nor any ERISA Affiliate has contributed to nor has any actual or contingent, direct or indirect, liability in respect of any employee benefit plan (as defined in Section 3(3) of ERISA) or other employee 27 31 benefit arrangement (collectively, the "PLANS"), within the five-consecutive- year period immediately preceding the first day of the year in which the Closing Date occurs other than those liabilities with respect to such Plans specifically described on SCHEDULE 5.22(a). SCHEDULE 5.22(a) sets forth all Plans. At no time, except as set forth in SCHEDULE 5.22(a) during such five year period has the Company or any ERISA Affiliate participated in or contributed to any Multiemployer Plan, nor during such period has the Company or any ERISA Affiliate had an obligation to participate in or contribute to any such Multiemployer Plan. No agreement subject to section 4204 of ERISA has been entered into in connection with the transactions contemplated in this Agreement. There are no outstanding liabilities of the Company or any ERISA Affiliate to any employee benefit plans previously, but no longer, maintained by the Company or any ERISA Affiliate, and the Company is not aware of any potential liabilities in connection therewith. There are no actions, suits or claims, other than for benefits in the ordinary course, pending or, to the knowledge of the Company, threatened against the Company, an ERISA Affiliate or the Plans which might subject the Company or any ERISA Affiliate to any material liability. The Company has made available to the Purchasers accurate and complete copies of all of the Plans. (b) PLAN COMPLIANCE. The Company and each of its Subsidiaries is in compliance in all material respects with all reporting, disclosure and registration requirements applicable to it under the Code, ERISA and all federal and state securities laws, and Department of Labor, Internal Revenue Service and Commission rules and regulations promulgated thereunder, with respect to all of the Plans, and is not subject to any liability, whether asserted or not, for any penalties to any Governmental Authority for late filing of any return, report or other governmental filing. No civil or criminal action brought pursuant to the provisions of Title I, Subtitle B, Part 5 of ERISA or any other federal or state law is pending or, to the Knowledge of the Company, threatened against any fiduciary of the Plans. No Plan, or any fiduciary thereof, to the Knowledge of the Company, has been, or is currently, the direct or indirect subject of an audit, investigation or examination by any Governmental Authority. All of the Plans comply currently, and have complied at all times (and all former Plans have complied at all times in the past), both as to form and operation, in all material respects, with their terms and with all Requirements of Law. Except as set forth on Schedule 5.22(b), each of the Plans maintained by the Company or any Subsidiary that is an "employee benefit pension plan" (within the meaning of Section 3(2)(A) of ERISA) has obtained a favorable determination (covering all changes or amendments applicable under Requirements of Law) from the Internal Revenue Service as to its qualification under Sections 401(a) and 501(a) of the Code or is within the remedial amendment period (as provided in Section 401(b) of the Code) for making any required changes or amendments, and nothing has occurred before or after the date of each such determination letter as would adversely affect such qualification. All amounts that are currently owing to Plan participants (including, without limitation, former Plan participants), or contributions required to be made to the Plans have been timely paid or contributed with respect to all periods prior to the Closing Date or provided for by adequate reserves on the Pro Forma Balance Sheet. (c) PROHIBITED TRANSACTIONS. Except as set forth on SCHEDULE 5.22(c), no Plan, nor any related trust, nor the Company, nor any Subsidiary thereof, nor any trustee, administrator or other "party in interest" or "disqualified person" (within the meaning of Section 3(14) of ERISA or Section 4975(e)(2) of the Code, respectively) with respect to the Plans, has engaged in any nonexempt "prohibited transaction" (within the meaning of Section 406 of 28 32 ERISA or Section 4975(c) of the Code, respectively) with respect to the participation of Company or any of its Subsidiaries therein, which could subject any of the Plans or related trusts, or any trustee, administrator or other fiduciary of any such Plan, or the Company, any Subsidiary of the Company or the Purchasers, or any other party dealing with the Plans, to the penalties or excise tax imposed on prohibited transactions by Section 502 of ERISA or Section 4975 of the Code which could have a material adverse effect on the Condition of the Company. (d) COBRA. Except as set forth in SCHEDULE 5.22(d), the Company and each of its Subsidiaries has complied in all material respects with the continuation coverage requirements of group health plans provided in Section 4980B of the Code, Sections 601 et seq. of ERISA, the Family and Medical Leave Act of 1994, and the regulations promulgated thereunder, and (ii) there are no individual claims by any employee of the Company or any Subsidiary for any illness or accident which is expected to exceed $75,000 in health related costs (net of insurance reimbursement) to the Company or any Subsidiary within the twelve (12)-month period following the Closing Date. (e) MISCELLANEOUS. Except as set forth on SCHEDULE 5.22(e) neither the Company, its Subsidiaries, nor any Plan provides for or promises retiree medical, disability or life insurance benefits to any current or former employee, officer or director of the Company or any of its Subsidiaries, other than continuation coverage required by section 4980B of the Code. Except as set forth on SCHEDULE 5.22(e) neither the Company nor any of its Subsidiaries is a party to or obligated under any agreement, plan, contract or other arrangements that will result, separately or in the aggregate, in the payment of any "excess parachute payment" within the meaning of section 280G of the Code. 5.23 PATENTS, TRADEMARKS, ETC. The Company and its Subsidiaries own or are licensed or otherwise have the right to use all patents, trademarks, service marks, trade names, copyrights, licenses, franchises and other rights, including, without limitation, with respect to all software developed, owned or licensed by the Company (collectively, the "RIGHTS"), being used to conduct their businesses as now operated. SCHEDULE 5.23 sets forth a complete list of licenses or other or other Contractual Obligations relating to the Company's and its Subsidiaries' Rights and of registrations of patents, trademarks, service marks and copyrights including any applications therefor constituting such Rights. To the Company's knowledge, no Right or product, process, method, substance or other material presently sold by or employed by the Company or any of its Subsidiaries, or which the Company or any of its Subsidiaries contemplates selling or employing, infringes upon the Rights that are owned by others. No litigation is pending and no claim has been made against the Company or any of its Subsidiaries or, to the knowledge of the Company, is threatened, contesting the right of the Company or any of its Subsidiaries to sell or use any Right or product, process, method, substance or other material presently sold by or employed by the Company or any of its Subsidiaries. Except as set forth on SCHEDULE 5.23, neither the Company nor any of its Subsidiaries has asserted any claim of infringement, misappropriation or misuse by any Person of any Rights owned by the Company or any of its Subsidiaries or to which any of them have exclusive use. Except as set forth on SCHEDULE 5.23, no employee, officer or consultant of the Company or any of its Subsidiaries has any proprietary, financial or other interest in any Rights owned or used by the Company or its Subsidiaries in their businesses. Except as set forth on SCHEDULE 5.23, neither the Company nor any of its Subsidiaries has any obligation to compensate any Person for the use of any Rights and 29 33 neither the Company nor any of its Subsidiaries has granted any license or other right to use any of the Rights of the Company or it Subsidiaries, whether requiring the payment of royalties or not. The Company and its Subsidiaries have taken all reasonable measures to protect and preserve the security, confidentiality and value of their Rights, including trade secrets and other confidential information, including, without limitation, all algorithms, methods, technology or know-how incorporated or embedded in, or underlying, software licensed by the Company to third parties. All trade secrets and other confidential information of the Company and its Subsidiaries are presently valued and protectible and are not part of the public domain or knowledge, nor have they been used, divulged or appropriated for the benefit of any Person other than the Company or its Subsidiaries or otherwise to the detriment of the Company or its Subsidiaries. To the Knowledge of the Company, no trade secret or other confidential information of the Company or any of its Subsidiaries has been used, divulged or appropriated to the detriment of the Company or its Subsidiaries. The Company has taken reasonable measures to ensure that, and, to the Knowledge of the Company, no employee or consultant of the Company or its Subsidiaries has used any trade secrets or other confidential information of any other Person in the course of his work for the Company or its Subsidiaries. No patent, invention, device, principle or any statute, law, rule, regulation, standard or code is pending or proposed which would restrict the Company's or any Subsidiary's ability to use any of the Rights. 5.24 POTENTIAL CONFLICTS OF INTEREST. Except as set forth on SCHEDULE 5.24, no stockholder or other security holder of the Company or any of its Subsidiaries holding 5% of the issued and outstanding shares of the Company or such Subsidiary, as the case may be, or any officer or director of the Company or any of its Subsidiaries: (a) owns, directly or indirectly, any interest in (excepting less than 5% stock holdings for investment purposes in securities of publicly held and traded companies), or is an officer, director, employee or consultant of, any Person that is, or is engaged in business as, a competitor, lessor, lessee, supplier, distributor, sales agent or customer of, or lender to or borrower from, the Company or any of its Subsidiaries; (b) owns, directly or indirectly, in whole or in part, any tangible or intangible property that the Company or any of its Subsidiaries uses in the conduct of business; or (c) has any cause of action or other claim whatsoever against, or owes or has advanced any amount to, the Company or any of its Subsidiaries, except for claims in the ordinary course of business such as for accrued vacation pay, accrued benefits under employee benefit plans, and similar matters and agreements existing on the date hereof. 5.25 TRADE RELATIONS. There exists no actual or, to the knowledge of the Company, threatened termination, cancellation or limitation of, or any adverse modification or change in, the business relationship of the Company, its Subsidiaries or their business with any customer or any group of customers whose purchases are individually or in the aggregate material to the business of the Company or any such Subsidiary, or with any material supplier, and there exists no present condition or state of facts or circumstances that would materially adversely affect the Condition of the Company or prevent the Company or its Subsidiaries from conducting their business after the consummation of the transactions contemplated by this Agreement, in substantially the same manner in which such business has heretofore been conducted. 5.26 OUTSTANDING BORROWINGS. SCHEDULE 5.26 lists (i) the amount of all Outstanding Borrowings of the Company and its Subsidiaries (other than Indebtedness under this 30 34 Agreement) as of the Closing, (ii) the Liens that relate to such Outstanding Borrowings and that encumber the assets of the Company and its Subsidiaries, (iii) the name of each lender thereof, and (iv) the amount of any unfunded commitments available to the Company or any Subsidiary in connection with any Outstanding Borrowings. 5.27 MATERIAL CONTRACTS. Neither the Company nor any Subsidiary is a party to any Contractual Obligation, or is subject to any charge, corporate restriction, judgment, injunction, decree, or Requirement of Law, materially adversely affecting the Condition of the Company. The Exhibit Index to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000 lists all contracts, agreements, commitments and other Contractual Obligations of the Company and its Subsidiaries as of the Closing Date, whether written or oral, other than (a) the Transaction Documents, (b) purchase orders in the ordinary course of business, and (c) any other contracts, agreements, commitments and other Contractual Obligations of the Company or any Subsidiary that do not extend beyond one year and involve the receipt or payment of not more than $5,000,000 (each, a "Material Contract"). Each of the contracts, agreements, commitments and other Contractual Obligations of the Company and its Subsidiaries required to be set forth on such Exhibit Index is in full force and effect. The Company has satisfied in full or provided for all of its liabilities and obligations under each Material Contract requiring performance prior to the date hereof in all material respects, and is not in default under any of them, nor, to the knowledge of the Company, does any condition exist that with notice or lapse of time or both would constitute such a default. To the knowledge of the Company, no other party to any such Material Contract is in default thereunder, nor does any condition exist that with notice or lapse of time or both would constitute such a default. Except for the consent required under the Senior Credit Agreement, which consent has been obtained, no approval or consent of any Person is needed for all of the Material Contracts to continue to be in full force and effect, and all of the Company's rights under such Material Contracts will be conveyed to the Purchasers, upon consummation of the transactions contemplated by this Agreement. 5.28 INSURANCE. SCHEDULE 5.28 accurately summarizes all of the insurance policies or programs of the Company and each Subsidiary in effect as of the date hereof, and indicates the insurer's name, policy number, expiration date, amount of coverage, type of coverage, annual premiums, exclusions and deductibles, and also indicates any self-insurance program that is in effect. All such policies are in full force and effect, are underwritten by financially sound and reputable insurers, are sufficient for all applicable Requirements of Law and otherwise are in compliance with the criteria set forth in Section 8.8 hereof. All such policies will remain in full force and effect and will not in any way be affected by, or terminate or lapse by reason of any of the transactions contemplated hereby. 5.29 SOLVENCY. The Company and its Subsidiaries, taken as a whole, are Solvent. 5.30 OTHER DOCUMENTS. The Company has delivered to the Purchasers true, complete and correct copies of all agreements, schedules, exhibits, certificates, financial information, filings and other documents relating to the Company and its Subsidiaries, and all amendments and modifications thereto which have been requested by the Purchasers. Such documents comprise a full and complete copy of all agreements and understandings between the 31 35 parties thereto with respect to the subject matter thereof and all transactions related thereto, and there are no material agreements or understandings, oral or written, or side agreements not contained therein that relate to or modify the substance thereof. Each of such documents to which either the Company or any of its Subsidiaries is a party has been duly authorized by all necessary corporate action on the part of the Company or such Subsidiary party thereto, was validly executed and delivered by such Person, and is the legal, valid and binding obligation of such Person and such Person's successors, enforceable in accordance with its terms. Each of such documents is in full force and effect, and none of their provisions have been waived by any party thereto. 5.31 OPERATING COMPANY. The Company is "an entity that is primarily engaged, directly or though a majority owned subsidiary or subsidiaries, in the production or sale of a product or service other than the investment of capital" within the meaning of the U.S. Department of Labor plan asset regulations, 29 C.F.R. Section 2510.3-101. ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS ---------------------------- Each Purchaser, severally but not jointly, hereby represents and warrants as to itself as follows: 6.1 CORPORATE EXISTENCE AND POWER. Each Purchaser is a corporation or partnership duly organized, validly existing, and if such Purchaser is a corporation, in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate or partnership power and authority to execute, deliver and perform its obligations under each Transaction Document to which it is or will be a party. 6.2 AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and performance by it of this Agreement and each other Transaction Document to which it is a party and the consummation of the Transactions contemplated hereby and thereby: (a) is within its power and authority and has been duly authorized by all necessary action; (b) does not and will not contravene the terms of its organizational documents or any amendment thereof or Requirement of Law applicable to such Purchaser; and (c) does not and will not violate, conflict with or result in any breach or contravention of any of its Contractual Obligations, or any order or decree directly relating to it. 6.3 BINDING EFFECT. This Agreement, and each of the Transaction Documents to which it is a party has been duly executed and delivered by it and this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. 32 36 6.4 NO LEGAL BAR. The execution, delivery and performance of this Agreement and each of the Transaction Documents to which it is a party by it will not violate any Requirement of Law applicable to it. 6.5 PURCHASE FOR OWN ACCOUNT. The Securities to be acquired by it pursuant to this Agreement are being or will be acquired for its own account and with no intention of distributing or reselling such securities or any part thereof in any transaction that would be in violation of the securities laws of the United States of America, or any state, without prejudice, however, to its right at all times to sell or otherwise dispose of all or any part of the Notes or the Warrants, under an effective registration statement under the Securities Act, or under an exemption from such registration available under the Securities Act, and subject, nevertheless, to the disposition of its property being at all times within its control. If the Purchaser should in the future decide to dispose of any of the Securities, the Purchaser understands and agrees that it may do so only in compliance with the Securities Act and applicable state securities laws, as then in effect. It agrees to the imprinting of a legend on certificates representing all of the Securities to the following effect: "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS." 6.6 LITIGATION. Except as set forth on SCHEDULE 6.6, there are no legal actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Purchasers, threatened, at law, in equity, in arbitration or before any Governmental Authority against or affecting the Purchasers or any of its Subsidiaries (or, as applicable, to the Purchasers' knowledge, any of their respective shareholders, directors, officers, employees or agents). No injunction, writ, temporary restraining order, decree or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of the Transaction Documents. 6.7 ERISA. At least one of the following statements is an accurate representation and warranty as to each source of funds ("SOURCE") to be used by the Purchasers to pay the purchase price for the Securities to be purchased by it: (a) the Source is a general account of an insurance company, and the amount of the reserves and liabilities for the general account contract(s) held by or on behalf of any Benefit Plan (as defined by the annual statement for life insurance companies approved by the National Association of Insurance Commissioners (the "NAIC ANNUAL STATEMENT")) together with the amount of the reserves and liabilities for the general account contract(s) held by or on behalf of any other Benefit Plans maintained by the same employer (or affiliate thereof as defined in Department of Labor Prohibited Transaction Exemption ("PTE") 95-60) or by the same employee organization (as defined by the NAIC Annual Statement) in the general account do not exceed 10% of the total reserves and liabilities of the general account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with the state of domicile of the insurance company (for purposes of the percentage limitation in this clause (a), the amount of reserves and liabilities for the general account contract(s) held by or on 33 37 behalf of a plan shall be determined before reduction for credits on account of any reinsurance ceded on a coinsurance basis); or (b) the Source is a separate account that is maintained solely in connection with such Purchaser's fixed contractual obligations under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate account or to any participant or beneficiary of such plan (including any annuitant), are not affected in any manner by the investment performance of the separate account; or (c) the Source is either (i) an insurance company pooled separate account, within the meaning of Prohibited Transaction Exemption ("PTE") 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as the Purchaser has disclosed to the Company in writing pursuant to this paragraph (ii), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (d) the Source constitutes assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (I) the identity of such QPAM and (II) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this paragraph (c); or (e) the Source is a governmental plan; or (f) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this paragraph (e); or (g) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA or Section 408 of the Code. As used in this Section 6.7, the terms "employee benefit plan," "governmental plan," "party in interest" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA and "QPAM Exemption" shall mean PTE 84-14. 6.8 BROKER'S, FINDER'S OR SIMILAR FEES. Except as set forth in Section 2.4 hereof, there are no brokerage commissions, finder's fees or similar fees or commissions payable 34 38 in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with it or any action taken by it. 6.9 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENT. No approval, consent, compliance, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Requirement of Law or contractual obligation, and no lapse of a waiting period under a Requirement of Law or contractual obligation, is necessary or required in connection with the execution, delivery or performance by it or enforcement against it of this Agreement, the Transaction Documents, or the transactions contemplated hereby. 6.10 The Purchasers hereby agree to provide the Company with a schedule of all trading activity in the Common Stock of the Company for the thirty (30) days prior to the Closing Date as soon as reasonably practicable following the Closing Date. ARTICLE 7 INDEMNIFICATION --------------- 7.1 INDEMNIFICATION. In addition to all other sums due hereunder or provided for in this Agreement, the Company agrees to indemnify and hold harmless the Purchasers and their respective Affiliates and each of their respective officers, directors, agents, employees, Subsidiaries, partners, members, attorneys, accountants and controlling persons (each, an "INDEMNIFIED PARTY") to the fullest extent permitted by law from and against any and all losses, claims, damages, expenses (including, without limitation, reasonable fees, disbursements and other charges of counsel and costs of investigation incurred by an Indemnified Party in any action or proceeding between the Company (or any of its Subsidiaries) and such Indemnified Party (or Indemnified Parties) or between an Indemnified Party (or Indemnified Parties) and any third party or otherwise) or other liabilities, losses, or diminution in value (collectively, "LIABILITIES") resulting from or arising out of any breach of any representation or warranty, covenant or agreement of the Company in this Agreement, the Registration Rights Agreement, the Note, the Warrant, or the other Transaction Documents, including without limitation, the failure to make payment when due of amounts owing pursuant to this Agreement, the Note, or the other Transaction Documents, on the due date thereof (whether at the scheduled maturity, by acceleration or otherwise) or any legal, administrative or other actions (including, without limitation, actions brought by any of the Purchasers, the Company, any of its Subsidiaries or any holders of equity or indebtedness of the Company or any of its Subsidiaries or derivative actions brought by any Person claiming through or in the Company's or any Subsidiary's name), proceedings or investigations (whether formal or informal), or written threats thereof, based upon, relating to or arising out of the Transaction Documents, the transactions contemplated thereby, or any Indemnified Party's role therein or in the transactions contemplated thereby; PROVIDED, HOWEVER, that the Company shall not be liable under this Section 7.01 to an Indemnified Party: (a) for any amount paid by the Indemnified Party in settlement of claims by the Indemnified Party without the Company's consent (which consent shall not be unreasonably withheld), (b) to the extent that it is finally judicially determined that such Liabilities resulted primarily from the willful misconduct or gross negligence of such Indemnified Party or (c) to the 35 39 extent that it is finally judicially determined that such Liabilities resulted primarily from the breach by such Indemnified Party of any representation, warranty, covenant or other agreement of such Indemnified Party contained in this Agreement; PROVIDED, FURTHER, that if and to the extent that such indemnification is unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of such Liabilities which shall be permissible under applicable laws. In connection with the obligation of the Company to indemnify for expenses as set forth above, the Company further agrees, upon presentation of appropriate invoices containing reasonable detail, to reimburse each Indemnified Party for all such expenses (including, without limitation, fees, disbursements and other charges of counsel and costs of investigation incurred by an Indemnified Party in any action or proceeding between the Company (or any of its Subsidiaries) and such Indemnified Party (or Indemnified Parties) or between an Indemnified Party (or Indemnified Parties) and any third party or otherwise) as they are incurred by such Indemnified Party; PROVIDED, HOWEVER, that if an Indemnified Party is reimbursed hereunder for any expenses, such reimbursement of expenses shall be refunded to the extent it is finally judicially determined that the Liabilities in question resulted primarily from (i) the willful misconduct or gross negligence of such Indemnified Party or (ii) the breach by such Indemnified Party of any representation, warranty, covenant or other agreement of such Indemnified Party contained in this Agreement or any other Transaction Document. 7.2 PROCEDURE; NOTIFICATION. Each Indemnified Party under this Article 7 will, promptly after the receipt of notice of the commencement of any action, investigation, claim or other proceeding against such Indemnified Party in respect of which indemnity may be sought from the Company under this Article 7, notify the Company in writing of the commencement thereof. The omission of any Indemnified Party so to notify the Company of any such action shall not relieve the Company from any liability which it may have to such Indemnified Party unless, and only to the extent that, such omission results in the Company's forfeiture of substantive rights or defenses. In case any such action, claim or other proceeding shall be brought against any Indemnified Party and it shall notify the Company of the commencement thereof, the Company shall be entitled to assume the defense thereof at its own expense, with counsel satisfactory to such Indemnified Party in its reasonable judgment; PROVIDED, HOWEVER, that any Indemnified Party may, at its own expense, retain separate counsel to participate in such defense. Notwithstanding the foregoing, in any action, claim or proceeding in which the Company, on the one hand, and an Indemnified Party, on the other hand, is, or is reasonably likely to become, a party, such Indemnified Party shall have the right to employ separate counsel at the Company's expense and to control its own defense of such action, claim or proceeding if, in the reasonable opinion of counsel to such Indemnified Party, a conflict or potential conflict exists between the Company, on the one hand, and such Indemnified Party, on the other hand, that would make such separate representation advisable; PROVIDED, HOWEVER, that in no event shall the Company be required to pay fees and expenses under this Article 7 for more than one firm of attorneys in any jurisdiction in any one legal action or group of related legal actions. The Company agrees that it will not, without the prior written consent of the Purchasers, settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated hereby (if any Indemnified Party is a party thereto or has been actually threatened to be made a party thereto) unless such settlement, compromise or consent includes an unconditional release of the Purchasers and each other Indemnified Party from all liability arising or that may arise out of such claim, action or 36 40 proceeding. The Company shall not be liable for any settlement of any claim, action or proceeding effected against an Indemnified Party without its written consent, which consent shall not be unreasonably withheld. The rights accorded to Indemnified Parties hereunder shall be in addition to any rights that any Indemnified Party may have at common law, by separate agreement or otherwise. 7.3 REGISTRATION RIGHTS AGREEMENT. Notwithstanding anything to the contrary in this Article 7, the indemnification and contribution provisions of the Registration Rights Agreement shall govern any claim made with respect to registration statements filed pursuant thereto or sales made thereunder. ARTICLE 8 AFFIRMATIVE COVENANTS --------------------- Until the payment by the Company of all principal of and interest on the Note and all other amounts due to Purchasers under this Agreement and the other Transaction Documents, including, without limitation, all fees, expenses and amounts due in respect of indemnity obligations under Article 7, the Company hereby covenants and agrees with the Purchasers as follows: 8.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company shall maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP (it being understood that monthly financial statements are not required to have footnote disclosures). The Company shall deliver to the Purchasers each of the financial statements and other reports described below: (a) MONTHLY AND QUARTERLY FINANCIAL INFORMATION. As soon as available and in any event within twenty-five (25) days after the end of each month (including months that are also the last month of a fiscal quarter). The Company shall deliver the monthly financial report prepared for internal management review, substantially in the form of the report for July, 2000 delivered to Purchasers. As soon as available and in any event within forty-five (45) days after the end of each fiscal quarter (ninety (90) days with respect to fiscal quarters that are also the last fiscal quarter of the fiscal year), the Company shall deliver (i) the consolidated and consolidating balance sheets of the Company and its Subsidiaries, as at the end of such quarter and the related consolidated and consolidating statements of income and consolidated cash flow for such quarter and for the period from the beginning of the then current fiscal year of the Company to the end of such quarter and (ii) a schedule of the outstanding Indebtedness for borrowed money of the Company and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan. (b) YEAR-END FINANCIAL INFORMATION. As soon as available and in any event within ninety (90) days after the end of the fiscal year of the Company, the Company shall deliver (i) the consolidated and consolidating balance sheets of the Company and its Subsidiaries 37 41 as at the end of such year and the related consolidated and consolidating statements of income and stockholders' equity and consolidated cash flow for such fiscal year, (ii) a schedule of the outstanding Indebtedness for borrowed money of the Company and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan, and (iii) a report with respect to the financial statements from Deloitte & Touche, LLP or another "Big Five" firm of certified public accountants selected by the Company and reasonably acceptable to the Purchasers, which report shall be issued pursuant to an audit conducted by such firm of certified public accountants in conformity with GAAP. Such report shall contain an "Unqualified" opinion (as such term is defined in AU Section 508.10 of the American Institute of Certified Public Accountants Professional Standards. (c) COMPANY'S COMPLIANCE CERTIFICATE. Together with each delivery of financial statements of the Company and its Subsidiaries pursuant to Sections 8.1(a) (with respect to quarterly financial statements only) and 8.1(b) above, the Company shall deliver or cause to be delivered a fully and properly completed compliance certificate (in substantially the form attached hereto as EXHIBIT D (or in such other form or substance as shall be satisfactory to Purchaser) and referred to as a "COMPLIANCE CERTIFICATE") signed by the chief executive officer or chief financial officer of the Company together with a report of the Company's firm of certified public accountants (with respect to 8.1(b) only) that it is not aware of any condition or event that constitutes a default or Event of Default under any of the Transaction Documents. (d) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, the Company shall deliver copies of all significant reports submitted by the Company's firm of certified public accountants in connection with each annual, interim or special audit or review of any type of the financial statements or related internal control systems of the Company and its Subsidiaries made by such accountants, including any comment letter submitted by such accountants to management in connection with their services. (e) MANAGEMENT REPORTS. Together with each delivery of financial statements of the Company and its Subsidiaries pursuant to subsections 8.1(a) and 8.1(b), the Company will deliver a management report (i) describing the operations and financial condition of the Company and its Subsidiaries for the period then ended and the portion of the current fiscal year then elapsed (or for the fiscal year then ended in the case of year-end financials), (ii) setting forth in comparative form the corresponding figures for the corresponding periods of the previous fiscal year and the corresponding figures from the most recent projections for the current fiscal year delivered pursuant to subsection 8.1(f) and (iii) discussing the reasons for any significant variations. The information above shall be presented in reasonable detail and shall be certified by the chief financial officer of the Company to the effect that such information fairly presents the results of operations and financial condition of the Company and its Subsidiaries as at the dates and for the periods indicated. Notwithstanding the foregoing, in the case of month-end financials that are not also quarter-end financials, no such management report shall be required except to the extent otherwise prepared by the Company. (f) PROJECTIONS. The Company shall continue to prepare a Tactical Plan Summary for each fiscal year (or other document substantially the same as the Tactical Plan Summary for the Fiscal Year 2001, dated April 12, 2000), and such Tactical Plan Summary shall 38 42 be provided to the Purchasers no later than forty-five (45) days after the beginning of the fiscal year to which such document relates. (g) SEC FILINGS AND PRESS RELEASES. Promptly upon their becoming available, the Company shall deliver copies of (i) all SEC Reports of the Company and each Subsidiary, (ii) all financial statements, reports, notices and proxy statements sent or made available by the Company or any of its Subsidiaries to their security holders, (iii) all regular and periodic reports and all registration statements and prospectuses, if any, filed by the Company or any of its Subsidiaries with any securities exchange or with the Commission or any governmental or private regulatory authority, and (iv) all press releases and other statements made available by the Company or any of its Subsidiaries to the public concerning material developments in the business the Company or any of its Subsidiaries. (h) EVENTS OF DEFAULT, ETC. Promptly upon the Company obtaining knowledge of any of the following events or conditions, the Company shall deliver copies of all notices given or received by the Company or any of its Subsidiaries with respect to any such event or condition and a certificate of the Company's Chief Executive Officer specifying the nature and period of existence of such event or condition and what action the Company has taken, is taking and proposes to take with respect thereto: (i) any condition or event that constitutes a breach of any provision of this Agreement or any other Transaction Document; (ii) any notice that any Person has given to the Company or any Subsidiary, or any other action, taken with respect to a claimed default in any agreement evidencing Indebtedness or any other material agreement to which the Company or any Subsidiary is a party; or (iii) any event or condition that could reasonably be expected to result in any material adverse effect on the Condition of the Company. (i) LITIGATION. Promptly upon any officer of the Company obtaining knowledge of (i) the institution of any action, suit, proceeding, governmental investigation or arbitration against or affecting the Company or any of its Subsidiaries or any property of the Company or any of its Subsidiaries not previously disclosed by the Company to the Purchasers or (ii) any material development in any action, suit, proceeding, governmental investigation or arbitration at any time pending against or affecting the Company or any of its Subsidiaries or any property of the Company or any of its Subsidiaries, which, in each case, the Company reasonably determines that such matter may, if adversely determined, have a material adverse effect on the Condition of the Company, the Company will promptly give notice and a description thereof to the Purchasers and provide such other information as any Purchasers or its counsel may reasonably request, PROVIDED, HOWEVER, that the Company shall not be required to provide such description or other information if in the reasonable opinion of the Company's counsel, such action would violate the attorney-client or work product privileges existing with respect to such matter. (j) SUBSIDIARIES. Not less than fifteen (15) days prior to creating a Subsidiary or acquiring the stock of, or other equity interests in, a Person, such that such Person will become a Subsidiary, the Company shall notify the Purchasers of the Company's or any of its Subsidiary's intention to create such Subsidiary or acquire such stock or equity interests, and following such notice such Subsidiary will not be created or acquired until the Company has 39 43 caused each Subsidiary to execute a joinder to this Agreement, and the other Transaction Documents in form and substance reasonably satisfactory to the Purchasers. (k) SUPPLEMENTED SCHEDULES; NOTICE OF CORPORATE CHANGES. Annually, concurrently with the delivery of the projections required by subsection 8.1(f), the Company shall supplement in writing and deliver to the Purchasers revisions of the Schedules annexed to this Agreement as if the representations and warranties in this agreement were made as of such date to the extent necessary to disclose new or changed facts or circumstances after the Closing Date which could have a material adverse effect upon the Condition of the Company, to the extent not otherwise disclosed to Purchasers pursuant to the provisions of this Agreement; PROVIDED that subsequent disclosures shall not constitute a cure or waiver of any Event of Default resulting from the matters disclosed. The Company shall provide prompt written notice to the Purchasers of any material change after the Closing Date in the authorized and issued capital stock or other equity interests of the Company or any of its Subsidiaries or any other material amendment to their charter, by-laws or other organizational documents, such notice, in each case, to identify the applicable jurisdictions, capital structures or amendments as applicable. (l) NO DEFAULTS. The Company shall deliver to the Purchasers concurrently with the delivery of the financial statements referred to in Section 8.1(b), a certificate of the Company's Chief Financial Officer stating that to his or her knowledge no Event of Default shall have occurred during the period covered thereby, except as specified in such certificate. (m) OTHER INFORMATION. With reasonable promptness, the Company shall deliver such other information and data with respect to the Company or any of its Subsidiaries as from time to time may be reasonably required by the Purchasers. (n) PUBLICLY AVAILABLE INFORMATION. Notwithstanding anything to the contrary contained in subsection 8.1(a), 8.1(b), and 8.1(e), at such time, and for so long as (and only for so long as), the Company is subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, the annual and quarterly information and reports and the management reports required to be delivered by the Company pursuant to subsections 8.1(a), 8.1(b) and 8.1(e) hereof shall not be required to be provided by the Company to the Purchasers, provided that the Company shall promptly provide to the Purchasers all information and reports required to be delivered by the Company under the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, as in effect on the date hereof. 8.2 PRESERVATION OF CORPORATE EXISTENCE. The Company shall, and shall cause each of its Subsidiaries to: (a) preserve and maintain in full force and effect its corporate (or, as applicable, limited liability partnership or other entity) existence; (b) conduct its business in accordance with sound business practices, keep its properties in good working order and condition (normal wear and tear excepted), and from time to time make all needed repairs to, renewals of or replacements of its properties (except to 40 44 the extent that any of such properties are obsolete or are being replaced) so that the efficiency of its business operations shall be fully maintained and preserved; and (c) file or cause to be filed in a timely manner all reports, applications, estimates and licenses that shall be required by each Governmental Authority. 8.3 PAYMENT OF OBLIGATIONS. The Company shall, and shall cause each of its Subsidiaries to, pay and discharge as the same shall become due and payable, all their respective obligations and liabilities including without limitation: (a) all Tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Company or such Subsidiary; (b) all lawful claims which the Company and each of its Subsidiaries is obligated to pay, which are due and which, if unpaid, might by law become a Lien upon its property, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Company or such Subsidiary; and (c) all payments of principal, interest and other amounts when due on Indebtedness. 8.4 COMPLIANCE WITH LAWS. The Company shall comply, and shall cause each of its Subsidiaries to comply, in all material respects with all Requirements of Law and with the directions of each Governmental Authority having jurisdiction over them or their business or property (including, without limitation, all applicable Environmental Laws). 8.5 RESERVATION OF SHARES. The Company shall at all times reserve and keep available out of its authorized capital stock, solely for the purpose of issuance or delivery upon exercise of the Warrants, the maximum number of shares of capital stock that may be issuable or deliverable upon such exercise or conversion, as the case may be (the "EXERCISABLE SHARES"). The Exercisable Shares shall, when issued or delivered in accordance with the Warrants, be duly and validly issued, fully paid and non-assessable, and free and clear of all Liens, liabilities and rights. The Company shall issue such capital stock in accordance with the provisions of the Warrants, and shall otherwise comply, in each case, with the terms thereof. 8.6 INSPECTION. The Company will permit, and will cause each of its Subsidiaries to permit, representatives of each of the Purchasers to visit and inspect any of their properties, to examine their corporate, financial and operating records and make copies thereof or abstracts therefrom, and to discuss their affairs, finances and accounts with their respective directors, officers and independent public accountants, all at such reasonable times during normal business hours and as often as may be reasonably requested, upon reasonable advance notice and conducted in such a manner as to minimize disruption of business to the Company and its Subsidiaries; PROVIDED, HOWEVER, that no such inspection, examination or inquiry, the failure to conduct same, nor any knowledge of any Purchaser, including, without limitation, any 41 45 knowledge obtained by such Purchaser in connection with any such inspection, investigation or inquiry, shall constitute a waiver of any rights such Purchaser may have under any representation, warranty, covenant, term or agreement under any of the Transaction Documents. 8.7 PAYMENT OF NOTE. The Company shall pay the principal of, interest on and other amounts due in respect of, the Notes on the dates and in the manner provided in the Notes and to the accounts set forth on EXHIBIT E hereto, unless otherwise instructed by the holder of the particular Note. 8.8 INSURANCE. The Company and its Subsidiaries shall maintain or cause to be maintained in good repair, working order and condition all material properties used in their respective businesses and will make or cause to be made all appropriate repairs, renewals and replacements thereof. The Company and its Subsidiaries will maintain or cause to be maintained with financially sound and reputable insurers public liability and property damage insurance with respect to their respective businesses and properties against loss or damage of the kinds customarily carried or maintained by companies of established reputation engaged in similar businesses and in amounts acceptable to Purchasers and will deliver evidence thereof to Purchasers. 8.9 BOOKS AND RECORDS. The Company shall, and shall cause each of its Subsidiaries to, keep proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Company and each of its Subsidiaries in accordance with GAAP consistently applied to the Company and its Subsidiaries taken as a whole. 8.10 USE OF PROCEEDS. The Company shall use the proceeds of the sale of Securities hereunder only as follows: (i) for the payment of fees and expenses in connection with the transactions contemplated hereunder and in the other Transaction Documents, and (ii) for the repayment of the Bridge Notes as contemplated in Section 3.16. 8.11 BOARD ATTENDANCE. The Company shall give WMF and Whitney and Albion I, Albion II and Equitable notice of (in the same manner as notice is given to directors), and permit one Person designated by WMF (or Whitney) (the "WHITNEY DESIGNEE") and one person designated by Albion I, Albion II and Equitable (the "ALBION/EQUITABLE DESIGNEE") to attend as observer, all meetings of the Company's Board of Directors and all executive and other committee meetings of the Board of Directors and shall provide to WMF and Whitney and Albion I, Albion II and Equitable the same information concerning the Company, and access thereto, provided to members of the Company's Board of Directors and such committees. If, however, in connection with the consideration or deliberation by the Company's Board of Directors of the commencement, prosecution or defense of a claim against one or more of the Purchasers relating to the Transaction Documents, the Company's Board of Directors conclude in good faith that, in the exercise of their fiduciary duty to the Company and its shareholders, such deliberation or consideration must occur without the presence of either or both of the Whitney Designee and/or the Albion/Equitable Designee, the Company's Board of Directors shall so advise such designees, who shall recuse themselves from such portion of the meeting at 42 46 which such consideration or deliberation occurs. Upon conclusion of such consideration or deliberation, such designees shall be permitted to return to the meeting. The reasonable travel expenses incurred by any Whitney Designee (and the Albion/Equitable Designee) in attending any board or committee meetings shall be reimbursed by the Company to the extent consistent with the Company's then existing policy of reimbursing directors generally for such expenses. Notwithstanding any other provision of this Agreement, (i) the rights granted under this Section 8.11 to WMF and Whitney, and to Albion I, Albion II and Equitable are personal to such parties and shall not be transferred to any successor, holder, transferee or assignee of the Notes or Warrants, or the Common Stock underlying such Warrants (ii) the right of WMF and Whitney to appoint the Whitney designee shall terminate at such time as WMF, together with its Affiliates, cease to hold Notes having an aggregate principal amount of $12,500,000, exclusive of any optional prepayment of a portion of the WMF Note pursuant to Section 4 thereof, and (iii) the right of Albion I, Albion II and Equitable to appoint the Albion/Equitable Designee shall terminate at such time as Albion I, Albion II and Equitable, together with their respective Affiliates, cease to hold Notes having an aggregate principal amount of $12,500,000, exclusive of any optional prepayment of a portion of the Albion/Equitable Notes pursuant to Section 4 thereof. ARTICLE 9 NEGATIVE COVENANTS ------------------ Until the payment by the Company of all principal of and interest on the Notes and all other amounts due at the time of payment of such principal and interest to the Purchasers under this Agreement and the other Transaction Documents, including, without limitation, all fees, expenses and amounts due at such time in respect of indemnity obligations under Article 7, the Company hereby covenants and agrees with the Purchasers as follows: 9.1 FUNDAMENTAL CHANGES; CONSOLIDATIONS, MERGERS AND ACQUISITIONS. (a) The Company shall not, and shall not permit any of its Subsidiaries directly or indirectly to: (i) amend, modify or waive any material term or provision of its Certificate of Incorporation, By-laws or other organizational or governing agreements and documents, unless required by law; (ii) enter into any transaction of merger or consolidation except for Approved Acquisitions; (iii) liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution); or (iv) acquire by purchase or otherwise all or any substantial part of the business or assets of any other Person, except for Approved Acquisitions. (b) The following transactions shall not be prohibited by Section 9.1(a): (i) any Subsidiary of the Company may be merged or consolidated with or into the Company (PROVIDED that the Company shall be the continuing or surviving corporation) or with or into any Wholly Owned Subsidiary Guarantor (PROVIDED that the Wholly Owned Subsidiary Guarantor shall be the continuing or surviving corporation); 43 47 (ii) any Subsidiary of the Company may dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Company or any Wholly Owned Subsidiary Guarantor; or (iii) any Subsidiary may liquidate or dissolve into the Company or any Wholly Owned Subsidiary Guarantor if the Company determines in good faith that such liquidation or dissolution is in the best interests of the Company; PROVIDED, HOWEVER, that in each such case described in clauses (i) through (ii) no Default or Event of Default, both before and after giving effect to such transaction, shall have occurred and be continuing under any of the Transaction Documents and no such transaction would (x) result in tax consequences that could reasonably be expected to have a material adverse effect on the Condition of the Company, (y) if all of the Subsidiaries of the Company were dissolved and liquidated immediately following such transaction, result in the Company receiving net assets having a value less than that of the net assets that would have been received by the Company if such liquidation occurred immediately prior to such transaction; or (z) materially disadvantage the Purchasers. 9.2 TRANSACTIONS WITH AFFILIATES. Except in the ordinary course of business and consistent with past practices, the Company shall not, and shall not permit any of its Subsidiaries to, (a) enter into any transaction or agreement or other Contractual Obligation with, or make any payment (other than pursuant to agreements existing on the date hereof or subsequently approved by the Purchasers) to, any Affiliate, other than a Wholly Owned Subsidiary Guarantor, (b) amend or terminate any existing agreement with any Affiliate, other than a Wholly Owned Subsidiary Guarantor, (c) purchase from or provide to an Affiliate, other than a Wholly Owned Subsidiary Guarantor, any selling, general, management or administrative services, (d) directly or indirectly make any sales to or purchases from an Affiliate, other than a Wholly Owned Subsidiary Guarantor, or (e) increase the compensation being paid to an Affiliate, other than a Wholly Owned Subsidiary Guarantor. 9.3 NO INCONSISTENT AGREEMENTS. None of the Company nor any of its Subsidiaries shall enter into any Contractual Obligation or enter into any amendment or other modification to any currently existing Contractual Obligation of the Company, or any of their Subsidiaries, which by its terms restricts or prohibits the ability of the Company to pay the principal of or interest on the Notes or to fully satisfy all of the obligations under the Transaction Documents of the Company or any of its Subsidiaries. 9.4 LIMITATION ON INDEBTEDNESS. The Company shall not, and shall not cause, suffer or permit any of its Subsidiaries to, directly or indirectly, collectively and in the aggregate, issue, assume or otherwise incur any Indebtedness, other than: (a) Indebtedness created under this Agreement; (b) Senior Indebtedness, up to an aggregate outstanding principal amount of $260,000,000, or other Indebtedness other than Capital Lease Obligations, up to an aggregate outstanding principal amount of $2,000,000, in either case inclusive of Indebtedness listed on SCHEDULE 5.26; 44 48 (c) Non-current liabilities for post-employment healthcare and other insurance benefits; (d) Trade payables and accrued expenses, in each case arising in the ordinary course of business; (e) Indebtedness secured by a Lien permitted under Section 9.5; (f) Indebtedness between and/or among the Company and any Wholly-Owned Subsidiary Guarantors; (g) Indebtedness between and/or among the Company and any Subsidiary that is not a Wholly-Owned Subsidiary Guarantor (or among any Subsidiary that is not a Wholly Owned Subsidiary Guarantor and any Wholly Owned Subsidiary Guarantor), PROVIDED that the obligations of such Indebtedness shall: (i) be subordinated in right of payment to all Indebtedness under the Note and this Agreement from and after such time as any portion of the Indebtedness under the Note and this Agreement shall become due and payable (whether at stated maturity, by acceleration or otherwise); and (ii) have such other terms and provisions as the Purchasers may reasonably require; and (h) Refinancings, refundings or extensions of Senior Indebtedness, PROVIDED, that any such refinancings, refundings or extensions shall not be incurred from any Person other than a bank, savings and loan association, insurance company, pension fund, mutual fund, commercial finance company or institutional lender having total assets (together with its Affiliates) in excess of $500,000,000 and shall not: (i) exceed the principal amount permitted under Section 9.4(b) hereof; (ii) shorten the maturity (or weighted average life to maturity) of such Indebtedness or convert a revolving credit facility into a facility which provides for the amortization of principal; (iii) increase the interest rate applicable to such Indebtedness; (iv) upon the occurrence and during the continuance of an Event of Default, cause any covenants or undertakings (whether affirmative or negative) of the Company or its Subsidiaries in respect of such Indebtedness to be more restrictive than such covenants or undertakings had been prior to such refinancing, refunding or extension; (v) facilitate the exercise or enforcement of any remedies of any obligee of such Indebtedness in respect of any default or event of default thereunder; 45 49 (vi) materially and adversely affect any obligations under the Transaction Documents to Purchasers; (vii) result in any amendments or modifications of any of the subordination provisions applicable to such Indebtedness. (i) Interest rate protection arrangements or hedging devices entered into by the Company and its Subsidiaries required under the Senior Loan Documents. (j) Indebtedness incurred pursuant to an Approved Acquisition; (k) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefore shall not at the time be required to be made in accordance with the provisions of Section 8.3; (l) Indebtedness in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which any of the Company or any of its Subsidiaries shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review; (m) Endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business. (n) Capital Lease Obligations not exceeding $8,000,000 in aggregate amount at any time outstanding; or (o) Indebtedness incurred in connection with (i) the acquisition after the Closing Date of any real or personal property by any of the Borrowers or their Subsidiaries, and (ii) the issuance by any of the Company or any of its Subsidiaries of any industrial revenue bonds, industrial development bonds or similar instruments, PROVIDED that the aggregate principal amount of Indebtedness of the Company and its Subsidiaries incurred pursuant to this clause (o) shall not exceed the aggregate amount of $10,000,000 at any one time. 9.5 LIMITATION ON LIENS. The Company, will not, and will not permit any of its Subsidiaries, directly or indirectly, to create, incur, assume or permit to exist any Lien on or with respect to any property or asset (including, without limitation, any document or instrument with respect to goods or accounts receivable) of the Company or its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, except Permitted Encumbrances. "PERMITTED ENCUMBRANCES" means the following: (a) Liens for Taxes, assessments or other governmental charges which are not yet due and payable or which are being contested in good faith with a reserve or other appropriate provision having been made therefor; (b) Liens of landlords, carriers, warehousemen, mechanics, materialmen and other similar liens imposed by law, which are incurred in the ordinary course of business for sums not more than thirty (30) days delinquent or which are being contested in good faith; 46 50 PROVIDED that a reserve or other appropriate provision shall have been made therefor and the aggregate amount of such Liens is less than $10,000,000; (c) Liens (other than any Lien imposed under or in connection with ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety, stay, customs and appeal bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (d) Liens for purchase money obligations to acquire assets; PROVIDED that: (i) each such Lien attaches to such asset concurrently with or within 10 days after acquisition thereof; (ii) does not exceed the purchase price of such asset; and (iii) the Indebtedness secured by all such Liens, shall not exceed $4,000,000; and (iv) each such Lien encumbers only the asset so purchased; (e) Any attachment or judgment Lien not constituting an Event of Default; (f) Leases or subleases granted to others not interfering in any material respect with the business of the Company or any of its Subsidiaries; (g) Easements, rights of way, restrictions and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Subsidiaries; (h) Liens existing on the date hereof and renewals and extensions thereof, which Liens are set forth on SCHEDULE 5.26 hereto; and (i) Liens granted in favor of the Administrative Agent and Lenders under the Senior Credit Documents. 9.6 DISPOSITIONS OF ASSETS. Except for items listed on SCHEDULE 9.6, the Company will not, and will not permit any of its Subsidiaries, directly or indirectly, to convey, sell (pursuant to a sale/leaseback or otherwise), lease, sublease, transfer or otherwise dispose of, or grant any Person an option to acquire, in one transaction or a series of transactions, any of its property, business or assets, or the capital stock of or other equity interests in any of its Subsidiaries, whether now owned or hereafter acquired, except for: (a) Bona fide sales of inventory, including real estate acquired in the ordinary course of business, to customers for fair value in the ordinary course of business and dispositions of obsolete equipment not used or useful in the business; 47 51 (b) Asset Dispositions if all of the following conditions are met: (i) the market value of assets sold or otherwise disposed of (by the Company and its Subsidiaries taken as a whole) in any fiscal year do not exceed $500,000; (ii) the sale price received is at least equal to the fair market value of such assets; (iii) at least 75% of the consideration received is Cash; (iv) after giving effect to the sale or other disposition of the assets included within the Asset Disposition and the repayment of Indebtedness with the proceeds thereof, the Company would be in compliance on a pro forma basis with the covenants set forth in Section 9.8 hereof recomputed for the most recently ended month for which information is available and is in compliance with all other terms and conditions of this Agreement; and (v) no Event of Default then exists or shall result from such sale or other disposition. 9.7 LIMITATIONS ON RESTRICTED PAYMENTS. The Company will not make, or permit any of its Subsidiaries to make, any Restricted Payment, EXCEPT that, so long as no default or Event of Default under the Notes has occurred and is continuing or would result therefrom, the Company may declare and pay dividends on or in respect of any shares of its capital stock in an aggregate amount not to exceed $2,000,000 paid in any period of twelve (12) consecutive months. 9.8 FINANCIAL COVENANTS. The Company covenants and agrees that until payment in full of all Indebtedness hereunder and under the Notes, the Company shall comply with and shall cause each of its Subsidiaries to comply with all covenants in this Section 9.8 applicable to such Person. Compliance with the covenants in this Section 9.8 shall be determined on a consolidated basis in accordance with GAAP consistently applied, unless explicitly stated otherwise. (a) INTEREST COVERAGE. The Company shall not permit the ratio of Consolidated EBITDA to Consolidated Total Interest Expense for the Company and its Subsidiaries, on a consolidated basis, for any twelve (12) month period ending on the last day of a fiscal quarter during any of the periods set forth below to be less than the ratio set forth below for such period: PERIOD RATIO Closing Date to and including September 30, 2001 1.50:1.00 October 1, 2001 to and including September 30, 2002 1.75:1.00 October 1, 2002 to and including September 30, 2003 2.00:1.00 October 1, 2003 and thereafter 2.25:1.00 48 52 (b) FIXED CHARGE COVERAGE. The Company shall not permit the ratio of (i) Consolidated EBITDA for any twelve (12) month period ending on the last day of a fiscal quarter during any of the periods set forth below, less Capital Expenditures for such period, to (ii) the sum of Consolidated Total Interest Expense for such period and the aggregate amount of payments of principal of any Funded Indebtedness actually made or required to be made during such period, to be less than the ratio set forth below for such period: PERIOD RATIO Closing Date to and including March 31, 2002 1.10:1.00 April 1, 2002 to and including June 30, 2003 1.15:1.00 July 1, 2003 and thereafter 1.30:1.00 (c) TOTAL LEVERAGE TEST. The Company shall not permit the ratio of Funded Indebtedness as of the last day of any fiscal quarter during any of the periods set forth below to Consolidated Adjusted EBITDA for the twelve (12) month period ending on the last day of such fiscal quarter, with respect to the Company and its Subsidiaries, on a consolidated basis, to be greater than the ratio set forth below for such period: PERIOD RATIO Closing Date to and including June 30, 2001 5.35:1.00 July 1, 2001 to and including June 30, 2002 5.15:1.00 July 1, 2002 to and including March 31, 2003 5.00:1.00 April 1, 2003 to and including December 31, 2003 4.75:1.00 January 1, 2004 and thereafter 4.50: 1.00 (d) CAPITAL EXPENDITURES. The Company shall not permit aggregate Capital Expenditures of the Company and its Subsidiaries in any fiscal year to exceed the amounts set forth below for each corresponding period. PERIOD AMOUNT Fiscal Year ending March 31, 2001 $12,000,000 Fiscal Year ending March 31, 2002 $13,000,000 Fiscal Year ending March 31, 2003 and thereafter $15,000,000 (e) MINIMUM NET WORTH TEST. The Company and its Subsidiaries have a Consolidated Net Worth on the date hereof of at least $100,000,000. The Company will not permit Consolidated Net Worth at any time to be less than $100,000,000, as such amount shall be increased at the end of each Fiscal quarter thereafter (commencing with the fiscal quarter ending on or around September 30 2000) for the Fiscal quarter thereafter, by the addition of 75% of Consolidated Net Income earned after June 30, 2000. 9.9 EMPLOYEE BENEFIT PLANS. Except with respect to obligations in existence as of the Closing Date, the Company shall not, and shall not permit any of its Subsidiaries or any ERISA Affiliate, without the prior approval of the Purchasers, (a) to establish or contribute to any employee benefit plan (within the meaning of Section 3(3) of ERISA) or other employee 49 53 benefit arrangement which (i) is subject to Title IV of ERISA or is otherwise a Defined Benefit Plan, Multiemployer Plan or multiple employer plan (within the meaning of Section 413(c) of the Code); or (ii) provides post-retirement welfare benefits or "parachute payments" (within the meaning of Section 280G(b) of the Code); or (b) to amend any Plan if the effect of such amendment would cause such Plan to be a plan or arrangement described in clause (a)(i) hereof or to provide any of the benefits described in clause (a)(ii) hereof. 9.10 LIMITATION ON BUSINESS OF THE COMPANY. Neither the Company nor any of its Subsidiaries shall materially change the business of the Company or such Subsidiaries from the Business. 9.11 INVESTMENTS. Except in the ordinary course of business and consistent with past practices, the Company shall not, and shall not permit any of its Subsidiaries, directly or indirectly, to make or own any Investment in any Person except: (a) Investments in Cash Equivalents; provided that such Cash Equivalents are not subject to setoff rights in favor of the issuing bank arising from any existing banking relationship; (b) intercompany loans and investments to the extent permitted under Section 9.2 or 9.4; (c) loans and advances to employees for moving, entertainment, travel and other similar expenses in the ordinary course of business not to exceed $250,000 in the aggregate at any time outstanding; (d) Investments of less than $100,000, provided that the aggregate of such Investments is less than $1,000,000; (e) Investments in existence on the Closing Date; and (f) as provided on SCHEDULE 9.11. 9.12 CONTINGENT OBLIGATIONS. The Company shall not, nor shall it permit any of their Subsidiaries directly or indirectly to create or become or be liable with respect to any Contingent Obligation except those; (a) resulting from endorsements of negotiable instruments for collection in the ordinary course of business; (b) arising under this Agreement; (c) existing on the Closing Date and as described in SCHEDULE 9.12 annexed hereto; (d) arising with respect to customary indemnification and purchase price adjustment obligations incurred in connection with any Asset Dispositions; (e) incurred in the ordinary course of business with respect to surety and appeal bonds, performance and return-of-money bonds and similar obligations not exceeding any time outstanding $250,000 in aggregate liability; (f) incurred with respect to any Indebtedness permitted pursuant to Section 9.04 hereof; and (g) not otherwise permitted by clauses (a) through (f) above so long as any such Contingent Obligations, in the aggregate at any time outstanding do not exceed $250,000. 9.13 MANAGEMENT FEES AND COMPENSATION. The Company shall not, nor shall it permit any of its Subsidiaries, directly or indirectly, to pay any management, consulting or similar fees to any Affiliate or to any director, officer or employee of the Company or any of its Subsidiaries except (i) reasonable director's fees and expenses, (ii) reasonable employee compensation (including reasonable severance arrangements), (iii) agreements valued at no more than $60,000 per year, per individual, and (iv) as set forth on SCHEDULE 9.13. Notwithstanding the foregoing, no payments may be made with respect to any items set forth on SCHEDULE 9.13 upon the incurrence and during the continuation of a default or an Event of Default. 9.14 FISCAL YEAR. The Company and its Subsidiaries shall not change their fiscal year without the prior consent of the Purchasers. 50 54 9.15 PRESS RELEASE; PUBLIC OFFERING MATERIALS. Neither the Company nor any of its Affiliates shall, nor shall the Company or any of its Affiliates permit any of their respective Subsidiaries to disclose the name of any Purchaser or any of its Affiliates in any press release or in any prospectus, proxy statement or other materials filed with the governmental entity relating to a public offering of the capital stock or other equity interest of the Company, any of its Affiliates or any of their respective Subsidiaries without such Purchaser's or such Affiliate's prior written consent which shall not be unreasonably withheld or as required under any Requirement of Law of the rules of any Stock Exchange. 9.16 SUBSIDIARIES. Except as permitted in Section 8.1(j), the Company shall not, nor shall any of the Subsidiaries be permitted to, directly or indirectly, establish, create or acquire any new Subsidiary. 9.17 NO NEGATIVE PLEDGES. Except pursuant to the existing agreements with the creditors of the Senior Indebtedness, the Company will not, and will not permit any of its Subsidiaries, directly or indirectly to enter into or assume any agreement prohibiting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired. 9.18 NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO THE COMPANY. Except pursuant to the existing agreements with the creditors of the Senior Indebtedness and except as otherwise provided herein, the Company will not, and will not permit any of its Subsidiaries, directly or indirectly to create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of the Company or any such Subsidiary to: (a) pay dividends or make any other distribution on any of such Subsidiary's capital stock (or equity interest) owned by the Company or any Subsidiary; (b) subject to subordination provisions for the benefit of Purchasers, pay any Indebtedness owed to the Company or any other Subsidiary; (c) make loans or advances to the Company or any other Subsidiary; or (d) transfer any of its property or assets to the Company or any other Subsidiary. 9.19 TAX ELECTION. The Company will not make any elections to treat the Company as anything other than an association taxable as a corporation for U.S. federal income tax purposes. ARTICLE 10 PREPAYMENT ---------- 10.1 OPTIONAL PREPAYMENT. Subject to Section 7 of the Notes and the provisions of the Subordination Agreement, the Company may prepay outstanding principal (together with accrued interest) on the Note in accordance with the "Optional Prepayment" provisions set forth in Section 4 of the Notes. 10.2 MANDATORY PREPAYMENT. Subject to Section 7 of the Notes and the provisions of the Subordination Agreement, the Company shall prepay outstanding principal 51 55 (together with accrued interest) on the Note in accordance with the "MANDATORY PREPAYMENT" provisions set forth in Section 3 of the Notes. ARTICLE 11 MISCELLANEOUS ------------- 11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the representations and warranties made herein shall survive the execution and delivery of this Agreement, any investigation by or on behalf of the Purchasers, acceptance of the Securities and payment therefor, until such time as the Notes have been paid in full and all other obligations under the Transaction Documents have been satisfied in full. 11.2 NOTICES. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, telecopier (with receipt confirmed), courier service or personal delivery: a. if to the Company: TransTechnology Corporation 150 Allen Road Liberty Corner, NJ 07938 Telecopier: (908) 903-9691 Attention: Mr. Joseph Spanier with a copy to: Hahn Loeser & Parks LLP 3300 BP Tower 200 Public Square Cleveland, OH 44114 Telecopier: (216) 241-2824 Attention: F. Ronald O'Keefe, Esq. b. if to WMF: J. H. Whitney Mezzanine Fund, L.P. 177 Broad Street, 15th Floor Stamford, Connecticut 06901 Telecopier No.: (203) 973-1422 Attention: Mr. David A. Scherl Mr. Daniel J. O'Brien with a copy to: Morrison Cohen Singer & Weinstein, LLP 52 56 750 Lexington Avenue New York, New York 10022 Telecopier No.: (212) 735-8704 Attention: Andrew M. Arsiotis, Esq. Jack Levy, Esq. c. if to Albion I: Albion Alliance Mezzanine Fund I, L.P. 1345 Avenue of the Americas New York, New York 10105 Telecopier No.: (212) 969-6659 Attention: James R. Wilson with a copy to: Morrison Cohen Singer & Weinstein, LLP 750 Lexington Avenue New York, New York 10022 Telecopier No.: (212) 735-8704 Attention: Andrew M. Arsiotis, Esq. Jack Levy, Esq. d. If to Albion II: Albion Alliance Mezzanine Fund II, L.P. 1345 Avenue of the Americas New York, New York 10105 Telecopier No.: (212) 969-6659 Attention: James R. Wilson with a copy to: Morrison Cohen Singer & Weinstein, LLP 750 Lexington Avenue New York, New York 10022 Telecopier No.: (212) 735-8704 Attention: Andrew M. Arsiotis, Esq. Jack Levy, Esq. e. if to Equitable: The Equitable Life Assurance Society of the United States c/o Albion Alliance 1345 Avenue of the Americas New York, New York 10105 Telecopier No.: (212) 969-6659 53 57 Attention: James R. Wilson with a copy to: Morrison Cohen Singer & Weinstein, LLP 750 Lexington Avenue New York, New York 10022 Telecopier No.: (212) 735-8704 Attention: Andrew M. Arsiotis, Esq. Jack Levy, Esq. f. if to Fleet: Fleet Corporate Finance, Inc. One Federal Street Boston, MA 02110 Telecopier No.: (617) 434-4970 Attention: Bradley Stewart with a copy to: Morrison Cohen Singer & Weinstein, LLP 750 Lexington Avenue New York, New York 10022 Telecopier No.: (212) 735-8704 Attention: Andrew M. Arsiotis, Esq. Jack Levy, Esq. g. If to Citizens: Citizens Capital, Inc. 28 State Street Boston, MA 02109 Telecopier No.: (617) 725-5630 Attention: Randall L. Kutch with a copy to: Morrison Cohen Singer & Weinstein, LLP 750 Lexington Avenue New York, New York 10022 Telecopier No.: (212) 735-8704 Attention: Andrew M. Arsiotis, Esq. Jack Levy, Esq. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial overnight courier service; if mailed, five Business Days after being deposited in the mail, postage prepaid; or if telecopied, when receipt is acknowledged. 54 58 11.3 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto. Subject to applicable securities laws, the Purchasers may assign any of their respective rights (except as provided in Section 8.11) under any of the Transaction Documents to any Person and any holder of the Notes, the Warrants or the Common Stock issuable upon exercise of the Warrants may assign, in whole or in part, the Notes, or Warrants or the Common Stock issuable upon exercise of the Warrants to any Person. The foregoing sentence notwithstanding, no Purchaser shall assign any of its rights under any of the Transaction Documents or the Common Stock issuable upon exercise of the Warrants to any competitor of the Company without the prior written consent of the Company. No equity or debt fund shall be deemed to be a competitor solely as a result of such fund having invested in a competitor of the Company. The Company may not assign any of its rights, or delegate any of their obligations, under this Agreement without the prior written consent of the Purchasers, and any such purported assignment by the Company without the written consent of the Purchasers shall be void and of no effect. Except as provided in Article 7, no Person other than the parties hereto and their successors and permitted assigns is intended to be a beneficiary of any of the Transaction Documents. 11.4 AMENDMENT AND WAIVER. (a) No failure or delay on the part of any of the parties hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the parties hereto at law, in equity or otherwise. (b) No amendment, supplement or modification of or to any provision in this Agreement or any of the Notes, or any waiver of any such provision or consent to any departure by any party from the terms of any such provision may be made orally. (c) Any (i) amendment, supplement or modification hereto or to any of the Notes, (ii) consent hereunder or under any of the Notes or (iii) waiver of any provision (collectively, "MODIFICATION") of this Agreement or of any of the Notes shall be effective as to all holders of the Notes if given pursuant to a written agreement signed by the Company and the holders of at least a majority of the principal amount of the Outstanding Notes which shall include at least two holders of Notes which are not Affiliates (the "REQUISITE NOTEHOLDERS"); PROVIDED, HOWEVER, that no Modification with respect to this Agreement or any of the Notes shall (1) decrease, forgive or change the amount of principal or premium of such Notes, (2) extend the originally scheduled time of payment or prepayment of the principal or premium of such Notes or the time of payment of interest on such Notes, (3) reduce the rate of interest payable on such Notes, (4) permit any further subordination of the principal or interest of such Notes beyond that provided under the Senior Credit Documents, or (5) release any Guarantor from any of its obligations under the Subsidiary Guaranty, without the prior written consent of the holder of each Note. Any Modification with respect to this Agreement or any of the Warrants shall be effective as to all holders of Warrants if given pursuant to a written agreement signed by the Company and the holders of Warrants exercisable into at least a majority of the shares of Common Stock for which all of the Warrants are then exercisable in the aggregate, which shall 55 59 include at least two holders of the Warrants which are not Affiliates. No Modification of any of the provisions of this Section 11 shall be effective without the prior written consent of all of the parties hereto. (d) Any amendment, supplement or modification of or to any provision of this Agreement or any Note, any waiver of any provision of this Agreement or any Note, and any consent to any departure by any party from the terms of any provision of this Agreement or any Note made or given in conformity herewith, shall (i) apply to all of the parties hereto and their successors and assigns and (ii) be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement, no notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. 11.5 SIGNATURES; COUNTERPARTS. Telefacsimile transmissions of any executed original document and/or retransmission of any executed telefacsimile transmission shall be deemed to be the same as the delivery of an executed original. At the request of any party hereto, the other parties hereto shall confirm telefacsimile transmissions by executing duplicate original documents and delivering the same to the requesting party or parties. 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. 11.6 HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 11.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED IN ACCORDANCE WITH, AND ENFORCED UNDER, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS OR INSTRUMENTS ENTERED INTO AND PERFORMED ENTIRELY WITHIN SUCH STATE. 11.8 DETERMINATIONS, REQUEST OR CONSENTS. Subject to the provisions of Section 11.4, all determinations, requests, consents, waivers or amendments to be made by the Purchasers in their respective opinions or judgments or with their approval or otherwise pursuant to the Transaction Documents shall be made (i) with respect to the Notes, by the holders of the Notes, and (ii) with respect to the Warrants, by the holders of the Warrants. 11.9 JURISDICTION, JURY TRIAL WAIVER, ETC. (a) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES, THE WARRANTS OR ANY AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND HEREBY EXPRESSLY SUBMITS TO THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT 56 60 FORUM. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN SECTION 11.02, SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING. (b) EACH OF THE COMPANY AND ITS SUBSIDIARIES HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES, THE WARRANTS OR ANY OF THE OTHER TRANSACTION DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EACH OF THE COMPANY AND ITS SUBSIDIARIES (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY PURCHASER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PURCHASER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (II) ACKNOWLEDGES THAT THE PURCHASERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT, AND THE OTHER TRANSACTION DOCUMENTS TO WHICH THEY ARE PARTY BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN. 11.10 SEVERABILITY. If any one or more of the provisions contained in this Agreement, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions of this Agreement. The parties hereto further agree to replace such invalid, illegal or unenforceable provision of this Agreement with a valid, legal and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid, illegal or unenforceable provision. 11.11 RULES OF CONSTRUCTION. Unless the context otherwise requires, "or" is not exclusive, and references to sections or subsections refer to sections or subsections of this Agreement. 11.12 ENTIRE AGREEMENT. This Agreement, together with the exhibits and schedules hereto and the other Transaction Documents, is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein or therein. This Agreement, together with the exhibits and schedules hereto, and the other Transaction Documents supersede all prior agreements and understandings between the parties with respect to such subject matter. 11.13 CERTAIN EXPENSES. The Company will pay all reasonable expenses of the Purchasers (including, without limitation, fees, charges and disbursements of counsel) in connection with any amendment, supplement, modification or waiver of or to any provision of this Agreement or any of the other Transaction Documents or any documents relating thereto 57 61 (including, without limitation, a response to a request by the Company for the Purchasers' consent to any action otherwise prohibited hereunder or thereunder), or consent to any departure from, the terms of any provision of this Agreement or such other documents. 11.14 PUBLICITY. Except as may be required by applicable law, none of the parties hereto shall issue a publicity release or announcement or otherwise make any public disclosure concerning this Agreement or the transactions contemplated hereby, without prior approval by the other party hereto. If any announcement is required by law to be made by any party hereto, prior to making such announcement such party will deliver a draft of such announcement to the other parties and shall give the other parties an opportunity to comment thereon. Notwithstanding the foregoing, each Purchaser and its Affiliates may list the Company's name and logo, and describe the Company's business in their marketing materials and may post such information on their website. 11.15 FURTHER ASSURANCES. Each of the parties shall execute such documents and perform such further acts (including, without limitation, obtaining any consents, exemptions, authorizations, or other actions by, or giving any notices to, or making any filings with, any Governmental Authority or any other Person) as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement, including without limitation, any post-closing assignment(s) by the Purchasers of a portion of the Securities to a Person not currently a party hereto. In connection with any such post-closing assignment, the Company shall enter into an intercreditor agreement with the Purchasers and any subsequent holders of the Notes, on terms and conditions reasonably satisfactory to all parties thereto. 11.16 OBLIGATIONS OF THE PURCHASERS. Each Purchaser's obligations and the obligations of the Company hereunder are subject to the execution and delivery of this Agreement by the other Purchasers. The obligations of each Purchaser shall be several and not joint and no Purchaser shall be liable or responsible for the acts or omissions of any other Purchaser. 11.17 NO STRICT CONSTRUCTION. The parties hereto have participated jointly in the negotiation and drafting of this Agreement and the other Transaction Documents. In the event an ambiguity or question of intent or interpretation arises under any provision of this Agreement or any Transaction Document, this Agreement or such other Transaction Document shall be construed as if drafted jointly by the parties thereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement or any other Transaction Document. No knowledge of, or investigation, including without limitation, due diligence investigation, conducted by, or on behalf of, any Purchaser shall limit, modify or affect the representations set forth in Article 5 of this Agreement or the right of any Purchaser to rely thereon. 11.18 CONFIDENTIALITY. Each of the Purchasers agrees, on behalf of itself and each of its Affiliates, directors, officers, employees and representatives, to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of the same nature and in accordance with safe and sound commercial practices, any non-public information supplied to it by the Company or any of the Subsidiary Guarantors pursuant to this Agreement that is identified by such Person as being confidential at 58 62 the time the same is delivered to such Purchaser, PROVIDED that nothing herein shall limit the disclosure of such information (a) after such information shall have become public other than through a violation of this Section 11.18, (b) to the extent required pursuant to a subpoena, civil investigative demand (or similar process), order, statute, rule or other legal requirement promulgated or imposed by a court or by a judicial, regulatory, self-regulatory or legislative body, organization, agency or committee or otherwise in connection with any judicial or administrative proceeding (including, without limitation, in response to oral questions, interrogatories or requests for information or documents), (c) to counsel, auditors or accountants for any of the Purchasers, (d) to any regulatory authority having jurisdiction over any of the Purchasers, (e) to any other Purchaser, (f) in connection with any litigation to which any one or more of the Purchasers is a party, or in connection with the enforcement of rights or remedies hereunder or under any of the Transaction Documents, (g) to a Subsidiary, Affiliate, partner, director, officer or employee of such Purchaser provided, such parties agree to be bound by provisions substantially similar to this Section 11.18, (h) to any assignee or participant (or prospective assignee or participant) permitted pursuant to Section 11.3 so long as such assignee or participant agrees to be bound by the provisions herein, or (i) with the consent of the Company. Each of the Purchasers agrees that it will not buy, sell trade or otherwise dispose of any Common Stock of the Company during any period that the Company has instructed its directors, officers and employees that any trading is prohibited, provided that such Purchaser has received notice in the same manner as the directors, officers and employees of the Company, and further that it will not buy, sell, trade or otherwise purchase or dispose of any Common Stock of the Company during the ten (10) consecutive Business Days prior to August 29, 2001. Each of the Purchasers agrees that it will not cause, induce or recommend to any of its Affiliates to buy, sell, trade or otherwise dispose of any Common Stock of the Company during any period that the Company has instructed its directors, officers and employees that any trading is prohibited, provided that such Purchaser has received notice in the same manner as the directors, officers and employees of the Company, or to buy, sell, trade or otherwise purchase or dispose of any Common Stock of the Company during the ten (10) consecutive Business Days prior to August 29, 2001. Each of the Purchasers further agrees that it will, in accordance with its customary practices, place the Common Stock of the Company on its restricted list of securities, if any, which directors, officers and employees of such Purchaser are instructed not to purchase or sell. If WMF on the one hand, or Albion I, Albion II and Equitable ("ALBION/EQUITABLE"), on the other hand, shall have notified the Company that WMF or Albion/Equitable, as appropriate, waives its right to (i) have a WMF Designee and/or an Albion/Equitable Designee and under Section 8.11 and (ii) access to the information provided to such designee thereunder and to the Purchasers under Section 8.1, then the three preceding sentences of this Section 11.18 shall cease to apply to WMF and/or Albion/Equitable, as appropriate, for a period beginning on the date that is fifteen (15) days following delivery of such notice to the Company until a date on which WMF and/or Albion/Equitable, as appropriate, notifies the Company that it has completed any contemplated transaction in the Company's Common Stock and reinstates its rights under Section 8.1 and 8.11 (the "WAIVER PERIOD"); provided, however, that the contemplated restrictions on trading described above during the ten (10) consecutive Business Days prior to August 29, 2001 shall remain in effect during the Waiver Period. 11.19 PRIOR NOTIFICATION. Unless specifically prohibited by applicable law or court order, each of the Purchasers shall, prior to disclosure thereof, notify the Company of any 59 63 request for disclosure of any such non-public information by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Purchaser by such governmental agency) or pursuant to legal process, and shall consult with the Company on the advisability of taking legally available steps to resist or narrow any such request. In the event that such steps are not available or effective, or are deemed inadvisable by counsel to such Purchaser, as the case may be, or in the event that the Company waives compliance with the provisions of this Section 11.19, such Purchaser, and/or its respective representatives, as the case may be, may disclose to any tribunal only the portion of such non-public information which it is advised by counsel is legally required to be disclosed, and shall exercise reasonable efforts to obtain assurances that confidential treatment will be accorded such non-public information. Such Purchaser shall be entitled to reimbursement from the Company for expense incurred by it or any Affiliated Person, including the fees and expense of counsel, in connection with any action taken pursuant to this Section 11.19. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 60 64 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective officers hereunto duly authorized as of the date first above written. TRANSTECHNOLOGY CORPORATION By: /s/ Michael J. Berthelot ------------------------------- Name: Michael J. Berthelot Title: President J. H. WHITNEY MEZZANINE FUND, L.P. By: Whitney GP, L.L.C. By: /s/ Joseph D. Carrabino, Jr. ------------------------------- Name: Joseph D. Carrabino, Jr. A Managing Member ALBION ALLIANCE MEZZANINE FUND I, L.P. By: Albion Alliance, LLC Its General Partner By: /s/ James R. Wilson ------------------------------ James R. Wilson Title: Senior Vice President ALBION ALLIANCE MEZZANINE FUND II, L.P. By: AA MEZZ II GP, Its General Partner By: Albion Alliance, LLC Its Sole Member 61 65 By: /s/ James R. Wilson -------------------------------- James R. Wilson Title: Senior Vice President THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES By: /s/ James R. Wilson -------------------------------- James R. Wilson Title: Investment Officer FLEET CORPORATE FINANCE, INC. By: /s/ Michael Browne ------------------------------- Michael Browne Managing Director CITIZENS CAPITAL, INC. By: /s/ Randall Kutch ------------------------------- Name: Randall Kutch Title: Director [SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT] 62 66 Exhibit A SENIOR SUBORDINATED PROMISSORY NOTE THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY ARE SUBORDINATE TO THE SENIOR DEBT AS DEFINED IN, AND IN THE MANNER AND TO THE EXTENT SET FORTH IN, AN INTERCREDITOR AND SUBORDINATION AGREEMENTS DATED AS OF AUGUST ____, 2000 AMONG THE BORROWER, THE PURCHASERS AND FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT, AND EACH HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF SHALL BE BOUND BY THE PROVISIONS OF SUCH INTERCREDITOR AND SUBORDINATION AGREEMENT. THE SUBORDINATED INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT RANKS PARI PASSU WITH CERTAIN OTHER SUBORDINATED INDEBTEDNESS OF THE MAKER AND IS OTHERWISE SUBJECT TO CERTAIN OTHER RESTRICTIONS SET FORTH IN THAT CERTAIN SUBORDINATED INDEBTEDNESS INTERCREDITOR AGREEMENT, DATED AS OF AUGUST 29, 2000, BY AND AMONG THE MAKER HEREOF, THE PAYEE NAMED HEREIN, CERTAIN OTHER HOLDER(S) OF INDEBTEDNESS OF THE MAKER AND THE GUARANTORS OF SUCH INDEBTEDNESS, AS SUCH AGREEMENT MAY BE AMENDED FROM TIME TO TIME. TRANSTECHNOLOGY CORPORATION 16% SENIOR SUBORDINATED PROMISSORY NOTE DUE AUGUST 29, 2005 $[__________] New York, New York August 29, 2000 67 FOR VALUE RECEIVED, the undersigned, TransTechnology Corporation, a Delaware corporation (the "BORROWER"), hereby promise to pay to the order of [__________________] ("______"), [______________], or its registered assigns (the "HOLDER"), the principal sum of [_______________] DOLLARS ($[____________]) on August 29, 2005, (the "MATURITY DATE"), with interest thereon from time to time as provided herein. 1. PURCHASE AGREEMENT. This Senior Subordinated Promissory Note (the "NOTE") is issued by the Borrower, on the date hereof, pursuant to the Securities Purchase Agreement (the "PURCHASE AGREEMENT"), dated as of August 29, 2000 by and between the Borrower, J.H. Whitney Mezzanine Fund L.P., Albion Alliance Mezzanine Fund I, L.P., Albion Alliance Mezzanine Fund II, L.P., The Equitable Life Assurance Society of the United States, Fleet Corporate Finance, Inc., and Citizens Capital Incorporated (collectively, the "Purchasers"), and is subject to the terms thereof. This Note, together with all other promissory notes issued under the Purchase Agreement, and all promissory notes issued pursuant to paragraph 2(b) and paragraph 12 hereof or thereof are hereinafter referred to as the "NOTES." The Holder is entitled to the benefits of this Note and the Purchase Agreement, as it relates to the Note, and may enforce the agreements of the Borrower contained herein and therein and exercise the remedies provided for hereby and thereby or otherwise available in respect hereto and thereto. Capitalized terms used herein without definition are used herein with the meanings ascribed to such terms in the Purchase Agreement. 2. INTEREST. The Borrower promises to pay interest ("INTEREST") on the principal amount of this Note at the rate of 16% per annum (the "INTEREST RATE"). Interest on this Note shall accrue from and including the date of issuance through and until repayment of the principal amount of this Note and payment of all Interest in full, and shall be computed on the basis of a 360-day year of twelve 30-day months. Interest shall be paid as follows: (a) BASIC INTEREST. The Borrower shall pay interest (the "BASIC INTEREST") on the principal amount of this Note at the rate of 13% per annum (the "BASIC INTEREST RATE"), quarterly on each March 31, June 30, September 30 and December 31 of each year or, if any such date shall not be a Business Day, on the next succeeding Business Day to occur after such date (each date upon which interest shall be so payable, an "INTEREST PAYMENT DATE"), beginning on September 30, 2000, by wire transfer of immediately available funds to an account at a bank designated in writing by the Holder. In the absence of any such written designation, any such Interest payment shall be deemed made on the date a check in the applicable amount payable to the order of Holder is received by the Holder at its last address as reflected in Borrower's note registers; if no such address appears, then to such Holder in care of the last address in such note register of any predecessor holder of this Note (or its predecessor). (b) PIK INTEREST. The Borrower shall pay interest ("PIK INTEREST") on the principal amount of this Note at a rate of 3% per annum (the "PIK INTEREST RATE"), by delivery to the Holder, by a date no later than each Interest Payment Date, of an additional promissory note (each, a "PIK NOTE") having an aggregate principal amount equal to the accrued but unpaid PIK Interest on this Note (and the amount of accrued but unpaid PIK Interest on any previously delivered PIK Notes) and otherwise having substantially identical terms to this Note (including, without limitation, with respect to the Interest Rate). Interest on each PIK Note shall accrue at the Interest Rate from the 2 68 Interest Payment Date in respect of which such additional PIK Note was issued until repayment of the principal and payment of all accrued interest in full. If for any reason one or more PIK Notes shall not be delivered in accordance herewith, Interest shall accrue on this Note such that the aggregate Interest due and payable on the Maturity Date and on each Interest Payment Date would be the same as if all PIK Notes not issued had been issued, and the principal payable on the Maturity Date with respect to this Note shall be an amount equal to the sum of the principal outstanding hereunder and the aggregate principal which would be outstanding if the PIK Notes not issued had been issued. Notwithstanding the foregoing, at the option of the Borrower, Interest payable under this Section 2(b) shall be payable in cash on any one or more Interest Payment Dates. For purposes of this Note, the term "PIK Interest" shall be deemed to include payments of Interest in cash at the PIK Interest Rate with respect to such times, if any, that the Borrower shall choose such cash option. (c) DEFAULT RATE OF INTEREST. Notwithstanding the foregoing provisions of this Section 2, but subject to applicable law, any overdue principal of and overdue Interest on this Note shall bear interest, payable on demand in immediately available funds, for each day from the date payment thereof was due to the date of actual payment, at a rate equal to the sum of (i) the Interest Rate and (ii) an additional 2% per annum, and, upon and during the occurrence of an Event of Default (as hereinafter defined), this Note shall bear interest, from the date of the occurrence of such Event of Default until such Event of Default is cured or waived, payable on demand in immediately available funds, at a rate equal to the sum of (i) the Interest Rate and (ii) an additional 2% per annum. Subject to applicable law, any interest that shall accrue on overdue Interest on this Note as provided in the preceding sentence and shall not have been paid in full on or before the next Interest Payment Date to occur after the date on which the overdue interest became due and payable shall itself be deemed to be overdue Interest on this Note to which the preceding sentence shall apply. The term "Interest" shall mean and include all additional interest payable pursuant to this Section 2(c). (d) CALCULATION OF INTEREST. Basic Interest shall be computed at all times without regard to PIK Interest or the PIK Interest Rate. PIK Interest shall be computed at all times without regard to Basic Interest or the Basic Interest Rate. (e) NO USURIOUS INTEREST. In the event that any interest rate(s) provided for in this Section 2 shall be determined to be unlawful, such interest rate(s) shall be computed at the highest rate permitted by applicable law. Any payment by the Borrower of any Interest amount in excess of that permitted by law shall be considered a mistake, with the excess being applied to the principal amount of this Note without prepayment premium or penalty; if no such principal amount is outstanding, such excess shall be returned to Borrower. 3. MANDATORY PREPAYMENT/REDEMPTION. (a) PUBLIC OFFERINGS. Subject to the subordination provisions of Section 7 hereof and the right of the Senior Creditors to receive payment, upon the consummation of a Public Offering (as hereinafter defined), the Borrower shall, at the election of the Holder, prepay the outstanding principal amount of this Note in accordance with the redemption prices (the "MANDATORY REDEMPTION PRICES") set forth below (expressed as a percentage of the outstanding principal amount of this Note), together with Interest accrued thereon through the date of such prepayment to the 3 69 extent of the net cash proceeds of such Public Offering after payment of the Senior Creditors, or, if the Senior Creditors have waived prepayment, to the extent of the net cash proceeds of such Public Offering. If the consummation of a Public Offering shall occur during the consecutive 12-month period immediately preceding August 29 of the calendar year set forth below, the Mandatory Redemption Price shall be determined based upon the percentage of the outstanding principal amount of this Note which corresponds to the period in question, as provided below. Period Mandatory Redemption Price ------ -------------------------- 2001 109% 2002 109% 2003 105% 2004 103% 2005 101% Borrower shall pay the Mandatory Redemption Price, together with Interest accrued thereon, within 5 Business Days after receipt by any of the Borrower or any of its Subsidiaries of the proceeds of such Public Offering. For the purposes hereof, "PUBLIC OFFERING" means the sale by any of the Borrower, or any of its Subsidiaries of its capital stock pursuant to a registration statement on Form S-1 or otherwise under the Securities Act in which the issuer receives any Net Cash Proceeds. For the purposes hereof, "NET CASH PROCEEDS" means (x) the cash proceeds in respect of an Public Offering minus (y) reasonable brokerage commissions or underwriting fees and other reasonable fees and expenses (including, without limitation, reasonable fees, charges and disbursements of counsel and reasonable fees and expenses of investment bankers) relating to such Public Offering. (b) LIQUIDITY EVENT. Subject to the subordination provisions of Section 7 hereof, upon the occurrence of a Liquidity Event (as hereinafter defined), the Borrower shall, at the election of the Holder, prepay the outstanding principal amount of this Note in accordance with the Mandatory Redemption Prices set forth above in Section 3(a), together with interest accrued thereon through the date of such prepayment If the occurrence of a Liquidity Event shall occur during the consecutive 12-month period immediately preceding August 29 of the calendar year set forth above in Section 3(a), the Mandatory Redemption Price shall be determined based upon the percentage of the outstanding principal amount of this Note which corresponds to the period in question. (c) Borrower shall pay the Mandatory Redemption Price, together with interest accrued thereon, within 5 Business Days after the occurrence of a Liquidity Event. For the purposes hereof, "Liquidity Event" means (i) any transaction or related series of transactions pursuant to a single plan of action, in which any Person or group, other than the Purchaser or any of its affiliates becomes the beneficial owner of 50% or more of the then outstanding capital stock of any of the Borrower or of any of its Subsidiaries, the revenues of which, individually or in the aggregate, are equal to or in excess of 25% of the EBITDA of the Borrower and its Subsidiaries, taken as a whole, (ii) the sale or other disposition of all or substantially all of the assets of any of the Borrower or of one or more of its Subsidiaries the revenues of which, individually or in the aggregate, are equal to or in excess of 25% of the EBITDA of the Borrower and its Subsidiaries, taken as a whole, (iii) the liquidation, dissolution or winding up of any of the Borrower or of one or more of its Subsidiaries the revenues of which, individually or in the aggregate, are equal to or in excess of 25% of the EBITDA of the 4 70 Borrower and its Subsidiaries, taken as a whole, or (iv) the combination of the Borrower or of any of its Subsidiaries, the revenues of which, individually or in the aggregate, are equal to or in excess of 25% of the EBITDA of the Borrower and its Subsidiaries, taken as a whole, with another entity, as a result of which (A) any Person or group, other than the Purchaser or any of its affiliates becomes the beneficial owner of 50% or more of the then outstanding capital stock of the combined entity or (B) the directors of such Borrower constitute less than a majority of the Board of Directors of the combined equity. (d) NOTICE. The Borrower shall give written notice to the Holder of any mandatory prepayment pursuant to this Section 3 at least five (5) Business Days prior to the date of such prepayment. Such notice shall be given in the manner specified in Section 11.02 of the Purchase Agreement. (e) PIK NOTES NOT DELIVERED. If for any reason one or more PIK Notes shall not be delivered in accordance with Section 2(b) of this Note, the principal amount of this Note for purposes of calculating the Mandatory Redemption Price shall be deemed to be the principal of this Note plus the principal of all PIK Notes not so delivered, provided, however, that the Mandatory Redemption Price payable with respect to this Note and all PIK Notes actually delivered pursuant hereto in the aggregate shall not exceed the Mandatory Redemption Price which would have been payable if all PIK Notes required to be delivered in accordance with Section 2(b) of this Note had actually been delivered. 4. OPTIONAL PREPAYMENT/REDEMPTION. (a) Subject to the Subordination provisions of Section 7 hereof, upon notice given to the Holder as provided in Section 4(b), the Borrower, at its option, may prepay all or any portion of the principal amount of this Note at any time after August 29, 2001, by paying to the Holder an amount equal to the redemption prices (the "OPTIONAL REDEMPTION PRICES") set forth below (expressed as a percentage of the outstanding principal amount being prepaid, from time to time) together with Interest accrued and unpaid thereon to the date fixed for such prepayment, and reasonable out-of-pocket costs and expenses (including, without limitation, reasonable fees, charges and disbursements of counsel), if any, associated with such prepayment; provided, however, each prepayment of less than the full outstanding balance of the principal amount of this Note shall be in an aggregate principal amount of this Note of $5,000,000 or integral multiples of $1,000,000 in excess thereof, and provided, further, that unless this Note and all Notes shall be paid in full, the aggregate principal balance of the Notes outstanding at any time shall be at least $4,000,000. If such prepayment is to be made by the Borrower to the Holder during the consecutive 12-month period immediately preceding August 29, of the calendar year set forth below, the Optional Redemption Price shall be determined based upon the percentage of the outstanding principal amount of this Note and which corresponds to period in question: Period Optional Redemption Price ------ ------------------------- 2002 109% 2003 105% 5 71 2004 103% 2005 101% (b) The Borrower shall give written notice of prepayment of this Note, or any portion thereof, pursuant to this Section 4 not less than 5 nor more than 60 days prior to the date fixed for such prepayment. Such notice of prepayment pursuant to this Section 4 shall be given in the manner specified in Section 11.2 of the Purchase Agreement. Upon notice of prepayment pursuant to this Section 4 being given by the Borrower, the Borrower covenants and agrees that it will prepay, on the date therein fixed for prepayment, this Note or the portion hereof so called for prepayment, at the applicable Optional Redemption Price set forth above with respect to the outstanding principal amount of this Note or the portion thereof so called for prepayment, together with Interest accrued and unpaid thereon to the date fixed for such prepayment, and the costs and expenses referred to in Section 4(a). (c) All optional prepayments under this Section 4 shall include payment of accrued Interest on the principal amount of this Note so prepaid and shall be applied first to all costs, expenses and indemnities payable under the Purchase Agreement, then to payment of default interest, if any, then to payment of the Basic Interest, then to payment of the PIK Interest, and thereafter to principal. (d) If for any reason one or more PIK Notes shall not be delivered in accordance with Section 2(b) of this Note, the principal amount of this Note for purposes of calculating the Optional Redemption Price shall be deemed to be the principal of this Note plus the principal of all PIK Notes not so delivered, provided, however, that the Optional Redemption Price payable with respect to this Note and all PIK Notes actually delivered pursuant hereto in the aggregate shall not exceed the Optional Redemption Price which would have been payable if all PIK Notes required to be delivered in accordance with Section 2(b) of this Note had actually been delivered. 5. AMENDMENT. Amendments and modifications of this Note may be made only in the manner provided in Section 11.4 of the Purchase Agreement. 6. DEFAULTS AND REMEDIES. (a) EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall occur if: (i) the Borrower shall default in the payment of the principal of this Note, when and as the same shall become due and payable, whether at maturity or at a date fixed for prepayment or by acceleration or otherwise; or (ii) the Borrower shall default in the payment of any installment of Basic Interest according to its terms, when and as the same shall become due and payable and such default shall continue for a period of 5 days or Borrower shall fail to deliver any PIK Note, or an appropriate amount of cash in lieu thereof pursuant to Section 2(b), when and as the same shall become 6 72 deliverable or payable, as the case may be, and such failure shall continue for a period of 5 days after request for the delivery or payment thereof, as the case may be, by the Holder; or (iii) the Borrower shall default in the due observance or performance of any covenant to be observed or performed pursuant to Sections 8.1, 8.2(a), 8.3, 8.8, 8.10, 8.11 or Article 9 of the Purchase Agreement; provided, however, that a default under Article 9 which does not or is not likely to have a material adverse effect on the Borrower, and all of its Subsidiaries, taken as a whole shall become an Event of Default only if such default shall continue for a period of 20 days; or (iv) the Borrower, or any of its Subsidiaries shall default in the due observance or performance of any other covenant, condition or agreement on the part of the Borrower any of its Subsidiaries to be observed or performed pursuant to the terms hereof or pursuant to the terms of the Purchase Agreement or any of the Transaction Documents (other than those referred to in clauses (i), (ii) or (iii) of this Section 6(a)), and such default shall continue for 15 days after the earliest of (A) the date the Borrower is required pursuant to the Transaction Documents or otherwise to give notice thereof to the Holder (whether or not such notice is actually given) or (B) the date of written notice thereof, specifying such default and, if such default is capable of being remedied, requesting that the same be remedied, shall have been given to the Borrower by the Holder; or (v) any representation, warranty or certification made by or on behalf of the Borrower or any of its Subsidiaries in the Purchase Agreement, this Note, the Transaction Documents or in any certificate or other document delivered pursuant hereto or thereto shall have been incorrect when made or deemed to be made or repeated; or (vi) any event or condition shall occur that results in (A) the acceleration of the maturity of any Indebtedness of any of the Borrower or any of its Subsidiaries, or (B) a default of any Indebtedness of the Borrower or any of its Subsidiaries, which continues beyond any applicable period of cure and which would permit the holder to accelerate (automatically or upon notice and declaration) such Indebtedness, in either case in a principal amount aggregating $250,000 or more (except for capital leases, for which the threshold shall be $1,000,000); or (vii) any uninsured damage to or property casualty loss, theft or destruction of any assets of the Borrower or any of its Subsidiaries shall occur that is in excess of $2,500,000; or (viii) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (a) relief in respect of the Borrower, or any of its Subsidiaries, or of a substantial part of its property or assets, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar law, (b) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any of its Subsidiaries, or for a substantial part of its property or assets, or (c) the winding up or liquidation of the Borrower or any of its Subsidiaries, and such proceeding or petition shall continue undismissed for 60 days, or an order or decree approving or ordering any of the foregoing shall be entered; or 7 73 (ix) any of the Borrower or any of its Subsidiaries shall (a) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar law, (b) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in paragraph (viii) of this Section 6(a), (c) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any of the Borrower or any of its Subsidiaries, or for a substantial part of its property or assets, (d) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (e) make a general assignment for the benefit of creditors, (f) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (g) take any action for the purpose of effecting any of the foregoing; or (x) one or more judgments for the payment of money in an aggregate amount in excess of $2,000,000 (to the extent not covered by insurance) shall be rendered against the Borrower, or any of its Subsidiaries and the same shall remain undischarged for a period of 30 days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of any of the Borrower, or any of its Subsidiaries to enforce any such judgment. (b) ACCELERATION. If an Event of Default occurs under Section 6(a)(viii) or (ix), then the outstanding principal of and all accrued Interest on this Note shall automatically become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived. If any other Event of Default occurs and is continuing the Holder, by written notice to the Borrower, may declare the principal of and accrued Interest on this Note to be immediately due and payable. Upon such declaration, such principal and Interest shall become immediately due and payable. The Holder may rescind an acceleration and its consequences 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, and if the rescission would not conflict with any judgment or decree. Any notice or rescission shall be given in the manner specified in Section 11.2 of the Purchase Agreement. 7. SUBORDINATION. This Note is subject to and subordinated by the terms of an Intercreditor and Subordination Agreement, dated the date hereof, among Fleet National Bank, as Administrative Agent, the Borrower and the Purchasers, which is incorporated herein by reference. This Note is subject to the terms of a Subordinated Indebtedness Intercreditor Agreement, dated the date hereof, among the Company and the Purchasers. 8. USE OF PROCEEDS. The Borrower shall use the principal amount of this Note in accordance with the permitted uses described in Section 8.10 of the Purchase Agreement. 9. SUITS FOR ENFORCEMENT. (a) Subject to Section 7, upon the occurrence of any one or more Events of Default, the Holder of this Note may proceed to protect and enforce its rights hereunder by suit in equity, action at law or by other appropriate proceeding, whether for the specific performance of any covenant or 8 74 agreement contained in the Purchase Agreement or this Note or in aid of the exercise of any power granted in the Purchase Agreement or this Note, or may proceed to enforce the payment of this Note, or to enforce any other legal or equitable right of the Holders of this Note. (b) In case of any default under this Note, the Borrower will pay to the Holder such amounts as shall be sufficient to cover the costs and expenses of such Holder due to such default, as provided in Article 7 of the Purchase Agreement. 10. REMEDIES CUMULATIVE. No remedy herein conferred upon the Holder is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. 11. REMEDIES NOT WAIVED. No course of dealing between the Borrower and the Holder or any delay on the part of the Holder in exercising any rights hereunder shall operate as a waiver of any right. 12. TRANSFER. (a) The term "HOLDER" as used herein shall also include any transferee of this Note whose name has been recorded by the Borrower in the Note Register. Each transferee of this Note acknowledges that this Note has not been registered under the Securities Act, and may be transferred only pursuant to an effective registration under the Securities Act or pursuant to an applicable exemption from the registration requirements of the Securities Act. (b) The Borrower shall maintain a register (the "NOTE REGISTER") in its principal offices for the purpose of registering the Note and any transfer or partial transfer thereof, which register shall reflect and identify, at all times, the ownership of record of any interest in the Note. Upon the issuance of this Note, the Borrower shall record the name and address of the initial purchaser of this Note in the Note Register as the first Holder. Upon surrender for registration of transfer or exchange of this Note at the principal offices of the Borrower, the Borrower shall, at its expense, execute and deliver one or more new Notes of like tenor and of denominations of at least $500,000 (except as may be necessary to reflect any principal amount not evenly divisible by $500,000) of a like aggregate principal amount, registered in the name of the Holder or a transferee or transferees. Every Note surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by written instrument of transfer duly executed by the Holder of such Note or such holder's attorney duly authorized in writing. (c) This Note may be transferred or assigned, in whole or in part, by the Holder at any time, subject to the provisions of Section 11.3 of the Purchase Agreement. 13. REPLACEMENT OF NOTE. On receipt by the Borrower of an affidavit of an authorized representative of the Holder stating the circumstances of the loss, theft, destruction or mutilation of this Note (and in the case of any such mutilation, on surrender and cancellation of such Note), the Borrower, at its expense, will promptly execute and deliver, in lieu thereof, a new Note of like tenor. If required by the Borrower, such Holder must provide indemnity sufficient in the reasonable 9 75 judgment of the Borrower to protect the Borrower from any loss which they may suffer if a lost, stolen or destroyed Note is replaced. 14. COVENANTS BIND SUCCESSORS AND ASSIGNS. All the covenants, stipulations, promises and agreements in this Note contained by or on behalf of the Borrower shall bind its successors and assigns, whether so expressed or not. 15. NOTICES. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, telecopier (with receipt confirmed), courier service or personal delivery at the addresses specified in Section 11.2 of the Purchase Agreement. All such notices and communications shall be deemed to have been duly given when: delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial overnight courier service; if mailed, five Business Days after being deposited in the mail, postage prepaid; or if telecopied, when receipt is acknowledged. 16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED IN ACCORDANCE WITH, AND ENFORCED UNDER, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS OR INSTRUMENTS ENTERED INTO AND PERFORMED ENTIRELY WITHIN SUCH STATE. 17. SEVERABILITY. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 10 76 18. Headings. The headings in this Note are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. TRANSTECHNOLOGY CORPORATION By: _______________________________ Name: Title: [SIGNATURE PAGE TO PROMISSORY NOTE] 11 77 EXHIBIT D COMPLIANCE CERTIFICATE TRANSTECHNOLOGY CORPORATION DATE: , 2000 This certificate is given by TransTechnology Corporation, a Delaware corporation (the "Company"), pursuant to Section 8.1(c) of that certain Securities Purchase Agreement dated as of August 29, 2000, by and among the Company, J. H. Whitney Mezzanine Fund, L.P., Albion Alliance Mezzanine Fund I, L.P., Albion Alliance Mezzanine Fund II, L.P., The Equitable Life Assurance Society of the United States, Fleet Corporate Finance, Inc., and Citizens Capital Inc., as such agreement may have been amended, restated, supplemented or otherwise modified from time to time (the "AGREEMENT"). Capitalized terms used herein without definition shall have the meanings set forth in the Agreement. The officer executing this certificate is the Chief Financial Officer of the Company and as such is duly authorized to execute and deliver this certificate on behalf of the Company. By executing this certificate such officer hereby certifies that: (a) the financial statements delivered with this certificate in accordance with Section 8.1(a) and/or 8.1(b) of the Agreement fairly present in all material respects the results of operations and financial condition of the Company and its Subsidiaries as of the dates of such financial statements; (b) he has reviewed the terms of the Agreement and the Note and has made, or caused to be made under his supervision, a review in reasonable detail of the transactions and conditions of the Company and its Subsidiaries during the accounting period covered by such financial statements; (c) such review has not disclosed the existence during or at the end of such accounting period, and he has no knowledge of the existence as of the date hereof, of any condition or event that constitutes an Event of Default, except as set forth in EXHIBIT A hereto which includes a description of the nature and period of existence of such Event of Default and what action the Company has taken, is undertaking and proposes to take with respect thereto; (d) the Company and its Subsidiaries are in compliance with the covenants contained in Articles 8 and 9 of the Agreement, as demonstrated on the attached worksheets (in form and substance previously agreed upon), except as set forth or described in EXHIBIT A; and (e) (i) Interest Coverage is ______:1.00 (ii) Fixed Charge Coverage is _____:1.00 (iii) Total Leverage is _____: 1:00 (iv) Capital Expenditures are $______________ (v) Net Worth is $_______________ 78 IN WITNESS WHEREOF, the Company has caused this Certificate to be executed by its Chief Financial Officer this ___ day of ___________, 200__. TRANSTECHNOLOGY CORPORATION --------------------------- By: ------------------------------------- Chief Financial Officer 2 79 EXHIBIT E Albion Alliance Mezzanine Fund I, L.P. Chase Manhattan Bank 1221 Avenue of the Americas New York, NY ABA #021000021 Account #323-216528 Albion Alliance Mezzanine Fund II, L.P. Chase Manhattan Bank 1221 Avenue of the Americas New York, NY ABA #021000021 Account #910-2-795953 The Equitable Life Assurance Society of the United States Chase Manhattan Bank 1221 Avenue of the Americas New York, NY ABA #021000021 Account #037-2-409417 80 SCHEDULE 5.1 CORPORATE EXISTENCE
81 SCHEDULE 5.1 CONTINUED
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83 SCHEDULES 5.3 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENT 1. Consent of lenders under the Second Amended and Restated Credit Agreement by and among the Company and its Subsidiaries and by Fleet National Bank, as successor to BankBoston, N.A.,, as administrative agent, and the other lenders listed therein (the "Senior Credit Agreement"). 84 SCHEDULE 5.8 TITLE TO PROPERTIES All of the Company's assets, wherever located, are subject to liens held by Fleet National Bank as successor to BankBoston, N.A., pursuant to the Senior Credit Documents, including but not limited to: 1. See attached summary list of UCC filings, UCC fixture filings, federal and state tax liens and judgment liens prepared by Bingham Dana LLP. 2. See listing of patents attached as item A on Schedule 5.23. 3. See listing of trademarks attached as item B on Schedule 5.23. 4. Mortgages on Real Property: -------------------------- (a) Sand Canyon, California (b) Irvington, New Jersey (c) Mountainside, New Jersey (d) Union, New Jersey (e) Glen Head, New York (f) Saltsburg, Pennsylvania (g) Ridgefield, Connecticut (h) Massillon, Ohio (i) Hamilton, Ontario (j) Wiesbadener Strasse/Fischbacher Strasse, Konigstein, Germany (k) Wiesbadener Strasse, Konigstein, Germany (l) Frittlingen, Germany (m) "Hayfield", Colne Road, Glusburn, Keighley, West Yorkshire, England 85 TransTechnology Corporation Updated Lien Search Summary 1000/85321 August 23, 2000
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110 SCHEDULE 5.9 USE OF REAL PROPERTY 1. TransTechnology (GB) Limited is engaging in procedures to comply with the requirements for obtaining a fire certificate at the manufacturing facility in Keighley, England. 2. Joint Meetings of Essex and Union Counties, New Jersey ("Joint Meeting") advised TransTechnology Engineered Rings USA, Inc. (f/k/a Industrial Retaining Ring Company) that it was in violation of Joint Meeting's self-monitoring reporting requirements for total cyanide and cyanide amendable for the months of January and February 1999. The matter was resolved by the parties through the entry of an Administrative Consent Order. 3. List of facilities without Certificates of Occupancy: Aerospace Rivet Manufacturers Corporation (City of Industry, CA) TCR Corporation (Minneapolis, MN) The Palnut Company, a division of The Company (Mountainside, NJ) TransTechnology Engineered Components, LLC (Massillon, OH) TransTechnology Engineered Rings USA, Inc. (Irvington, NJ) 111 SCHEDULE 5.10 TAXES 1. There is an employment tax audit for fiscal year end March 31, 1995 currently under appeal. A waiver of time for assessment is in place through December 2000. 2. In the ordinary course of business, the Company and its Subsidiaries have filed for extensions of time in which to file federal, state and local income tax returns for the fiscal year ending March 31, 2000. 112 SCHEDULE 5.14 ABSENCE OF CERTAIN CHANGES OR EVENTS 1. Since March 31, 2000, TransTechnology (GB) Limited sold its real property in Bingley, West Yorkshire, England. 113 SCHEDULE 5.15 ENVIRONMENTAL MATTERS 1. See attached reports. 114 SCHEDULE 5.15 - ------------- A. TRANSTECHNOLOGY DIVISIONS THAT STORE HAZARDOUS MATERIALS: - ------------------------------------------------------------ BREEZE EASTERN BREEZE INDUSTRIAL PRODUCTS TRANSTECHNOLOGY ENGINEERED RINGS USA (f/k/a INDUSTRIAL RETAINING RING) PALNUT NORCO TCR ARM TRANSTECHNOLOGY ENGINEERED COMPONENTS (TTEC), MASSILLON, OH TRANSTECHNOLOGY ENGINEERED COMPONENTS (TTEC), BRUNSWICK, OH TRANSTECHNOLOGY ENGINEERED COMPONENTS (TTEC), ONTARIO, CANADA TRANSTECHNOLOGY GREAT BRITAIN (TTGB) SEEGER ORBIS KONIGSTEIN PEBRA TT BRASIL B. PROPERTY DISCLOSURES (RELEASE OF HAZARDOUS MATERIALS AND/OR LISTED SITE): - ----------------------------------------------------------------------------
115
C. AFFIRMATIVE OBLIGATIONS UNDER ORDERS, DECREES, JUDGMENTS, AND AGREEMENTS - ---------------------------------------------------------------------------
116 - ------------------------------------------------------------------------------------------------------------
D. ENVIRONMENTAL LITIGATION - ---------------------------
E. OTHER DIVESTED BUSINESSES SITES (REMEDIATED AND CLOSED OR FOR WHICH NO - ------------------------------------------------------------------------- CURRENT ACTION IS IDENTIFIED) - ----------------------------- EASTERN ROTOCRAFT (DOYLESTOWN, PA) SIDEREAL (PORTLAND, OR) LUNDY UK (PORTSMOUTH, ENGLAND) HOWARD BROTHERS (AUBURN, MA) LLOYD MANUFACTURING (WARREN, RI) BELFORT INSTRUMENTS (BALTIMORE, MD) LUNDY FINANCIAL SYSTEMS (CHARLOTTE, NC) LUNDY TECHNICAL CENTER (POMPANO BEACH, FL) 117 OFFICE OF ENVIRONMENTAL AFFAIRS REPORT PERIOD ENDING JUNE 30, 2000 --------------------------- The following table and narrative outline the current status of TransTechnology Corporation's Environmental Projects/Matters. These projects are being managed by the TransTechnology Corporation Office of Environmental Affairs ("TTC OEA"). Those sites or environmental issues not listed or discussed below have no substantively new or updated information to convey. BOLDED TEXT INDICATES THAT NEW OR UPDATED INFORMATION IS PROVIDED. - -------------------------------------------------------------------------------- SITE/MATTER ISSUE CURRENT STATUS ----------- ----- -------------- - -------------------------------------------------------------------------------- FEDERAL TTC/TVA/AEC Site CRA completed an Act 2 compliant LABORATORIES Activities - Area clean-up plan required under the (FL), 15A (CNS tear gas PADEP COA submitted to PADEP in SALTSBURG, PA drum disposal area) early January 2000. PADEP responded and Remedial design by disapproving the plan on a of groundwater RA technical basis in late March. This for Area 15A on TTC action was expected by TTC OEA. owned property PADEPs primary issues relate to 1) the lack of complete vertical and horizontal delineation of groundwater contamination emanating from the Area 15A source location and 2) no media specific remedy was proposed in the clean-up plan. Strategically, TTC OEA omitted reference to a specific remedy so that other (perhaps more cost effective) 'innovative' technologies could be field evaluated prior to committing to groundwater extraction. TTC has acquired approximately 210 acres of land from ICI, thus providing TTC OEA with unrestricted access to the property down gradient of Area 15A. ADDITIONAL GROUNDWATER AND OVERBURDEN SITE CHARACTERIZATION IN AREA 15A IS CURRENTLY TAKING PLACE AND IS ANTICIPATED TO BE COMPLETE IN JULY (2Q FY01). Following completion of this phase of field work, TTC will proceed to evaluate and then select a favorable remedial alternative, revise the clean-up plan, and submit the document to PADEP for approval. It is likely that the remedy will now be sited on the property acquired from ICI. Relocation of the remediation system away from the immediate contaminant source area may provide some value and long term cost savings to the company. The remedy implementation schedule has a duration of approximately 1.5 years. Otherwise, no change in status of technical issues since last report. - -------------------------------------------------------------------------------- FL PaDEP Consent No change in status of COA issues Order and since last report. Agreement (COA) for Area 15A/TTC-DOJ liability issues - -------------------------------------------------------------------------------- TTC ELECTRONICS Detailed design No change in status since last (TTE), WYOMING, of shallow report. IL groundwater remedy - -------------------------------------------------------------------------------- SOS, PLACERITA Property QUARTERLY GROUNDWATER MONITORING CANYON FACILITY Development REPORTS SUMMARIZING GROUNDWATER (SOS PCF), CA -Groundwater REMEDIATION ACTIVITIES CONTINUE TO mitigation BE SUBMITTED TO THE RWQCB AND DTSC. THE RWQCB ASSIGNED A CASE OFFICER TO THIS PROJECT DURING 1Q FY01 (THE BOARD HAS NOT ASSIGNED A CASE OFFICER TO THIS PROJECT SINCE APPROXIMATELY 1995 DUE TO INSUFFICIENT STAFFING AT THE BOARD). THE RWQCB WILL ONCE AGAIN BE REVIEWING QUARTERLY REPORTS AS THEY DID IN THE 1980S AND EARLY 1990S. TTC DOES NOT ANTICIPATE ANY CHANGES BASED ON THIS MORE ACTIVE OVERSIGHT BY THE RWQCB. No change in the technical status since last report. - -------------------------------------------------------------------------------- STAINLESS STEEL Soil CRA submitted a proposed ISVE system PRODUCTS (SSP), remediation closure plan to the CA RWQCB in BURBANK, CA project December 1999. As expected, the plan was rejected due to the presence of VOC concentrations in the 'deeper zone' underlying the site exceeding calculated numerical screening criteria. Consequently, the ISVE system will remain operative through FY 01. For reasons that are unclear, the RWQCB has requested that SSP and other regional PRPs perform an investigation regarding the historic use of chromium (Cr) at their sites, conduct additional on-site groundwater sampling for the Cr parameter, and then report the resulting data. TTC PREPARED A PACKAGE OF MATERIAL SUMMARIZING THE CR PARAMETER AS IT RELATES TO HISTORIC OPERATIONS AND PREVIOUS CHARACTERIZATION AT THE SITE AND SUBMITTED THE PACKAGE TO THE RWQCB. TO DATE THE RWQCB HAS NOT RESPONDED TO THE SUBMITTAL. - -------------------------------------------------------------------------------- 118 - -------------------------------------------------------------------------------- INDUSTRIAL Additional site NJDEP required that TTC 1) further RETAINING RING investigation investigate other areas of the site COMPANY (IRR), and remedial where metals not characteristic of IRVINGTON, NJ actions regional fill material have been measured above NJDEP soil cleanup criteria (e.g., mercury and antimony), 2) evaluate and then certify the integrity of many subgrade structures (e.g, sumps) present at the site, and 3) perform an additional groundwater sampling event in order to support TTC's assertion that groundwater contamination observed beneath the IRR site is predominantly the result of multiple off-site releases/sources. MOST OF THESE FIELD ACTIVITIES WERE COMPLETED DURING 1Q FY01. TTC STILL NEEDS TO OBTAIN SEVERAL SHALLOW SOIL SAMPLES FROM THE CONRAIL EASEMENT ADJACENT TO THE IRR PROPERTY. AN ACCESS AGREEMENT HAS BEEN SIGNED AND RETURNED TO CONRAIL AND TTC ANTICIPATES THAT THE REMAINING FIELD WORK WILL BE COMPLETED DURING JULY OR EARLY AUGUST. FOLLOWING COMPLETION OF THE ANALYSIS OF SAMPLES COLLECTED DURING THE INVESTIGATION, TTC WILL SUMMARIZE THE RESULTS IN A REPORT WHICH WILL BE SUBMITTED TO NJDEP. - -------------------------------------------------------------------------------- TCR CORPORATION Soil and The MN MPCA approved the groundwater (TCR), groundwater remediation closure report submitted MINNEAPOLIS, MN assessment to the agency in November 1999. MPCA PROVIDED WRITTEN NOTIFICATION THAT NO ADDITIONAL ACTION IS REQUIRED AND MONITORING WELLS WERE ABANDONED DURING 1Q FY00. THE PROJECT HAS BEEN SUCCESSFULLY COMPLETED. - -------------------------------------------------------------------------------- NORCO, INC. Soil and CTDEP approved a modified Haley & (NORCO), groundwater Aldrich (site consultant) Phase III RIDGEFIELD, CT assessment workplan in February 2000 and the scope of work was successfully implemented in mid-March. GROUNDWATER DATA INDICATE THAT ELEVATED LEVELS OF METALS (PRIMARILY ARSENIC) ARE PRESENT IN GROUNDWATER BENEATH THE SITE. THESE ELEVATED METALS CONCENTRATIONS MAY BE NATURALLY OCCURRING AND RELATED TO THE MATRIX MATERIAL IN WHICH THE WATER OCCURS. IN AN EFFORT TO DETERMINE WHETHER THE ELEVATED METALS CONCENTRATIONS ARE NATURALLY OCCURRING (BACKGROUND), TTC REQUESTED THAT THE CORE SAMPLES OBTAINED DURING DRILLING BE ANALYZED FOR METALS. TTC OEA IS CURRENTLY AWAITING THE RESULTS OF THESE ADDITIONAL ANALYSES. - -------------------------------------------------------------------------------- BREEZE EASTERN Environmental Issues related to property (BE), UNION, NJ issues divestiture, site development, and associated with the NJDEP MOA are described below: the sale of an undeveloped I. MOA ISSUES: SOIL BORINGS WERE parcel of land CONDUCTED IN AND AROUND THE FORMER located at BE LOCATION OF A 20,000 GALLON UNDERGROUND STORAGE TANK (UST). BE NJDEP ISRA BASED ON THE RESULTS OF THE FIELD MOA INVESTIGATION, THE TANK APPEARS TO HAVE BEEN REMOVED AND THE EXCAVATION BACKFILLED WITH FILL MATERIAL. RESULTS OF THE ANALYSIS OF THE SOIL SAMPLES COLLECTED DURING THE INVESTIGATION ARE PENDING. II. PROPERTY DEVELOPMENT ISSUES: No change in status of technical issues since last report. III. ADMINISTRATIVE ISSUES RELATED TO PROPERTY DEVELOPMENT: No change in status since last report. IV. ISO 14001: BE successfully completed the last ISO audit and remains ISO 14001 registered. - -------------------------------------------------------------------------------- FORMER LUNDY Environmental THE SITE HAS BEEN LISTED ON THE NEW SYSTEMS AND site mitigation YORK REGISTRY OF INACTIVE HAZARDOUS SERVICES (TTSS) program WASTE SITES. TTC DOES NOT ANTICIPATE SITE, GLEN HEAD, ANY SHORT-TERM REGULATORY ACTION NY BASED ON THIS LISTING. - -------------------------------------------------------------------------------- CAE ELECTRONICS, CERCLA No change in status since last INC. (CAE) COST (Federal/CA report. RECOVERY MATTER, Superfund) Cost SUNNYVALE, CA Recovery Action related to the former SOS operation - -------------------------------------------------------------------------------- 119 - -------------------------------------------------------------------------------- FOUR COUNTY PRP Group DE No change in status since last LANDFILL SITE MINIMIS report. (FCLF), DELONG, IN settlement CERCLA (State Superfund) liability - -------------------------------------------------------------------------------- CALAVERAS Calaveras No change in status since last RESERVOIR/SRI Reservoir Site report. SITE, SAN groundwater FRANCISCO, CA remedy - -------------------------------------------------------------------------------- ANDERTON Soil and There has been no substantive change INTERNATIONAL, groundwater in status of the soil/groundwater BINGLEY, WEST investigation environmental project since issuance YORKSHIRE, UK and remediation of the last report(s). TTGB PROJECT PERSONNEL ARE CURRENTLY EVALUATING ISSUES RELATED TO ASBESTOS REMOVAL DURING POTENTIAL REMODEL/DEMOLITION ACTIVITIES AT THE ANDERTON FACILITY. TTC OEA is also providing limited environmental support related to closure of the business. - -------------------------------------------------------------------------------- TT GB, LTD. Various TTC OEA is providing technical (TTGB), GLUSBURN, environmental support at TTGB in connection with WEST YORKSHIRE, UK projects and the following projects/initiatives: compliance (i) providing internal and external initiatives oversight/resources for a potable water source, security of supply, and redistribution evaluation/project (where significant progress is being made), (ii) internal and external oversight for the deburring area wastewater treatment evaluation project, (iii) internal and external oversight for the on-going water and waste minimization project, and (iv) institution of the TTC OEA TSDF audit project pursuant to TTC Policy & Procedure. (V) ANTICIPATED COMMENCEMENT OF RISK ASSESSMENTS DURING THE SECOND HALF OF FY01. - ------------------- ----------------- ------------------------------------------ TT BRASIL LTDA. Soil and TTC OEA intends to perform: 1) (TTB), SAO PAULO, groundwater follow-up potable water, 2) third BRAZIL investigation party water supplier, and 3) and remediation groundwater sampling events at TTB project, in mid-April 2000 and 2) continues potable water to assist with the new DEM team project transition and integration. TTB successfully completed the latest surveillance audit and remains ISO 14001 registered. There has been no substantive change in status of the soil/groundwater environmental project since issuance of the last report(s). LOCAL AUTHORITIES HAVE REQUESTED THAT TTB REPLACE THE PUMP IN THE ONSITE WATER SUPPLY WELL. TTC IS UNCLEAR AS TO THE RATIONALE FOR THIS REQUEST SINCE THE PUMP WAS RECENTLY REPLACED AND IS FUNCTIONING PROPERLY. TTC IS CURRENTLY EVALUATING THIS REQUEST. - -------------------------------------------------------------------------------- WARDEN OIL (WO) MERLA (MN State No change in status since last PRP MATTER, Superfund) report. MINNEAPOLIS, MN liability - -------------------------------------------------------------------------------- TT ENGINEERED Site remedial As reported previously, TTC and COMPONENTS LLC investigation Eaton jointly administered a site (TTEC) project investigation project at the TTEC MASSILLON, OH Massillon, OH facility. Resultant chemical data were generally consistent with that collected previously by Eaton. Chlorinated/aromatic VOCs, certain metals, and SVOCs were detected locally in site soil and groundwater. An area of petroleum (gasoline) contaminated soil, not previously observed, was identified proximal to an active on-site AST. No gasoline constituents were, however, detected in groundwater. A supporting human health risk assessment (HHRA) was also prepared for the site. The HHRA, with certain qualifications, concluded that the site poses no unacceptable risk to the receptor base considered. Ohio EPA has published no numerical soil/groundwater screening or remediation criteria so there is no firm guidance as to 'reportability or 'actionability' of the data. The site has been scrutinized by various regulators (Federal and State) since the mid-1980's with no resulting cause of action. This fact considered in conjunction with the conclusions of the HHRA suggest that TTC consider termination of site environmental investigative activities with no regulatory interface/concurrence. TTC OEA CONTINUES TO DISCUSS AND EVALUATE THIS ALTERNATIVE WITH LOCAL ENVIRONMENTAL COUNSEL AND TTC GENERAL COUNSEL. - -------------------------------------------------------------------------------- 120 - -------------------------------------------------------------------------------- TTC OEA INTERNAL Multimedia TTC OEA WILL PROVIDE REVIEW AND DEPARTMENT environmental CORRECTIVE ACTION REQUESTS FOR SELF PROJECTS UPDATE - auditing AUDITS CONDUCTED DURING THE FIRST FY 00/01 programs HALF OF FY01. SELF AUDITS WILL BE COMPLETED BY ALL DOMESTIC FACILITIES EXCEPT THOSE CURRENTLY PURSUING ISO 14001 REGISTRATION. TTC OEA CONTINUES TO SEARCH FOR AN APPROPRIATE AUDIT PROTOCOL FOR TT CANADA. TT GB, SOF, AND SOK HAVE ELECTED TO PERFORM STATUTORILY REQUIRED OCCUPATIONAL RISK ASSESSMENTS RATHER THAN CONDUCTING EHS AUDITS DURING THE 2000-01 AUDIT PERIOD. SOF AND SOK HAVE INITIATED THESE ASSESSMENTS. Conducting the risk assessments to identify workplace risk is an essential element of health and safety practice in Europe and will 1) reduce employee exposure to occupational injuries and 2) consequently limit TTC's long term liability to worker compensation type claims. Once the risk assessments have been completed in the UK and Germany, conventional EHS auditing will resume at these exempted facilities. - -------------------------------------------------------------------------------- INTERNAL TTC OEA THE TTC DIRECTOR OF ENVIRONMENTAL DEPARTMENT AFFAIRS, JEFF FORGANG, LEFT PROJECT UPDATE - TRANSTECHNOLOGY EFFECTIVE 6/16/00 TO FY 00/01 PURSUE OTHER CAREER ACTIVITIES. SONJA DONALDSON, AN ENVIRONMENTAL CONSULTANT TO TTC FOR THE PAST 7 YEARS, IS CURRENTLY SERVING AS THE ACTING DIRECTOR OF ENVIRONMENTAL AFFAIRS FOR TTC. THE ANNUAL ENVIRONMENTAL CONFERENCE WAS CONDUCTED IN MINNEAPOLIS, MN ON JUNE 26 AND 27, 2000. THE CONFERENCE WAS ATTENDED BY THE TTC GENERAL COUNSEL AND REPRESENTATIVES FROM MOST DOMESTIC AND INTERNATIONAL OPERATION UNITS. THE FOCUS OF THE CONFERENCE WAS ISO 14001 REGISTRATION AND CURRENT HEALTH AND SAFETY ISSUES, INCLUDING ERGONOMICS AND METAL WORKING FLUIDS. - -------------------------------------------------------------------------------- INTERNAL ISO 14001 A brief description of the scope of DEPARTMENT Standard the ISO 14001 program and TTC OEA FY PROJECT UPDATE - Registration 00/01 objectives are as follows: FY 00/01 PHASE 1: External 'gap' analysis phase. Five TTC operations (see list below) will undergo baseline ISO gap auditing during FY 01. These audits will evaluate business processes, practices, and state of conformance to the elements of the ISO 14001 standard. STATUS: This work is being initiated at NORCO, TCR, and TT EC (excluding Palnut). TTC OEA is providing on-site Steering Committee training (basic and advanced EMS) and technical support. PHASE 2: The second phase is termed the "initial review". During this phase the lead firm, site personnel, and/or TTC OEA develop specific plans for correcting the gaps and deficiencies identified during Phase 1. It is during this phase that the actual development of the overall program(s) and strategies for certification occur. ISO Registrars are also selected during this phase. STATUS: THIS PROCESS HAS BEEN COMPLETED AT BI, AND IS IN PROGRESS AT NORCO, TCR, AND TT EC. PHASE 3: This "implementation phase" consists of the integration (as practical) of our existing ISO/QS 9000 programs with the ISO 14001 system and development of programs/procedures required for certification. This phase includes all required personnel training. STATUS: THIS PROCESS HAS BEEN COMPLETED AT BI, AND IS ANTICIPATED TO OCCUR DURING 2Q FY01 AT NORCO, TCR, AND TT EC. PHASE 4: This phase includes the actual Registrar Stage I and II registration audits. STATUS: THIS PROCESS HAS BEEN COMPLETED AT BI, AND IS ANTICIPATED TO OCCUR DURING 3Q AND 4Q FY01 AT NORCO, TCR, AND TT EC. As indicated above, TCR, NORCO, and the three newly acquired TT Engineered Components companies have initiated the ISO 14001 registration process. BI OBTAINED ISO 14001 REGISTRATION DURING Q1 FY 01. The implementation of ISO 14001 within TTC will be phased through at least three (3) fiscal years commencing FY 99. 121 SCHEDULE 5.17 ------------- SUBSIDIARIES ------------ 1. Refer to Schedule 5.1 for a list of the Subsidiaries and their jurisdictions of incorporation and foreign qualification. 2. The Company's and its Subsidiaries' shares are pledged to Fleet National Bank, as successor to BankBoston, N.A., and the Lenders (as defined therein) pursuant to the Amended and Restated Securities Pledge Agreement dated as of August 31, 1999. 3. The Company owns a 60% interest in the Spanish limited company (joint venture), TransTechnology Espana, S.A. 122 SCHEDULE 5.18 ------------- CAPITALIZATION -------------- 1. Options and awards granted from 01/01/90 to 08/18/00 and outstanding as of 08/18/00: Restricted Stock Awards 3,635 Non-Qualified Stock 210,487 Incentive Stock Options 260,964 =========================================================== Total 475,086 2. There are no warrants, rights or securities convertible into capital stock. 123 SCHEDULE 5.20 ------------- BROKER'S, FINDER'S OR SIMILAR FEES ---------------------------------- 1. Placement fee to FleetBoston Robertson Stephens, Inc. 124 SCHEDULE 5.21 ------------- LABOR RELATIONS --------------- 1. Collective Bargaining Agreements: -------------------------------- a. Collective Bargaining Agreement between TransTechnology Corporation, Engineered Components Massillon Division, and the United Paperworker's International Union affiliated with the AFL-CIO-CLC, Union No. 7334, effective June 30, 1999 to June 30, 2004. b. Collective Bargaining Agreement between TransTechnology Corporation, Breeze Industrial Products Division, and the Automotive Chauffeurs, parts and garage Employees, Local union No. 926, an affiliate of the International Brotherhood of teamsters, Chauffeurs, Warehousemen, and Helpers of America, effective September 1, 1997 to August 31, 2002. c. Collective Bargaining Agreement between Breeze-Eastern Division of The Company and Local No. 267 of the International Union United Automobile Aerospace, Agricultural Implement Workers of America, effective November 8, 1999 to October 1, 2004. 2. Employment Agreements: --------------------- TransTechnology (GB) Limited and John Young Ellison Holdings Ltd. (assumed by TransTechnology (GB) Limited) and: Andrew Crabtree Michael Ellison Simon Ellison TransTechnology Engineered Rings USA, Inc, (f/k/a Industrial Retaining Ring Company) and Eric Luopy TransTechnology Engineered Components, LLC and: Majid Daneshvar Mary Allen Anderson Dobbins Nigel Ware Robert Windsor TransTechnology Canada Corporation and Michael Sheehy Aerospace Rivet Manufacturers Corporation and: Caesar Bansil Claudette Gillis Ali Naqvi 125 SCHEDULE 5.21 CONTINUED NORCO, Inc. and: Surin Malhotra William Miller Seeger-Orbis GmbH & Co. OHG and Sven Wolber 3. Executive Severance Agreements: ------------------------------ The Company and: Michael Berthelot Stanley Erman John Funk Gerald Harvey Peter Lowe Surin Malhotra Edson Pardini Michael Rott Joseph Spanier Robert Tunno Thomas Watson Robert White Sven-Uwe Wolber John Young 4. Consulting Agreements: --------------------- The Company and: John Dalton (director) Ulf Jemsby NORCO, Inc. and Joseph Metz 5. An election administered by the National Labor Relations Board was held June 22, 2000 at The Palnut Company, a division of The Company, pursuant to which the United Auto Workers won the right to recognition. 6. Scheduled negotiations with respect to the pension contribution under the current collective bargaining agreement for the TransTechnology Engineered Components, LLC, Massillon facility identified in Item 1(a) of this Schedule 5.21 are currently in process. 7. TransTechnology (GB) Limited is currently negotiating a recognition agreement with the Amalgamated Engineers and Electricians Union with respect to employees at its Glusburn, West Yorkshire, England Plant. 126 SCHEDULE 5.22(a) ---------------- EMPLOYEE BENEFIT PLANS: EMPLOYEE BENEFIT PLANS AND LIABILITIES -------------------------------------------------------------- 1. List of Employee Benefit Plans and Arrangements: ----------------------------------------------- TransTechnology Corporation Retirement Savings Plan TransTechnology Engineered Components, LLC Hourly Employees 401(k) Savings Plan Pension Plan for the Hourly Rate Employees of the Engineered Components Operations Massillon Division Post Retirement Health Care Benefits Plan for Breeze Eastern Union Employees (frozen) TransTechnology Corporation's 1996 - 1998 Incentive Compensation Plan TransTechnology Corporation 1999-2000 Incentive Compensation Plan - DEV Plan TransTechnology Corporation Annual Cash Bonus Plan TransTechnology Corporation Amended and Restated 1992 Long Term Incentive Compensation Plan 1998 Non-Employee Director Stock Option Plan 1999 Long Term Incentive Plan of the Company. The Palnut Company Gainsharing Plan TransTechnology Canada Corporation Profit Sharing Plan Seeger-Orbis GmbH & Co. OHG Pension Plan Seeger-Orbis GmbH & Co. Social Plan TransTechnology Canada Corporation Pension Plan (in formation) TransTechnology Canada Corporation Profit Sharing Plan TransTechnology Canada Corporation Health Plans (Salaried plan and Hourly plan) TransTechnology Canada Corporation (Sun Life Assurance Company of Canada Contract Nos. 25251 & 56251) The Anderton Pension Plan (at TransTechnology (GB) Limited) The Anderton Retirement and Life Assurance Plan (at TransTechnology (GB) Limited) 127 SCHEDULE 5.22(a) CONTINUED All Employee Benefit Plans and Arrangements referred to in the following Employee Handbooks: TransTechnology Policy and Procedure Manual TCR Corporation Employee Handbook The Palnut Company Employee Handbook Breeze Eastern Salaried Employment Handbook Aerospace Rivet Manufacturers Corporation Employee Handbook 2. Other than (a) the Electronics Local 431 Pension Fund relating to employees of Seeger Inc., a subsidiary of The Company, and (b) the Western Pennsylvania Teamster and Employers pension Fund relating to employees of the Company's Breeze-Industrial division, neither the Company nor any ERISA affiliate is a member of any multi-employer plan. 3. See attached list of welfare benefit plans. 4. See Schedule 5.21 for a listing of Executive Severance Agreements and Schedule 5.22(e) for reference to retiree medical plans. 128 TRANSTECHNOLOGY CORPORATION WELFARE BENEFIT PLAN REVIEW CONTROL SHEET ------------- Please attach an additional sheet for plans not listed below. Please indicate "not applicable" or "N/A" for those plans that the company does not provide.
129 TCR CORPORATION TRANSTECHNOLOGY CORPORATION WELFARE BENEFIT PLAN REVIEW CONTROL SHEET ------------- Please attach an additional sheet for plans not listed below. Please indicate "not applicable" or "N/A" for those plans that the company does not provide.
130 TRANSTECHNOLOGY CORPORATION WELFARE BENEFIT PLAN REVIEW CONTROL SHEET Please attach an additional sheet for plans not listed below. Please indicate "not applicable" or "N/A" for those plans that the company does not provide.
131
132 TRANSTECHNOLOGY CORPORATION WELFARE BENEFIT PLAN REVIEW CONTROL SHEET Please attach an additional sheet for plans not listed below. Please indicate "not applicable" or "N/A" for those plans that the company does not provide.
133 TRANSTECHNOLOGY CORPORATION WELFARE BENEFIT PLAN REVIEW CONTROL SHEET Please attach an additional sheet for plans not listed below. Please indicate "not applicable" or "X = NA" for those plans that the company does not provide.
*(1) Our FSA reporting is done thru TT's Combined Annual Return #526. 134 TRANSTECHNOLOGY CORPORATION WELFARE BENEFIT PLAN REVIEW CONTROL SHEET CORPORATE Please attach an additional sheet for plans not listed below. Please indicate "not applicable" or "N/A" for those plans that the company does not provide.
135 TRANSTECHNOLOGY CORPORATION WELFARE BENEFIT PLAN REVIEW CONTROL SHEET PALNUT Please attach an additional sheet for plans not listed below. Please indicate "not applicable" or "N/A" for those plans that the company does not provide.
136 BREEZE INDUSTRIAL WELFARE BENEFIT PLAN REVIEW CONTROL SHEET Please attach an additional sheet for plans not listed below. Please indicate "not applicable" or "N/A" for those plans that the company does not provide.
137 TRANSTECHNOLOGY BRASIL LTDA BENEFITS PROGRAM
138 SCHEDULE 5.22(b) ---------------- EMPLOYEE BENEFIT PLANS: PLAN COMPLIANCE --------------------------------------- Each of the Plans have received a favorable determination letter except for the following: 1. TransTechnology Engineered Components, LLC Hourly Employees 401(k) Savings Plan which TransTechnology Engineered Components, LLC for which a request has been made; and 2. Pension Plan for the Hourly Rate Employees of the Engineered Components Operations Massillon Division, which was recently adopted and the time for application for favorable determination has not yet expired. 139 SCHEDULE 5.22(c) ---------------- EMPLOYEE BENEFIT PLANS: PROHIBITED TRANSACTIONS ----------------------------------------------- NONE 140 SCHEDULE 5.22(d) ---------------- EMPLOYEE BENEFIT PLANS: COBRA ----------------------------- NONE 141 SCHEDULE 5.22(e) ---------------- EMPLOYEE BENEFIT PLANS: MISCELLANEOUS ------------------------------------- 1. The Executive Severance Agreements listed at Schedule 5.21 are structured to preclude penalization under the Internal Revenue Code regarding excess parachute payments. However, the agreements allow the executive's election of a payment which might constitute an excess parachute payment. 2. TransTechnology Engineered Components, LLC ("TTEC") is currently advancing, on behalf of Eaton Corporation, retiree medical benefits to Massillon Union Employees who retired prior to August 31, 1999 (the date on which TTEC acquired these operations). 142 SCHEDULE 5.23 ------------- PATENTS, TRADEMARKS, ETC. ------------------------- A. See attached listing of patents in which a security interest has been granted to by Fleet National Bank, as successor to BankBoston, N.A., pursuant to the Amended and Restated Patent Collateral Assignment and Security Agreement, dated as of August 31, 1999. B. See attached listing of trademarks in which a security interest has been granted to by Fleet National Bank, as successor to BankBoston, N.A., pursuant to the Amended and Restated Trademark Collateral Security and Pledge Agreement, dated as of August 31, 1999. C. License Agreements: ------------------ 1. Purchase and Sale Agreement between Eaton Corporation, through its Engineered Fasteners Division, and Com-Corp Industries, Inc. 2. Dacromet 320 License Agreement between Metal Coatings International, Inc. and the Palnut division of The Company subject to termination pursuant to notice received August 25, 2000. 3. Assignment and Assumption of Dacromet licenses for Ohio and Canada facilities by and among Eaton Corporation, Eaton Yale, Ltd., TransTechnology Engineered Components, LLC and TransTechnology Canada Corporation. 4. License Agreement between McDonnell Douglas Corporation and Aerospace Rivet Manufacturers Corporation. D. The Company has under review a complaint for filing in the U.S. District Court for the Eastern District of Michigan against JATCO TransTechnology ("JATCO") and certain affiliated entities alleging infringement of the Company's rights in the name "TransTechnology". E. The Company opposed the trademark application filed in the United Kingdom by JCS Hi-Torque Limited related to the mark "Hi-Torque". Applicant withdrew the trademark application. 143 SCHEDULE 5.23.A SCHEDULE A ---------- (LIST OF U.S. PATENTS) TRANSTECHNOLOGY CORPORATION
144 -2- SCHEDULE A ---------- (LIST OF U.S. PATENTS) SEEGER INC.
NORCO INC.
145 -3- SCHEDULE A ---------- (LIST OF U.S. PATENTS) TRANSTECHNOLOGY ENGINEERED COMPONENTS, LLC
146 -4- SCHEDULE A ---------- (LIST OF FOREIGN PATENTS) SEEGER INC.
TRANSTECHNOLOGY ENGINEERED COMPONENTS, LLC
147 -5-
TRANSTECHNOLOGY CANADA CORPORATION
148 SCHEDULE 5.23.B SCHEDULE A ---------- (LIST OF U.S. TRADEMARKS) U.S. TRADEMARK REGISTRATIONS TRANSTECHNOLOGY CORPORATION
149 -2- SEEGER INC.
AEROSPACE RIVET MANUFACTURERS CORPORATION
NORCO INC.
TRANSTECHNOLOGY ENGINEERED COMPONENTS, LLC
150 -3- TRADEMARK APPLICATIONS TRANSTECHNOLOGY CORPORATION
NORCO, INC.
TCR CORPORATION
151 -4- SCHEDULE A ---------- (LIST OF FOREIGN TRADEMARKS) SEEGER INC.
152 -5- TRANSTECHNOLOGY ENGINEERED COMPONENTS, LLC
TRANSTECHNOLOGY CANADA CORPORATION
(PENDING) SEEGER INC.
153 SCHEDULE 5.24 ------------- POTENTIAL CONFLICTS OF INTEREST ------------------------------- NONE 154 SCHEDULE 5.26 ------------- OUTSTANDING BORROWINGS ---------------------- 1. AMOUNT AS OF JULY 2, 2000 --------------- Breeze-Industrial PA Development Authority $ 956,000 IRR-Northwestern Mutual Life $ 394,000 Revolving Credit Facility (8.83%) $148,079,000 Revolving Credit Facility (10.75%) $ 10,000,000 Term Loan (9.44%) $ 44,375,000 Bridge Loan (16.69%) $ 75,211,000 2. See Schedules 5.8 and 5.17. 155 SCHEDULE 5.28 ------------- INSURANCE --------- 1. See attached report. 2. See Schedule 5.22(a) for health care policies. 156
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08/03/00 Page 8 164 TransTechnology Corporation VEHICLE LIABILITY POLICY Report newly acquired vehicles to obtain a proof of insurance identification card. This card must be carried in the glove compartment at all times. Call Greg Johnson (805 ###-###-####) to report changes in owned or leased vehicles. The TransTechnology business auto policy provides these coverages: - - Liability - Owned Vehicles. We have liability coverage (both bodily injury and property damage) for accidents involving owned vehicles. - Hired (Rented) Vehicles in U.S. and Canada Only. The TransTechnology policy automatically provides liability insurance for the Corporation when employees use rented vehicles. - Nonowned (Employee-Owned) Vehicles. The TT auto policy protects TT and its subsidiaries from liability suits when employees use their own cars on company business. IMPORTANT - THE CORPORATE POLICY PROTECTS THE CORPORATION ONLY. It will not compensate employees for damage to their own vehicles nor will it protect employees from claims filed against them personally. - - Physical Damage - Owned Vehicles. Owned or leased vehicles are covered for physical damage loss. They are insured at actual cash value up to $30,000. The deductible for collision damage is $250. - Hired (Rented) Vehicles in U.S. and Canada Only. Vehicles are automatically covered for physical damage by the corporate auto policy. You do not need to purchase the Collision Damage Waiver. Rented vehicles are insured at actual cash value up to $30,000. - Nonowned (Employee-Owned) Vehicles. TT does not provide coverage for physical damage to nonowned (employee-owned) vehicles! 08/03/00 Page 9 165
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08/03/00 Page 19 175 SCHEDULE 6.6 ------------ LITIGATION ---------- NONE 176 SCHEDULE 9.6 ------------ DISPOSITION OF ASSETS --------------------- REAL ESTATE FROM DISCONTINUED OPERATIONS ---------------------------------------- Union, New Jersey Real Estate Glen Head, New York Real Estate Placerita, California Real Estate Wyoming, Illinois Real Estate 177 SCHEDULE 9.11 ------------- INVESTMENTS ----------- As of July 30, 2000 1. ELECSYS INCORPORATED Notes $3,269,869 Warrant $3,170,000 ---------- Total $6,439,869 2. NUMBER COMPANY NAME OF SHARES TYPE ------------ --------- ---- Textron 100 Common SPS Technologies, Inc. 100 Common Fairchild Corp. 100 Common Illinois Tool Works 100 Common Penn Engineering & Manufacturing Corp. 100 Common Federal Screw Works 100 Common Chicago Rivet & Machine Co. 100 Common Black & Decker 100 Common Dev Tech Corp 100 Common 178 SCHEDULE 9.12 ------------- CONTINGENT OBLIGATIONS ---------------------- 1. Currency Hedges - TransTechnology Corporation Forward Contracts for sale of DM executed 9-17-99 and maturing on 9-18-00 and sale of Sterling executed on 10-23-99 with contract maturity date of 10-23-00. 2. TransTechnology Interest Rate Swap Agreements effective 5-4-99 and 3-3-00 with maturity dates 5-4-02 and 3-3-03, respectively. 3. Currency Hedges - Seeger-Orbis Forward Contracts for future payments to TransTechnology (GB) Limited purchase of Sterling executed on 2-18-00, 2-22-00 and 3-13-00 with contract maturity dates on 9-6-00, 9-7-00, 10-6-00, 11-7-00, 12-7-00, 1-5-01, 2-6-01, 3-6-01, and 4-6-01. 4. TransTechnology (GB) Limited Foreign Currency Forward Contracts for sale of Euros for sterling with contract maturity dates from 8-31-99 through 1-15-01 and sale of dollars for sterling with contract maturity dates from 9-11-00 through 12-11-00. 6. ISDA Master Agreement between The Company and Bank One, N.A. 7. TransTechnology Corporation guaranty of debts and liabilities of TransTechnology (GB) Limited and Ellison Holdings Ltd. (through November 31, 2000) 8. TransTechnology Corporation guaranty of Altersteilzeit Pension Plan (Seeger-Orbis). 9. Earnout Agreement with the Sellers under acquisition agreements for: a. Aerospace Rivet Manufacturers Corporation; b. NORCO, Inc.; and c. Ellison Holdings plc 179 SCHEDULE 9.13 ------------- MANAGEMENT FEES AND COMPENSATION -------------------------------- 1. Consulting Agreement between The Company and John Dalton (director).
