<Page>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 28, 2002
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------------------
TRANSDIGM INC.
TRANSDIGM HOLDING COMPANY
SUBSIDIARY GUARANTORS LISTED ON SCHEDULE A HERETO
(Exact names of co-registrants as specified in their charters)
----------------------------------
<Table>
TRANSDIGM INC. TRANSDIGM HOLDING COMPANY
DELAWARE 3728 DELAWARE
(State or other jurisdiction of (Primary Standard (State or other jurisdiction of
incorporation or organization) Industrial incorporation or organization)
Classification Code Number)
34-1750032 13-3733378
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
</Table>
----------------------------------
26380 CURTISS WRIGHT PARKWAY
RICHMOND HEIGHTS, OHIO 44143
(216) 289-4939
(Address, including zip code, and telephone number, including
area code, of TransDigm Inc. and TransDigm Holding Company's principal executive
offices)
----------------------------------
GREGORY RUFUS
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND ASSISTANT SECRETARY
TRANSDIGM INC.
26380 CURTISS WRIGHT PARKWAY
RICHMOND HEIGHTS, OHIO 44143
(216) 289-4939
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------------------------
COPIES TO:
KIRK A. DAVENPORT II, ESQ.
LATHAM & WATKINS
885 THIRD AVENUE
SUITE 1000
NEW YORK, NEW YORK 10022
(212) 906-1200
----------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED EXCHANGE OFFER: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
----------------------------------
CALCULATION OF REGISTRATION FEE
<Table>
<Caption>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE(1)
10 3/8% Senior Subordinated Notes due
2008(2).................................... $75,000,000 102.675% $77,006,250 $7,085
Guarantees of the 10 3/8% Senior Subordinated
Notes due 2008(3).......................... $75,000,000 N/A N/A N/A
</Table>
(1) The registration fee has been calculated pursuant to Rule 457(f)(2) under
the Securities Act of 1933 and reflects the book value of the notes as of
June 28, 2002. The Proposed Maximum Aggregate Offering Price is estimated
solely for the purpose of calculating the registration fee.
(2) The 10 3/8% Senior Subordinated Notes due 2008 will be the obligations of
TransDigm Inc.
(3) Each of TransDigm Holding Company, ZMP, Inc., Adams Rite Aerospace, Inc.,
Marathon Power Technologies Company, Christie Electric Corp. and Champion
Aerospace Inc. will guarantee on an unconditional basis the obligations of
TransDigm Inc. under the 10 3/8% Senior Subordinated Notes due 2008. The
guarantees are not traded separately. Pursuant to Rule 457(n), no additional
registration fee is due in respect of the guarantees.
----------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Page>
SCHEDULE A
<Table>
CHAMPION AEROSPACE INC. ZMP, INC.
(Exact name of registrant as specified in its (Exact name of registrant as specified in its
charter) charter)
DELAWARE CALIFORNIA
(State or other jurisdiction of incorporation or (State or other jurisdiction of incorporation or
organization) organization)
3722 3728
(Primary Standard Industrial Classification Code (Primary Standard Industrial Classification Code
Number) Number)
58-2623644 95-4056651
(I.R.S. Employer Identification Number) (I.R.S. Employer Identification Number)
1230 OLD NORRIS ROAD 4141 NORTH PALM STREET
LIBERTY, SC 29657 FULLERTON, CA 92635
(864) 843-1162 (714) 278-6500
(Address, including zip code, and (Address, including zip code, and
telephone number, including area code, telephone number, including area code,
of registrants principal executive offices) of registrants principal executive offices)
</Table>
<Table>
ADAMS RITE AEROSPACE, INC. CHRISTIE ELECTRIC CORP.
(Exact name of registrant as specified in its (Exact name of registrant as specified in its
charter) charter)
CALIFORNIA CALIFORNIA
(State or other jurisdiction of incorporation (State or other jurisdiction of incorporation
or organization) or organization)
3728 3629
(Primary Standard Industrial Classification (Primary Standard Industrial Classification
Code Number) Code Number)
95-4056812 95-0987760
(I.R.S. Employer Identification Number) (I.R.S. Employer Identification Number)
4141 NORTH PALM STREET 8301 IMPERIAL DRIVE
FULLERTON, CA 92835 WACO, TX 76712
(714) 278-6500 (254) 776-0650
(Address, including zip code, and (Address, including zip code, and
telephone number, including area code, telephone number, including area code,
of registrants principal executive offices) of registrants principal executive offices)
</Table>
MARATHON POWER TECHNOLOGIES COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
3691
(Primary Standard Industrial Classification Code Number)
74-2707437
8301 IMPERIAL DRIVE
WACO, TX 76712
(254) 776-0650
(Address, including zip code, and
telephone number, including area code,
of registrants principal executive offices)
<Page>
SUBJECT TO COMPLETION, DATED JUNE 28, 2002.
PROSPECTUS
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<Page>
TRANSDIGM INC.
OFFER TO EXCHANGE
$75,000,000 PRINCIPAL AMOUNT OF ITS 10 3/8% SERIES B SENIOR SUBORDINATED NOTES
DUE 2008, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, FOR ANY AND ALL
OF ITS OUTSTANDING 10 3/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2008.
------------------
We are offering to exchange our registered 10 3/8% Series B Senior
Subordinated Notes due 2008, which we refer to as the "exchange notes," for all
of our outstanding 10 3/8% Series A Senior Subordinated Notes due 2008 that were
issued on June 7, 2002, which we refer to as "old notes." We refer to the old
notes and the exchange notes collectively as the "notes." The terms of the
exchange notes are identical to the terms of the old notes, except that the
exchange notes have been registered under the federal securities laws and,
therefore, are freely transferable. The exchange notes will represent the same
debt as the old notes, and we will issue the exchange notes under the same
indenture.
PLEASE CONSIDER THE FOLLOWING:
Our offer to exchange old notes for exchange notes will be open until
5:00 p.m., New York City time, on , 2002, unless we extend the
offer.
You should carefully review the procedures for tendering old notes beginning on
page 24 of this prospectus.
If you fail to tender your old notes, you will continue to hold unregistered
securities and your ability to transfer them could be adversely affected.
No public market currently exists for the notes. We do not intend to apply for
listing of the exchange notes on any securities exchange or automated quotation
system and, therefore, no active public market is anticipated.
Broker-dealers receiving exchange notes in exchange for old notes acquired for
their own account though market-making or other trading activities must deliver
a prospectus in any resale of the exchange notes.
INFORMATION ABOUT THE NOTES:
The notes will mature on December 1, 2008.
We will pay interest on the notes semi-annually in arrears on June 1 and
December 1 of each year at the rate of 10 3/8% per annum.
We may redeem the notes on or after December 1, 2003 at the rates set forth in
this prospectus.
The notes are unsecured obligations and are subordinated to all of the existing
and future senior indebtedness and other liabilities of the guarantors and us.
If we undergo a change of control or sell some of our assets, we may be required
to offer to purchase notes from you.
--------------------------
YOU SHOULD CAREFULLY REVIEW THE RISK FACTORS BEGINNING ON PAGE 14 OF THIS
PROSPECTUS.
--------------------------
Neither the U.S. Securities and Exchange Commission nor any other federal or
state agency has approved or disapproved of the exchange notes, nor have any of
these organizations determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
THE DATE OF THIS PROSPECTUS IS , 2002.
<Page>
Each broker-dealer that receives exchange notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such exchange notes. The letter of transmittal
delivered with this prospectus states that by so acknowledging and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act of 1933. This prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of exchange notes received in exchange
for old notes where such old notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities. We have agreed
that, for a period of up to 195 days after the effectiveness of the exchange
offer registration statement, we will make this prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
------------------------
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
--------
WHERE YOU CAN FIND MORE INFORMATION......................... ii
FORWARD-LOOKING STATEMENTS.................................. ii
PROSPECTUS SUMMARY.......................................... 1
RISK FACTORS................................................ 14
THE EXCHANGE OFFER.......................................... 24
USE OF PROCEEDS............................................. 33
CAPITALIZATION.............................................. 34
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION...... 35
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA............. 43
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 45
BUSINESS.................................................... 56
MANAGEMENT.................................................. 65
PRINCIPAL STOCKHOLDERS...................................... 72
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 74
DESCRIPTION OF OTHER INDEBTEDNESS........................... 75
DESCRIPTION OF THE EXCHANGE NOTES........................... 78
BOOK-ENTRY; DELIVERY AND FORM............................... 116
PLAN OF DISTRIBUTION........................................ 118
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES....... 119
EXPERTS..................................................... 124
LEGAL MATTERS............................................... 124
INDEX TO FINANCIAL STATEMENTS............................... F-1
</Table>
i
<Page>
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the U.S. Securities and Exchange Commission, which we
refer to as the "Commission," a registration statement on Form S-4, which we
refer to as the "exchange offer registration statement," which term shall
encompass all amendments, exhibits, annexes and schedules thereto, pursuant to
the Securities Act of 1933 and the rules and regulations thereunder, which we
refer to collectively as the Securities Act, covering the exchange notes being
offered. As allowed by the Commission's rules, this prospectus does not contain
all the information you can find in the exchange offer registration statement.
For further information with respect to us and the exchange offer, reference is
made to the exchange offer registration statement. Statements made in this
prospectus as to the contents of any contract, agreement or other documents
referred to are not necessarily complete. For a more complete understanding and
description of each contract, agreement or other document filed as an exhibit to
the exchange offer registration statement, we encourage you to read the
documents contained in the exhibits. This information is available free of
charge to any holders of securities of TransDigm upon written or oral request to
Gregory Rufus, TransDigm Inc., 26380 Curtiss Wright Parkway, Richmond Heights,
OH, 44143, telephone: (216) 289-4939. In order to obtain timely delivery of such
documents, holders must request this information no later than five business
days prior to the expiration date of the exchange offer for the notes.
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, which we refer to as the Exchange Act. In accordance
with the Exchange Act, we file annual, quarterly and special reports, proxy
statements and other information with the Commission. These documents and other
information can be inspected and copied at the public reference rooms that the
Commission maintains at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission also maintains a website at HTTP://WWW.SEC.GOV, which
contains reports and other information regarding registrants that file
electronically with the Commission. Copies of these materials can be obtained at
prescribed rates from the Public Reference Section of the Commission at the
principal offices of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
WE HAVE NOT AUTHORIZED ANY DEALER, SALESMAN OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. IF YOU ARE GIVEN ANY INFORMATION OR REPRESENTATIONS THAT ARE NOT
DISCUSSED HEREIN, YOU MUST NOT RELY ON THAT INFORMATION OR REPRESENTATION. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES, NOR
DOES THIS PROSPECTUS CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS CURRENT ONLY AS OF THE DATE ON THE COVER PAGE OF THIS
PROSPECTUS AND MAY CHANGE AFTER THAT DATE. THE DELIVERY OF THIS PROSPECTUS DOES
NOT, UNDER ANY CIRCUMSTANCES, MEAN THAT THERE HAS BEEN A CHANGE IN OUR AFFAIRS
SINCE THE DATE HEREOF. IT ALSO DOES NOT MEAN THAT THE INFORMATION IN THIS
PROSPECTUS IS CORRECT AFTER THIS DATE.
FORWARD-LOOKING STATEMENTS
This prospectus contains both historical and "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Although we believe that such statements are based on reasonable
assumptions, these forward-looking statements are subject to numerous factors,
risks and uncertainties that could cause actual outcomes and results to be
materially different from those projected. Potential investors and other readers
are urged to consider these factors carefully in evaluating the forward-looking
statements, including the factors described under the heading "Risk Factors,"
and are cautioned not to place undue reliance on these forward-looking
ii
<Page>
statements. The factors, risks and uncertainties that could cause actual
outcomes and results to be materially different from those projected include,
among others, the following:
- the impact of general economic conditions in the regions in which we do
business;
- general industry conditions, including competition and product, raw
material and energy prices;
- changes in exchange rates and currency values;
- capital expenditure requirements;
- access to capital markets; and
- other factors described in this prospectus.
Our actual results, performance or achievements could differ materially from
those expressed in, or implied by, the forward-looking statements. We can give
no assurances that any of the events anticipated by the forward-looking
statements will occur or, if any of them do, what impact they will have on our
results of operations and financial condition. You are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date of this prospectus. We undertake no obligation to publicly update these
forward-looking statements to reflect new information, future events or
otherwise.
iii
<Page>
PROSPECTUS SUMMARY
IN THIS PROSPECTUS, THE WORDS "TRANSDIGM," "WE," "US" AND "OUR" REFER TO
TRANSDIGM INC., THE ISSUER OF THE NOTES, AND OUR SUBSIDIARIES UNLESS THE CONTEXT
OTHERWISE INDICATES. THE TERM "HOLDINGS" REFERS TO TRANSDIGM HOLDING COMPANY,
THE PARENT HOLDING COMPANY OF TRANSDIGM, WHICH HAS NO ASSETS OTHER THAN THE
CAPITAL STOCK OF TRANSDIGM. THE TERM "CHAMPION AEROSPACE" REFERS TO CHAMPION
AVIATION PRODUCTS, A DIVISION OF FEDERAL MOGUL IGNITION COMPANY THAT WE ACQUIRED
ON MAY 31, 2001. "THE TERM "PRO FORMA," WHEN USED TO DESCRIBE OUR OPERATIONS,
REFERS TO OUR OPERATIONS AFTER GIVING EFFECT TO OUR ACQUISITION OF CHAMPION
AEROSPACE AND, WHERE RELEVANT, THE OFFERING OF THE OLD NOTES, AS THOUGH THOSE
TRANSACTIONS HAD OCCURRED AT THE BEGINNING OF THE REFERENCED PERIOD. THIS
SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS, BUT DOES NOT
CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO YOU. THIS PROSPECTUS
INCLUDES SPECIFIC TERMS OF THE EXCHANGE OFFER, AS WELL AS INFORMATION REGARDING
OUR BUSINESS AND DETAILED FINANCIAL DATA. WE ENCOURAGE YOU TO READ THE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS AND
THE DOCUMENTS WE HAVE REFERRED YOU TO.
OVERVIEW
We are a leading supplier of highly engineered aircraft components for use
on nearly all commercial and military aircraft. Most of our products share three
common characteristics: (1) highly engineered and proprietary; (2) significant
aftermarket content; and (3) large shares of niche markets.
We sell our products to commercial airlines, aircraft maintenance
facilities, aircraft and aircraft system original equipment manufacturers, or
OEMs, and various agencies of the United States and foreign governments. We
generate the majority of our EBITDA from sales of replacement parts in the
commercial and defense aftermarkets. Most of our OEM sales are on an exclusive
sole source basis; therefore, in most cases, we are the only certified provider
of these parts in the aftermarket. Aftermarket parts sales are driven by the
size of the worldwide aircraft fleet, are relatively stable and generate
recurring revenues over the life of an aircraft that are many times the size of
the original OEM purchases. We have over 40 years of experience in most of our
product lines, which allows us to benefit from a large and growing installed
base of aircraft. For the twelve months ended March 30, 2002, we generated pro
forma net sales, operating income and EBITDA, As Defined, of $252.3 million,
$70.9 million and $90.2 million, respectively.
We focus our businesses on continual value creation. Our business philosophy
is centered around three value principles: (1) obtaining profitable new business
by applying our technical capabilities to specific engineering problems;
(2) striving to continually improve productivity; and (3) pricing our product to
fairly reflect the unique value provided. Additionally, we continually seek
acquisition opportunities compatible with our value creation philosophy. We have
a demonstrated capability to acquire, integrate and improve aerospace
businesses.
We differentiate ourselves based on our engineering and manufacturing
capabilities, and typically will not bid on non-proprietary "build to print"
business. Our products have strong brand names within the airline industry and a
reputation for high quality, reliability and customer service. We focus on
developing highly customized products to solve specific problems of aircraft
operators and manufacturers. While aftermarket sales accounted for approximately
60% of our fiscal 2001 pro forma net sales and OEM sales accounted for the
remaining 40%, aftermarket sales typically carry a substantially higher gross
margin than sales to OEMs.
OUR PRODUCTS
Our products have a long history in the aircraft component industry and are
found on virtually all types of commercial and military aircraft. We estimate
that approximately 75% of our net sales are derived from products for which we
have achieved sole source designation, and that over 90% of our net sales are
derived from products of proprietary design. Our products are organized into two
groupings: power system components and airframe system components.
1
<Page>
Power system components generated 53% of our reported net sales (63% of pro
forma net sales) in fiscal 2001 and primarily serve the power requirements of
commercial and military aircraft. Our major customers for these products include
substantially all worldwide engine/auxiliary power unit, or APU, end users such
as American Airlines, British Airways, Delta, Air France, and Lufthansa and
engine/APU OEMs such as General Electric, United Technologies, Rolls Royce and
Honeywell; regional and business jet end users such as Comair, Mesa and
Continental Express, and regional and business jet OEMs such as Bombardier,
Cessna, Gulfstream and Raytheon; and various United States and foreign defense
agencies and OEMs such as Lockheed Martin. Our major products are ignition
system components such as igniters, exciters and spark plugs, used to start and
restart turbine and reciprocating aircraft engines; gear pumps used primarily in
lubrication and fuel applications; mechanical/electromechanical controls used in
numerous actuation applications and batteries/chargers used to provide starting
and back-up power.
Airframe system components generated 47% of our reported net sales (37% of
pro forma net sales) in fiscal 2001 and primarily serve the requirements of
various airframe systems used in commercial and military aircraft. Our major
customers for these products are the worldwide large commercial transport end
users and OEMs such as Boeing and Airbus; the regional and business jet end
users and OEMs mentioned above, and the various United States and foreign
defense agencies and OEMs. Our major products are engineered connectors used in
fuel, pneumatic and hydraulic applications; engineered latches used in various
bin, door and other applications on both the interior and exterior of the
airframe; and lavatory hardware and components.
COMPETITIVE STRENGTHS
We believe our key competitive strengths are:
- LARGE INSTALLED PRODUCT BASE AND RECURRING REVENUE STREAM. We estimate
that approximately 75% of our net sales are derived from products for
which we have achieved sole source designation, and that over 90% of our
net sales are derived from products of proprietary design. As a result, we
have a large and growing installed base of products on large commercial
transport aircraft as well as regional, business and military aircraft
platforms. This installed base affords us the opportunity to capture a
long-term stream of highly profitable aftermarket revenues. Over the life
of an aircraft, sales of replacement parts can generate revenues many
times the size of the original OEM purchases. Aftermarket sales generate
most of our EBITDA because they typically carry gross margins that are
significantly higher than those generated from OEM sales.
- PROVEN ABILITY TO DEVELOP NEW PRODUCTS. We have a successful record of
introducing solutions-oriented products. We work closely with aircraft
operators and OEMs to identify their unmet needs, such as a component that
fails to meet performance expectations or that requires excessive
maintenance. We then utilize our engineering and design capabilities to
develop a prototype for a component that increases the value of the
product to the customer. After we have fulfilled rigorous testing
requirements and obtained necessary regulatory approvals, the product is
made available for sale in the aftermarket and to OEMs. We believe that
our ability to successfully develop new products has contributed to our
significant growth.
- DIVERSIFIED BUSINESS MIX. Our business is diversified between sales in the
aftermarket and sales to OEMs. In addition, each of these segments is
further diversified among the large commercial transport, regional,
business and military aircraft markets. As a result, we are not overly
dependent on any one segment or platform. The large commercial transport
OEM market accounted for approximately 15% of our net sales in fiscal
2001.
- LEADING POSITIONS IN NICHE MARKETS. With over 40 years of experience in
most of our product lines, we have well-established and highly regarded
products and trade names, such as "Adel," "Wiggins," "Controlex,"
"Marathon" and "Champion Aerospace-Registered Trademark-," and are a
leader in many of
2
<Page>
our product lines. For example, Champion Aerospace-Registered Trademark-
has one of the strongest brands in the aerospace industry with a 95-year
history as a leader in the aircraft ignitor market.
- SUCCESSFUL TRACK RECORD OF INTEGRATING ACQUISITIONS. Our experienced
management team has a proven track record of consolidating operations,
reducing overhead and rationalizing costs. Management has successfully
integrated a number of acquisitions. In each case, management has
substantially improved the operating margins through the systematic
implementation of our three value generation principles.
BUSINESS STRATEGY
Key elements of our strategy are:
- PROVIDE VALUE ADDED PRODUCTS TO CUSTOMERS. We will continue to focus on
marketing and manufacturing highly engineered products to customers
that place a premium on our capabilities. We have been effective in
communicating to aircraft operators the value of our products in terms
of cost savings generated by their greater reliability and performance,
as well as reduced maintenance requirements. Our reputation for quality
and sole supplier status for many parts has allowed us to capture a
significant portion of the value generated by our products. We intend
to continue to develop and market high value added products that
provide significant benefits to our customers.
- GENERATE NEW BUSINESS INITIATIVES. We have been successful in
identifying and commercializing new business opportunities to drive
revenue growth. We have been particularly effective in creating
aftermarket opportunities by developing superior products to retrofit
aircraft already in service. For example, in response to the heightened
demand for security since the recent terrorist attacks, we developed a
highly engineered cockpit door safety mechanism that simultaneously
prevents penetration into the cockpit while providing a rapid response
in the event of an emergency, such as depressurization.
Airbus-Registered Trademark- recently committed to purchase these
components to offer as a retrofit to the existing
Airbus-Registered Trademark- fleet and to include them on all new
deliveries. We intend to continue to aggressively pursue growth
opportunities through our new business initiatives.
- REALIZE PRODUCTIVITY SAVINGS. We will continue to focus on improving
operating margins through manufacturing improvements and increases in
employee productivity. We have achieved significant increases in
productivity since our formation in 1993. We have rationalized our
manufacturing facilities and redesigned our manufacturing and other
business practices to maximize efficiency. For example, we encourage
our employees through performance incentives to learn to operate
multiple manufacturing stations in order to minimize overall labor
costs. This initiative and others like it have enabled us to
significantly increase sales without material increases in headcount.
- PURSUE STRATEGIC ACQUISITIONS. We intend to pursue acquisitions where
we believe that we can enhance value, reduce costs and develop new
business. The aircraft component industry is highly fragmented, with
many of the companies in the industry being small operators or small
non-core operations of larger businesses. We believe the industry is
experiencing consolidation due to customer requirements that favor more
focused and sophisticated suppliers.
RECENT DEVELOPMENTS
The aerospace industry was hit particularly hard by the events of
September 11, 2001. The immediate reduction in air traffic severely impacted the
profitability of the airline industry, which began to curtail flights and
stretch out or cancel airframe deliveries. Facing this expected downturn, we
promptly developed a near term market forecast to use as a basis for fiscal 2002
planning. Based on this forecast, which we believed to be conservative, we
implemented a series of actions to significantly
3
<Page>
reduce our cost structure while maintaining our ability to respond to market
dynamics and develop new business. As part of this effort, we significantly
reduced our workforce in early October.
It currently appears that the overall market forecast we used for planning
purposes was somewhat conservative. Although we continue to experience a
significant downturn in the commercial aerospace markets, air travel appears to
be recovering faster than we initially anticipated and we currently expect the
aftermarket sector to recover slowly over the next four to six quarters as
improvements in air traffic continue. We expect commercial transport OEM
production rates to continue to decline in the near term as new transport
delivery schedules are canceled or extended. We also expect regional and
business jet operations and production rates to be negatively impacted to a
lesser degree. Military activity is difficult to predict, but based upon our
broad base of applications, we anticipate a modest increase in military orders
over the near term.
Sales generation during the first half of fiscal year 2002 was higher than
we anticipated compared to our near term market forecast immediately following
September 11th. Although we expect full year fiscal 2002 net sales to be below
fiscal year 2001 pro forma net sales, we now believe the results will be better
than the estimates we made immediately following September 11th. In addition, as
a result of our rapid cost reductions, continued productivity efforts,
proprietary niche market positions and continued new business generation, we
believe pro forma EBITDA, As Defined, for the twelve months ended March 30, 2002
is reasonably indicative of our expected EBITDA, As Defined, for fiscal 2002.
This section includes forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended. We cannot assure you that our current outlook will prove to
be correct. See "Risk Factors."
ODYSSEY INVESTMENT PARTNERS
We are controlled by Odyssey Investment Partners, a private equity firm that
invests in management-backed leveraged acquisitions, growth financings and
recapitalizations of manufacturing, financial services and communications
companies. Collectively, the principals of Odyssey have been involved in over 65
private equity transactions including Dresser Inc., Dayton Superior Corporation,
TriStar Aerospace Co., Williams Scotsman, Inc., Monarch Marking Systems, Inc.,
Western Wireless Corp. (the former parent of VoiceStream Communications) and
Independent Wireless One Corporation (a Sprint PCS affiliate). Odyssey
Investment Partners is the successor firm to the private equity activities of
Odyssey Partners, LP, which was founded in 1982. Its current fund has over
$760 million of committed capital.
On December 3, 1998, Phase II Acquisition Corp., an entity formed by
affiliates of Odyssey Investment Partners, LP, and Holdings consummated a
definitive agreement and plan of merger, which we refer to as the merger
agreement or the merger. Pursuant to the terms of the merger, Phase II
Acquisition Corp. was merged with and into Holdings, with Holdings being the
surviving corporation in the merger. In connection with the merger, KIA IV-TD,
LLC and Kelso Equity Partners II, LP retained approximately 15.4% of the
surviving corporation's outstanding common stock. For financial reporting
purposes, this merger, which we refer to as the recapitalization, was treated as
a recapitalization, which had no impact on the historical basis of Holdings'
consolidated assets and liabilities.
------------------------
Our executive offices are located at 26380 Curtiss Wright Parkway, Richmond
Heights, Ohio 44143. Our telephone number is (216) 289-4939.
4
<Page>
THE OFFERING OF THE OLD NOTES
On June 7, 2002, we completed an offering of $75.0 million in aggregate
principal amount of our 10 3/8% Series A Senior Subordinated Notes due 2008,
which was exempt from registration under the Securities Act. We used the
proceeds of the offering to repay the Tranche A facility and to ratably repay
portions of Tranches B and C of our credit facility and to pay related fees and
expenses.
<Table>
Old Notes................................. We sold the old notes to Deutsche Bank Securities Inc.
and Credit Suisse First Boston Corporation, the initial
purchasers, on June 7, 2002. The initial purchasers
subsequently resold the old notes to qualified
institutional buyers pursuant to Rule 144A under the
Securities Act and to non-U.S. persons outside the
United States in reliance on Regulation S under the
Securities Act.
Registration Rights Agreement............. In connection with the sale of the old notes, we and the
guarantors entered into a registration rights agreement
with the initial purchasers. Under the terms of that
agreement, we each agreed to:
- file a registration statement for the exchange offer
and the exchange notes within 70 days after the issue
date of the old notes;
- use our reasonable best efforts to cause the
registration statement to become effective under the
Securities Act within 160 days after the issue date
of the old notes;
- use our reasonable best efforts to consummate the
exchange offer within 195 days after the issue date
of the old notes, and
- file a shelf registration statement for the resale of
the old notes under certain circumstances and use our
reasonable best efforts to cause such shelf
registration statement to become effective under the
Securities Act.
If we do not meet one of these requirements, we must pay
additional interest on the old notes until we meet the
requirement. The exchange offer is being made pursuant
to the registration rights agreement and is intended to
satisfy the rights granted under the registration rights
agreement, which rights terminate upon completion of the
exchange offer.
</Table>
5
<Page>
THE EXCHANGE OFFER
The following is a brief summary of terms of the exchange offer. For a more
complete description of the exchange offer, see "The Exchange Offer."
<Table>
Securities Offered........................ $75,000,000 in aggregate principal amount of 10 3/8%
Series B Senior Subordinated Notes due 2008.
Exchange Offer............................ We are offering to exchange $1,000 principal amount of
our 10 3/8% Series B Senior Subordinated Notes due 2008,
which have been registered under the Securities Act, for
each $1,000 principal amount of our currently
outstanding 10 3/8% Series A Senior Subordinated Notes
due 2008, which we refer to as the "old notes". We will
accept any and all old notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on
, 2002. Holders may tender some or all of
their old notes pursuant to the exchange offer. However,
notes may be tendered only in integral multiples of
$1,000 in principal amount. The form and terms of the
exchange notes are the same as the form and terms of the
old notes except that:
- the exchange notes have been registered under the
federal securities laws and will not bear any legend
restricting their transfer;
- the exchange notes bear a different CUSIP number than
the old notes; and
- the holders of the exchange notes will not be
entitled to certain rights under the registration rights
agreement, including the provisions for an increase
in the interest rate on the old notes in some
circumstances relating to the timing of the exchange
offer.
See "The Exchange Offer." Together, the old notes and
the exchange notes constitute an additional issuance of
10 3/8% Senior Subordinated Notes due 2008 under the
indenture, dated as of December 3, 1998, as supplemented
on April 23, 1999 and June 26, 2001, under which
$125.0 million in aggregate principal amount of notes
were previously issued, which we refer to as the "1998
notes." The exchange notes offered hereby are identical
to our outstanding 1998 notes. As of the date hereof,
$75.0 million in aggregate principal amount of old notes
are outstanding and $125.0 million in aggregate
principal amount of 1998 notes are outstanding.
Transferability of Exchange Notes......... We believe that you will be able to freely transfer the
exchange notes without registration or any prospectus
delivery requirement so long as you may accurately make
the representations listed under "The Exchange Offer--
Transferability of the Exchange Notes." If you are a
broker-dealer that acquired old notes as a result of
market-making or other trading activities, you must
deliver a prospectus in
</Table>
6
<Page>
<Table>
connection with any resale of the exchange notes. See
"Plan of Distribution."
Expiration Date........................... The exchange offer will expire at 5:00 p.m., New York
City time, on , 2002, unless we decide to
extend the exchange offer.
Conditions to the Exchange Offer.......... The exchange offer is subject to certain customary
conditions, some of which may be waived by us. See "The
Exchange Offer--Conditions to the Exchange Offer."
Procedure for Tendering Old Notes......... If you wish to accept the exchange offer, you must
complete, sign and date the letter of transmittal, or a
facsimile of the letter of transmittal, in accordance
with the instructions contained in this prospectus and
in the letter of transmittal. You should then mail or
otherwise deliver the letter of transmittal, or
facsimile, together with the old notes to be exchanged
and any other required documentation, to the exchange
agent at the address set forth in this prospectus and in
the letter of transmittal.
By executing the letter of transmittal, you will
represent to us that, among other things:
- you, or the person or entity receiving the related
exchange notes, are acquiring the exchange notes in the
ordinary course of business;
- neither you nor any person or entity receiving the
related exchange notes is engaging in or intends to
engage in a distribution of the exchange notes within
the meaning of the federal securities laws;
- neither you nor any person or entity receiving the
related exchange notes has an arrangement or
understanding with any person or entity to
participate in any distribution of the exchange
notes;
- neither you nor any person or entity receiving the
related exchange notes is an "affiliate" of TransDigm or
the guarantors, as that term is defined under
Rule 405 of the Securities Act; and
- you are not acting on behalf of any person or entity
who could not truthfully make these statements.
See "The Exchange Offer--Procedures for Tendering Old
Notes" and "Plan of Distribution."
Effect of Not Tendering................... Any old notes that are not tendered or that are tendered
but not accepted will remain subject to the restrictions
on transfer. Since the old notes have not been
registered under the federal securities laws, they bear
a legend restricting their transfer absent registration
or the availability of a specific exemption from
registration. Upon the completion of the exchange offer,
we will have no further obligations, except under
limited circumstances, to provide for registration of
the old notes
</Table>
7
<Page>
<Table>
under the federal securities laws. See "The Exchange
Offer--Effect of Not Tendering."
Interest on the Exchange Notes and the Old
Notes................................... The exchange notes will bear interest from the most
recent interest payment date to which interest has been
paid on the old notes or, if no interest has been paid,
from June 1, 2002. Interest on the old notes accepted
for exchange will cease to accrue upon the issuance of
the exchange notes.
Withdrawal Rights......................... Tenders of old notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration
Date.
Federal Tax Consequences.................. There should be no federal income tax consequences to
you if you exchange your old notes for exchange notes in
the exchange offer. See "Certain United States Federal
Income Tax Considerations."
Use of Proceeds........................... We will not receive any proceeds from the issuance of
exchange notes pursuant to the exchange offer.
Exchange Agent............................ State Street Bank and Trust Company, the trustee under
the indenture, is serving as exchange agent in
connection with the exchange offer.
</Table>
8
<Page>
TERMS OF THE EXCHANGE NOTES
The following is a brief summary of the terms of the exchange notes. The
financial terms and covenants of the exchange notes are the same as the old
notes. For a more complete description of the terms of the exchange notes, see
"Description of the Exchange Notes."
<Table>
Issuer.................................... TransDigm Inc.
Securities Offered........................ $75,000,000 in aggregate principal amount of 10 3/8%
Series B Senior Subordinated Notes due 2008.
Maturity.................................. December 1, 2008.
Interest Rate............................. 10 3/8% per year.
Interest Payment Dates.................... June 1 and December 1 of each year. The exchange notes
will bear interest from the most recent interest payment
date to which interest has been paid on the old notes
or, if no interest has been paid, from June 1, 2002.
Guarantees................................ Holdings, the parent holding company of TransDigm, will
unconditionally guarantee the exchange notes. However,
you should not rely upon the guarantee by Holdings
because Holdings has no assets other than its equity
interest in TransDigm. In addition, each of our domestic
subsidiaries on the issue date will unconditionally
guarantee the exchange notes.
If we create or acquire a new domestic subsidiary, it
will guarantee the exchange notes unless we designate
the subsidiary as an "unrestricted subsidiary" under the
indenture or the subsidiary does not have significant
assets.
Ranking................................... The exchange notes will be our unsecured senior
subordinated obligations and will rank junior to our
existing and future senior debt. The guarantees by
Holdings and our subsidiaries will be subordinated to
existing and future senior debt of Holdings and our
subsidiaries, respectively. On a pro forma basis as of
March 30, 2002, we estimate that we and our subsidiaries
would have had $180.0 million of senior debt and
Holdings would have had $209.3 million of senior debt,
in each case, excluding approximately $30.0 million that
we expect to have available to borrow under our credit
facility. In addition, pursuant to the amendment to the
credit facility, we are permitted to incur
$150.0 million either of additional bank borrowings,
which would also be senior to the exchange notes, or
subordinated debt. This additional debt is permitted
under the credit facility; however, there are currently
no commitments to provide such funds. The exchange notes
will be PARI PASSU with the 1998 notes. The guarantees
of the exchange notes will be PARI PASSU with the
guarantees of the 1998 notes.
See "Description of the Exchange Notes--Brief
Description of the Notes and the Guarantees."
</Table>
9
<Page>
<Table>
Optional Redemption....................... We cannot redeem the exchange notes until December 1,
2003. Thereafter, we may redeem some or all of the
exchange notes at the redemption prices listed in the
"Description of the Exchange Notes" section under the
heading "Optional Redemption," plus accrued interest.
Change of Control Offer................... If we experience a change of control, we must give
holders of the exchange notes the opportunity to sell us
their exchange notes at 101% of their face amount, plus
accrued and unpaid interest and additional interest, if
any.
We might not be able to pay you the required price for
exchange notes you present to us at the time of a change
of control, because:
- we might not have enough funds at that time; or
- the terms of our senior debt may prevent us from
paying.
See "Description of the Exchange Notes--Change of
Control."
Asset Sale Proceeds....................... If we engage in asset sales, we generally must either
invest the net cash proceeds from such sales in our
business within a period of time, repay senior debt or
make an offer to purchase a principal amount of the
exchange notes equal to the excess net cash proceeds.
The purchase price of the exchange notes will be 100% of
their principal amount, plus accrued interest. See
"Description of the Exchange Notes--Certain
Covenants--Limitation on Asset Sales."
Certain Indenture Provisions.............. The indenture governing the exchange notes contains
certain covenants limiting our (and most or all of our
subsidiaries') ability to:
- incur additional debt or enter into sale and
leaseback transactions;
- pay dividends or distributions on capital stock or
repurchase capital stock;
- issue stock of subsidiaries;
- make certain investments;
- create liens on our assets to secure debt;
- enter into transactions with affiliates;
- merge or consolidate with another company; and
- transfer and sell assets.
These covenants are subject to a number of important
limitations and exceptions. See "Description of the
Exchange Notes--Certain Covenants."
Risk Factors.............................. Investing in the exchange notes involves substantial
risks. See "Risk Factors" for a description of certain
of the risks you should consider before investing in the
exchange notes.
</Table>
10
<Page>
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth summary historical consolidated financial
information of Holdings for the years ended September 30, 1999, 2000 and 2001
and for the six months ended March 30, 2002. The summary historical consolidated
financial data for each of the years in the three-year period ended
September 30, 2001 have been derived from Holdings' consolidated financial
statements, which have been audited by Deloitte & Touche LLP, independent
auditors. The summary historical consolidated financial data as of and for the
six months ended March 30, 2002 have been derived from Holdings' unaudited
consolidated financial statements included elsewhere in this prospectus, which
in the opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results of
operations, financial position, and cash flows. The results for the six months
ended March 30, 2002 are not necessarily indicative of the results that may be
expected for the entire year. Separate historical financial information for
TransDigm Inc. is not presented since Holdings has no operations or assets
separate from its investment in TransDigm Inc. and since the exchange notes will
be guaranteed by Holdings and all direct and indirect subsidiaries of
TransDigm Inc. (other than two wholly-owned, non-guarantor subsidiaries that
have inconsequential assets, liabilities and equity, and whose only operations
are the result of intercompany activity which is immediately dividended to
TransDigm Inc.).
The following table also sets forth summary pro forma consolidated data for
Holdings and, where indicated, TransDigm Inc., as of March 30, 2002, for the
fiscal year ended September 30, 2001, for the six months ended March 30, 2002
and for the twelve months ended March 30, 2002. The pro forma data for the
fiscal year ended September 30, 2001 and the twelve months ended March 30, 2002
give effect to the offering of the old notes and the Champion Aerospace
acquisition as if such transactions had been consummated on October 1, 2000 and
April 1, 2001, respectively. The pro forma data for the six months ended
March 30, 2002 give effect to the offering of the old notes as if it had been
consummated on October 1, 2001. The pro forma consolidated balance sheet data as
of March 30, 2002 give effect to the offering of the old notes as if it had
occurred as of March 30, 2002. The pro forma financial information is not
necessarily indicative of either future results of operations or the results
that might have occurred if the foregoing transactions had been consummated on
the dates indicated above. We cannot assure you that assumptions used in the
preparation of the pro forma financial data will prove to be correct. The
Champion Aerospace acquisition was completed on May 31, 2001.
We acquired ZMP, Inc. and its wholly-owned subsidiary, Adams Rite
Aerospace, Inc. on April 23, 1999 and Christie Electric Corp. on March 8, 2000.
On March 26, 2001, we acquired an exclusive, worldwide license to produce and
sell products composed of a lubrication and scavenge pump product line along
with certain related equipment and inventory. These acquisitions, as well as the
Champion Aerospace acquisition, were accounted for as purchases. The results of
operations of ZMP, Adams Rite, Christie, Champion Aerospace and the acquired
product line are included in Holdings' consolidated financial statements from
the date of each of these acquisitions.
The following table should be read in conjunction with "Unaudited Pro Forma
Consolidated Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of
11
<Page>
Operations" and the Consolidated Historical Financial Statements and the notes
thereto included elsewhere in this prospectus. All amounts are presented in
thousands, except ratios.
<Table>
<Caption>
HISTORICAL PRO FORMA
------------------------------------------------ -------------------------------------
SIX SIX TWELVE
MONTHS FISCAL YEAR MONTHS MONTHS
FISCAL YEAR ENDED SEPTEMBER 30, ENDED ENDED ENDED ENDED
------------------------------------ MARCH 30, SEPTEMBER 30, MARCH 30, MARCH 30,
1999 2000 2001 2002 2001 2002 2002
---------- ---------- ---------- --------- ------------- --------- ---------
STATEMENT OF OPERATIONS DATA:
Net sales......................... $130,818 $150,457 $ 200,773 $117,613 $ 247,761 $117,613 $ 252,337
Gross profit...................... 60,867 68,264 82,248 53,465 99,198 53,465 104,032
Selling and administrative........ 13,620 16,799 20,669 10,475 24,152 10,475 23,642
Amortization of intangibles....... 2,063 1,843 2,966 3,167 5,201 3,167 5,853
Research and development.......... 2,139 2,308 2,943 1,372 4,285 1,372 3,613
Merger expenses................... 40,012 -- -- -- -- -- --
-------- -------- --------- -------- --------- -------- ---------
Operating income(1)............... 3,033 47,314 55,670 38,451 65,560 38,451 70,924
Interest expense, net(2).......... 22,722 28,563 31,926 16,885 40,890 18,502 38,757
Pre-tax income (loss)............. (19,689) 18,751 23,744 21,566 24,670 19,949 32,167
Provision (benefit) for income
taxes........................... (2,772) 7,972 9,386 9,277 9,533 8,630 13,210
-------- -------- --------- -------- --------- -------- ---------
Net income (loss)................. $(16,917) $ 10,779 $ 14,358 $ 12,289 $ 15,137 $ 11,319 $ 18,957
======== ======== ========= ======== ========= ======== =========
OTHER FINANCIAL DATA:
Cash flow provided by (used in):
Operating activities............ $(16,219) $ 16,305 $ 22,761 $ 25,456 $ 20,319 $ 24,330 $ 33,870
Investing activities............ (44,599) (5,120) (173,588) (1,056) (174,091) (1,056) (166,359)
Financing activities............ 44,061 (9,605) 157,739 (6,646) 157,792 (6,593) 152,762
EBITDA(3)......................... 9,407 53,826 64,316 45,092 77,519 45,092 83,688
EBITDA, As Defined(4)............. 50,562 54,011 70,955 45,092 84,158 45,092 90,171
Capital expenditures.............. 3,043 4,368 4,486 1,056 5,044 1,056 3,904
TransDigm Inc. total debt to
EBITDA, As Defined(5)........... 4.8x 4.4x 5.4x 8.4x 4.2x
Pro forma TransDigm Inc. net debt
to EBITDA, As Defined(6)........ 3.9x
</Table>
<Table>
<Caption>
PRO
HISTORICAL FORMA
--------------------------------------------- ---------
AS OF SEPTEMBER 30, AS OF AS OF
--------------------------------- MARCH 30, MARCH 30,
1999 2000 2001 2002 2002
--------- --------- --------- --------- ---------
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents................................ $ 2,729 $ 4,309 $ 11,221 $ 28,975 $ 28,975
Working capital.......................................... 35,531 39,437 55,672 64,542 75,557
Total assets............................................. 164,417 168,833 372,898 379,029 380,314
Total debt............................................... 266,557 261,601 413,209 408,204 411,257
TransDigm Inc. total debt(5)............................. 244,557 236,962 385,612 378,982 382,035
TransDigm Inc. net debt(6)............................... 241,828 232,653 374,391 350,007 353,060
Total stockholders' equity (deficiency).................. (127,622) (118,409) (103,388) (92,539) (93,600)
</Table>
- ------------------------------
(1) Operating income includes the effect of a non-cash charge of $1,143 in
fiscal 1999 due to a purchase accounting adjustment to inventory associated
with the acquisition of Adams Rite, a non-cash charge of $185 in fiscal 2000
due to a purchase accounting adjustment to inventory associated with the
acquisition of Christie, non-cash charges of $3,193 and $3,446 in fiscal
2001 due to purchase accounting adjustments to inventory associated with the
acquisitions of Champion Aerospace and a product line, respectively.
(2) Includes $2,989, $2,669 and $2,030 of interest expense incurred by Holdings
during fiscal 2001, 2000 and 1999, respectively, and $1,642 of interest
expense for the six months ended March 30, 2002 relating to the Holdings PIK
Notes. Holdings has no other interest expense. TransDigm is not an obligor
or a guarantor under the Holdings PIK Notes.
(3) EBITDA represents earnings before interest, taxes, depreciation and
amortization. EBITDA is presented because management believes it is
frequently used by securities analysts, investors and other interested
parties in the evaluation of
12
<Page>
companies in Holdings' industry. However, other companies in Holdings'
industry may calculate EBITDA differently than Holdings does. EBITDA is not
a measurement of financial performance under accounting principles generally
accepted in the United States of America and should not be considered as an
alternative to cash flow from operating activities, as a measure of
liquidity or an alternative to net income as indicators of Holdings'
operating performance or any other measures of performance derived in
accordance with accounting principles generally accepted in the United
States of America. See Holdings' consolidated statements of cash flows
included in Holdings' consolidated financial statements included elsewhere
in this prospectus.
(4) EBITDA, As Defined, is calculated by adding to EBITDA those merger expenses
incurred in fiscal 1999 and the incremental inventory costs associated with
the write up of inventory required by the purchase accounting treatment
applied to the acquisitions of Adams Rite and ZMP for 1999, Christie for
fiscal 2000 and Champion Aerospace and a product line for fiscal 2001 as
follows (all amounts in thousands):
<Table>
<Caption>
HISTORICAL PRO FORMA
-------------------------------------------- --------------------------------------------
FISCAL YEAR ENDED SIX MONTHS FISCAL YEAR SIX MONTHS TWELVE MONTHS
SEPTEMBER 30, 2001 ENDED ENDED ENDED ENDED
------------------------------ MARCH 30, SEPTEMBER 30, MARCH 30, MARCH 30,
2000 1999 2001 2002 2001 2002 2002
-------- -------- -------- ----------- ------------- ----------- --------------
EBITDA.......................... $ 9,407 $53,826 $64,316 $45,092 $77,519 $45,092 $83,688
Adjustments:
Merger Expenses................. 40,012 -- -- -- -- -- --
Inventory Purchase Accounting
Adjustments................... 1,143 185 6,639 -- 6,639 -- 6,483
------- ------- ------- ------- ------- ------- -------
EBITDA, As Defined.............. $50,562 $54,011 $70,955 $45,092 $84,158 $45,092 $90,171
======= ======= ======= ======= ======= ======= =======
</Table>
EBITDA, As Defined, is presented herein to provide additional information
with respect to the ability of Holdings to satisfy its debt service,
capital expenditure and working capital requirements and because certain
types of covenants in TransDigm Inc.'s and Holdings' borrowing arrangements
are tied to similar measures. While EBITDA-based measures are frequently
used as measures of operations and the ability to meet debt service
requirements, they are not necessarily comparable to other similarly titled
captions of other companies due to differences in methods of calculation.
(5) TransDigm Inc. total debt excludes the Holdings PIK Notes as those notes are
not an obligation of TransDigm Inc. or any of its subsidiaries.
TransDigm Inc. pro forma total debt as of March 30, 2002 includes the $2,006
premium received in connection with the issuance of the old notes.
(6) TransDigm Inc. net debt represents TransDigm Inc. total debt less
TransDigm Inc. cash and cash equivalents.
13
<Page>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND ALL OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE
OFFER. INVESTING IN THE NOTES INVOLVES A HIGH DEGREE OF RISK. THE OCCURRENCE OF
ANY ONE OR MORE OF THE FOLLOWING COULD MATERIALLY ADVERSELY AFFECT YOUR
INVESTMENT IN THE NOTES OR OUR BUSINESS AND OPERATING RESULTS.
RESTRICTIONS ON TRANSFER--IF YOU DO NOT PROPERLY TENDER YOUR OLD NOTES, YOUR
ABILITY TO TRANSFER SUCH OLD NOTES WILL BE ADVERSELY AFFECTED.
We will only issue exchange notes in exchange for old notes that are timely
received by the exchange agent, together with all required documents, including
a properly completed and signed letter of transmittal. Therefore, you should
allow sufficient time to ensure timely delivery of the old notes and you should
carefully follow the instructions on how to tender your old notes. Neither we
nor the exchange agent are required to tell you of any defects or irregularities
with respect to your tender of the old notes. If you do not tender your old
notes or if we do not accept your old notes because you did not tender your old
notes properly, then, after we consummate the exchange offer, you may continue
to hold old notes that are subject to the existing transfer restrictions. In
addition, if you tender your old notes for the purpose of participating in a
distribution of the exchange notes, you will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the exchange notes. If you are a broker-dealer
that receives exchange notes for your own account in exchange for old notes that
you acquired as a result of market-making activities or any other trading
activities, you will be required to acknowledge that you will deliver a
prospectus in connection with any resale of such exchange notes. After the
exchange offer is consummated, if you continue to hold any old notes, you may
have difficulty selling them because there will be less old notes outstanding.
In addition, if a large amount of old notes are not tendered or are tendered
improperly, the limited amount of exchange notes that would be issued and
outstanding after we consummate the exchange offer could lower the market price
of such exchange notes.
SUBSTANTIAL LEVERAGE--OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR
FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.
We have a significant amount of indebtedness. Holdings' ratio of earnings to
fixed charges would have been 1.8 to 1.0 on a pro forma basis for the twelve
months ended March 30, 2002. The following chart shows certain of our important
credit statistics and is presented assuming we had completed the offering of the
old notes and the application of the proceeds therefrom as of the date specified
below (dollars in millions):
<Table>
<Caption>
AT
MARCH 30, 2002
--------------
Total TransDigm Inc. indebtedness........................... $382.0
TransDigm Inc. stockholders' equity (deficit)............... $(48.1)
</Table>
In addition, Holdings has an additional $29.2 million of indebtedness
represented by the Holdings PIK Notes (all of which will be senior to Holdings'
guarantee of the notes) and, on a pro forma basis, Holdings has a stockholders'
deficit of approximately $93.6 million. See "Unaudited Pro Forma Consolidated
Financial Information."
Our substantial indebtedness could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations with respect to
the notes;
- increase our vulnerability to general adverse economic and industry
conditions;
14
<Page>
- limit our ability to fund future working capital, capital expenditures,
research and development costs and other general corporate requirements;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures, research and development efforts and other general corporate
purposes;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
- place us at a competitive disadvantage compared to our competitors that
have less debt; and
- limit, along with the financial and other restrictive covenants in our
indebtedness, among other things, our ability to borrow additional funds.
And, failing to comply with those covenants could result in an event of
default which, if not cured or waived, could have a material adverse
effect on us.
See "Description of the Exchange Notes" and "Description of Other
Indebtedness--TransDigm--The Credit Facility."
NO ESTABLISHED TRADING MARKET--YOU MAY BE UNABLE TO SELL YOUR EXCHANGE NOTES IF
AN ACTIVE TRADING MARKET FOR THE EXCHANGE NOTES DOES NOT DEVELOP.
The exchange notes do not have an established trading market, and none may
develop. We do not intend to apply for listing of the exchange notes on any
securities exchange or for quotation on any automated dealer quotation system.
The liquidity of any market for the exchange notes will depend on the number of
holders of the exchange notes, the interest of securities dealers in making a
market in the exchange notes and other factors. The initial purchasers of the
old notes have indicated to us that they intend to make a market in the exchange
notes, as permitted by applicable laws and regulations. However, the initial
purchasers are under no obligation to do so. At their discretion, the initial
purchasers could discontinue their market-making efforts at any time without
notice. Accordingly, we cannot assure you as to the development or liquidity of
any market for the exchange notes. If an active trading market does not develop,
the market price and liquidity of the exchange notes may be adversely affected.
If the exchange notes are traded, they may trade at a discount from their
initial offering price depending upon prevailing interest rates, the market for
similar securities, general economic conditions, our performance and business
prospects and certain other factors.
ADDITIONAL BORROWINGS AVAILABLE--DESPITE CURRENT INDEBTEDNESS LEVELS, WE AND OUR
SUBSIDIARIES MAY STILL BE ABLE TO INCUR SUBSTANTIALLY MORE DEBT. THIS COULD
FURTHER EXACERBATE THE RISKS ASSOCIATED WITH OUR SUBSTANTIAL LEVERAGE.
We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. The terms of the indenture do not fully prohibit us
or our subsidiaries from doing so. Our credit facility permits additional
borrowings of up to $180.0 million, including $30.0 million under our revolving
credit facility and $150.0 million of uncommitted additional bank borrowings and
all of those borrowings are senior to the notes and the guarantees. If new debt
is added to our and our subsidiaries' current debt levels, the related risks
that we and they now face could intensify.
See "Capitalization," "Selected Historical Consolidated Financial Data,"
"Description of the Exchange Notes" and "Description of Other
Indebtedness--TransDigm--The Credit Facility."
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ABILITY TO SERVICE DEBT--TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A
SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS
BEYOND OUR CONTROL.
Our ability to make payments on and to refinance our indebtedness, including
the notes, and to fund planned capital expenditures and research and development
efforts will depend on our ability to generate cash in the future. This, to a
certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control.
Based on our current level of operations and anticipated cost savings and
operating improvements, we believe our cash flow from operations, available cash
and available borrowings under our credit facility, will be adequate to meet our
future liquidity needs for at least the next several years.
We cannot assure you, however, that our business will generate sufficient
cash flow from operations, that currently anticipated cost savings and operating
improvements will be realized on schedule or at all or that future borrowings
will be available to us under our credit facility in an amount sufficient to
enable us to pay our indebtedness, including the notes, or to fund our other
liquidity needs. We may need to refinance all or a portion of our indebtedness,
including the notes, on or before maturity. We cannot assure you that we will be
able to refinance any of our indebtedness, including our credit facility and the
notes, on commercially reasonable terms or at all.
SUBORDINATION--YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES IS JUNIOR TO OUR
EXISTING INDEBTEDNESS AND POSSIBLY ALL OF OUR FUTURE BORROWINGS. FURTHER, THE
GUARANTEES OF THE NOTES ARE JUNIOR TO ALL OF THE GUARANTORS' EXISTING
INDEBTEDNESS AND POSSIBLY TO ALL OF THEIR FUTURE BORROWINGS.
The notes and the guarantees rank behind all of our and the guarantors'
existing indebtedness (other than trade payables) and all of our and their
future borrowings (other than trade payables), except any future indebtedness
that expressly provides that it ranks equal with, or junior in right of payment
to, the notes and the guarantees. As a result, upon any distribution to our
creditors or the creditors of the guarantors in a bankruptcy, liquidation or
reorganization or similar proceeding relating to us or the guarantors or our or
their property, the holders of our senior debt and the senior debt of the
guarantors will be entitled to be paid in full and in cash before any payment
may be made with respect to the notes or the guarantees.
In addition, all payments on the notes and the guarantees will be blocked in
the event of a payment default on senior debt and may be blocked for up to 179
of 360 consecutive days in the event of certain non-payment defaults on senior
debt.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to us or the guarantors, holders of the notes will
participate with trade creditors and all other holders of our subordinated
indebtedness and the subordinated indebtedness of the guarantors in the assets
remaining after we and the guarantors have paid all of our senior debt. However,
because the indenture requires that amounts otherwise payable to holders of the
notes in a bankruptcy or similar proceeding be paid to holders of senior debt
instead, holders of the notes may receive less, ratably, than holders of trade
payables in any such proceeding. In any of these cases, we and the guarantors
may not have sufficient funds to pay all of our creditors and holders of notes
may receive less, ratably, than the holders of senior debt.
Assuming we had completed the offering of the old notes on March 30, 2002,
the notes and the guarantees would have been subordinated to $180.0 million of
senior debt under our credit facility. In addition, the credit facility would
provide for additional senior debt borrowings of up to $180.0 million, including
$30.0 million under our revolving credit facility and $150.0 million of
uncommitted additional bank borrowings. Holdings' guarantee of the notes would
have been subordinated to $209.3 million of senior debt consisting of the
guarantee of the credit facility and the Holdings PIK Notes. We will be
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permitted to borrow substantial additional indebtedness, including senior debt,
in the future under the terms of the indenture.
LIMITED VALUE OF HOLDINGS GUARANTEE--YOU SHOULD NOT RELY ON THE GUARANTEE BY
HOLDINGS IN THE EVENT WE CANNOT MAKE PAYMENTS UPON THE NOTES.
The exchange notes will be guaranteed by Holdings, our parent holding
company, on a senior subordinated basis. You should not rely on this guarantee
because Holdings has no assets other than our capital stock. If we cannot make
payments under the notes, Holdings probably cannot make payments either. In
addition, this guarantee will be subordinated to all senior debt of Holdings
(consisting of Holdings' guarantee of the $180.0 million of borrowings under the
credit facility and the $29.2 million of borrowings consisting of the Holdings
PIK Notes, in each case, on a pro forma basis at March 30, 2002), whose holders
would be paid before you in the event of a liquidation.
RISKS RELATED TO TERRORISM--WE MAY NOT YET KNOW THE FULL IMPACT OF THE
SEPTEMBER 11TH TERRORIST ATTACKS, AND ANY FUTURE TERRORIST ATTACKS MAY HAVE A
MATERIAL ADVERSE IMPACT ON OUR BUSINESS.
On September 11, 2001, the United States was subjected to multiple terrorist
attacks, which involved the hijacking of four U.S. commercial aircraft. In the
aftermath of the terrorist attacks, passenger traffic on commercial flights was
significantly lower than prior to the attacks and many commercial airlines
reduced their operating schedules. The overall result of the terrorist attacks
was billions of dollars in losses to the airlines industry. The full impact of
these events and any future terrorist attacks is not yet known and could cause
airlines to delay purchases of spare parts and new aircraft. If demand for new
aircraft and spare parts decreases, there may be a decrease in demand for
certain of our products.
DEPENDENCE ON MAJOR CUSTOMERS--WE RELY HEAVILY ON CERTAIN CUSTOMERS FOR MUCH OF
OUR SALES.
Our two largest customers for the year ended September 30, 2001, were Aviall
(a distributor of aftermarket parts to airlines throughout the world) and Boeing
(including McDonnell Douglas). These customers accounted for approximately 17%
and 8%, respectively, of our consolidated net sales in fiscal 2001. Our top ten
customers for the year ended September 30, 2001 accounted for approximately 55%
of our consolidated net sales. The loss of any one or more of these key
customers could have a material adverse effect on our business. See
"Business--Customers" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
CUSTOMER CONTRACTS--WE GENERALLY DO NOT HAVE GUARANTEED FUTURE SALES OF OUR
PRODUCTS. FURTHER, WE ARE OBLIGATED UNDER FIXED PRICE CONTRACTS WITH SOME OF OUR
CUSTOMERS, SO WE TAKE THE RISK FOR COST OVERRUNS.
As is customary in our business, we do not have long-term contracts with
most of our aftermarket customers and therefore do not have guaranteed future
sales. Although we do have long-term contracts with many of our OEM customers,
some of those customers, such as the United States government, may terminate
these contracts on short notice and, in many other cases, our customers have not
committed to buy any minimum quantity of our products. In addition, we must
anticipate the future volume of orders based upon the historic purchasing
patterns of customers and upon our discussions with customers as to their
anticipated future requirements. Cancellations, reductions or delays in orders
by a customer or a group of customers could have a material adverse effect on
our business, financial condition and results of operations.
We also have entered into fixed-price contracts with some of our customers,
where we agree to perform the work for a fixed price and, accordingly, realize
all the benefit or detriment resulting from
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any decreased or increased costs for making these products. Sometimes we accept
a fixed-price contract for a product which we have not yet produced, which
increases the risks of delays or cost overruns.
A number of our contracts do not permit us to recover for increases in input
prices, taxes or labor costs, although some contracts provide for renegotiation
to address certain material adverse changes. Any such increases are likely to
have an adverse effect on our business.
AIRCRAFT COMPONENTS SEGMENT RISKS--OUR BUSINESS IS SENSITIVE TO THE NUMBER OF
FLIGHT HOURS THAT OUR CUSTOMERS' PLANES SPEND ALOFT AND TO OUR CUSTOMERS'
PROFITABILITY. THESE ITEMS ARE, IN TURN, AFFECTED BY GENERAL ECONOMIC
CONDITIONS. IN ADDITION, OUR SALES TO MANUFACTURERS OF NEW LARGE AIRCRAFT ARE
CYCLICAL.
We compete in the aircraft component segment of the aerospace industry. Our
business is directly affected by economic factors and other trends that affect
our customers, including projected market growth that may not materialize or be
sustainable. Specifically, the aircraft component segment is sensitive to
changes in the number of miles flown by paying customers of commercial airlines,
which we refer to as revenue passenger miles, and, to a lesser extent, to
changes in the profitability of the commercial airline industry and the size and
age of the worldwide aircraft fleet.
Revenue passenger miles and airline profitability have historically been
correlated with the general economic environment, although national and
international events can also play a key role. For example, revenue passenger
miles declined primarily as a result of increased security concerns among
airline customers following the events of September 11th. See "--Risks Related
to Terrorism." Any future reduction would reduce the use of commercial aircraft
and, consequently, the need for spare parts and new aircraft. During periods of
reduced airline profitability, some airlines may elect to delay purchases of
spare parts, preferring instead to deplete existing inventories. If demand for
new aircraft and spare parts decreases, there may be a decrease in demand for
certain of our products. Therefore, any future decline in revenue passenger
miles, airline profitability or the size of the worldwide aircraft fleet, for
any reason, could have a material adverse effect on our business. See
"Business--Industry Overview."
In addition, sales to manufacturers of large commercial aircraft, which
accounted for approximately 15% of our net sales in fiscal 2001, have
historically experienced periodic downturns. In the past, these sales have been
affected by airline profitability, which is impacted by fuel and labor costs and
price competition, and other things. Due in part to these factors, the number of
large commercial aircraft delivered has dropped from a peak of 914 aircraft in
1999. As a result of the events of September 11th and a weakened economy, many
industry analysts expect aircraft deliveries to trend significantly downward
from over 850 aircraft delivered in 2001. Prior downturns have adversely
effected our net sales, gross margin and net income. These and certain other
factors may cause a downturn in sales to manufacturers of large commercial
aircraft in the future which may have a material adverse effect on our business.
FLUCTUATIONS IN DEFENSE SPENDING--A DECLINE IN THE U.S. DEFENSE BUDGET MAY
ADVERSELY AFFECT OUR SALES OF PARTS USED IN MILITARY AIRCRAFT.
Approximately 20% of our sales in fiscal 2001 were related to products used
in military aircraft, over half of which were spare parts provided to various
governmental agencies.
The United States' defense budget has fluctuated in recent years, at times
resulting in reduced demand for new aircraft and, to a lesser extent, spare
parts. In addition, foreign military sales are affected by U.S. government
regulations, regulations by the purchasing foreign government and political
uncertainties in the United States and abroad. The United States' defense budget
may continue to fluctuate, and may decline, and sales of defense related items
to foreign governments may decrease. If there is a decline which reduces demand
for our components, our business may be adversely affected.
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In addition, the terms of defense contracts with the U.S. government
generally permit the government to terminate contracts partially or completely,
with or without cause, at any time. Any unexpected termination of a significant
government contract could have an adverse effect on our business.
GOVERNMENT REGULATION AND INDUSTRY OVERSIGHT--OUR BUSINESS WOULD BE ADVERSELY
AFFECTED IF WE LOST OUR GOVERNMENT OR INDUSTRY APPROVALS OR IF MORE ONEROUS
GOVERNMENT REGULATIONS WERE ENACTED OR INDUSTRY OVERSIGHT INCREASED.
The aircraft component industry is highly regulated in the United States and
in other countries. In order to sell our components, we and the components we
manufacture must be certified by the Federal Aviation Administration, the United
States Department of Defense and similar agencies in foreign countries and by
individual manufacturers.
If new and more stringent government regulations are adopted or if industry
oversight increases we might incur significant expenses to comply with any new
regulations or heightened industry oversight. If material authorizations or
approvals were revoked or suspended, our business would be adversely affected.
See "Business--Governmental Regulation."
To the extent that we operate outside the United States, we are subject to
the Foreign Corrupt Practices Act, or FCPA, which generally prohibits United
States companies and their intermediaries from bribing foreign officials for the
purpose of obtaining or keeping business or otherwise obtaining favorable
treatment. In particular, we may be held liable for actions taken by our
strategic or local partners even though such partners are foreign companies that
are not subject to the FCPA. Any determination that we have violated the FCPA
could result in sanctions that could have a material adverse effect on our
business.
RISKS ASSOCIATED WITH OUR WORKFORCE--WE ARE DEPENDENT ON OUR HIGHLY TRAINED
EMPLOYEES AND ANY WORK STOPPAGE OR DIFFICULTY HIRING SIMILAR EMPLOYEES WOULD
ADVERSELY AFFECT OUR BUSINESS.
Because our products are complicated and very detailed, we are highly
dependent on an educated and trained workforce. There is substantial competition
for skilled personnel in the aircraft component industry and we could be
adversely affected by a shortage of skilled employees. We may not be able to
fill new positions or vacancies created by expansion or turnover or attract and
retain qualified personnel.
At March 30, 2002, approximately 9% of our employees were represented by the
United Steelworkers Union, and approximately 6% were represented by the United
Automobile, Aerospace and Agricultural Implement Workers of America. Our
collective bargaining agreements with these labor unions expire in April 2005
and November 2004, respectively. Although we believe that our relations with our
employees are good, we cannot assure you that we will be able to negotiate a
satisfactory renewal of these collective bargaining agreements or that our
employee relations will remain stable. Because we maintain a relatively small
inventory of finished goods and operate on relatively short lead times for our
products, any work shortage could have a material adverse effect on our
business. See "Business--Employees."
DEPENDENCE ON KEY PERSONNEL--IF WE LOSE OUR SENIOR MANAGEMENT OR TECHNICAL
PERSONNEL, OUR BUSINESS MAY BE ADVERSELY AFFECTED.
Our success is dependent upon our senior management, as well as on our
ability to attract and retain qualified personnel, including engineers. There is
substantial competition for these kinds of personnel in the aircraft component
industry. We may not be able to retain our existing senior management or
engineering staff, fill new positions or vacancies created by expansion or
turnover, or attract additional qualified personnel. Although we have entered
into employment agreements with
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certain executive officers, these agreements may not be renewed. See
"Management--Employment Agreements."
RISKS ASSOCIATED WITH SUPPLIERS--OUR BUSINESS IS DEPENDENT ON THE AVAILABILITY
OF CERTAIN COMPONENTS AND RAW MATERIALS THAT WE BUY FROM SUPPLIERS.
Our business is affected by the price and availability of the raw materials
and component parts that we use to manufacture our components. Our business,
therefore, could be adversely affected by factors affecting our suppliers, or by
increased costs of such raw materials or components if we are unable to pass
along such price increases to our customers. Because we maintain a relatively
small inventory of raw materials and component parts, our business could be
adversely affected if we are unable to obtain these raw materials and components
from our suppliers in the quantities we require or on favorable terms. Although
we believe that we could identify alternative suppliers, or alternative raw
materials or component parts, the lengthy and expensive FAA and OEM
certification process associated with aerospace products could prevent efficient
replacement of a material or supplier and could have a material adverse effect
on our business. See "Business--Raw Materials and Patents."
POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES--WE MAY BE LIABLE FOR PENALTIES
UNDER A VARIETY OF ENVIRONMENTAL LAWS, EVEN IF WE DID NOT CAUSE ANY
ENVIRONMENTAL PROBLEMS. CHANGES IN ENVIRONMENTAL LAWS OR UNEXPECTED
INVESTIGATIONS COULD ADVERSELY AFFECT OUR BUSINESS.
Our business and our facilities are subject to a number of federal, state
and local laws and regulations, which govern, among other things, the discharge
of hazardous materials into the air and water as well as the handling, storage
and disposal of such materials.
Pursuant to certain environmental laws, a current or previous owner or
operator of land may be liable for the costs of investigation, removal or
remediation of hazardous materials at such property. These laws typically impose
liability whether or not the owner or operator knew of, or was responsible for,
the presence of any hazardous materials. Persons who arrange (as defined under
these statutes) for the disposal or treatment of hazardous materials also may be
liable for the costs of investigation, removal or remediation of such substances
at the disposal or treatment site, regardless of whether the affected site is
owned or operated by them. See "Business--Environmental Matters."
Because we own and operate a number of facilities, and because we arrange
for the disposal of hazardous materials at many disposal sites, we may incur
costs for investigation, removal and remediation, as well as capital costs
associated with compliance with environmental laws. Although such environmental
costs have not been material in the past and are not expected to be material in
the future, changes in environmental laws or unexpected investigation and
clean-up costs could have a material adverse effect on our business.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS--OUR INTERNATIONAL BUSINESS
EXPOSES US TO RISKS RELATING TO INCREASED REGULATION AND POLITICAL OR ECONOMIC
INSTABILITY, GLOBALLY OR WITHIN CERTAIN FOREIGN COUNTRIES.
Our export sales to customers were approximately $54.8 million,
$36.2 million and $30.7 million in fiscal 2001, fiscal 2000 and fiscal 1999,
respectively. In addition, a portion of the products we sell to domestic
distributors is resold to foreign end-users. These sales are subject to numerous
additional risks, including the impact of foreign government regulations,
currency fluctuations, political uncertainties and differences in business
practices.
Foreign governments could adopt regulations or take other actions that would
have a direct or indirect adverse impact on our business or market opportunities
abroad. Furthermore, the political, cultural and economic climate outside the
United States may not be favorable to our business and growth strategy.
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RISKS RELATED TO POTENTIAL FUTURE ACQUISITIONS--WE INTEND TO PURSUE FUTURE
ACQUISITIONS AND OUR BUSINESS MAY BE ADVERSELY AFFECTED IF WE CANNOT CONSUMMATE
ACQUISITIONS ON SATISFACTORY TERMS OR EFFECTIVELY INTEGRATE NEW OPERATIONS.
We intend to pursue acquisitions that we believe will present opportunities
to realize significant synergies, operating expense reductions or overhead cost
savings and increase our market position. This acquisition strategy may require
substantial capital, and we may not be able to raise the necessary funds on
terms satisfactory to us or at all. Our acquisition strategy is also limited by
the availability of suitable acquisition candidates. We cannot assure you that
we will be able to consummate any future acquisitions.
We regularly engage in discussions with respect to potential acquisition and
investment opportunities. If we consummate an acquisition, our capitalization
and results of operations may change significantly and you will not have the
opportunity to evaluate the economic, financial and other relevant information
that we will consider in determining the application of these funds. Future
acquisitions would likely result in the incurrence of debt and contingent
liabilities and an increase in interest expense and amortization expenses or
periodic impairment charges related to goodwill and other intangible assets,
which could have a material adverse effect upon our business.
Acquisitions involve numerous risks, including difficulties in the
assimilation of the operations, technologies, services and products of the
acquired companies and the diversion of management's attention from other
business concerns. For all of these reasons, if any such acquisitions occur, our
business could be adversely affected.
COMPETITION--WE FACE SIGNIFICANT COMPETITION.
We operate in a highly competitive global industry and compete against a
number of companies, including divisions of larger companies, some of which have
significantly greater financial, technological and marketing resources than us.
Competitors in our product lines are both U.S. and foreign companies and range
in size from divisions of large corporations to small privately held entities.
We believe that our ability to compete depends on high product performance,
consistently high quality, short lead-time and timely delivery, competitive
price, superior customer service and support and continued certification under
customer quality requirements and assurance programs. Our inability to compete
successfully with respect to these or other factors may materially adversely
affect our business and financial condition. See "Business--Competition."
CONTROL BY ODYSSEY--WE ARE CONTROLLED BY ODYSSEY, WHOSE INTERESTS MAY NOT BE
ALIGNED WITH YOURS.
Odyssey and its co-investors indirectly own approximately 83.7% of the
common equity interests in our parent company, Holdings and, therefore, have the
power, subject to certain exceptions, to control Holdings. They also control the
appointment of management and the entering into of mergers, sales of
substantially all assets and other extraordinary transactions. The interests of
Odyssey may not in all cases be aligned with yours. See "Certain Relationships
and Related Transactions."
PRODUCT LIABILITY; CLAIMS EXPOSURE--WE COULD BE ADVERSELY AFFECTED AS A RESULT
OF A LAWSUIT IF ONE OF OUR COMPONENTS CAUSES AN AIRCRAFT TO CRASH AND WE ARE NOT
COVERED BY OUR INSURANCE POLICIES.
Our operations expose us to potential liabilities for personal injury or
death as a result of the failure of an aircraft component that has been
designed, manufactured or serviced by us. While we believe that our liability
insurance is adequate to protect us from future products liability claims, if
claims were to arise, such insurance coverage may not be adequate.
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Additionally, we may not be able to maintain insurance coverage in the
future at an acceptable cost. Any such liability not covered by insurance or for
which third party indemnification is not available could have a material adverse
effect on our business.
FINANCING CHANGE OF CONTROL OFFER--WE MAY NOT HAVE THE ABILITY TO RAISE THE
FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE
INDENTURE.
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all outstanding notes at 101% of the
principal amount thereof plus accrued and unpaid interest, and additional
interest, if any, to the date of repurchase. However, it is possible that we
will not have sufficient funds at the time of the change of control to make the
required repurchase of notes or that restrictions in our credit facility will
not allow such repurchases. In addition, certain important corporate events,
such as leveraged recapitalizations that would increase the level of our
indebtedness, would not constitute a "Change of Control" under the indenture.
See "Description of the Exchange Notes--Change of Control."
FRAUDULENT CONVEYANCE MATTERS--FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER
SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN
PAYMENTS RECEIVED FROM GUARANTORS.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a guarantee could be voided, or claims in respect of a
guarantee could be subordinated to all other debts of that guarantor if, among
other things, the guarantor, at the time it incurred the indebtedness evidenced
by its guarantee:
- received less than reasonably equivalent value or fair consideration for
the incurrence of such guarantee; or
- was insolvent or rendered insolvent by reason of such incurrence; or
- was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by that guarantor pursuant to its guarantee could
be voided and required to be returned to the guarantor, or to a fund for the
benefit of the creditors of us or the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
- the sum of its debts, including contingent liabilities, were greater than
the fair saleable value of all of its assets, or
- if the present fair saleable value of its assets were less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature, or
- it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that each guarantor, after giving effect to its
guarantee of the notes, will not be insolvent, will not have unreasonably small
capital for the business in which it is engaged and will not have incurred debts
beyond its ability to pay such debts as they mature. We cannot assure you,
however, as to what
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standard a court would apply in making these determinations or that a court
would agree with our conclusions in this regard.
FORWARD-LOOKING STATEMENTS--OUR FORWARD-LOOKING STATEMENTS MAY PROVE TO BE
INACCURATE.
This prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act, including
statements about forecasts, our plans, strategies and prospects in this
prospectus. Although we believe that our plans, intentions and expectations
reflected in or suggested by these forward-looking statements are reasonable, we
can give no assurance that they will be achieved. Important factors that could
cause actual results to differ materially from the forward-looking statements we
make in this prospectus are set forth above in this "Risk Factors" section and
elsewhere in this prospectus. All forward-looking statements attributable to us
or persons acting on our behalf are expressly qualified in their entirety by
these cautionary statements.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
We sold the old notes to Deutsche Bank Securities Inc. and Credit Suisse
First Boston Corporation, the initial purchasers, on June 7, 2002. The initial
purchasers subsequently resold the old notes to qualified institutional buyers
pursuant to Rule 144A under the Securities Act and to non-U.S. persons outside
the United States in reliance on Regulation S under the Securities Act. In
connection with the issuance of the old notes, we and the guarantors entered
into a registration rights agreement with the initial purchasers of the old
notes. The registration rights agreement requires us to register the exchange
notes under the federal securities laws and offer to exchange the exchange notes
for the old notes. The exchange notes will be issued without a restrictive
legend and generally may be resold without registration under the federal
securities laws. We are effecting the exchange offer to comply with the
registration rights agreement.
The registration rights agreement requires us and the guarantors to:
- file a registration statement for the exchange offer and the exchange
notes within 70 days after the issue date of the old notes;
- use our reasonable best efforts to cause the registration statement to
become effective under the Securities Act within 160 days after the issue
date of the old notes;
- use our reasonable best efforts to consummate the exchange offer within
195 days after the issue date of the old notes; and
- file a shelf registration statement for the resale of the old notes under
certain circumstances and use our reasonable best efforts to cause such
registration statement to become effective under the Securities Act.
These requirements under the registration rights agreement will be satisfied
when we complete the exchange offer. However, if we fail to meet any of these
requirements, we must pay additional interest on the old notes at the rate of
0.50% per year until the applicable requirement has been met. We must pay an
additional 0.50% per year for each 90 days that a requirement has not been met.
However, we will not be required to pay more than 1.00% per year in additional
interest on the old notes. Immediately following the completion of a
requirement, any additional interest with respect to that particular requirement
will cease to accrue. We have also agreed to keep the registration statement for
the exchange offer effective for at least 20 days (or longer, if required by
applicable law) after the date on which notice of the exchange offer is mailed
to holders.
Under the registration rights agreement, our obligations to register the
exchange notes will terminate upon the completion of the exchange offer.
However, under certain circumstances specified in the registration rights
agreement, we may be required to file a "shelf" registration statement for a
continuous offer in connection with the old notes pursuant to Rule 415 under the
Securities Act.
This summary includes only the material terms of the registration rights
agreement. For a full description, you should refer to the complete copy of the
registration rights agreement, which has been filed as an exhibit to the
exchange offer registration statement. See "Where You Can Find More
Information."
TRANSFERABILITY OF THE EXCHANGE NOTES
Based on an interpretation of the Securities Act by the staff of the
Commission in several no-action letters issued to third parties unrelated to us,
we believe that you, or any other person receiving exchange notes, may offer for
resale, resell or otherwise transfer such notes without complying with the
registration and prospectus delivery requirements of the federal securities
laws, if:
- you, or the person or entity receiving such exchange notes, is acquiring
such notes in the ordinary course of business;
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- neither you nor any such person or entity is engaging in or intends to
engage in a distribution of the exchange notes within the meaning of the
federal securities laws;
- neither you nor any such person or entity has an arrangement or
understanding with any person or entity to participate in any distribution
of the exchange notes;
- neither you nor any such person or entity is an "affiliate" of TransDigm
or the guarantors, as such term is defined under Rule 405 under the
Securities Act; and
- you are not acting on behalf of any person or entity who could not
truthfully make these statements.
To participate in the exchange offer, you must represent as the holder of
old notes that each of these statements is true.
Any holder of old notes who is our affiliate or who intends to participate
in the exchange offer for the purpose of distributing the exchange notes:
- will not be able to rely on the interpretation of the staff of the
Commission set forth in the no-action letters described above; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer of the notes,
unless the sale or transfer is made pursuant to an exemption from those
requirements.
Broker-dealers receiving exchange notes in exchange for old notes acquired
for their own account through market-making or other trading activities may not
rely on this interpretation by the Commission. Such broker-dealers may be deemed
to be "underwriters" within the meaning of the Securities Act and must therefore
acknowledge, by signing the letter of transmittal, that they will deliver a
prospectus meeting the requirements of the Securities Act in connection with
resale of the exchange notes. The letter of transmittal states that by
acknowledging that it will deliver, and by delivering, a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The Commission has taken the position that
participating broker-dealers may fulfill their prospectus delivery requirements
with respect to the exchange notes, other than a resale of an unsold allotment
from the original sale of the old notes, with the prospectus contained in the
exchange offer registration statement. As described above, under the
registration rights agreement, we have agreed to allow participating
broker-dealers and other persons, if any, subject to similar prospectus delivery
requirements to use the prospectus contained in the exchange offer registration
statement in connection with the resale of the exchange notes. See "Plan of
Distribution."
TERMS OF THE EXCHANGE OFFER; ACCEPTANCE OF TENDERED NOTES
Upon the terms and subject to the conditions in this prospectus and in the
letter of transmittal, we will accept any and all old notes validly tendered and
not withdrawn prior to 5:00 p.m., New York City time, on , 2002. We
will issue $1,000 principal amount of exchange notes in exchange for each $1,000
principal amount of old notes accepted in the exchange offer. Holders may tender
some or all of their notes pursuant to the exchange offer. However, notes may be
tendered only in integral multiples of $1,000 in principal amount.
The form and terms of the exchange notes are the same as the form and terms
of the old notes except that:
- the exchange notes have been registered under the federal securities laws
and will not bear any legend restricting their transfer;
- the exchange notes bear a different CUSIP number from the old notes; and
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<Page>
- the holders of the exchange notes will not be entitled to certain rights
under the registration rights agreement, including the provisions for an
increase in the interest rate on the old notes in some circumstances
relating to the timing of the exchange offer.
The exchange notes will evidence the same debt as the old notes. Holders of
exchange notes will be entitled to the benefits of the indenture.
As of the date of this prospectus, old notes representing $75.0 million in
aggregate principal amount were outstanding. We have fixed , 2002 as
the date on which this prospectus and the letter of transmittal will be mailed
initially. We intend to conduct the exchange offer in accordance with the
applicable requirements of the Exchange Act and the rules and regulations of the
Commission under the Exchange Act.
We shall be deemed to have accepted validly tendered old notes when and if
we have given oral or written notice to the exchange agent of our acceptance.
The exchange agent will act as agent for the tendering holders for the purpose
of receiving the exchange notes from us. If any tendered notes are not accepted
for exchange because of an invalid tender, the occurrence of other events
described in this prospectus or otherwise, we will return the certificates for
any unaccepted notes, at our expense, to the tendering holder as promptly as
practicable after the expiration of the exchange offer.
Holders who tender old notes in the exchange offer will not be required to
pay brokerage commissions or fees with respect to the exchange of notes or,
subject to the instructions in the letter of transmittal, transfer taxes with
respect to the exchange of notes. We will pay all charges and expenses in
connection with the exchange offer as described under the subheading
"--Solicitation of Tenders; Fees and Expenses." However, we will not pay any
taxes incurred in connection with a holder's request to have exchange notes or
non-exchanged notes issued in the name of a person other than the registered
holder. See "--Transfer Taxes" in this section below.
EXPIRATION DATE; EXTENSIONS; AMENDMENT
The exchange offer will expire at 5:00 p.m., New York City time, on
, 2002, or the "Expiration Date," unless we extend the exchange
offer. To extend the exchange offer, we will notify the exchange agent and each
registered holder of any extension before 9:00 a.m. New York City time, on the
next business day after the previously scheduled Expiration Date. We reserve the
right to extend the exchange offer, delay accepting any tendered notes or, if
any of the conditions described below under the heading "--Conditions to the
Exchange Offer" have not been satisfied, to terminate the exchange offer. We
also reserve the right to amend the terms of the exchange offer in any manner.
We will give oral or written notice of such delay, extension, termination or
amendment to the exchange agent.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will bear interest from the most recent interest payment
date to which interest has been paid on the old notes or, if no interest has
been paid, from June 1, 2002. Interest on the old notes accepted for exchange
will cease to accrue upon the issuance of the exchange notes.
Interest on the notes is payable semi-annually on each June 1 and
December 1 of each year beginning on December 1, 2002.
PROCEDURES FOR TENDERING OLD NOTES
Only a holder of old notes may tender notes in the exchange offer. To tender
in the exchange offer, you must:
- complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal;
- have the signatures guaranteed if required by the letter of transmittal;
and
26
<Page>
- mail or otherwise deliver the letter of transmittal or such facsimile,
together with the old notes and any other required documents, to the
exchange agent prior to 5:00 p.m., New York City time, on the Expiration
Date.
To tender old notes effectively, you must complete the letter of transmittal
and other required documents and the exchange agent must receive all the
documents prior to 5:00 p.m., New York City time, on the Expiration Date.
Delivery of the old notes may be made by book-entry transfer in accordance with
the procedures described below. The exchange agent must receive confirmation of
book-entry transfer prior to the Expiration Date.
By executing the letter of transmittal you will make to us the
representations set forth in the first paragraph under the heading
"--Transferability of the Exchange Notes."
All tenders not withdrawn before the Expiration Date and the acceptance of
the tender by us will constitute agreement between you and us under the terms
and subject to the conditions in this prospectus and in the letter of
transmittal including an agreement to deliver good and marketable title to all
tendered notes prior to the Expiration Date free and clear of all liens,
charges, claims, encumbrances, adverse claims and rights and restrictions of any
kind.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, YOU SHOULD USE AN OVERNIGHT OR HAND
DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW FOR SUFFICIENT TIME TO ENSURE
DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION OF THE EXCHANGE OFFER. YOU
MAY REQUEST YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE TO
EFFECT THESE TRANSACTIONS FOR YOU. YOU SHOULD NOT SEND ANY NOTE, LETTER OF
TRANSMITTAL OR OTHER REQUIRED DOCUMENT TO US.
If your notes are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and you desire to tender, you should
contact the registered holder promptly and instruct the registered holder to
tender on your behalf. See "Instruction to Registered Holder and/or Book-Entry
Transfer Facility Participant from Beneficial Owner" included with the letter of
transmittal.
The exchange of notes will be made only after timely receipt by the exchange
agent of certificates for old notes, a letter of transmittal and all other
required documents, or timely completion of a book-entry transfer. If any
tendered notes are not accepted for any reason or if old notes are submitted for
a greater principal amount than the holder desires to exchange, the exchange
agent will return such unaccepted or non-exchanged notes to the tendering holder
promptly after the expiration or termination of the exchange offer. In the case
of old notes tendered by book-entry transfer, the exchange agent will credit the
non-exchanged notes to an account maintained with The Depository Trust Company.
GUARANTEE OF SIGNATURES
Holders must obtain a guarantee of all signatures on a letter of transmittal
or a notice of withdrawal unless the old notes are tendered:
- by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter of
transmittal; or
- for the account of an "eligible guarantor institution."
Signature guarantees must be made by a member of or participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program, the Stock Exchange Medallion Program, or by an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 promulgated
under the Securities Exchange Act (namely, banks; brokers and dealers; credit
unions; national securities exchanges; registered securities associations;
learning agencies; and savings associations).
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<Page>
SIGNATURE ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS
If the letter of transmittal is signed by a person other than the registered
holder of the old notes, the registered holder must endorse the old notes or
provide a properly completed bond power. Any such endorsement or bond power must
be signed by the registered holder as that registered holder's name appears on
the old notes. Signatures on such old notes and bond powers must be guaranteed
by an "eligible guarantor institution."
If you sign the letter of transmittal or any old notes or bond power as a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation, fiduciary or in any other representative capacity, you must so
indicate when signing. You must submit satisfactory evidence to the exchange
agent of your authority to act in such capacity.
BOOK-ENTRY TRANSFER
We understand that the exchange agent will make a request promptly after the
date of this prospectus to establish accounts with respect to the old notes at
the book-entry transfer facility, The Depository Trust Company, for the purpose
of facilitating the exchange offer. Subject to the establishment of the
accounts, any financial institution that is a participant in DTC's system may
make book-entry delivery of old notes by causing DTC to transfer the notes into
the exchange agent's account in accordance with DTC's procedures for such
transfer. However, although delivery of old notes may be effected through
book-entry transfer into the exchange agent's account at DTC, the letter of
transmittal (or a manually signed facsimile of the letter of transmittal) with
any required signature guarantees, or an "agent's message" in connection with a
book-entry transfer, and any other required documents, must, in any case, be
transmitted to and received by the exchange agent, or the guaranteed delivery
procedures set forth below must be complied with, in each case, prior to the
Expiration Date. Delivery of documents to DTC does not constitute delivery to
the exchange agent.
The exchange agent and DTC have confirmed that the exchange offer is
eligible for the DTC Automated Tender Offer Program. Accordingly, the DTC
participants may electronically transmit their acceptance of the exchange offer
by causing the DTC to transfer old notes to the exchange agent in accordance
with DTC's Automated Tender Offer Program procedures for transfer. Upon receipt
of such holder's acceptance through the Automated Tender Offer Program, DTC will
edit and verify the acceptance and send an "agent's message" to the exchange
agent for its acceptance. Delivery of tendered notes must be made to the
exchange agent pursuant to the book-entry delivery procedures set forth above,
or the tendering DTC participant must comply with the guaranteed delivery
procedures set forth below.
The term "agent's message" means a message transmitted by DTC, and received
by the exchange agent and forming part of the confirmation of a book-entry
transfer, which states that:
- DTC has received an express acknowledgment from the participant in DTC
tendering notes subject to the book-entry confirmation;
- the participant has received and agrees to be bound by the terms of the
letter of transmittal; and
- we may enforce such agreement against such participant.
In the case of an agent's message relating to guaranteed delivery, the term
means a message transmitted by DTC and received by the exchange agent, which
states that DTC has received an express acknowledgment from the participant in
DTC tendering notes that such participant has received and agrees to be bound by
the notice of guaranteed delivery.
DETERMINATION OF VALID TENDERS; TRANSDIGM'S RIGHTS UNDER THE EXCHANGE OFFER
All questions as to the validity, form, eligibility, time of receipt,
acceptance and withdrawal of tendered notes will be determined by us in our sole
discretion, which determination will be final and
28
<Page>
binding on all parties. We expressly reserve the absolute right, in our sole
discretion, to reject any or all old notes not properly tendered or any old
notes the acceptance of which would, in the opinion of our counsel, be unlawful.
We also reserve the absolute right in our sole discretion to waive or amend any
conditions of the exchange offer or to waive any defects or irregularities of
tender for any particular note, whether or not similar defects or irregularities
are waived in the case of other notes. Our interpretation of the terms and
conditions of the exchange offer will be final and binding on all parties. No
alternative, conditional or contingent tenders will be accepted. Unless waived,
any defects or irregularities in connection with tenders of old notes must be
cured by the tendering holder within such time as we determine.
Although we intend to notify holders of defects or irregularities in tenders
of old notes, neither we, the exchange agent or any other person shall be under
any duty to give notification of defects or irregularities in such tenders or
will incur any liability to holders for failure to give such notification.
Holders will be deemed to have tendered old notes only when such defects or
irregularities have been cured or waived. The exchange agent will return to the
tendering holder, after the expiration of the exchange offer, any old notes that
are not properly tendered and as to which the defects have not been cured or
waived.
GUARANTEED DELIVERY PROCEDURES
If you desire to tender old notes pursuant to the exchange offer and
(1) certificates representing such old notes are not immediately available,
(2) time will not permit your letter of transmittal, certificates representing
such old notes and all other required documents to reach the exchange agent on
or prior to the Expiration Date, or (3) the procedures for book-entry transfer
(including delivery of an agent's message) cannot be completed on or prior to
the Expiration Date, you may nevertheless tender such notes with the effect that
such tender will be deemed to have been received on or prior to the Expiration
Date if all the following conditions are satisfied:
- you must effect your tender through an "eligible guarantor institution,"
which is defined above under the heading "--Guarantee of Signatures;"
- a properly completed and duly executed notice of guaranteed delivery,
substantially in the form provided by us herewith, or an agent's message
with respect to guaranteed delivery that is accepted by us, is received by
the exchange agent on or prior to the Expiration Date as provided below;
and
- the certificates for the tendered notes, in proper form for transfer (or a
book-entry confirmation of the transfer of such notes into the exchange
agent account at DTC as described above), together with a letter of
transmittal (or a manually signed facsimile of the letter of transmittal)
properly completed and duly executed, with any signature guarantees and
any other documents required by the letter of transmittal or a properly
transmitted agent's message, are received by the exchange agent within
three New York Stock Exchange, Inc. trading days after the date of
execution of the notice of guaranteed delivery.
The notice of guaranteed delivery may be sent by hand delivery, facsimile
transmission or mail to the exchange agent and must include a guarantee by an
eligible guarantor institution in the form set forth in the notice of guaranteed
delivery.
WITHDRAWAL RIGHTS
Except as otherwise provided in this prospectus, you may withdraw tendered
notes at any time before 5:00 p.m., New York City time, on , 2002. For a
withdrawal of tendered notes to be effective, a written or facsimile
transmission notice of withdrawal must be received by the exchange agent on or
prior to the expiration of the exchange offer. For DTC participants, a written
notice of
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<Page>
withdrawal may be made by electronic transmission through DTC's Automated Tender
Offer Program. Any notice of withdrawal must:
- specify the name of the person having tendered the notes to be withdrawn;
- identify the notes to be withdrawn, including the certificate number(s)
and principal amount of such notes, or, in the case of notes transferred
by book-entry transfer, the name and number of the account at DTC;
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which such notes were tendered, with any
required signature guarantees, or be accompanied by documents of transfer
sufficient to have the trustee with respect to the notes register the
transfer of such notes into the name of the person withdrawing the tender
and a properly completed irrevocable proxy authorizing such person to
effect such withdrawal on behalf of such holder; and
- specify the name in which any such notes are to be registered, if
different from that of the registered holder.
Any permitted withdrawal of notes may not be rescinded. Any notes properly
withdrawn will thereafter be deemed not to have been validly tendered for
purposes of the exchange offer. The exchange agent will return any withdrawn
notes without cost to the holder promptly after withdrawal of the notes. Holders
may retender properly withdrawn notes at any time before the expiration of the
exchange offer by following one of the procedures described above under the
heading "--Procedures for Tendering Old Notes."
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the exchange offer, we shall not be
required to accept for exchange, or issue any exchange notes for, any old notes,
and may terminate or amend the exchange offer as provided in this prospectus
before the acceptance of the old notes, if we determine that the exchange offer
violates any law, statute, rule, regulation or interpretation by the staff of
the Commission or any order of any governmental agency or court of competent
jurisdiction.
These conditions are for the sole benefit of TransDigm and the guarantors
and may be asserted or waived by us in whole or in part at any time and from
time to time in our sole discretion. Our failure to exercise any of these rights
at any time will not be deemed a waiver of such rights and each of such rights
shall be deemed an ongoing right which may be asserted by us at any time and
from time to time.
In addition, we will not accept for exchange any old notes tendered, and no
exchange notes will be issued in exchange for those old notes, if at any time
any stop order is threatened or issued with respect to the registration
statement for the exchange offer and the exchange notes or the qualification of
the indenture under the Trust Indenture Act of 1939. In any such event, we must
use our reasonable best efforts to obtain the withdrawal or lifting of any stop
order at the earliest possible moment.
EFFECT OF NOT TENDERING
To the extent old notes are tendered and accepted in the exchange offer, the
principal amount of old notes will be reduced by the amount so tendered and a
holder's ability to sell untendered old notes could be adversely affected. In
addition, after the completion of the exchange offer, the old notes will remain
subject to restrictions on transfer. Since the old notes have not been
registered under the federal securities laws, they bear a legend restricting
their transfer absent registration or the availability of a specific exemption
from registration. The holders of old notes not tendered will have no further
registration rights, except for the limited registration rights described above
under the heading "--Purpose of the Exchange Offer."
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Accordingly, the notes not tendered may be resold only:
- to us or our subsidiaries;
- pursuant to a registration statement which has been declared effective
under the Securities Act;
- for so long as the notes are eligible for resale pursuant to Rule 144A
under the Securities Act to a person the seller reasonably believes is a
qualified institutional buyer that purchases for its own account or for
the account of a qualified institutional buyer to whom notice is given
that the transfer is being made in reliance on Rule 144A; or
- pursuant to any other available exemption from the registration
requirements of the Securities Act (in which case TransDigm and the
trustee shall have the right to require the delivery of an opinion of
counsel, certifications and/or other information satisfactory to TransDigm
and the trustee), subject in each of the foregoing cases to any
requirements of law that the disposition of the seller's property or the
property of such investor account or accounts be at all times within its
or their control and in compliance with any applicable state securities
laws.
Upon completion of the exchange offer, due to the restrictions on transfer
of the old notes and the absence of such restrictions applicable to the exchange
notes, it is likely that the market, if any, for old notes will be relatively
less liquid than the market for exchange notes. Consequently, holders of old
notes who do not participate in the exchange offer could experience significant
diminution in the value of their old notes, compared to the value of the
exchange notes.
REGULATORY APPROVALS
Other than the federal securities laws, there are no federal or state
regulatory requirements that we must comply with and there are no approvals that
we must obtain in connection with the exchange offer.
SOLICITATION OF TENDERS; FEES AND EXPENSES
We will bear the expenses of soliciting tenders. We are mailing the
principal solicitation. However, our officers and regular employees and those of
our affiliates may make additional solicitation by telegraph, telecopy,
telephone or in person.
We have not retained any dealer-manager in connection with the exchange
offer. We will not make any payments to brokers, dealers, or others soliciting
acceptances of the exchange offer. However, we may pay the exchange agent
reasonable and customary fees for its services and may reimburse it for its
reasonable out-of-pocket expenses.
We will pay the cash expenses incurred in connection with the exchange
offer. These expenses include fees and expenses of the exchange agent and
trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the old
notes. The carrying value is face value plus a $2.0 million premium received in
connection with the offering of the old notes. Accordingly, we will recognize no
gain or loss for accounting purposes. The expenses of the exchange offer will be
expensed over the term of the exchange notes.
TRANSFER TAXES
We will pay all transfer taxes, if any, required to be paid by TransDigm in
connection with the exchange of the old notes for the exchange notes. However,
holders who instruct us to register exchange notes in the name of, or request
that old notes not tendered or not accepted for exchange be
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returned to, a person other than the registered holder will be responsible for
the payment of any transfer tax arising from such transfer.
THE EXCHANGE AGENT
State Street Bank and Trust Company is serving as the exchange agent for the
exchange offer. ALL EXECUTED LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE
EXCHANGE AGENT AT THE ADDRESS LISTED BELOW. Questions, requests for assistance
and requests for additional copies of this prospectus or the letter of
transmittal should be directed to the exchange agent at the address or telephone
number listed below.
<Table>
By Registered or Certified Mail: State Street Bank and Trust Company
P.O. Box 778
Boston, MA 02102-0078
Attention: Janice Lee
By Overnight Courier or By Hand: State Street Bank and Trust Company
Two Avenue de Lafayette
5th Floor, Corporate Trust Window
Boston, MA 02111-1724
Attention: Janice Lee
By Facsimile: (617) 662-1452
Confirm by Telephone: (617) 662-1525
</Table>
Originals of all documents sent by facsimile should be promptly sent to the
exchange agent by registered or certified mail, by hand, or by overnight
delivery service.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
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USE OF PROCEEDS
We will not receive any proceeds from the issuance of the exchange notes in
the exchange offer. We will receive in exchange old notes in like principal
amount. We will retire or cancel all of the old notes tendered in the exchange
offer.
On June 7, 2002 we issued and sold the old notes. The net proceeds from the
sale of the old notes were approximately $74.0 million after deducting expenses
of the offering and expenses relating to the use of proceeds therefrom,
including initial purchasers' discounts and commissions. We used the net
proceeds to repay all of our existing indebtedness under the Tranche A facility
of our credit facility, the outstanding balance of which was $35.5 million as of
March 30, 2002 and to repay portions of our indebtedness under the Tranche B and
Tranche C facilities of our credit facility on a pro rata basis, the outstanding
balances of which were $104.3 million and $114.1 million as of March 30, 2002,
respectively. As of March 30, 2002, the loans under the Tranche A facility, the
Tranche B facility and the Tranche C facility bore interest rates of 4.9%, 5.4%
and 5.4%, respectively, and these facilities mature on November 15, 2004,
May 15, 2006 and May 15, 2007, respectively.
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CAPITALIZATION
The following table sets forth the consolidated capitalization of Holdings
as of March 30, 2002, on a historical basis and a pro forma basis after giving
effect to the offering of the old notes and the use of proceeds therefrom as if
it had occurred on March 30, 2002. This table should be read in conjunction with
the information contained in "Use of Proceeds," "Unaudited Pro Forma
Consolidated Financial Information" and the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" as
well as the Consolidated Historical Financial Statements and the notes thereto
included elsewhere in this prospectus. All amounts are presented in thousands.
<Table>
<Caption>
MARCH 30, 2002
---------------------
ACTUAL PRO FORMA
------ ---------
(UNAUDITED)
Cash and cash equivalents................................... $ 28,975 $ 28,975
========= =========
Total debt (including current maturities):
Credit facility:(1)
Revolving credit facility............................... $ -- $ --
Tranche A facility(2)................................... 35,547 2,584
Tranche B facility...................................... 104,298 84,762
Tranche C facility...................................... 114,137 92,683
10 3/8%Senior Subordinated Notes due 2008(3).............. 125,000 202,006
--------- ---------
Total TransDigm Inc. debt............................... 378,982 382,035
--------- ---------
Holdings PIK Notes(4)..................................... 29,222 29,222
--------- ---------
Total Holdings debt..................................... 408,204 411,257
--------- ---------
Holdings Redeemable Common Stock(4)......................... 1,701 1,701
Holdings 16% Cumulative Redeemable Preferred Stock(4)....... 14,558 14,558
Stockholders' equity (deficit):
Common stock $0.01 par value and paid-in capital.......... 102,080 102,080
Other stockholders' equity (deficit)...................... (194,619) (195,680)
--------- ---------
Total stockholders' equity (deficit).................... (92,539) (93,600)
--------- ---------
Total capitalization........................................ $ 331,924 $ 333,916
========= =========
</Table>
- ------------------------
(1) The credit facility includes a $30.0 million revolving credit facility, of
which $30.0 million was available for borrowing by us as of March 30, 2002.
The indebtedness under the credit facility is an obligation of
TransDigm Inc. and is guaranteed by Holdings and certain subsidiaries of
TransDigm Inc. See "Description of Other Indebtedness--TransDigm--The Credit
Facility."
(2) We used a portion of the proceeds from the offering of the old notes to
fully repay the outstanding balance of the Tranche A facility as of June 7,
2002, the closing date of the offering. Prior to June 7, 2002, we repaid
$2,584 of the Tranche A facility. Because we do not give pro forma effect to
the $2,584 repayment, this amount appears in the pro forma column.
(3) This indebtedness represents an obligation of TransDigm Inc. and is
guaranteed by Holdings and certain subsidiaries of TransDigm Inc. Pro forma
amount includes $75.0 million face value of the old notes and the
$2.0 million premium paid in connection with the issuance of the old notes.
(4) The Holdings PIK Notes, Holdings Redeemable Common Stock and the Holdings
16% Cumulative Redeemable Preferred Stock, which we refer to as the Holdings
16% Preferred Stock, are each obligations of Holdings and are not
obligations of TransDigm Inc. or the obligations of any of its subsidiaries.
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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following pro forma consolidated financial information of Holdings has
been derived by the application of pro forma adjustments to Holdings' historical
consolidated financial statements for (1) the year ended September 30, 2001,
(2) the six months ended March 30, 2002 and (3) the twelve months ended
March 30, 2002. The pro forma consolidated statements of operations for the year
ended September 30, 2001 and the twelve months ended March 30, 2002 give effect
to the offering of the old notes and the use of proceeds therefrom as well as
the acquisition of Champion Aerospace, as if such transactions had been
consummated on the first day of the periods presented. The pro forma
consolidated statement of operations for the six months ended March 30, 2002
gives effect to the offering of the old notes and the use of proceeds therefrom
as if it had been consummated on October 1, 2001. The pro forma consolidated
balance sheet as of March 30, 2002 gives effect to the offering of the old notes
and the use of proceeds therefrom as if it had occurred as of March 30, 2002.
The adjustments necessary to fairly present this pro forma consolidated
financial information have been made based on available information and, in the
opinion of management, are reasonable and are described in the accompanying
notes. The pro forma consolidated financial information should not be considered
indicative of actual results that would have been achieved had the Champion
Aerospace acquisition and the offering of the old notes been consummated on the
respective dates indicated and do not purport to indicate balance sheet data or
results of operations as of any future date or for any future period. We cannot
assure you that the assumptions used in the preparation of the pro forma
consolidated financial information will prove to be correct. You should read the
pro forma consolidated financial statements together with the "Use of Proceeds"
and the "Management's Discussion and Analysis of Financial Condition and Results
of Operations" sections and the Consolidated Historical Financial Statements and
the notes thereto, and other financial information included elsewhere in this
prospectus.
The acquisition of Champion Aerospace has been accounted for as a purchase.
The purchase price consideration of $160.1 million in cash and $2.2 million of
costs associated with the acquisition was funded through: (1) $147.6 million of
new borrowings under our existing credit facility, (2) $14.3 million received
(net of fees of $0.7 million) from the issuance of $15.0 million of Holdings 16%
Cumulative Redeemable Preferred Stock, which we refer to as the 16% Holdings
Preferred Stock, and warrants to purchase 1,381.9 shares of Holdings' common
stock and (3) the use of $0.4 million of existing cash balances. We also
borrowed an additional $15.0 million under the credit facility to pay
$5.0 million of debt issuance costs and provide $10.0 million of working capital
for future operations. The purchase price has been allocated to the assets
acquired and liabilities assumed of Champion Aerospace based on a preliminary
analysis of their fair values.
35
<Page>
TRANSDIGM HOLDING COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 2001
(IN THOUSANDS)
<Table>
<Caption>
CHAMPION
HOLDINGS AEROSPACE PRO FORMA HOLDINGS
HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS(3) PRO FORMA
------------- ------------- -------------- ---------
Net sales.................................... $ 200,773 $46,988 -- $ 247,761
Cost of sales................................ 118,525 30,038 -- 148,563
--------- ------- ------- ---------
Gross profit................................. 82,248 16,950 -- 99,198
--------- ------- ------- ---------
Operating expenses:
Selling and administrative................. 20,669 3,483 -- 24,152
Amortization of intangibles................ 2,966 572 $ 1,663(a) 5,201
Research and development................... 2,943 1,342 -- 4,285
Federal-Mogul corporate charge............. -- 848 (848)(b) --
--------- ------- ------- ---------
Total operating expenses................. 26,578 6,245 815 33,638
--------- ------- ------- ---------
Income from operations....................... 55,670 10,705 (815) 65,560
Interest expense--net........................ 31,926 1,381 7,583(c) 40,890
--------- ------- ------- ---------
Income before income taxes................... 23,744 9,324 (8,398) 24,670
Income tax provision......................... 9,386 3,506 (3,359)(d) 9,533
--------- ------- ------- ---------
Net income................................... $ 14,358 $ 5,818 $(5,039) $ 15,137
========= ======= ======= =========
EBITDA, As Defined(4)........................ $ 70,955 $12,355 $ 848 $ 84,158
========= ======= ======= =========
Cash flow provided from (used by):
Operating activities....................... $ 22,761 $ 503 $(2,945) $ 20,319
Investing activities....................... (173,588) (503) -- (174,091)
Financing activities....................... 157,739 -- 53 157,792
</Table>
36
<Page>
TRANSDIGM HOLDING COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 30, 2002
(IN THOUSANDS)
<Table>
<Caption>
HOLDINGS PRO FORMA HOLDINGS
HISTORICAL(1) ADJUSTMENTS(3) PRO FORMA
------------- -------------- ----------
Net sales............................................... $117,613 -- $117,613
Cost of sales........................................... 64,148 -- 64,148
-------- ------- --------
Gross profit............................................ 53,465 -- 53,465
-------- ------- --------
Operating expenses:
Selling and administrative............................ 10,475 -- 10,475
Amortization of intangibles........................... 3,167 -- 3,167
Research and development.............................. 1,372 -- 1,372
-------- ------- --------
Total operating expenses............................ 15,014 -- 15,014
-------- ------- --------
Income from operations.................................. 38,451 -- 38,451
Interest expense--net................................... 16,885 $ 1,617(c) 18,502
-------- ------- --------
Income before income taxes.............................. 21,566 (1,617) 19,949
Income tax provision.................................... 9,277 (647)(d) 8,630
-------- ------- --------
Net income.............................................. $ 12,289 $ (970) $ 11,319
======== ======= ========
EBITDA, As Defined(4)................................... $ 45,092 $ -- $ 45,092
======== ======= ========
Cash flow provided by (used in):
Operating activities.................................. $ 25,456 $(1,126) $ 24,330
Investing activities.................................. (1,056) -- (1,056)
Financing activities.................................. (6,646) 53 (6,593)
</Table>
37
<Page>
TRANSDIGM HOLDING COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED MARCH 30, 2002
(IN THOUSANDS)
<Table>
<Caption>
CHAMPION
HOLDINGS AEROSPACE PRO FORMA HOLDINGS
HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS(3) PRO FORMA
------------- ------------- -------------- ----------
Net sales................................... $ 240,522 $11,815 -- $ 252,337
Cost of sales............................... 139,853 8,452 -- 148,305
--------- ------- ------- ---------
Gross profit................................ 100,669 3,363 -- 104,032
--------- ------- ------- ---------
Operating expenses:
Selling and administrative................ 22,605 1,037 -- 23,642
Amortization of intangibles............... 5,294 119 $ 440(a) 5,853
Research and development.................. 3,114 499 -- 3,613
Federal-Mogul corporate charge............ -- 213 (213)(b) --
--------- ------- ------- ---------
Total operating expenses................ 31,013 1,868 227 33,108
--------- ------- ------- ---------
Income from operations...................... 69,656 1,495 (227) 70,924
Interest expense--net....................... 34,530 345 3,382(c) 38,757
--------- ------- ------- ---------
Income before income taxes.................. 35,126 1,150 (4,109) 32,167
Income tax provision........................ 14,394 460 (1,644)(d) 13,210
--------- ------- ------- ---------
Net income.................................. $ 20,732 $ 690 $(2,465) $ 18,957
========= ======= ======= =========
EBITDA, As Defined(4)....................... $ 88,077 $ 1,881 $ 213 $ 90,171
========= ======= ======= =========
Cash flow provided by (used in):
Operating activities...................... $ 35,980 $ 46 $(2,156) $ 33,870
Investing activities...................... (166,313) (46) -- (166,359)
Financing activities...................... 152,709 -- 53 152,762
</Table>
38
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(1) The amounts in this column represent the reported results for Holdings
for the applicable period, which include the acquisition of Champion Aerospace
from May 31, 2001 through the end of the applicable period.
(2) The amounts in this column represent the results for Champion Aerospace
for the applicable period prior to May 31, 2001, the date of the acquisition.
(3) The amounts in this column represent the adjustments necessary to give
effect to the acquisition of Champion Aerospace, the offering of the old notes
and the use of proceeds therefrom as follows:
(a) This adjustment reflects Champion Aerospace goodwill amortization.
(b) This reflects the reversal of the corporate charge allocated to
Champion Aerospace by Federal-Mogul, its former parent company.
(c) The adjustment to interest expense reflects the following (amounts
in thousands):
<Table>
<Caption>
TWELVE MONTHS
FISCAL YEAR ENDED SIX MONTHS ENDED ENDED
SEPTEMBER 30, 2001 MARCH 30, 2002 MARCH 30, 2002
------------------ ---------------- --------------
Interest expense on the indebtedness
related to the Champion Aerospace
acquisition.......................... $5,962 -- $1,490
Amortization of debt issuance costs on
the indebtedness related to the
Champion Aerospace acquisition....... 672 -- 168
Elimination of the Champion Aerospace
interest expense allocated by
Federal-Mogul for the period prior to
May 31, 2001......................... (1,381) -- (345)
Elimination of the interest expense
related to debt retired in connection
with the offering of the old notes... (5,210) $(2,118) (4,913)
Elimination of the amortization of debt
issuance costs related to the debt
retired in connection with the
offering of the old notes............ (366) (218) (424)
Additional interest expense related to
the old notes........................ 7,781 3,891 7,781
Amortization of debt issuance costs on
the old notes........................ 425 212 425
Amortization of premium on the notes... (300) (150) (300)
------ ------- ------
Total adjustment....................... $7,583 $ 1,617 $3,882
====== ======= ======
</Table>
A 0.125% increase or decrease in the assumed weighted average interest rate
applicable to TransDigm Inc.'s indebtedness outstanding under TransDigm Inc.'s
credit facility would change the pro forma interest expense and net income after
giving effect to the offering of the old notes by $0.2 million and
$0.1 million, respectively.
39
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(d) The tax effect of pro forma adjustments to income before income
taxes is based on the estimated applicable tax rates.
(4) EBITDA, As Defined, represents earnings before interest, taxes,
depreciation and amortization plus incremental inventory costs associated with
the write up of inventory required by the purchase accounting treatment of the
Champion Aerospace acquisition and the acquisition of a product line as follows
(the amounts in the Champion Aerospace column represent the reported results for
Champion Aerospace prior to May 31, 2001, the date of the acquisition) (all
amounts in thousands):
FISCAL YEAR ENDED SEPTEMBER 30, 2001
<Table>
<Caption>
CHAMPION TRANSDIGM
HOLDINGS AEROSPACE INC. PRO HOLDINGS
HISTORICAL HISTORICAL FORMA PRO FORMA
---------- ---------- --------- ---------
Net income.......................................... $14,358 $ 5,818 $17,001 $15,137
Income tax provision................................ 9,386 3,506 10,658 9,533
Interest expense.................................... 31,926 1,381 37,901 40,890
Depreciation and amortization....................... 8,646 1,650 11,959 11,959
Champion Aerospace and product line acquisition
inventory purchase accounting adjustments......... 6,639 -- 6,639 6,639
------- ------- ------- -------
EBITDA, As Defined.................................. $70,955 $12,355 $84,158 $84,158
======= ======= ======= =======
</Table>
SIX MONTHS ENDED MARCH 30, 2002
<Table>
<Caption>
TRANSDIGM
HOLDINGS INC. PRO HOLDINGS PRO
HISTORICAL FORMA FORMA
---------- --------- ------------
Net income.................................................. $12,289 $12,252 $11,319
Income tax provision........................................ 9,277 9,339 8,630
Interest expense............................................ 16,885 16,860 18,502
Depreciation and amortization............................... 6,641 6,641 6,641
------- ------- -------
EBITDA, As Defined.......................................... $45,092 $45,092 $45,092
======= ======= =======
</Table>
TWELVE MONTHS ENDED MARCH 30, 2002
<Table>
<Caption>
CHAMPION TRANSDIGM
HOLDINGS AEROSPACE INC. PRO HOLDINGS PRO
HISTORICAL HISTORICAL FORMA FORMA
---------- ---------- --------- ------------
Net income........................................ $20,732 $ 690 $20,957 $18,957
Income tax provision.............................. 14,394 460 14,553 13,210
Interest expense.................................. 34,530 345 35,414 38,757
Depreciation and amortization..................... 11,938 386 12,764 12,764
Champion Aerospace and product line acquisition
inventory purchase accounting adjustments....... 6,483 -- 6,483 6,483
------- ------ ------- -------
EBITDA, As Defined................................ $88,077 $1,881 $90,171 $90,171
======= ====== ======= =======
</Table>
40
<Page>
TRANSDIGM HOLDING COMPANY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET(1)
MARCH 30, 2002
(IN THOUSANDS)
<Table>
<Caption>
HOLDINGS PRO FORMA HOLDINGS
HISTORICAL ADJUSTMENTS(2) PRO FORMA
---------- -------------- ---------
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 28,975 -- $ 28,975
Accounts receivable, net............................... 32,536 -- 32,536
Inventories............................................ 49,600 -- 49,600
Deferred income taxes.................................. 9,749 -- 9,749
Prepaid expenses and other............................. 1,009 -- 1,009
--------- -------- ---------
Total current assets................................. 121,869 -- 121,869
Property, plant and equipment--net....................... 39,677 -- 39,677
Intangible assets--net................................... 201,311 -- 201,311
Debt issue costs--net.................................... 11,230 $ 1,285(a) 12,515
Deferred income taxes and other.......................... 4,942 -- 4,942
--------- -------- ---------
TOTAL.................................................... $ 379,029 $ 1,285 $ 380,314
========= ======== =========
LIABILITIES & STOCKHOLDERS' DEFICIENCY
Current liabilities:
Current portion of long-term liabilities............... $ 18,965 $(10,308)(b) $ 8,657
Accounts payable....................................... 7,861 -- 7,861
Accrued liabilities.................................... 30,501 (707)(c) 29,794
--------- -------- ---------
Total current liabilities............................ 57,327 (11,015) 46,312
Long-term debt--less current portion..................... 391,839 13,361(b) 405,200
Other non-current liabilities............................ 6,143 -- 6,143
--------- -------- ---------
Total liabilities.................................... 455,309 2,346 457,655
--------- -------- ---------
Cumulative Redeemable Preferred Stock.................... 14,558 -- 14,558
Holdings Redeemable common stock......................... 1,701 -- 1,701
Stockholders' equity (deficit):
Common stock........................................... 102,080 -- 102,080
Warrants............................................... 1,934 -- 1,934
Retained earnings (deficit)............................ (196,052) (1,768)(a) (197,113)
707 (c) --
Accumulated other comprehensive loss................... (501) -- (501)
--------- -------- ---------
Total stockholders' equity (deficit)................. (92,539) (1,061) (93,600)
--------- -------- ---------
TOTAL.................................................... $ 379,029 $ 1,285 $ 380,314
========= ======== =========
</Table>
41
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(1) The Unaudited Pro Forma Consolidated Balance Sheet assumes the offering
of the old notes was consummated on March 30, 2002. We used the net proceeds of
the offering of the old notes to repay existing indebtedness under our credit
facility, including $33.0 million of indebtedness under our Tranche A facility,
$19.5 million under our Tranche B facility and $21.5 million under our Tranche C
facility and to pay related fees and expenses of $3.0 million. See "Use of
Proceeds."
(2) The amounts in this column represent the adjustments necessary to
determine Holdings' pro forma consolidated balance sheet after giving effect to
the offering of the old notes and the application of the proceeds therefrom.
(a) This adjustment represents the recognition of debt issuance costs
associated with the offering of the old notes as well as the write-off of
debt issuance costs associated with the Tranche A facility, and the portions
of the Tranche B and Tranche C facilities being paid off.
(b) This adjustment represents the $77.0 million of proceeds from the
old notes less the $33.0 million payoff of the Tranche A Facility, the $19.5
million paydown of the Tranche B facility and the $21.5 million paydown of
the Tranche C Facility.
(c) This adjustment represents the tax benefit of the write-off of debt
issuance costs associated with the Tranche A facility, and the portions of
the Tranche B and Tranche C facilities being paid off, based on the
estimated applicable statutory tax rates.
42
<Page>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
information of Holdings for each of the years in the five-year period ended
September 30, 2001 and as of the end of each of such years and for each of the
six-month periods ended March 31, 2001 and March 30, 2002 and as of the end of
each such six-month period. The selected historical consolidated financial data
for each of the years in the three-year period ended September 30, 2001 have
been derived from Holdings' consolidated financial statements included elsewhere
in this prospectus, which have been audited by Deloitte & Touche LLP. The
selected historical consolidated financial data as of and for the six months
ended March 31, 2001 and March 30, 2002 have been derived from Holdings'
unaudited consolidated financial statements included elsewhere in this
prospectus, which in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results of operations, financial position, and cash flows.
The results for the six months ended March 30, 2002 are not necessarily
indicative of the results that may be expected for the entire year. Separate
historical financial information for TransDigm Inc. is not presented since
Holdings has no operations or assets separate from its investment in
TransDigm Inc. and since the exchange notes will be guaranteed by Holdings and
all direct and indirect subsidiaries of TransDigm Inc. (other than two
wholly-owned, non-guarantor subsidiaries that have inconsequential assets,
liabilities and equity, and whose only operations are the result of intercompany
activity which is immediately dividended to TransDigm Inc.).
We acquired Marathon Power Technologies Company on August 8, 1997,
ZMP, Inc. and its wholly-owned subsidiary, Adams Rite Aerospace, Inc. on
April 23, 1999 and Christie Electric Corp. on March 8, 2000. On March 26, 2001,
we acquired an exclusive, worldwide license to produce and sell products
composed of a lubrication and scavenge pump product line along with certain
related equipment and inventory. We completed the Champion Aerospace acquisition
on May 31, 2001. These acquisitions were accounted for as purchases. The results
of operations of Marathon, ZMP, Adams Rite, Christie, Champion Aerospace and the
acquired product line are included in Holdings' consolidated financial
statements from the date of each of these acquisitions.
You should read the following table together with the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
section and the Consolidated Historical Financial Statements and the notes
thereto included elsewhere in this prospectus. All amounts are presented in
thousands, except ratios.
<Table>
<Caption>
FISCAL YEAR ENDED
SEPTEMBER 30, SIX MONTHS ENDED
------------------------------ ---------------------
MARCH 31, MARCH 30,
1997 1998 1999 2000 2001 2001 2002
-------- -------- -------- -------- -------- --------- ---------
STATEMENT OF OPERATIONS DATA:
Net sales......................................... $78,159 $110,868 $130,818 $150,457 $200,773 $77,864 $117,613
Gross profit...................................... 28,856 51,473 60,867 68,264 82,248 35,044 53,465
Selling and administrative........................ 7,561 10,473 13,620 16,799 20,669 8,539 10,475
Amortization of intangibles....................... 2,089 2,438 2,063 1,843 2,966 839 3,167
Research and development.......................... 1,116 1,724 2,139 2,308 2,943 1,201 1,372
Merger expenses................................... -- -- 40,012 -- -- -- --
------- -------- -------- -------- -------- ------- --------
Operating income(1)............................... 18,090 36,838 3,033 47,314 55,670 24,465 38,451
Interest expense, net(2).......................... 3,463 3,175 22,722 28,563 31,926 14,281 16,885
Warrant put value adjustment...................... 4,800 6,540 -- -- -- -- --
------- -------- -------- -------- -------- ------- --------
Pre-tax income (loss)............................. 9,827 27,123 (19,689) 18,751 23,744 10,184 21,566
Provision (benefit) for income taxes.............. 5,193 12,986 (2,772) 7,972 9,386 4,269 9,277
------- -------- -------- -------- -------- ------- --------
Income (loss) before extraordinary item........... 4,634 14,137 (16,917) 10,779 14,358 5,915 12,289
Extraordinary item................................ (1,462) -- -- -- -- -- --
------- -------- -------- -------- -------- ------- --------
Net income (loss)................................. $ 3,172 $ 14,137 $(16,917) $ 10,779 $ 14,358 $ 5,915 $ 12,289
======= ======== ======== ======== ======== ======= ========
OTHER FINANCIAL DATA:
Ratio of Earnings to
Fixed Charges(3)................................ 3.7x 9.0x .1x 1.6x 1.7x 1.7x 2.3x
</Table>
43
<Page>
<Table>
<Caption>
AS OF SEPTEMBER 30, AS OF
------------------------------------------------------- ---------------------
MARCH 31, MARCH 30,
1997 1998 1999 2000 2001 2001 2002
-------- -------- --------- --------- --------- --------- ---------
BALANCE SHEET DATA
(AT END OF PERIOD):
Cash and cash equivalents..................... $ 5,397 $ 19,486 $ 2,729 $ 4,309 $ 11,221 $ 6,599 $ 28,975
Working capital............................... 16,520 16,654 35,531 39,437 55,672 32,525 64,542
Total assets.................................. 101,969 115,785 164,417 168,833 372,898 191,598 379,029
Long-term debt, including current portion..... 50,000 45,000 266,557 261,601 413,209 261,576 408,204
Total stockholders' equity (deficiency)....... 22,613 36,427 (127,622) (118,409) (103,388) (112,877) (92,539)
</Table>
- ------------------------------
(1) Operating income includes the effect of a non-cash charge of $666 in fiscal
1997 and $242 in fiscal 1998 due to a purchase accounting adjustment to
inventory associated with the acquisition of Marathon, a non-cash charge of
$1,143 in fiscal 1999 due to a purchase accounting adjustment to inventory
associated with the acquisition of Adams Rite, a non-cash charge of $185 in
fiscal 2000 due to a purchase accounting adjustment to inventory associated
with the acquisition of Christie, and non-cash charges of $3,193 and $3,446
in fiscal 2001 due to purchase accounting adjustments to inventory
associated with the acquisitions of assets and liabilities from Champion
Aerospace and a product line, respectively, and non-cash charges of $156 in
the six month period ended March 31, 2001 due to purchase accounting
adjustments to inventory associated with the acquisition of a product line.
(2) All of the interest expense reported for fiscal 1997 and 1998 represents
interest expense of TransDigm Inc. Holdings had no interest expense prior to
the recapitalization discussed in Note 1 to the consolidated financial
statements of Holdings included elsewhere in this prospectus. After the
recapitalization, $2,989, $2,669 and $2,030 of interest expense was incurred
by Holdings during fiscal 2001, 2000 and 1999, respectively and $1,642 and
$1,468 of interest expense for the six months ended March 30, 2002 and
March 31, 2001, respectively, relating to the Holdings PIK Notes. Holdings
has no other interest expense. TransDigm Inc. is not an obligor or a
guarantor under the Holdings PIK Notes.
(3) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of earnings before income taxes plus fixed charges. Fixed charges
consist of interest expense, amortization of debt expense and the portion
(approximately 33%) of rental expense that management believes is
representative of the interest component of rental expense. Earnings were
insufficient to cover fixed charges by $20 for fiscal 1999 due to merger
expenses of $40,012.
44
<Page>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE STATEMENTS IN THIS DISCUSSION REGARDING THE INDUSTRY OUTLOOK, OUR
EXPECTATIONS REGARDING THE FUTURE PERFORMANCE OF OUR BUSINESSES, AND THE OTHER
NON-HISTORICAL STATEMENTS IN THIS DISCUSSION ARE FORWARD-LOOKING STATEMENTS.
THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO NUMEROUS RISKS AND
UNCERTAINTIES, INCLUDING BUT NOT LIMITED TO THE RISKS AND UNCERTAINTIES
DESCRIBED IN THE "RISK FACTORS" SECTION. YOU SHOULD READ THE FOLLOWING
DISCUSSION OF THE RESULTS OF OUR OPERATIONS AND FINANCIAL CONDITION TOGETHER
WITH THE SECTIONS ENTITLED "RISK FACTORS" AND "SELECTED HISTORICAL CONSOLIDATED
FINANCIAL DATA" AND WITH OUR CONSOLIDATED HISTORICAL FINANCIAL STATEMENTS AND
NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. OUR FISCAL YEAR ENDS ON
SEPTEMBER 30 OF THE YEARS INDICATED.
OVERVIEW
We are a leading supplier of highly engineered aircraft components for use
on nearly all commercial and military aircraft. Most of our products share three
common characteristics: (1) highly engineered and proprietary; (2) significant
aftermarket content; and (3) large shares of niche markets.
We sell our products to commercial airlines, aircraft maintenance
facilities, aircraft and aircraft system original equipment manufacturers, or
OEMs, and various agencies of the United States and foreign governments. We
generate the majority of our EBITDA from sales of replacement parts in the
commercial and defense aftermarkets. Most of our OEM sales are on an exclusive
sole source basis; therefore, in most cases, we are the only certified provider
of these parts in the aftermarket. Aftermarket parts sales are driven by the
size of the worldwide aircraft fleet, are relatively stable and generate
recurring revenues over the life of an aircraft that are many times the size of
the original OEM purchases. We have over 40 years of experience in most of our
product lines, which allows us to benefit from a large and growing installed
base of aircraft.
For the fiscal year ended September 30, 2001, we generated pro forma net
sales, operating income and EBITDA, As Defined, of $247.8 million,
$65.6 million and $84.2 million, respectively; for the twelve months ended
March 30, 2002, we generated pro forma net sales, operating income and EBITDA,
As Defined, of $252.3 million, $70.9 million and $90.2 million, respectively;
and for the six months ended March 30, 2002, we generated pro forma net sales,
operating income and EBITDA, As Defined, of $117.6 million, $38.5 million and
$45.1 million, respectively.
In connection with the recapitalization that occurred during fiscal 1999,
including the financing and the application of the proceeds thereof, we incurred
certain nonrecurring costs and charges, consisting primarily of compensation
costs for management bonuses and stock options that were canceled in conjunction
with the recapitalization, the cost of terminating a financial advisory services
agreement with an affiliate of one of our stockholders, the write-off of
deferred financing costs, and professional, advisory and financing fees. We
recorded a one-time charge of approximately $40.0 million ($29.0 million after
tax) related to the recapitalization during the year ended September 30, 1999.
Because the cash costs included in this charge were funded principally through
the proceeds of the 1998 notes and borrowings under our credit facility, this
cost did not materially impact our liquidity, ongoing operations or market
position. For a discussion of the consequences of the incurrence of indebtedness
in connection with the recapitalization, see "--Liquidity and Capital
Resources."
SIGNIFICANT ACQUISITION
In the ordinary course of our business, we pursue acquisitions where we
believe we can enhance value, reduce costs and develop new business. The
following is a summary of a significant acquisition during fiscal 2001.
45
<Page>
On May 31, 2001, we (through Champion Aerospace) acquired substantially all
of the assets and certain liabilities of the Champion Aviation Products business
from Federal Mogul Ignition Company, or Federal-Mogul, a wholly-owned subsidiary
of Federal-Mogul Corporation, for approximately $160.1 million in cash, subject
to adjustment based on the level of acquired working capital as of the closing
of the acquisition. Champion Aerospace is engaged in researching, designing,
developing, engineering, manufacturing, marketing, distributing and selling
ignition systems and related components and other products, including, without
limitation, igniters, spark plugs, exciters; for turbine and piston aircraft
applications as well as other aerospace engine and industrial applications.
RECENT DEVELOPMENTS
The aerospace industry was hit particularly hard by the events of
September 11, 2001. The immediate reduction in air traffic severely impacted the
profitability of the airline industry, which began to curtail flights and
stretch out or cancel airframe deliveries. Facing this expected downturn, we
promptly developed a near term market forecast to use as a basis for fiscal 2002
planning. Based on this forecast, which we believed to be conservative, we
implemented a series of actions to significantly reduce our cost structure while
maintaining our ability to respond to market dynamics and develop new business.
As part of this effort, we significantly reduced our workforce in early October.
It currently appears that the overall market forecast we used for planning
purposes was somewhat conservative. Although we continue to experience a
significant downturn in the commercial aerospace markets, air travel appears to
be recovering faster than we initially anticipated and we currently expect the
aftermarket sector to recover slowly over the next four to six quarters as
improvements in air traffic continue. We expect commercial transport OEM
production rates to continue to decline in the near term as new transport
delivery schedules are canceled or extended. We also expect regional and
business jet operations and production rates to be negatively impacted to a
lesser degree. Military activity is difficult to predict, but based upon our
broad base of applications, we anticipate a modest increase in military orders
over the near term.
Sales generation during the first half of fiscal year 2002 was higher than
we anticipated compared to our near term market forecast immediately following
September 11th. Although we expect full year fiscal 2002 net sales to be below
fiscal year 2001 pro forma net sales, we now believe the results will be better
than the estimates we made immediately following September 11th. In addition, as
a result of our rapid cost reductions, continued productivity efforts,
proprietary niche market positions and continued new business generation, we
believe pro forma EBITDA, As Defined, for the twelve months ended March 30, 2002
is reasonably indicative of our expected EBITDA, As Defined, for fiscal 2002.
This section includes forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended. We cannot assure you that our current outlook will prove to
be correct. See "Risk Factors."
SIGNIFICANT ACCOUNTING POLICIES
Our consolidated financial statements reflect the selection and application
of accounting policies that require management to make significant estimates and
assumptions. Our significant accounting policies are described in Note 3 to our
consolidated financial statements included elsewhere in this prospectus.
Accounting estimates are an integral part of our consolidated financial
statements and are based on knowledge and experience about past and current
events and on assumptions about future events. Significant accounting estimates
reflected in our consolidated financial statements for fiscal years 1999, 2000
and 2001 and for the six-months ended March 31, 2001 and March 30, 2002 include
the valuation allowances for inventory obsolescence and uncollectible accounts
receivable, accrued liabilities recognized for losses on uncompleted contracts,
environmental costs, sales returns and repairs, and
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preliminary allocations of purchase prices for business combinations along with
the pending purchase price adjustment amounts.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain of our
operating data as a percentage of net sales.
<Table>
<Caption>
SIX MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, ---------------------
--------------------------------- MARCH 31, MARCH 30,
1999 2000 2001 2001 2002
--------- --------- --------- --------- ---------
Net sales........................... 100% 100% 100% 100% 100%
--- --- --- --- ---
Gross profit........................ 47 45 41 45 45
Selling and administrative.......... 10 11 10 11 9
Amortization of intangibles......... 2 1 2 1 3
Research and development............ 2 2 1 2 1
Merger expenses..................... 31 -- -- -- --
--- --- --- --- ---
Operating income.................... 2 31 28 31 33
Interest expense--net............... 17 19 16 18 14
Provision (benefit) for income
taxes............................. (2) 5 5 5 8
--- --- --- --- ---
Net income (loss)................... (13)% 7% 7% 8% 11%
=== === === === ===
</Table>
CHANGES IN RESULTS OF OPERATIONS
SIX MONTHS ENDED MARCH 30, 2002 COMPARED WITH SIX MONTHS ENDED MARCH 31, 2001.
- - NET SALES. Net sales increased by $39.7 million, or 51.0%, to $117.6 million
for the six-month period ended March 30, 2002 from $77.9 million for the
six-month period ended March 31, 2001, primarily due to the Champion Aerospace
acquisition.
- - GROSS PROFIT. Gross profit (net sales less cost of sales) increased by
$18.4 million, or 52.6%, to $53.5 million for the six-month period ended
March 30, 2002 from $35.1 million for the comparable six-month period last
year. This increase is attributable to the higher sales discussed above. Gross
profit as a percentage of net sales was 45% for both periods.
- - SELLING AND ADMINISTRATIVE. Selling and administrative expenses increased by
$2.0 million, or 22.7%, to $10.5 million for the six-month period ended
March 30, 2002 from $8.5 million for the six-month period ended March 31, 2001
primarily due to the Champion Aerospace acquisition, partially offset by cost
saving actions taken as a result of the September 11th terrorist attacks.
Selling and administrative expenses decreased as a percentage of net sales to
9.0% for the six-month period ended March 30, 2002 from 11.0% for the
six-month period ended March 31, 2001 due to increased selling and
administrative efficiencies as a result of the Champion Aerospace acquisition
and cost saving actions discussed previously.
- - AMORTIZATION OF INTANGIBLES. Amortization of intangibles expense increased by
$2.4 million for the six-month period ended March 30, 2002 to $3.2 million
from $0.8 million for the six-month period ended March 31, 2001 primarily as a
result of amortization of the intangible assets recognized in connection with
the Champion Aerospace acquisition.
- - RESEARCH AND DEVELOPMENT. Research and development expense increased
$0.2 million, or 14.2%, from $1.2 million for the six-month period ended
March 31, 2001 to $1.4 million for the six-month period ended March 30, 2002
as a result of additional research and development activities to
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complement our sales efforts. Research and development expense, as a
percentage of net sales, decreased from 2% for the six-month period ended
March 31, 2001 to 1% for the six-month period ended March 30, 2002.
- - INCOME FROM OPERATIONS. Operating income increased by $14.0 million, or
57.2%, from $24.5 million for the six-month period ended March 31, 2001 to
$38.5 million for the six-month period ended March 30, 2002, primarily as a
result of the factors referred to above.
- - INTEREST EXPENSE. Interest expense increased by $2.6 million, or 18.2%, to
$16.9 million for the six-month period ended March 30, 2002 from
$14.3 million for the six-month period ended March 31, 2001. This was caused
by an increase in the level of outstanding borrowings as a result of the
Champion Aerospace acquisition partially offset by a decrease in interest
rates.
- - INCOME TAXES. Income tax expense as a percentage of income before income
taxes was approximately 43% for the six-month period ended March 30, 2002 and
was comparable to the 42% effective tax rate for the six-month period ended
March 31, 2001.
- - NET INCOME. We earned $12.3 million for the six-month period ended March 30,
2002 compared to net income of $5.9 million for the six-month period ended
March 31, 2001, primarily as a result of the factors referred to above.
FISCAL YEAR ENDED SEPTEMBER 30, 2001 COMPARED WITH FISCAL YEAR ENDED
SEPTEMBER 30, 2000.
- - NET SALES. Net sales increased by $50.3 million, or 33.4%, to $200.8 million
for the year ended September 30, 2001 from $150.5 million for the year ended
September 30, 2000. Approximately $34.3 million of the increase was due to the
Champion Aerospace and product line acquisitions and the remainder was due to
increased pricing and volume on existing products and new business
opportunities.
- - GROSS PROFIT. Gross profit (net sales less cost of sales) increased by
$13.9 million, or 20.5%, to $82.2 million for the year ended September 30,
2001 from $68.3 million for the year ended September 30, 2000. This increase
is attributable to higher sales discussed above. Gross profit as a percentage
of net sales declined to 41% for the year ended September 30, 2001 from 45%
for the year ended September 30, 2000, principally due to $6.6 million of
non-cash charges from inventory purchase accounting adjustments related to the
Champion Aerospace and product line acquisitions.
- - SELLING AND ADMINISTRATIVE. Selling and administrative expenses increased by
$3.9 million, or 23%, to $20.7 million for the year ended September 30, 2001
from $16.8 million for the year ended September 30, 2000. Approximately
$2.1 million of the increase was due to the Champion Aerospace and product
line acquisitions and the remainder was due to additional new business
initiatives. Selling and administrative expenses as a percentage of net sales
decreased slightly from 11% for the year ended September 30, 2000 to 10% for
the year ended September 30, 2001.
- - AMORTIZATION OF INTANGIBLES. Amortization of intangibles increased by
$1.2 million, or 60.9%, to $3.0 million for the year ended September 30, 2001
from $1.8 million for the year ended September 30, 2000. This increase is
primarily the result of amortization of the intangible assets recognized in
connection with the Champion Aerospace acquisition.
- - RESEARCH AND DEVELOPMENT. Research and development expense increased
$0.6 million, or 27.5%, to $2.9 million for the year ended September 30, 2001
compared to $2.3 million for the year ended September 30, 2000, principally
due to the Champion Aerospace acquisition and additional research and
development activities to complement our sales efforts. Research and
development expense as a percentage of net sales decreased slightly from 2%
for the year ended September 30, 2000 to 1% for the year ended September 30,
2001.
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- - OPERATING INCOME. Operating income increased $8.4 million, or 17.7%, from
$47.3 million for the year ended September 30, 2000 to $55.7 million for the
year ended September 30, 2001, due to the factors described previously.
- - INTEREST EXPENSE. Interest expense increased by $3.3 million, or 11.8%, to
$31.9 million for the year ended September 30, 2001 from $28.6 million for the
year ended September 30, 2000. This was primarily caused by an increase in the
average level of outstanding borrowings in connection with the Champion
Aerospace acquisition, partially offset by a decrease in interest rates.
- - INCOME TAXES. Income tax expense as a percentage of income before income
taxes was 39.5% for fiscal 2001 compared to 42.5% for fiscal 2000, primarily
due to increased tax benefits generated by foreign sales and less
non-deductible expenses.
- - NET INCOME. We earned $14.4 million for the year ended September 30, 2001
compared to $10.8 million for the year ended September 30, 2000 primarily as a
result of the factors referred to above.
FISCAL YEAR ENDED SEPTEMBER 30, 2000 COMPARED WITH FISCAL YEAR ENDED
SEPTEMBER 30, 1999.
- - NET SALES. Net sales increased by $19.6 million, or 15%, to $150.4 million
for the year ended September 30, 2000 from $130.8 million for the year ended
September 30, 1999, principally due to the acquisition of ZMP, Inc. and its
wholly-owned subsidiary Adams Rite in April 1999 partially offset by declines
in the net sales of AeroControlex and AdelWiggins due to an industry-wide
spare parts inventory correction.
- - GROSS PROFIT. Gross profit (net sales less cost of sales) increased by
$7.4 million, or 12.2%, to $68.3 million for the year ended September 30, 2000
from $60.9 million for the year ended September 30, 1999. This increase is
attributable to higher sales discussed above. Gross profit as a percentage of
net sales was 45% for the year ended September 30, 2000 and 47% for the year
ended September 30, 1999. This change was the result of the acquisition of ZMP
in April 1999, which has a slightly lower gross profit margin than us as a
whole, as well as the decline in sales at AeroControlex and AdelWiggins
discussed previously.
- - SELLING AND ADMINISTRATIVE. Selling and administrative expenses increased by
$3.2 million, or 23.3%, to $16.8 million for the year ended September 30, 2000
from $13.6 million for the year ended September 30, 1999. This increase
principally resulted from the acquisition of ZMP and additional new business
initiatives. Selling and administrative expenses as a percentage of net sales
increased slightly from 10% for the year ended September 30, 1999 to 11% for
the year ended September 30, 2000.
- - AMORTIZATION OF INTANGIBLES. Amortization of intangibles decreased by
$0.3 million, or 10.7%, to $1.8 million for the year ended September 30, 2000
from $2.1 million for the year ended September 30, 1999. This decrease is the
result of certain intangibles becoming fully amortized.
- - RESEARCH AND DEVELOPMENT. Research and development expense increased
$0.2 million, or 7.9%, to $2.3 million for the year ended September 30, 2000
compared to $2.1 million for the year ended September 30, 1999, principally
due to the acquisition of ZMP in April 1999. Research and development expense
as a percentage of net sales was 2% for each of the years ended September 30,
2000 and September 30, 1999.
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- - MERGER EXPENSES. Merger costs totaling $40.0 million were incurred during
fiscal 1999 in connection with the merger and recapitalization. The nature of
the merger-related charges is detailed below:
<Table>
<Caption>
(IN THOUSANDS)
--------------
Compensation expense on stock options....................... $19,437
Management bonuses.......................................... 6,450
Termination of financial advisory services agreement........ 5,850
Professional fees and expenses.............................. 7,201
Write-off of deferred financing costs....................... 552
Other....................................................... 522
-------
$40,012
=======
</Table>
- - OPERATING INCOME. Operating income increased $44.3 million from $3.0 million
for the year ended September 30, 1999 to $47.3 million for the year ended
September 30, 2000. Operating income, excluding merger expenses, increased
$4.3 million, or 9.9%. This increase is primarily attributable to the
acquisition of ZMP.
- - INTEREST EXPENSE. Interest expense increased by $5.9 million, or 25.7%, to
$28.6 million for the year ended September 30, 2000 from $22.7 million for the
year ended September 30, 1999. This increase results from the increase in the
average level of outstanding borrowings in connection with the
recapitalization and the acquisition of ZMP and an increase in interest rates.
- - INCOME TAXES. Income tax expense (benefit) as a percentage of income (loss)
before income taxes was 42.5% for fiscal 2000 and (14.1%) for fiscal 1999. The
tax provision recorded in fiscal 2000 was significantly impacted by
non-deductible goodwill amortization, particularly the amortization of the
goodwill recognized in conjunction with the acquisition of ZMP. The tax
benefit recorded for fiscal 1999 was significantly impacted by the
non-deductible expenses incurred in connection with the recapitalization.
- - NET INCOME (LOSS). We earned $10.8 million for the year ended September 30,
2000 compared to a net loss of $16.9 million for the year ended September 30,
1999 primarily as a result of the factors referred to above.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES. We generated approximately $25.5 million of cash from
operating activities during the six months ended March 30, 2002 compared to
approximately $12.2 million during the six months ended March 31, 2001. The
increase is primarily due to increased earnings from the Champion Aerospace
acquisition along with the cost saving initiatives we undertook as a result of
the September 11th terrorist attacks. We generated approximately $22.7 million
of cash from operating activities during the year ended September 30, 2001 and
approximately $16.3 million during the year ended September 30, 2000.
Approximately $16.2 million of cash was used in operating activities during the
year ended September 30, 1999. The increase in cash generated by operating
activities from fiscal 2000 to fiscal 2001 is primarily due to increased
earnings from the acquisitions and the cost saving initiatives described above.
The change from fiscal 1999 to fiscal 2000 is due to the one-time merger
expenses of $40.0 million in fiscal 1999 and improved operating results in
fiscal 2000, partially offset by an increase in interest expense in fiscal 2000
due to the recapitalization and an increase in interest rates.
INVESTING ACTIVITIES. Cash used in investing activities was approximately
$1.1 million during the six months ended March 30, 2002 compared to
approximately $8.3 million during the six months ended March 31, 2001. The
change is mainly due to the product line acquisition in the first six months of
2001 and a decrease in capital expenditures. Cash used in investing activities
was approximately
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$173.6 million during the year ended September 30, 2001, approximately
$5.1 million during the year ended September 30, 2000 and approximately
$44.6 million during the year ended September 30, 1999. The increase from fiscal
2000 to fiscal 2001 is mainly due to the Champion Aerospace acquisition and the
decrease from fiscal 1999 to fiscal 2000 is primarily due to the use of
$41.6 million of cash in fiscal 1999 for the ZMP and Adams Rite acquisition.
Marathon Power Technologies Company, our wholly-owned subsidiary, used
approximately $2.4 million of cash in fiscal 2000 for the acquisition of
Christie Electric Corp.
FINANCING ACTIVITIES. Cash used in financing activities during the six
months ended March 30, 2002 was approximately $6.6 million compared to
approximately $1.6 million during the six months ended March 31, 2001. This
increase in cash used in financing activities was due to decreased borrowings
(in March 2001, borrowings were made to finance the product line acquisition)
and an increase in the repayment of debt obligations. Cash provided by (used in)
financing activities during the year ended September 30, 2001 was approximately
$157.7 million, approximately $(9.6) million during the year ended
September 30, 2000 and approximately $44.1 million during the year ended
September 30, 1999. The change in financing cash flows from fiscal 2000 to
fiscal 2001 was due to our incurrence of substantial indebtedness as a result of
the Champion Aerospace acquisition and the change in financing cash flows from
fiscal 1999 to fiscal 2000 is due to the incurrence and refinancing of
substantial debt as a result of the recapitalization and the ZMP and Adams Rite
acquisition.
CAPITAL RESOURCES. Our credit facility consists of (1) a $30.0 million
revolving credit facility maturing six years from December 3, 1998, which we
refer to as the execution date, and (2) a term loan facility in an aggregate
principal amount of $263.8 million, consisting of a $43.3 million Tranche A
facility maturing six years from the execution date, a $105.5 million Tranche B
facility maturing seven and a half years from the execution date and a
$115.0 million Tranche C facility maturing eight and a half years from the
execution date. As of March 30, 2002, the outstanding balances of our Tranche A,
B and C facilities were $35.5 million, $104.3 million and $114.1 million,
respectively. In connection with the offering of the old notes, we repaid the
Tranche A facility and a portion of each of the Tranche B and Tranche C
facilities.
The interest rate for the credit facility is, at our option, either (A) a
floating rate equal to the base rate plus the applicable margin, as defined in
the credit facility, or (B) the Eurodollar rate for fixed periods of one, two,
three, or six months, plus the applicable margin. The overall interest rate and
applicable margin are determined based on (1) in the case of the Tranche A
facility and the revolving credit facility, (A) an interest rate determined by
the base rate, plus 2.25%, 2.00%, 1.75% or 1.50% depending on Holdings' ability
to achieve the respective debt coverage ratio specified in the credit facility,
as amended; or (B) an interest rate determined by the Eurodollar Rate, plus
3.25%, 3.00%, 2.75% or 2.50% depending on Holdings' ability to achieve the
respective debt coverage ratio specified in the credit facility, as amended; and
(2) in the case of the Tranche B facility and the Tranche C facility, (A) an
interest rate determined by the base rate, plus 2.50%; or (B) an interest rate
determined by the Eurodollar rate, plus 3.50%. The credit facility is subject to
mandatory prepayment with a defined percentage of net proceeds from certain
asset sales, insurance proceeds or other awards that are payable in connection
with the loss, destruction or condemnation of any assets, certain new debt and
equity offerings and 50% of excess cash flow (as defined in the credit facility)
in excess of a predetermined amount under the credit facility.
The credit facility requires us to repay the outstanding indebtedness on a
periodic basis through the various maturity dates. The credit facility also
contains restrictive covenants that, among other things, limit the incurrence of
additional indebtedness, the payment of dividends, transactions with affiliates,
asset sales, acquisitions, mergers and consolidations, liens and encumbrances,
and prepayments of other indebtedness.
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We repaid the Tranche A facility and part of the Tranche B and C facilities
with a portion of the proceeds from the offering of the old notes. In addition,
we amended our credit facility in connection with the offering of the old notes.
The amendments to the credit facility:
- allowed us to incur the indebtedness represented by the old notes;
- allow us to pay dividends to Holdings for the purpose of retiring the
Holdings PIK Notes;
- allow us to incur up to $150.0 million of additional bank borrowings or
subordinated debt (for which there are currently no commitments to provide
such funds), subject to certain restrictions, including a requirement that
such debt must be used:
- to finance acquisitions permitted by the amended credit facility, or
- to pay the dividends to Holdings to retire the Holdings PIK Notes;
- allow us to effect permitted acquisitions, with the aggregate amount paid
for all such permitted acquisitions not to exceed $225.0 million;
- require that at least $10.0 million must remain unused and available under
our $30.0 million revolving credit facility immediately following any
acquisition;
- modified certain existing financial covenants; and
- waive any mandatory prepayment from excess cash flow for fiscal 2002.
The Chairman of our Board of Directors, Mr. Peacock, holds a
presently-exercisable put option enabling him to require us to purchase up to
80% of his common stock (including shares acquired through the exercise of stock
options and held at least six months) at fair value, subject to certain
restrictions under our long-term debt agreements and subject to his continued
service as Chairman of the Board of Holdings and us. As of March 30, 2002, 8,114
shares of common stock that Mr. Peacock can acquire under presently-exercisable
stock options are subject to the put. The estimated fair value of such shares,
net of the exercise price of the related stock options, totaled approximately
$8.6 million at March 30, 2002. Mr. Peacock and other members of management hold
put rights that may become exercisable in the future with respect to other
shares of common stock, including shares of common stock subject to options. See
"Management--Employment Agreements" and "Management--Stock Option Plans."
The prepayment provision of the Holdings PIK Notes contains a prepayment
penalty that begins to increase on December 4, 2003. We may pay a dividend to
Holdings to repurchase the Holdings PIK Notes prior to December 4, 2003. The
amendment to our credit facility will permit this dividend. In addition, we
anticipate that on the date of its payment, this dividend will be permitted
under the restricted payments covenant of the indenture. See "Description of the
Exchange Notes--Certain Covenants--Limitation on Restricted Payments."
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The following table sets forth contractual cash obligations for the next
several fiscal years giving effect to (1) the offering of the old notes and
(2) the use of the net proceeds from the offering to repay all of the Tranche A
facility and a pro rata portion of each of the Tranche B and C facilities under
the credit facility (dollars in millions):
<Table>
<Caption>
2007 AND
2002(1) 2003 2004 2005 2006 THEREAFTER TOTAL
-------- -------- -------- -------- -------- ---------- --------
CONTRACTUAL CASH OBLIGATIONS:
Long-Term Debt(2)................... $1.5 $4.6 $13.5 $37.7 $56.4 $295.5 $409.2
Operating Leases.................... .6 1.2 1.2 1.1 1.0 5.5 10.6
Redeemable Preferred Stock.......... -- -- -- -- -- 14.6 14.6
Other Long-Term Obligations......... 0.4 2.2 2.2 2.2 -- -- 7.0
---- ---- ----- ----- ----- ------ ------
Total Contractual Cash
Obligations..................... $2.5 $8.0 $16.9 $41.0 $57.4 $317.6 $441.4
==== ==== ===== ===== ===== ====== ======
</Table>
- ------------------------
(1) Beginning March 31, 2002.
(2) This amount includes $29.2 million relating to the Holdings PIK Notes. As
mentioned earlier, TransDigm may pay a dividend to Holdings to be used to
prepay the Holdings PIK Notes in fiscal 2004. This amount excludes a
$2.0 million premium received in connection with the offering of the old
notes which will be amortized over the term of the notes.
Our primary future cash needs will consist of debt service and capital
expenditures. We incur capital expenditures for the purpose of maintaining and
replacing existing equipment and facilities and, from time to time, for facility
expansion. Capital expenditures totaled approximately $4.5 million and
$4.4 million during fiscal 2001 and 2000, respectively. We expect our capital
expenditures will increase moderately in the future.
We may from time to time seek to retire our outstanding debt through cash
purchases and/or exchanges for equity securities, in open market purchases,
privately negotiated transactions or otherwise. Such repurchases or exchanges,
if any, will depend on prevailing market conditions, our liquidity requirements,
contractual restrictions and other factors. The amounts involved may be
material. In addition, we may issue additional debt if prevailing market
conditions are favorable to doing so.
We intend to pursue additional acquisitions that present opportunities to
realize significant synergies, operating expense economies or overhead cost
savings or to increase our market position. We regularly engage in discussions
with respect to potential acquisitions and investments. However, there are no
binding agreements with respect to any material acquisitions at this time, and
there can be no assurance that we will be able to reach an agreement with
respect to any future acquisition. Our acquisition strategy may require
substantial capital, and no assurance can be given that we will be able to raise
any necessary funds on terms acceptable to us or at all. If we incur additional
debt to finance acquisitions, our total interest expense will increase.
Our ability to make scheduled payments of principal of, or to pay the
interest on, or to refinance, our indebtedness, or to fund planned capital
expenditures and research and development efforts, will depend on our ability to
generate cash in the future. This, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond our control. Based on our current level of operations and anticipated
cost savings and operating improvements, we believe our cash flow from
operations, available cash and available borrowings under our credit facility,
will be adequate to meet our future liquidity needs for at least the next
several years. We cannot assure you, however, that our business will generate
sufficient cash flow from operations, that currently anticipated cost savings
and operating improvements will be realized on schedule or at all or that future
borrowings will be available to us under our credit facility in an amount
sufficient to enable us
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to pay our indebtedness or to fund our other liquidity needs. We may need to
refinance all or a portion of our indebtedness on or before maturity. We cannot
assure you that we will be able to refinance any of our indebtedness, including
our credit facility and the notes, on commercially reasonable terms or at all.
See "Risk Factors."
INFLATION
Many of our raw materials and operating expenses are sensitive to the
effects of inflation, which could result in changing operating costs. The
effects of inflation on our businesses during the years ended September 30,
2001, 2000 and 1999 and the six months ended March 30, 2002 and March 31, 2001
were not significant.
ADDITIONAL DISCLOSURE REQUIRED BY INDENTURE
Separate historical financial information for TransDigm Inc. is not
presented since Holdings has no operations or assets separate from its
investment in TransDigm Inc. and since the exchange notes will be guaranteed by
Holdings and all direct and indirect subsidiaries of TransDigm Inc. (other than
two wholly-owned, non-guarantor subsidiaries that have inconsequential assets,
liabilities and equity, and whose only operations are the result of intercompany
activity which is immediately dividended to TransDigm Inc.). In addition,
Holdings' only obligations at March 30, 2002 other than its guarantees of debt
under the indenture related to the 1998 notes and the credit facility consist of
(1) the Holdings PIK Notes of $29.2 million due 2009; (2) the Holdings 16%
Preferred Stock with an aggregate liquidation preference of $15.0 million; and
(3) "put" rights held by certain persons to require Holdings to repurchase, at
fair market value, shares of Holdings' common stock (including shares that may
be acquired through the exercise of stock options) held by such persons. The
Holdings PIK Notes bear interest in the form of additional Holdings PIK Notes at
12% annually and the Holdings 16% Preferred Stock accrue dividends in cash, or
at Holdings' option, in the form of additional shares of Holdings cumulative
redeemable preferred stock, at 16% annually. Interest expense recognized on the
Holdings PIK Notes during the six-month periods ended March 30, 2002 and
March 31, 2001 was $1.6 million and $1.5 million, respectively. Dividend accrual
on the Holdings 16% Preferred Stock (which was issued on May 31, 2001) was
$1.2 million during the six-month period ended March 30, 2002. For a discussion
of Holdings' obligation to repurchase its common stock pursuant to put rights
held by members of management, see "--Liquidity and Capital Resources." Because
the common stock subject to put rights is required to be repurchased at fair
market value, the value of Holdings' repurchase obligation will increase to the
extent the fair market value of Holdings' common stock increases.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are subject to interest rate risk with respect to borrowings under our
credit facility as the interest rates on such borrowings vary with market
conditions and, thus, the amount of outstanding borrowings approximates the fair
value of the indebtedness. The weighted average interest rate on the
$254.0 million of borrowings outstanding under the credit facility at March 30,
2002 and the $260.6 million of borrowings outstanding under the credit facility
at September 30, 2001 were 5.4% and 6.9%, respectively. The effect of a
hypothetical one percentage point increase in interest rates would increase our
annual interest costs under the credit facility by approximately $2.5 million
based on the amount of borrowings outstanding at March 30, 2002.
Also outstanding at March 30, 2002 was $125.0 million of our indebtedness in
the form of the 1998 notes, $29.2 million of the Holdings PIK Notes and Holdings
16% Preferred Stock with an aggregate liquidation preference of $15.0 million.
At September 30, 2001, the recorded amounts of these obligations were
$125.0 million, $27.6 million and $13.2 million, respectively. The interest
rates on the 1998 notes and the Holdings PIK Notes are fixed at 10 3/8% and 12%
per year, respectively, and the
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dividends accrue on the Holdings 16% Preferred Stock at 16% annually. The fair
value of the 1998 notes was approximately $126.3 million at March 30, 2002 and
$99.4 million at September 30, 2001, based upon quoted market prices. A
determination of the fair value of each of the Holdings PIK Notes and the
Holdings 16% Preferred Stock is not considered practicable because they are held
by related parties and are not publicly traded. For a discussion of Holdings'
obligation to repurchase its common stock pursuant to put rights held by members
of management, see "--Liquidity and Capital Resources." Because the common stock
subject to put rights is required to be repurchased at fair market value, the
value of Holdings' repurchase obligation will increase to the extent the fair
market value of Holdings' common stock increases.
NEW ACCOUNTING STANDARDS
In June 2001, the FASB issued Statements of Financial Accounting Standards
("SFAS") No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 141, which is effective for all business
combinations initiated after June 30, 2001, requires that the purchase method of
accounting be used to account for such transactions. SFAS No. 141 also
established two criteria that must be met for intangible assets (other than
goodwill) to be recognized in accounting for a business combination, the
contractual-legal criterion and the separability criterion. The issuance of SFAS
No. 141 had no impact on our consolidated financial statements as of and for the
year ended September 30, 2001.
SFAS No. 142 changes the accounting for goodwill from an amortization method
to an impairment-only approach. Amortization of goodwill, including goodwill
recorded as a result of past business combinations, will cease upon adoption of
this statement, which must occur no later than the first quarter of our year
ending September 30, 2003. In addition, upon implementation of this statement,
the carrying amounts of intangible assets recorded in connection with past
business combinations that do not meet the criteria in SFAS No. 141 for
recognition apart from goodwill, must be reclassified to goodwill when SFAS
No. 142 is implemented. We have not determined the impact that this statement
will have on our consolidated financial position or results of operations.
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. This statement requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred. The amount recorded as a liability will be capitalized by increasing
the carrying amount of the related long-lived asset. Subsequent to initial
measurement, the liability is accreted to the ultimate amount anticipated to be
paid and is also adjusted for revisions to the timing of the amount of estimated
cash flows. The capitalized cost is depreciated over the useful life of the
related asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon settlement. The
provisions of this statement become effective for our fiscal year ending
September 30, 2003. We have not determined the impact, if any, that this
statement will have on our financial statements.
In August 2001, the FASB issued SFAS No. 144, Accounting for Impairment or
Disposals of Long-Lived Assets. This statement specifies the accounting model to
be used for long-lived assets to be disposed of by sale (whether previously held
and used or newly acquired) and by broadening the presentation of discontinued
operations to include more disposal transactions. The provisions of this
statement become effective for our fiscal year ending September 30, 2003. We
have not determined the impact that this statement will have on our consolidated
financial position or results of operations.
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BUSINESS
OVERVIEW
We are a leading supplier of highly engineered aircraft components for use
on nearly all commercial and military aircraft. Most of our products share three
common characteristics: (1) highly engineered and proprietary; (2) significant
aftermarket content; and (3) large shares of niche markets.
We sell our products to commercial airlines, aircraft maintenance
facilities, aircraft and aircraft system original equipment manufacturers, or
OEMs, and various agencies of the United States and foreign governments. We
generate the majority of our EBITDA from sales of replacement parts in the
commercial and defense aftermarkets. Most of our OEM sales are on an exclusive
sole source basis; therefore, in most cases, we are the only certified provider
of these parts in the aftermarket. Aftermarket parts sales are driven by the
size of the worldwide aircraft fleet, are relatively stable and generate
recurring revenues over the life of an aircraft that are many times the size of
the original OEM purchases. We have over 40 years of experience in most of our
product lines, which allows us to benefit from a large and growing installed
base of aircraft. For the twelve months ended March 30, 2002, we generated pro
forma net sales, operating income and EBITDA, As Defined, of $252.3 million,
$70.9 million and $90.2 million, respectively.
We focus our businesses on continual value creation. Our business philosophy
is centered around three value principles: (1) obtaining profitable new business
by applying our technical capabilities to specific engineering problems;
(2) striving to continually improve productivity; and (3) pricing our product to
fairly reflect the unique value provided. Additionally, we continually seek
acquisition opportunities compatible with our value creation philosophy. We have
a demonstrated capability to acquire, integrate and improve aerospace
businesses.
We differentiate ourselves based on our engineering and manufacturing
capabilities, and typically will not bid on non-proprietary "build to print"
business. Our products have strong brand names within the airline industry and a
reputation for high quality, reliability and customer service. We focus on
developing highly customized products to solve specific problems of aircraft
operators and manufacturers. While aftermarket sales accounted for approximately
60% of our fiscal 2001 pro forma net sales and OEM sales accounted for the
remaining 40%, aftermarket sales typically carry a substantially higher gross
margin than sales to OEMs.
We were formed in 1993 through a management-led buyout of the Aerospace
Components Group of IMO Industries Inc. Since our formation, we have
successfully established leadership positions in well-defined, profitable niches
of the aircraft components market that we believe offer sustainable growth
opportunities.
INDUSTRY OVERVIEW
The aircraft components industry is highly fragmented, consisting of a large
number of small, specialized companies and a limited number of well-capitalized
companies. We compete in product-specific markets that we estimate range in size
from $10 million to $100 million in annual revenues. We believe that the small
size of our markets, combined with the industry's stringent regulatory approval
and certification requirements and the need to make significant investments in
research and development, reduces the risk of new entrants. Specifically, we
believe most of our markets are too small to attract large aerospace companies
and that the financial resources and technical expertise required to introduce
or improve a product, and thereby compete in these markets, are beyond the reach
of most small companies. In addition, all potential competitors must meet the
certification requirements and qualification approvals required by the FAA as
well as aircraft and engine OEMs.
The aerospace industry was significantly impacted by the events of
September 11th. The immediate reduction in air traffic severely impacted the
profitability of the airline industry, which began to curtail
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flights and stretch out or cancel airframe deliveries. Since the September 11th
system shutdown, there has been a slow, but steady, recovery in air traffic
trends for the worldwide airlines. According to the Air Transport Association,
worldwide revenue passenger miles were down approximately 9% in March 2002
versus the prior year, as compared to a decline of approximately 50% in the
second half of September 2001 and a decline of approximately 26% in
October 2001 versus the prior year.
AFTERMARKET
The large worldwide aircraft fleet that must be serviced regularly to meet
FAA standards and aircraft reliability requirements creates a large and
profitable aftermarket for replacement parts. Demand for aftermarket parts
depends on revenue passenger miles and, to a lesser extent, on airline
profitability, each of which has historically been correlated with changes in
general economic conditions and the size and age of the worldwide aircraft
fleet. We believe that aftermarket sales will continue to be an attractive
market as a result of the following factors:
- Worldwide large commercial transport revenue passenger miles, or RPMs,
have increased from approximately 680 billion in 1981 to approximately two
trillion in 2001, with 1991 and 2001 representing the only two years in
the last twenty in which annual revenue passenger miles decreased. The FAA
forecasts that revenue passenger miles will recover to pre-September 11th
levels by the end of 2003 and will continue to grow at an average growth
rate of approximately 5% through 2013. The aircraft fleet installed base
has continued to increase over time despite volatility in aircraft
deliveries and retirements. At the end of 2001, the large commercial
aircraft fleet of Boeing and Airbus aircraft consisted of approximately
13,700 aircraft, a compound annual increase of approximately 4% from
approximately 9,200 aircraft in 1991. Following September 11th, grounded
aircraft in storage rose from 1,100 in August 2001 to approximately 2,000
as of December 2001. It is uncertain how many of these aircraft will
return to service.
- The regional airline industry has been a fast growing sector within recent
years as a result of the introduction of regional jets in the late 1980s.
RPMs for U.S. carriers grew from 7.8 billion in 1991 to 25.7 billion in
2001, a compound annual increase of approximately 12.5%. The installed
base of regional jets has increased since their introduction in the late
1980s to approximately 1,200 aircraft at the end of 2001. The FAA
forecasts that regional carriers will continue to experience secular
growth and that RPMs for the entire regional airline industry (jets and
turboprops) will increase at an average annual growth rate greater than 7%
through 2013.
- The business jet sector has also experienced rapid growth in recent years
with the introduction of fractional ownership programs such as Net Jets
and Flight Options. Hours flown by general aviation aircraft operating
with turbine-powered engines has increased from 2.3 million in 1994 to
4.7 million in 2000, a compound annual increase of approximately 13%. The
FAA forecasts that business jet hours should increase by approximately 4%
annually over the next 10 years.
- Aircraft capacity utilization remains at high levels. Passenger load
factors (measured as the percentage of occupied seats per flight) for U.S.
carriers as reported by the Air Transport Association increased from 63%
in 1991 to over 70% prior to September 11th. Passenger load factors
improved to over 75% in March 2002 from a trough in September 2001 of 59%
as airlines have had positive trends in airline traffic and reduced
capacity since the September 11th shutdown. Load factors are currently at
levels that are significantly higher than prior cycles.
OEM
Demand for OEM components depends on new aircraft deliveries. Demand for new
aircraft is a function of (1) demand for air travel, (2) aircraft operator
profitability, (3) fleet age, (4) regulatory
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mandates such as noise reduction, and (5) the lag time between order and
delivery, which causes airlines to order aircraft according to perceived future
need.
- In the early 1990's, many airlines significantly reduced spending on new
aircraft due to weakened financial performance. With the return of airline
profitability, commercial OEMs experienced a surge in large aircraft
deliveries from fewer than 400 aircraft in 1995 to a peak of 914 aircraft
in 1999. As a result of the events of September 11th and a weakened
economy, many industry analysts expect aircraft deliveries to trend
significantly downward from over 850 aircraft delivered in 2001.
- The regional jet aircraft market has grown significantly in recent years
as large airlines have realized significant cost savings by passing
shorter routes to regional carriers. The new turbine engine aircraft also
offers greater comfort and flying range, attracting increasing numbers of
passengers. Regional jet deliveries have increased significantly to over
300 in 2001 since their introduction in the late 1980s.
- The business jet market is driven by, among other factors, the increasing
popularity of fractional ownership and the increasing demand for more
expedient and convenient travel. Deliveries of business jets have
increased significantly in recent years, growing from approximately 250
aircraft annually in the early 1990s to in excess of 700 deliveries in
2000.
- While military spending for new aircraft has significantly declined with
the end of the cold war, military parts and repair spending has been
relatively stable for the last several years, as existing platforms
require parts to remain operational. The recent terrorist attacks and
significant concerns over military readiness are driving an increase in
defense spending forecasts.
COMPETITIVE STRENGTHS
We believe our key competitive strengths are:
- LARGE INSTALLED PRODUCT BASE AND RECURRING REVENUE STREAM. We estimate
that approximately 75% of our net sales are derived from products for
which we have achieved sole source designation, and that over 90% of our
net sales are derived from products of proprietary design. As a result, we
have a large and growing installed base of products on large commercial
transport aircraft as well as regional, business and military aircraft
platforms. This installed base affords us the opportunity to capture a
long-term stream of highly profitable aftermarket revenues. Over the life
of an aircraft, sales of replacement parts can generate revenues many
times the size of the original OEM purchases. Aftermarket sales generate
most of our EBITDA because they typically carry gross margins that are
significantly higher than those generated from OEM sales.
- PROVEN ABILITY TO DEVELOP NEW PRODUCTS. We have a successful record of
introducing solutions-oriented products. We work closely with aircraft
operators and OEMs to identify their unmet needs, such as a component that
fails to meet performance expectations or that requires excessive
maintenance. We then utilize our engineering and design capabilities to
develop a prototype for a component that increases the value of the
product to the customer. After we have fulfilled rigorous testing
requirements and obtained necessary regulatory approvals, the product is
made available for sale in the aftermarket and to OEMs. We believe that
our ability to successfully develop new products has contributed to our
significant growth.
- DIVERSIFIED BUSINESS MIX. Our business is diversified between sales in the
aftermarket and sales to OEMs. In addition, each of these segments is
further diversified among the large commercial transport, regional,
business and military aircraft markets. As a result, we are not overly
dependent on any one segment or platform. The large commercial transport
OEM market accounted for approximately 15% of our net sales in fiscal
2001.
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- LEADING POSITIONS IN NICHE MARKETS. With over 40 years of experience in
most of our product lines, we have well-established and highly regarded
products and trade names, such as "Adel," "Wiggins," "Controlex,"
"Marathon" and "Champion Aerospace-Registered Trademark-," and are a
leader in many of our product lines. For example, Champion
Aerospace-Registered Trademark- has one of the strongest brands in the
aerospace industry with a 95-year history as a leader in the aircraft
ignitor market.
- SUCCESSFUL TRACK RECORD OF INTEGRATING ACQUISITIONS. Our experienced
management team has a proven track record of consolidating operations,
reducing overhead and rationalizing costs. Management has successfully
integrated a number of acquisitions. In each case, management has
substantially improved the operating margins through the systematic
implementation of our three value generation principles.
BUSINESS STRATEGY
Key elements of our strategy are:
- PROVIDE VALUE ADDED PRODUCTS TO CUSTOMERS. We will continue to focus on
marketing and manufacturing highly engineered products to customers that
place a premium on our capabilities. We have been effective in
communicating to aircraft operators the value of our products in terms of
cost savings generated by their greater reliability and performance, as
well as reduced maintenance requirements. Our reputation for quality and
sole supplier status for many parts has allowed us to capture a
significant portion of the value generated by our products. We intend to
continue to develop and market high value added products that provide
significant benefits to our customers.
- GENERATE NEW BUSINESS INITIATIVES. We have been successful in identifying
and commercializing new business opportunities to drive revenue growth. We
have been particularly effective in creating aftermarket opportunities by
developing superior products to retrofit aircraft already in service. For
example, in response to the heightened demand for security since the
recent terrorist attacks, we developed a highly engineered cockpit door
safety mechanism that simultaneously prevents penetration into the cockpit
while providing a rapid response in the event of an emergency, such as
depressurization. Airbus-Registered Trademark- recently committed to
purchase these components to offer as a retrofit to the existing
Airbus-Registered Trademark- fleet and to include them on all new
deliveries. We intend to continue to aggressively pursue growth
opportunities through our new business initiatives.
- REALIZE PRODUCTIVITY SAVINGS. We will continue to focus on improving
operating margins through manufacturing improvements and increases in
employee productivity. We have achieved significant increases in
productivity since our formation in 1993. We have rationalized our
manufacturing facilities and redesigned our manufacturing and other
business practices to maximize efficiency. For example, we encourage our
employees through performance incentives to learn to operate multiple
manufacturing stations in order to minimize overall labor costs. This
initiative and others like it have enabled us to significantly increase
sales without material increases in headcount.
- PURSUE STRATEGIC ACQUISITIONS. We intend to pursue acquisitions where we
believe that we can enhance value, reduce costs and develop new business.
The aircraft component industry is highly fragmented, with many of the
companies in the industry being small operators or small non-core
operations of larger businesses. We believe the industry is experiencing
consolidation due to customer requirements that favor more focused and
sophisticated suppliers.
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PRODUCTS
Our products have a long history in the aircraft component industry and are
found on virtually all types of commercial and military aircraft. We estimate
that approximately 75% of our net sales are derived from products for which we
have achieved sole source designation, and that over 90% of our net sales are
derived from products of proprietary design. Our products are organized into two
groupings: power system components and airframe system components.
Power system components generated 53% of our reported net sales (63% of pro
forma net sales) in fiscal 2001 and primarily serve the power requirements of
commercial and military aircraft. Our major customers for these products include
substantially all worldwide engine/auxiliary power unit, or APU, end users such
as American Airlines, British Airways, Delta, Air France, and Lufthansa and
engine/APU OEMs such as General Electric, United Technologies, Rolls Royce and
Honeywell; regional and business jet end users such as Comair, Mesa and
Continental Express, and regional and business jet OEMs such as Bombardier,
Cessna, Gulfstream and Raytheon; and various United States and foreign defense
agencies and OEMs such as Lockheed Martin. Our major products are ignition
system components such as igniters, exciters and spark plugs, used to start and
restart turbine and reciprocating aircraft engines; gear pumps used primarily in
lubrication and fuel applications; mechanical/electromechanical controls used in
numerous actuation applications and batteries/chargers used to provide starting
and back-up power.
Airframe system components generated 47% of our reported net sales (37% of
pro forma net sales) in fiscal 2001 and primarily serve the requirements of
various airframe systems used in commercial and military aircraft. Our major
customers for these products are the worldwide large commercial transport end
users and OEMs such as Boeing and Airbus; the regional and business jet end
users and OEMs mentioned above, and the various United States and foreign
defense agencies and OEMs. Our major products are engineered connectors used in
fuel, pneumatic and hydraulic applications; engineered latches used in various
bin, door and other applications on both the interior and exterior of the
airframe; and lavatory hardware and components.
Power system components generated 53% of our reported net sales (63% of pro
forma net sales) in fiscal 2001, 45% of our reported net sales in fiscal 2000
and 52% of our reported net sales in fiscal 1999. Airframe system component
generated 47% of our reported net sales (37% of pro forma net sales) in fiscal
2001, 55% of our reported net sales in fiscal 2000 and 48% of our reported net
sales in fiscal 1999.
Our power system components and airframe system components are produced and
sold under a number of industry trade names. Our power system components are
manufactured by our AeroControlex, Champion Aerospace and Marathon product
groups. AeroControlex's major products are gear pumps and
mechanical/electromechanical controls. Champion Aerospace produces various
ignition system components, including igniters, spark plugs and exciters.
Marathon manufactures nickel cadmium batteries/chargers. Our airframe system
components are manufactured by our AdelWiggins and Adams Rite Aerospace product
groups. AdelWiggins' major product line is an extensive offering of engineered
connectors. Adams Rite Aerospace primarily offers engineered latches and
lavatory components.
SALES AND MARKETING
Consistent with our overall strategy, our sales and marketing organization
is structured to understand and anticipate the needs of customers in order to
continually develop a stream of technical solutions that generate significant
value. In particular, we focus on the high-margin, repeatable aftermarket
segment.
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We have structured our sales efforts along our major product lines,
assigning a product line manager to each line. The product line managers are
expected to grow the sales and profitability of their product line faster than
the served market and to achieve the targeted annual level of bookings, sales,
new business and profitability for each product. Assisting the product line
managers are account managers and sales engineers who are responsible for
covering major OEM and airline accounts. Account managers and sales engineers
are expected to be familiar with the personnel, organization and needs of
specific customers, for achieving total bookings and new business goals at each
account, and, in conjunction with the product line managers, for determining
when additional resources are required at customer locations. Most of our sales
personnel are compensated in part on their bookings and sales and ability to
identify and convert new business opportunities.
Though the majority are employees, the account manager function may be
performed by independent representatives depending on the specific customer,
product and geographic location. We also use a limited number of distributors to
provide logistical support as well as primary customer contact with certain
smaller accounts. Our major distributors are Aviall, Satair and AAR.
BACKLOG
We believe that sales order backlog (i.e., orders for products that have not
yet been shipped) is a useful indicator of future sales. As of March 30, 2002,
we estimated our sales order backlog at $117.0 million compared to an estimated
$83.2 million (which did not include Champion Aerospace) reported as of
March 31, 2001. The majority of the purchase orders outstanding as of March 30,
2002 are scheduled for delivery within the next twelve months. Purchase orders
are generally subject to cancellation by the customer prior to shipment. The
level of unfilled purchase orders at any given date during the year will be
materially affected by the timing of our receipt of purchase orders and the
speed with which those orders are filled. Accordingly, our backlog as of
March 30, 2002 may not necessarily represent the actual amount of shipments or
sales for any future period.
FOREIGN OPERATIONS
We manufacture all of our products in the United States. However, a portion
of our current sales is conducted abroad and a portion of our products are
resold to foreign end-users. Our export sales to customers were approximately
$54.8 million, $36.2 million and $30.7 million in fiscal 2001, fiscal 2000 and
fiscal 1999, respectively. These sales are subject to numerous additional risks,
including the impact of foreign government regulations, currency fluctuations,
political uncertainties and differences in business practices. We cannot assure
you that foreign governments will not adopt regulations or take other action
that would have a direct or indirect adverse impact on our business or market
opportunities within such governments' countries. Furthermore, we cannot assure
you that the political, cultural and economic climate outside the United States
will be favorable to our operations and growth strategy.
MANUFACTURING AND ENGINEERING
We maintain five manufacturing facilities. Each facility serves its
respective product lines and comprises manufacturing, distribution, engineering
as well as administrative functions, including management, sales and finance.
The facilities encompass approximately 105,000, 44,000, 150,000, 50,000 and
169,000 square feet of manufacturing space in Los Angeles, California;
Cleveland, Ohio; Waco, Texas; Fullerton, California; and Liberty, South
Carolina, respectively. In the last several years, we have taken a number of
steps to improve productivity and reduce costs, including consolidating
operations, developing improved control systems that allow for accurate product
line profit and loss accounting, investing in equipment and tooling, installing
modern information systems and implementing a broad-based employee training
program. We believe that our manufacturing systems and equipment are critical
competitive factors that permit it to meet the rigorous tolerances and cost
sensitive price
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structure of aircraft customers. We focus our manufacturing activities by
product line, alternating our equipment among designs as demand requires.
We attempt to differentiate ourselves from competitors by efficiently and
consistently producing highly engineered products with high quality and timely
delivery. Our proprietary products are designed by our engineering staff and
intended to serve an unmet need in the aircraft component industry, particularly
through our new product initiatives. See "--Products." These proprietary designs
must withstand the extraordinary conditions and stresses that will be endured by
products during use and meet the rigorous demands of our customers' tolerance
and quality requirements.
We use sophisticated equipment and procedures to ensure the quality of our
products and to comply with military specifications and FAA and OEM
certification requirements. We perform a variety of testing procedures,
including testing under different temperature, humidity and altitude levels,
shock and vibration testing and X-ray fluorescent measurement. These procedures,
together with other customer approved techniques for document, process and
quality control, are used throughout our manufacturing facilities.
CUSTOMERS
Our customers include: (A) worldwide commercial airlines, including national
and regional airlines, particularly for aftermarket maintenance, repair and
overhaul, or MRO, components, (B) large commercial transport and regional and
business aircraft OEMs, (C) various agencies of the United States and foreign
governments, including the United States military, (D) military OEMs, and
(E) various other industrial customers. For the year ended September 30, 2001,
our customers Aviall (a distributor of aftermarket parts to airlines throughout
the world) and Boeing (including McDonnell Douglas) represented approximately
17% and 8%, respectively, of our net sales. Aviall and Boeing (including
McDonnell Douglas) represented approximately 10% and 9%, respectively, of our
net sales during the year ended September 30, 2000, and Aviall and Boeing
(including McDonnell Douglas) represented approximately 15% and 14% of our net
sales for the year ended September 30, 1999.
We have strong customer relationships with virtually all important large
commercial transport, general aviation and military OEMs. The demand for our
aftermarket parts and services is related to our extensive installed base,
revenue passenger miles and, to a lesser extent, airline profitability and the
size and age of the worldwide aircraft fleet. Some of our business is executed
under long-term agreements with customers, which encompass many products under a
common agreement. We are also a leading supplier of components used on United
States' designed military aircraft. Our products are used on a variety of
fighter aircraft and helicopters, including the Boeing F-15 and F-18, Lockheed
Martin F-16, the E2C (Hawkeye) and the Blackhawk and Apache helicopters.
COMPETITION
We compete with a number of established companies, including divisions of
larger companies that have significantly greater financial, technological and
marketing resources than us. The niche markets within the aerospace industry
served by us are relatively fragmented with several competitors for each of the
products and services provided by us. Due to the global nature of the commercial
aircraft industry, competition in these categories comes from both U.S. and
foreign companies. We know of no single competitor, however, that provides the
same range of products and services as those provided by us. Competitors in our
product lines range in size from divisions of large corporations to small
privately held entities, with only one or two components in their entire product
line. We believe that our ability to compete depends on high product
performance, consistently high quality and timely delivery, competitive price,
and superior customer service and support. We cannot assure you that we will be
able to compete successfully with respect to these or other factors in the
future.
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GOVERNMENTAL REGULATION
The commercial aircraft component industry is highly regulated by both the
FAA in the United States and by the Joint Aviation Authorities in Europe, while
the military aircraft component industry is governed by military quality
specifications. We, and the components we manufacture, are required to be
certified by one or more of these entities, and, in some cases, by individual
OEMs in order to engineer and service parts and components used in specific
aircraft models. If material authorizations or approvals were revoked or
suspended, our operations would be adversely affected. In the future, new and
more stringent government regulations may be adopted, or industry oversight may
be heightened, which may have an adverse impact on us.
We must also satisfy the requirements of our customers, including OEMs and
airlines that are subject to FAA regulations, and provide these customers with
products and services that comply with the government regulations applicable to
commercial flight operations. In addition, the FAA requires that various
maintenance routines be performed on aircraft components, and we currently
satisfy or exceed these maintenance standards in our repair and overhaul
services. Several of our operating divisions include FAA-approved repair
stations.
Our operations are also subject to a variety of worker and community safety
laws. The Occupational Health and Safety Act, or OHSA, mandates general
requirements for safe workplaces for all employees. In addition, OHSA provides
special procedures and measures for the handling of certain hazardous and toxic
substances. We believe that our operations are in material compliance with
OHSA's health and safety requirements.
RAW MATERIALS AND PATENTS
We use various raw materials, including titanium, aluminum, nickel powder,
nickel screen, stainless steel and cadmium, in our manufacturing processes. The
availability and prices of such raw materials may fluctuate and we may not be
able to recover price increases in these supplies. We also purchase a variety of
manufactured component parts from various suppliers. We concentrate our orders,
however, among a few suppliers in order to strengthen our supplier
relationships. Raw materials and component parts are generally available from
multiple suppliers at competitive prices. However, any delay in our ability to
obtain necessary raw materials and component parts may affect our ability to
meet customer production needs.
We have various trade secrets, proprietary information, trademarks, trade
names, patents, copyrights and other intellectual property rights, which we
believe, in the aggregate but not individually, are important to our business.
ENVIRONMENTAL MATTERS
Our operations and current and/or former facilities are subject to federal,
state and local environmental laws and to regulation by government agencies,
including the Environmental Protection Agency. Among other matters, these
regulatory authorities impose requirements that regulate the emission,
discharge, generation, management, transportation and disposal of hazardous
materials and pollutants, govern response actions to hazardous materials which
may be or have been released to the environment, and require us to obtain and
maintain permits in connection with our operations. The extensive regulatory
framework imposes significant compliance burdens and risks on us. Although
management believes that our operations and our facilities are in compliance in
all material respects with applicable environmental laws, there can be no
assurance that future changes in such laws, regulations or interpretations
thereof or the nature of our operations will not require us to make significant
additional expenditures to ensure compliance in the future. According to some
environmental laws, a current or previous owner or operator of real property may
be liable for the costs of investigations, removal or remediation of hazardous
materials at such property. Those laws
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typically impose liability whether or not the owner or operator knew of, or was
responsible for, the presence of such hazardous materials. Persons who arrange,
or are deemed to have arranged, for disposal or treatment of hazardous materials
also may be liable for the costs of investigation, removal or remediation of
those substances at the disposal or treatment site, regardless of whether the
affected site is owned or operated by that person. Because we own and/or operate
a number of facilities, and because we arrange for the disposal of hazardous
materials at many disposal sites, we may incur costs for investigation, removal
and remediation, as well as capital costs associated with compliance. Although
those environmental costs have not been material in the past and are not
expected to be material in the future, there can be no assurance that changes in
environmental laws or unexpected investigation and clean-up costs will not be
material. We do not currently contemplate material capital expenditures for
environmental compliance and remediation for fiscal 2002 or fiscal 2003.
We have been addressing contaminated soil and groundwater beneath our
facility in Waco, Texas. Although we cannot assure you that material
expenditures will not be required in the future to address currently
unidentified contamination or to satisfy further requirements of the Texas
Natural Resources Conservation Commission, or TNRCC, we believe that the current
soil and groundwater remediation at our Waco facility will not require the
incurrence of material expenditures.
In connection with our acquisition of Marathon, a $2.0 million escrow was
created to cover the cost of remediation that TNRCC might require for those
contaminants at the Waco facility. During September 1998, the former owner of
Marathon filed a lawsuit against us to release the environmental escrow alleging
that we had violated the requirements of the stock purchase agreement relating
to the investigation of the presence of certain contaminants at the Waco, Texas
facility. We have filed counter claims against the seller and we cannot
presently determine the ultimate outcome of this matter.
PROPERTIES AND FACILITIES
We own and operate a 130,000 square foot facility in Los Angeles,
California, a 63,000 square foot facility in Cleveland, Ohio, a 219,000 square
foot facility in Waco, Texas and a 219,000 square foot facility in Liberty,
South Carolina. In addition, we lease and operate a 100,000 square foot facility
in Fullerton, California and approximately 17,000 square feet in Richmond
Heights, Ohio, which is also our headquarters. We also lease certain of our
other non-material facilities. We believe that our machinery, plants and offices
are in satisfactory operating condition and will have sufficient capacity to
meet foreseeable future needs without incurring significant additional capital
expenditures.
EMPLOYEES
As of March 30, 2002, we had approximately 950 employees. Approximately 9%
of our employees were represented by the United Steelworkers Union, and
approximately 6% were represented by the United Automobile, Aerospace and
Agricultural Implement Workers of America. Our collective bargaining agreements
with these labor unions expire in April 2005 and November 2004, respectively. We
consider our relationship with our employees generally to be satisfactory.
LEGAL PROCEEDINGS
During the ordinary course of business, we are from time to time threatened
with, or may become a party to, legal actions and other proceedings. While we
are currently involved in some legal proceedings, we believe the results of
these proceedings will not have a material effect on our financial condition,
results of operations, or cash flows. We believe that our potential exposure to
those legal actions is adequately covered by our aviation product and general
liability insurance.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND OTHER KEY EMPLOYEES
The following table sets forth certain information concerning the directors
and executive officers of Holdings and us:
<Table>
<Caption>
NAME AGE POSITION
- --------------------------------------- -------- -----------------------------------------------------
Douglas W. Peacock..................... 63 Chairman of the Board of Directors
W. Nicholas Howley..................... 50 President, Chief Executive Officer and Director
Robert S. Henderson.................... 45 President, AdelWiggins Group
Raymond F. Laubenthal.................. 41 President, AeroControlex Group
John F. Leary.......................... 55 President, Adams Rite Aerospace, Inc.
Albert J. Rodriguez.................... 41 President, Marathon Power Technologies Company
W. Todd Littleton...................... 38 President, Champion Aerospace Inc.
Gregory Rufus.......................... 45 Vice President and Chief Financial Officer
Stephen Berger......................... 62 Director
Muzzafar Mirza......................... 44 Director
William Hopkins........................ 38 Director
Thomas R. Wall, IV..................... 43 Director
John W. Paxton......................... 65 Director
</Table>
MR. PEACOCK has been our Chairman of the Board of Directors since our
inception in September 1993 and Chairman of the Board of Directors of Holdings
since the consummation of the recapitalization. Prior to December 2001,
Mr. Peacock also served as Chief Executive Officer of us and Holdings. He is
also a director of Microporous Products, L.P. Prior to joining TransDigm,
Mr. Peacock spent six years with IMO Industries Inc. as Executive Vice President
of IMO's Instruments and Aerocomponents Group from 1991 to 1993, Executive Vice
President of Power Systems from 1989 to 1991, and managed IMO's turbomachinery
business from 1987 to 1989. Prior to joining IMO, Mr. Peacock spent 15 years in
various managerial positions at Westinghouse Electric Corp. Mr. Peacock received
a B.S. degree in chemical engineering from Washington State University and a
Ph.D. in physical chemistry from the University of Illinois.
MR. HOWLEY has been a Director and President of Holdings and us since the
consummation of the recapitalization. He has served as Chief Executive Officer
of Holdings and us since December 2001. From the completion of the
recapitalization until December 2001, Mr. Howley served as President and Chief
Operating Officer of us and Holdings. Mr. Howley served as our Executive Vice
President and President of the AeroControlex Group from our inception in
September 1993 to the date of the consummation of the recapitalization. Prior to
joining us, Mr. Howley served as General Manager of IMO Industries Inc.
Aeroproducts Division, and Director of Finance for the 15 divisions of IMO's
Turbomachinery, Aerospace, and Power Transmission groups. Mr. Howley received
his B.S. in engineering from Drexel University and an MBA from the Harvard
University Graduate School of Business.
MR. HENDERSON became President of the AdelWiggins Group in August 1999. He
previously had served as President of Marathon Power Technologies Company since
March 1998. From April 1997 until March 1998, he served as Manager of Operations
for the AdelWiggins Group. From 1991 until 1994, Mr. Henderson served as
Operations Manager at RainBird Sprinkler. Mr. Henderson received his B.A. in
mathematics from Brown University and attended the Harvard University Graduate
School of Business.
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MR. LAUBENTHAL has been President of the AeroControlex Group since
November 1998. From December 1996 until November 1998, Mr. Laubenthal served as
Director of Manufacturing and Engineering for the AeroControlex Group and had
prior extensive experience in manufacturing and engineering at Parker Hannifin
Corporation and Textron. From October 1992 to December 1996, Mr. Laubenthal
served as Director of Manufacturing for the AeroControlex Group. Mr. Laubenthal
received a B.S. degree in mechanical engineering from Case Western Reserve
University and an MBA from Northern Illinois University.
MR. LEARY has been President of Adams Rite Aerospace, Inc. since June 1999.
From 1995 to June 1999, Mr. Leary was a General Operations Manager with Furon
Company. From 1991 to 1995, Mr. Leary was the Plant Manager of Emerson Electric,
Chromalox Division. Mr. Leary received a B.S. degree in Mechanical Engineering
from the New Jersey Institute of Technology.
MR. RODRIGUEZ has been President of Marathon Power Technologies Company
since September 1999. From January 1998 until September 1999, Mr. Rodriguez
served as Director of Commercial Operations for the AeroControlex Group. From
1993 to 1997, Mr. Rodriguez served as Director of Sales and Marketing for the
AeroControlex Group. Mr. Rodriguez has prior experience with IMO Industries,
Esterline, as well as Kaiser Electro Precision. Mr. Rodriguez received his
Bachelor of Engineering with a concentration in Chemical Engineering from
Stevens Institute of Technology.
MR. LITTLETON has been President of Champion Aerospace Inc. since
March 2002. He previously had served as Director of Operations, Engineering for
Champion Aerospace Inc. since July 2001. Mr. Littleton came to this position
from Robert Bosch Corp. where he was Director of Manufacturing for the Anti-Lock
Brakes and Fuel Systems Products in Anderson, S.C. from 1989 to July 2001. Prior
to that he was Business Unit Manager with responsibility for Bosch's fuel
systems product business. His prior experience also includes various operating
management and engineering assignments with WABCO and T&S Brass. Mr. Littleton
received a B.S. degree in mechanical engineering from Auburn University and has
completed the Executive Leadership Skills Program at the University of South
Carolina.
MR. RUFUS became Vice President and Chief Financial Officer in August 2000.
Prior to joining us, Mr. Rufus spent 19 years at Emerson Electric, including
divisional vice president responsibilities at Ridge Tool, Liebert Corp., and
Harris Calorific, all part of the Emerson organization. Prior to Emerson,
Mr. Rufus spent four years with Ernst & Young. Mr. Rufus received his CPA
certification in Ohio in 1980. Mr. Rufus received a B.A. degree in accounting
from Baldwin-Wallace College and attended the Weatherhead School of Management
at Case Western Reserve University.
MR. BERGER has served as one of our Directors and a Director of Holdings
since the consummation of the recapitalization. He is also currently serving as
Chairman of Odyssey Investment Partners, LLC. Prior to joining Odyssey
Investment Partners, LLC, Mr. Berger was a general partner of Odyssey Partners,
LP. From 1990 to 1993, Mr. Berger served as Chairman and CEO of FGIC, a
wholly-owned subsidiary of GE Capital Corp., and subsequently became Executive
Vice President of GE Capital Corp. From 1985 to 1990, Mr. Berger was Executive
Director of the Port Authority of New York and New Jersey. Mr. Berger presently
serves as a member of the Board of Trustees of Brandeis University and a member
of the Board of Directors of Dayton Superior Corporation.
MR. MIRZA has served as one of our Directors and a Director of Holdings
since the consummation of the recapitalization. Mr. Mirza is also currently a
member of Odyssey Investment Partners, LLC and was a principal in the private
equity investing group of Odyssey Partners, LP from 1993 to 1997. In addition,
Mr. Mirza is currently a member of the Board of Directors of Dresser, Inc. and
Velocita Corp. From 1988 to 1993, Mr. Mirza was employed by the merchant banking
group of GE Capital Corp.
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MR. HOPKINS has served as one of our Directors and a Director of Holdings
since the consummation of the recapitalization. Mr. Hopkins is also currently a
member of Odyssey Investment Partners, LLC and was a principal in the private
equity investing group of Odyssey Partners, LP from 1994 to 1997. In addition,
Mr. Hopkins is currently a member of the Board of Directors of Dayton Superior
Corporation. Prior to joining Odyssey, Mr. Hopkins was a member of the merchant
banking group of GE Capital Corp.
MR. WALL has served as one of our Directors and a Director of Holdings since
our inception in 1993. Mr. Wall joined Kelso & Company in 1983 and has served as
a Managing Director of Kelso & Company since 1990. Mr. Wall presently serves as
a member of the Board of Directors of AMF Bowling, Inc., Citation Corporation,
Consolidated Vision Group, Inc., Key Components, Inc., Mitchell Supreme Fuel
Company, Mosler Inc., Peebles, Inc., and 21st Century Newspapers, Inc.
MR. PAXTON has served as one of our Directors and a Director of Holdings
since the consummation of the recapitalization. Mr. Paxton is also currently
President of Zebra Technologies and a member of its Board of Directors, Chairman
of the Board of Paxton Associates, and a member of the Board of Directors of
Dayton Superior Corporation. Mr. Paxton was Chairman of the Board of Directors,
President and Chief Executive Officer of Telxon Corporation from March 1999 to
December 2000 and a member of the Board of Directors of Paxar Corporation and
President of Paxar's Printing Solution Group from October 1997 to the calendar
year end 1998. Mr. Paxton served as President and Chief Executive Officer of
Monarch Marking Systems from October 1995 to October 1997. Prior to joining
Monarch Marking Systems, Mr. Paxton joined Litton Industries as a Corporate Vice
president in 1991 when Litton acquired Intermec Corporation where Paxton was
Chairman, President and CEO. During his years at Litton, Mr. Paxton had
responsibility for the Industrial Automation Group. He became Corporate
Executive Vice President and Chief Operating Officer of the Industrial
Automation Systems Group of Western Atlas, Inc. when Western Atlas, Inc. was
spun off by Litton in March 1994. Mr. Paxton served as a member of the Board of
Directors of AIM, National Association of Manufacturers and the World Economic
Forum. Mr. Paxton is a guest lecturer at Ohio University.
BOARD COMMITTEES
Holdings' Board of Directors has a Compensation Committee and an Audit
Committee. The Compensation Committee, which is comprised of Messrs. Berger,
Mirza and Hopkins, establishes salaries, incentives and other forms of
compensation for executive officers and administers incentive compensation and
benefit plans provided for employees. The Audit Committee, which is comprised of
Messrs. Mirza and Hopkins, reviews Holdings' and our audit policies and oversees
the engagement of Holdings' and our independent auditors.
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EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid or accrued by
us for services rendered during fiscal 2001, 2000 and 1999 to our Chief
Executive Officer and each of our four other most highly paid executive
officers, who we refer to collectively as the named executive officers:
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION SECURITIES
FISCAL --------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS/SARS COMPENSATION
- --------------------------- -------- -------- ---------- ---------------- ------------- -------------
Douglas W. Peacock................. 2001 $345,000 $ 420,000 -- $17,795(3)
Chairman of the Board and 2000 330,000 200,000 -- 18,575
Chief Executive Officer(8) 1999 323,750 2,857,500 4,500 options 19,659
W. Nicholas Howley................. 2001 243,750 335,000 -- 12,641(4)
President, Chief Operating 2000 225,000 135,000 -- 12,094
Officer and Director(8) 1999 215,000 2,080,000 4,500 options 10,896
Raymond F. Laubenthal.............. 2001 134,250 90,000 -- 9,020(5)
President of AeroControlex 2000 121,998 37,500 -- 8,660
1999 113,000 181,450 700 options 7,910
Robert S. Henderson................ 2001 160,250 87,500 -- 10,595(6)
President of AdelWiggins 2000 155,000 45,000 -- 10,583
1999 137,469 450,000 700 options 9,744
Gregory Rufus...................... 2001 137,250 92,500 -- 7,185(7)
Vice President and Chief 2000 13,207 40,000 575 options 279
Financial Officer 1999 -- -- -- --
</Table>
- ------------------------------
(1) Bonus for fiscal year 1999 includes a one-time bonus paid by us in
connection with the recapitalization.
(2) Does not include perquisites and other personal benefits because the value
of these items did not exceed the lesser of $50,000 or 10% of reported
salary and bonus of any of the listed executives.
(3) Includes $10,200 in contributions by us for calendar year 2001 to a plan
established under Section 401(k) of the Internal Revenue Code, which we
refer to as the 401(k) plan, and $7,595 of Company-paid life insurance.
(4) Includes $10,200 in contributions by us for calendar year 2001 to the 401(k)
plan and $2,441 in Company-paid life insurance.
(5) Includes $8,460 in contributions by us for calendar year 2001 to the 401(k)
plan and $560 in Company-paid life insurance.
(6) Includes $9,720 in contributions by us for calendar year 2001 to the 401(k)
plan and $875 in Company-paid life insurance.
(7) Includes $6,440 in contributions by us for calendar year 2001 to the 401(k)
plan and $745 in Company-paid life insurance.
(8) Effective December 3, 2001, Mr. Howley was named to the position of
President and Chief Executive Officer. Mr. Peacock will remain as Chairman
of the Board.
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AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
<Table>
<Caption>
NUMBER OF SHARES
SHARES UNDERLYING
ACQUIRED UNEXERCISED VALUE OF UNEXERCISED IN
EXERCISE ON VALUE OPTIONS/SAR AT FISCAL THE MONEY OPTIONS/SARS
NAME PRICE EXERCISE REALIZED YEAR-END AT FISCAL YEAR-END(2)
- ---- -------- -------- -------- --------------------- -------------------------
Douglas W. Peacock.............. $ 100 -- -- Exercisable 2,992 Exercisable $4,158,880
Chairman of the Board Unexercisable.. -- Unexercisable --
and Chief Executive Officer(1) 335 -- -- Exercisable 3,097 Exercisable 3,577,035
Unexercisable.. -- Unexercisable --
1,040 -- -- Exercisable 2,025 Exercisable 911,250
Unexercisable 2,475 Unexercisable 1,113,750
W. Nicholas Howley.............. 100 -- -- Exercisable 3,890 Exercisable 5,407,100
President, Chief Operating Unexercisable -- Unexercisable --
Officer and Director(1) 335 -- -- Exercisable 1,900 Exercisable 2,194,500
Unexercisable.. -- Unexercisable --
1,040 -- -- Exercisable 2,025 Exercisable 911,250
Unexercisable 2,475 Unexercisable 1,113,750
Raymond F. Laubenthal........... 100 -- -- Exercisable 80 Exercisable 111,200
President of AeroControlex Unexercisable -- Unexercisable --
200 -- -- Exercisable 400 Exercisable 516,000
Unexercisable -- Unexercisable --
335 -- -- Exercisable 300 Exercisable 346,500
Unexercisable -- Unexercisable --
1,040 -- -- Exercisable 315 Exercisable 141,750
Unexercisable 385 Unexercisable 173,250
Robert S. Henderson............. 154 -- -- Exercisable 172 Exercisable 229,792
President of AdelWiggins Unexercisable.. -- Unexercisable --
200 -- -- Exercisable 400 Exercisable 516,000
Unexercisable -- Unexercisable --
335 -- -- Exercisable 200 Exercisable 231,000
Unexercisable.. -- Unexercisable --
1,040 -- -- Exercisable 315 Exercisable 141,750
Unexercisable.. 385 Unexercisable 173,250
Gregory Rufus................... 1,180 -- -- Exercisable 259 Exercisable 80,290
Vice President and Chief Unexercisable 316 Unexercisable 97,960
Financial Officer
</Table>
- ------------------------------
(1) Effective December 3, 2001, Mr. Howley was named to the position of
President and Chief Executive Officer. Mr. Peacock will remain as Chairman
of the Board.
(2) The value of an unexercised option equals the aggregate fair market value of
the shares underlying the option (based on an estimated $1,490 per share
value at fiscal year end), less the aggregate exercise price of the option.
The $1,490 per share value used in this calculation is only an estimate as
of September 30, 2001. The actual share value on that date may have been
different, and share values are subject to change over time.
MANAGEMENT STOCKHOLDERS' AGREEMENT
In connection with the recapitalization, Holdings, Odyssey and the employee
stockholders of Holdings, including the named executive officers, who we refer
to collectively as the management stockholders, entered into a management
stockholders' agreement which governs the shares of common stock of Holdings
retained by such persons after the recapitalization and any new shares acquired
thereafter, including pursuant to the exercise of options. Subsequent to the
recapitalization, certain additional management stockholders have been
signatories to the management stockholders' agreement. See "--Stock Option
Plan."
The management stockholders' agreement provides that, except for certain
transfers to family members and family trusts, no management stockholder may
transfer common stock until the fifth anniversary of the recapitalization, and
thereafter, any proposed transfer will be subject to Holdings' right of first
refusal.
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The management stockholders' agreement also provides that upon termination
of the employment of a management stockholder under certain circumstances, that
management stockholder will have certain put rights and Holdings will have
certain call rights regarding any common stock or any options to purchase common
stock, in each case, owned by him at that time.
Pursuant to his employment agreement, as amended, Mr. Peacock has additional
rights to require Holdings to repurchase a portion of his common stock under
certain circumstances. See "--Employment Agreements."
If the provisions of any law, the terms of credit and financing arrangements
or Holdings' financial circumstances would prevent Holdings from making a
repurchase of shares pursuant to the management stockholders' agreement,
Holdings will not make such purchase until all such prohibitions lapse, and will
then pay the management stockholder, in addition to the repurchase price, a
specified rate of interest on the repurchase price.
The management stockholders' agreement further provides that, in the event
of certain types of transfers of common stock by Odyssey, the management
stockholders may participate in those transfers and/or Odyssey may require the
management stockholders to transfer their shares in those transactions, in each
case, on a pro rata basis.
Pursuant to the management stockholders' agreement, the management
stockholders are entitled to participate on a pro rata basis with, and on the
same terms as, Odyssey in any future offering of common stock. Those
participation rights will lapse following a public offering of common stock if
the common stock so offered is then listed on a national exchange or if the
public offering includes 50% or more of the outstanding common stock that will
have been issued following the offering.
EMPLOYMENT AGREEMENTS
In connection with the recapitalization, Holdings entered into an employment
agreement with each of Messrs. Peacock and Howley. Effective as of December 3,
2001, Mr. Peacock resigned from his position as Chief Executive Officer of
Holdings and us, but continues to serve as Holdings' and our Chairman of the
Board. Mr. Howley has succeeded Mr. Peacock to the position of Chief Executive
Officer of Holdings and us. In connection with these events, we amended the
terms of our employment agreements with Messrs. Peacock and Howley.
Pursuant to the amended agreement with Mr. Peacock, Mr. Peacock will serve
as Holdings' and our Chairman of the Board through the earlier of December 3,
2006 or the occurrence of a "change in control" (as defined in his employment
agreement) during which time he will receive an annual base salary at a rate no
less than $100,000. In the event Mr. Peacock's service terminates by reason of
death, disability, termination without "cause" or resignation with "good reason"
(all as defined in his employment agreement), Holdings will continue payment of
base salary, bonus and other perquisites and benefits for 18 months thereafter.
In the event Mr. Peacock's services are terminated for any reason (other than
for "cause"), Holdings will provide medical coverage for Mr. Peacock and his
spouse following such termination for their respective lives.
Under Mr. Howley's amended employment agreement, Mr. Howley will serve as
Holdings' and our President and Chief Executive Officer for a period of at least
five years, during which time he will receive an annual base salary at a rate no
less than $335,000. In the event Mr. Howley's employment terminates by reason of
death, disability, termination without "cause" or resignation with "good reason"
(all as defined in his employment agreement), Holdings will continue payment of
base salary, bonus and other perquisites and benefits for 18 months thereafter.
Pursuant to these employment agreements, Messrs. Peacock and Howley are also
eligible for annual salary increases as determined by our Compensation
Committee, and annual cash bonuses based on achievement of performance criteria
established by our Board of Directors.
Additionally, Mr. Peacock's employment agreement provides that so long as he
serves as Chairman of the Board, Mr. Peacock can require Holdings to repurchase
up to 80% of his common stock
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(including certain options to purchase common stock), provided that we satisfy
certain financial targets. Mr. Peacock's right to require the repurchase of
these shares became exercisable in fiscal 2002 and Mr. Peacock shall have this
right so long as he continues to serve as Chairman of the Board for Holdings.
Holdings will be permitted to honor this repurchase obligation to Mr. Peacock by
issuing notes under certain circumstances. Mr. Peacock may also require
repurchase of his common stock under certain circumstances as set forth in the
management stockholders' agreement. See "Management Stockholders' Agreement."
STOCK OPTION PLAN
During fiscal 1999, Holdings adopted the 1998 Stock Option Plan, which we
refer to as the option plan, pursuant to which stock options may be granted to
"independent directors" (as defined in the option plan), or to employees or
consultants of Holdings, us and any subsidiary of us or Holdings, who we refer
to collectively as the plan participants. In addition, the option plan governs
those options retained pursuant to the recapitalization, which we refer to as
the rollover options. A total of 18,990 shares of common stock of Holdings was
reserved for issuance under the Option Plan and 1,570, 1,695 and 15,115 of the
options were issued during fiscal 2001, 2000 and 1999, respectively. During 2001
and 2000, stock options pertaining to 320 and 1,995 shares of common stock,
respectively, were forfeited by employees due to terminations of such employees'
employment. Options to purchase these shares may be reissued by Holdings to
other plan participants in the future. Holdings' Chief Executive Officer has
discretion to select the plan participants and to specify the terms of such
options, including the number of shares, the exercise price and the terms of
vesting and expiration of options, subject to approval by the Compensation
Committee.
The Compensation Committee has discretion under the option plan to adjust
options to reflect certain specified events such as stock dividends, stock
splits, recapitalizations, mergers or reorganizations of, or by Holdings. In
addition, the Board of Directors has the right to amend, suspend or terminate
the option plan, subject to stockholder approval for certain amendments.
The rollover options are fully vested and nonforfeitable. In connection with
the recapitalization, and subsequent thereto, Holdings has granted options to
certain of our employees, including the named executive officers, for the
purchase of shares of common stock of Holdings, which we refer to as the new
options. Such new options are intended to qualify as "incentive stock options"
to the extent permitted under the Internal Revenue Code, and have an exercise
price equal to the price per share paid by Odyssey in connection with the
recapitalization (with respect to the new options issued in connection with the
recapitalization) or the per-share fair market value of Holdings' common stock
at the time of grant (with respect to later grants of new options). The new
options generally will expire 10 years after grant and may expire earlier in the
event of a holder's earlier termination of employment.
Prior to May 31, 2001, the terms of each named executive officer's new
options provided that the options would vest upon the passage of time and/or
upon Holdings' attainment of certain financial targets. Effective May 31, 2001,
the terms of the new options of the named executive officers were modified to
provide for the vesting of an additional percentage of each executive's new
options so that, as of September 30, 2001, a total of 45% of each named
executive officer's new options were vested. Additionally, subject to each
executive's continued employment with and, in the case of Mr. Peacock, continued
service as Chairman of the Board of Holdings and us, the remaining 55% of each
named executive officer's new options will become exercisable upon the earlier
of (1) the date which is seven years and nine months after such new option was
granted, or (2) a "change of control," if any, on or prior to September 30,
2003, pursuant to which certain investor return targets are satisfied.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the common stock of Holdings as of September 30, 2001 with respect
to each beneficial owner of more than 5.0% of the outstanding common stock of
Holdings and beneficial ownership of the common stock of Holdings by each
director and named executive officer and all directors and executive officers as
a group:
<Table>
<Caption>
COMMON STOCK
BENEFICIALLY OWNED
---------------------
NAME OF BENEFICIAL OWNER SHARES PERCENTAGE
- ------------------------ -------- ----------
Stephen Berger (1).......................................... 100,240 83.7%
Robert S. Henderson (2)..................................... 1,087 *
William Hopkins (1)......................................... 100,240 83.7
W. Nicholas Howley (3)...................................... 7,815 6.1
Kelso & Company (4)......................................... 18,422 15.4
Raymond F. Laubenthal (5)................................... 1,095 *
Muzzafar Mirza (1).......................................... 100,240 83.7
Odyssey Investment Partners, LP (1)......................... 100,240 83.7
John W. Paxton.............................................. -- *
Douglas W. Peacock (6)...................................... 8,925 7.0
Gregory Rufus (7)........................................... 259 *
Thomas R. Wall, IV (4)...................................... 18,422 15.4
All officers and directors as a group (12 members)(8)....... 138,876 99.8
</Table>
- ------------------------
* Less than 1.0%
(1) Consists of 100,240 shares of common stock owned by Odyssey Investment
Partners, LP (the "Fund"), Odyssey Coinvestment, LLC ("Coinvestment"), TD
Coinvestment I, LLC ("TD I"), and TD Coinvestment II, LLC ("TD II" and
together with the Fund, Coinvestment and TD I, "Odyssey"). Odyssey Capital
Partners, LLC is the general partner of the Fund. Odyssey Investment
Partners, LLC is the manager of the Fund and the managing member of each of
Coinvestment, TD I and TD II. Stephen Berger, Muzzafar Mirza, William
Hopkins (directors of Holdings) and Brian Kwait and Paul Barnett are
managing members of Odyssey Capital Partners, LLC and Odyssey Investment
Partners, LLC and, therefore, may each be deemed to share voting and
investment power with respect to such shares deemed to be owned by Odyssey.
Each of them disclaims beneficial ownership of such shares.
(2) Includes options to purchase 1,087 shares exercisable within 60 days.
(3) Includes options to purchase 7,815 shares exercisable within 60 days.
(4) KIA IV-TD, LLC ("KIA IV-TD") and Kelso Equity Partners II, L.P. ("KEP II")
have beneficial ownership of 17,473 and 949 shares, respectively. Due to
their common control, KIA IV-TD, Kelso Partners IV, L.P., the managing
member of KIA IV-TD ("KP IV" and, together with KIA IV-TD and KEP II,
"Kelso"), and KEP II could be deemed to beneficially own each other's
shares, but each disclaims such beneficial ownership. In addition,
Mr. Wall, Joseph S. Schuchert, Frank T. Nickell, George E. Matelich, Michael
B. Goldberg, David I. Wahrhaftig, Frank K. Bynum, Jr. and Phillip E. Berney
may be deemed to share beneficial ownership of shares beneficially owned by
KIA IV-TD, KP IV and KEP II by virtue of their status as general partners of
KP IV, which is the managing member of KIA IV-TD, and as general partners of
KEP II, but each disclaims such beneficial ownership.
(5) Includes options to purchase 1,095 shares exercisable within 60 days.
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(6) Includes options to purchase 8,114 shares exercisable within 60 days and 811
shares and votes owned by TD Equity LLC, of which Mr. Peacock is the
managing member. Mr. Peacock disclaims ownership of the 811 shares and votes
owned by TD Equity LLC.
(7) Includes options to purchase 259 shares exercisable within 60 days.
(8) As described in footnotes (1), (2), and (4), Messrs. Berger, Hopkins and
Mirza may each be deemed to share investment and voting power with respect
to 100,240 shares deemed to be beneficially owned by the General Partner of
Odyssey, Mr. Wall may be deemed to share investment and voting power with
respect to 18,422 shares owned by Kelso and Mr. Peacock may be deemed to
share investment and voting power with respect to 811 shares owned by TD
Equity LLC. Each of Messrs. Berger, Hopkins, Mirza, Wall and Peacock
disclaims ownership of such shares. Excluding such shares, all officers and
directors as a group beneficially own 19,403 shares, or 13.9%, which are
purchasable within 60 days upon the exercise of options.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TAX ALLOCATION AGREEMENT
We and Holdings are parties to a tax allocation agreement. Under the terms
of the tax allocation agreement, we are obligated to make payments to Holdings
equal to the amount of income taxes that we and subsidiaries would have owed for
federal and state income taxes if we and subsidiaries were, for tax purposes, a
separate consolidated group.
ONE-TIME MANAGEMENT BONUSES
Following the consummation of the recapitalization, we paid certain members
of senior management an aggregate of $5.9 million as a one-time bonus in
connection with the recapitalization. See "Management--Executive Compensation."
STOCKHOLDERS' AGREEMENTS
Pursuant to a merger agreement, Holdings, Odyssey and KIA IV-TD and KEP II
entered into a stockholders agreement concurrently with consummation of the
recapitalization. The stockholders agreement provides for customary transfer
restrictions, tag-along and drag-along rights, registration rights and an
agreement among the parties to vote their shares of Common Stock, including the
agreement of Odyssey to designate a representative of Kelso to the Board of
Directors of Holdings. See also "Management--Management Stockholders' Agreement"
and "Management--Employment Agreements" for a description of certain agreements
that we and Holdings have entered into with certain members of management in
connection with the recapitalization.
ODYSSEY FINANCIAL SERVICES
As part of the recapitalization, we paid Odyssey a fee of approximately
$3.5 million. In addition, in connection with the Champion Aerospace
acquisition, we paid Odyssey a fee of approximately $1.7 million. We reimburse
Odyssey for all of its reasonable and customary out of pocket expenses that it
incurs in connection with advisory services that it provides to us. Odyssey is
the majority stockholder of Holdings. In addition, Messrs. Berger, Hopkins and
Mirza, each a director of Holdings and us, are managing members of the general
partner of Odyssey.
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DESCRIPTION OF OTHER INDEBTEDNESS
TRANSDIGM
THE CREDIT FACILITY
Our credit facility consists of (1) a $30.0 million revolving credit
facility maturing six years from December 3, 1998, which we refer to as the
execution date, and (2) a term loan facility in an aggregate principal amount of
$263.8 million, consisting of a $43.3 million Tranche A facility maturing six
years from the execution date, a $105.5 million Tranche B facility maturing
seven and a half years from the execution date and a $115.0 Tranche C facility
maturing eight and a half years from the execution date. As of March 30, 2002,
the outstanding balances of our Tranche A, B and C facilities were
$35.5 million, $104.3 million and $114.1 million, respectively.
The interest rate for the credit facility is, at our option, either (A) a
floating rate equal to the base rate plus the applicable margin, as defined in
the credit facility, or (B) the Eurodollar rate for fixed periods of one, two,
three, or six months, plus the applicable margin. The overall interest rate and
applicable margin are determined based on (1) in the case of the Tranche A
facility and the revolving credit facility, (A) an interest rate determined by
the base rate, plus 2.25%, 2.00%, 1.75% or 1.50% depending on Holdings' ability
to achieve the respective debt coverage ratio specified in the credit facility,
as amended; or (B) an interest rate determined by the Eurodollar rate, plus
3.25%, 3.00%, 2.75% or 2.50% depending on Holdings' ability to achieve the
respective debt coverage ratio specified in the credit facility, as amended; and
(2) in the case of the Tranche B facility and the Tranche C facility, (A) an
interest rate determined by the base rate, plus 2.50%; or (B) an interest rate
determined by the Eurodollar rate, plus 3.50%. The credit facility is subject to
mandatory prepayment with a defined percentage of net proceeds from certain
asset sales, insurance proceeds or other awards that are payable in connection
with the loss, destruction or condemnation of any assets, certain new debt and
equity offerings and 50% of excess cash flow (as defined in the credit facility)
in excess of a predetermined amount under the credit facility.
The credit facility requires us to repay the outstanding indebtedness on a
periodic basis through the various maturity dates.
The credit facility contains various covenants, customary for similar credit
facilities or otherwise appropriate under the circumstances, that (1) restrict
us, Holdings and our respective subsidiaries from various actions, including,
among others, mergers and sales of assets, use of proceeds, granting of liens,
incurrence of indebtedness, voluntary prepayment of indebtedness, including the
notes, capital expenditures, paying dividends, business activities, investments
and acquisitions, transactions with affiliates, certain restrictions affecting
subsidiaries, voluntary prepayment of other indebtedness and amendments or
modifications to instruments governing such other indebtedness and (2) require
us to achieve and maintain certain financial covenants.
The credit facility includes events of default provisions that are typical
for senior credit facilities or otherwise appropriate under the circumstances.
All obligations under the credit facility are guaranteed by Holdings and each of
our direct and indirect subsidiaries. The indebtedness under the credit facility
is secured by a pledge of our stock and all of the stock of our domestic
subsidiaries and a perfected lien and security interest in our assets other than
real estate (tangible and intangible) and such assets of our direct and indirect
subsidiaries and Holdings.
In connection with the offering of the old notes, we repaid the Tranche A
facility and repaid a portion of each of the Tranche B and Tranche C facilities.
In addition, we amended our credit facility in connection with the offering of
the old notes. The amendments to the credit facility:
- allowed us to incur the indebtedness represented by the old notes;
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- allow us to pay dividends to Holdings for the purpose of retiring the
Holdings PIK Notes; and
- allow us to incur up to $150.0 million of additional bank borrowings or
subordinated debt (for which there are currently no commitments to provide
such funds), subject to certain restrictions, including a requirement that
such debt must be used:
- to finance acquisitions permitted by the amended credit facility, or
- to pay the dividends to Holdings to retire the Holdings PIK Notes;
- allow us to effect permitted acquisitions, with the aggregate amount paid
for all such permitted acquisitions not to exceed $225.0 million;
- require that at least $10.0 million must remain unused and available under
our $30.0 million revolving credit facility immediately following any
acquisition;
- modified certain existing financial covenants; and
- waive any mandatory prepayment from excess cash flow for fiscal 2002.
HOLDINGS
HOLDINGS PIK NOTES
Concurrently with our issuance of the 1998 notes, Holdings issued the
Holdings PIK Notes to certain shareholders of Holdings in connection with the
recapitalization. The Holdings PIK Notes were issued to investors together with
shares of common stock of Holdings. The Holdings PIK Notes are unsecured
obligations of Holdings, subordinated to the guarantee of the credit facility by
Holdings, but senior to the guarantee of the notes by Holdings. The Holdings PIK
Notes mature in 2009.
Interest on the Holdings PIK Notes accrues at an annual fixed rate of 12%
and is payable semiannually in the form of additional Holdings PIK Notes for
five years after their issuance in December 1998. Thereafter, cash interest is
payable semi-annually commencing 2004. The Holdings PIK Notes are redeemable at
the option of Holdings, in whole or in part, at a price equal to 100% of the
principal amount thereof for five years after their issuance in December 1998
and thereafter at the prices set forth in the indenture pursuant to which the
Holdings PIK Notes were issued, which we refer to as the Holdings Indenture. If
Holdings experiences specific kinds of changes in control, it must offer to
repurchase the Holdings PIK Notes at a price equal to 101% of the principal
amount thereof.
The Holdings PIK Notes contain certain covenants on a consolidated basis,
including covenants that limit (1) indebtedness, (2) restricted payments,
(3) distributions by subsidiaries, (4) transactions with affiliates, (5) sales
of assets and subsidiary stock, (6) dividend and other payment restrictions, and
(7) mergers or consolidations. The Holdings PIK Notes contain customary events
of default and the holders of the Holdings PIK Notes have customary registration
rights that commenced in December 2001. The covenants and default provisions in
the Holdings Indenture are substantially similar to those contained in the
indenture governing the notes, but are less restrictive in certain respects.
HOLDINGS 16% CUMULATIVE REDEEMABLE PREFERRED STOCK
Concurrently with the Champion Aerospace acquisition, Holdings issued and
sold the Holdings 16% Cumulative Redeemable Preferred Stock, which we refer to
as the Holdings 16% Preferred Stock, and warrants to purchase 1,381.87 shares of
Holdings' common stock to First Union Investors, Inc. for $15.0 million.
Dividends on the Holdings 16% Preferred Stock accrue at 16% annually. Holdings
may pay dividends on the Holdings 16% Preferred Stock in cash, or at its option,
in the form of additional shares of Holdings 16% Preferred Stock.
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The Holdings 16% Preferred Stock is mandatorily redeemable on May 31, 2010.
If Holdings experiences specific kinds of changes in control, it must offer to
redeem the Holdings 16% Preferred Stock at a price equal to 101% of the
liquidation preference thereof if such event occurs prior to May 31, 2004, and
at a price equal to 100% of the liquidation preference thereof if such event
occurs any time thereafter. In addition, Holdings is required to redeem the
Holdings 16% Preferred Stock upon the acceleration of Holdings' obligations
under the credit agreement.
The Holdings 16% Preferred Stock contains certain covenants, including
covenants that limit (1) acquisition indebtedness, (2) restricted payments,
(3) distributions by subsidiaries, (4) transactions with affiliates,
(5) dividend and other payment restrictions, and (6) mergers or consolidations.
The Holdings 16% Preferred Stock contain customary events of noncompliance.
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DESCRIPTION OF THE EXCHANGE NOTES
TransDigm issued the old notes pursuant to the indenture, dated as of
December 3, 1998, as supplemented on April 23, 1999 and June 26, 2001, among
itself, the Guarantors and State Street Bank and Trust Company, as trustee,
which we refer to as the indenture. An aggregate of $125.0 million in principal
amount of 10 3/8% Senior Subordinated Notes due 2008 were previously issued on
December 3, 1998 pursuant to the indenture, which we refer to as the 1998 notes.
The old notes, as an additional issuance of 10 3/8% Senior Subordinated Notes
due 2008, are "Additional Notes" as defined in the indenture. The old notes are
identical to, and are PARI PASSU with and treated identically with, the 1998
notes, except that the old notes are subject to transfer restrictions until we
consummate this exchange offer and the old notes are exchanged for exchange
notes, or the old notes are resold under a shelf registration statement.
You can find definitions of certain capitalized terms used in this
description under the subheading "--Certain Definitions." For purposes of this
description:
- references to "TransDigm" mean TransDigm Inc. and not its Subsidiaries;
and
- "notes" means the exchange notes, the old notes and the 1998 notes, in
each case outstanding at any given time and issued under the indenture.
The exchange notes will be issued under the indenture. The terms of the
exchange notes are identical in all material respects to the old notes except
that, upon completion of the exchange offer, the exchange notes will be:
- registered under the Securities Act; and
- free of any covenants regarding exchange registration rights.
The following is a summary of the material provisions of the indenture. It
does not include all of the provisions of the indenture. We urge you to read the
indenture because it, and not this description, defines your rights. The terms
of the notes include those stated in the indenture and those made part of the
indenture by reference to the Trust Indenture Act of 1939, or the TIA, as in
effect on the date of the indenture. We have filed a copy of the indenture as an
exhibit to the registration statement which includes this prospectus.
The registered holder of a note (a "Holder") will be treated as the owner of
it for all purposes. Only registered Holders will have rights under the
indenture.
TransDigm will issue the notes in fully registered form in denominations of
$1,000 and integral multiples of $1,000. The Trustee will initially act as
paying agent and registrar. The notes may be presented for registration of
transfer and exchange at the offices of the registrar. TransDigm may change any
paying agent and registrar without notice to Holders. TransDigm will pay
principal (and premium, if any) on the notes at the Trustee's corporate office
in New York, New York. At TransDigm's option, interest also may be paid by
mailing a check to the Holders registered address.
Any notes that remain outstanding after the completion of this exchange
offer, together with the exchange notes issued in connection with this exchange
offer and the 1998 notes, will be treated as a single class of securities under
the indenture.
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
The notes:
- are unsecured obligations of TransDigm;
- are subordinated in right of payment to all Senior Debt of TransDigm; and
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- are guaranteed by Holdings, the parent company of TransDigm, and by each
of TransDigm's domestic subsidiaries.
Each guarantee of the notes:
- is an unsecured obligation of the guarantor; and
- is subordinated in right of payment to all Senior Debt of that guarantor.
PRINCIPAL, MATURITY AND INTEREST
The notes are limited in aggregate principal amount to $200.0 million, of
which $125.0 million in aggregate principal amount were issued in December 1998
and the remaining $75.0 million in aggregate principal amount were issued in the
offering of the old notes in June 2002. The notes will mature on December 1,
2008. Interest on these notes will accrue at the rate of 10 3/8% per annum and
will be payable semiannually in cash on each June 1 and December 1, accruing
from the most recent interest date on which interest has been paid on the old
notes or, if no interest has been paid, from June 1, 2002. TransDigm will make
interest payments to the persons who are registered Holders at the close of
business on the May 15 and November 15 immediately preceding the applicable
interest payment date.
These notes do not contain any mandatory sinking fund.
REDEMPTION
OPTIONAL REDEMPTION. Except as described below, these notes are not
redeemable before December 1, 2003. Thereafter, TransDigm may redeem the notes
at its option, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the following redemption prices (expressed as percentages of
the principal amount thereof) if redeemed during the twelve month period
commencing on December 1 of the year set forth below.
<Table>
<Caption>
YEAR PERCENTAGE
- ---- ----------
2003........................................................ 105.188%
2004........................................................ 103.458%
2005........................................................ 101.729%
2006 and thereafter......................................... 100.000%
</Table>
In addition, TransDigm must pay all accrued and unpaid interest on the notes
redeemed.
SELECTION AND NOTICE OF REDEMPTION
In the event that TransDigm chooses to redeem less than all of the notes,
selection of the notes for redemption will be made by the Trustee either:
(1) in compliance with the requirements of the principal national securities
exchange, if any, on which such notes are listed; or
(2) on a PRO RATA basis, by lot or by such method as the Trustee shall deem
fair and appropriate. No notes of a principal amount of $1,000 or less
shall be redeemed in part.
SUBORDINATION
The payment of all Obligations on the notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Debt of TransDigm including its obligations under the
Credit Facility.
The holders of Senior Debt will be entitled to receive payment in full in
cash of all Obligations due in respect of Senior Debt (including interest after
the commencement of any bankruptcy or other
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like proceeding at the rate specified in the applicable Senior Debt whether or
not such interest is an allowed claim in any such proceeding) before the Holders
of notes will be entitled to receive any payment with respect to the notes in
the event of any distribution to creditors of TransDigm:
(1) in a liquidation or dissolution of TransDigm;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to TransDigm or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshalling of TransDigm's assets and liabilities.
TransDigm also may not make any payment in respect of the notes if:
(1) a payment default on Designated Senior Debt occurs and is continuing; or
(2) any other default occurs and is continuing on Designated Senior Debt
that permits holders of the Designated Senior Debt to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment
Blockage Notice") from the Representative of any Designated Senior Debt.
Payments on the notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such default is
cured or waived; and
(2) in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived (so long as no other event of
default exists) or 180 days after the date on which the applicable
Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the effectiveness of the immediately prior Payment Blockage
Notice.
No nonpayment default that existed or was continuing on the date of delivery
of any Payment Blockage Notice to the Trustee shall be, or be made, the basis
for a subsequent Payment Blockage Notice unless such default shall have been
cured or waived for a period of not less than 90 days.
TransDigm must promptly notify holders of Senior Debt if payment of the
notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event of
a bankruptcy, liquidation or reorganization of TransDigm, Holders of these notes
may recover less ratably than creditors of TransDigm who are holders of Senior
Debt. See "Risk Factors--Subordination."
After giving effect to the offering of the old notes and the application of
the net proceeds therefrom, on a pro forma basis, at March 30, 2002, the
aggregate principal amount of Senior Debt outstanding of TransDigm and Holdings
would have been approximately $180.0 million and $209.3 million, respectively.
GUARANTEE
The obligations of TransDigm under the notes and the indenture will be
guaranteed (the "Guarantees") on a senior subordinated basis by Holdings and the
Domestic Restricted Subsidiaries. The Guarantees will be subordinated in right
of payment to all Senior Debt of Holdings and the Domestic Restricted
Subsidiaries, respectively, to the same extent that the notes are subordinated
to Senior Debt of TransDigm. Since Holdings is a holding company with no
significant operations, the Guarantee by Holdings provides little, if any,
additional credit support for the notes, and investors should not rely on the
Guarantee by Holdings in evaluating an investment in the notes.
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CHANGE OF CONTROL
If a Change of Control occurs, each Holder will have the right to require
that TransDigm purchase all or a portion of such Holder's notes pursuant to the
offer described below (the "Change of Control Offer"), at a purchase price equal
to 101% of the principal amount thereof plus accrued interest to the date of
purchase. Within 30 days following the date upon which the Change of Control
occurred, TransDigm must send, by first class mail, a notice to each Holder,
which notice shall govern the terms of the Change of Control Offer. Such notice
shall state, among other things, the purchase date, which must be no earlier
than 30 days nor later than 60 days from the date such notice is mailed, other
than as may be required by law (the "Change of Control Payment Date"). Holders
electing to have a note purchased pursuant to a Change of Control Offer will be
required to surrender the note, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the note completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the third
business day prior to the Change of Control Payment Date.
Prior to the mailing of the notice referred to above, but in any event
within 30 days following any Change of Control, TransDigm covenants to:
(1) repay in full all Indebtedness under the Credit Facility and all other
Senior Debt the terms of which require repayment upon a Change of
Control; or
(2) obtain the requisite consents under the Credit Facility and all such
other Senior Debt to permit the repurchase of the notes as provided
below. TransDigm's failure to comply with the covenant described in the
immediately preceding sentence shall constitute an Event of Default
described in clause (3) and not in clause (2) under "Events of Default"
below.
TransDigm will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner in compliance with the indenture.
If a Change of Control Offer is made, there can be no assurance that
TransDigm will have available funds sufficient to pay the Change of Control
purchase price for all the notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event TransDigm is required to
purchase outstanding notes pursuant to a Change of Control Offer, TransDigm
expects that it would seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that TransDigm would be able to obtain such financing.
You should note that this provision will not protect you from the adverse
aspects of a highly leveraged transaction, reorganization, restructuring, merger
or similar transaction.
TransDigm will comply with the requirements of Rule 14e-1 under the Exchange
Act to the extent such laws and regulations are applicable in connection with
the repurchase of notes pursuant to a Change of Control Offer. To the extent
that TransDigm complies with the provisions of any such securities laws or
regulations, TransDigm shall not be deemed to have breached its obligations
under the "Change of Control" provisions of the indenture.
CERTAIN COVENANTS
The indenture contains, among others, the following covenants:
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS. TransDigm will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively "incur") any Indebtedness (other than Permitted
Indebtedness); PROVIDED, HOWEVER, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, TransDigm and the Guarantors may incur
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Indebtedness (including, without limitation, Acquired Indebtedness) and
Restricted Subsidiaries of TransDigm that are not Guarantors may incur Acquired
Indebtedness, in each case if on the date of the incurrence of such
Indebtedness, after giving effect to the incurrence thereof, the Consolidated
Fixed Charge Coverage Ratio of TransDigm would have been greater than 2.0 to
1.0.
LIMITATION ON RESTRICTED PAYMENTS. TransDigm will not, and will not cause
or permit any of its Restricted Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any distribution (other than
dividends or distributions payable in Qualified Capital Stock of
TransDigm) on or in respect of shares of TransDigm's Capital Stock to
holders of such Capital Stock;
(2) purchase, redeem or otherwise acquire or retire for value any Capital
Stock of TransDigm or any direct or indirect parent of TransDigm or any
warrants, rights or options to purchase or acquire shares of any class of
such Capital Stock;
(3) make any principal payment on, purchase, defease, redeem, prepay,
decrease or otherwise acquire or retire for value, prior to any scheduled
final maturity, scheduled repayment or scheduled sinking fund payment,
any Indebtedness of TransDigm that is subordinate or junior in right of
payment to the notes; or
(4) make any Investment (other than Permitted Investments) (each of the
foregoing actions set forth in clauses (1), (2), (3) and (4) being
referred to as a "Restricted Payment");
if at the time of such Restricted Payment or immediately after giving effect
thereto:
(i) a Default or an Event of Default shall have occurred and be continuing;
or
(ii) TransDigm is not able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant; or
(iii) the aggregate amount of Restricted Payments (including such proposed
Restricted Payment) made subsequent to the Issue Date (other than
Restricted Payments made pursuant to clauses (2)(i), (3), (4), (5),
(6), (7), (8), (9) and (10) of the following paragraph) shall exceed
the sum, without duplication, of:
(w) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be loss, minus 100% of such loss) of
TransDigm earned subsequent to the beginning of the first fiscal
quarter commencing after the Issue Date and on or prior to the date
the Restricted Payment occurs (the "Reference Date") (treating such
period as a single accounting period); plus
(x) 100% of the aggregate net cash proceeds (including the fair market
value of property other than cash that would constitute Marketable
Securities or a Permitted Business) received by TransDigm from any
Person (other than a Subsidiary of TransDigm) from the issuance and
sale subsequent to the Issue Date and on or prior to the Reference
Date of Qualified Capital Stock of TransDigm; plus
(y) without duplication of any amounts included in
clause (iii)(x) above, 100% of the aggregate net cash proceeds of any
equity contribution received by TransDigm from a holder of
TransDigm's Capital Stock (excluding, in the case of clauses
(iii)(x) and (y), any net cash proceeds from an Equity Offering to
the extent used to redeem the notes in compliance with the provisions
set forth under "--Redemption--Optional Redemption Upon Equity
Offerings"); plus
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(z) 100% of the aggregate net proceeds (including the fair market value
of property other than cash that would constitute Marketable
Securities or a Permitted Business) of any (A) sale or other
disposition of any Investment (other than a Permitted Investment)
made by TransDigm and its Restricted Subsidiaries or (B) dividend
from, or the sale of the stock of, an Unrestricted Subsidiary.
As of March 30, 2002, TransDigm would have been permitted to make
approximately $42.8 million of Restricted Payments in accordance with the
foregoing.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit:
(1) the payment of any dividend or the consummation of any irrevocable
redemption within 60 days after the date of declaration of such dividend
or notice of such redemption if the dividend or payment of the redemption
price, as the case may be, would have been permitted on the date of
declaration or notice;
(2) if no Default or Event of Default shall have occurred and be continuing
or shall occur as a consequence thereof, the acquisition of any shares of
Capital Stock of TransDigm (the "Retired Capital Stock") either
(i) solely in exchange for shares of Qualified Capital Stock of TransDigm
(the "Refunding Capital Stock") or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of TransDigm) of shares of Qualified Capital Stock of
TransDigm and, in the case of subclause (i) of this clause (2), if
immediately prior to the retirement of the Retired Capital Stock the
declaration and payment of dividends thereon was permitted under
clause (5) of this paragraph, the declaration and payment of dividends on
the Refunding Capital Stock in an aggregate amount per year no greater
than the aggregate amount of dividends per annum that was declarable and
payable on such Retired Capital Stock immediately prior to such
retirement; PROVIDED that at the time of the declaration of any such
dividends on the Refunding Capital Stock, no Default or Event of Default
shall have occurred and be continuing or would occur as a consequence
thereof;
(3) if no Default or Event of Default shall have occurred and be continuing,
the acquisition of any Indebtedness of TransDigm that is subordinate or
junior in right of payment to the notes either (i) solely in exchange for
shares of Qualified Capital Stock of TransDigm, or (ii) through the
application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of TransDigm) of (A) shares of Qualified
Capital Stock of TransDigm or (B) Refinancing Indebtedness;
(4) if no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof, the declaration and payment of
dividends to holders of any class or series of Designated Preferred Stock
(other than Disqualified Capital Stock) issued after the Issue Date
(including, without limitation, the declaration and payment of dividends
on Refunding Capital Stock in excess of the dividends declarable and
payable thereon pursuant to clause (2) of this paragraph); PROVIDED that,
at the time of such issuance, TransDigm, after giving effect to such
issuance on a pro forma basis, would have had a Consolidated Fixed Charge
Coverage Ratio of at least 2.0 to 1.0;
(5) payments to Holdings for the purpose of permitting, and in an amount
equal to the amount required to permit, Holdings to redeem or repurchase
Holdings' common equity or options in respect thereof, in each case in
connection with the repurchase provisions of employee stock option or
stock purchase agreements or other agreements to compensate management
employees; PROVIDED that all such redemptions or repurchases pursuant to
this clause (5) shall not exceed $2.0 million in any fiscal year (which
amount shall be increased by the amount of any net cash proceeds received
from the sale since the Issue Date of Capital Stock (other than
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Disqualified Capital Stock) to members of TransDigm's management team
that have not otherwise been applied to the payment of Restricted
Payments pursuant to the terms of clause (iii) of the immediately
preceding paragraph and by the cash proceeds of any "key-man" life
insurance policies which are used to make such redemptions or
repurchases) since the Issue Date; PROVIDED, FURTHER, that the
cancellation of Indebtedness owing to TransDigm from members of
management of TransDigm or any of its Restricted Subsidiaries in
connection with any repurchase of Capital Stock of Holdings (or warrants
or options or rights to acquire such Capital Stock) will not be deemed to
constitute a Restricted Payment under the indenture;
(6) the making of distributions, loans or advances to Holdings in an amount
not to exceed $1.0 million PER ANNUM in order to permit Holdings to pay
the ordinary operating expenses of Holdings (including, without
limitation, directors' fees, indemnification obligations, professional
fees and expenses);
(7) payments to Holdings in respect of taxes pursuant to the terms of the
Tax Allocation Agreement as in effect on the Issue Date and as amended
from time to time pursuant to amendments that do not increase the amounts
payable by TransDigm or any of its Restricted Subsidiaries thereunder;
(8) repurchases of Capital Stock deemed to occur upon the exercise of stock
options if such Capital Stock represents a portion of the exercise price
thereof;
(9) other Restricted Payments in an aggregate amount not to exceed
$7.5 million; and
(10) distributions to Holdings to fund the Transactions (as described under
"Use of Proceeds") subsequent to the issuance of the notes.
In determining the aggregate amount of Restricted Payments made subsequent
to the Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, (a) amounts expended pursuant to clauses (1) and (2)(ii) shall be
included in such calculation, PROVIDED such expenditures pursuant to clause (5)
shall not be included to the extent of the cash proceeds received by TransDigm
from any "key-man" life insurance policies and (b) amounts expended pursuant to
clauses (2)(i), (3), (4), (5), (6), (7), (8), (9) and (10) shall be excluded
from such calculation.
LIMITATION ON ASSET SALES. TransDigm will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless:
(1) TransDigm or the applicable Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to
the fair market value of the assets sold or otherwise disposed of (as
determined in good faith by TransDigm's Board of Directors);
(2) at least 75% of the consideration received by TransDigm or the
Restricted Subsidiary, as the case may be, from such Asset Sale shall be
in the form of cash or Cash Equivalents and is received at the time of
such disposition; PROVIDED that the amount of:
(a) any liabilities (as shown on TransDigm's or such Restricted
Subsidiary's most recent balance sheet) of TransDigm or any such
Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the notes) that are assumed by the transferee of any
such assets;
(b) any notes or other obligations received by TransDigm or any such
Restricted Subsidiary from such transferee that are converted by
TransDigm or such Restricted Subsidiary into cash within 90 days of
the receipt thereof (to the extent of the cash received); and
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(c) any Designated Noncash Consideration received by TransDigm or any of
its Restricted Subsidiaries in such Asset Sale having an aggregate
fair market value, taken together with all other Designated Noncash
Consideration received pursuant to this clause (c) that is at that
time outstanding, not to exceed 5% of Total Assets at the time of the
receipt of such Designated Noncash Consideration (with the fair
market value of each item of Designated Noncash Consideration being
measured at the time received and without giving effect to subsequent
changes in value), shall be deemed to be cash for the purposes of
this provision or for purposes of the second paragraph of this
covenant; and
(3) upon the consummation of an Asset Sale, TransDigm shall apply, or cause
such Restricted Subsidiary to apply, the Net Cash Proceeds relating to
such Asset Sale within 365 days of receipt thereof either (A) to prepay
any Senior Debt, or Indebtedness of a Restricted Subsidiary that is not a
Guarantor and, in the case of any such Indebtedness under any revolving
credit facility, effect a corresponding reduction in the availability
under such revolving credit facility (or effect a permanent reduction in
the availability under such revolving credit facility regardless of the
fact that no prepayment is required in order to do so (in which case no
prepayment should be required)), (B) to reinvest in Productive Assets, or
(C) a combination of prepayment and investment permitted by the foregoing
clauses (3)(A) and (3)(B). Pending the final application of any such Net
Cash Proceeds, TransDigm or such Restricted Subsidiary may temporarily
reduce Indebtedness under a revolving credit facility, if any, or
otherwise invest such Net Cash Proceeds in Cash Equivalents. On the 366th
day after an Asset Sale or such earlier date, if any, as the Board of
Directors of TransDigm or of such Restricted Subsidiary determines not to
apply the Net Cash Proceeds relating to such Asset Sale as set forth in
clauses (3)(A), (3)(B) and (3)(C) of the preceding sentence (each, a "Net
Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds
which have not been applied on or before such Net Proceeds Offer Trigger
Date as permitted in clauses (3)(A), (3)(B) and (3)(C) of the next
preceding sentence (each a "Net Proceeds Offer Amount") shall be applied
by TransDigm or such Restricted Subsidiary to make an offer to purchase
(the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment
Date") not less than 30 nor more than 60 days following the applicable
Net Proceeds Offer Trigger Date, from all Holders on a PRO RATA basis,
the maximum amount of notes that may be purchased with the Net Proceeds
Offer Amount at a price equal to 100% of the principal amount of the
notes to be purchased, plus accrued and unpaid interest thereon, if any,
to the date of purchase; PROVIDED, HOWEVER, that if at any time any
non-cash consideration (including any Designated Noncash Consideration)
received by TransDigm or any Restricted Subsidiary of TransDigm, as the
case may be, in connection with any Asset Sale is converted into or sold
or otherwise disposed of for cash (other than interest received with
respect to any such non-cash consideration), then such conversion or
disposition shall be deemed to constitute an Asset Sale hereunder and the
Net Cash Proceeds thereof shall be applied in accordance with this
covenant. Notwithstanding the foregoing, if a Net Proceeds Offer Amount
is less than $10.0 million, the application of the Net Cash Proceeds
constituting such Net Proceeds Offer Amount to a Net Proceeds Offer may
be deferred until such time as such Net Proceeds Offer Amount plus the
aggregate amount of all Net Proceeds Offer Amounts arising subsequent to
the Net Proceeds Offer Trigger Date relating to such initial Net Proceeds
Offer Amount from all Asset Sales by TransDigm and its Restricted
Subsidiaries aggregates at least $10.0 million, at which time TransDigm
or such Restricted Subsidiary shall apply all Net Cash Proceeds
constituting all Net Proceeds Offer Amounts that have been so deferred to
make a Net Proceeds Offer (the first date the aggregate of all such
deferred Net Proceeds Offer Amounts is equal to $10.0 million or more
shall be deemed to be a Net Proceeds Offer Trigger Date).
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Notwithstanding the immediately preceding paragraph, TransDigm and its
Restricted Subsidiaries will be permitted to consummate an Asset Sale without
complying with such paragraph to the extent that:
(1) at least 75% of the consideration for such Asset Sale constitutes
Productive Assets, cash, Cash Equivalents and/or Marketable Securities;
and
(2) such Asset Sale is for fair market value; provided that any
consideration consisting of cash, Cash Equivalents and/or Marketable
Securities received by TransDigm or any of its Restricted Subsidiaries in
connection with any Asset Sale permitted to be consummated under this
paragraph shall constitute Net Cash Proceeds subject to the provisions of
the preceding paragraph.
Each Net Proceeds Offer will be mailed to the record Holders as shown on the
register of Holders within 30 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set forth
in the indenture. Upon receiving notice of the Net Proceeds Offer, Holders may
elect to tender their notes in whole or in part in integral multiples of $1,000
in exchange for cash. To the extent Holders properly tender notes in an amount
exceeding the Net Proceeds Offer Amount, notes of tendering Holders will be
purchased on a PRO RATA basis (based on amounts tendered). A Net Proceeds Offer
shall remain open for a period of 20 business days or such longer period as may
be required by law. To the extent that the aggregate amount of notes tendered
pursuant to a Net Proceeds Offer is less than the Net Proceeds Offer Amount,
TransDigm may use any remaining Net Proceeds Offer Amount for general corporate
purposes or for any other purpose not prohibited by the indenture. Upon
completion of any such Net Proceeds Offer, the Net Proceeds Offer Amount shall
be reset at zero.
TransDigm will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of notes
pursuant to a Net Proceeds Offer. To the extent that the provisions of any
securities laws or regulations conflict with the "Asset Sale" provisions of the
indenture, TransDigm shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
"Asset Sale" provisions of the indenture by virtue thereof.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. TransDigm will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any consensual encumbrance or consensual
restriction on the ability of any Restricted Subsidiary of TransDigm to:
(1) pay dividends or make any other distributions on or in respect of its
Capital Stock;
(2) make loans or advances or pay any Indebtedness or other obligation owed
to TransDigm or any other Restricted Subsidiary of TransDigm; or
(3) transfer any of its property or assets to TransDigm or any other
Restricted Subsidiary of TransDigm, except for such encumbrances or
restrictions existing under or by reason of:
(a) applicable law;
(b) the indenture;
(c) non-assignment provisions of any contract or any lease of any
Restricted Subsidiary of TransDigm entered into in the ordinary
course of business;
(d) any instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person or the properties or
assets of the Person so acquired;
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(e) the Credit Facility;
(f) agreements existing on the Issue Date to the extent and in the manner
such agreements are in effect on the Issue Date;
(g) restrictions on the transfer of assets subject to any Lien permitted
under the indenture imposed by the holder of such Lien;
(h) restrictions imposed by any agreement to sell assets or Capital Stock
permitted under the indenture to any Person pending the closing of
such sale;
(i) any agreement or instrument governing Capital Stock of any Person
that is acquired;
(j) any Purchase Money Note or other Indebtedness or other contractual
requirements of a Securitization Entity in connection with a
Qualified Securitization Transaction; provided that such restrictions
apply only to such Securitization Entity;
(k) other Indebtedness or Permitted Subsidiary Preferred Stock
outstanding on the Issue Date or permitted to be issued or incurred
under the indenture; PROVIDED that any such restrictions are ordinary
and customary with respect to the type of Indebtedness being incurred
or Preferred Stock being issued (under the relevant circumstances);
(l) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business; and
(m) any encumbrances or restrictions imposed by any amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings of the contracts,
instruments or obligations referred to in clauses (a) through
(l) above; PROVIDED that such amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacements or refinancings are, in the good faith judgment of
TransDigm's Board of Directors (evidenced by a Board Resolution)
whose judgment shall be conclusively binding, not materially more
restrictive with respect to such dividend and other payment
restrictions than those contained in the dividend or other payment
restrictions prior to such amendment, modification, restatement,
renewal, increase, supplement, refunding, replacement or refinancing.
LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. TransDigm will
not permit any of its Restricted Subsidiaries to issue any Preferred Stock
(other than to TransDigm or to a Restricted Subsidiary of TransDigm) or permit
any Person (other than TransDigm or a Restricted Subsidiary of TransDigm) to own
any Preferred Stock of any Restricted Subsidiary of TransDigm, other than
Permitted Subsidiary Preferred Stock. The provisions of this covenant will not
apply to any of the Guarantors.
LIMITATION ON LIENS. TransDigm will not, and will not cause or permit any
of its Restricted Subsidiaries to, directly or indirectly create, incur, assume
or permit or suffer to exist any Liens of any kind against or upon any property
or assets or any proceeds therefrom, of TransDigm or any of its Restricted
Subsidiaries whether owned on the Issue Date or acquired after the Issue Date,
in each case to secure Indebtedness or trade payables, unless:
(1) in the case of Liens securing Indebtedness that is expressly subordinate
or junior in right of payment to the notes, the notes are secured by a
Lien on such property, assets or proceeds that is senior in priority to
such Liens; and
(2) in all other cases, the notes are equally and ratably secured, except
for:
(a) Liens existing as of the Issue Date to the extent and in the manner
such Liens are in effect on the Issue Date;
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(b) Liens securing Senior Debt;
(c) Liens securing the notes;
(d) Liens of TransDigm or a Wholly Owned Restricted Subsidiary of
TransDigm on assets of any Restricted Subsidiary of TransDigm;
(e) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness that was secured by a Lien permitted under
the indenture and which has been incurred in accordance with the
provisions of the indenture; PROVIDED, HOWEVER, that such Liens do
not extend to or cover any categories of property or assets of
TransDigm or any of its Restricted Subsidiaries not securing the
Indebtedness so Refinanced; and
(f) Permitted Liens.
PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED DEBT. TransDigm will not,
and will not permit any Restricted Subsidiary that is a Guarantor to, incur or
suffer to exist Indebtedness that is senior in right of payment to the notes or
such Guarantor's Guarantee, as the case may be, and subordinate in right of
payment to any other Indebtedness of TransDigm or such Guarantor, as the case
may be.
MERGER CONSOLIDATION AND SALE OF ASSETS. TransDigm will not, in a single
transaction or series of related transactions, consolidate or merge with or into
any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or
cause or permit any Restricted Subsidiary of TransDigm to sell, assign,
transfer, lease, convey or otherwise dispose of) all or substantially all of
TransDigm's assets (determined on a consolidated basis for TransDigm and
TransDigm's Restricted Subsidiaries) whether as an entirety or substantially as
an entirety to any Person unless:
(1) either:
(a) TransDigm shall be the surviving or continuing corporation; or
(b) the Person (if other than TransDigm) formed by such consolidation or
into which TransDigm is merged or the Person which acquires by sale,
assignment, transfer, lease, conveyance or other disposition the
properties and assets of TransDigm and of TransDigm's Restricted
Subsidiaries substantially as an entirety (the "Surviving Entity"):
(x) shall be a corporation organized and validly existing under the
laws of the United States or any State thereof or the District of
Columbia; and
(y) shall expressly assume, by supplemental indenture (in form and
substance satisfactory to the Trustee), executed and delivered to
the Trustee, the due and punctual payment of the principal of,
and premium, if any, and interest on all of the notes and the
performance of every covenant of the notes, the indenture and the
registration rights agreement on the part of TransDigm to be
performed or observed;
(2) except in the case of a merger of TransDigm with or into a Wholly Owned
Restricted Subsidiary of TransDigm and except in the case of a merger
entered into solely for the purpose of reincorporating TransDigm in
another jurisdiction, immediately after giving effect to such transaction
and the assumption contemplated by clause (1)(b)(y) above (including
giving effect to any Indebtedness and Acquired Indebtedness incurred in
connection with or in respect of such transaction), TransDigm or such
Surviving Entity, as the case may be, shall be able to incur at least
$1.00 of additional Indebtedness pursuant to the "Limitation on
Incurrence of Additional Indebtedness" covenant;
(3) except in the case of a merger of TransDigm with or into a Wholly Owned
Restricted Subsidiary of TransDigm and except in the case of a merger
entered into solely for the purpose of reincorporating TransDigm in
another jurisdiction, immediately after giving effect
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to such transaction and the assumption contemplated by clause (1)(b)(y)
above (including, without limitation, giving effect to any Indebtedness
and Acquired Indebtedness incurred and any Lien granted in connection
with or in respect of the transaction), no Default or Event of Default
shall have occurred or be continuing; and
(4) TransDigm or the Surviving Entity shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or
other disposition and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture comply with
the applicable provisions of the indenture and that all conditions
precedent in the indenture relating to such transaction have been
satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of TransDigm the Capital Stock of which constitutes all or
substantially all of the properties and assets of TransDigm, shall be deemed to
be the transfer of all or substantially all of the properties and assets of
TransDigm. However, transfer of assets between or among TransDigm and its
Restricted Subsidiaries will not be subject to the foregoing covenant.
The indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of the assets of TransDigm in
accordance with the foregoing, in which TransDigm is not the continuing
corporation, the successor Person formed by such consolidation or into which
TransDigm is merged or to which such conveyance, lease or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
TransDigm under the indenture and the notes with the same effect as if such
surviving entity had been named as such and that, in the event of a conveyance,
lease or transfer, the conveyor, lessor or transferor will be released from the
provisions of the indenture.
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. TransDigm will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into or permit to occur any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with, or for the benefit of, any of
its Affiliates (an "Affiliate Transaction"), other than Affiliate Transactions
on terms that are not materially less favorable than those that might reasonably
have been obtained in a comparable transaction at such time on an arm's-length
basis from a Person that is not an Affiliate of TransDigm; PROVIDED, HOWEVER,
that for a transaction or series of related transactions with an aggregate value
of $2.5 million or more, at TransDigm's option, either:
(1) a majority of the disinterested members of the Board of Directors of
TransDigm shall determine in good faith that such Affiliate Transaction
is on terms that are not materially less favorable than those that might
reasonably have been obtained in a comparable transaction at such time on
an arm's-length basis from a Person that is not an Affiliate of TransDigm
or
(2) the Board of Directors of TransDigm or any such Restricted Subsidiary
party to such Affiliate Transaction shall have received an opinion from a
nationally recognized investment banking, appraisal or accounting firm
that such Affiliate Transaction is on terms not materially less favorable
than those that might reasonably have been obtained in a comparable
transaction at such time on an arm's-length basis from a Person that is
not an Affiliate of TransDigm;
and PROVIDED, FURTHER, that for an Affiliate Transaction with an aggregate value
of $10.0 million or more the Board of Directors of TransDigm or any such
Restricted Subsidiary party to such Affiliate Transaction shall have received an
opinion from a nationally recognized investment banking, appraisal or accounting
firm that such Affiliate Transaction is on terms not materially less favorable
than those
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that might reasonably have been obtained in a comparable transaction at such
time on an arm's-length basis from a Person that is not an Affiliate of
TransDigm.
The restrictions set forth in the first paragraph of this covenant shall not
apply to:
(1) reasonable fees and compensation paid to, and indemnity provided on
behalf of, officers, directors, employees or consultants of TransDigm or
any Restricted Subsidiary of TransDigm as determined in good faith by
TransDigm's Board of Directors or senior management;
(2) transactions exclusively between or among TransDigm and any of its
Restricted Subsidiaries or exclusively between or among such Restricted
Subsidiaries, provided such transactions are not otherwise prohibited by
the indenture;
(3) any agreement as in effect as of the Issue Date or any amendment thereto
or any transaction contemplated thereby (including pursuant to any
amendment thereto) in any replacement agreement thereto so long as any
such amendment or replacement agreement is not more disadvantageous to
the Holders in any material respect than the original agreement as in
effect on the Issue Date;
(4) Restricted Payments or Permitted Investments permitted by the indenture;
(5) transactions effected as part of a Qualified Securitization Transaction;
(6) the payment of customary annual management, consulting and advisory fees
and related expenses to the Permitted Holders and their Affiliates made
pursuant to any financial advisory, financing, underwriting or placement
agreement or in respect of other investment banking activities,
including, without limitation, in connection with acquisitions or
divestitures which are approved by the Board of Directors of TransDigm or
such Restricted Subsidiary in good faith;
(7) payments or loans to employees or consultants that are approved by the
Board of Directors of TransDigm in good faith;
(8) sales of Qualified Capital Stock;
(9) the existence of, or the performance by TransDigm or any of its
Restricted Subsidiaries of its obligations under the terms of, any
stockholders agreement (including any registration rights agreement or
purchase agreement related thereto) to which it is a party as of the
Issue Date and any similar agreements which it may enter into thereafter;
PROVIDED, HOWEVER, that the existence of, or the performance by TransDigm
or any of its Restricted Subsidiaries of obligations under, any future
amendment to any such existing agreement or under any similar agreement
entered into after the Issue Date shall only be permitted by this
clause (9) to the extent that the terms of any such amendment or new
agreement are not disadvantageous to the Holders of the notes in any
material respect; and
(10) transactions permitted by and complying with, the provisions of the
"Merger, Consolidation and Sale of Assets" covenant.
FUTURE GUARANTEES BY RESTRICTED SUBSIDIARIES. TransDigm will not create or
acquire another Domestic Restricted Subsidiary unless such Domestic Restricted
Subsidiary executes and delivers a supplemental indenture to the indenture,
providing for a senior subordinated guarantee of payment of the notes by such
Restricted Subsidiary (the "Guarantee").
Notwithstanding the foregoing, any such Guarantee by a Domestic Restricted
Subsidiary of the notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged, without any further
action required on the part of the Trustee or any Holder, upon any sale or other
disposition (by merger or otherwise) to any Person which is not a Restricted
Subsidiary of
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TransDigm of all of TransDigm's Capital Stock in, or all or substantially all of
the assets of, such Domestic Restricted Subsidiary; PROVIDED that such sale or
disposition of such Capital Stock or assets is otherwise in compliance with the
terms of the indenture. A form of such Guarantee will be attached as an exhibit
to the indenture.
CONDUCT OF BUSINESS. The indenture will provide that TransDigm will not,
and will not permit any of its Restricted Subsidiaries to, engage in any
businesses a majority of whose revenues are not derived from businesses that are
the same or reasonably similar, ancillary or related to, or a reasonable
extension, development or expansion of, the businesses in which TransDigm and
its Restricted Subsidiaries are engaged on the Issue Date.
REPORTS TO HOLDERS. The indenture will provide that, whether or not
required by the rules and regulations of the Commission, so long as any notes
are outstanding, TransDigm will furnish to the Holders of notes:
(1) all quarterly and annual financial information that would be required to
be contained in a filing with the Commission on Forms 10-Q and 10-K if
TransDigm were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
that describes the financial condition and results of operations of
TransDigm and its consolidated Subsidiaries (showing in reasonable
detail, either on the face of the financial statements or in the
footnotes thereto and in Management's Discussion and Analysis of
Financial Condition and Results of Operations, the financial condition
and results of operations of TransDigm and its Restricted Subsidiaries
separate from the financial condition and results of operations of the
Unrestricted Subsidiaries of TransDigm) and, with respect to the annual
information only, a report thereon by TransDigm's certified independent
accountants and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if TransDigm were required to file such reports,
in each case, within the time periods specified in the Commission's rules
and regulations. For so long as Holdings is a guarantor of the notes, the
indenture will permit TransDigm to satisfy its obligations under this
covenant by furnishing financial information relating to Holdings;
PROVIDED that the same is accompanied by consolidating information that
explains in reasonable detail the differences between the information
relating to Holdings, on the one hand, and the information relating to
TransDigm and its Restricted Subsidiaries on a stand-alone basis, on the
other hand.
In addition, following the consummation of this exchange offer, whether or
not required by the rules and regulations of the Commission, TransDigm will
file a copy of all such information and reports with the Commission for public
availability within the time periods specified in the Commission's rules and
regulations (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, TransDigm has agreed that, for so long as any notes remain
outstanding, it will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
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EVENTS OF DEFAULT
The following events are defined in the indenture as "Events of Default":
(1) the failure to pay interest on any notes when the same becomes due and
payable and the default continues for a period of 30 days (whether or not
such payment shall be prohibited by the subordination provisions of the
indenture);
(2) the failure to pay the principal on any notes, when such principal
becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase notes tendered
pursuant to a Change of Control Offer or a Net Proceeds Offer on the date
specified for such payment in the applicable offer to purchase) (whether
or not such payment shall be prohibited by the subordination provisions
of the indenture);
(3) a default in the observance or performance of any other covenant or
agreement contained in the indenture which default continues for a period
of 30 days after TransDigm receives written notice specifying the default
(and demanding that such default be remedied) from the Trustee or the
Holders of at least 25% of the outstanding principal amount of the notes
(except in the case of a default with respect to the "Merger,
Consolidation and Sale of Assets" covenant, which will constitute an
Event of Default with such notice requirement but without such passage of
time requirement);
(4) the failure to pay at final stated maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of TransDigm or any Restricted Subsidiary of
TransDigm (other than a Securitization Entity) which failure continues
for at least 20 days, or the acceleration of the final stated maturity of
any such Indebtedness, which acceleration remains uncured or unrescinded
for at least 20 days, if the aggregate principal amount of such
Indebtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal at final maturity or
which has been accelerated (in each case with respect to which the 20-day
period described above has passed), aggregates $5.0 million or more at
any time;
(5) one or more judgments in an aggregate amount in excess of $5.0 million
shall have been rendered against TransDigm or any of its Significant
Subsidiaries and such judgments remain undischarged, unpaid or unstayed
for a period of 60 days after such judgment or judgments become final and
non-appealable; or
(6) certain events of bankruptcy affecting TransDigm or any of its
Significant Subsidiaries.
If an Event of Default (other than an Event of Default specified in
clause (6) above with respect to TransDigm) shall occur and be continuing, the
Trustee or the Holders of at least 25% in principal amount of outstanding notes
may declare the principal of and accrued interest on all the notes to be due and
payable by notice in writing to TransDigm and the Trustee specifying the
respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"), and the same:
(1) shall become immediately due and payable or
(2) if there are any amounts outstanding under the Credit Facility, shall
become immediately due and payable upon the first to occur of an
acceleration under the Credit Facility or 5 business days after receipt
by TransDigm and the Representative under the Credit Facility of such
Acceleration Notice but only if such Event of Default is then continuing.
If an Event of Default specified in clause (6) above with respect to
TransDigm occurs and is continuing, then all unpaid principal of, and
premium, if any, and accrued and unpaid interest on all of the
outstanding notes shall IPSO FACTO become and be immediately due and
payable without any declaration or other act on the part of the Trustee
or any Holder.
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The indenture provides that, at any time after a declaration of acceleration
with respect to the notes as described in the preceding paragraph, the Holders
of a majority in principal amount of the notes may rescind and cancel such
declaration and its consequences:
(1) if the rescission would not conflict with any judgment or decree;
(2) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
the acceleration;
(3) to the extent the payment of such interest is lawful, interest on
overdue installments of interest and overdue principal, which has become
due otherwise than by such declaration of acceleration, has been paid;
(4) if TransDigm has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances; and
(5) in the event of the cure or waiver of an Event of Default of the type
described in clause (6) of the description above of Events of Default,
the Trustee shall have received an officers' certificate and an opinion
of counsel that such Event of Default has been cured or waived. No such
rescission shall affect any subsequent Default or impair any right
consequent thereto.
The Holders of a majority in principal amount of the notes may waive any
existing Default or Event of Default under the indenture, and its consequences,
except a default in the payment of the principal of or interest on any notes.
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture and under the TIA. Subject to the provisions of the
indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.
Under the indenture, TransDigm is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining knowledge of
any Default or Event of Default (provided that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
TransDigm may, at its option and at any time, elect to have its obligations
discharged with respect to the outstanding notes ("Legal Defeasance"). Such
Legal Defeasance means that TransDigm shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding notes, except
for:
(1) the rights of Holders to receive payments in respect of the principal
of, premium, if any, and interest on the notes when such payments are
due;
(2) TransDigm's obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payments;
(3) the rights, powers, trust, duties and immunities of the Trustee and
TransDigm's obligations in connection therewith; and
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(4) the Legal Defeasance provisions of the indenture.
In addition, TransDigm may, at its option and at any time, elect to have the
obligations of TransDigm released with respect to certain covenants that are
described in the indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
reorganization and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) TransDigm must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders cash in U.S. dollars, non-callable U.S. government
obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and
interest on the notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be;
(2) in the case of Legal Defeasance, TransDigm shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable
to the Trustee confirming that
(a) TransDigm has received from, or there has been published by the
Internal Revenue Service a ruling or
(b) since the date of the indenture, there has been a change in the
applicable federal income tax law,
in either case to the effect that, and based thereon such opinion of counsel
shall confirm that, the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred;
(3) in the case of Covenant Defeasance, TransDigm shall have delivered to
the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (other than a Default or an Event of Default
resulting from the borrowing of funds to be applied to such deposit and
the grant of any Lien securing such borrowing) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time
in the period ending on the 91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under the indenture
(other than a Default or an Event of Default resulting from the borrowing
of funds to be applied to such deposit and the grant of any Lien securing
such borrowing) or any other material agreement or instrument to which
TransDigm or any of its Subsidiaries is a party or by which TransDigm or
any of its Subsidiaries is bound;
(6) TransDigm shall have delivered to the Trustee an officers' certificate
stating that the deposit was not made by TransDigm with the intent of
preferring the Holders over any other creditors of TransDigm or with the
intent of defeating, hindering, delaying or defrauding any other
creditors of TransDigm or others;
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(7) TransDigm shall have delivered to the Trustee an officers' certificate
and an opinion of counsel, each stating that all conditions precedent
provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with;
(8) TransDigm shall have delivered to the Trustee an opinion of counsel to
the effect that:
(a) the trust funds will not be subject to any rights of holders of
Senior Debt, including, without limitation, those arising under the
indenture; and
(b) after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
and
(9) certain other customary conditions precedent are satisfied.
Notwithstanding the foregoing, the opinion of counsel required by
clause (2) above with respect to a Legal Defeasance need not be delivered if all
notes not therefore delivered to the Trustee for cancellation (1) have become
due and payable, or (2) will become due and payable on the maturity date within
one year under arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of TransDigm.
SATISFACTION AND DISCHARGE
The indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
notes, as expressly provided for in the indenture) as to all outstanding notes
when
(1) either:
(a) all the notes theretofore authenticated and delivered (except lost,
stolen or destroyed notes which have been replaced or paid and notes
for whose payment money has theretofore been deposited in trust or
segregated and held in trust by TransDigm and thereafter repaid to
TransDigm or discharged from such trust) have been delivered to the
Trustee for cancellation or
(b) all notes not theretofore delivered to the Trustee for cancellation
have become due and payable, pursuant to an optional redemption
notice or otherwise, and TransDigm has irrevocably deposited or
caused to be deposited with the Trustee funds in an amount sufficient
to pay and discharge the entire Indebtedness on the notes not
theretofore delivered to the Trustee for cancellation, for principal
of, premium, if any, and interest on the notes to the date of deposit
together with irrevocable instructions from TransDigm directing the
Trustee to apply such funds to the payment thereof at maturity or
redemption, as the case may be; and
(2) TransDigm has paid all other sums payable under the indenture by
TransDigm,
The Trustee will acknowledge the satisfaction and discharge of the indenture
if TransDigm has delivered to the Trustee an officers' certificate and an
opinion of counsel stating that all conditions precedent under the indenture
relating to the satisfaction and discharge of the indenture have been complied
with.
MODIFICATION OF THE INDENTURE
From time to time, TransDigm and the Trustee, without the consent of the
Holders, may amend the indenture for certain specified purposes, including
curing ambiguities, defects or inconsistencies, so long as such change does not,
in the opinion of the Trustee, adversely affect the rights of any of the Holders
in any material respect. In formulating its opinion on such matters, the Trustee
will be entitled
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to rely on such evidence as it deems appropriate, including, without limitation,
solely on an opinion of counsel. Other modifications and amendments of the
indenture may be made with the consent of the Holders of a majority in principal
amount of the then outstanding notes issued under the indenture, except that,
without the consent of each Holder affected thereby, no amendment may:
(1) reduce the amount of notes whose Holders must consent to an amendment;
(2) reduce the rate of or change or have the effect of changing the time for
payment of interest, including defaulted interest, on any notes;
(3) reduce the principal of or change or have the effect of changing the
fixed maturity of any notes, or change the date on which any notes may be
subject to redemption or reduce the redemption price therefor;
(4) make any notes payable in money other than that stated in the notes;
(5) make any change in the provisions of the indenture protecting the right
of each Holder to receive payment of principal of and interest on such
note on or after the due date thereof or to bring suit to enforce such
payment, or permitting Holders of a majority in principal amount of notes
to waive Defaults or Events of Default;
(6) after TransDigm's obligation to purchase notes arises thereunder, amend,
change or modify in any material respect the obligation of TransDigm to
make and consummate a Change of Control Offer in the event of a Change of
Control or modify any of the provisions or definitions with respect
thereto after a Change of Control has occurred; or
(7) modify or change any provision of the indenture or the related
definitions affecting the subordination or ranking of the notes in a
manner which adversely affects the Holders.
GOVERNING LAW
The indenture provides that it and the notes will be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
THE TRUSTEE
The indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the indenture, and use the same
degree of care and skill in its exercise as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
The indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of TransDigm, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee is permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
indenture. Reference is made to the indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
TransDigm or at the time it merges or
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consolidates with or into TransDigm or any of its Subsidiaries or that is
assumed in connection with the acquisition of assets from such Person and in
each case not incurred by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Restricted Subsidiary of TransDigm or
such acquisition, merger or consolidation.
"AFFILIATE" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
Notwithstanding the foregoing, no Person (other than TransDigm or any Subsidiary
of TransDigm) in whom a Securitization Entity makes an Investment in connection
with a Qualified Securitization Transaction shall be deemed to be an Affiliate
of TransDigm or any of its Subsidiaries solely by reason of such Investment.
"ASSET ACQUISITION" means (a) an Investment by TransDigm or any Restricted
Subsidiary of TransDigm in any other Person pursuant to which such Person shall
become a Restricted Subsidiary of TransDigm, or shall be merged with or into
TransDigm or any Restricted Subsidiary of TransDigm, or (b) the acquisition by
TransDigm or any Restricted Subsidiary of TransDigm of the assets of any Person
(other than a Restricted Subsidiary of TransDigm) other than in the ordinary
course of business.
"ASSET SALE" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by TransDigm or any of its
Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any
Person other than TransDigm or a Restricted Subsidiary of TransDigm of:
(1) any Capital Stock of any Restricted Subsidiary of TransDigm, or
(2) any other property or assets of TransDigm or any Restricted
Subsidiary of TransDigm other than in the ordinary course of business;
PROVIDED, HOWEVER, that Asset Sales or other dispositions shall not include:
(a) a transaction or series of related transactions for which
TransDigm or its Restricted Subsidiaries receive aggregate consideration
of less than $1.0 million;
(b) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of TransDigm as permitted under
"--Certain Covenants--Merger, Consolidation and Sale of Assets" or any
disposition that constitutes a Change of Control;
(c) the sale or discount, in each case without recourse, of accounts
receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof;
(d) disposals or replacements of obsolete equipment in the ordinary
course of business;
(e) the sale, lease, conveyance, disposition or other transfer by
TransDigm or any Restricted Subsidiary of assets or property to one or
more Restricted Subsidiaries in connection with Investments permitted
under the "Limitation on Restricted Payments" covenant or pursuant to any
Permitted Investment; and
(f) sales of accounts receivable, equipment and related assets
(including contract rights) of the type specified in the definition of
"Qualified Securitization Transaction" to a Securitization Entity for the
fair market value thereof, including cash in an amount at least equal to
75% of the fair market value thereof as determined in accordance with
GAAP. For the purposes of this clause (f), Purchase Money Notes shall be
deemed to be cash.
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"BOARD OF DIRECTORS" means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have been
duly adopted by the Board of Directors of such Person and to be in full force
and effect on the date of such certification, and delivered to the Trustee.
"CAPITAL STOCK" means:
(1) with respect to any Person that is a corporation, any and all
shares, interests, participations or other equivalents (however designated
and whether or not voting) of corporate stock, including each class of
Common Stock and Preferred Stock, of such Person and
(2) with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"CASH EQUIVALENTS" means:
(1) marketable direct obligations issued by or unconditionally
guaranteed by, the United States Government or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
(2) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's;
(3) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's;
(4) certificates of deposit or bankers' acceptances maturing within one
year from the date of acquisition thereof issued by any bank organized under
the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the date
of acquisition thereof combined capital and surplus of not less than
$250.0 million;
(5) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (1) above entered
into with any bank meeting the qualifications specified in clause (4) above;
and
(6) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (1) through
(5) above.
"CHANGE OF CONTROL" means the occurrence of one or more of the following
events:
(1) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of
TransDigm or Holdings to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "Group"), other than to the
Permitted Holders or their Related Parties or any Permitted Group;
(2) the approval by the holders of Capital Stock of TransDigm or
Holdings, as the case may be, of any plan or proposal for the liquidation or
dissolution of TransDigm or Holdings, as the case may be (whether or not
otherwise in compliance with the provisions of the indenture);
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(3) any Person or Group (other than the Permitted Holders or their
Related Parties or any Permitted Group) shall become the owner, directly or
indirectly, beneficially or of record, of shares representing more than 40%
of the aggregate ordinary voting power represented by the issued and
outstanding Capital Stock of TransDigm or Holdings at a time where the
Permitted Holders and their Related Parties in the aggregate own a lesser
percentage of the aggregate ordinary voting power represented by such issued
and outstanding Capital Stock; or
(4) the first day on which a majority of the members of the Board of
Directors of TransDigm or Holdings are not Continuing Directors.
"COMMON STOCK" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"CONSOLIDATED EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of such Person's:
(1) Consolidated Net Income; and
(2) to the extent Consolidated Net Income has been reduced thereby:
(a) all income taxes and foreign withholding taxes of such Person and
its Restricted Subsidiaries paid or accrued in accordance with GAAP for
such period;
(b) Consolidated Interest Expense;
(c) Consolidated Non-cash Charges less any non-cash items increasing
Consolidated Net Income for such period (other than normal accruals in
the ordinary course of business), all as determined on a consolidated
basis for such Person and its Restricted Subsidiaries in accordance with
GAAP; and
(d) any cash charges resulting from the Transactions that are
incurred prior to the six month anniversary of the Issue Date.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four-Quarter Period") ending prior to the date of the
transaction giving rise to the need to calculate the Consolidated Fixed Charge
Coverage Ratio for which financial statements are available (the "Transaction
Date") to Consolidated Fixed Charges of such Person and, in the case of
TransDigm and the Guarantors, for the Four-Quarter Period. In addition to and
without limitation of the foregoing, for purposes of this definition,
"Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after
giving effect on a pro forma basis for the period of such calculation to:
(1) the incurrence or repayment of any Indebtedness or the issuance of
any Designated Preferred Stock of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to
the need to make such calculation and any incurrence or repayment of other
Indebtedness or the issuance or redemption of other Preferred Stock (and the
application of the proceeds thereof), other than the incurrence or repayment
of Indebtedness in the ordinary course of business for working capital
purposes pursuant to revolving credit facilities, occurring during the
Four-Quarter Period or at any time subsequent to the last day of the
Four-Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment or issuance or redemption, as the case may be (and
the application of the proceeds thereof), had occurred on the first day of
the Four-Quarter Period; and
(2) any Asset Sales or other dispositions or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the
need to make such calculation as a result of such Person or
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one of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring,
assuming or otherwise being liable for Acquired Indebtedness and also
including any Consolidated EBITDA (including any pro forma expense and cost
reductions and other operating improvements that have occurred or are
reasonably expected to occur, all as determined in accordance with
Regulation S-X promulgated under the Securities Act) attributable to the
assets which are the subject of the Asset Acquisition or Asset Sale or other
disposition and without regard to clause (4) of the definition of
Consolidated Net Income) occurring during the Four-Quarter Period or at any
time subsequent to the last day of the Four-Quarter Period and on or prior
to the Transaction Date, as if such Asset Sale or other disposition or Asset
Acquisition (including the incurrence or assumption of any such Acquired
Indebtedness) occurred on the first day of the Four-Quarter Period. If such
Person or any of its Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the preceding sentence shall give
effect to the incurrence of such guaranteed Indebtedness as if such Person
or any Restricted Subsidiary of such Person had directly incurred or
otherwise assumed such other Indebtedness that was so guaranteed.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio":
(1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal
to the rate of interest on such Indebtedness in effect on the Transaction
Date; and
(2) notwithstanding clause (1) of this paragraph, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest
is covered by agreements relating to Interest Swap Obligations, shall be
deemed to accrue at the rate per annum resulting after giving effect to the
operation of such agreements.
"CONSOLIDATED FIXED CHARGES" means, with respect to any Person for any
period, the sum, without duplication, of:
(1) Consolidated Interest Expense; PLUS
(2) the product of (x) the amount of all cash dividend payments on any
series of Preferred Stock of such Person times (y) a fraction, the numerator
of which is one and the denominator of which is one minus the then current
effective consolidated federal, state and local income tax rate of such
Person, expressed as a decimal; PLUS
(3) the product of (x) the amount of all dividend payments on any series
of Permitted Subsidiary Preferred Stock times (y) a fraction, the numerator
of which is one and the denominator of which is one minus the then current
effective consolidated federal, state and local income tax rate of such
Person, expressed as a decimal; PROVIDED that with respect to any series of
Preferred Stock that was not paid cash dividends during such period but that
is eligible to be paid cash dividends during any period prior to the
maturity date of the notes, cash dividends shall be deemed to have been paid
with respect to such series of Preferred Stock during such period for
purposes of this clause (3).
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the sum of, without duplication:
(1) the aggregate of all cash and non-cash interest expense with respect
to all outstanding Indebtedness of such Person and its Restricted
Subsidiaries, including the net costs associated with Interest Swap
Obligations, for such period determined on a consolidated basis in
conformity with GAAP, but excluding amortization or write-off of debt
issuance costs;
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(2) the consolidated interest expense of such Person and its Restricted
Subsidiaries that was capitalized during such period; and
(3) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, for any period, the aggregate net income
(or loss) of TransDigm and its Restricted Subsidiaries for such period on a
consolidated basis, determined in accordance with GAAP and without any deduction
in respect of Preferred Stock dividends; PROVIDEDthat there shall be excluded
therefrom:
(1) gains and losses from Assets Sales (without regard to the
$1.0 million limitation set forth in the definition thereof) and the related
tax effects according to GAAP;
(2) gains and losses due solely to fluctuations in currency values and
the related tax effects according to GAAP;
(3) all extraordinary, unusual or nonrecurring charges, gains and losses
(including, without limitation, all restructuring costs and any expense or
charge related to the repurchase of Capital Stock or warrants or options to
purchase Capital Stock), and the related tax effects according to GAAP;
(4) the net income (or loss) of any Person acquired in a pooling of
interests transaction accrued prior to the date it becomes a Restricted
Subsidiary of TransDigm or is merged or consolidated with or into TransDigm
or any Restricted Subsidiary of TransDigm;
(5) the net income (but not loss) of any Restricted Subsidiary of
TransDigm to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of TransDigm of that income is
prohibited by contract, operation of law or otherwise;
(6) the net loss of any Person, other than a Restricted Subsidiary of
TransDigm;
(7) the net income of any Person, other than a Restricted Subsidiary of
TransDigm, except to the extent of cash dividends or distributions paid to
TransDigm or a Restricted Subsidiary of TransDigm by such Person;
(8) in the case of a successor to the referent Person by consolidation
or merger or as a transferee of the referent Person's assets, any earnings
of the successor corporation prior to such consolidation, merger or transfer
of assets; and
(9) any non-cash compensation charges, including any arising from
existing stock options resulting from any merger or recapitalization
transaction.
For purposes of clause (iii)(w) of the first paragraph of the "Limitation on
Restricted Payments" covenant, Consolidated Net Income shall be reduced by any
cash dividends paid with respect to any series of Designated Preferred Stock.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash charges and
expenses of such Person and its Restricted Subsidiaries reducing Consolidated
Net Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP (excluding any such
charges that require an accrual of or a reserve for cash payments for any future
period other than accruals or reserves associated with mandatory repurchases of
equity securities).
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"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of TransDigm or Holdings who:
(1) was a member of such Board of Directors on the Issue Date; or
(2) was nominated for election or elected to such Board of Directors by
any of the Permitted Holders or with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"CREDIT FACILITIES" means one or more debt facilities (including, without
limitation, the Credit Facility) or commercial paper facilities with banks or
other institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) and/or letters of credit or banker's acceptances.
"CREDIT FACILITY" means the Credit Agreement dated as of the Issue Date
among TransDigm, the lenders party thereto in their capacities as lenders
thereunder and Bankers Trust Company, as administrative agent, together with the
related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder or adding Restricted
Subsidiaries of TransDigm as additional borrowers or guarantors thereunder) all
or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect
TransDigm or any Restricted Subsidiary of TransDigm against fluctuations in
currency values.
"DEFAULT" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"DESIGNATED NONCASH CONSIDERATION" means any noncash consideration received
by TransDigm or one of its Restricted Subsidiaries in connection with an Asset
Sale that is designated as Designated Noncash Consideration pursuant to an
Officers' Certificate executed by the principal executive officer and the
principal financial officer of TransDigm or such Restricted Subsidiary at the
time of such Asset Sale. Any particular item of Designated Noncash Consideration
will cease to be considered to be outstanding once it has been sold for cash or
Cash Equivalents. At the time of receipt of any Designated Noncash
Consideration, TransDigm shall deliver an Officers' Certificate to the Trustee
which shall state the fair market value of such Designated Noncash Consideration
and shall state the basis of such valuation, which shall be a report of a
nationally recognized investment banking, appraisal or accounting firm with
respect to the receipt in one or a series of related transactions of Designated
Noncash Consideration with a fair market value in excess of $10.0 million.
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"DESIGNATED PREFERRED STOCK" means Preferred Stock that is so designated as
Designated Preferred Stock, pursuant to an Officers' Certificate executed by the
principal executive officer and the principal financial officer of TransDigm, on
the issuance date thereof, the cash proceeds of which are excluded from the
calculation set forth in clause (iii)(x) of the first paragraph of the
"Limitation on Restricted Payments" covenant.
"DESIGNATED SENIOR DEBT" means
(1) Indebtedness under or in respect of the Credit Facility and
(2) any other Indebtedness constituting Senior Debt which, at the time
of determination, has an aggregate principal amount of at least
$25.0 million and is specifically designated in the instrument evidencing
such Senior Debt as "Designated Senior Debt" by TransDigm.
"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable at the option of the holder thereof), or upon the
happening of any event (other than an event which would constitute a Change of
Control), matures (excluding any maturity as the result of an optional
redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the sole option of the
holder thereof (except, in each case, upon the occurrence of a Change of
Control) on or prior to the final maturity date of the notes.
"DOMESTIC RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of
TransDigm that is incorporated under the laws of the United States or any state
thereof or the District of Columbia.
"EQUITY OFFERING" means any offering of Qualified Capital Stock of Holdings
or TransDigm; provided that:
(1) in the event of an offering by Holdings, Holdings contributes to the
capital of TransDigm the portion of the net cash proceeds of such offering
necessary to pay the aggregate redemption price (plus accrued interest to
the redemption date) of the notes to be redeemed pursuant to the provisions
described under "--Redemption--Optional Redemption upon Equity Offerings"
and,
(2) in the event such equity offering is not in the form of a public
offering registered under the Securities Act, the proceeds received by
TransDigm directly or indirectly from such offering are not less than
$10.0 million.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto.
"FAIR MARKET VALUE" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of TransDigm acting reasonably and
in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of TransDigm delivered to the Trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect from time to time.
"GUARANTEE" means:
(1) the guarantee of the notes by Holdings and the Domestic Restricted
Subsidiaries of TransDigm; and
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(2) the guarantee of the notes by any Restricted Subsidiary required
under the terms of the "Future Guarantees by Restricted Subsidiaries"
covenant.
"GUARANTOR" means any Restricted Subsidiary that incurs a Guarantee;
provided that upon the release and discharge of such Restricted Subsidiary from
its Guarantee in accordance with the indenture, such Restricted Subsidiary shall
cease to be a Guarantor.
"HEDGING AGREEMENT" means any agreement with respect to the hedging of price
risk associated with the purchase of commodities used in the business of
TransDigm and its Restricted Subsidiaries, so long as any such agreement has
been entered into in the ordinary course of business and not for purposes of
speculation.
"INDEBTEDNESS" means with respect to any Person, without duplication:
(1) all Obligations of such Person for borrowed money;
(2) all Obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments;
(3) all Capitalized Lease Obligations of such Person;
(4) all Obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all
Obligations under any title retention agreement (but excluding trade
accounts payable and other accrued liabilities arising in the ordinary
course of business);
(5) all Obligations for the reimbursement of any obligor on any letter
of credit, banker's acceptance or similar credit transaction;
(6) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (1) through (5) above and clause (8)
below;
(7) all Obligations of any other Person of the type referred to in
clauses (1) through (6) which are secured by any Lien on any property or
asset of such Person, the amount of such Obligation being deemed to be the
lesser of the fair market value of such property or asset or the amount of
the Obligation so secured;
(8) all Obligations under currency agreements and interest swap
agreements of such Person; and
(9) all Disqualified Capital Stock issued by such Person with the amount
of Indebtedness represented by such Disqualified Capital Stock being equal
to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends, if any.
For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the Board of Directors of the issuer of such Disqualified Capital
Stock. For the purposes of calculating the amount of Indebtedness of a
Securitization Entity outstanding as of any date, the face or notional amount of
any interest in receivables or equipment that is outstanding as of such date
shall be deemed to be Indebtedness but any such interests held by Affiliates of
such Securitization Entity shall be excluded for purposes of such calculation.
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"INTEREST SWAP OBLIGATIONS" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"INVESTMENT" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by
TransDigm and its Restricted Subsidiaries in accordance with normal trade
practices of TransDigm or such Restricted Subsidiary, as the case may be. If
TransDigm or any Restricted Subsidiary of TransDigm sells or otherwise disposes
of any Common Stock of any direct or indirect Restricted Subsidiary of TransDigm
such that, after giving effect to any such sale or disposition, such Restricted
Subsidiary is no longer a Restricted Subsidiary of TransDigm (or, in the case of
a Restricted Subsidiary that is not Wholly Owned Restricted Subsidiary of
TransDigm, such Restricted Subsidiary has a minority interest that is held by an
Affiliate of TransDigm that is not a Restricted Subsidiary of TransDigm),
TransDigm shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Common Stock of such
Restricted Subsidiary not sold or disposed of.
"ISSUE DATE" means the date of original issuance of the notes on
December 3, 1998.
"LIEN" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"MARKETABLE SECURITIES" means publicly traded debt or equity securities that
are listed for trading on a national securities exchange and that were issued by
a corporation whose debt securities are rated in one of the three highest rating
categories by either S&P or Moody's.
"MOODY'S" means Moody's Investors Service, Inc.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
TransDigm or any of its Restricted Subsidiaries from such Asset Sale net of:
(1) reasonable out-of-pocket expenses and fees relating to such Asset
Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions);
(2) taxes paid or payable after taking into account any reduction in
consolidated tax liability due to available tax credits or deductions and
any tax sharing arrangements; and
(3) appropriate amounts to be provided by TransDigm or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP,
against any liabilities associated with such Asset Sale and retained by
TransDigm or any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale.
"OBLIGATIONS" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
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"PERMITTED BUSINESS" means any business (including stock or assets) that
derives a majority of its revenues from the business engaged in by TransDigm and
its Restricted Subsidiaries on the Issue Date and/or activities that are
reasonably similar, ancillary or related to, or a reasonable extension,
development or expansion of, the businesses in which TransDigm and its
Restricted Subsidiaries are engaged on the Issue Date.
"PERMITTED GROUP" means any group of investors that is deemed to be a
"person" (as such term is used in Section 13(d)(3) of the Exchange Act) by
virtue of the Stockholders Agreements, as the same may be amended, modified or
supplemented from time to time, provided that no single Person (together with
its Affiliates), other than the Permitted Holders and their Related Parties, is
the "beneficial owner" (as such term is used in Section 13(d) of the Exchange
Act), directly or indirectly, of more than 50% of the voting power of the issued
and outstanding Capital Stock of TransDigm or Holdings (as applicable) that is
"beneficially owned" (as defined above) by such group of investors.
"PERMITTED HOLDERS" means Odyssey Investment Partners Fund, LP, its
Affiliates and any general or limited partners of Odyssey Investment Partners
Fund, L.P.
"PERMITTED INDEBTEDNESS" means, without duplication, each of the following:
(1) Indebtedness under the notes in an aggregate principal amount not to
exceed $125.0 million;
(2) Indebtedness of TransDigm or any of its Restricted Subsidiaries
incurred pursuant to one or more Credit Facilities in an aggregate principal
amount at any time outstanding not to exceed $155.0 million, less:
(A) the aggregate amount of Indebtedness of Securitization Entities
at the time outstanding, less
(B) the amount of all mandatory principal payments actually made by
TransDigm or any such Restricted Subsidiary since the Issue Date with the
Net Proceeds of an Asset Sale in respect of term loans under a credit
facility (excluding any such payments to the extent refinanced at the
time of payment), and
(C) further reduced by any repayments of revolving credit borrowings
under a credit facility with the Net Cash Proceeds of an Asset Sale that
are accompanied by a corresponding commitment reduction thereunder;
PROVIDED that the amount of Indebtedness permitted to be incurred
pursuant to the Credit Facilities in accordance with this clause (2)
shall be in addition to any Indebtedness permitted to be incurred
pursuant to the Credit Facilities in reliance on, and in accordance with,
clauses (7), (13) and (14) below;
(3) other indebtedness of TransDigm and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(4) Interest Swap Obligations of TransDigm or any of its Restricted
Subsidiaries covering Indebtedness of TransDigm or any of its Restricted
Subsidiaries; PROVIDED that any Indebtedness to which any such Interest Swap
Obligations correspond is otherwise permitted to be incurred under the
indenture; and PROVIDED, FURTHER, that such Interest Swap Obligations are
entered into, in the judgment of TransDigm, to protect TransDigm or any of
its Restricted Subsidiaries from fluctuation in interest rates on its
outstanding Indebtedness;
(5) Indebtedness of TransDigm or any Restricted Subsidiary under Hedging
Agreements and Currency Agreements;
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(6) the incurrence by TransDigm or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among TransDigm and any such Restricted
Subsidiaries; PROVIDED, HOWEVER, that:
(a) if TransDigm is the obligor on such Indebtedness and the payee is
a Restricted Subsidiary that is not a Guarantor, such Indebtedness is
expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the notes and
(b) (1) any subsequent issuance or transfer of Capital Stock that
results in any such Indebtedness being held by a Person other than
TransDigm or a Restricted Subsidiary thereof and (2) any sale or other
transfer of any such Indebtedness to a Person that is not either
TransDigm or a Restricted Subsidiary thereof (other than by way of
granting a Lien permitted under the indenture or in connection with the
exercise of remedies by a secured creditor) shall be deemed, in each
case, to constitute an incurrence of such Indebtedness by TransDigm or
such Restricted Subsidiary, as the case may be, that was not permitted by
this clause (6);
(7) Indebtedness (including Capitalized Lease Obligations) incurred by
TransDigm or any of its Restricted Subsidiaries to finance the purchase,
lease or improvement of property (real or personal) or equipment (whether
through the direct purchase of assets or the Capital Stock of any person
owning such assets) in an aggregate principal amount outstanding not to
exceed $5.0 million;
(8) Refinancing Indebtedness;
(9) guarantees by TransDigm and its Restricted Subsidiaries of each
other's Indebtedness; PROVIDED that such Indebtedness is permitted to be
incurred under the indenture and PROVIDED, FURTHER, that in the event such
Indebtedness (other than Acquired Indebtedness) is incurred pursuant to the
Consolidated Fixed Charge Coverage Ratio, such guarantees are by TransDigm
or a Guarantor only;
(10) Indebtedness arising from agreements of TransDigm or a Restricted
Subsidiary of TransDigm providing for indemnification, adjustment of
purchase price, earn out or other similar obligations, in each case,
incurred or assumed in connection with the disposition of any business,
assets or a Restricted Subsidiary of TransDigm, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of financing such
acquisition; PROVIDED that the maximum assumable liability in respect of all
such Indebtedness shall at no time exceed the gross proceeds actually
received by TransDigm and its Restricted Subsidiaries in connection with
such disposition;
(11) obligations in respect of performance and surety bonds and
completion guarantees provided by TransDigm or any Restricted Subsidiary of
TransDigm in the ordinary course of business;
(12) the incurrence by a Securitization Entity of Indebtedness in a
Qualified Securitization Transaction that is not recourse to TransDigm or
any Subsidiary of TransDigm (except for Standard Securitization
Undertakings);
(13) Indebtedness incurred by TransDigm or any of the Guarantors in
connection with the acquisition of a Permitted Business which Indebtedness
is incurred on or prior to September 30, 1999; PROVIDED that on the date of
the incurrence of such Indebtedness, after giving effect to the incurrence
thereof and the use of proceeds therefrom, the Consolidated Fixed Charge
Coverage Ratio of TransDigm would be greater than the greater of (x) the
Consolidated Fixed Charge Coverage Ratio of TransDigm immediately prior to
the incurrence of such Indebtedness and (y) the Consolidated Fixed Charge
Coverage Ratio of TransDigm on the Issue Date;
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(14) additional Indebtedness of TransDigm and its Restricted
Subsidiaries in an aggregate principal amount does not exceed $10.0 million
at any one time outstanding (which amount may, but need not, be incurred in
whole or in part under a credit facility);
(15) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except in
the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; PROVIDED, HOWEVER, that such indebtedness is
extinguished within five business days of incurrence; and
(16) Indebtedness of TransDigm or any of its Restricted Subsidiaries
represented by letters of credit for the account of TransDigm or such
Restricted Subsidiary, as the case may be, issued in the ordinary course of
business of TransDigm or such Restricted Subsidiary, including, without
limitation, in order to provide security for workers' compensation claims or
payment obligations in connection with self-insurance or similar
requirements in the ordinary course of business and other Indebtedness with
respect to workers' compensation claims, self-insurance obligations,
performance, surety and similar bonds and completion guarantees provided by
TransDigm or any Restricted Subsidiary of TransDigm in the ordinary course
of business.
For purposes of determining compliance with the "Limitation on Incurrence of
Additional Indebtedness" covenant, in the event that an item of Indebtedness
meets the criteria of more than one of the categories of Permitted Indebtedness
described in clauses (1) through (16) above or is entitled to be incurred
pursuant to the Consolidated Fixed Charge Coverage Ratio provisions of such
covenant, TransDigm shall, in its sole discretion, classify (or later
reclassify) such item of Indebtedness in any manner that complies with such
covenant. Accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms, and the payment of dividends on Disqualified
Capital Stock in the form of additional shares of the same class of Disqualified
Capital Stock will not be deemed to be an incurrence of Indebtedness or an
issuance of Disqualified Capital Stock for purposes of the "Limitations on
Incurrence of Additional Indebtedness" covenant.
"PERMITTED INVESTMENTS" means:
(1) Investments by TransDigm or any Restricted Subsidiary of TransDigm
in any Restricted Subsidiary of TransDigm (other than a Restricted
Subsidiary of TransDigm in which an Affiliate of TransDigm that is not a
Restricted Subsidiary of TransDigm holds a minority interest) (whether
existing on the Issue Date or created thereafter) or any Person (including
by means of any transfer of cash or other property) if as a result of such
Investment such Person shall become a Restricted Subsidiary of TransDigm
(other than Restricted Subsidiary of TransDigm in which an Affiliate of
TransDigm that is not a Restricted Subsidiary of TransDigm holds a minority
interest) or that will merge with or consolidate into TransDigm or a
Restricted Subsidiary of TransDigm and Investments in TransDigm by any
Restricted Subsidiary of TransDigm;
(2) investments in cash and Cash Equivalents;
(3) loans and advances to employees and officers of TransDigm and its
Restricted Subsidiaries for bona fide business purposes in an aggregate
principal amount not to exceed $5.0 million at any one time outstanding;
(4) Currency Agreements, Hedging Agreements and Interest Swap
Obligations entered into in the ordinary course of business and otherwise in
compliance with the indenture;
(5) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers or in good
faith settlement of delinquent obligations of such trade creditors or
customers;
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(6) Investments made by TransDigm or its Restricted Subsidiaries as a
result of consideration received in connection with an Asset Sale made in
compliance with the "Limitation on Asset Sales" covenant;
(7) Investments existing on the Issue Date;
(8) accounts receivable created or acquired in the ordinary course of
business;
(9) guarantees by TransDigm or a Restricted Subsidiary of TransDigm
permitted to be incurred under the indenture;
(10) additional Investments having an aggregate fair market value, taken
together with all other Investments made pursuant to this clause (10) that
are at that time outstanding, not to exceed $10.0 million (with the fair
market value of each Investment being measured at the time made and without
giving effect to subsequent changes in value);
(11) any Investment by TransDigm or a Subsidiary of TransDigm in a
Securitization Entity or any Investment by a Securitization Entity in any
other Person in connection with a Qualified Securitization Transaction;
provided that any Investment in a Securitization Entity is in the form of a
Purchase Money Note or an equity interest; and
(12) Investments the payment for which consists exclusively of Qualified
Capital Stock of TransDigm.
"PERMITTED LIENS" means the following types of Liens:
(1) Liens for taxes, assessments or governmental charges or claims
either:
(a) not delinquent; or
(b) contested in good faith by appropriate proceedings and as to
which TransDigm or its Restricted Subsidiaries shall have set aside on
its books such reserves as may be required pursuant to GAAP;
(2) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen and repairmen and other Liens imposed by
law incurred in the ordinary course of business for sums not yet delinquent
or being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(3) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(4) judgment Liens not giving rise to an Event of Default;
(5) easements, rights-of-way zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of TransDigm or
any of its Restricted Subsidiaries;
(6) any interest or title of a lessor under any Capitalized Lease
Obligation;
(7) purchase money Liens to finance property or assets of TransDigm or
any Restricted Subsidiary of TransDigm acquired, constructed or improved in
the ordinary course of business; PROVIDED, HOWEVER, that
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(a) the related purchase money Indebtedness shall not exceed the cost
of such property or assets and shall not be secured by any property or
assets of TransDigm or any Restricted Subsidiary of TransDigm other than
the property and assets so acquired and
(b) the Lien securing such Indebtedness shall be created within
90 days of such acquisition;
(8) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(9) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(10) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of TransDigm or
any of its Restricted Subsidiaries, including rights of offset and set-off;
(11) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
indenture;
(12) Liens securing Indebtedness under Currency Agreements and Hedging
Agreements;
(13) Liens incurred in the ordinary course of business of TransDigm or
any Restricted Subsidiary with respect to obligations that do not in the
aggregate exceed $5.0 million at any one time outstanding;
(14) Liens on assets transferred to a Securitization Entity or an assets
of a Securitization Entity, in either case incurred in connection with a
Qualified Securitization Transaction;
(15) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of TransDigm and its
Restricted Subsidiaries;
(16) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(17) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of custom duties in connection with the
importation of goods;
(18) Liens securing Acquired Indebtedness incurred in compliance with
the "Limitation on Incurrence of Additional Indebtedness" covenant;
(19) Liens placed upon assets of a Restricted Subsidiary of TransDigm
that is not a Guarantor to secure Indebtedness of such Restricted Subsidiary
that is otherwise permitted under the indenture; and
(20) Liens existing on the Issue Date, together with any Liens securing
Indebtedness incurred in reliance on clause (8) of the definition of
Permitted Indebtedness in order to refinance the Indebtedness secured by
Liens existing on the Issue Date; PROVIDED that the Liens securing the
refinancing Indebtedness shall not extend to property other than that
pledged under the Liens securing the Indebtedness being refinanced.
"PERMITTED SUBSIDIARY PREFERRED STOCK" means any series of Preferred Stock
of a Restricted Subsidiary of TransDigm that constitutes Qualified Capital Stock
and has a fixed dividend rate, the liquidation value of all series of which,
when combined with the aggregate amount of Indebtedness of
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TransDigm and its Restricted Subsidiaries incurred pursuant to clause (14) of
the definition of Permitted Indebtedness, does not exceed $5.0 million.
"PERSON" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"PREFERRED STOCK" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"PRODUCTIVE ASSETS" means assets (including Capital Stock) that are used or
usable by TransDigm and its Restricted Subsidiaries in Permitted Businesses.
"PURCHASE MONEY NOTE" means a promissory note of a Securitization Entity
evidencing a line of credit, which may be irrevocable, from TransDigm or any
Subsidiary of TransDigm in connection with a Qualified Securitization
Transaction to a Securitization Entity, which note shall be repaid from cash
available to the Securitization Entity other than amounts required to be
established as reserves pursuant to agreements, amounts paid to investors in
respect of interest and principal and amounts paid in connection with the
purchase of newly generated receivables or newly acquired equipment.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not Disqualified
Capital Stock.
"QUALIFIED SECURITIZATION TRANSACTION" means any transaction or series of
transactions that may be entered into by TransDigm or any of its Restricted
Subsidiaries pursuant to which TransDigm or any of its Subsidiaries may sell,
convey or otherwise transfer to:
(1) a Securitization Entity (in the case of a transfer by TransDigm or
any of its Restricted Subsidiaries); and
(2) any other Person (in the case of a transfer by a Securitization
Entity), or may grant a security interest in any accounts receivable or
equipment (whether now existing or arising or acquired in the future) of
TransDigm or any of its Restricted Subsidiaries, and any assets related
thereto including, without limitation, all collateral securing such accounts
receivable and equipment, all contracts and contract rights and all
guarantees or other obligations in respect of such accounts receivable and
equipment, proceeds of such accounts receivable and equipment and other
assets (including contract rights) which are customarily transferred or in
respect of which security interests are customarily granted in connection
with assets securitization transactions involving accounts receivable and
equipment.
"RECAPITALIZATION" means the recapitalization of Holdings consummated on the
Issue Date.
"REFINANCE" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"REFINANCING INDEBTEDNESS" means any Refinancing, modification, replacement,
restatement, refunding, deferral, extension, substitution, supplement,
reissuance or resale of existing or future Indebtedness (other than intercompany
Indebtedness), including any additional Indebtedness incurred to pay interest or
premiums required by the instruments governing such existing or future
Indebtedness as in effect at the time of issuance thereof ("Required Premiums")
and fees in connection therewith; PROVIDED that any such event shall not:
(1) directly or indirectly result in an increase in the aggregate
principal amount of Permitted Indebtedness, except to the extent such
increase is a result of a simultaneous incurrence of additional
Indebtedness:
(a) to pay Required Premiums and related fees; or
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(b) otherwise permitted to be incurred under the indenture; and
(2) create Indebtedness with a Weighted Average Life to Maturity at the
time such Indebtedness is incurred that is less than the Weighted Average
Life to Maturity at such time of the Indebtedness being refinanced,
modified, replaced, renewed, restated, refunded, deferred, extended,
substituted, supplemented, reissued or resold.
"RELATED PARTY" with respect to any Permitted Holder means:
(a)(1) any spouse, sibling, parent or child of such Permitted Holder; or
(2) the estate of any Permitted Holder during any period in which such
estate holds Capital Stock of TransDigm for the benefit of any Person
referred to in clause (a)(1); or
(b) any trust, corporation, partnership, limited liability company or
other entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially owning an interest of more than 50% of which consist of, or the
sole managing partner or managing member of which is, one or more Permitted
Holders and/or such other Persons referred to in the immediately preceding
clause (a).
"REPRESENTATIVE" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; PROVIDED that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"RESTRICTED SUBSIDIARY" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to TransDigm or a Restricted Subsidiary of any property, whether owned
by TransDigm or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by TransDigm or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.
"SECURITIZATION ENTITY" means a Wholly Owned Subsidiary of TransDigm (or
another Person in which TransDigm or any Subsidiary of TransDigm makes an
Investment and to which TransDigm or any Subsidiary of TransDigm transfers
accounts receivable or equipment and related assets) which engages in no
activities other than in connection with the financing of accounts receivable or
equipment and which is designated by the Board of Directors of TransDigm (as
provided below) as a Securitization Entity:
(1) no portion of the Indebtedness or any other Obligations (contingent
or otherwise) of which:
(a) is guaranteed by TransDigm or any Restricted Subsidiary of
TransDigm (excluding guarantees of Obligations (other than the principal
of, and interest on, Indebtedness)) pursuant to Standard Securitization
Undertakings;
(b) is recourse to or obligates TransDigm or any Restricted
Subsidiary of TransDigm in any way other than pursuant to Standard
Securitization Undertakings; or
(c) subjects any property or asset of TransDigm or any Restricted
Subsidiary of TransDigm, directly or indirectly, contingently or
otherwise, to the satisfaction thereof, other than pursuant to Standard
Securitization Undertakings;
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(2) with which neither TransDigm nor any Restricted Subsidiary of
TransDigm has any material contract, agreement, arrangement or understanding
other than on terms no less favorable to TransDigm or such Restricted
Subsidiary than those that might be obtained at the time from Persons that
are not Affiliates of TransDigm, other than fees payable in the ordinary
course of business in connection with servicing receivables of such entity;
and
(3) to which neither TransDigm nor any Restricted Subsidiary of
TransDigm has any obligations to maintain or preserve such entity's
financial condition or cause such entity to achieve certain levels of
operating results.
Any such designation by the Board of Directors of TransDigm shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolution of TransDigm giving effect to such designation and an Officers'
Certificate certifying that such designation complied with foregoing conditions.
"SENIOR DEBT" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of TransDigm or any Guarantor, whether outstanding on the Issue
Date or thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the notes. Without
limiting the generality of the foregoing, "Senior Debt" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of:
(x) all monetary obligations of every nature of TransDigm or any
Guarantor under the Credit Facility, including, without limitation,
obligations to pay principal and interest, reimbursement obligations under
letters of credit, fees, expenses and indemnities;
(y) all Interest Swap Obligations (and guarantees thereof); and
(z) all obligations (and guarantees thereof) under Currency Agreements
and Hedging Agreements, in each case whether outstanding on the Issue Date
or thereafter incurred.
Notwithstanding the foregoing, "Senior Debt" shall not include:
(i) any Indebtedness of TransDigm or a Guarantor to TransDigm or to a
Subsidiary of TransDigm;
(ii) other than the Holdings PIK Notes, any Indebtedness to, or
guaranteed on behalf of, any shareholder, director, officer or employee
of TransDigm or any Subsidiary of TransDigm (including, without
limitation, amounts owed for compensation) other than a shareholder who
is also a lender (or an Affiliate of a lender) under the Credit
Facilities (including the Credit Facility);
(iii) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services;
(iv) Indebtedness represented by Disqualified Capital Stock;
(v) any liability for federal, state, local or other taxes owed or
owing by TransDigm;
(vi) that portion of any Indebtedness incurred in violation of the
indenture provisions set forth under "Limitation on Incurrence of
Additional Indebtedness" (but, as to any such obligation, no such
violation shall be deemed to exist for purposes of this clause (vi) if
the
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holder(s) of such obligation or their representative and the Trustee
shall have received an Officer's Certificate of TransDigm to the effect
that the incurrence of such Indebtedness does not (or in the case of
revolving credit indebtedness, that the incurrence of the entire
committed amount thereof at the date on which the initial borrowing
thereunder is made) would not violate such provisions of the indenture;
(vii) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is
without recourse to TransDigm; and
(viii) any Indebtedness which is, by its express terms, subordinated
in right of payment to any other Indebtedness of TransDigm.
"SIGNIFICANT SUBSIDIARY," with respect to any Person, means any Restricted
Subsidiary of such Person that satisfies the criteria for a "significant
subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Securities
Act.
"STANDARD SECURITIZATION UNDERTAKINGS" means representations, warranties,
covenants and indemnities entered into by TransDigm or any subsidiary of
TransDigm which are reasonably customary in an accounts receivable or equipment
transaction.
"STOCKHOLDERS AGREEMENTS" means those certain stockholders agreements
entered into in connection with the Recapitalization.
"SUBSIDIARY," with respect to any Person, means:
(i) any corporation of which the outstanding Capital Stock having at
least a majority of the votes entitled to be cast in the election of
directors under ordinary circumstances shall at the time be owned, directly
or indirectly by such Person; or
(ii) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person.
"TAX ALLOCATION AGREEMENT" means the tax allocation agreement dated as of
the Issue Date between Holdings and TransDigm.
"TOTAL ASSETS" means the total consolidated assets of TransDigm and its
Restricted Subsidiaries, as set forth on TransDigm's most recent consolidated
balance sheet.
"U.S. SUBSIDIARY" means any Subsidiary of TransDigm that is incorporated
under the laws of the United States or any State thereof or the District of
Columbia.
"UNRESTRICTED SUBSIDIARY" of any Person means:
(1) any Subsidiary of such Person that at the time of determination
shall be or continue to be designated an Unrestricted Subsidiary by the
Board of Directors of such Person in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, TransDigm or any other Subsidiary of TransDigm that is not a
Subsidiary of the Subsidiary to be so designated; PROVIDED that:
(1) TransDigm certifies to the Trustee that such designation complies
with the "Limitation on Restricted Payments" covenant; and
(2) each Subsidiary to be so designated and each of its Subsidiaries has
not at the time of designation, and does not thereafter, create, incur,
issue, assume, guarantee or otherwise become
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directly or indirectly liable with respect to any Indebtedness pursuant to
which the lender has recourse to any of the assets of TransDigm or any of
its Restricted Subsidiaries.
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if (x) immediately after giving effect to such
designation, TransDigm is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant and
(y) immediately before and immediately after giving effect to such designation,
no Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the then outstanding aggregate principal amount of such
Indebtedness; into
(2) the sum of the total of the products obtained by multiplying;
(a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including payment
at final maturity, in respect thereof; by
(b) the number of years (calculated to the nearest one-twelfth) which
will elapse between such date and the making of such payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means any Wholly Owned
Subsidiary of such Person which at the time of determination is a Restricted
Subsidiary.
"WHOLLY OWNED SUBSIDIARY" of any Person means any Subsidiary of such Person
of which all the outstanding voting securities (other than in the case of a
Restricted Subsidiary that is incorporated in a jurisdiction other than a State
in the United States or the District of Columbia, directors' qualifying shares
or an immaterial amount of shares required to be owned by other Persons pursuant
to applicable law) are owned by such Person or any Wholly Owned Subsidiary of
such Person.
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BOOK-ENTRY; DELIVERY AND FORM
Except as described herein under the heading "--Certificated Securities,"
exchange notes will initially be represented by one or more permanent global
exchange notes in fully registered form without interest coupons, which we refer
to as the global notes, and will be deposited with the Trustee as custodian for
The Depositary Trust Company, which we refer to as DTC, and registered in the
name of a nominee of DTC.
THE GLOBAL NOTES
We expect that pursuant to procedures established by DTC (1) upon the
issuance of the global notes, DTC or its custodian will credit, on its internal
system, the principal amount at maturity of the individual beneficial interests
represented by such global notes to the respective accounts of persons who have
accounts with such depositary and (2) ownership of beneficial interests in the
global notes will be shown on, and the transfer of such ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants). Such accounts initially will be
designated by or on behalf of the initial purchasers and ownership of beneficial
interests in the global notes will be limited to persons who have accounts with
DTC, or participants, or persons who hold interests through participants.
So long as DTC, or its nominee, is the registered owner or holder of the
notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the notes represented by such global notes for all purposes
under the indenture. No beneficial owner of an interest in the global notes will
be able to transfer that interest except in accordance with DTC's procedures, in
addition to those provided for under the indenture.
Payments of the principal of, premium (if any), and interest (including
additional interest) on, the global notes will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of us, the Trustee or any
paying agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the global notes or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment of principal,
premium, if any, or interest (including additional interest) on the global
notes, will credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount at maturity of
the global notes as shown on the records of DTC or its nominee. We also expect
that payments by participants to owners of beneficial interests in the global
notes held through such participants will be governed by standing instructions
and customary practice, as is now the case with securities held for the accounts
of customers registered in the names of nominees for such customers. Such
payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same-day funds. If a holder requires physical delivery of a
certificated security for any reason, including to sell exchange notes to
persons in states that require physical delivery of the exchange notes, or to
pledge such securities, such holder must transfer its interest in the global
notes, in accordance with the normal procedures of DTC and with the procedures
set forth in the indenture.
DTC has advised us that it will take any action permitted to be taken by a
holder of exchange notes (including the presentation of exchange notes for
exchange as described below) only at the direction of one or more participants
to whose accounts the DTC interests in the global notes are credited and only in
respect of such portion of the aggregate principal amount at maturity of
exchange notes as to which such participant or participants has or have given
such direction. However, if there is
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an event of default under the indenture applicable to any global notes, DTC will
exchange the global notes for certificated securities, which it will distribute
to its participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the global notes among participants of DTC, it is
under no obligation to perform such procedures and such procedures may be
discontinued at any time. Neither we nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
CERTIFICATED SECURITIES
Certificated securities shall be issued in exchange for the old notes in the
exchange offer or for beneficial interests in the global notes, in each case, if
requested by a holder of such old note or such beneficial interests,
respectively. In addition, certificated securities shall be issued in exchange
for beneficial interests in the global notes if DTC is at any time unwilling or
unable to continue as a depository for the global notes and a successor
depository is not appointed by us within 90 days.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such exchange notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of exchange notes received in exchange for old notes
where such old notes were acquired as a result of market-making activities or
other trading activities. We have agreed that we will, for a period of up to
195 days after the exchange offer registration statement is declared effective
by the Commission, make this prospectus, as amended or supplemented, available
to any broker-dealer for use in connection with any such resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such exchange notes. Any
broker-dealer that resells exchange notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of exchange notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of up to 195 days after the exchange offer registration
statement is declared effective by the Commission, we will promptly send
additional copies of the prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests such document in the letter of
transmittal. We have agreed to pay all expenses incident to the exchange offer
other than commissions or concessions of any brokers or dealers and will
indemnify the holders of the exchange notes, including any broker-dealers,
against certain liabilities, including liabilities under the Securities Act.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of certain material United States
federal income tax consequences relevant to the exchange of the old notes
pursuant to this exchange offer and the ownership and disposition of the
exchange notes, but does not purport to be a complete analysis of all potential
tax effects. The discussion is based upon the Internal Revenue Code of 1986, as
amended, or the Code, United States Treasury Regulations issued thereunder,
Internal Revenue Service rulings and pronouncements and judicial decisions now
in effect, all of which are subject to change at any time. Any such change may
be applied retroactively in a manner that could adversely affect a holder of the
notes. This discussion does not address all of the United States federal income
tax consequences that may be relevant to a holder in light of such holder's
particular circumstances or to holders subject to special rules, such as
financial institutions, banks, partnerships and other pass-through entities,
United States expatriates, insurance companies, dealers in securities or
currencies, traders in securities, United States Holders (defined below) whose
functional currency is not the United States dollar, tax-exempt organizations
and persons holding the notes as part of a "straddle," "hedge," "conversion
transaction" or other integrated transaction. In addition, this discussion
assumes that the notes are properly characterized as debt for United States
federal income tax purposes. Moreover, the effect of any applicable state, local
or foreign tax laws is not discussed. The discussion deals only with notes held
as "capital assets" within the meaning of Section 1221 of the Code.
As used herein, "United States Holder" means a beneficial owner of the notes
who or that is, for United States federal income tax purposes:
- an individual that is a citizen or resident of the United States;
- a corporation or other entity taxable as a corporation created or
organized in or under the laws of the United States or a political
subdivision thereof;
- an estate, the income of which is subject to United States federal income
tax regardless of its source; or
- a trust, if a United States court can exercise primary supervision over
the administration of the trust and one or more United States persons can
control all substantial trust decisions, or, if the trust was in existence
on August 20, 1996, it has elected to continue to be treated as a United
States person.
If a partnership or other entity taxable as a partnership holds the notes,
the tax treatment of a partner will generally depend on the status of the
partner and the activities of the partnership. Such partner should consult its
tax advisor as to the tax consequences.
We have not sought and will not seek any rulings from the Internal Revenue
Service, or the IRS, with respect to the matters discussed below. There can be
no assurance that the IRS will not take a different position concerning the tax
consequences of the exchange of the old notes pursuant to this exchange offer or
the ownership or disposition of the exchange notes or that any such position
would not be sustained.
HOLDERS OF THE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE
APPLICATION OF THE TAX CONSEQUENCES DISCUSSED BELOW TO THEIR PARTICULAR
SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX
LAWS, INCLUDING GIFT AND ESTATE TAX LAWS.
FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER
The exchange of the old notes for the exchange notes in the exchange offer
should not be treated as an "exchange" for federal income tax purposes, because
the exchange notes should not be considered to differ materially in kind or
extent from the old notes. Accordingly, the exchange of old notes for exchange
notes should not be a taxable event to holders for federal income tax purposes.
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Moreover, the exchange notes should have the same tax attributes as the old
notes and the same tax consequences to holders as the old notes have to holders,
including without limitation, the same issue price, adjusted issue price,
adjusted tax basis and holding period. Therefore, references to "notes" apply
equally to the exchange notes and the old notes.
UNITED STATES HOLDERS
INTEREST
Payments of stated interest on the notes generally will be taxable to a
United States Holder as ordinary income at the time that such payments are
received or accrued, in accordance with such United States Holder's method of
accounting for United States federal income tax purposes.
We intend to take the position that the notes should not be treated as
contingent payment debt instruments because of any premium or similar amounts in
excess of the principal and the stated interest that may become payable upon a
repurchase of the notes and, therefore, such premium or similar amounts are not
taken into account in United States Holders' income until such amounts become
payable. However, the IRS may take a different position, which could affect the
timing of both a United States Holder's recognition of income and the
availability of our deduction with respect to such additional amounts.
MARKET DISCOUNT
If a United States Holder acquires a note at a cost that is less than the
stated redemption price at maturity, the amount of such difference is treated as
"market discount" for federal income tax purposes, unless such difference is
less than .0025 multiplied by the stated redemption price at maturity multiplied
by the number of complete years until maturity (from the date of acquisition).
Under the market discount rules of the Code, a United States Holder is
required to treat any gain on the sale, exchange, retirement or other
disposition of a note as ordinary income to the extent of the accrued market
discount that has not been previously included in income. Thus, principal
payments and payments received upon the sale or exchange of a note are treated
as ordinary income to the extent of accrued market discount that has not been
previously included in income. If a United States Holder disposes of a note with
market discount in certain otherwise nontaxable transactions, such holder may be
required to include accrued market discount as ordinary income as if the holder
had sold the note at its then fair market value.
In general, the amount of market discount that has accrued is determined on
a ratable basis. A United States Holder may, however, elect to determine the
amount of accrued market discount on a constant yield to maturity basis. This
election is made on a note-by-note basis and is irrevocable.
With respect to notes with market discount, a United States Holder may not
be allowed to deduct immediately a portion of the interest expense on any
indebtedness incurred or continued to purchase or to carry the notes. A United
States Holder may elect to include market discount in income currently as it
accrues, in which case the interest deferral rule set forth in the preceding
sentence will not apply. This election will apply to all debt instruments that a
U.S. holder acquires on or after the first day of the first taxable year to
which the election applies and is irrevocable without the consent of the IRS.
AMORTIZABLE BOND PREMIUM
In general, if a United States Holder purchases a note for an amount in
excess of the stated principal amount of the note, such excess will constitute
bond premium. A United States Holder generally may elect to amortize the premium
over the remaining term of the note on a constant yield method (ignoring our
option to redeem the notes at 100% of the principal amount) as an offset to
interest when includible in income under its regular accounting method. The
notes are subject to call
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provisions at our option at various times, as described in this prospectus under
"Description of the Exchange Notes--Redemption." A United States Holder will
calculate the amount of amortizable bond premium based on the amount payable at
the applicable call date, but only if the use of the call date (in lieu of the
stated maturity date) results in a smaller amortizable bond premium for the
period ending on the call date. If such holder does not elect to amortize bond
premium, that premium will decrease the gain or increase the loss it would
otherwise recognize on disposition of the note. An election to amortize premium
on a constant yield method will also apply to all debt obligations held or
subsequently acquired by the electing United States Holder on or after the first
day of the first taxable year to which the election applies. The election may
not be revoked without the consent of the IRS. United States Holders should
consult their own tax advisors before making this election.
THE RULES GOVERNING AMORTIZABLE BOND PREMIUM ARE COMPLICATED, AND UNITED STATES
HOLDERS SHOULD CONSULT THEIR TAX ADVISORS CONCERNING THE APPLICATION OF THESE
RULES.
SALE OR OTHER TAXABLE DISPOSITION OF THE NOTES
A United States Holder will recognize gain or loss on the sale, exchange
(other than pursuant to a tax-free transaction), redemption, retirement or other
taxable disposition of a note equal to the difference between the amount
realized upon the disposition (less a portion allocable to any accrued and
unpaid interest, which will be taxable as ordinary income if not previously
included in such holder's income) and the United States Holder's adjusted tax
basis in the note. A United States Holder's adjusted basis in a note generally
will be the United States Holder's cost therefor, reduced by the amount of
amortized bond premium, if any, and increased by the amount of market discount,
if any, previously included in income in respect of the note. This gain or loss
generally will be a capital gain or loss, except as described under "Market
Discount" above, and if the United States Holder is an individual that has held
the note for more than one year, such capital gain will generally be subject to
tax at a maximum rate of 20%, or 18% if such holder has held the notes for more
than five years. A United States Holder's ability to deduct capital losses may
be limited.
BACKUP WITHHOLDING
A United States Holder may be subject to information reporting and/or backup
withholding tax (at a rate of up to 30%) when such holder receives interest and
principal payments on the notes held or upon the proceeds received upon the sale
or other taxable disposition of such notes. Certain holders (including, among
others, corporations and certain tax-exempt organizations) are generally not
subject to backup withholding. A United States Holder will be subject to this
backup withholding tax if such holder is not otherwise exempt and such holder:
- fails to furnish its taxpayer identification number, or TIN, which, for an
individual, is ordinarily his or her social security number;
- furnishes an incorrect TIN;
- is notified by the IRS that it has failed to properly report payments of
interest or dividends; or
- fails to certify, under penalties of perjury, that it has furnished a
correct TIN and that the IRS has not notified the United States Holder
that it is subject to backup withholding.
United States Holders should consult their personal tax advisors regarding
their qualification for an exemption from backup withholding and the procedures
for obtaining such an exemption, if applicable. The backup withholding tax is
not an additional tax and taxpayers may use amounts withheld as a credit against
their United States federal income tax liability or may claim a refund as long
as they timely provide certain information to the IRS.
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NON-UNITED STATES HOLDERS
DEFINITION OF NON-UNITED STATES HOLDERS; INTEREST PAYMENTS AND GAINS FROM
DISPOSITIONS
A "non-United States Holder" is a beneficial owner of the notes who, for
United States federal income tax purposes, is a nonresident alien or a
corporation, trust or estate that is not a United States Holder.
Interest paid to a non-United States Holder will not be subject to United
States federal withholding tax of 30% (or, if applicable, a lower treaty rate)
under the so-called "portfolio interest exception" provided that such interest
is not effectively connected with a trade or business in the United States and:
- such holder does not directly or indirectly, actually or constructively,
own 10% or more of the total combined voting power of all of our classes
of stock that are entitled to vote within the meaning of the Code and the
United States Treasury Regulations;
- such holder is not a controlled foreign corporation that is related to us
directly or constructively through stock ownership and is not a bank that
received such notes on an extension of credit made pursuant to a loan
agreement entered into in the ordinary course of its trade or business;
and
- either (1) the non-United States Holder certifies on IRS Form W-8BEN or
other successor form, under penalties of perjury, that it is not a "United
States person" within the meaning of the Code and provides its name and
address, or (2) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary
course of its trade or business and holds the notes on behalf of the
non-United States Holder certifies to us or our paying agent under
penalties of perjury that it, or the financial institution between it and
the non-United States Holder, has received IRS Form W-8BEN or other
successor form from the non-United States Holder or from another
qualifying institutional intermediary and provides us or our paying agent
with a copy of such statement.
Special rules are applicable to intermediaries and partnerships and holders
should consult their tax advisors regarding the certification requirements
applicable to intermediaries and partnerships. If the non-United States Holder
cannot satisfy the requirements described above, payments of such interest will
be subject to the 30% (or lower applicable treaty rate) United States federal
withholding tax, unless the non-United States Holder provides us with a properly
executed (1) IRS Form W-8BEN (or successor form) claiming an exemption from or
reduction in withholding under the benefit of an applicable tax treaty or
(2) IRS Form W-8ECI (or successor form) stating that interest paid on a note is
not subject to withholding tax because it is effectively connected with the
non-United States Holder's conduct of a trade or business in the United States.
Any premium or similar amounts in excess of the principal and the stated
interest that may become payable upon a repurchase of the notes may be treated
as amounts realized with respect to a sale or exchange of the notes, or as
income subject to the United States federal withholding tax. A non-United States
Holder that is subject to the withholding tax should consult its own tax
advisors as to whether it can obtain a refund for all or a portion of the
withholding tax.
A non-United States Holder will generally not be subject to United States
federal income tax or withholding tax on gain recognized on the sale, exchange,
redemption, retirement or other taxable disposition of a note that is not
effectively connected to a trade or business in the United States. However, a
non-United States Holder may be subject to tax on such gain if such holder is an
individual who was present in the United States for 183 days or more in the
taxable year of the disposition and certain other conditions are met, in which
case such holder may have to pay a United States federal income tax of 30% (or,
if applicable, a lower treaty rate) on such gain.
122
<Page>
If interest or gain from a taxable disposition of the notes is effectively
connected with a non-United States Holder's conduct of a United States trade or
business, and, if an income tax treaty applies, the non-United States Holder
maintains a United States "permanent establishment" to which the interest or
gain is generally attributable, the non-United States Holder may be subject to
United States federal income tax on the interest or gain on a net basis in the
same manner as if it were a United States Holder. If interest income received
with respect to the notes is taxable on a net basis, the 30% withholding tax
described above will not apply (assuming an appropriate certification is
provided). A foreign corporation that is a holder of a note also may be subject
to a "branch profits tax" equal to 30% of its effectively connected earnings and
profits for the taxable year, subject to certain adjustments, unless it
qualifies for a lower rate under an applicable income tax treaty. For this
purpose, interest on a note or gain recognized on the taxable disposition of a
note will be included in earnings and profits if the interest or gain is
effectively connected with the conduct by the foreign corporation of a trade or
business in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Backup withholding will generally not apply to payments made by us or our
paying agents, in their capacities as such, to a non-United States Holder of a
note provided that we or our paying agents do not have actual knowledge or
reason to know that such holder is a United States person and, if the holder has
provided the required certification that it is not a United States person as
described above. However, certain information reporting may still apply with
respect to interest payments even if certification is provided. Payments of the
proceeds from a disposition by a non-United States Holder of a note made to or
through a foreign office of a broker will not be subject to information
reporting or backup withholding, except that information reporting (but
generally not backup withholding) may apply to those payments if the broker is:
- a United States person;
- a controlled foreign corporation for United States federal income tax
purposes;
- a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified
three-year period; or
- a foreign partnership, if at any time during its tax year, one or more of
its partners are United States persons, as defined in Treasury
regulations, who in the aggregate hold more than 50% of the income or
capital interest in the partnership or if, at any time during its tax
year, the foreign partnership is engaged in a United States trade or
business.
Payment of the proceeds from a disposition by a non-United States Holder of
a note made to or through the United States office of a broker is generally
subject to information reporting and backup withholding unless the holder or
beneficial owner establishes an exemption from information reporting and backup
withholding.
Non-United States Holders should consult their own tax advisors regarding
the application of withholding and backup withholding in their particular
circumstances and the availability of and procedure for obtaining an exemption
from withholding and backup withholding under current Treasury Regulations. In
this regard, the current Treasury Regulations provide that a certification may
not be relied on if we or our agent (or other payor) knows or has reasons to
know that the certification may be false. Any amounts withheld under the backup
withholding rules from a payment to a non-United States Holder will be allowed
as a credit against the holder's United States federal income tax liability or
may claim a refund, provided the required information is furnished timely to the
IRS.
123
<Page>
EXPERTS
The consolidated financial statements of TransDigm Holding Company as of
September 30, 2001 and 2000, and for the years ended September 30, 2001, 2000
and 1999, included in this prospectus and the related financial statement
schedule included elsewhere in the registration statement have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports
appearing herein and elsewhere in the registration statement, and have been so
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
The financial statements of Federal-Mogul Aviation Inc., a division of
Federal-Mogul Ignition Company that we acquired on May 31, 2001 (which we refer
to as Champion Aerospace), as of December 31, 2000 and 1999 and for the years
then ended, the period from October 10, 1998 through December 31, 1998 and the
financial statements of the Aviation Division of the Cooper Automotive Division
of Cooper Industries (the "Predecessor") for the period from January 1, 1998
through October 9, 1998 included in this prospectus have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report appearing
herein, and are included in reliance upon such report given on the authority of
such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the exchange notes offered hereby will be passed upon for us
by Latham & Watkins, New York, New York. Certain partners at Latham & Watkins
own equity interests in an entity that owns equity of Holdings.
124
<Page>
INDEX TO FINANCIAL STATEMENTS
<Table>
<Caption>
PAGE
----
TRANSDIGM HOLDING COMPANY
Report of Deloitte & Touche LLP, Independent Auditors....... F-2
Consolidated Balance Sheets as of September 30, 2001 and
2000...................................................... F-3
Consolidated Statements of Operations for the years ended
September 30, 2001, 2000 and 1999......................... F-4
Consolidated Statements of Changes in Stockholders' Equity
(Deficiency) for the years ended September 30, 2001, 2000
and 1999.................................................. F-5
Consolidated Statements of Cash Flows for the years ended
September 30, 2001,
2000 and 1999............................................. F-6
Notes to Consolidated Financial Statements for the years
ended September 30, 2001,
2000 and 1999............................................. F-7
Unaudited Consolidated Balance Sheets as of March 30, 2002
and September 30, 2001.................................... F-32
Unaudited Consolidated Statements of Income for the thirteen
and twenty-six week periods ended March 30, 2002 and
March 31, 2001............................................ F-33
Unaudited Consolidated Statements of Changes in
Stockholders' Equity (Deficiency) for the twenty-six week
period ended March 30, 2002............................... F-34
Unaudited Consolidated Statements of Cash Flows for the
twenty-six week periods ended
March 30, 2002 and March 31, 2001......................... F-35
Notes to the Consolidated Financial Statements for the
thirteen and twenty-six week periods ended March 30, 2002
and March 31, 2001........................................ F-36
SUPPLEMENTARY DATA:
Report of Deloitte & Touche LLP, Independent Auditors....... F-45
Valuation and Qualifying Accounts for the years ended
September 30, 2001, 2000 and 1999......................... F-46
FEDERAL-MOGUL AVIATION, INC.
Report of Ernst & Young LLP, Independent Auditors........... F-47
Statements of Operations for the years ended December 31,
2000 and 1999, for the period from October 10, 1998
through December 31, 1998 and for the Aviation Division of
the Cooper Automated Division of Cooper Industries (the
Predecessor) for the period from January 1, 1998 to
October 9, 1998........................................... F-48
Balance Sheets as of December 31, 2000 and 1999............. F-49
Statements of Cash Flows for the years ended December 31,
2000 and 1999, for the period from October 10, 1998
through December 31, 1998 and for the Aviation Division of
the Cooper Automated Division of Cooper Industries (the
Predecessor) for the period from January 1, 1998 to
October 9, 1998........................................... F-50
Notes to Financial Statements as of December 31, 2000 and
1999, for the years ended December 31, 2000 and 1999, for
the period from October 10, 1998 through December 31,
1998 and for the Aviation Division of the Cooper Automated
Division of Cooper Industries (the Predecessor) for the
period from January 1, 1998 to October 9, 1998............ F-51
Unaudited Balance Sheets as of March 31, 2001 and
December 31, 2000......................................... F-56
Unaudited Statements of Operations for the thirteen-week
periods ended March 31, 2001 and 2000..................... F-57
Unaudited Statements of Cash Flows for the thirteen-week
periods ended March 31, 2001 and 2000..................... F-58
Notes to Financial Statements as of March 31, 2001 and
December 31, 2000 and for the thirteen-week periods ended
March 31, 2001 and 2000................................... F-59
</Table>
F-1
<Page>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
TransDigm Holding Company
We have audited the accompanying consolidated balance sheets of TransDigm
Holding Company and subsidiaries (the "Company") as of September 30, 2001 and
2000, and the related consolidated statements of operations, changes in
stockholders' equity (deficiency) and cash flows for each of the three years in
the period ended September 30, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of TransDigm Holding Company and
subsidiaries as of September 30, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 2001 in conformity with accounting principles generally accepted
in the United States of America.
/s/ Deloitte & Touche LLP
Cleveland, Ohio
December 1, 2001 (except for Notes 19 and 20 for which the date is June 7, 2002)
F-2
<Page>
TRANSDIGM HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2001 AND 2000
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
2001 2000
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 11,221 $ 4,309
Accounts receivable--net (Note 4)......................... 40,215 26,796
Inventories (Note 5)...................................... 47,872 32,889
Income taxes refundable................................... 1,796
Deferred income taxes (Note 12)........................... 9,749 5,197
Prepaid expenses and other................................ 447 535
--------- ---------
Total current assets.................................... 109,504 71,522
PROPERTY, PLANT AND EQUIPMENT--Net (Note 6)................. 42,095 25,029
INTANGIBLE ASSETS--Net (Note 7)............................. 203,858 56,957
DEBT ISSUE COSTS--Net....................................... 12,494 9,400
DEFERRED INCOME TAXES AND OTHER (Note 12)................... 4,947 5,925
--------- ---------
TOTAL ASSETS................................................ $ 372,898 $ 168,833
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Current portion of long-term liabilities (Notes 9 and
11)..................................................... $ 15,822 $ 10,953
Accounts payable.......................................... 9,181 5,672
Accrued liabilities (Note 8).............................. 28,829 15,460
--------- ---------
Total current liabilities............................... 53,832 32,085
LONG-TERM DEBT--Less current portion (Note 9)............... 399,587 250,648
OTHER NON-CURRENT LIABILITIES (Note 11)..................... 8,033 3,138
--------- ---------
Total liabilities....................................... 461,452 285,871
--------- ---------
CUMULATIVE REDEEMABLE PREFERRED STOCK (Note 13)............. 13,222
--------- ---------
REDEEMABLE COMMON STOCK (Note 13)........................... 1,612 1,371
--------- ---------
STOCKHOLDERS' DEFICIENCY:
Common stock, $.01 par value (Note 13).................... 102,080 102,156
Warrants (Note 13)........................................ 1,934
Retained deficit.......................................... (206,901) (220,115)
Accumulated other comprehensive loss...................... (501) (450)
--------- ---------
Total stockholders' deficiency.......................... (103,388) (118,409)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY.............. $ 372,898 $ 168,833
========= =========
</Table>
See notes to consolidated financial statements.
F-3
<Page>
TRANSDIGM HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
YEARS ENDED SEPTEMBER 30,
------------------------------
2001 2000 1999
-------- -------- --------
NET SALES (Note 4).......................................... $200,773 $150,457 $130,818
COST OF SALES (Including charge of $6,639, $185, and $1,143
in 2001, 2000, and 1999, respectively, due to inventory
purchase accounting adjustments) (Note 2)................. 118,525 82,193 69,951
-------- -------- --------
GROSS PROFIT................................................ 82,248 68,264 60,867
-------- -------- --------
OPERATING EXPENSES:
Selling and administrative................................ 20,669 16,799 13,620
Amortization of intangibles............................... 2,966 1,843 2,063
Research and development.................................. 2,943 2,308 2,139
Merger expenses (Note 1).................................. 40,012
-------- -------- --------
Total operating expenses................................ 26,578 20,950 57,834
-------- -------- --------
INCOME FROM OPERATIONS...................................... 55,670 47,314 3,033
INTEREST EXPENSE--NET....................................... 31,926 28,563 22,722
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES........................... 23,744 18,751 (19,689)
INCOME TAX PROVISION (BENEFIT) (Note 12).................... 9,386 7,972 (2,772)
-------- -------- --------
NET INCOME (LOSS)........................................... $ 14,358 $ 10,779 $(16,917)
======== ======== ========
</Table>
See notes to consolidated financial statements.
F-4
<Page>
TRANSDIGM HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
ACCUMULATED
RETAINED OTHER
COMMON EARNINGS COMPREHENSIVE
STOCK WARRANTS (DEFICIT) INCOME (LOSS) TOTAL
-------- -------- --------- ------------- ---------
BALANCE, OCTOBER 1, 1998.............. $ 24,281 $ 12,900 $(754) $ 36,427
---------
Comprehensive Loss:
Net loss............................ (16,917) (16,917)
Other comprehensive income.......... 272 272
---------
Comprehensive loss................ (16,645)
Issuance of common stock.............. 100,652 100,652
Payment of consideration in
recapitalization.................... (22,808) (224,356) (247,164)
Purchase of common stock.............. (28) (28)
Adjustment of redeemable common
stock............................... (864) (864)
-------- -------- --------- ----- ---------
BALANCE, SEPTEMBER 30, 1999........... 102,097 (229,237) (482) (127,622)
---------
Comprehensive Income:
Net income.......................... 10,779 10,779
Other comprehensive income.......... 32 32
---------
Comprehensive income.............. 10,811
Exercise of stock options............. 274 274
Income tax benefit from stock
options............................. 460 460
Adjustment of redeemable common
stock............................... (675) (1,657) (2,332)
-------- -------- --------- ----- ---------
BALANCE, SEPTEMBER 30, 2000........... 102,156 (220,115) (450) (118,409)
---------
Comprehensive Income:
Net income.......................... 14,358 14,358
Other comprehensive loss............ (51) (51)
---------
Comprehensive income.............. 14,307
Issuance of warrants for purchase of
common stock........................ $ 1,934 1,934
Purchase of common stock.............. (125) (125)
Income tax benefit from stock
options............................. 49 49
Adjustment of redeemable common
stock............................... (256) (256)
Cumulative redeemable preferred stock:
Dividends accrued................... (800) (800)
Accretion for original issuance
discount.......................... (88) (88)
-------- -------- --------- ----- ---------
BALANCE, SEPTEMBER 30, 2001........... $102,080 $ 1,934 $(206,901) $(501) $(103,388)
======== ======== ========= ===== =========
</Table>
See notes to consolidated financial statements.
F-5
<Page>
TRANSDIGM HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
YEARS ENDED SEPTEMBER 30,
--------------------------------
2001 2000 1999
--------- -------- ---------
OPERATING ACTIVITIES:
Net income (loss)......................................... $ 14,358 $10,779 $ (16,917)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation............................................ 5,680 4,669 4,311
Amortization of intangibles............................. 2,966 1,843 2,063
Amortization of debt issue costs........................ 1,946 1,705 2,165
Interest deferral on Holdings PIK Notes................. 2,958 2,639 2,000
Deferred income taxes................................... 147 1,684 (1,078)
Changes in assets and liabilities, net of effects from
acquisition of businesses (Note 2):
Accounts receivable................................... (13,331) (3,970) (5,234)
Inventories........................................... 4,530 (2,337) (842)
Refundable income taxes............................... 1,796 1,323
Prepaid expenses and other assets..................... 382 (679) (2,500)
Accounts payable...................................... (947) 191 (744)
Accrued and other liabilities......................... 2,276 (1,542) 557
--------- ------- ---------
Net cash provided by (used in) operating activities....... 22,761 16,305 (16,219)
--------- ------- ---------
INVESTING ACTIVITIES:
Capital expenditures...................................... (4,486) (4,368) (3,043)
Acquisition of Champion Aviation (Note 2)................. (162,318)
Acquisition of Honeywell product line (Note 2)............ (6,784)
Acquisition of ZMP, Inc. (Note 2)......................... 1,648 (41,556)
Acquisition of Christie Electric Corp. (Note 2)........... (2,400)
--------- ------- ---------
Net cash used in investing activities................... (173,588) (5,120) (44,599)
--------- ------- ---------
FINANCING ACTIVITIES:
Borrowings under credit facility, net of fees of $5,040 in
2001 and $5,361 in 1999................................. 157,560 118,639
Proceeds from subordinated notes, net of fees of $6,868... 118,132
Proceeds from exercise of stock options and issuance of
common stock, including redeemable common stock......... 295 100,998
Proceeds from Holdings PIK Notes and common stock, net of
fees of $341............................................ 19,659
Proceeds from issuance of cumulative redeemable preferred
stock and warrants, net of fees of $733 (Note 2)........ 14,267
Payment of consideration in recapitalization -common stock
and warrants............................................ (263,896)
Repayment of amounts borrowed under credit facility....... (13,949) (7,595) (49,443)
Purchase of common stock, including redeemable common
stock................................................... (139) (2,305) (28)
--------- ------- ---------
Net cash provided by (used in) financing activities..... 157,739 (9,605) 44,061
--------- ------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 6,912 1,580 (16,757)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................ 4,309 2,729 19,486
--------- ------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 11,221 $ 4,309 $ 2,729
========= ======= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest.................... $ 26,078 $23,955 $ 14,955
========= ======= =========
Cash paid during the year for income taxes................ $ 6,200 $ 5,004 $ 1,195
========= ======= =========
</Table>
See notes to consolidated financial statements.
F-6
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
1. DESCRIPTION OF THE BUSINESS AND MERGER
DESCRIPTION OF THE BUSINESS--TransDigm Holding Company ("Holdings"), through
its wholly-owned operating subsidiary, TransDigm Inc. ("TransDigm"), is a
premier supplier of engineered power system and airframe components servicing
predominantly the aerospace industry. TransDigm, which includes the
AeroControlex and AdelWiggens Groups, along with its wholly-owned subsidiaries,
Champion Aerospace Inc. ("Champion"), Marathon Power Technologies Company
("Marathon"), ZMP, Inc. ("ZMP"), and Adams Rite Aerospace, Inc. ("Adams Rite")
(collectively, the "Company") offers a broad line of proprietary aerospace
components. Major product offerings in the Power System Components categories
include ignition system components, fuel and lube pumps, mechanical controls,
and batteries and chargers. Major product offerings in the Airframe System
Components categories include engineered connectors, engineered latches, and
lavatory hardware and components.
MERGER--On December 3, 1998, Phase II Acquisition Corp. ("Acquiror"), an
entity formed by affiliates of Odyssey Investment Partners, LP ("Odyssey"), and
Holdings consummated a definitive agreement and plan of merger (the "Merger
Agreement" or the "Merger"). Pursuant to the terms of the Merger, Acquiror was
merged with and into Holdings, with Holdings being the surviving corporation in
the Merger (the "Surviving Corporation"). In the Merger, owners of Holdings'
outstanding common stock received, in exchange for each outstanding share of
common stock (except for shares held directly or indirectly by Holdings or the
Rolled Shares, as defined below), the "Per Share Merger Consideration," as
defined in the Merger Agreement. The aggregate consideration payable pursuant to
the Merger, including amounts payable to holders of options and warrants, was
approximately $299.7 million.
In connection with the Merger, KIA IV-TD, LLC and Kelso Equity Partners II,
LP (collectively, "Kelso") retained approximately 15.4% of the Surviving
Corporation's outstanding common stock (the "Rolled Shares"). In addition,
certain members of management of Holdings agreed, in connection with and as a
condition to entering into the Merger Agreement, to roll over stock options with
an estimated gross and net value of approximately $17.2 million and
$13.7 million, respectively. The Merger was treated as a recapitalization (the
"Recapitalization") for financial reporting purposes, which had no impact on the
historical basis of Holdings' consolidated assets and liabilities.
Simultaneously with the Merger, Holdings and TransDigm refinanced all of
their existing debt. The Merger, the refinancing and payment of fees and
expenses were funded by (i) existing cash balances, (ii) investments by Odyssey
of $100.2 million, (iii) funds from a new $120 million Senior credit facility,
(iv) funds from $125 million Senior Subordinated Notes, and (v) Holdings PIK
Notes of $20 million issued to certain stockholders. The Senior credit facility
has been subsequently increased to $293 million in connection with the Champion
Aviation Products acquisition (see Note 2).
In connection with the Merger, the Company incurred a one-time charge of
approximately $40 million during fiscal 1999 consisting primarily of
compensation costs recognized as a result of the cancellation of certain stock
options, the costs of terminating a financial advisory services agreement, the
write-off of deferred financing costs and professional advisory fees.
Separate financial statements of TransDigm are not presented since the
Senior Subordinated Notes are guaranteed by Holdings and all direct and indirect
subsidiaries of TransDigm and since Holdings has no operations or assets
separate from its investment in TransDigm.
F-7
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
2. ACQUISITIONS
CHAMPION AVIATION--Through a newly-formed, wholly-owned subsidiary, Champion
Aerospace Inc., TransDigm acquired substantially all of the assets and certain
liabilities of the Champion Aviation Products ("Champion Aviation") business on
May 31, 2001 (the "Acquisition"), from Federal Mogul Ignition Company
("Federal-Mogul"), a wholly-owned subsidiary of Federal-Mogul Corporation, for
approximately $160.1 million in cash, subject to adjustment based on the level
of acquired working capital as of the closing of the Acquisition. Champion
Aviation is engaged in researching, designing, developing, engineering,
manufacturing, marketing, distributing and selling ignition systems and related
components and other products (including, without limitation, igniters, spark
plugs, and exciters) for turbine and piston aircraft applications as well as
other aerospace engine and industrial applications.
The purchase price consideration of $160.1 million in cash and $2.2 million
of costs associated with the Acquisition was funded through:
(1) $147.6 million of new borrowings under the Company's existing Senior credit
facility, (2) $14.3 million received (net of fees of $.7 million) from the
issuance of $15 million of Holdings' 16 percent Cumulative Redeemable Preferred
Stock (see Note 13) and warrants to purchase 1,381.87 shares of Holdings' common
stock (see Note 13), and (3) the use of $.4 million of the Company's existing
cash balances. TransDigm also borrowed an additional $15 million under the
Senior credit facility to pay $5 million of debt issuance costs and provide
$10 million of working capital for future operations.
Approximately $2.6 million of the additional borrowings were obtained under
the Company's revolving credit line, $45 million was added to the Company's
existing Tranche B Facility, and $115 million was borrowed in the form of a new
Tranche C Facility maturing in May 2007 under the Senior credit facility.
The Company accounted for the Acquisition as a purchase and included the
results of operations of the acquired business in its fiscal 2001 consolidated
financial statements from the effective date of the Acquisition. The purchase
price was allocated based on a preliminary determination, which is subject to
adjustment, of estimated fair values at the date of the Acquisition and resulted
in goodwill of approximately $134 million being recorded on the Company's
consolidated balance sheet. This goodwill is being amortized on a straight-line
basis over forty years.
The following table summarizes the unaudited, consolidated pro forma results
of operations of the Company, as if the Acquisition had occurred at the
beginning of the years ended September 30 (in thousands):
<Table>
<Caption>
2001 2000
-------- --------
Net sales............................................... $247,803 $219,073
Operating income........................................ 65,192 60,879
Net income.............................................. 14,731 10,380
</Table>
This pro forma information is not necessarily indicative of the results that
actually would have been obtained if the operations had been combined as of the
beginning of the years presented and is not intended to be a projection of
future results.
HONEYWELL PRODUCT LINE--During December 2000, the Company entered into
agreements with Honeywell International, Inc. ("Honeywell") to purchase certain
inventory of Honeywell's lubrication
F-8
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
2. ACQUISITIONS (CONTINUED)
and scavenge pump product line for $4.5 million, along with an option to enter
into an exclusive, worldwide license agreement to produce and sell such products
for at least forty years and to buy certain related assets. The cost of the
option was not significant.
During January 2001, the Company exercised the option and, on March 26,
2001, the Company executed the license agreement, acquired the related assets
(including additional inventory of approximately $1.4 million), and entered into
a five year supply agreement with Honeywell in return for a cash payment of
$6.6 million at closing and a commitment to make future, specified (see
Note 11) and variable royalty payments under the license agreement.
The Company accounted for the acquisition as a purchase and has included the
results of operations of the acquired product line (which were not material
through September 30, 2001) in its fiscal 2001 consolidated financial statements
from the effective date of the acquisition. The closing of the option
transaction was recorded in March 2001 based on a preliminary determination,
which is subject to adjustment, of the estimated fair values of the assets and
liabilities acquired as a result of the transaction. Intangible assets of
$15.7 million, consisting of the license agreement and goodwill that were
recorded as a result of the acquisition are being amortized on a straight-line
basis over twenty years.
The purchase price of the inventory acquired from Honeywell in both
December 2000 and March 2001 is subject to adjustment based upon a final
determination of the value acquired, as defined.
Pro forma net sales and results of operations for this acquisition, had the
acquisition occurred at the beginning of the years ended September 30, 2001 and
2000, are not significant and, accordingly, are not provided.
CHRISTIE ELECTRIC CORP.--On March 8, 2000, Marathon acquired all of the
issued and outstanding common shares of Christie Electric Corp. ("Christie") for
$2.4 million. The Company accounted for the acquisition as a purchase and
included the results of operations of Christie, which are not material to the
Company's consolidated results of operations, in its fiscal 2000 consolidated
financial statements from the effective date of acquisition. Goodwill of
$1.8 million, which resulted from the acquisition, is being amortized on a
straight-line basis over forty years.
ZMP, INC. AND ADAMS RITE AEROSPACE, INC.--On April 23, 1999, TransDigm
acquired all of the outstanding common stock of ZMP, the corporate parent of
Adams Rite, through a merger. Adams Rite manufactures mechanical hardware, fluid
controls, lavatory hardware, electromechanical controls and oxygen systems
related products. The purchase price for the acquisition was $41 million,
subject to adjustment for changes in working capital and other matters as
defined in the merger agreement. The acquisition was funded through $36 million
of additional borrowings under the Company's credit facility and the use of
approximately $5 million of the Company's cash balances. During the year ended
September 30, 2000, the Company received a purchase price adjustment of
$1.6 million, net of expenses. As a result of the acquisition, ZMP and Adams
Rite became wholly-owned subsidiaries of TransDigm.
The Company accounted for the acquisition as a purchase and included the
results of operations of the acquired companies in the accompanying fiscal 1999
consolidated financial statements from the
F-9
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
2. ACQUISITIONS (CONTINUED)
effective date of the acquisition. The purchase price (including related
expenses) was allocated based on a determination of estimated fair values at the
date of the acquisition and resulted in goodwill of approximately $24 million
being recorded on the Company's consolidated balance sheet. This goodwill is
being amortized on a straight-line basis over forty years.
The following table summarizes the unaudited, consolidated pro-forma results
of operations, as if the acquisition had occurred at the beginning of the year
ended September 30, 1999 (in thousands):
<Table>
Net sales................................................... $151,624
Income from operations...................................... 1,913
Net loss.................................................... (18,646)
</Table>
The consolidated pro-forma operating loss for the year ended September 30,
1999 includes the following charges recognized by Adams Rite prior to the
acquisition: (1) $1.4 million ($.84 million after tax) for compensation expense
recognized in connection with a common stock warrant granted to its former chief
executive officer and (2) $.8 million ($.8 million after tax) for costs directly
related to the acquisition.
This pro-forma information is not necessarily indicative of the results that
actually would have been obtained if the operations had been combined as of the
beginning of the year presented and is not intended to be a projection of future
results.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION--The accompanying consolidated financial statements include
the accounts of TransDigm Holding Company and subsidiaries. All significant
intercompany balances and transactions have been eliminated.
REVENUE RECOGNITION--Revenue is recognized when products are shipped to the
customer. Any anticipated losses on contracts are charged to earnings when
identified.
CASH EQUIVALENTS--The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS--The Company reserves for amounts
determined to be uncollectible based on specific identification and historical
experience.
INVENTORIES--Inventories are stated at the lower of cost or market. Cost of
inventories is determined by the average cost and the first-in, first-out (FIFO)
methods. Provision for potentially obsolete or slow-moving inventory is made
based on management's analysis of inventory levels and future sales forecasts.
In accordance with industry practice, all inventories are classified as current
assets even though a portion of the inventories may not be sold within one year.
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are stated at
cost. Depreciation is computed using the straight-line method at rates based on
the estimated useful lives of the assets.
DEBT ISSUE COSTS AND DISCOUNTS--The cost of obtaining financing as well as
debt discounts are amortized using the interest method over the terms of the
respective debt issues.
F-10
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS--Intangible assets are amortized on a straight-line basis
over their respective estimated useful lives ranging from 5 to 40 years. The
Company assesses the recoverability of intangibles by determining whether the
amortization over the remaining life can be recovered through projected,
undiscounted, cash flows from future operations.
INCOME TAXES--The Company accounts for income taxes using an asset and
liability approach. Deferred taxes are recorded for the difference between the
book and tax basis of various assets and liabilities.
PRODUCT WARRANTY COSTS--The Company generally provides a one year warranty
on certain products beginning on the date the product is installed on an
aircraft. A provision for estimated sales returns and the cost of repairs is
recorded at the time of sale and periodically adjusted to reflect actual
experience.
ESTIMATES--The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
COMPREHENSIVE INCOME (LOSS)--The Company's accumulated other comprehensive
income (loss), consisting principally of its minimum pension liability
adjustment, is reported separately in the accompanying consolidated balance
sheets and statements of changes in stockholders' equity (deficiency), net of
taxes of ($404,000), ($317,000), and ($390,000) at September 30, 2001, 2001, and
1999, respectively.
SEGMENT REPORTING--The Company's principal business, aircraft component
supplier, is reported as one segment. Substantially all of the Company's
operations are located within the United States.
RECLASSIFICATIONS--Certain reclassifications have been made to the 2000
financial statements to conform to the classifications used in 2001.
4. SALES AND ACCOUNTS RECEIVABLE
SALES--The Company's sales and receivables are concentrated in the aerospace
industry. The major customers for Power System Components include commercial and
defense aftermarket end users of engines and APUs, engine and APU OEMs, and
regional and business jet manufacturers and end users. The major customers for
Airframe System Components include commercial and defense aftermarket end users,
commercial transport OEMs, and regional and business jet manufacturers and end
users.
F-11
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
4. SALES AND ACCOUNTS RECEIVABLE (CONTINUED)
Information concerning the Company's net sales by its major system component
categories is as follows for the years ended September 30 (in thousands):
<Table>
<Caption>
2001 2000 1999
-------- -------- --------
Power System Components....................... $106,811 $ 67,275 $ 68,537
Airframe System Components.................... 93,962 83,182 62,281
-------- -------- --------
Total......................................... $200,773 $150,457 $130,818
======== ======== ========
</Table>
For the year ended September 30, 2001, two customers represented
approximately 17% and 8%, respectively, of the Company's net sales. Two
customers represented approximately 10% and 9%, respectively, of the Company's
net sales during the year ended September 30, 2000 and two customers represented
approximately 15% and 14% of the Company's net sales for the year ended
September 30, 1999. Export sales to customers, primarily in Western Europe, were
$54.8 million in fiscal 2001, $36.2 million in fiscal 2000, and $30.7 million in
fiscal 1999.
ACCOUNTS RECEIVABLE--Accounts receivable consist of the following at
September 30 (in thousands):
<Table>
<Caption>
2001 2000
-------- --------
Due from U.S. government or prime contractors under U.S.
government programs..................................... $ 3,798 $ 4,571
Commercial customers...................................... 37,573 22,596
Allowance for uncollectible accounts...................... (1,156) (371)
------- -------
Accounts receivable--net.................................. $40,215 $26,796
======= =======
</Table>
Approximately 18% of the Company's receivables at September 30, 2001 were
due from two customers. In addition, approximately 24% of the Company's
receivables were due from entities which principally operate outside of the
United States. Credit is extended based on an evaluation of each customer's
financial condition and collateral is generally not required.
5. INVENTORIES
Inventories consist of the following at September 30 (in thousands):
<Table>
<Caption>
2001 2000
-------- --------
Work-in-progress and finished goods....................... $36,787 $20,995
Raw materials and purchased component parts............... 18,380 18,325
------- -------
Total................................................... 55,167 39,320
Reserve for excess and obsolete inventory................. (7,295) (6,431)
------- -------
Inventories--net.......................................... $47,872 $32,889
======= =======
</Table>
F-12
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following at September 30 (in
thousands):
<Table>
<Caption>
2001 2000
-------- --------
Land and improvements................................... $ 4,881 $ 4,720
Buildings and improvements.............................. 20,869 10,687
Machinery and equipment................................. 39,918 30,437
Furniture and fixtures.................................. 6,091 4,220
Construction in progress................................ 814 1,014
-------- --------
Total................................................. 72,573 51,078
Accumulated depreciation................................ (30,478) (26,049)
-------- --------
Property, plant and equipment--net...................... $ 42,095 $ 25,029
======== ========
</Table>
7. INTANGIBLE ASSETS
Intangible assets, net of accumulated amortization, consist of the following
at September 30 (in thousands):
<Table>
<Caption>
2001 2000
-------- --------
Goodwill................................................. $191,630 $56,176
Honeywell license agreement (Note 2)..................... 11,946
Technology and other..................................... 282 781
-------- -------
Total.................................................... $203,858 $56,957
======== =======
</Table>
Accumulated amortization of intangibles was $23.3 million at September 30,
2001 and $20.3 million at September 30, 2000.
8. ACCRUED LIABILITIES
Accrued liabilities consist of the following at September 30 (in thousands):
<Table>
<Caption>
2001 2000
-------- --------
Estimated losses on uncompleted contracts................. $10,233 $ 1,900
Compensation and related benefits......................... 6,650 5,281
Interest.................................................. 5,540 4,857
Sales returns and repairs................................. 2,903 1,467
Income taxes payable...................................... 1,062
Other..................................................... 2,441 1,955
------- -------
Total..................................................... $28,829 $15,460
======= =======
</Table>
F-13
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
9. DEBT
SUMMARY--The Company's long-term debt consists of the following at
September 30 (in thousands):
<Table>
<Caption>
2001 2000
-------- --------
Term loans.............................................. $260,612 $111,962
Senior Subordinated Notes............................... 125,000 125,000
Holdings PIK Notes...................................... 27,597 24,639
-------- --------
Total debt............................................ 413,209 261,601
Current maturities...................................... (13,622) (10,953)
-------- --------
Long-term portion....................................... $399,587 $250,648
======== ========
</Table>
REVOLVING CREDIT AND TERM LOANS--In connection with the acquisition of
Champion Aviation (see Note 2), TransDigm increased its Senior credit facility
with a group of financial institutions to $293 million, which consists of (1) a
$30 million revolving credit line maturing in November 2004 and (2) a term loan
facility in the aggregate of $263 million, consisting of a $43 million Tranche A
Facility maturing in 2004, a $105 million Tranche B Facility maturing in 2006,
and a $115 million Tranche C Facility maturing in 2007. At September 30, 2001,
the Company had $30 million of borrowings (the entire revolving credit line)
available under the credit facility.
The interest rate under the credit facility is, at TransDigm's option,
either (A) a floating rate equal to the Base Rate plus the Applicable Margin, as
defined in the credit facility; or (B) the Eurodollar Rate for fixed periods of
one, two, three, or six months, plus the Applicable Margin. The Credit Facility
is subject to mandatory prepayment with a defined percentage of net proceeds
from certain asset sales, insurance proceeds or other awards that are payable in
connection with the loss, destruction or condemnation of any assets, certain new
debt and equity offerings and 50% of excess cash flow (as defined in the credit
facility) over a predetermined amount defined in the credit facility. The
interest rates on outstanding borrowings at September 30, 2001 ranged from 6.38%
to 7.06%.
All obligations under the Senior credit facility are guaranteed by Holdings
and each of the subsidiaries, direct and indirect, of TransDigm. The
indebtedness outstanding under the Senior credit facility is secured by a pledge
of the stock of TransDigm and all of its domestic subsidiaries and a perfected
lien and security interest in assets other than real estate (tangible and
intangible) of TransDigm, its direct and indirect subsidiaries and Holdings. The
agreement also contains a number of restrictive covenants that, among other
things, restrict Holdings, TransDigm and their subsidiaries from various
actions, including mergers and sales of assets, use of proceeds, granting of
liens, incurrence of indebtedness, voluntary prepayment of indebtedness, capital
expenditures, payment of dividends, business activities, investments and
acquisitions, and transactions with affiliates. The agreement also requires the
Company to comply with certain financial covenants pertaining to earnings,
interest coverage and leverage. The Company was in compliance with all financial
covenants of the Senior credit facility as of September 30, 2001. The maturities
of the Company's term loans by fiscal year are as follows: $13.6 million in
fiscal 2002, $19.4 million in fiscal 2003, $29.4 million in fiscal 2004,
$48.6 million in fiscal 2005, $67.7 million in fiscal 2006, and $81.9 million in
fiscal 2007.
F-14
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
9. DEBT (CONTINUED)
SENIOR SUBORDINATED NOTES--TransDigm's Senior Subordinated Notes (the
"Notes") bear interest at an annual rate of 10 3/8%, maturing on December 1,
2008, and are unsecured obligations of TransDigm ranking subordinate to the
Company's senior debt, as defined in the note agreement. The Notes are
redeemable after December 1, 2003, in whole or in part, at specified redemption
prices, which decline over the remaining term of the Notes. If a change in
control of the Company occurs, the holders of the Notes will have the right to
demand that the Company redeem the Notes at a purchase price equal to 101% of
the principal amount of the Notes plus accrued interest. The Notes contain many
of the same restrictive covenants included in the Senior credit facility. The
Company was in compliance with all financial covenants of the Notes as of
September 30, 2001.
HOLDINGS PIK NOTES--In connection with the Merger (see Note 1), Holdings
issued $20 million of pay-in-kind notes due 2009 ("Holdings PIK Notes" or "PIK
Notes"). The PIK Notes are unsecured obligations of Holdings, which has no
significant assets or operations. Interest on the PIK Notes is accrued at an
annual fixed rate of 12% and is payable semi-annually in the form of additional
PIK Notes through December 2003. Thereafter, cash interest is payable
semi-annually commencing in the year 2004. The PIK Notes are redeemable by
Holdings prior to their maturity under certain circumstances and contain many of
the same restrictive covenants included in the Notes and Senior credit facility.
The Company was in compliance with all financial covenants of the PIK Notes as
of September 30, 2001.
10. RETIREMENT PLANS
The Company has two non-contributory defined benefit pension plans, which
together cover certain union employees. The plans provide benefits of stated
amounts for each year of service. The Company's funding policy is to contribute
actuarially determined amounts allowable under Internal Revenue Service
regulations. The plans' assets consist primarily of guaranteed investment
contracts with an insurance company.
Financial information for the defined benefit plans is provided below (in
thousands):
<Table>
<Caption>
YEARS ENDED
SEPTEMBER 30,
-------------------
2001 2000
-------- --------
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation, beginning of year..................... $5,034 $4,841
Service cost.............................................. 82 87
Interest cost............................................. 359 333
Benefits paid............................................. (298) (261)
Change in actuarial assumptions........................... 217 34
------ ------
Benefit obligation, end of year........................... $5,394 $5,034
====== ======
</Table>
F-15
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
10. RETIREMENT PLANS (CONTINUED)
<Table>
<Caption>
2001 2000
-------- --------
CHANGE IN PLAN ASSETS:
Fair value of plan assets, beginning of year.............. $3,846 $3,381
Actual return on plan assets.............................. 239 220
Employer contribution..................................... 635 506
Benefits paid............................................. (298) (261)
------ ------
Fair value of plan assets, end of year.................... $4,422 $3,846
====== ======
</Table>
<Table>
<Caption>
2001 2000
-------- --------
AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS AT
SEPTEMBER 30 CONSIST OF:
Intangible assets......................................... $ (311) $ (267)
Accrued liabilities....................................... 551 500
Other non-current liabilities............................. 421 688
Accumulated other comprehensive loss...................... (880) (793)
------ ------
Net amount recognized..................................... $ (219) $ 128
====== ======
</Table>
<Table>
<Caption>
2001 2000
-------- --------
WEIGHTED-AVERAGE ASSUMPTIONS AS OF SEPTEMBER 30:
Discount rate............................................. 7.0% 7.0%
Expected return on plan assets............................ 6.0% 6.0%
</Table>
<Table>
<Caption>
YEARS ENDED
SEPTEMBER 30,
------------------------------
2001 2000 1999
-------- -------- --------
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost........................................ $ 82 $ 87 $ 83
Interest cost....................................... 359 333 319
Expected return on plan assets...................... (236) (210) (177)
Net amortization and deferral....................... 83 71 70
----- ----- -----
Net periodic pension cost........................... $ 288 $ 281 $ 295
===== ===== =====
</Table>
The Company also sponsors certain defined contribution employee savings
plans that cover substantially all of the Company's non-union employees. Under
the plans, the Company contributes a percentage of employee compensation and
matches a portion of employee contributions. The cost recognized for such
contributions under these plans for the years ended September 30, was
approximately $1.0 million, $1.2 million, and $.7 million in fiscal 2001, 2000,
and 1999, respectively.
F-16
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
11. OTHER NON-CURRENT LIABILITIES
Other non-current liabilities consist of the following at September 30 (in
thousands):
<Table>
<Caption>
2001 2000
-------- --------
Obligation under Honeywell license agreement (net of
imputed interest of $1,043) (Note 2).................... $ 7,757
Accrued pension costs (Note 10)........................... 421 $ 688
Other..................................................... 2,055 2,450
-------- ------
Total................................................... 10,233 3,138
Current portion of Honeywell license agreement
obligation.............................................. (2,200)
-------- ------
Other non-current liabilities............................. $ 8,033 $3,138
======== ======
</Table>
The Honeywell license agreement obligation is non-interest bearing and is
due in annual installments of $2.2 million during each of the next four fiscal
years. The obligation has been recorded at its present value using an imputed
interest rate of 8%.
12. INCOME TAXES
The provision (benefit) for income taxes consists of the following for the
years ended September 30 (in thousands):
<Table>
<Caption>
2001 2000 1999
-------- -------- --------
Current............................................ $9,239 $6,288 $(1,694)
Deferred........................................... 186 1,545 (481)
Net operating loss carryforward--state and local
income taxes..................................... (39) 139 (597)
------ ------ -------
Total.............................................. $9,386 $7,972 $(2,772)
====== ====== =======
</Table>
The difference between the provision (benefit) for income taxes at the
federal statutory income tax rate and the tax shown in the consolidated
statements of operations for the years ended September 30 are as follows (in
thousands):
<Table>
<Caption>
2001 2000 1999
-------- -------- --------
Tax at statutory rate of 35% (34% in 1999)......... $8,310 $6,563 $(6,694)
State and local income taxes....................... 650 700 (56)
Nondeductible merger expenses...................... 4,290
Benefit from foreign sales corporation............. (483) (363) (615)
Nondeductible goodwill amortization and interest
expense.......................................... 746 711 526
Other--net......................................... 163 361 (223)
------ ------ -------
Provision (benefit) for income taxes............... $9,386 $7,972 $(2,772)
====== ====== =======
</Table>
F-17
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
12. INCOME TAXES (CONTINUED)
The components of the deferred tax assets at September 30 consist of the
following (in thousands):
<Table>
<Caption>
2001 2000
-------- --------
CURRENT ASSET:
Estimated losses on uncompleted contracts............... $ 3,991 $ 741
Inventory............................................... 1,844 1,921
Employee benefits....................................... 1,723 1,343
Sales returns and repairs............................... 1,012 456
Other accrued liabilities............................... 1,179 736
------- -------
Total..................................................... $ 9,749 $ 5,197
======= =======
NON-CURRENT ASSET:
Holdings PIK Notes interest............................. $ 2,761 $ 1,689
Intangible assets....................................... 1,910 3,202
Retirement and other accrued obligations................ 870 1,120
Property, plant and equipment........................... (1,785) (1,562)
Net operating loss carryforwards--state and local income
taxes (expiring from 2005 through 2016)............... 499 460
------- -------
Total..................................................... $ 4,255 $ 4,909
======= =======
</Table>
13. CAPITAL STOCK, WARRANTS, AND OPTIONS
COMMON STOCK--Authorized common stock of the Company consists of 900,000
shares of common stock (voting), par value $.01 per share and 100,000 shares of
Class A (non-voting) common stock. The total number of shares of voting common
stock outstanding at September 30, 2001 and 2000 was 119,814 and 119,824,
respectively. No shares of Class A (non-voting) common stock were outstanding at
September 30, 2001 and 2000. Common stock issued to management personnel is
subject to certain agreements, which provide management shareholders the right
(a "put") to require the Company to repurchase their shares of common stock
under certain conditions at fair market value. Accordingly, the estimated put
value of the outstanding shares of voting common stock held by management (1,152
and 1,162 shares at September 30, 2001 and 2000, respectively) has been
classified as redeemable common stock in the accompanying consolidated balance
sheets. During fiscal 2002, the necessary conditions are expected to be met with
respect to 649 shares of the Company's redeemable common stock, which will
enable a management shareholder to require the Company to repurchase the shares.
In connection with the Merger (see Note 1) in 1999, the Company issued
101,503 shares of common stock (voting) principally to Odyssey and also
repurchased 231,448 shares of common stock (voting and non-voting Class A) for
$247.2 million.
COMMON STOCK OPTIONS--The Company has certain stock option plans for its
employees. The options generally vest and enable the employee to purchase a
certain number of the Company's common shares at a specified price upon the
earlier of: (1) the occurrence of certain events such as the achievement of
certain earnings targets or a change in the control of the Company or
(2) certain specified dates in the option agreements. The options are not
exercisable more than ten years after the date the options are granted.
F-18
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
13. CAPITAL STOCK, WARRANTS AND OPTIONS (CONTINUED)
A summary of the status of the Company's stock option plans as of
September 30, 2001, 2000, and 1999 and changes during the years then ended is
presented below:
<Table>
<Caption>
2001 2000 1999
-------------------- -------------------- --------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------- --------- -------- --------- -------- ---------
Outstanding at beginning of year............... 29,531 $ 634 30,399 $ 623 37,467 $ 158
Granted........................................ 1,570 1,400 1,695 1,180 15,115 1,040
Exercised/cancelled (see Note 1)............... (320) 1,128 (2,563) 864 (22,183) 121
------ ------ -------
Outstanding at end of year..................... 30,781 668 29,531 634 30,399 623
====== ====== =======
Exercisable at end of year..................... 21,428 477 16,516 300 17,084 298
====== ====== =======
</Table>
The following table summarizes information about stock options outstanding
at September 30, 2001:
<Table>
<Caption>
OPTIONS OUTSTANDING
--------------------------------------------
WEIGHTED-
AVERAGE
EXERCISE NUMBER REMAINING NUMBER
PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISABLE
- ---------------------------------------- ----------- ---------------- -----------
$ 100.................................. 7,002 2.2 7,002
154.................................. 172 3.5 172
200.................................. 1,245 4.5 1,245
335.................................. 6,297 5.7 6,297
1,040................................. 13,000 7.6 5,850
1,180................................. 1,495 8.8 673
1,400................................. 1,570 9.7 189
------ ------
30,781 21,428
====== ======
</Table>
At September 30, 2001, 2,925 remaining options were available for award
under the Company's stock option plans. In addition, 10,589 of the exercisable
stock options at September 30, 2001, with exercise prices of $100 (2,992
options), $335 (3,097 options), and $1,040 (4,500 options), provide the holder a
right under certain conditions, to require the Company to purchase the shares
that can be acquired from the exercise of the options. It is expected that the
conditions will be met during fiscal 2002 that will enable the holder to
exercise this right with respect to eighty percent of the options.
The Company applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its stock option plans. No compensation cost
has been recognized for its stock option plans. Had compensation cost for the
Company's stock option plans been determined based on the fair value at the
grant dates for awards under those plans consistent with the method specified in
Statement No. 123 of the Financial Accounting Standards Board ("FASB"), the
Company's net income for the year ended September 30, 2001 would have been
reduced by approximately $204,000; the Company's net income for the year ended
September 30, 2000 would have been reduced by approximately
F-19
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
13. CAPITAL STOCK, WARRANTS AND OPTIONS (CONTINUED)
$205,000; and the Company's net loss for the year ended September 30, 1999 would
have increased by $634,000.
The weighted average fair value of options granted during the years ended
September 30, 2001, 2000, and 1999 was $411, $399, and $383, respectively. The
fair value of the options granted was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions: risk-free
interest rates ranging from 4.53% to 5.99%, expected life of approximately seven
years, expected volatility and dividend yield of 0%.
WARRANTS TO PURCHASE COMMON STOCK--At September 30, 2001, warrants to
purchase 1,381.87 shares of Holdings' common stock were issued and outstanding.
The warrants were issued in connection with the acquisition of Champion Aviation
(see Note 2) and are exercisable through May 2011 at an exercise price per share
of $0.01.
CUMULATIVE REDEEMABLE PREFERRED STOCK--The authorized preferred stock of
Holdings consists of 75,000 shares of 16% cumulative redeemable preferred stock
with a par value of $.01 per share. As of September 30, 2001, 15,000 shares of
the preferred stock were issued and outstanding. The preferred stock has a
stated liquidation preference of $1,000 per share and dividends are payable in
cash or delivery of additional shares of preferred stock. The preferred stock,
including all accumulated and unpaid dividends, is also subject to mandatory
redemption in 2010. Prior to the date of mandatory redemption, under certain
circumstances (including a change in control), the preferred stock is subject to
optional redemption. The terms of the preferred stock require the Company to
comply with certain financial covenants pertaining to earnings, interest
coverage, and leverage.
14. LEASES
The Company leases office space for its corporate headquarters and two of
its divisions. The Company also leases a manufacturing facility. The office
space lease requires rental payments of approximately $200,000 per year through
2004. TransDigm may also be required to share in the operating costs of the
facility under certain conditions. The facility lease requires rental payments
ranging from $540,000 to $780,000 through December 2012. TransDigm also has
commitments under operating leases for vehicles and equipment. Rental expense
was $1,106,000 in 2001, $978,000 in 2000, and $688,000 in 1999. Future, minimum
rental commitments at September 30, 2001 under operating leases having initial
or remaining non-cancelable lease terms exceeding one year are $1,235,000 in
2002, $1,236,000 in 2003, $1,182,000 in 2004, $1,136,000 in 2005, $985,000 in
2006, and $5,473,000 thereafter.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has various financial instruments, including cash and cash
equivalents, accounts receivable and payable, accrued liabilities and long-term
debt. The carrying value of the Company's cash and cash equivalents, accounts
receivable and payable, and accrued liabilities approximates their fair value
due to the short-term maturities of these assets and liabilities. The Company
also believes that the aggregate fair value of its term loans approximates its
carrying amount because the interest rates on the debt are reset on a frequent
basis to reflect current market rates. The fair value of the Company's Senior
Subordinated Notes approximated $99.4 million at September 30, 2001 based upon
quoted market prices. A determination of the fair value of the Holdings PIK
Notes is not considered practicable because they are held by a related party
(see Note 1) and are not publicly traded.
F-20
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
16. CONTINGENCIES
ENVIRONMENTAL--The soil and groundwater beneath the Company's facility in
Waco, Texas have been impacted by releases of hazardous materials. The resulting
contaminants of concern have been delineated and characterized. Because the
majority of these contaminants are presently below action levels prescribed by
the Texas Natural Resources Conservation Commission ("TNRCC"), and because a
$2 million escrow was previously funded in connection with the Company's
acquisition of Marathon to cover the cost of remediation that TNRCC might
require for those contaminants currently in excess of action limits, the Company
does not believe the condition of the soil and groundwater at the Waco facility
will require incurrence of material expenditures; however, there can be no
assurance that additional contamination will not be discovered or that the
remediation required by the TNRCC will not be material to the financial
condition, results of operations, or cash flows of the Company.
During September 1998, the former owner of Marathon filed a lawsuit against
the Company to release the environmental escrow alleging that the Company had
violated the requirements of the Stock Purchase Agreement relating to the
investigation of the presence of certain contaminants at the Waco, Texas
facility. The Company has filed counter claims against the seller and the
ultimate outcome of this matter cannot presently be determined.
OTHER--While the Company is currently involved in certain legal proceedings,
management believes the results of these proceedings will not have a material
effect on the financial condition, results of operations or cash flows of the
Company. During the ordinary course of business, the Company is from time to
time threatened with, or may become a party to, legal actions and other
proceedings. The Company believes that its potential exposure to such legal
actions is adequately covered by its aviation product and general liability
insurance.
17. QUARTERLY FINANCIAL DATA (UNAUDITED)
<Table>
<Caption>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS)
YEAR ENDED SEPTEMBER 30, 2001
Net sales............................................. $35,780 $42,084 $54,201 $68,708
Gross profit.......................................... 15,787 19,257 21,088 26,116
Net income............................................ 1,986 3,929 3,582 4,861
YEAR ENDED SEPTEMBER 30, 2000
Net sales............................................. $33,734 $36,434 $40,233 $40,056
Gross profit.......................................... 15,599 16,609 18,179 17,877
Net income............................................ 2,100 2,717 3,429 2,533
</Table>
F-21
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
18. NEW ACCOUNTING STANDARDS
In June 2001, the FASB issued Statements of Financial Accounting Standards
("SFAS") No. 141, BUSINESS COMBINATIONS, and No. 142, GOODWILL AND OTHER
INTANGIBLE ASSETS. SFAS No. 141, which is effective for all business
combinations initiated after June 30, 2001, requires that the purchase method of
accounting be used to account for such transactions. SFAS No. 141 also
established two criteria that must be met for intangible assets (other than
goodwill) to be recognized in accounting for a business combination, the
contractual-legal criterion and the separability criterion. The issuance of SFAS
No. 141 had no impact on the Company's consolidated financial statements as of
and for the year ended September 30, 2001.
SFAS No. 142 changes the accounting for goodwill from an amortization method
to an impairment-only approach. Amortization of goodwill, including goodwill
recorded as a result of past business combinations, will cease upon adoption of
this statement, which must occur no later than the first quarter of the
Company's year ending September 30, 2003. In addition, upon implementation of
this statement, the carrying amounts of intangible assets recorded in connection
with past business combinations that do not meet the criteria in SFAS No. 141
for recognition apart from goodwill, must be reclassified to goodwill when SFAS
No. 142 is implemented. The Company has not determined the impact that this
statement will have on its consolidated financial position or results of
operations.
In June 2001, the FASB issued SFAS No. 143, ACCOUNTING FOR ASSET RETIREMENT
OBLIGATIONS. This statement requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred. The amount recorded as a liability will be capitalized by increasing
the carrying amount of the related long-lived asset. Subsequent to initial
measurement, the liability is accreted to the ultimate amount anticipated to be
paid and is also adjusted for revisions to the timing of the amount of estimated
cash flows. The capitalized cost is depreciated over the useful life of the
related asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon settlement. The
provisions of this statement become effective for the Company's fiscal year
ending September 30, 2003. The Company has not determined the impact, if any,
that this statement will have on its financial statements.
In August 2001, the FASB issued SFAS No. 144, ACCOUNTING FOR IMPAIRMENT OR
DISPOSALS OF LONG-LIVED ASSETS. This statement specifies the accounting model to
be used for long-lived assets to be disposed of by sale (whether previously held
and used or newly acquired) and by broadening the presentation of discontinued
operations to include more disposal transactions. The provisions of this
statement become effective for the Company's fiscal year ending September 30,
2003. The Company has not determined the impact that this statement will have on
its consolidated financial position or results of operations.
19. SUPPLEMENTAL GUARANTOR INFORMATION
The Company's Senior Subordinated Notes, including the additional notes
issued on June 7, 2002 (see Note 20) are unconditionally guaranteed by Holdings
and each of TransDigm's domestic subsidiaries on a senior subordinated basis.
The Holdings guarantee of the Senior Subordinated Notes is subordinated to
Holdings' repayment of the Holdings PIK Notes, as well as the Holdings'
guarantee of TransDigm's borrowings under its Senior credit facility. The
guarantee of the Senior Subordinated Notes by TransDigm's domestic subsidiaries
is subordinated to the subsidiaries' guarantee of TransDigm's Senior credit
facility. The following supplemental consolidating condensed financial
information presents the balance sheets of the Company as of September 30, 2001
and 2000 and its statements of operations and cash flows for each of the three
years in the period ended September 30, 2001.
F-22
<Page>
TRANSDIGM HOLDING COMPANY
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 30, 2001
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
SUBSIDIARY TOTAL
HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED
--------- --------- ---------- ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........... $ 12,294 $ (1,073) $ 11,221
Accounts receivable--net............ 17,481 22,734 40,215
Inventories......................... 19,353 28,519 47,872
Deferred income taxes............... 9,749 9,749
Prepaid expenses and other.......... 132 315 447
-------- --------- --------
Total current assets.......... 59,009 50,495 109,504
INVESTMENTS IN SUBSIDIARIES AND
INTERCOMPANY BALANCES............. $(144,774) 395,987 (141,163) $(110,050)
PROPERTY, PLANT AND
EQUIPMENT--Net.................... 10,954 31,141 42,095
INTANGIBLE ASSETS--Net.............. 19,384 184,474 203,858
DEBT ISSUE COSTS--Net............... 255 12,239 12,494
DEFERRED INCOME TAXES AND OTHER..... 4,947 4,947
--------- -------- --------- --------- --------
TOTAL ASSETS........................ $(144,519) $502,520 $ 124,947 $(110,050) $372,898
========= ======== ========= ========= ========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Current portion of long-term
liabilities..................... $ 15,822 $ 15,822
Accounts payable.................. 4,909 $ 4,272 9,181
Accrued liabilities............... 17,836 10,993 28,829
-------- --------- --------
Total current liabilities..... 38,567 15,265 53,832
LONG-TERM DEBT--Less current
portion........................... $ 27,597 371,990 399,587
OTHER NON-CURRENT LIABILITIES....... 6,671 1,362 8,033
--------- -------- --------- --------
Total liabilities............. 27,597 417,228 16,627 461,452
--------- -------- --------- --------
CUMULATIVE REDEEMABLE PREFERRED
STOCK............................. 13,222 13,222
--------- --------
REDEEMABLE COMMON STOCK............. 1,612 1,612
--------- --------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIENCY)...................... (186,950) 85,292 108,320 $(110,050) (103,388)
--------- -------- --------- --------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)............... $(144,519) $502,520 $ 124,947 $(110,050) $372,898
========= ======== ========= ========= ========
</Table>
F-23
<Page>
TRANSDIGM HOLDING COMPANY
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
SUBSIDIARY TOTAL
HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED
--------- --------- ---------- ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............... $ 4,554 $ (245) $ 4,309
Accounts receivable--net................ 16,491 10,305 26,796
Inventories............................. 16,985 15,904 32,889
Income taxes refundable................. 1,796 1,796
Deferred income taxes................... 5,197 5,197
Prepaid expenses and other.............. 318 217 535
-------- -------- ---------
Total current assets................ 45,341 26,181 71,522
INVESTMENT IN SUBSIDIARIES AND
INTERCOMPANY BALANCES................... $(158,803) 250,197 16,338 $(107,732)
PROPERTY, PLANT AND
EQUIPMENT--Net.......................... 10,866 14,163 25,029
INTANGIBLE ASSETS--Net.................... 5,903 51,054 56,957
DEBT ISSUE COSTS--Net..................... 286 9,114 9,400
DEFERRED INCOME TAXES AND OTHER........... 5,925 5,925
--------- -------- -------- --------- ---------
TOTAL ASSETS.............................. $(158,517) $327,346 $107,736 $(107,732) $ 168,833
========= ======== ======== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Current portion of long-term
liabilities........................... $ 10,953 $ 10,953
Accounts payable........................ 3,788 $ 1,884 5,672
Accrued liabilities..................... 10,566 4,894 15,460
-------- -------- ---------
Total current liabilities........... 25,307 6,778 32,085
LONG-TERM DEBT--Less current portion...... $ 24,640 226,008 250,648
OTHER NON-CURRENT LIABILITIES............. 1,701 1,437 3,138
--------- -------- -------- ---------
Total liabilities................... 24,640 253,016 8,215 285,871
--------- -------- -------- ---------
REDEEMABLE COMMON STOCK................... 1,371 1,371
--------- ---------
STOCKHOLDERS' EQUITY (DEFICIENCY)......... (184,528) 74,330 99,521 $(107,732) (118,409)
--------- -------- -------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)............................ $(158,517) $327,346 $107,736 $(107,732) $ 168,833
========= ======== ======== ========= =========
</Table>
F-24
<Page>
TRANSDIGM HOLDING COMPANY
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2001
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
SUBSIDIARY TOTAL
HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED
--------- --------- ---------- ------------ ------------
NET SALES................................. $108,650 $92,123 $200,773
COST OF SALES............................. 61,554 56,971 118,525
-------- ------- --------
GROSS PROFIT.............................. 47,096 35,152 82,248
-------- ------- --------
OPERATING EXPENSES:
Selling and administrative.............. 14,867 5,802 20,669
Amortization of intangibles............. 480 2,486 2,966
Research and development................ 1,983 960 2,943
-------- ------- --------
Total operating expenses............ 17,330 9,248 26,578
-------- ------- --------
INCOME FROM OPERATIONS.................... 29,766 25,904 55,670
INTEREST EXPENSE--NET..................... $ 2,988 24,656 4,282 31,926
------- -------- ------- --------
INCOME (LOSS) BEFORE INCOME TAXES......... (2,988) 5,110 21,622 23,744
INCOME TAX PROVISION (BENEFIT)............ (1,181) 2,020 8,547 9,386
------- -------- ------- ------- --------
NET INCOME (LOSS)......................... $(1,807) $ 3,090 $13,075 $ -- $ 14,358
======= ======== ======= ======= ========
</Table>
F-25
<Page>
TRANSDIGM HOLDING COMPANY
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
SUBSIDIARY TOTAL
HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED
--------- --------- ---------- ------------ ------------
NET SALES........................... $88,824 $61,633 $150,457
COST OF SALES....................... 46,125 36,068 82,193
------- ------- --------
GROSS PROFIT........................ 42,699 25,565 68,264
------- ------- --------
OPERATING EXPENSES:
Selling and administrative........ 12,120 4,679 16,799
Amortization of intangibles....... 450 1,393 1,843
Research and development.......... 1,550 758 2,308
------- ------- --------
Total operating expenses...... 14,120 6,830 20,950
------- ------- --------
INCOME FROM OPERATIONS.............. 28,579 18,735 47,314
INTEREST EXPENSE -- NET............. $ 2,670 25,925 (32) 28,563
------- ------- ------- --------
INCOME (LOSS) BEFORE INCOME TAXES... (2,670) 2,654 18,767 18,751
INCOME TAX PROVISION (BENEFIT)...... (1,135) 1,131 7,976 7,972
------- ------- ------- ------- --------
NET INCOME (LOSS)................... $(1,535) $ 1,523 $10,791 $ -- $ 10,779
======= ======= ======= ======= ========
</Table>
F-26
<Page>
TRANSDIGM HOLDING COMPANY
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
SUBSIDIARY TOTAL
HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED
--------- --------- ---------- ------------ ------------
NET SALES................................. $ 95,010 $35,808 $130,818
COST OF SALES............................. 49,008 20,943 69,951
-------- ------- --------
GROSS PROFIT.............................. 46,002 14,865 60,867
-------- ------- --------
OPERATING EXPENSES:
Selling and administrative.............. 10,540 3,080 13,620
Amortization of intangibles............. 1,072 991 2,063
Research and development................ 1,423 716 2,139
Merger expenses......................... $ 40,012 40,012
-------- -------- ------- --------
Total operating expenses............ 40,012 13,035 4,787 57,834
-------- -------- ------- --------
INCOME FROM OPERATIONS.................... (40,012) 32,967 10,078 3,033
INTEREST EXPENSE -- NET................... 2,025 20,676 21 22,722
-------- -------- ------- --------
INCOME (LOSS) BEFORE INCOME TAXES......... (42,037) 12,291 10,057 (19,689)
INCOME TAX PROVISION (BENEFIT)............ (11,711) 4,916 4,023 (2,772)
-------- -------- ------- ------- --------
NET INCOME (LOSS)......................... $(30,326) $ 7,375 $ 6,034 $ -- $(16,917)
======== ======== ======= ======= ========
</Table>
F-27
<Page>
TRANSDIGM HOLDING COMPANY
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 2001
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
SUBSIDIARY TOTAL
HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED
--------- --------- ---------- ------------ ------------
OPERATING ACTIVITIES:
Net income (loss)....................... $ (1,807) $ 3,090 $13,075 $ 14,358
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities.................. 2,988 5,869 (454) 8,403
--------- --------- ------- ---------
Net cash provided by operating
activities............................ 1,181 8,959 12,621 22,761
--------- --------- ------- ---------
INVESTING ACTIVITIES:
Capital expenditures.................... (919) (3,567) (4,486)
Business acquisitions................... (169,102) (169,102)
--------- --------- ------- ---------
Net cash used in investing activities... (170,021) (3,567) (173,588)
--------- --------- ------- ---------
FINANCING ACTIVITIES:
Changes in intercompany activities...... (15,309) 25,191 (9,882)
Borrowings under credit facility........ 157,560 157,560
Proceeds from issuance of cumulative
redeemable preferred stock and
warrants.............................. 14,267 14,267
Repayment of amounts borrowed under
credit facility....................... (13,949) (13,949)
Purchase of common stock, including
redeemable common stock............... (139) (139)
--------- --------- ------- ---------
Net cash provided by (used in) financing
activities............................ (1,181) 168,802 (9,882) 157,739
--------- --------- ------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................. 7,740 (828) 6,912
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR.................................... 4,554 (245) 4,309
--------- --------- ------- ------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR.... $ -- $ 12,294 $(1,073) $ -- $ 11,221
========= ========= ======= ======= =========
</Table>
F-28
<Page>
TRANSDIGM HOLDING COMPANY
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
SUBSIDIARY TOTAL
HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED
--------- --------- ---------- ------------ ------------
OPERATING ACTIVITIES:
Net income (loss)....................... $(1,535) $ 1,523 $10,791 $10,779
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities.................. 2,670 3,431 (575) 5,526
------- ------- ------- -------
Net cash provided by operating
activities............................ 1,135 4,954 10,216 16,305
------- ------- ------- -------
INVESTING ACTIVITIES:
Capital expenditures.................... (1,781) (2,587) (4,368)
Business acquisitions................... (752) (752)
------- ------- ------- -------
Net cash used in investing activities... (2,533) (2,587) (5,120)
------- ------- ------- -------
FINANCING ACTIVITIES:
Changes in intercompany activities...... 875 7,510 (8,385)
Proceeds from exercise of stock options
and issuance of common stock,
including redeemable common stock..... 295 295
Repayment of amounts borrowed under
credit facility....................... (7,595) (7,595)
Purchase of common stock, including
redeemable common stock............... (2,305) (2,305)
------- ------- ------- ------- -------
Net cash used in financing activities... (1,135) (85) (8,385) (9,605)
------- ------- ------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................. 2,336 (756) 1,580
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR.................................... 2,218 511 2,729
------- ------- ------- ------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR.... $ -- $ 4,554 $ (245) $ -- $ 4,309
======= ======= ======= ======= =======
</Table>
F-29
<Page>
TRANSDIGM HOLDING COMPANY
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
SUBSIDIARY TOTAL
HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED
--------- --------- ---------- ------------ ------------
OPERATING ACTIVITIES:
Net income (loss)......................... $(30,326) $ 7,375 $ 6,034 $ (16,917)
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities.............................. 2,025 (17) (1,310) 698
--------- --------- ------- ---------
Net cash provided by (used in) operating
activities.............................. (28,301) 7,358 4,724 (16,219)
--------- --------- ------- ---------
INVESTING ACTIVITIES:
Capital expenditures...................... (1,851) (1,192) (3,043)
Acquisition of business................... (41,556) (41,556)
--------- --------- ------- ---------
Net cash used in investing activities..... (43,407) (1,192) (44,599)
--------- --------- ------- ---------
FINANCING ACTIVITIES:
Changes in intercompany activities........ 171,568 (168,535) (3,033)
Borrowings under credit facility.......... 118,639 118,639
Proceeds from subordinated notes.......... 118,132 118,132
Proceeds from exercise of stock options
and issuance of common stock, including
redeemable common stock................. 100,998 100,998
Proceeds from Holdings PIK Notes and
common stock............................ 19,659 19,659
Payment of consideration in
recapitalization........................ (263,896) (263,896)
Repayment of amounts borrowed under credit
facility................................ (49,443) (49,443)
Purchase of common stock, including
redeemable common stock................. (28) (28)
--------- --------- ------- ---------
Net cash provided by (used in) financing
activities.............................. 34,094 15,720 (5,753) 44,061
--------- --------- ------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (17,256) 499 (16,757)
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR...................................... 19,474 12 19,486
--------- --------- ------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR...... $ -- $ 2,218 $ 511 $ -- $ 2,729
========= ========= ======= ====== =========
</Table>
20. SUBSEQUENT EVENTS
On June 7, 2002, the Company issued $75 million of additional 10 3/8% Senior
Subordinated Notes, due December 1, 2008, at a premium of approximately
$2 million. The proceeds of the notes, net of fees and expenses of approximately
$3 million, were used to repay $74 million of the borrowings outstanding under
the Company's Senior credit facility ($33 million under the Tranche A facility,
$19.5 million under the Tranche B facility, and $21.5 million under the Tranche
C facility).
In conjunction with the issuance of the Senior Subordinated Notes,
TransDigm's Senior credit facility was amended to, among other things, permit
TransDigm to: (1) incur up to $150 million of additional bank borrowings or
subordinated debt to finance acquisitions or pay dividends to Holdings
F-30
<Page>
TRANSDIGM HOLDING COMPANY
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
(IN THOUSANDS OF DOLLARS) (CONTINUED)
20. SUBSEQUENT EVENTS (CONTINUED)
to retire the Holdings PIK Notes and (2) make future acquisitions as long as the
aggregate purchase price of all such acquisitions does not exceed $225 million
and certain other conditions are met. The amendment also modified certain
financial covenants and waived any mandatory prepayment of amounts owed under
the Senior credit facility from excess cash flow, if any, generated by TransDigm
during fiscal 2002.
* * * * * *
F-31
<Page>
TRANSDIGM HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
MARCH 30,
2002 SEPTEMBER 30,
(UNAUDITED) 2001
----------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 28,975 $ 11,221
Accounts receivable, net.................................. 32,536 40,215
Inventories (Note 3)...................................... 49,600 47,872
Deferred income taxes..................................... 9,749 9,749
Prepaid expenses and other................................ 1,009 447
---------- ----------
Total current assets.................................... 121,869 109,504
PROPERTY, PLANT AND EQUIPMENT--Net.......................... 39,677 42,095
INTANGIBLE ASSETS--Net...................................... 201,311 203,858
DEBT ISSUE COSTS--Net....................................... 11,230 12,494
DEFERRED INCOME TAXES AND OTHER............................. 4,942 4,947
---------- ----------
TOTAL....................................................... $ 379,029 $ 372,898
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Current portion of long-term liabilities.................. $ 18,965 $ 15,822
Accounts payable.......................................... 7,861 9,181
Accrued liabilities....................................... 30,501 28,829
---------- ----------
Total current liabilities............................... 57,327 53,832
LONG-TERM DEBT--Less current portion........................ 391,839 399,587
OTHER NON-CURRENT LIABILITIES............................... 6,143 8,033
---------- ----------
Total liabilities....................................... 455,309 461,452
---------- ----------
CUMULATIVE REDEEMABLE PREFERRED STOCK....................... 14,558 13,222
REDEEMABLE COMMON STOCK (Note 4)............................ 1,701 1,612
STOCKHOLDERS' DEFICIENCY:
Common stock.............................................. 102,080 102,080
Warrants.................................................. 1,934 1,934
Retained deficit.......................................... (196,052) (206,901)
Accumulated other comprehensive loss...................... (501) (501)
---------- ----------
Total stockholders' deficiency.......................... (92,539) (103,388)
---------- ----------
TOTAL....................................................... $ 379,029 $ 372,898
========== ==========
</Table>
See notes to consolidated financial statements.
F-32
<Page>
TRANSDIGM HOLDING COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN AND TWENTY-SIX WEEK PERIODS ENDED
MARCH 30, 2002 AND MARCH 31, 2001
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<Table>
<Caption>
THIRTEEN WEEK TWENTY-SIX WEEK
PERIODS ENDED PERIODS ENDED
--------------------- ---------------------
MARCH 30, MARCH 31, MARCH 30, MARCH 31,
2002 2001 2002 2001
--------- --------- --------- ---------
NET SALES................................................ $ 59,888 $ 42,084 $117,613 $ 77,864
COST OF SALES (Including charge of $156 during the
periods ending March 31, 2001 due to inventory purchase
accounting adjustments)................................ 32,450 22,827 64,148 42,820
-------- -------- -------- --------
GROSS PROFIT............................................. 27,438 19,257 53,465 35,044
-------- -------- -------- --------
OPERATING EXPENSES:
Selling and administrative............................. 5,135 4,283 10,475 8,539
Amortization of intangibles............................ 1,774 420 3,167 839
Research and development............................... 692 688 1,372 1,201
-------- -------- -------- --------
Total operating expenses............................. 7,601 5,391 15,014 10,579
-------- -------- -------- --------
INCOME FROM OPERATIONS................................... 19,837 13,866 38,451 24,465
INTEREST EXPENSE--Net.................................... 8,281 7,250 16,885 14,281
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES............................... 11,556 6,616 21,566 10,184
INCOME TAX PROVISION..................................... 4,970 2,687 9,277 4,269
-------- -------- -------- --------
NET INCOME............................................... $ 6,586 $ 3,929 $ 12,289 $ 5,915
======== ======== ======== ========
</Table>
See notes to consolidated financial statements.
F-33
<Page>
TRANSDIGM HOLDING COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE TWENTY-SIX WEEK PERIOD ENDED MARCH 30, 2002
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<Table>
<Caption>
ACCUMULATED
OTHER
COMMON RETAINED COMPREHENSIVE
STOCK WARRANTS DEFICIT LOSS TOTAL
-------- -------- --------- ------------- ---------
BALANCE, OCTOBER 1, 2001............... $102,080 $1,934 $(206,901) $(501) $(103,388)
Net income............................. 12,289 12,289
Accretion of redeemable common stock... (104) (104)
Cumulative redeemable preferred stock:
Dividends accrued.................... (1,200) (1,200)
Amortization of original issue
discount........................... (136) (136)
-------- ------ --------- ----- ---------
BALANCE, MARCH 30, 2002................ $102,080 $1,934 $(196,052) $(501) $ (92,539)
======== ====== ========= ===== =========
</Table>
See notes to consolidated financial statements.
F-34
<Page>
TRANSDIGM HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEK PERIODS ENDED
MARCH 30, 2002 AND MARCH 31, 2001
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<Table>
<Caption>
TWENTY-SIX WEEK
PERIODS ENDED
---------------------
MARCH 30, MARCH 31,
2002 2001
--------- ---------
OPERATING ACTIVITIES:
Net income................................................ $12,289 $ 5,915
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation............................................ 3,474 2,510
Amortization of intangibles............................. 3,167 839
Amortization of debt issue costs........................ 1,264 804
Interest deferral on Holdings PIK Notes................. 1,626 1,452
Changes in assets and liabilities, net of effects from
acquisition of business:
Accounts receivable................................... 7,679 2,890
Inventories........................................... (1,728) (2,740)
Other assets.......................................... (1,177) 1,233
Accounts payable...................................... (1,320) 617
Accrued liabilities and other......................... 182 (1,283)
------- -------
Net cash provided by operating activities............... 25,456 12,237
------- -------
INVESTING ACTIVITIES:
Capital expenditures...................................... (1,056) (1,691)
Acquisition of product line (Note 5)...................... -- (6,640)
------- -------
Net cash used in investing activities................... (1,056) (8,331)
------- -------
FINANCING ACTIVITIES:
Net borrowings under revolving credit loans................. -- 4,000
Repayment of term loans..................................... (6,631) (5,477)
Purchase of capital stock................................... (15) (139)
------- -------
Net cash used in financing activities................... (6,646) (1,616)
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS....................... 17,754 2,290
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 11,221 4,309
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $28,975 $ 6,599
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest.................. $13,891 $12,074
======= =======
Cash paid during the period for income taxes.............. $ 8,574 $ 2,710
======= =======
</Table>
See notes to consolidated financial statements.
F-35
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN AND TWENTY-SIX WEEK PERIODS ENDED
MARCH 30, 2002 AND MARCH 31, 2001
1. DESCRIPTION OF THE BUSINESS
TransDigm Holding Company ("Holdings"), through its wholly-owned operating
subsidiary, TransDigm Inc. ("TransDigm"), is a leading supplier of highly
engineered power system and airframe components servicing predominantly the
aerospace industry. TransDigm, which includes the AeroControlex and AdelWiggins
Groups, along with its wholly-owned subsidiaries, Champion Aerospace Inc.
("Champion"), Marathon Power Technologies Company ("Marathon"), ZMP, Inc.
("ZMP"), and Adams Rite Aerospace, Inc. ("Adams Rite") (collectively, the
"Company") offers a broad line of proprietary aerospace components. Major
product offerings in the Power System Components category include ignition
system components, fuel and lube pumps, mechanical controls, and batteries and
chargers. Major product offerings in the Airframe System Components category
include engineered connectors, engineered latches, and lavatory hardware and
components.
2. UNAUDITED INTERIM FINANCIAL INFORMATION
Except for the September 30, 2001 consolidated balance sheet, which was
derived from the Company's audited financial statements, the financial
information included herein is unaudited; however, the information reflects all
adjustments (consisting solely of normal recurring adjustments) that are, in the
opinion of management, necessary for a fair presentation of the Company's
financial position and results of operations and cash flows for the interim
periods presented. The results of operations for the thirteen and twenty-six
week periods ended March 30, 2002 are not necessarily indicative of the results
to be expected for the full year.
3. INVENTORIES
Inventories are stated at the lower of cost or market. Cost of inventories
is determined by the average cost and the first-in, first-out (FIFO) methods.
Inventories consist of the following (in thousands):
<Table>
<Caption>
MARCH 30, SEPTEMBER 30,
2002 2001
--------- -------------
Work-in-progress and finished goods......................... $32,060 $36,787
Raw materials and purchased component parts................. 24,920 18,380
------- -------
Total..................................................... 56,980 55,167
Reserve for excess and obsolete inventory................... (7,380) (7,295)
------- -------
Inventories--net............................................ $49,600 $47,872
======= =======
</Table>
4. CONTINGENCIES
ENVIRONMENTAL--The Company has been addressing contaminated soil and
groundwater beneath its facility in Waco, Texas. Although there can be no
assurance that material expenditures will not be required in the future to
address currently unidentified contamination or to satisfy further requirements
of the Texas Natural Resources Conservation Commission ("TNRCC"), the Company
believes that the current soil and groundwater remediation at the Waco facility
will not require the incurrence of material expenditures.
F-36
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN AND TWENTY-SIX WEEK PERIODS ENDED
MARCH 30, 2002 AND MARCH 31, 2001 (CONTINUED)
4. CONTINGENCIES (CONTINUED)
In connection with the Company's acquisition of Marathon, a $2.0 million
escrow was created to cover the cost of remediation that TNRCC might require at
the facility. During September 1998, the former owner of Marathon filed a
lawsuit against the Company to release the environmental escrow alleging that
the Company had violated the requirements of the stock purchase agreement
relating to the investigation of the presence of certain contaminants at the
Waco, Texas facility. The Company has filed counter claims against the seller
and the ultimate outcome of this matter cannot presently be determined.
PUT OPTION--During the thirteen-week period ended March 30, 2002, a put
option ("put") became exercisable enabling the holder to require the Company to
purchase up to 80% of his Common Stock (including shares acquired through the
exercise of stock options and held at least six months) at fair value, subject
to certain restrictions under the Company's long-term debt agreements and his
continued service as Chairman of the Board of Holdings and TransDigm). As of
March 30, 2002, there were no outstanding shares of Common Stock subject to the
put; however, 8,114 shares of Common Stock that can be acquired under
exercisable stock options at March 30, 2002 are subject to the put. The
estimated fair value of such shares, net of the exercise price of the related
stock options, totaled approximately $8.6 million at March 30, 2002. An
additional 2,475 shares of Common Stock that are issuable in the future if
certain stock options become exercisable upon the occurrence of certain events
(change in control, achievement of certain earnings targets, etc.) or certain
specified dates in the option agreements are also subject to the put. The
estimated fair value of such shares, net of the exercise price of the related
stock options, totaled approximately $1.1 million at March 30, 2002.
OTHER--During the ordinary course of business, the Company is from time to
time threatened with, or may become a party to, legal actions and other
proceedings. While the Company is currently involved in some legal proceedings,
it believes the results of these proceedings will not have a material effect on
its financial condition, results of operations, or cash flows. The Company
believes that its potential exposure to such legal actions s adequately covered
by its aviation product and general liability insurance.
5. ACQUISITION
CHAMPION AEROSPACE--Through a newly-formed, wholly-owned subsidiary,
Champion Aerospace Inc., TransDigm acquired substantially all of the assets and
certain liabilities of the Champion Aviation Products ("Champion Aerospace")
business on May 31, 2001 (the "Acquisition") from Federal Mogul Ignition Company
("Federal-Mogul"), a wholly-owned subsidiary of Federal-Mogul Corporation, for
approximately $160.1 million in cash, subject to adjustment based on the level
of acquired working capital as of the closing of the Acquisition. Champion
Aerospace is engaged in researching, designing, developing, engineering,
manufacturing, marketing, distributing and selling ignition systems and related
components and other products (including, without limitation, igniters, spark
plugs, and exciters) for turbine and piston aircraft applications as well as
other aerospace engine and industrial applications.
The purchase price consideration of $160.1 million in cash and $2.2 million
of costs associated with the Acquisition was funded through:
(1) $147.6 million of new borrowings under the Company's existing Senior Credit
Facility, (2) $14.3 million received (net of fees of $.7 million) from the
issuance
F-37
<Page>
TRANSDIGM HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN AND TWENTY-SIX WEEK PERIODS ENDED
MARCH 30, 2002 AND MARCH 31, 2001 (CONTINUED)
5. ACQUISITION (CONTINUED)
of $15 million of Holdings' 16 percent Cumulative Redeemable Preferred Stock and
warrants to purchase 1,381.87 shares of Holdings' common stock, and (3) the use
of $.4 million of the Company's existing cash balances. TransDigm also borrowed
an additional $15 million under the Senior Credit Facility to pay $5 million of
debt issuance costs and provide $10 million of working capital for future
operations.
Approximately $2.6 million of the additional borrowings were obtained under
the Company's revolving credit line, $45 million was added to the Company's
existing Tranche B Facility, and $115 million was borrowed in the form of a new
Tranche C Facility maturing in May 2007 under the Senior Credit Facility.
The Company accounted for the Acquisition as a purchase and included the
results of operations of the acquired business in its fiscal 2001 consolidated
financial statements from the effective date of the Acquisition. The purchase
price was allocated based on a preliminary determination, which is subject to
adjustment, of estimated fair values at the date of the Acquisition and resulted
in goodwill of approximately $134 million being recorded on the Company's
consolidated balance sheet. This goodwill is being amortized on a straight-line
basis over forty years.
The following table summarizes the unaudited, consolidated pro forma results
of operations of the Company, as if the Acquisition had occurred at the
beginning of the twenty-six week period ended March 31, 2001 (in thousands):
<Table>
Net sales................................................... $113,037
Operating income............................................ $ 33,087
Net income.................................................. $ 8,188
</Table>
This pro forma information is not necessarily indicative of the results that
actually would have been obtained if the operations had been combined as of the
beginning of the period presented and is not intended to be a projection of
future results.
6. SUPPLEMENTAL GUARANTOR INFORMATION
The Company's Senior Subordinated Notes, including the additional notes
issued on June 7, 2002 (see Note 7) are unconditionally guaranteed by Holdings
and each of TransDigm's domestic subsidiaries on a senior subordinated basis.
The Holdings guarantee of the Senior Subordinated Notes is subordinated to
Holdings' repayment of the Holdings PIK Notes, as well as the Holdings'
guarantee of TransDigm's borrowings under its Senior credit facility. The
guarantees of The Senior Subordinated Notes by TransDigm's domestic subsidiaries
is subordinated to the subsidiaries' guarantee of TransDigm's Senior credit
facility. The following supplemental consolidating condensed financial
information presents the balance sheets of the Company as of March 30, 2002 and
September 30, 2001 and its statements of income and cash flows for the
twenty-six week periods ended March 30, 2002 and March 31, 2001.
F-38
<Page>
TRANSDIGM HOLDING COMPANY
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF MARCH 30, 2002
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
SUBSIDIARY TOTAL
HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED
--------- --------- ---------- ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 30,416 $ (1,441) $ 28,975
Accounts receivable, net........... 14,960 17,576 32,536
Inventories........................ 19,580 30,020 49,600
Deferred income taxes.............. 9,749 9,749
Prepaid expenses and other......... 153 856 1,009
-------- --------- --------
Total current assets............. 74,858 47,011 121,869
INVESTMENT IN SUBSIDIARIES AND
INTERCOMPANY BALANCES.............. $(144,725) 396,438 (141,545) $(110,168)
PROPERTY, PLANT AND EQUIPMENT--Net... 10,057 29,620 39,677
INTANGIBLE ASSETS--Net............... 19,158 182,153 201,311
DEBT ISSUE COSTS--Net................ 240 10,990 11,230
DEFERRED INCOME TAXES AND OTHER...... 4,942 4,942
--------- -------- --------- --------- --------
TOTAL................................ $(144,485) $516,443 $ 117,239 $(110,168) $379,029
========= ======== ========= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Current portion of long-term
liabilities...................... $ 18,965 $ 18,965
Accounts payable................... 4,644 $ 3,217 7,861
Accrued liabilities................ 18,525 11,976 30,501
-------- --------- --------
Total current liabilities........ 42,134 15,193 57,327
LONG-TERM DEBT--Less current
portion............................ $ 29,223 362,616 391,839
OTHER NON-CURRENT LIABILITIES........ 4,781 1,362 6,143
--------- -------- --------- --------
Total liabilities.............. 29,223 409,531 16,555 455,309
CUMULATIVE REDEEMABLE PREFERRED
STOCK.............................. 14,558 14,558
REDEEMABLE COMMON STOCK.............. 1,701 1,701
STOCKHOLDERS' EQUITY (DEFICIENCY).... (189,967) 106,912 100,684 $(110,168) (92,539)
--------- -------- --------- --------- --------
TOTAL................................ $(144,485) $516,443 $ 117,239 $(110,168) $379,029
========= ======== ========= ========= ========
</Table>
F-39
<Page>
TRANSDIGM HOLDING COMPANY
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 30, 2001
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
SUBSIDIARY TOTAL
HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED
--------- --------- ---------- ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........... $ 12,294 $ (1,073) $ 11,221
Accounts receivable -- net.......... 17,481 22,734 40,215
Inventories......................... 19,353 28,519 47,872
Deferred income taxes............... 9,749 9,749
Prepaid expenses and other.......... 132 315 447
-------- -------- ---------
Total current assets.............. 59,009 50,495 109,504
INVESTMENTS IN SUBSIDIARIES AND
INTERCOMPANY BALANCES............... $(144,774) 395,987 (141,163) $(110,050)
PROPERTY, PLANT AND EQUIPMENT --
Net................................. 10,954 31,141 42,095
INTANGIBLE ASSETS -- Net.............. 19,384 184,474 203,858
DEBT ISSUE COSTS -- Net............... 255 12,239 12,494
DEFERRED INCOME TAXES AND OTHER....... 4,947 4,947
--------- -------- -------- --------- ---------
TOTAL ASSETS.......................... $(144,519) $502,520 $124,947 $(110,050) $ 372,898
========= ======== ======== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Current portion of long-term
liabilities....................... $ 15,822 $ 15,822
Accounts payable.................... 4,909 $ 4,272 9,181
Accrued liabilities................. 17,836 10,993 28,829
-------- -------- ---------
Total current liabilities......... 38,567 15,265 53,832
LONG-TERM DEBT -- Less current
portion............................. $ 27,597 371,990 399,587
OTHER NON-CURRENT LIABILITIES......... 6,671 1,362 8,033
--------- -------- -------- ---------
Total liabilities................. 27,597 417,228 16,627 461,452
CUMULATIVE REDEEMABLE PREFERRED
STOCK............................... 13,222 13,222
REDEEMABLE COMMON STOCK............... 1,612 1,612
TOTAL STOCKHOLDERS' EQUITY
(DEFICIENCY)........................ (186,950) 85,292 108,320 $(110,050) (103,388)
--------- -------- -------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)................. $(144,519) $502,520 $124,947 $(110,050) $ 372,898
========= ======== ======== ========= =========
</Table>
F-40
<Page>
TRANSDIGM HOLDING COMPANY
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE TWENTY-SIX WEEK PERIOD ENDED MARCH 30, 2002
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
SUBSIDIARY TOTAL
HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED
--------- --------- ---------- ------------ ------------
NET SALES........................... $56,422 $61,191 $117,613
COST OF SALES....................... 28,676 35,472 64,148
------- ------- --------
GROSS PROFIT........................ 27,746 25,719 53,465
------- ------- --------
OPERATING EXPENSES:
Selling and administrative........ 6,650 3,825 10,475
Amortization of intangibles....... 667 2,500 3,167
Research and development.......... 826 546 1,372
------- ------- --------
Total operating expenses........ 8,143 6,871 15,014
------- ------- --------
INCOME FROM OPERATIONS.............. 19,603 18,848 38,451
INTEREST EXPENSE--Net............... $ 1,641 10,188 5,056 16,885
------- ------- ------- --------
INCOME (LOSS) BEFORE INCOME TAXES... (1,641) 9,415 13,792 21,566
INCOME TAX PROVISION (BENEFIT)...... (706) 4,050 5,933 9,277
------- ------- ------- ------- --------
NET INCOME (LOSS)................... $ (935) $ 5,365 $ 7,859 $ -- $ 12,289
======= ======= ======= ======= ========
</Table>
F-41
<Page>
TRANSDIGM HOLDING COMPANY
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE TWENTY-SIX WEEK PERIOD ENDED MARCH 31, 2001
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
SUBSIDIARY TOTAL
HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED
--------- --------- ---------- ------------ ------------
NET SALES........................... $43,870 $33,994 $77,864
COST OF SALES....................... 23,297 19,523 42,820
------- ------- -------
GROSS PROFIT........................ 20,573 14,471 35,044
------- ------- -------
OPERATING EXPENSES:
Selling and administrative........ 6,493 2,046 8,539
Amortization of intangibles....... 839 839
Research and development.......... 818 383 1,201
------- ------- -------
Total operating expenses........ 8,150 2,429 10,579
------- ------- -------
INCOME FROM OPERATIONS.............. 12,423 15,676 24,465
INTEREST EXPENSE--Net............... $ 1,506 12,611 164 14,281
------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES... (1,506) (188) 11,878 10,184
INCOME TAX PROVISION (BENEFIT)...... (631) (79) 4,979 4,269
------- ------- ------- ------ -------
NET INCOME (LOSS)................... $ (875) $ (109) $ 6,899 $ -- $ 5,915
======= ======= ======= ====== =======
</Table>
F-42
<Page>
TRANSDIGM HOLDING COMPANY
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE TWENTY-SIX WEEK PERIOD ENDED MARCH 30, 2002
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
SUBSIDIARY TOTAL
HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED
--------- --------- ---------- ------------ ------------
OPERATING ACTIVITIES:
Net income (loss)................. $ (935) $ 5,365 $ 7,859 $ 12,289
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities...................... 1,641 4,160 7,366 13,167
------ -------- -------- --------
Net cash provided by operating
activities...................... 706 9,525 15,225 25,456
------ -------- -------- --------
INVESTING ACTIVITIES--Capital
expenditures...................... (579) (477) (1,056)
------ -------- -------- --------
FINANCING ACTIVITIES:
Changes in intercompany
activities...................... (691) 15,807 (15,116)
Repayment of term loans........... (6,631) (6,631)
Purchase of capital stock......... (15) (15)
------ -------- -------- --------
Net cash provided by (used in)
financing activities............ (706) 9,176 (15,116) (6,646)
------ -------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................... 18,122 (368) 17,754
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD......................... 12,294 (1,073) 11,221
------ -------- -------- ------- --------
CASH AND CASH EQUIVALENTS, END OF
PERIOD............................ $ -- $ 30,416 $ (1,441) $ -- $ 28,975
====== ======== ======== ======= ========
</Table>
F-43
<Page>
TRANSDIGM HOLDING COMPANY
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE TWENTY-SIX WEEK PERIOD ENDED MARCH 31, 2001
(IN THOUSANDS OF DOLLARS)
<Table>
<Caption>
SUBSIDIARY TOTAL
HOLDINGS TRANSDIGM GUARANTORS ELIMINATIONS CONSOLIDATED
--------- --------- ---------- ------------ ------------
OPERATING ACTIVITIES:
Net income (loss)....................... $ (875) $ (109) $ 6,899 $ 5,915
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities.................. 1,468 4,961 (107) 6,322
------ ------- ------- -------
Net cash provided by operating
activities............................ 593 4,852 6,792 12,237
------ ------- ------- -------
INVESTING ACTIVITIES:
Capital expenditures.................... (762) (929) (1,691)
Acquisition of product line............. (6,640) (6,640)
------ ------- ------- -------
Net cash used in investing activities... (7,402) (929) (8,331)
------ ------- ------- -------
FINANCING ACTIVITIES:
Changes in intercompany activities...... (454) 7,044 (6,590)
Net borrowings under revolving credit
loans................................. 4,000 4,000
Repayment of term loans................. (5,477) (5,477)
Purchase of capital stock............... (139) (139)
------ ------- ------- -------
Net cash provided by (used in) financing
activities............................ (593) 5,567 (6,590) (1,616)
------ ------- ------- -------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................. 3,017 (727) 2,290
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD.................................. 4,554 (245) 4,309
------ ------- ------- ------ -------
CASH AND CASH EQUIVALENTS, END OF
PERIOD.................................. $ -- $ 7,571 $ (972) $ -- $ 6,599
====== ======= ======= ====== =======
</Table>
7. SUBSEQUENT EVENTS
On June 7, 2002, the Company issued $75 million of additional 10 3/8% Senior
Subordinated Notes, due December 1, 2008, at a premium of approximately
$2 million. The proceeds of the notes, net of fees and expenses of approximately
$3 million, were used to repay $74 million of the borrowings outstanding under
the Company's Senior credit facility ($33 million under the Tranche A facility,
$19.5 million under the Tranche B facility, and $21.5 million under the Tranche
C facility).
In conjunction with the issuance of the Senior Subordinated Notes,
TransDigm's Senior credit facility was amended to, among other things, permit
TransDigm to: (1) incur up to $150 million of additional bank borrowings or
subordinated debt to finance acquisitions or pay dividends to Holdings to retire
the Holdings PIK Notes and (2) make future acquisitions as long as the aggregate
purchase price of all such acquisitions does not exceed $225 million and certain
other conditions are met. The amendment also modified certain financial
covenants and waived any mandatory prepayment of amounts owed under the Senior
credit facility from excess cash flow, if any, generated by TransDigm during
fiscal 2002.
* * * * *
F-44
<Page>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of TransDigm Holding Company
We have audited the consolidated balance sheets of TransDigm Holding Company and
subsidiaries (the "Company") as of September 30, 2001 and 2000, and the related
consolidated statements of operations, changes in stockholders' equity
(deficiency) and cash flows for each of the three years in the period ended
September 30, 2001 and have issued our report thereon dated December 1, 2001
(June 7, 2002 as to Notes 19 and 20); such consolidated financial statements and
report are included in this prospectus. Our audits also included the
consolidated financial statement schedule of the Company, shown on page F-46.
This consolidated financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
/s/ DELOITTE & TOUCHE LLP
Cleveland, Ohio
December 1, 2001
F-45
<Page>
TRANSDIGM HOLDING COMPANY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
(IN THOUSANDS)
<Table>
<Caption>
COLUMN C
ADDITIONS
COLUMN B ----------------------------------------------------
BALANCE AT CHARGED TO CHAMPION
COLUMN A BEGINNING COSTS AND CHRISTIE ZMP AVIATION
DESCRIPTION OF PERIOD EXPENSES ACQUISITION ACQUISITION ACQUISITION
- ---------------------------------------------------- ---------- ---------- ----------- ----------- -----------
Year Ended September 30, 2001:
Allowance for doubtful accounts................... $ 371 $ 839
Reserve for excess and and obsolete inventory..... 6,431 504 $ 841
Sales returns and repairs......................... 1,467 599 1,676
Environmental..................................... 47
Year Ended September 30, 2000:
Allowance for doubtful accounts................... 441 60 $ 20
Reserve for excess and and obsolete inventory..... 7,110 684 100
Sales returns and repairs......................... 1,841 (267) 100
Environmental..................................... 157 35 17
Year Ended September 30, 1999:
Allowance for doubtful accounts................... 265 35 $ 150
Reserve for excess and and obsolete inventory..... 4,335 (437) 2,583
Sales returns and repairs......................... 1,391 392 828
Environmental..................................... 280 (42)
<Caption>
COLUMN C
ADDITIONS
----------- COLUMN D COLUMN E
DEDUCTIONS BALANCE
COLUMN A HONEYWELL FROM AT END OF
DESCRIPTION ACQUISITION RESERVE (1) PERIOD
- ---------------------------------------------------- ----------- ----------- ---------
Year Ended September 30, 2001:
Allowance for doubtful accounts................... $ 54 $1,156
Reserve for excess and and obsolete inventory..... $ 350 831 7,295
Sales returns and repairs......................... 839 2,903
Environmental..................................... 14 33
Year Ended September 30, 2000:
Allowance for doubtful accounts................... 150 371
Reserve for excess and and obsolete inventory..... 1,463 6,431
Sales returns and repairs......................... 207 1,467
Environmental..................................... 162 47
Year Ended September 30, 1999:
Allowance for doubtful accounts................... 9 441
Reserve for excess and and obsolete inventory..... (629) 7,110
Sales returns and repairs......................... 770 1,841
Environmental..................................... 81 157
</Table>
- ------------------------
(1) For the allowance for doubtful accounts and reserve for excess and obsolete
inventory, the amounts in this column represent charge-offs net of
recoveries. For the sales returns and repairs and environmental accrued
liabilities, the amounts primarily represent expenditures charged against
liabilities.
F-46
<Page>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Federal-Mogul Corporation:
We have audited the accompanying balance sheets of Federal-Mogul
Aviation, Inc. as of December 31, 2000 and 1999 and the related statements of
operations and cash flows for the years then ended, the period from October 10,
1998 through December 31, 1998 and for the Aviation Division of the Cooper
Automotive Division of Cooper Industries (the Predecessor) for the period from
January 1, 1998 through October 9, 1998. These financial statements are the
responsibility of the respective Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Federal-Mogul
Aviation, Inc. at December 31, 2000 and 1999 and the results of its operations
and its cash flows for the years then ended, the period from October 10, 1998
through December 31, 1998 and for the Predecessor for the period from
January 1, 1998 through October 9, 1998, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Detroit, Michigan
March 1, 2001, except for Note 7, as to which the date is
May 31, 2001
F-47
<Page>
FEDERAL-MOGUL AVIATION, INC.
STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS)
<Table>
<Caption>
PREDECESSOR
YEAR ENDED -----------
DECEMBER 31, OCTOBER 10- JANUARY 1-
------------------- DECEMBER 31, OCTOBER 9,
2000 1999 1998 1998
-------- -------- ------------ -----------
Net sales.......................................... $68,616 $64,584 $13,628 $47,034
Cost of products sold.............................. 41,392 38,977 8,641 30,298
Selling, general and administrative expenses....... 7,146 7,228 1,380 5,446
Amortization expense............................... 2,219 2,092 289 309
Other expense, net................................. 1,986 1,858 1,618 12
------- ------- ------- -------
Earnings before income taxes..................... 15,873 14,429 1,700 10,969
Income taxes....................................... 6,875 6,278 776 4,314
------- ------- ------- -------
Net Earnings..................................... $ 8,998 $ 8,151 $ 924 $ 6,655
======= ======= ======= =======
</Table>
See accompanying Notes to Financial Statements.
F-48
<Page>
FEDERAL-MOGUL AVIATION, INC.
BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<Table>
<Caption>
DECEMBER 31,
-------------------
2000 1999
-------- --------
ASSETS
Cash........................................................ $ 1 $ 1
Other receivables........................................... 25 378
Inventories................................................. 10,805 11,454
Perishable tooling and supplies............................. 1,942 1,710
-------- --------
Total current assets...................................... 12,773 13,543
Property, plant and equipment, less accumulated
depreciation.............................................. 18,223 19,073
Goodwill, less accumulated amortization..................... 81,938 84,097
Other intangibles, less accumulated amortization............ 759 818
Other assets................................................ 6 51
-------- --------
Total Assets.............................................. $113,699 $117,582
======== ========
LIABILITIES AND NET PARENT INVESTMENT
Accounts payable............................................ $ 1,743 $ 4,598
Accrued compensation........................................ 90 125
Other accrued liabilities................................... 751 1,517
-------- --------
Total current liabilities................................... 2,584 6,240
Net parent investment....................................... 111,115 111,342
-------- --------
Total Liabilities and Net Parent Investment............... $113,699 $117,582
======== ========
</Table>
See accompanying Notes to Financial Statements.
F-49
<Page>
FEDERAL-MOGUL AVIATION, INC.
STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
<Table>
<Caption>
PREDECESSOR
-----------
YEAR ENDED OCTOBER 10- JANUARY 1-
DECEMBER 31, THROUGH THROUGH
------------------- DECEMBER 31, OCTOBER 9,
2000 1999 1998 1998
-------- -------- ------------ -----------
Cash flows from operating activities:
Net Earnings....................................... $8,998 $ 8,151 $ 924 $6,655
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation expense............................... 1,509 1,286 519 2,122
Amortization expense............................... 2,219 2,092 289 309
Changes in assets and liabilities:
Other receivables................................ 353 (378) 600 (1,618)
Inventories...................................... 649 5,120 300 (4,883)
Accounts payable and accrued liabilities......... (3,621) 660 (795) (1,624)
Other assets and liabilities, net................ (3) 523 -- 23
------ ------- ------ ------
Net cash provided by operating activities...... 10,104 17,454 1,837 984
Cash flows from investing activities:
Capital expenditures............................... (879) (799) (275) (420)
Cash flows from financing activities:
Net inter-company activity with parent............. (9,225) (16,655) (1,562) (564)
------ ------- ------ ------
Change in cash....................................... -- -- -- --
Cash at beginning of period...................... 1 1 1 1
------ ------- ------ ------
Cash at end of period............................ $ 1 $ 1 $ 1 $ 1
====== ======= ====== ======
</Table>
See accompanying Notes to Financial Statements.
F-50
<Page>
FEDERAL-MOGUL AVIATION, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying financial statements reflect the assets, liabilities and
operations of Federal-Mogul Aviation, Inc. ("Aviation"). Aviation is a wholly
owned subsidiary of Federal-Mogul Corporation ("Federal-Mogul"). Aviation was
previously an operating unit included in the Cooper Automotive Division of
Cooper Industries, Inc. ("Cooper"). Federal-Mogul purchased the automotive
divisions of Cooper, including Aviation, on October 9, 1998.
Aviation operates with complete financial and operations staff on a
decentralized basis. Its parent provides certain centralized services for
employee benefits administration, cash management, risk management, legal
services, public relations, domestic tax reporting and internal and external
audit. Its parent bills Aviation for all direct costs incurred on behalf of
Aviation. General corporate, accounting, tax, legal and other administrative
costs that are not directly attributable to the operations of Aviation have been
allocated to Aviation in the accompanying financial statements.
The accompanying financial statements are presented as if Aviation had
existed as an entity separate from its parent during the period presented and
include the assets, liabilities, revenues and expenses that are directly related
to Aviation's operations. Since the date of Federal-Mogul's acquisition of
Aviation, the financial statements include the push-down of fair value
adjustments to assets and liabilities, including goodwill, other intangible
assets and property, plant and equipment and their related amortization and
depreciation adjustments.
Because Aviation is fully integrated into its parent's worldwide cash
management system, all of its cash requirements are provided by its parent and
any excess cash generated by Aviation is transferred to its parent. Aviation
participates in Federal-Mogul's accounts receivable securitization program. On
an ongoing basis, Aviation sells certain accounts receivable to Federal-Mogul
Funding Corporation ("FMFC"), a wholly owned subsidiary of Federal-Mogul, which
then sells such receivables, without recourse, to a financial conduit. The
transfers of these receivables are charged to the net parent investment account.
Aviation does not retain any interest in these receivables and the accounts
receivable are sold at carrying value.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
INVENTORIES: Inventories are carried at cost or, if lower, net realizable
value. Prior to Federal-Mogul's acquisition of Aviation, cost was determined
using the first-in, first-out ("FIFO") method. Subsequent to Federal-Mogul's
acquisition of Aviation, cost was determined using the last-in, first-out
("LIFO") method, which approximated FIFO for all years presented.
F-51
<Page>
FEDERAL-MOGUL AVIATION, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
At December 31, inventories consisted of the following (in thousands):
<Table>
<Caption>
2000 1999
-------- --------
Raw materials............................................. $ 3,382 $ 3,067
Work-in-process........................................... 6,136 6,795
Finished goods............................................ 1,287 1,592
------- -------
Net inventories......................................... $10,805 $11,454
======= =======
</Table>
REVENUE RECOGNITION: Aviation recognizes revenues and the related customer
incentives when there is evidence of a sales agreement, the delivery of the
goods has occurred, the sales price is fixed or determinable and the ability to
collect the revenue is reasonably assured. Aviation generally records revenue
upon shipment of product to the customer, which coincides with the transfer of
title under standard commercial terms.
RESEARCH AND DEVELOPMENT COSTS: Aviation expenses research and development
costs when incurred. Research and development costs were $1.6 million and
$1.9 million for the years ended December 31, 2000 and 1999 and $1.4 million and
$0.4 million for the period from January 1, 1998 through October 9, 1998 and
October 10, 1998 through December 31, 1998, respectively.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at
Federal-Mogul's cost. Depreciation is provided over the estimated useful lives
of the related assets using the straight-line method, which in general are
depreciated over the following lives: buildings--10 to 40 years and machinery
and equipment--3 to 20 years.
At December 31, property, plant and equipment consisted of the following (in
thousands):
<Table>
<Caption>
2000 1999
-------- --------
Property, Plant and equipment:
Land.................................................... $ 110 $ 110
Buildings............................................... 9,288 8,656
Machinery and equipment................................. 11,270 11,390
Construction-in-progress................................ 869 722
------- -------
21,537 20,878
Accumulated depreciation................................ (3,314) (1,805)
------- -------
$18,223 $19,073
======= =======
</Table>
F-52
<Page>
FEDERAL-MOGUL AVIATION, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL AND OTHER INTANGIBLE ASSETS: At December 31, goodwill and other
intangible assets, which resulted from Federal-Mogul's acquisition of Aviation,
consisted of the following (in thousands):
<Table>
<Caption>
ESTIMATED
USEFUL LIFE 2000 1999
----------- -------- --------
Goodwill........................................ 40 years $86,406 $86,406
Accumulated amortization........................ (4,468) (2,309)
------- -------
Net goodwill.................................... $81,938 $84,097
======= =======
Assembled workforce............................. 15 years $ 891 $ 891
Accumulated amortization........................ (132) (73)
------- -------
Net assembled workforce......................... $ 759 $ 818
======= =======
</Table>
Intangible assets are periodically reviewed for impairment indicators. If
impairment indicators exist, an assessment of undiscounted future cash flows
related to assets held for use or fair value for assets held for sale are
evaluated accordingly. Intangible assets are amortized on a straight-line basis
over their estimated useful lives.
NET PARENT INVESTMENT: The Net Parent Investment account includes
Aviation's historical earnings, intercompany amounts, income taxes deferred and
payable, postemployment benefit liabilities and other transactions between
Aviation and its parent.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying amounts of certain
financial instruments such as other receivables and accounts payable approximate
their fair value for all years presented.
NOTE 3: NET PARENT INVESTMENT
Changes in net parent investment during the three years ended December 31,
were as follows (in thousands):
<Table>
Balance at January 1, 1998.................................. $ 42,904
Net inter-company transactions with parent................ (1,927)
Net income for period from January 1, 1998 to October 9,
1998.................................................... 6,655
--------
Balance at October 9, 1998.................................. $ 47,632
========
Federal-Mogul's initial investment in Aviation.............. $ 81,979
Net inter-company transactions with parent................ 1,290
Net income for period from October 10, 1998 to December
31, 1998................................................ 924
--------
Balance at December 31, 1998................................ 84,193
Net inter-company transactions with parent................ 18,998
Net income................................................ 8,151
--------
Balance at December 31, 1999................................ 111,342
Net inter-company transactions with parent................ (9,225)
Net income................................................ 8,998
--------
Balance at December 31, 2000................................ $111,115
========
</Table>
F-53
<Page>
FEDERAL-MOGUL AVIATION, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3: NET PARENT INVESTMENT (CONTINUED)
Intercompany transactions are principally cash transfers and non-cash
charges between Aviation and its parent.
Aviation has an inter-company loan with Federal-Mogul in the amount of
$30.5 million, which is included in the net parent investment balance at
December 31, 2000, 1999 and 1998. In 2000, 1999 and 1998 Federal-Mogul charged
interest on this balance based on the stated rate of 6.9%.
Federal-Mogul has pledged 100% of Aviation's capital stock and also provided
collateral in the form of a pledge of inventories, property, plant and
equipment, real property and intellectual properties to secure certain
outstanding debt of Federal-Mogul. In addition, Aviation has guaranteed fully
and unconditionally, on a joint and several basis, the obligation to pay
principal and interest under Federal-Mogul's Senior Credit Agreements and its
publicly traded registered debt. Such pledges and guarantees have also been made
by certain other subsidiaries of Federal-Mogul.
NOTE 4: INCOME TAXES
Aviation files a consolidated return with its parent for U.S. federal income
tax purposes. Federal income tax expense is calculated on a separate-return
basis for financial reporting purposes. A reconciliation between Aviation's
statutory federal income tax rate and its effective tax rate is summarized
below:
<Table>
<Caption>
YEAR ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, JANUARY 1, 1998 OCTOBER 10, 1998
----------------------- THROUGH THROUGH
2000 1999 OCTOBER 9, 1998 DECEMBER 31, 1998
-------- -------- --------------- -----------------
Effective tax rate reconciliation:
U.S. Federal statutory rate............ 35% 35% 35% 35%
Non-deductible goodwill................ 5 6 8 1
State and Local Taxes.................. 3 3 3 3
-- -- -- --
Effective Tax Rate..................... 43% 44% 46% 39%
== == == ==
</Table>
Deferred taxes and income taxes payable are a component of the net
investment in parent.
NOTE 5: PENSION PLANS
In 1998, prior to Federal-Mogul's acquisition of Aviation, the various
pension plans of Aviation were merged into one plan of Cooper. As such, the
related pension liabilities were recorded to net parent investment. This plan
was assumed by Federal-Mogul in its acquisition of the automotive divisions of
Cooper. This plan was required to be fully funded by Cooper prior to the
acquisition by Federal-Mogul. In 2000, Federal-Mogul consolidated all domestic
qualified defined benefit plans into one plan, the Federal Mogul Corporation
Pension Plan.
The expense charged to Aviation was $0.2 million and $0.2 million for the
years ended December 31, 2000 and 1999 and $0.3 million for the period from
January 1, 1998 through October 8, 1998. There was no expense recorded for the
period from October 9, 1998 through December 31, 1998.
At December 31, 2000 and 1999, the Federal-Mogul Corporation Pension Plan's
projected benefit obligation was $721.8 million and $345.6 million based on
discount rates of 8% and 7.75%, and the fair value of plan assets were
$852.5 million and $327.0 million, respectively.
F-54
<Page>
FEDERAL-MOGUL AVIATION, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6: CONCENTRATION OF CREDIT RISK AND OTHER
Aviation grants credit to their customers, which are primarily in the
aerospace industry. Credit risk with respect to trade receivables is generally
diversified due to the large number of entities comprising Aviation's customer
base. Aviation performs periodic credit evaluations of their customers and
generally do not require collateral.
Aviation operates in a single business segment, manufacturing primarily
engine ignition systems and related parts for the aerospace industry. Aviation
manufactures and distributes these products for use in the aerospace aftermarket
and original equipment segments of the industry. Two distributors accounted for
approximately 25% and 12%, 27% and 10%, and 31% and 11% of net sales for the
years ended December 31, 2000, 1999 and 1998, respectively. No other customer
accounted for 10% or more of revenues in 2000, 1999 or 1998. All of Aviation's
operations are conducted in the United States. Net sales to customers outside
the United States, principally to European customers, were 22%, 20%, and 22% of
the total net sales for the years ended December 31, 2000, 1999 and 1998,
respectively.
NOTE 7: SUBSEQUENT EVENT
On May 31, 2001, a corporation formed by TransDigm Inc. acquired
substantially all of the assets and assumed certain liabilities of Aviation for
approximately $160.1 million in cash. The purchase price is subject to
adjustment for changes in working capital as defined in the Asset Purchase
Agreement.
F-55
<Page>
FEDERAL-MOGUL AVIATION, INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
MARCH 31, DECEMBER 31,
2001 2000
----------- ------------
(UNAUDITED)
ASSETS
Cash...................................................... $ 1 $ 1
Other receivables......................................... 10 25
Inventories (Note 3)...................................... 12,282 10,805
Perishable tooling and supplies........................... 2,021 1,942
-------- --------
Total current assets.................................... 14,314 12,773
-------- --------
Property, plant and equipment, less accumulated
depreciation............................................ 17,881 18,223
Goodwill, less accumulated amortization................... 81,362 81,938
Other intangibles, less accumulated amortization.......... 726 759
Other assets.............................................. 6
-------- --------
TOTAL ASSETS................................................ $114,283 $113,699
======== ========
LIABILITIES AND NET PARENT INVESTMENT
Accounts payable.......................................... $ 3,410 $ 1,743
Accrued compensation...................................... 93 90
Other accrued liabilities................................. 1,205 751
-------- --------
Total current liabilities............................... 4,708 2,584
-------- --------
Net parent investment..................................... 109,575 111,115
-------- --------
TOTAL LIABILITIES AND NET PARENT INVESTMENT................. $114,283 $113,699
======== ========
</Table>
See accompanying Notes to Financial Statements.
F-56
<Page>
FEDERAL-MOGUL AVIATION, INC.
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
THIRTEEN WEEK
PERIOD ENDED
MARCH 31,
-------------------
2001 2000
-------- --------
NET SALES................................................... $18,458 $17,473
COST OF SALES............................................... 11,325 9,875
------- -------
GROSS PROFIT................................................ 7,133 7,598
------- -------
OPERATING EXPENSES:
Selling and administrative................................ 1,574 1,369
Amortization of intangibles............................... 609 449
Research and development.................................. 387 477
Federal-Mogul corporate charge............................ 318 318
------- -------
Total operating expenses................................ 2,888 2,613
------- -------
INCOME FROM OPERATIONS...................................... 4,245 4,985
INTEREST EXPENSE--NET....................................... 518 518
------- -------
INCOME BEFORE INCOME TAXES.................................. 3,727 4,467
INCOME TAX PROVISION........................................ 1,691 1,917
------- -------
NET INCOME.................................................. $ 2,036 $ 2,550
======= =======
</Table>
See accompanying Notes to Financial Statements.
F-57
<Page>
FEDERAL-MOGUL AVIATION, INC.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
THIRTEEN WEEK
PERIOD ENDED
MARCH 31,
-------------------
2001 2000
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 2,036 $ 2,550
Adjustments to reconcile to net cash provided by operating
activities:
Depreciation expense.................................... 407 435
Amortization expense.................................... 609 449
Changes in assets and liabilities:
Other receivables..................................... 15 345
Inventories........................................... (1,477) 305
Accounts payable and accrued liabilities.............. 2,124 (734)
Other assets and liabilities, net..................... (73) 44
------- -------
Net cash provided by operating activities........... 3,641 3,394
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (65) (125)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net inter-company activity with parent.................... (3,576) (3,269)
------- -------
CHANGE IN CASH.............................................. -- --
CASH, BEGINNING OF PERIOD................................... 1 1
------- -------
CASH, END OF PERIOD......................................... $ 1 $ 1
======= =======
</Table>
See accompanying Notes to Financial Statements.
F-58
<Page>
FEDERAL-MOGUL AVIATION, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2001 AND DECEMBER 31, 2000
AND FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 31, 2001 AND 2000
1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
The accompanying financial statements reflect the assets, liabilities and
operations of Federal-Mogul Aviation, Inc. ("Aviation"). Aviation is a
wholly-owned subsidiary of Federal-Mogul Corporation ("Federal-Mogul"). Aviation
was previously an operating unit included in the Cooper Automotive Division of
Cooper Industries, Inc. ("Cooper"). Federal-Mogul purchased the automotive
divisions of Cooper, including Aviation, on October 9, 1998.
Prior to the transaction described in Note 4, Aviation operated with
complete financial and operations staff on a decentralized basis. Its parent
provided certain centralized services for employee benefits administration, cash
management, risk management, legal services, public relations, domestic tax
reporting and internal and external audit. Its parent billed Aviation for all
direct costs incurred on behalf of Aviation. General corporate, accounting, tax,
legal and other administrative costs that were not directly attributable to the
operations of Aviation have been allocated to Aviation in the accompanying
financial statements.
The accompanying financial statements are presented as if Aviation had
existed as an entity separate from its parent during the period presented and
include the assets, liabilities, revenues and expenses that are directly related
to Aviation's operations. The financial statements include the push-down of fair
value adjustments resulting from Federal-Mogul's acquisition of Aviation to
Aviation's assets and liabilities, including goodwill, other intangible assets
and property, plant and equipment, as well as the related adjustments of
amortization and depreciation.
2. UNAUDITED FINANCIAL INFORMATION
The unaudited financial statements included herein reflect all adjustments
(consisting solely of normal recurring adjustments) that are, in the opinion of
management, necessary for a fair presentation of Aviation's financial position
and results of operations and cash flows for the interim periods presented in
accordance with accounting principles generally accepted in the United States of
America and with instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, the financial statements do not include all the information and
footnotes required under accounting principles generally accepted in the United
States of America for complete financial statements. The results of operations
for the thirteen week period ended March 31, 2001 are not necessarily indicative
of the results to be expected for the full year. For further information, refer
to the consolidated financial statements and footnotes included in this document
for the year ended December 31, 2000.
F-59
<Page>
FEDERAL-MOGUL AVIATION, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2001 AND DECEMBER 31, 2000
AND FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 31, 2001 AND 2000 (CONTINUED)
3. INVENTORIES
Inventories are carried at cost, or if lower, net realizable value. Cost of
inventories is determined by the first-in, first-out (FIFO) method. Inventories
consist of the following (in thousands):
<Table>
<Caption>
MARCH 31, DECEMBER 31,
2001 2000
--------- ------------
Raw materials......................................... $ 4,171 $ 3,382
Work-in-progress...................................... 6,398 6,136
Finished goods........................................ 1,713 1,287
------- -------
Inventories--net...................................... $12,282 $10,805
======= =======
</Table>
4. SUBSEQUENT EVENT
On May 31, 2001, a corporation formed by TransDigm Inc. acquired
substantially all of the assets and assumed certain liabilities of Aviation for
approximately $160.1 million in cash. The purchase price is subject to
adjustment for changes in working capital as defined in the Asset Purchase
Agreement.
F-60
<Page>
[LOGO]
TRANSDIGM INC.
OFFER TO EXCHANGE
75,000,000 PRINCIPAL AMOUNT OF ITS 10 3/8% SERIES B
SENIOR SUBORDINATED NOTES DUE 2008,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR ANY AND ALL OF ITS OUTSTANDING 10 3/8% SERIES A
SENIOR SUBORDINATED NOTES DUE 2008.
------------------
PROSPECTUS
------------------------
, 2002
<Page>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
We, Holdings, Marathon Power Technologies Company, and Champion
Aerospace Inc. are incorporated under the laws of the State of Delaware.
Section 145 of the Delaware General Corporation Law provides that a Delaware
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement in connection with specified actions, suits and
proceedings, whether civil, criminal, administrative or investigative (other
than action by or in the right of the corporation--a "derivative action"), if
they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. A similar standard is applicable in the case of derivative
actions, except that indemnification only extends to expenses (including
attorneys' fees) incurred in connection with the defense or settlement of such
action, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's certificate of
incorporation, bylaws, disinterested director vote, stockholder vote, agreement,
or otherwise.
ZMP, Inc., Adams Rite Aerospace and Christie Electric Corp. are incorporated
under the laws of the State of California. Section 317 of the California General
Corporation Law provides that a California corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, other than in certain derivative actions as
described below, by reason of the fact that he or she is or was a director,
officer, employee or other agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or was a
director, officer, employee or agent of a corporation that was a predecessor
corporation of the corporation or of another enterprise at the request of the
predecessor corporation, against expenses, including attorneys' fees, judgments,
fines, settlements and other amounts actually or reasonably incurred by such
person in connection with this action, suit or proceeding if such person acted
in good faith and in a manner he or she reasonably believed to be in the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his or her conduct was
unlawful. In the case of a derivative action, no indemnification shall be made
in respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation in the performance of his or her duty
to the corporation and its shareholders unless and only to the extent that the
court in which this action or suit is or was pending shall determine that, in
view of all of the circumstances of the case, such person is fairly and
reasonably entitled to indemnify for these expenses which this court shall deem
proper. Section 317 further provides that to the extent that this director,
officer, employee or agent of a corporation has been successful on the merits in
defense of any action, suit or proceeding referred to above or in the defense of
any claim, issue or matter, such person shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him or her in
connection with such defense.
Our Certificate of Incorporation and by-laws and the Certificates of
Incorporation and by-laws of Holdings, Marathon Power Technologies Company, and
Champion Aerospace Inc. generally provide for the indemnification of our and
their respective officers and directors to the fullest extent permitted under
Delaware law. Similarly, the Articles of Incorporation and by-laws of
ZMP, Inc., Adams Rite Aerospace and Christie Electric Corp. generally provide
for the indemnification of their respective officers and directors to the
fullest extent permitted under California law.
II-1
<Page>
Holdings maintains an insurance policy that pays on behalf of the
co-registrants' respective directors and officers all losses for which the
directors and officers are not indemnified by the co-registrants and for which
the directors and officers are legally liability on account of claims made as a
result of any error, misstatement, misleading statement, act, omission, neglect,
or breach of duty committed, attempted, or allegedly committed or attempted, in
such person's capacity as a director or officer, or any matter claimed against
such person solely by reason of such person's service as a director or officer
(a "wrongful act"). The policy also pays on behalf of the co-registrants all
losses for which the co-registrants grant indemnification as permitted or
required by law for claims made and as a result of a wrongful act for which such
co-registrants' directors and officers are legally liable.
Holdings has agreed (1) to indemnify its Chairman of the Board and its
President and Chief Executive Officer to the fullest extent permitted under
Delaware law; (2) to advance to such persons their reasonable attorneys' fees
and expenses; and (3) to maintain Directors and Officers insurance protecting
such persons during the term of their employment, in each case subject to
certain exceptions.
ITEM 21. EXHIBITS AND FINANCIAL DATA SCHEDULES.
(A) Exhibits
The following is a list of all the exhibits filed as part of the
Registration Statement.
<Table>
<Caption>
NUMBER DESCRIPTION OF EXHIBIT
------ ------------------------------------------------------------
*2.1 Agreement and Plan of Merger, dated August 3, 1998, between
Phase II Acquisition Corp. and TransDigm Holding Company.
*2.2 Amendment One, dated November 9, 1998, to the Agreement and
Plan of Merger between Phase II Acquisition Corp. and
TransDigm Holding Company.
*2.3 Agreement and Plan of Reorganization, dated as of March 31,
1999, by and among TransDigm Inc., ARA Acquisition
Corporation, ZMP, Inc. and TCW Special Placements Fund II.
2.4 Asset Purchase Agreement, dated as of April 29, 2001, by and
between Aviation Acquisition Corporation and Federal-Mogul
Ignition Company. (Incorporated herein by reference to
Exhibit 2.1 to Holdings' Form 10-Q for the period ended
March 31, 2001). (File No. 1631079).
3.1 Restated Certificate of Incorporation, filed on May 31,
2001, of TransDigm Holding Company. (Incorporated herein by
reference to Exhibit 3.1 to Holdings' Form 8-K dated
May 31, 2001). (File No. 1658668).
3.2 Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of
Preferred Stock and Qualifications, Limitations and
Restrictions Thereof of 16% Cumulative Redeemable Preferred
Stock of TransDigm Holding Company. (Incorporated herein by
reference to Exhibit 4.1 to Holdings' Form 8-K dated
May 31, 2001). (File No. 1658668).
*3.3 Certificate of Ownership and Merger, filed on December 3,
1998, merging Phase II Acquisition Corp. with and into
TransDigm Holding Company.
*3.4 Certificate of Incorporation, filed on July 2, 1993, of
NovaDigm Acquisition, Inc. (TransDigm Inc.).
</Table>
II-2
<Page>
<Table>
<Caption>
NUMBER DESCRIPTION OF EXHIBIT
------ ------------------------------------------------------------
*3.5 Certificate of Amendment, filed on July 22, 1993, of the
Certificate of Incorporation of NovaDigm Acquisition, Inc.
(TransDigm Inc.).
*3.6 Certificate of Ownership and Merger, filed on September 13,
1993, merging IMO Aerospace Company with and into TransDigm
Inc.
*3.7 Certificate of Incorporation, filed on March 28, 1994, of
MPT Acquisition Corp. (Marathon Power Technologies Company).
*3.8 Certificate of Amendment, filed on May 18, 1994, of the
Certificate of Incorporation of MPT Acquisition Corp.
(Marathon Power Technologies Company).
*3.9 Certificate of Amendment, filed on May 24, 1994, of the
Certificate of Incorporation of MPT Acquisition Corp.
(Marathon Power Technologies Company).
*3.10 Amended and Restated Articles of Incorporation, filed on
April 23, 1999, of ZMP, Inc.
*3.11 Certificate of Ownership and Merger, filed on April 23,
1999, merging ARA Acquisition Corporation with and into
ZMP, Inc.
*3.12 Articles of Incorporation, filed on July 30, 1986, of
ARP Acquisition Corporation (Adams Rite Aerospace, Inc.).
*3.13 Certificate of Amendment, filed on September 12, 1986, of
the Articles of Incorporation of ARP Acquisition Corporation
(Adams Rite Aerospace, Inc.).
*3.14 Certificate of Amendment, filed on January 27, 1992, of the
Articles of Incorporation of Adams Rite Aerospace Products,
Inc. (Adams Rite Aerospace, Inc.).
*3.15 Certificate of Amendment, filed on December 31, 1992, of the
Articles of Incorporation of Adams Rite Aerospace Products,
Inc. (Adams Rite Aerospace, Inc.).
*3.16 Certificate of Amendment, filed on August 11, 1997, of the
Articles of Incorporation of Adams Rite Aerospace Sabre
International, Inc. (Adams Rite Aerospace, Inc.).
3.17+ Articles of Incorporation, filed on April 16, 2001, of
Aviation Acquisition Corporation (Champion Aerospace Inc.).
3.18+ Certificate of Amendment, filed on June 1, 2001, of the
Articles of Incorporation of Aviation Acquisition
Corporation (Champion Aerospace Inc.).
3.19+ Articles of Incorporation, filed on December 6, 1929, of
McColpin--Christie Electric Corporation, LTD. (Christie
Electric Corp.).
3.20+ Certificate of Amendment, filed on November 3, 1947, of the
Articles of Incorporation of McColpin--Christie Corporation,
LTD. (Christie Electric Corp.).
3.21+ Certificate of Amendment, filed on May 26, 1952, of the
Articles of Incorporation of McColpin--Christie
Corporation, LTD. (Christie Electric Corp.).
3.22+ Certificate of Amendment, filed on May 1, 1956, of the
Articles of Incorporation of McColpin--Christie Corp.
(Christie Electric Corp.)
3.23+ Certificate of Amendment, filed on May 1, 1979, of the
Articles of Incorporation of Christie Electric Corp.
3.24+ Certificate of Ownership, filed on April 16, 1985, of
Christie Electric Corp.
3.25+ Certificate of Amendment, filed on September 29, 1993, of
the Articles of Incorporation of Christie Electric Corp.
</Table>
II-3
<Page>
<Table>
<Caption>
NUMBER DESCRIPTION OF EXHIBIT
------ ------------------------------------------------------------
*3.26 Bylaws of TransDigm Holding Company.
*3.27 Bylaws of NovaDigm Acquisition, Inc. (TransDigm Inc.).
*3.28 Bylaws of MPT Acquisition Corp. (Marathon Power Technologies
Company).
*3.29 Amended and Restated Bylaws of ZMP, Inc.
*3.30 Amended and Restated Bylaws of Adams Rite Aerospace, Inc.
3.31+ Bylaws of Aviation Acquisition Corporation (Champion
Aerospace Inc.).
3.32+ Bylaws of Christie Electric Corp.
*4.1 Indenture, dated December 3, 1998, among TransDigm Inc.,
TransDigm Holding Company and Marathon Power Technologies
Company and State Street Bank and Trust Company, as trustee,
relating to the 10 3/8% Senior Subordinated Notes due 2008
and the registered 10 3/8% Senior Subordinated Notes
due 2008.
*4.2 Supplemental Indenture, dated April 23, 1999, among
ZMP, Inc. and Adams Rite Aerospace, Inc. and State Street
Bank and Trust Company, as trustee.
*4.3 Specimen Certificate of 10 3/8% Senior Subordinated Notes
due 2008 (the "old notes") (included in Exhibit 4.1 hereto).
*4.4 Specimen Certificate of the registered 10 3/8% Senior
Subordinated Notes due 2008 (the "exchange notes") (included
in Exhibit 4.1 hereto).
*4.5 Registration Rights Agreement, dated December 3, 1998, among
TransDigm Inc., TransDigm Holding Company and Marathon Power
Technologies Company and BT Alex. Brown Incorporated and
Credit Suisse First Boston Corporation.
4.6+ Registration Rights Agreement, dated June 7, 2002, among
TransDigm Inc., the Guarantors and the Initial Purchasers
(each as defined therein), relating to the $75 million of
10 3/8% Senior Subordinated Notes due 2008.
*4.7 Indenture, dated December 3, 1998, between TransDigm Holding
Company and State Street Bank and Trust Company, as trustee,
relating to $20,000,000 aggregate principal amount of 12%
Pay-in-Kind Senior Notes due 2009.
*4.8 Specimen Certificate of 12% Pay-in-Kind Senior Notes
due 2009 (included in Exhibit 4.7 hereto).
*4.9 Registration Rights Agreement, dated December 3, 1998, among
TransDigm Holding Company and Kelso Investment
Associates IV, L.P. and Kelso Equity Partners II, L.P.
4.10 Investment Agreement, dated as of May 31, 2001, by and
between TransDigm Holding Company and First Union Investors,
Inc. (Incorporated herein by reference to Exhibit 4.3 to
Holdings' Form 8-K dated May 31, 2001). (File No. 1658668).
5.1+ Opinion of Latham & Watkins as to the legality of the
securities, dated June 28, 2002.
*10.1 Stockholders' Agreement, dated December 3, 1998, by and
among TransDigm Holding Company, Odyssey Investment Partners
Fund, LP, Odyssey Coinvestors, LLC, TD-Equity LLC,
KIA IV-TD, LLC and Kelso Equity Partners II, L.P.
*10.2 Stockholders' Agreement, dated December 3, 1998, by and
among TransDigm Holding Company, Odyssey Investment Partners
Fund and certain employee stockholders of TransDigm Holding
Company.
</Table>
II-4
<Page>
<Table>
<Caption>
NUMBER DESCRIPTION OF EXHIBIT
------ ------------------------------------------------------------
*10.3 Tax Allocation Agreement, dated December 3, 1998, between
TransDigm Holding Company and TransDigm Inc.
**10.4 Employment Agreement dated May 19, 1999, between TransDigm
Holding Company and Douglas W. Peacock.
10.5+ Employment Agreement Amendment, dated January 17, 2002,
between TransDigm Holding Company and Douglas W. Peacock.
**10.6 Employment Agreement dated May 19, 1999, between TransDigm
Holding Company and W. Nicholas Howley.
10.7+ Employment Agreement Amendment, dated January 17, 2002,
between TransDigm Holding Company and W. Nicholas Howley.
*10.8 TransDigm Inc. Senior Executive Benefits Plan.
*10.9 Summary of Annual Incentive Compensation Plan for Key
Management Employees of TransDigm Inc.
10.10+ Purchase Agreement, dated June 4, 2002, by and among
TransDigm Inc., the Guarantors and the Initial Purchasers
(each as defined therein), with respect to the $75 million
of 10 3/8% Senior Subordinated Notes due 2008.
10.11 Amended and Restated Credit Agreement, dated as of
December 3, 1998 and amended and restated as of May 31,
2001, by and among TransDigm Holding Company, TransDigm
Inc., various lending institutions party thereto, Credit
Suisse First Boston, as Syndication Agent and Bankers Trust
Company, as Administrative Agent. (Incorporated herein by
reference to Exhibit 4.2 to Holdings' Form 8-K dated May 31
2001). (File No. 1658668).
10.12+ First Amendment and Consent, dated as of May 14, 2002, to
the Amended and Restated Credit Agreement.
12.1+ Statement of Computation of Ratio of Earnings to Fixed
Charges.
12.2+ Statement of Computation of Ratio of TransDigm Inc. Total
Debt to EBITDA (as defined).
12.3+ Statement of Computation of Ratio of Pro Forma TransDigm
Inc. Net Debt to EBITDA (as defined).
21.1+ Subsidiaries of TransDigm Holding Company.
23.1+ Consent of Ernst & Young LLP.
23.2+ Consent of Deloitte & Touche LLP.
23.3+ Consent of Latham & Watkins (included in exhibit 5.1
hereto).
24.1 Powers of Attorney (included in the signature pages to this
Registration Statement).
25.1+ 0 Statement of Eligibility and Qualification of Trustee on
Form T-1 under the Trust Indenture Act of 1939 of State
Street Bank and Trust Company.
99.1+ Form of Letter of Transmittal, with respect to old notes and
exchange notes.
99.2+ Form of Notice of Guaranteed Delivery, with respect to old
notes and exchange notes.
99.3+ Form of Letter to Registered Holders and Depository Trust
Company Participants and Instructions from Beneficial Owners
to Registered Holders and Depository Trust Company
Participants.
</Table>
II-5
<Page>
<Table>
<Caption>
NUMBER DESCRIPTION OF EXHIBIT
------ ------------------------------------------------------------
99.4+ Form of Letter to Clients.
99.5+ Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
</Table>
- ------------------------
+ Filed herewith.
* (Incorporated by reference to same titled exhibit to our Registration
Statement on Form S-4 dated January 29, 1999 File No. 333-71397, as
amended.)
** (Incorporated by reference to same titled exhibit to our Form 10-K dated
December 23, 1999 File No. 333-71397.)
(B) Financial Statement Schedules
Schedules are omitted since the information required to be submitted has
been included in Holdings' Consolidated Financial Statements or the notes
thereto.
ITEM 22. UNDERTAKINGS
The Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or equally prompt means. This
includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
II-6
<Page>
(5) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(6) that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-7
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TransDigm Inc.
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Richmond Heights, State
of Ohio, on June 28, 2002.
<Table>
TRANSDIGM INC.
By: /s/ GREGORY RUFUS
-----------------------------------------
Gregory Rufus
Vice President, Chief Financial Officer
and Assistant Secretary
</Table>
The undersigned directors and officers of TransDigm Inc. hereby constitute
and appoint W. Nicholas Howley and Gregory Rufus and each of them with full
power to act without the other and with full power of substitution and
resubstitution, our true and lawful attorneys-in-fact with full power to execute
in our name and behalf in the capacities indicated below this Registration
Statement on Form S-4 and any and all amendments thereto, including
post-effective amendments to this Registration Statement and to sign any and all
additional registration statements relating to the same offering of securities
as this Registration Statement that are filed pursuant to Rule 462(b) of the
Securities Act of 1933, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and hereby ratify and confirm that all such attorneys-in-fact, or any
of them, or their substitutes shall lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ W. NICHOLAS HOWLEY
------------------------------------------- President, Chief Executive June 28, 2002
W. Nicholas Howley Officer and Director
/s/ GREGORY RUFUS Vice President, Chief
------------------------------------------- Financial Officer and June 28, 2002
Gregory Rufus Assistant Secretary
/s/ DOUGLAS W. PEACOCK
------------------------------------------- Chairman of the Board of June 28, 2002
Douglas W. Peacock Directors
/s/ STEPHEN BERGER
------------------------------------------- Director June 28, 2002
Stephen Berger
/s/ WILLIAM HOPKINS
------------------------------------------- Director June 28, 2002
William Hopkins
</Table>
II-8
<Page>
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ MUZZAFAR MIRZA
------------------------------------------- Director June 28, 2002
Muzzafar Mirza
/s/ JOHN W. PAXTON
------------------------------------------- Director June 28, 2002
John W. Paxton
/s/ THOMAS R. WALL, IV
------------------------------------------- Director June 28, 2002
Thomas R. Wall, IV
</Table>
II-9
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TransDigm
Holding Company has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Richmond
Heights, State of Ohio, on June 28, 2002.
<Table>
TRANSDIGM HOLDING COMPANY
By: /s/ GREGORY RUFUS
-----------------------------------------
Gregory Rufus
Vice President, Chief Financial Officer
and
Assistant Secretary
</Table>
The undersigned directors and officers of TransDigm Holding Company hereby
constitute and appoint W. Nicholas Howley and Gregory Rufus and each of them
with full power to act without the other and with full power of substitution and
resubstitution, our true and lawful attorneys-in-fact with full power to execute
in our name and behalf in the capacities indicated below this Registration
Statement on Form S-4 and any and all amendments thereto, including
post-effective amendments to this Registration Statement and to sign any and all
additional registration statements relating to the same offering of securities
as this Registration Statement that are filed pursuant to Rule 462(b) of the
Securities Act of 1933, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and hereby ratify and confirm that all such attorneys-in-fact, or any
of them, or their substitutes shall lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ W. NICHOLAS HOWLEY
------------------------------------------- President, Chief Executive June 28, 2002
W. Nicholas Howley Officer and Director
/s/ GREGORY RUFUS Vice President, Chief
------------------------------------------- Financial Officer and June 28, 2002
Gregory Rufus Assistant Secretary
/s/ DOUGLAS W. PEACOCK
------------------------------------------- Chairman of the Board of June 28, 2002
Douglas W. Peacock Directors
/s/ STEPHEN BERGER
------------------------------------------- Director June 28, 2002
Stephen Berger
/s/ WILLIAM HOPKINS
------------------------------------------- Director June 28, 2002
William Hopkins
</Table>
II-10
<Page>
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ MUZZAFAR MIRZA
------------------------------------------- Director June 28, 2002
Muzzafar Mirza
/s/ JOHN W. PAXTON
------------------------------------------- Director June 28, 2002
John W. Paxton
/s/ THOMAS R. WALL, IV
------------------------------------------- Director June 28, 2002
Thomas R. Wall, IV
</Table>
II-11
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Champion
Aerospace Inc. has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Richmond
Heights, State of Ohio, on June 28, 2002.
<Table>
CHAMPION AEROSPACE INC.
By: /s/ GREGORY RUFUS
-----------------------------------------
Gregory Rufus
Treasurer and Assistant Secretary
</Table>
The undersigned directors and officers of Champion Aerospace Inc. hereby
constitute and appoint W. Nicholas Howley and Gregory Rufus and each of them
with full power to act without the other and with full power of substitution and
resubstitution, our true and lawful attorneys-in-fact with full power to execute
in our name and behalf in the capacities indicated below this Registration
Statement on Form S-4 and any and all amendments thereto, including
post-effective amendments to this Registration Statement and to sign any and all
additional registration statements relating to the same offering of securities
as this Registration Statement that are filed pursuant to Rule 462(b) of the
Securities Act of 1933, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and hereby ratify and confirm that all such attorneys-in-fact, or any
of them, or their substitutes shall lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ W. NICHOLAS HOWLEY Chairman of the Board of
------------------------------------------- Directors, Chief Executive June 28, 2002
W. Nicholas Howley Officer and Director
/s/ W. TODD LITTLETON
------------------------------------------- President June 28, 2002
W. Todd Littleton
/s/ GREGORY RUFUS
------------------------------------------- Treasurer, Assistant Secretary June 28, 2002
Gregory Rufus and Director
</Table>
II-12
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Marathon Power
Technologies Company has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Richmond Heights, State of Ohio, on June 28, 2002.
<Table>
MARATHON POWER TECHNOLOGIES COMPANY
By: /s/ GREGORY RUFUS
-----------------------------------------
Gregory Rufus
Treasurer and Assistant Secretary
</Table>
The undersigned directors and officers of Marathon Power Technologies
Company hereby constitute and appoint W. Nicholas Howley and Gregory Rufus and
each of them with full power to act without the other and with full power of
substitution and resubstitution, our true and lawful attorneys-in-fact with full
power to execute in our name and behalf in the capacities indicated below this
Registration Statement on Form S-4 and any and all amendments thereto, including
post-effective amendments to this Registration Statement and to sign any and all
additional registration statements relating to the same offering of securities
as this Registration Statement that are filed pursuant to Rule 462(b) of the
Securities Act of 1933, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and hereby ratify and confirm that all such attorneys-in-fact, or any
of them, or their substitutes shall lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ W. NICHOLAS HOWLEY Chairman of the Board of
------------------------------------------- Directors, Chief Executive June 28, 2002
W. Nicholas Howley Officer and Director
/s/ ALBERT J. RODRIGUEZ
------------------------------------------- President June 28, 2002
Albert J. Rodriguez
/s/ GREGORY RUFUS
------------------------------------------- Treasurer, Assistant Secretary June 28, 2002
Gregory Rufus and Director
</Table>
II-13
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ZMP, Inc. has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Richmond Heights, State
of Ohio, on June 28, 2002.
<Table>
ZMP, INC.
By: /s/ GREGORY RUFUS
-----------------------------------------
Gregory Rufus
Treasurer and Assistant Secretary
</Table>
The undersigned directors and officers of ZMP, Inc. hereby constitute and
appoint W. Nicholas Howley and Gregory Rufus and each of them with full power to
act without the other and with full power of substitution and resubstitution,
our true and lawful attorneys-in-fact with full power to execute in our name and
behalf in the capacities indicated below this Registration Statement on
Form S-4 and any and all amendments thereto, including post-effective amendments
to this Registration Statement and to sign any and all additional registration
statements relating to the same offering of securities as this Registration
Statement that are filed pursuant to Rule 462(b) of the Securities Act of 1933,
and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission and hereby
ratify and confirm that all such attorneys-in-fact, or any of them, or their
substitutes shall lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ W. NICHOLAS HOWLEY Chairman of the Board of
------------------------------------------- Directors, Chief Executive June 28, 2002
W. Nicholas Howley Officer and Director
/s/ JOHN F. LEARY
------------------------------------------- President June 28, 2002
John F. Leary
/s/ GREGORY RUFUS
------------------------------------------- Treasurer, Assistant Secretary June 28, 2002
Gregory Rufus and Director
</Table>
II-14
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Adams Rite
Aerospace, Inc. has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Richmond
Heights, State of Ohio, on June 28, 2002.
<Table>
ADAMS RITE AEROSPACE, INC.
By: /s/ GREGORY RUFUS
-----------------------------------------
Gregory Rufus
Treasurer and Assistant Secretary
</Table>
The undersigned directors and officers of Adams Rite Aerospace, Inc. hereby
constitute and appoint W. Nicholas Howley and Gregory Rufus and each of them
with full power to act without the other and with full power of substitution and
resubstitution, our true and lawful attorneys-in-fact with full power to execute
in our name and behalf in the capacities indicated below this Registration
Statement on Form S-4 and any and all amendments thereto, including
post-effective amendments to this Registration Statement and to sign any and all
additional registration statements relating to the same offering of securities
as this Registration Statement that are filed pursuant to Rule 462(b) of the
Securities Act of 1933, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and hereby ratify and confirm that all such attorneys-in-fact, or any
of them, or their substitutes shall lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ W. NICHOLAS HOWLEY Chairman of the Board of
------------------------------------------- Directors, Chief Executive June 28, 2002
W. Nicholas Howley Officer and Director
/s/ JOHN F. LEARY
------------------------------------------- President June 28, 2002
John F. Leary
/s/ GREGORY RUFUS
------------------------------------------- Treasurer, Assistant Secretary June 28, 2002
Gregory Rufus and Director
</Table>
II-15
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Christie
Electric Corp. has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Richmond
Heights, State of Ohio, on June 28, 2002.
<Table>
CHRISTIE ELECTRIC CORP.
By: /s/ GREGORY RUFUS
-----------------------------------------
Gregory Rufus
Treasurer and Assistant Secretary
</Table>
The undersigned directors and officers of Christie Electric Corp. hereby
constitute and appoint W. Nicholas Howley and Gregory Rufus and each of them
with full power to act without the other and with full power of substitution and
resubstitution, our true and lawful attorneys-in-fact with full power to execute
in our name and behalf in the capacities indicated below this Registration
Statement on Form S-4 and any and all amendments thereto, including
post-effective amendments to this Registration Statement and to sign any and all
additional registration statements relating to the same offering of securities
as this Registration Statement that are filed pursuant to Rule 462(b) of the
Securities Act of 1933, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and hereby ratify and confirm that all such attorneys-in-fact, or any
of them, or their substitutes shall lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ W. NICHOLAS HOWLEY Chairman of the Board of
------------------------------------------- Directors, Chief Executive June 28, 2002
W. Nicholas Howley Officer and Director
/s/ ALBERT J. RODRIGUEZ
------------------------------------------- President June 28, 2002
Albert J. Rodriguez
/s/ GREGORY RUFUS
------------------------------------------- Treasurer, Assistant Secretary June 28, 2002
Gregory Rufus and Director
</Table>
II-16
<Page>
EXHIBIT INDEX
<Table>
<Caption>
NUMBER DESCRIPTION OF EXHIBIT
- --------------------- ------------------------------------------------------------
*2.1 Agreement and Plan of Merger, dated August 3, 1998, between
Phase II Acquisition Corp. and TransDigm Holding Company.
*2.2 Amendment One, dated November 9, 1998, to the Agreement and
Plan of Merger between Phase II Acquisition Corp. and
TransDigm Holding Company.
*2.3 Agreement and Plan of Reorganization, dated as of March 31,
1999, by and among TransDigm Inc., ARA Acquisition
Corporation, ZMP, Inc. and TCW Special Placements Fund II.
2.4 Asset Purchase Agreement, dated as of April 29, 2001, by and
between Aviation Acquisition Corporation and Federal-Mogul
Ignition Company. (Incorporated herein by reference to
Exhibit 2.1 to Holdings' Form 10-Q for the period ended
March 31, 2001). (File No. 1631079).
3.1 Restated Certificate of Incorporation, filed on May 31,
2001, of TransDigm Holding Company. (Incorporated herein
by reference to Exhibit 3.1 to Holdings' Form 8-K dated
May 31, 2001). (File No. 1658668).
3.2 Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of
Preferred Stock and Qualifications, Limitations and
Restrictions Thereof of 16% Cumulative Redeemable
Preferred Stock of TransDigm Holding Company.
(Incorporated herein by reference to Exhibit 4.1 to
Holdings' Form 8-K dated May 31, 2001). (File No.
1658668).
*3.3 Certificate of Ownership and Merger, filed on December 3,
1998, merging Phase II Acquisition Corp. with and into
TransDigm Holding Company.
*3.4 Certificate of Incorporation, filed on July 2, 1993, of
NovaDigm Acquisition, Inc. (TransDigm Inc.).
*3.5 Certificate of Amendment, filed on July 22, 1993, of the
Certificate of Incorporation of NovaDigm Acquisition, Inc.
(TransDigm Inc.).
*3.6 Certificate of Ownership and Merger, filed on September 13,
1993, merging IMO Aerospace Company with and into
TransDigm Inc.
*3.7 Certificate of Incorporation, filed on March 28, 1994, of
MPT Acquisition Corp. (Marathon Power Technologies
Company).
*3.8 Certificate of Amendment, filed on May 18, 1994, of the
Certificate of Incorporation of MPT Acquisition Corp.
(Marathon Power Technologies Company).
*3.9 Certificate of Amendment, filed on May 24, 1994, of the
Certificate of Incorporation of MPT Acquisition Corp.
(Marathon Power Technologies Company).
*3.10 Amended and Restated Articles of Incorporation, filed on
April 23, 1999, of ZMP, Inc.
*3.11 Certificate of Ownership and Merger, filed on April 23,
1999, merging ARA Acquisition Corporation with and into
ZMP, Inc.
*3.12 Articles of Incorporation, filed on July 30, 1986, of ARP
Acquisition Corporation (Adams Rite Aerospace, Inc.).
*3.13 Certificate of Amendment, filed on September 12, 1986, of
the Articles of Incorporation of ARP Acquisition
Corporation (Adams Rite Aerospace, Inc.).
</Table>
II-17
<Page>
<Table>
<Caption>
NUMBER DESCRIPTION OF EXHIBIT
- --------------------- ------------------------------------------------------------
*3.14 Certificate of Amendment, filed on January 27, 1992, of the
Articles of Incorporation of Adams Rite Aerospace
Products, Inc. (Adams Rite Aerospace, Inc.).
*3.15 Certificate of Amendment, filed on December 31, 1992, of the
Articles of Incorporation of Adams Rite Aerospace
Products, Inc. (Adams Rite Aerospace, Inc.).
*3.16 Certificate of Amendment, filed on August 11, 1997, of the
Articles of Incorporation of Adams Rite Aerospace Sabre
International, Inc. (Adams Rite Aerospace, Inc.).
3.17+ Articles of Incorporation, filed on April 16, 2001, of
Aviation Acquisition Corporation (Champion Aerospace
Inc.).
3.18+ Certificate of Amendment, filed on June 1, 2001, of the
Articles of Incorporation of Aviation Acquisition
Corporation (Champion Aerospace Inc.).
3.19+ Articles of Incorporation, filed on December 6, 1929, of
McColpin -- Christie Electric Corporation, LTD. (Christie
Electric Corp.).
3.20+ Certificate of Amendment, filed on November 3, 1947, of the
Articles of Incorporation of McColpin -- Christie
Corporation, LTD. (Christie Electric Corp.).
3.21+ Certificate of Amendment, filed on May 26, 1952, of the
Articles of Incorporation of McColpin -- Christie
Corporation, LTD. (Christie Electric Corp.).
3.22+ Certificate of Amendment, filed on May 1, 1956, of the
Articles of Incorporation of McColpin -- Christie Corp.
(Christie Electric Corp.)
3.23+ Certificate of Amendment, filed on May 1, 1979, of the
Articles of Incorporation of Christie Electric Corp.
3.24+ Certificate of Ownership, filed on April 16, 1985, of
Christie Electric Corp.
3.25+ Certificate of Amendment, filed on September 29, 1993, of
the Articles of Incorporation of Christie Electric Corp.
*3.26 Bylaws of TransDigm Holding Company.
*3.27 Bylaws of NovaDigm Acquisition, Inc. (TransDigm Inc.).
*3.28 Bylaws of MPT Acquisition Corp. (Marathon Power Technologies
Company).
*3.29 Amended and Restated Bylaws of ZMP, Inc.
*3.30 Amended and Restated Bylaws of Adams Rite Aerospace, Inc.
3.31+ Bylaws of Aviation Acquisition Corporation (Champion
Aerospace Inc.).
3.32+ Bylaws of Christie Electric Corp.
*4.1 Indenture, dated December 3, 1998, among TransDigm Inc.,
TransDigm Holding Company and Marathon Power Technologies
Company and State Street Bank and Trust Company, as
trustee, relating to the 10 3/8% Senior Subordinated Notes
due 2008 and the registered 10 3/8% Senior Subordinated
Notes due 2008.
*4.2 Supplemental Indenture, dated April 23, 1999, among ZMP,
Inc. and Adams Rite Aerospace, Inc. and State Street Bank
and Trust Company, as trustee.
*4.3 Specimen Certificate of 10 3/8% Senior Subordinated Notes
due 2008 (the "old notes") (included in Exhibit 4.1
hereto).
</Table>
II-18
<Page>
<Table>
<Caption>
NUMBER DESCRIPTION OF EXHIBIT
- --------------------- ------------------------------------------------------------
*4.4 Specimen Certificate of the registered 10 3/8% Senior
Subordinated Notes due 2008 (the "exchange notes")
(included in Exhibit 4.1 hereto).
*4.5 Registration Rights Agreement, dated December 3, 1998, among
TransDigm Inc., TransDigm Holding Company and Marathon
Power Technologies Company and BT Alex. Brown Incorporated
and Credit Suisse First Boston Corporation.
4.6+ Registration Rights Agreement, dated June 7, 2002, among
TransDigm Inc., the Guarantors and the Initial Purchasers
(each as defined therein), relating to the $75 million of
10 3/8% Senior Subordinated Notes due 2008.
*4.7 Indenture, dated December 3, 1998, between TransDigm Holding
Company and State Street Bank and Trust Company, as
trustee, relating to $20,000,000 aggregate principal
amount of 12% Pay-in-Kind Senior Notes due 2009.
*4.8 Specimen Certificate of 12% Pay-in-Kind Senior Notes due
2009 (included in Exhibit 4.7 hereto).
*4.9 Registration Rights Agreement, dated December 3, 1998, among
TransDigm Holding Company and Kelso Investment Associates
IV, L.P. and Kelso Equity Partners II, L.P.
4.10 Investment Agreement, dated as of May 31, 2001, by and
between TransDigm Holding Company and First Union
Investors, Inc. (Incorporated herein by reference to
Exhibit 4.3 to Holdings' Form 8-K dated May 31, 2001).
(File No. 1658668).
5.1+ Opinion of Latham & Watkins as to the legality of the
securities, dated June 28, 2002.
*10.1 Stockholders' Agreement, dated December 3, 1998, by and
among TransDigm Holding Company, Odyssey Investment
Partners Fund, LP, Odyssey Coinvestors, LLC, TD-Equity
LLC, KIA IV-TD, LLC and Kelso Equity Partners II, L.P.
*10.2 Stockholders' Agreement, dated December 3, 1998, by and
among TransDigm Holding Company, Odyssey Investment
Partners Fund and certain employee stockholders of
TransDigm Holding Company.
*10.3 Tax Allocation Agreement, dated December 3, 1998, between
TransDigm Holding Company and TransDigm Inc.
**10.4 Employment Agreement dated May 19, 1999, between TransDigm
Holding Company and Douglas W. Peacock.
10.5+ Employment Agreement Amendment, dated January 17, 2002,
between TransDigm Holding Company and Douglas W. Peacock.
**10.6 Employment Agreement dated May 19, 1999, between TransDigm
Holding Company and W. Nicholas Howley.
10.7+ Employment Agreement Amendment, dated January 17, 2002,
between TransDigm Holding Company and W. Nicholas Howley.
*10.8 TransDigm Inc. Senior Executive Benefits Plan.
*10.9 Summary of Annual Incentive Compensation Plan for Key
Management Employees of TransDigm Inc.
10.10+ Purchase Agreement, dated June 4, 2002, by and among
TransDigm Inc., the Guarantors and the Initial Purchasers
(each as defined therein), with respect to the $75 million
of 10 3/8% Senior Subordinated Notes due 2008.
</Table>
II-19
<Page>
<Table>
<Caption>
NUMBER DESCRIPTION OF EXHIBIT
- --------------------- ------------------------------------------------------------
10.11 Amended and Restated Credit Agreement, dated as of December
3, 1998 and amended and restated as of May 31, 2001, by
and among TransDigm Holding Company, TransDigm Inc.,
various lending institutions party thereto, Credit Suisse
First Boston, as Syndication Agent and Bankers Trust
Company, as Administrative Agent. (Incorporated herein by
reference to Exhibit 4.2 to Holdings' Form 8-K dated May
31 2001). (File No. 1658668).
10.12+ First Amendment and Consent, dated as of May 14, 2002, to
the Amended and Restated Credit Agreement.
12.1+ Statement of Computation of Ratio of Earnings to Fixed
Charges.
12.2+ Statement of Computation of Ratio of TransDigm Inc. Total
Debt to EBITDA (as defined).
12.3+ Statement of Computation of Ratio of Pro Forma TransDigm
Inc. Net Debt to EBITDA (as defined).
21.1+ Subsidiaries of TransDigm Holding Company.
23.1+ Consent of Ernst & Young LLP.
23.2+ Consent of Deloitte & Touche LLP.
23.3+ Consent of Latham & Watkins (included in exhibit 5.1
hereto).
24.1 Powers of Attorney (included in the signature pages to this
Registration Statement).
25.1+ Statement of Eligibility and Qualification of Trustee on
Form T-1 under the Trust Indenture Act of 1939 of State
Street Bank and Trust Company.
99.1+ Form of Letter of Transmittal, with respect to old notes and
exchange notes.
99.2+ Form of Notice of Guaranteed Delivery, with respect to old
notes and exchange notes.
99.3+ Form of Letter to Registered Holders and Depository Trust
Company Participants and Instructions from Beneficial
Owners to Registered Holders and Depository Trust Company
Participants.
99.4+ Form of Letter to Clients.
99.5+ Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
</Table>
- ------------------------
+ Filed herewith.
* (Incorporated by reference to same titled exhibit to our Registration
Statement on Form S-4 dated January 29, 1999 File No. 333-71397, as
amended.)
** (Incorporated by reference to same titled exhibit to our Form 10-K dated
December 23, 1999 File No. 333-71397.)
II-20