sv3
As filed with the Securities and
Exchange Commission on April 14, 2011
File
No. 333-
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, DC 20549
Form S-3
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
Mistras Group, Inc.
(Exact name of registrant as
specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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8711
(Primary Standard Industrial
Classification Code Number)
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22-3341267
(I.R.S. Employer
Identification No.)
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195 Clarksville Road
Princeton Junction, New Jersey 08550
(609) 716-4000
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
Michael C. Keefe, Esq.
Executive Vice President and General Counsel
Mistras Group, Inc.
195 Clarksville Road
Princeton Junction, New Jersey 08550
(609) 716-4000
(Name, address, including
zip code, and telephone number, including area code, of agent
for service)
Please send copies of all communications to:
Sheldon G. Nussbaum, Esq.
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
(212) 318-3000
Approximate date of commencement of proposed sale to the
public: From time to time after the effective date of
this registration statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans,
please check the following
box: o
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, other than
securities offered only in connection with dividend or interest
reinvestment plans, check the following
box: þ
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this Form is a registration statement pursuant to General
Instruction I.D. or a post-effective amendment thereto that
shall become effective upon filing with the Commission pursuant
to Rule 462(e) under the Securities Act, check the
following
box. o
If this Form is a post-effective amendment to a registration
statement filed pursuant to General Instruction I.D. filed
to register additional securities or additional classes of
securities pursuant to Rule 413(b) under the Securities
Act, check the following
box. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large accelerated
filer o
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Accelerated
filer o
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Non-accelerated
filer þ
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Smaller reporting
company o
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(Do not check if a smaller reporting company)
CALCULATION OF
REGISTRATION FEE
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Proposed Maximum
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Proposed Maximum
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Amount of
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Title of Each Class of
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Amount to be
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Aggregate Price Per
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Aggregate Offering
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Registration
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Securities to Be Registered(1)
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Registered(1)(2)(3)
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Unit(3)
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Price(3)(4)
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Fee(3)
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Primary Offering:
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Common stock, par value $0.01 per share
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Preferred stock, par value $0.01 per share
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Debt securities
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Warrants
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Units(5)
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Total Primary Offering
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$
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80,000,000
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$
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80,000,000(6
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$
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9,288(6
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Secondary Offering:
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Common Stock, par value $0.01 per share
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2,764,401
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$
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16.87
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$
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46,635,445(7
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$
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5,415(7
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Total
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$
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126,635,445
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$
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14,703
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(1) |
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Also includes an indeterminate aggregate principal amount and
number of securities of each identified class of securities up
to a proposed aggregate offering price of $80,000,000, which may
be offered by the registrant from time to time in unspecified
numbers and at indeterminate prices, and as may be issued upon
conversion, redemption, repurchase, exchange or exercise of any
securities registered hereunder, including under any applicable
anti-dilution provisions. In addition, up to
2,764,401 shares of the registrants common stock may
be sold pursuant to this registration statement by the selling
stockholder described herein. Except as provided in
Rule 426(b) under Securities Act of 1933, in no event will
the aggregate offering price of all types of securities issued
by the registrant pursuant to this registration statement exceed
$80,000,000. |
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(2) |
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Pursuant to Rule 416 under the Securities Act of 1933, this
registration statement also covers any additional securities
that may be offered or issued in connection with any stock
split, stock dividend or similar transaction. |
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(3) |
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Pursuant to General Instruction II.D. of
Form S-3,
the table lists each of the classes of securities being
registered and the aggregate proceeds to be raised, but, other
than the secondary offering, does not specify by each class
information as to the amount to be registered, proposed maximum
offering price per unit, and proposed maximum aggregate offering
price. |
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Includes consideration to be received by the registrant, if
applicable, for registered securities that are issuable upon
exercise, conversion or exchange of other registered securities. |
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Consisting of some or all of the securities listed above, in any
combination, including common stock, preferred stock, debt
securities and warrants. |
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(6) |
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The proposed maximum aggregate offering price has been estimated
solely to calculate the registration fee in accordance with
Rule 457(o) under the Securities Act of 1933. |
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(7) |
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Pursuant to Rule 457(c) under the Securities Act of 1933,
the offering price and registration fee are computed based on
the average of the high and low prices reported for the
registrants common stock traded on the New York Stock
Exchange on April 13, 2011. |
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 Section 8(a), may determine.
The
information in this prospectus is not complete and may be
changed. The Company 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 is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
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Subject to completion, dated
April 14, 2011
PROSPECTUS
$80,000,000
Common Stock
Preferred
Stock
Debt
Securities
Warrants
Units
2,764,401
Shares of Common
Stock
Offered by the Selling
Stockholder
From time to time, we may offer and sell up to $80,000,000 of
our debt securities; common stock; preferred stock; or warrants
to purchase debt securities, common stock or preferred stock or
any combination of these securities; and units consisting of
debt securities, common stock, preferred stock or warrants or
any combination of these securities, in one or more
transactions. We may also offer common stock or preferred stock
upon conversion of debt securities; and common stock upon
conversion of preferred stock.
In addition, the selling stockholder, as described in this
prospectus, may offer and resell up to a total of
2,764,401 shares of our common stock. We will not receive
any proceeds from the sale of shares by the selling stockholder.
This prospectus describes some of the general terms that may
apply to these securities. We will provide specific terms of
these offerings and securities in one or more supplements to
this prospectus. We may also authorize one or more free writing
prospectuses to be provided to you in connection with these
offerings. The prospectus supplement, and any documents
incorporated by reference, may also add, update or change
information contained in this prospectus. You should read this
prospectus, the applicable prospectus supplement, any documents
incorporated by reference and any related free writing
prospectus carefully before buying any of the securities being
offered.
These securities may be offered and sold in the same offering or
in separate offerings, to or through underwriters, dealers, and
agents, or directly to purchasers. The names of any
underwriters, dealers, or agents involved in the sale of our
securities, their compensation and any over-allotment options
held by them will be described in the applicable prospectus
supplement. For a more complete description of the plan of
distribution of these securities, see the section entitled
Plan of Distribution beginning on page 50 of
this prospectus.
Our common stock is listed on the New York Stock Exchange under
the symbol MG. On April 13, 2011, the last
reported sale price of our common stock on the New York Stock
Exchange was $17.08.
You should review carefully the risks and uncertainties
described under the heading Risk Factors on
page 25 of this prospectus and contained in the applicable
prospectus supplement and any related free writing prospectus,
and under similar headings in the other documents that are
incorporated by reference into this prospectus before investing
in our securities.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus
is ,
2011.
Table of
contents
You should read this prospectus and the information incorporated
by reference carefully before you invest. Such documents contain
important information you should consider when making your
investment decision. See Incorporation of Certain
Documents by Reference on page 54 of this prospectus.
If you are in a jurisdiction where offers to sell, or
solicitations of offers to purchase, the securities offered by
this document are unlawful, or if you are a person to whom it is
unlawful to direct these types of activities, then the offer
presented in this prospectus does not extend to you. You should
rely only on the information provided in this prospectus or
documents incorporated by reference in this prospectus. We have
not authorized anyone to provide you with different information.
The information appearing in this prospectus, any applicable
prospectus supplement or any related free writing prospectus is
accurate only as of the date on the front of the document. Any
information we incorporated by reference is accurate only as of
the date of the document incorporated by reference, regardless
of the time of delivery of this prospectus, any applicable
prospectus supplement or any related free writing prospectus, or
any sale of a security. Our business, financial condition,
results of operations and prospects may have changed since those
dates.
About this
prospectus
This prospectus is part of a registration statement that we
filed with the Securities and Exchange Commission (the
SEC) utilizing a shelf registration
process or continuous offering process, which allows us to offer
and sell any combination of the securities described in this
prospectus in one or more offerings and also allows the selling
stockholder to offer and sell shares of our common stock in one
or more offerings. Using this prospectus, we may offer up to a
total dollar amount of $80,000,000 of these securities and the
selling stockholder may offer to sell up 2,764,401 shares
of our common stock.
This prospectus provides you with a general description of the
securities we or the selling stockholder may offer. Each time we
or the selling stockholder offer to sell securities pursuant to
this registration statement and the prospectus contained herein,
we will provide a prospectus supplement that will contain
specific information about the terms of that offering. That
prospectus supplement may include additional risk factors about
us and the terms of that particular offering. Prospectus
supplements may also add to, update or change the information
contained in this prospectus. To the extent that any statement
that we make in a prospectus supplement is inconsistent with
statements made in this prospectus, the statements made in this
prospectus will be deemed modified or superseded by those made
in such prospectus supplement. In addition, as we describe in
the section entitled Incorporation of Certain Documents by
Reference, we have filed and plan to continue to file
other documents with the SEC that contain information about us
and the business conducted by us and our subsidiaries. Before
you decide whether to invest in any of these securities, you
should read this prospectus, any applicable prospectus
supplement that further describes the offering of these
securities and the information we file with the SEC.
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Forward-looking
statements
This prospectus, any prospectus supplement and any documents we
incorporate by reference herein or therein may contain
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended
(Securities Act), and Section 21E of the
Securities Exchange Act of 1934, as amended (Exchange
Act). Forward-looking statements reflect our current
estimates, expectations and projections about our future
results, performance, prospects and opportunities.
Forward-looking statements include, among other things, the
information concerning our possible future results of
operations, business and growth strategies, financing plans, our
competitive position and the effects of competition, the
projected growth of the industries in which we operate, the
benefits and synergies to be obtained from our completed and any
future acquisitions, and statements of managements goals
and objectives, and other similar expressions concerning matters
that are not historical facts. Words such as may,
should, could, would,
predicts, potential,
continue, expects,
anticipates, future,
intends, plans, believes,
estimates, appears, projects
and similar expressions, as well as statements in the future
tense, identify forward-looking statements. Forward-looking
statements should not be read as a guarantee of future
performance or results, and will not necessarily be accurate
indications of the times at, or by which, such performance or
results will be achieved. Forward-looking information is based
on information available at the time and managements good
faith belief with respect to future events, and is subject to
risks and uncertainties that could cause actual performance or
results to differ materially from those expressed in the
statements.
We disclose important factors that could cause our actual
results to differ materially from our expectations under
Risk factors and elsewhere in this prospectus or any
documents we incorporate by reference herein or therein. These
cautionary statements qualify all forward-looking statements
attributed to us or persons acting on our behalf. When we
indicate that an event, condition or circumstance could or would
have an adverse effect on us, we mean to include effects upon
our business, financial and other condition, results of
operations, prospects and ability to service our debt.
Additional risks and uncertainties not currently known to us or
that we currently deemed to be immaterial also may materially
adversely affect our business, financial position and results of
operations or cash flows.
Risks and uncertainties that could cause actual results to vary
materially from those anticipated in the forward-looking
statements included in this prospectus include general economic
conditions in the markets in which we operate and
industry-related factors such as:
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loss of or reduction in business with a significant customer;
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an accident or incident involving our asset protection solutions;
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our current dependence on customers in the oil and gas industry;
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our ability to attract and retain trained engineers, scientists
and other highly skilled workers as well as members of senior
management;
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strengths and actions of our competitors;
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the timing, size and integration success of potential future
acquisitions;
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catastrophic events that cause disruptions to our business or
the business of our customers; and
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the continuing uncertain economic environment.
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The
company
This summary description about us and our business highlights
information contained elsewhere in this prospectus or
incorporated in this prospectus by reference. This summary does
not contain all of the information you should consider before
buying securities in an offering. You should carefully read this
entire prospectus and any applicable prospectus supplement,
including each of the documents incorporated herein or therein
by reference, before making an investment decision. In this
prospectus, our fiscal years, which end on May 31, are
identified according to the calendar year in which they end
(e.g., the fiscal year ended May 31, 2010 is referred to as
fiscal 2010), and unless otherwise specified or the
context otherwise requires, Mistras, we,
us and our refer to Mistras Group, Inc.
and its consolidated subsidiaries and their predecessors.
Corporate
information
We were founded by former AT&T Bell Laboratories
researchers in 1978 and operated as Physical Acoustics
Corporation until December 1994, when we reorganized and began
operating as Mistras Holdings Corp., a Delaware corporation. In
February 2007, we changed our name to Mistras Group, Inc. We
completed our initial public offering in October 2009 and listed
our common stock on the New York Stock Exchange. Our principal
executive offices are located at 195 Clarksville Road, Princeton
Junction, NJ 08550, and our telephone number at that address is
(609) 716-4000.
Our website is located at www.mistrasgroup.com.
Our
business
We are a one source leading global provider of
technology-enabled asset protection solutions used to evaluate
the structural integrity of critical energy, industrial and
public infrastructure. We combine industry-leading products and
technologies, expertise in mechanical integrity (MI) and
non-destructive testing (NDT) services and proprietary data
analysis and enterprise warehousing software to deliver a
comprehensive portfolio of customized solutions, ranging from
routine inspections to complex, plant-wide asset integrity
management and assessments. These mission critical solutions
enhance our customers ability to comply with governmental
safety and environmental regulations, extend the useful life of
their assets, increase productivity, minimize repair costs,
manage risk and avoid catastrophic disasters. Given the role our
services play in ensuring the safe and efficient operation of
infrastructure, we have historically provided a majority of our
services to our customers on a regular, recurring basis. We
serve a global customer base of companies with asset-intensive
infrastructure, including companies in the oil and gas
(downstream, midstream & upstream), fossil and nuclear
power, alternative energy, public infrastructure, chemicals,
aerospace and defense, transportation, primary metals and
metalworking, pharmaceutical/biotechnology, food processing
industries and research and engineering institutions. As of
April 1, 2011, we had approximately 2,700 employees,
including 32 Ph.D.s and approximately 100 other degreed
engineers and highly-skilled, certified technicians, in 78
offices across 15 countries. We have established long-term
relationships as a critical solutions provider to many of the
leading companies in our target markets. The following chart
represents the percentage of consolidated revenues we generated
from our various markets for the first nine months of fiscal
2011.
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Mistras revenues
by end market for the nine months ended February 28,
2011
Our asset protection solutions continuously evolve over time as
we combine the disciplines of NDT, MI services and data analysis
and data warehousing software to provide value to our customers.
The foundation of our business is NDT, which is the examination
of assets without impacting current and future usefulness or
impairing the integrity of these assets. The ability to inspect
infrastructure assets and not interfere with their operating
performance makes NDT a highly attractive alternative to many
traditional intrusive inspection techniques, which may require
dismantling equipment or shutting down a plant, mill or site.
Our MI services are a systematic engineering-based approach to
developing best practices for ensuring the on-going integrity
and safety of equipment and industrial facilities. MI services
involve conducting an inventory of infrastructure assets,
developing and implementing inspection and maintenance
procedures, training personnel in executing these procedures and
managing inspections, testing and assessments of customer
assets. By assisting customers in implementing MI programs we
enable them to identify gaps between existing and desired
practices, find and track deficiencies and degradations to be
corrected and establish quality assurance standards for
fabrication, engineering and installation of infrastructure
assets. We believe our MI services improve plant safety and
reliability and regulatory compliance, and in so doing reduce
maintenance costs. Our solutions also incorporate comprehensive
data analysis from our proprietary asset protection software to
provide customers with detailed, integrated and cost-effective
solutions that rate the risks of alternative maintenance
approaches and recommend actions in accordance with consensus
industry codes and standards and help to establish and support
key performance indicators (KPIs) to ensure continued safe
and economic operations.
We differentiate ourselves by delivering these solutions under
our One Source umbrella utilizing a proven
systematic method that creates a closed loop life cycle for
addressing continuous asset protection and improvement. As a
global asset protection leader, we provide a comprehensive range
of solutions that includes:
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traditional outsourced NDT services conducted by our
technicians, mechanical integrity assessments, above-ground
storage tank inspection and American Petroleum Institute
(API) visual inspections and predictive maintenance
(PDM) program development;
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advanced asset protection solutions, in most cases involving
proprietary acoustic emission (AE), digital
radiography, infrared, wireless
and/or
automated ultrasonic sensors, which are operated by our highly
trained technicians;
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a proprietary and customized portfolio of software products for
testing and analyzing data captured in real-time by our
technicians and sensors, including advanced features such as
pattern recognition and neural networks;
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enterprise software and relational databases to store and
analyze inspection data comparing to prior operations and
testing of similar assets, industrial standards and specific
risk conditions, such as use with highly flammable or corrosive
materials, and developing asset integrity management plans based
on risk-based inspection that specify an optimal schedule for
the testing, maintenance and retirement of assets; and
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on-line monitoring systems that provide for secure web-based
remote or
on-site
asset inspection, real-time reports and analysis of plant or
enterprise-wide structural integrity data, comparison of
integrity data to our library of historical inspection data and
analysis to better assess structural integrity and provide
alerts for and prioritize future inspections and maintenance.
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We offer our customers a customized package of services,
products and systems or our enterprise software and other niche
high-value products on a stand-alone basis. For example,
customers can purchase most of our sensors and accompanying
software to integrate with their own systems, or they can
purchase a complete turn-key solution, including our
installation, monitoring and assessment services. Importantly,
however, we do not sell certain of our advanced and proprietary
software and other products as stand-alone offerings; instead,
we embed them in our comprehensive service offerings to protect
our investment in intellectual property while providing an added
value which generates a substantial source of recurring revenues.
Asset protection
industry overview
Asset protection is a large and rapidly growing industry that
consists of NDT inspection, MI services and inspection data
warehousing and analysis. NDT plays a crucial role in assuring
the operational and structural integrity of critical
infrastructure without compromising the usefulness of the tested
materials or equipment. The evolution of NDT services, in
combination with broader industry trends, including increased
asset utilization and aging of infrastructure, the desire by
companies to extend the useful life of their existing
infrastructure, new construction projects, enhanced government
regulation and the shortage of certified NDT professionals have
made NDT an integral and increasingly outsourced part of many
asset-intensive industries. Well-publicized industrial and
public infrastructure failures and accidents such as the
Deepwater Horizon oil spill in the Gulf of Mexico and the I-35W
Mississippi River bridge collapse in Minnesota have raised the
level of safety awareness of regulators, and owners and
operators are recognizing the benefits that asset protection
solutions can provide.
Historically, NDT solutions predominantly used qualitative
testing methods aimed primarily at detecting defects in the
tested materials. This methodology, which we categorize as
traditional NDT, is typically labor intensive and,
as a result, considerably dependent upon the availability and
skill level of the certified technicians, engineers and
scientists performing the inspection services. The traditional
NDT market is highly fragmented, with a significant number of
small vendors providing inspection services to divisions of
companies or local governments situated in close proximity to
the vendors field inspection engineers and scientists.
Today, we believe that
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customers are increasingly looking for a single vendor capable
of providing a wider spectrum of asset protection solutions for
their global infrastructure that we call one-source.
This shift in underlying demand, which began in the early 1990s,
has contributed to a transition from traditional NDT solutions
to more advanced solutions that employ automated digital sensor
technologies and accompanying enterprise software, allowing for
the effective capture, storage, analysis and reporting of
inspection and engineering results electronically and in digital
formats. These advanced techniques, taken together with advances
in wired and wireless communication and information
technologies, have further enabled the development of remote
monitoring systems, asset-management and predictive maintenance
capabilities and other data analytics and management. We believe
that as advanced asset protection solutions continue to gain
acceptance among asset-intensive organizations, only those
vendors offering broad, complete and integrated solutions,
scalable operations and a global footprint will have a distinct
competitive advantage. Moreover, we believe that vendors that
are able to effectively deliver both advanced solutions and data
analytics, by virtue of their ownership of customers data,
develop a significant barrier to entry for competitors, and so
develop the capability to create significant recurring revenues.
We believe the following represent key dynamics driving the
growth of the asset protection industry:
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Extending the Useful Life of Aging
Infrastructure. The prohibitive cost and challenge of
building new infrastructure has resulted in the significant
aging of existing infrastructure and caused companies to seek
ways to extend the useful life of existing assets. For example,
due to the significant cost associated with constructing new
refineries, stringent environmental regulations which have
increased the costs of managing them and difficulty in finding
suitable locations on which to build them, no new refineries
have been constructed in the United States since 1976. Another
example is in the area of power transmission and distribution.
The Smart Grid initiative in the United States is causing
increased loading on aging transformers that are more than
30 years old in most cases. The need to test and monitor
these units to ensure their reliability until replacement is
instrumental in support of a reliable Smart Grid network.
Because aging infrastructure requires relatively higher levels
of maintenance and repair in comparison to new infrastructure,
as well as more frequent, extensive and ongoing testing,
companies and public authorities are increasing spending to
ensure the operational and structural integrity of existing
infrastructure.
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Outsourcing of Non-Core Activities and Technical Resource
Constraints. While many of our customers have
historically performed NDT services in-house, the increasing
sophistication and automation of NDT programs, together with a
decreasing supply of skilled professionals and stricter
governmental regulations, has led many companies and public
authorities to outsource NDT to providers that have the
necessary technical product portfolio, engineering expertise,
technical workforce and proven track record of results-oriented
performance to effectively meet their increasing requirements.
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Increasing Asset and Capacity Utilization. Due to
high energy prices, high repair and replacement costs and the
limited construction of new infrastructure, existing
infrastructure in some of our target markets is being used at
higher capacities, causing increased stress and fatigue that
accelerate deterioration. These higher prices and costs also
motivate our customers to complete repairs, maintenance,
replacements and upgrades more quickly. For example, increasing
demand for refined petroleum products, combined with high plant
utilization rates, is driving refineries to upgrade facilities
to make them more efficient and expand
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capacity. In order to sustain high capacity utilization rates,
customers are increasingly using asset protection solutions to
efficiently ensure the integrity and safety of their assets.
Implementation of asset protection solutions can also lead to
increased productivity as a result of reduced
maintenance-related downtime.
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Increasing Corrosion from Low-Quality Inputs. High
commodities prices and increasing energy demands have led to the
use of lower grade raw materials and feedstocks, such as
low-grade coal or petroleum, used in refinery and power
generation processes. These lower grade raw materials and
feedstocks, especially in the case of the refining process, can
rapidly corrode the infrastructure they come into contact with,
which in turn increases the need for asset protection solutions
to identify such corrosion and enable infrastructure owners to
proactively combat the problems caused by such corrosion.
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Increasing Use of Advanced Materials. Customers in
our target markets are increasingly utilizing advanced
materials, such as composites, and other unique technologies in
the manufacturing and construction of new infrastructure and
aerospace applications. As a result, they require advanced
testing, assessment and maintenance technologies to inspect and
to protect these assets, since many of these advanced materials
cannot be tested using traditional NDT techniques. We believe
that demand for NDT solutions will increase as companies and
public authorities continue to use these advanced materials, not
only during the operating phase of the lifecycle of their
assets, but also during the design, manufacturing and quality
control phases and integrating and embedding sensors directly
into the end product in support of total life cycle asset
management.
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Meeting Safety Regulations. Owners and operators of
infrastructure assets increasingly face strict government
regulations and safety requirements. Failure to meet these
standards can result in significant financial liabilities,
increased scrutiny by OSHA and other regulators, higher
insurance premiums and tarnished corporate brand value. There
have been several industrial accidents, including explosions and
fires, in recent years. These accidents created significant
damage to the reputation of refineries and coupled with concern
by owners, led OSHA to strengthen process safety enforcement
standards with the implementation of the National Emphasis
Program (NEP) that also extends to chemical plants for
compliance with Process Safety Management
Regulation 29 CFR 1919.119. As a result, these owners
and operators are seeking highly reliable asset protection
suppliers with a proven track record of providing asset
protection services, products and systems to assist them in
meeting these increasingly stringent regulations.
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Expanding Addressable End-Markets. Advances in NDT
sensor technology and asset protection software systems, and the
continued emergence of new technologies, are creating increased
demand for asset protection solutions in applications where
existing techniques were previously ineffective. Further, we
expect increased demand in relatively new markets, such as the
pharmaceutical and food processing industries, where
infrastructure is only now aging to a point where significant
maintenance is required.
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Expanding Addressable Geographies. We believe that a
substantial driver of incremental demand will come from
international markets, including Asia, Europe and Latin America.
Specifically, as companies and governments in these markets
build and maintain infrastructure and applications that require
the use of asset protection solutions, we believe demand for our
solutions will increase.
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We believe that the market available to us will continue to grow
rapidly as a result of macro-market trends, including aging
infrastructure, use of more advanced materials, such as
composites, and the increasing outsourcing of asset protection
solutions by companies who historically performed these services
using internal resources.
Our target
markets
We focus our sales, marketing and product development efforts on
a range of infrastructure-intensive industries and governmental
authorities. With our portfolio of asset protection services,
products and systems, we can effectively serve our customer base
throughout the lifecycle of their assets, beginning at the
design stage, through the construction and maintenance phase
and, as necessary, through the decommissioning of their
infrastructure. In general, our largest market in broad terms is
energy related infrastructure.
The rapid increase in world energy prices from 2003 to 2008,
combined with concerns about the environmental consequences of
greenhouse gas emissions, has led to renewed interest in
alternatives to fossil fuels particularly, nuclear
power and renewable resources. As a result, long-term prospects
continue to improve for generation from both nuclear and
renewable energy sources supported by government
incentives and by higher fossil fuel prices. While the problems
in Japans Fukushima-1 nuclear plant stemming from the
March 11, 2011 earthquake and tsunami have heightened
scrutiny about the safety of nuclear energy, the U.S. and other
countries do not appear to be halting construction of new
facilities.
Electricity from coal-fired generation is also expected to
increase, making coal the second fastest-growing source for
electricity generation. The outlook for coal could be altered
substantially, however, by any future legislation that would
reduce or limit the growth of greenhouse gas emissions.
Oil and
gas
Liquids including oil and gas remain the worlds largest
energy source given their importance in the transportation and
industrial end-use sectors. World crude oil and liquid fuels
consumption grew by an estimated 2.4 million barrels per
day in 2010 to 86.7 million barrels per day, the second
largest annual increase in at least 30 years. This growth
more than offset the reductions in demand during the prior two
years and surpassed the 2007 consumption level of
86.3 million barrels per day. The United States Energy
Information Administration (EIA) expects that world liquid fuels
consumption will grow by 1.5 million barrels per day in
2011 and by an additional 1.7 million barrels per day in
2012. Countries outside of the Organization for Economic
Cooperation and Development (OECD) will make up almost all of
the growth in consumption over the next 2 years, with the
largest demand increases coming from China, Brazil, and the
Middle East. The EIA expects that, among the OECD regions, North
America will show growth in oil consumption over the next two
years, offsetting declines in OECD Europe and Asia.
According to the EIA, in 2009 coal, oil and gas still supplied
approximately 80% of the global primary energy demand. A recent
report published by the National Petroleum Council (NPC) in the
United States predicted a 50 60% growth in total
global demand for energy by 2030. Because oil, gas, and coal
will continue to be the primary energy sources during this time,
the energy industry will have to continue increasing the supply
of these fuels to meet this increasing demand. In addition,
there were approximately 700 crude oil refineries in the world,
with 148 refineries operating in the United States. High energy
prices are driving consistently high
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utilization rates at these facilities. With aging infrastructure
and growing capacity constraints, asset protection continues to
grow as an indispensable tool in maintenance planning, quality
control and prevention of catastrophic failure in refineries and
petrochemical plants. Recent high oil and fossil fuel input
prices have placed additional pressure on industry participants
to increase capacity, focus on production efficiency and cost
reductions and shorten shut-down time or
turnarounds. Asset protection solutions are used for
both off-stream inspections, or inspection when the tested
infrastructure is shut-down, and increasingly,
on-stream
inspections, or inspection when the tested infrastructure is
operating at normal levels. While we expect off-stream
inspection of vessels and piping during a plant shut-down or
turnaround to remain a routine practice by companies in these
industries, we expect the areas of greatest future growth to
occur as a result of on-stream inspections and monitoring of
facilities, such as offshore platforms, transport systems and
oil and gas transmission lines, because of the substantial
opportunity costs of shutting them down. On-stream inspection
enables companies to avoid the costs associated with shutdowns
during testing while enabling the economic and safety advantages
of advanced planning or predictive maintenance.
Traditional power
generation and transmission
Asset protection in the power industry has traditionally been
associated with the inspection of high-energy, critical steam
piping, boilers, rotating equipment, utility aerial man-lift
devices, large transformer testing and various other
applications for nuclear and fossil-fuel based power plants. We
believe that in recent years the use of asset protection
solutions have grown rapidly in this industry due to the aging
of critical power generation and transmission infrastructure.
For instance, the average age of a nuclear power plant in the
United States is over 30 years. Furthermore, global demand
for power generation and transmission has grown rapidly and is
expected to continue, primarily as a result of the energy needs
of emerging economies such as China and India. The areas of
traditional power generation and transmission that we focus our
efforts on are nuclear, fossil and wind.
Other process
industries
The process industries, or industries in which raw materials are
treated or prepared in a series of stages, include chemicals,
pharmaceuticals, food processing and paper and pulp. Three
process industries that we focus our efforts on are chemical,
pharmaceuticals and food processing. As with oil and gas
processing facilities, chemical processing facilities require
significant spending on maintenance and monitoring. Given their
aging infrastructure, growing capacity constraints and
increasing capital costs, we believe asset protection solutions
continue to grow in importance in maintenance planning, quality
and cost control and prevention of catastrophic failure in the
chemicals industry. Although the pharmaceuticals and food
processing industries have historically not employed asset
protection solutions as much as other industries, we are now
seeing these industries increase the use of asset protection
solutions throughout their manufacturing and other processes.
Public
infrastructure
We believe that high profile infrastructure catastrophes, such
as the collapse of the
I-35W Mississippi
River bridge in Minneapolis, have caused public authorities to
more actively seek ways to prevent similar events from
occurring. Public authorities tasked with the construction of
new, and maintenance of existing, public infrastructure,
including bridges and highways,
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increasingly use asset protection solutions to test and inspect
these assets. Importantly, these authorities now employ asset
protection solutions throughout the life of these assets, from
their original design and construction, with the use of embedded
sensing devices to enable on-line monitoring, through ongoing
maintenance requirements. Nearly 25% of the approximately
600,000 public roads and bridges in the U.S. are classified
as deficient, according to the U.S. Federal
Highway Administration. An immediate cost-beneficial
investment aimed at replacing or repairing deficient bridges may
cost as much as $99 billion, according to the
U.S. Department of Transportation.
This is a target market for our application technology and
experience. Over the last ten years, we have provided testing
and health monitoring on hundreds of bridges and structures
worldwide, among which include some of the largest and
well-known bridges in the United Kingdom, Pennsylvania and the
greater New York metropolitan areas. In July 2010, we were
awarded a continuous on-line Structural Health Monitoring System
contract by the California Department of Transportation to be
installed on the San Francisco Oakland Bay Bridge. As a
result of our continued efforts to offer cost-effective
application technology to address the need for increased safety
measures, we received a $6.9 million project awarded under
the National Institute of Standards and Technology (NIST)
Innovation Program that is intended to bring a transformational
impact in the area of civil infrastructure structural health
monitoring using affordable self-powered wireless sensors.
Aerospace and
defense
The operational safety, reliability, structural integrity and
maintenance of aircraft and associated products is critical to
the aerospace and defense industries. Industry participants
increasingly use asset protection solutions to perform
inspections upon delivery, and also periodically employ asset
protection solutions during the operational service of aircraft,
using advanced ultrasonic immersion systems or digital
radiography in order to precisely detect structural defects.
Industry participants also use asset protection solutions for
the inspection of advanced composites found in new classes of
aircraft, ultrasonic fatigue testing of complete aircraft
structures, corrosion detection and on-board monitoring of
landing gear and other critical components. We expect increased
demand for our solutions from the aerospace industry to result
from wider use of advanced composites and distributed on-line
sensor networks and other embedded analytical applications built
into the structure of assets to enable real-time performance
monitoring and condition-based maintenance.
Primary metals
and metalworking
The quality control requirements driven by the low defect
tolerance within automated, robotic intensive metalwork
industries, such as screw machining, serve as key drivers for
the recent growth of NDT technologies, such as ultrasonics and
radiography. We expect that increasingly stringent quality
control requirements and competitive forces will drive the
demand for more costly finishing and polishing which, in turn,
will promote greater use of NDT throughout the production
lifecycle.
Transportation
The use of asset protection solutions within the transportation
industry is primarily focused in the automotive and rail
segments. Within the automotive segment, manufacturers use asset
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protection solutions throughout the entire design and
development process, including the inspection of raw material
inputs, during in-process manufacturing and, finally, during
end-product testing and analysis. Although asset protection
technologies have been utilized in the automobile industry for a
number of decades, we believe growth in the segment will
increase as automobile manufacturers begin to outsource their
asset protection requirements and take advantage of new
technologies that enable them to more thoroughly inspect their
products throughout the manufacturing process, reduce costs and
shorten time to market. Within the rail segment, asset
protection solutions are used primarily to test rails and
passenger and tank cars.
Our competitive
strengths
We believe the following competitive strengths contribute to our
being a leading provider of asset protection solutions and will
allow us to further capitalize on growth opportunities in our
industry:
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One Source Provider for Asset Protection
Solutions Worldwide. We believe we have the
comprehensive portfolio of proprietary and integrated asset
protection solutions, including services, products and systems
worldwide, which positions us to be the leading single source
provider for a customers asset protection requirements.
Through our network of 78 offices and independent
representatives in 15 countries around the world, we offer an
extensive portfolio of solutions that enables our customers to
consolidate all their inspection requirements and the associated
data storage and analytics on a single system that spans the
customers entire enterprise.
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Long-Standing Trusted Provider to a Diversified and Growing
Customer Base. By providing critical and reliable NDT
services, products and systems for more than 30 years and
expanding our asset protection solutions, we have become a
trusted partner to a large and growing customer base across
numerous infrastructure-intensive industries globally. Our
customers include some of the largest and most well-recognized
firms in the oil and gas, chemical, fossil and nuclear power,
aerospace and defense industries as well as the largest public
authorities.
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Repository of Customer-Specific Inspection Data. Our
enterprise software solutions enable us to capture and warehouse
our customers testing and inspection data in a centralized
database. As a result, we have accumulated large amounts of
proprietary process data and information that allows us to
provide our customers with value-added services, such as
benchmarking, reliability centered maintenance solutions
including predictive maintenance, inspection scheduling, data
analytics and regulatory compliance.
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Proprietary Products, Software and Technology
Packages. We have developed systems that have become
the cornerstone of several high value-added unique NDT
applications, such as those used for the testing of pressure
vessels (the MONPAC technology package) or above-ground storage
tanks (the TANKPAC technology package). These proprietary
products allow us to efficiently and effectively provide highly
valued solutions to our customers complex applications,
resulting in a significant competitive advantage. In addition to
the proprietary products and systems that we sell to customers
on a stand-alone basis, we also develop a range of proprietary
sensors, instruments, systems and software used exclusively by
our Services segment.
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Deep Domain Knowledge and Extensive Industry
Experience. We are an industry leader in developing
advanced asset protection solutions, including acoustic emission
testing for non-intrusive on-line monitoring of storage tanks
and pressure vessels, bridges and transformers,
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portable corrosion mapping, ultrasonic testing (UT) systems,
on-line plant asset integrity management with sensor fusion,
enterprise software solutions for plant-wide and fleet-wide
inspection data archiving and management, advanced and thick
composites inspection and ultrasonic phased array inspection of
thick wall boilers.
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Collaborating with Our Customers. Our asset
protection solutions have historically been designed in response
to our customers unique performance specifications and are
supported by our proprietary technologies. Our sales and
engineering teams work closely with our customers research
and design staff during the design phase in order to incorporate
our products into specified infrastructure projects, as well as
with facilities maintenance personnel to ensure that we are able
to provide the asset protection solutions necessary to meet
these customers changing demands.
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Experienced Management Team. Our management team has
a track record of leadership in NDT, averaging over
20 years experience in the industry. These individuals also
have extensive experience in growing businesses organically and
in acquiring and integrating companies, which we believe is
important to facilitate future growth in the fragmented asset
protection industry. In addition, our senior managers are
supported by highly experienced project managers who are
responsible for delivering our solutions to customers.
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Our growth
strategy
Our growth strategy emphasizes the following key elements:
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Continue to Develop Technology-Enabled Asset Protection
Services, Products and Systems. We intend to maintain
and enhance our technological leadership by continuing to invest
in the internal development of new services, products and
systems. Our highly trained team of Ph.D.s, engineers and
highly-skilled, certified technicians has been instrumental in
developing numerous significant asset protection standards, and
we believe their knowledge base will enable us to innovate a
wide range of new asset protection solutions more rapidly than
our competition.
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Increase Revenues from Our Existing Customers. Many
of our customers are multinational corporations with asset
protection requirements from multiple divisions at multiple
locations across the globe. Currently, we capture a relatively
small portion of their overall expenditures on these solutions.
We believe our superior services, products and systems, combined
with the trend of outsourcing asset protection solutions to a
small number of trusted service providers, positions us to
significantly expand both the number of divisions and locations
that we serve as well as the types of solutions we provide. We
strive to be the preferred global partner for our customers and
aim to become the single source provider for their asset
protection solution requirements.
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Add New Customers in Existing Target Markets. Our
current customer base represents a small fraction of the total
number of companies in our target markets with asset protection
requirements. Our scale, scope of products and services and
expertise in creating technology-enabled solutions have allowed
us to build a reputation for high-quality and has increased
customer awareness about us and our asset protection solutions.
We intend to leverage our reputation and solutions offerings to
win new customers within our existing target markets, especially
as asset protection solutions are adopted internationally. We
intend to continue to leverage our competitive strengths to win
new business as customers in our existing target
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markets continue to seek a single source and trusted provider of
advanced asset protection solutions.
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Expand Our Customer Base into New End Markets. We
believe we have significant opportunities to rapidly expand our
customer base in relatively new end markets, including the
maritime shipping, wind turbine and other alternative energy and
natural gas transportation industries and the market for public
infrastructure, such as highways and bridges. The expansion of
our addressable markets is being driven by the increased
recognition and adoption of asset protection services, products
and systems, and new NDT technologies enabling further
applications in industries such as healthcare and compressed and
liquefied natural gas transportation, and the aging of
infrastructure, such as construction and loading cranes and
ports, to the point where visual inspection has proven
inadequate and new asset protection solutions are required. We
expect to continue to expand our global sales organization, grow
our inspection data management and data mining services and find
new high-value applications, such as embedding our sensor
technology in assembly lines for electronics and distributed
sensor networks for aerospace applications. As companies in
these emerging end markets realize the benefits of our asset
protection solutions, we expect to expand our leadership
position by addressing customer needs and winning new business.
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Continue to Capitalize on Acquisitions. We intend to
continue employing a disciplined acquisition strategy to
broaden, complement and enhance our product and service
offerings, add new customers and certified personnel, expand our
sales channels, supplement our internal development efforts and
accelerate our expected growth. We believe the market for asset
protection solutions is highly fragmented with a large number of
potential acquisition opportunities. We have a proven ability to
integrate complementary businesses, as demonstrated by the
success of our past acquisitions, which have often contributed
entirely new products and services that have added significantly
to our revenues and profitability. In addition, we have begun to
offer and sell our advanced asset protection solutions to
customers of companies we acquired that had previously relied on
traditional NDT solutions. Importantly, we believe we have
improved the operational performance and profitability of our
acquired businesses by successfully integrating and selling a
comprehensive suite of solutions to the customers of these
acquired businesses.
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Our
segments
The Company has three financial segments:
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Services. This segment provides primarily asset
protection solutions primarily in North America with the largest
concentration in the United States, consisting primarily of
non-destructive testing and inspection services that are used to
evaluate the structural integrity of critical energy, industrial
and public infrastructure.
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Products and Systems. This segment designs,
manufactures, sells, installs and services our asset protection
products and systems, including equipment and instrumentation,
predominantly in the United States.
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International. This segment offers services,
products and systems similar to those of our Services and
Products and Systems segments to global markets, principally in
Europe, the Middle East, Africa, Asia and South America, but not
to customers in China and South Korea, which are served by our
Products and Systems segment.
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Our
solutions
We provide comprehensive asset protection solutions to a diverse
customer base. We combine the strengths of our proprietary
products, industry expertise, a suite of software solutions and
our highly skilled and experienced technicians and engineers to
deliver a broad set of inspection, engineering and information
technology services that address the complex business challenges
faced by our customers. Depending on the requirements of our
customers, we can provide them our software and other products
on a stand-alone basis or as a complete
end-to-end
solution consisting of sensor products, services and software.
Importantly, as part of our solutions, we are increasingly
providing on-line asset monitoring and management software
enabling our customers to have real-time access to assess the
structural health of their infrastructure.
Our
services
Our Services segment provides a range of testing and inspection
services to a diversified customer base across energy-related,
industrial and public infrastructure industries. We either
deploy our services directly at the customers location or
through our own extensive network of field testing facilities.
Our global footprint allows us to provide asset protection
solutions through local offices in close proximity to our
customers, permitting us to keep response time and per diem
costs to a minimum, while maximizing our ability to develop
meaningful, collaborative customer relationships. Examples of
our comprehensive portfolio of services include: testing
components of new construction as they are built or assembled,
providing corrosion monitoring data to help customers determine
whether to repair or retire infrastructure, providing material
analysis to ensure the integrity of infrastructure components
and supplying non-invasive on-stream techniques that enable our
customers to pinpoint potential problem areas prior to failure.
In addition, we also provide services to assist in the planning
and scheduling of resources for repairs and maintenance
activities. Our experienced inspection professionals perform
these services, which are supported by our advanced proprietary
software and hardware products.
Traditional NDT
services
Our certified personnel provide a range of traditional
inspection services. For example, our visual inspectors provide
comprehensive assessments of the condition of our
customers plant equipment during capital construction
projects and maintenance shutdowns. Of the broad set of
traditional NDT techniques that we provide, several lend
themselves to integration with our other offerings and often
serve as the initial entry point to more advanced customer
engagements. For example, we provide a comprehensive program for
the inspection of above-ground storage tanks designed to meet
stringent industry standards for the inspection, repair,
alteration and reconstruction of oil and petrochemical storage
tanks. This program includes magnetic flux exclusion for the
rapid detection of floor plate corrosion, advanced ultrasonic
systems and leak detection of floor defects, remote ultrasonic
crawlers for shell and roof inspections and trained, certified
inspectors for visual inspection and documentation.
Advanced NDT
services
In addition to traditional NDT services, we provide a broad
range of proprietary advanced NDT services that we offer on a
stand-alone basis or in combination with software solutions such
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our proprietary enterprise data warehousing and plant condition
monitoring software and systems (PCMS). We also provide on-line
monitoring capabilities and other solutions that enable the
delivery of accurate and real-time information to our customers.
Our advanced NDT services require more complex equipment and
more skilled inspection professionals to operate this equipment
and interpret test results. Some of the technologies and
techniques we use include:
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Automated ultrasonic testing
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Wireless data acquisition
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Guided ultrasonic long wave testing
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On-line plant asset integrity monitoring
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Infrared thermography
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Risk-based inspection
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Phased array ultrasonic testing
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Digital radiography
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Acoustic emission testing
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Sensor fusion (multi-sensor data integration)
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Automated Ultrasonic Phased Array Inspection
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Eddy current testing
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Advanced Infrared Inspection
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Line Scanning Thermography (LST)
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Reliability centered maintenance services (RCM)
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Mechanical
Integrity services
We provide a broad range of MI services that enable our
customers to meet stringent regulatory requirements. These
services increase plant safety, minimize unscheduled downtime
and allow our customers to plan for, repair and replace critical
components and systems before failure occurs. Our services are
designed to complement a comprehensive predictive and
preventative inspection and maintenance program that we can
provide for our customers in addition to the MI services.
Customers of our MI services have, in many instances, also
licensed our PCMS software, which allows for the storage and
analysis of data captured by our testing and inspection products
and services, and implemented this solution to complement our
inspection services.
As a result of the information captured by PCMS and our
risk-based inspection software module we are able to provide a
professional service known as Mechanical Integrity Gap
Analysis for process facilities. Our Mechanical Integrity
Gap Analysis service offers insight into the level of plant
readiness, how best to manage and monitor the integrity of
process facility assets, and how to extend the useful lives of
such assets. Our Mechanical Integrity Gap Analysis service also
assists customers in benchmarking and managing their
infrastructure through key performance indicators and metrics.
Our products and
systems
Our
software
Our software solutions are designed to meet the demands of our
customers data analysis and asset integrity management
requirements. Some of our key software solutions include:
PCMS
enterprise software: asset protection and
reliability
Our PCMS application is an enterprise software system that
allows for the warehousing and analysis of data as captured by
our testing and inspection products and services and convert it
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to valuable information. PCMS allows our customers to design and
develop asset integrity management plans that include:
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optimal systematic testing schedules for their infrastructure
based on real-time data captured by our sensors;
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alerts that notify customers when to perform special testing
services on suspect areas, enabling them to identify and resolve
flaws on a timely basis by using our PCMS risk-based inspection
(RBI) software module; and
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schedules for the maintenance and retirement of assets.
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PCMS also offers advantages by allowing the information it
develops and stores to be organized, linked and synchronized
with enterprise software systems such as SAP. We believe PCMS is
one of the more widely used process condition management
software systems in the world. We estimate that approximately
40% of U.S. refineries, by capacity, currently use PCMS.
This provides us not only with recurring software license fees,
but also marketing opportunities for additional software, asset
integrity management and other asset protection solutions. With
the addition of the RBI module, we expect the use of PCMS to
expand in the future. In addition, our risk-based inspection
application enables PCMS users to test and analyze their assets
operating conditions and other factors, such as operating
temperature range and contact with highly flammable or corrosive
products. This allows customers to classify or rank each asset
according to the probability and consequences of its structural
failure and schedule the appropriate frequency and types of
testing for that asset. We believe our RBI program allows our
customers to appropriately test their infrastructure in a more
cost-effective manner while reducing their overall risk profile,
which typically allows them to reduce their insurance premiums.
Application-based
software
We provide a comprehensive portfolio of application-specific
software products that cover a broad range of materials testing
and analysis methods, for neural networks, pattern recognition,
wavelet analysis and moment tensor analysis.
Some of the key software solutions we offer include:
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Advanced Data Analysis Pattern Recognition & Neural
Networks Software (NOESIS), which enables our AE experts to
develop automated remote monitoring systems for our customers.
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AE Software Platform (AEwin and AEwinPost), which are
Windows-based real time applications software for detection,
processing and analysis which locates the general location of
flaws on or in our customers structures.
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Loose Parts Monitoring Software (LPMS), which is a
software program for monitoring, detecting and evaluating
metallic loose parts in nuclear reactor coolant systems in
accordance with strict industry standards.
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Automated UT and Imaging Analysis Software (UTwin and
UTIA), which is a software platform for analyzing ultrasonic
inspection data and visualizing and identifying the location and
size of potential flaws.
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Technology
packages
In order to address some of the more common problems faced by
our customers, we have developed a number of robust technology
solutions. These packages generally allow more rapid and
effective testing of infrastructure because they minimize the
need for service professionals to customize and integrate asset
protection solutions with the infrastructure and interpret test
results. These packaged solutions use proprietary and
specialized testing procedures and hardware, advanced pattern
recognition, neural network software and databases to compare
test results against our prior testing data or national and
international structural integrity standards. Some of our widely
used technology packages in some of our target markets are:
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Technology
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package
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Type
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Description
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TANKPAC
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AE On-line Tank Floor Inspection
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Tests to monitor for emissions resulting from active corrosion
of the tested infrastructure
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MONPAC
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AE Pressure Vessel Testing
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An AE expert system that evaluates the condition of
metal pressure systems and tanks
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VPAC
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Loss Control for Valves in Process Plants
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Estimates valve leakage based on measurements made using our
inspection products
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POWERPAC
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AE On-line Power Transformer Monitoring
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Through on-line monitoring, detects and locates partial
discharge in power transformers by utilizing AE
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Wire Break
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On-line monitoring of wire breaks in Bridge suspension cables
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On-Line detection and location of wire breaks on suspension
cable bridges
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LeakTEC
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AE Leak detection
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On-Line monitoring and detection of gas and liquid leaks in
pipes and vessels
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Our other
products
AE
products
We are a leader in the design and manufacture of AE sensors,
instruments and turn-key systems used for the monitoring and
testing of materials, pressure components, processes and
structures. Though we principally sell our products as a system,
which includes a combination of sensors, an amplifier, signal
processing electronics, knowledge-based software and decision
and feedback electronics, we can also sell these as individual
components to certain customers that have the in-house expertise
to perform their own services. Our sensors listen to
structures and materials to detect real-time AE activity and to
determine the presence of structural flaws in the inspected
materials. Such materials include pressure vessels, storage
tanks, heat exchangers, piping, turbine blades and reactors.
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In addition, we provide leak monitoring and detection systems
used in diverse applications, including the detection and
location of both gaseous and liquid leaks in valves, vessels,
pipelines and tanks. AE leak monitoring and detection, when
applied in a systematic preventive maintenance program, has
proven to substantially reduce costs by eliminating the need for
visual valve inspection and unscheduled down-time. In addition,
EPA requirements regarding fugitive emissions helps drive the
market for this leak detection equipment.
UT
technology
We design, manufacture and market a full line of ultrasonic
equipment. While AE technology detects flaws and pinpoints their
location, our UT technology has the ability to size defects in
three-dimensional geometric representations. We manufacture a
complete line of UT systems including our line of Automated UT
scanners such as our LSI crawler and Mini-Scanner, our unique
portable UT handheld system with motion control to run our many
inspection scanners, and our immersion systems including small
bench top units to large UT and Gantry systems over 50 feet
long. We also design and fabricate custom scanners as requested
by customers in the metals and aerospace industries.
Vibration
sensors and systems
We design, manufacture and market a broad portfolio of vibration
sensing products under our Vibra-Metrics brand name. These
include a full line of accelerometers (vibration sensors),
on-line condition-based management systems, data delivery
systems and a comprehensive assortment of ancillary support
products. Our patented Sensor Highway monitoring systems offer
fully automated, unattended remote data acquisition and alarm
reporting for rotating mechanical equipment and machines, which
enable us to provide real-time predictive maintenance data to
our customers.
On-line
monitoring
Our on-line monitoring offerings combine all of our asset
protection services, products and systems. We provide temporary,
periodic and continuous monitoring of static infrastructures
such as bridges, pipes, and transformers, as well as dynamic or
rotating assets such as pumps, motors, gearboxes, steam and gas
turbines. Temporary monitoring is typically used when there is a
known defect or problem and the condition needs to be monitored
until repaired or new equipment can be placed in service.
Periodic monitoring, or walk around monitoring, is
used as a preventative maintenance tool to take machine and
device readings, on a periodic basis, to observe any change in
the assets condition such as increased vibration or
unusual heat buildup and dissipation. Continuous monitoring is
applied 24/7 on critical assets to observe the
earliest onset of a defect and track its progression to avoid
catastrophic failure. Since 1988, we have provided these
solutions to over eighty projects for a variety of industries
and applications. Our monitoring systems can be accessed both
on-site and
remotely using state of the art wireless technology and can
interface with customer data via the internet or other
proprietary secured networks. These monitoring systems provide
browser-based hierarchical displays of critical information and
can include alarm and customer notification options using
messaging and email services. By simultaneously using different
sensing devices such as acoustic emission or sound, vibration,
temperature, strain or corrosion gauges, often referred to as
sensor fusion, we can monitor and correlate different sensor
readiness to provide more accurate fault detection and
18
location determination while reducing or eliminating false
alarms. The information can also be used to correct operational
procedures that contributed to the failures.
Customers
During the first nine months of fiscal 2011, we provided our
asset protection solutions to approximately 4,800 different
customers. The following table lists some of our larger
customers by revenues for the first nine months of fiscal 2011,
in each of our target markets.
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Oil & Gas, including
Petrochemicals
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Power Generation &
Transmision
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Aerospace & Defense
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(61.4%)
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(9.5%)
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(4.6%)
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BP
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BE&K
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Aerojet
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Chevron
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Bechtel
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AMSEC
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Conoco Phillips
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Duke
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Carlton Forge Works
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ExxonMobil
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Entergy
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Chen-Tech Industries
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Lyondell
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Exelon
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Danner Corporation
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Marathon Oil
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Lower Colorado River Authority
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Electric Boat
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Petrobas
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Rolls Royce
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General Dynamics
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Shell
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SGT, LLC
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Hitco
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Tesoro
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Southern California Edison
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Indian Navy
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Valero
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Westinghouse
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Schlosser Forge Company
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Public Infrastructure,
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Industrial
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Process Industries
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Research and
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(7.2%)
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(9.1%)
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Engineering (5.0%)
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Alcan
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Air Products
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ADA
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Arcelormittal
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Bayer
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Amey Group
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Doncasters
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Blue Island Phenol
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BECA
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Golden Gate International
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Dow, Rohm, & Haas
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Emergency One Inc
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Jacobs Field Service North America, Inc.
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Dupont
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Humber Bridge Board
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Kaiser
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Equistar
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INRA
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Kent
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Honeywell
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IS
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Titanium Fabrication Corporation
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INEOS
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K-TEK
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Verwater
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Lyondell
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Mistras
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Wollostan Alloy
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Praxair, Inc.
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Watson Cogen Company
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The percentage in each heading above represents the percentage
that target market comprises of our total revenues. The
companies listed under each target market comprise, in total,
the following percentages of the revenues for that target market:
Oil & Gas: 68%
Power Generation: 62%
Aerospace & Defense: 39%
Industrial: 26%
Process Industries: 77%
Public Infrastructure: 35%
We have one customer, BP plc. (BP), which accounted
for 17% and 19% of total revenues for the nine months ended
February 28, 2011 and 2010, respectively. Our relationship
with BP is comprised of separate contracts for non-destructive
testing and inspection services with multiple affiliated
entities within the broad BP organization. We conduct business
with various divisions or affiliates of the BP organization
through numerous contracts covering many segments of BPs
business including downstream (refinery), midstream (pipelines)
and upstream (exploration). These contracts are typically
negotiated locally with the specific location, are of varying
lengths, have different start and end dates and differ in terms
of the scope of work and nature of services provided. Most
contracts are based on time and materials.
Geographic
Areas
We conduct our business in 15 different countries, but our
revenues and income is primarily derived from our
U.S. operations and substantially all of our long-lived
assets are located in the U.S. No individual foreign
country or region accounted for a material portion of the
Companys revenues or had a material amount of the
Companys long-lived assets. Note 20 to our
consolidated financial statements in our annual report on
Form 10-K
for the year ended May 31, 2010 sets forth our revenues,
long-lived assets and other financial information regarding our
international operations.
Seasonality
Our business is seasonal, which is primarily related to our
Services segment. Our first and third fiscal quarter revenues
for our Services segment are typically lower than our revenues
in the second and fourth fiscal quarters because demand for our
asset protection solutions from the oil and gas as well as the
fossil and nuclear power industries increases during their
non-peak production periods. For instance,
U.S. refineries non-peak periods are generally in our
second fiscal quarter, when they are retooling to produce more
heating oil for winter, and in our fourth fiscal quarter, when
they are retooling to produce more gasoline for summer. We
expect that the impact of seasonality on our first and third
fiscal quarter revenues and profitability and second and fourth
fiscal quarter cash flows will continue.
Competition
We operate in a highly competitive, but fragmented, market. Our
primary competitors are divisions of large companies, and many
of our other competitors are small companies, limited to a
specific product or technology and focused on a niche market or
geographic region. We believe that none of our competitors
currently provides the full range of asset protection and NDT
products, enterprise software and the traditional and advanced
services solutions that we
20
offer. Our competition with respect to NDT services include the
Acuren division of Rockwood Service Corporation, SGS Group, the
TCM division of Team, Inc. and APPLUS RTD, which is
majority-owned by The Carlyle Group. Our competition with
respect to our PCMS software includes UltraPIPE, a division of
Siemens, Lloyds Register Capstone, Inc. and Meridium
Systems. Our competition with respect to our ultrasonic products
are GE Inspection Technologies and Olympus NDT. In the
traditional NDT market, we believe the principal competitive
factors are project management, execution, price, reputation and
quality. In the advanced NDT market, reputation, quality and
size are more significant competitive factors than price. In
light of several characteristics of the NDT industry and
obstacles facing competitors, only a few of our existing
competitors can compete with us on a global basis, and we
believe few new companies are likely to enter the market. Some
of the most significant of such characteristics and obstacles
include: (1) having to acquire or develop advanced NDT
services, products and systems technologies, which in our case
occurred over many years of customer engagements and at
significant internal research and development expense,
(2) complex regulations and safety codes that require
significant industry experience, (3) license requirements
and evolved quality and safety programs, (4) costly and
time- consuming certification processes, (5) capital
requirements and (6) emphasis by large customers on size
and critical mass, length of relationship and past service
record.
Centers of
excellence
Another differentiator in our business model is the formation of
our Centers of Excellence (COEs), which we consider
to be incubators of inspection technology. The COEs are focused
around target applications in our key market segments. They are
supported by subject matter experts that will engage in
strategic sales opportunities offering customers value-added
solutions using advanced technologies and methods providing
oversight, management and consultation.
Sales and
marketing
We sell our asset protection solutions through all of our 78
offices worldwide. As of May 31, 2010, our world-wide sales
and marketing team, together with our center of
excellence managers, consisted of 63 employees. In
addition, our project and laboratory managers as well as our
management are trained on our solutions and often are the source
of sales leads and customer contacts. Our direct sales and
marketing teams work closely with our customers research
and design personnel, reliability engineers and facilities
maintenance engineers to demonstrate the benefits and
capabilities of our asset protection solutions, refine our asset
protection solutions based on changing customer needs and
identify potential sales opportunities. We divide our sales and
marketing efforts into services sales, software and other
products sales and marketing.
Our International sales group employs 14 sales managers and
professionals, each of whom is responsible for educating our
existing and potential customers about our asset protection
solutions in the geographical areas outside the United States
other than China and South Korea. The sales cycle for our asset
protection solutions and the agreements under which we provide
them in these areas are substantially similar to those of our
other segments.
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Manufacturing
Our hardware products are manufactured in our Princeton
Junction, New Jersey facility. Our Princeton Junction facility
includes the capabilities and personnel to fully produce all of
our AE products, NDT Automation Ultrasonic equipment and
Vibra-Metrics vibration sensing products.
Intellectual
property
Our success depends, in part, on our ability to maintain and
protect our proprietary technology and to conduct our business
without infringing on the proprietary rights of others. We
utilize a combination of intellectual property safeguards,
including patents, copyrights, trademarks and trade secrets, as
well as employee and third-party confidentiality agreements, to
protect our intellectual property.
As of April 1, 2011, we held 8 patents, all in the United
States which will expire at various times between fiscal 2011
and 2023, and license certain other patents. However, we
currently do not principally rely on these patents or licenses
to provide our proprietary asset protection solutions. Our
trademarks and service marks provide us and our products and
services with a certain amount of brand recognition in our
markets. However, we do not consider any single patent,
trademark or service mark material to our financial condition or
results of operations.
As of April 1, 2011, the primary trademarks and service
marks that we held in the United States included Mistras and our
stylized globe design. Other trademarks or service marks that we
utilize in localized markets or product advertising include
PCMS, Physical Acoustics Corporation (PAC), NOESIS, AEwin,
AEwinPost, UTwin, UTIA, LST, Vibra-Metrics, MONPAC, PERFPAC,
TANKPAC, VPAC, POWERPAC, Sensor Highway, Quality Services
Laboratories Inc. (QSL) and NDT Automation.
Many elements of our asset protection solutions involve
proprietary know-how, technology or data that are not covered by
patents or patent applications because they are not patentable,
or patents covering them would be difficult to enforce,
including technical processes, equipment designs, algorithms and
procedures. We believe that this proprietary know-how,
technology and data is the most important component of our
intellectual property assets used in our asset protection
solutions, and is a primary differentiator of our asset
protection solutions from those of our competitors. We rely on
various trade secret protection techniques and agreements with
our customers, service providers and vendors to protect these
assets. All of our employees in our Products and Systems segment
and certain of our other employees involved in the development
of our intellectual property have entered into confidentiality
and proprietary information agreements with us. These agreements
require our employees not to use or disclose our confidential
information, to assign to us all of the inventions, designs and
technologies they develop during the course of employment with
us, and otherwise address intellectual property protection
issues. We also seek confidentiality agreements from our
customers and business partners before we disclose any sensitive
aspects of our asset protection solutions technology or business
strategies. We are not currently involved in any material
intellectual property claims.
Research and
development
Our research and development is principally conducted by
engineers and scientists at our Princeton Junction, New Jersey
headquarters, and supplemented by other employees in the United
States and throughout the world, including France, Greece,
Japan, Russia and the
22
United Kingdom. Our total professional staff includes
32 employees who hold Ph.D.s, and over 100 engineers
and employees who hold Level III certification, the highest
level of certification from the American Society of
Non-Destructive Testing.
Employees
Providing our asset protection solutions requires a highly
skilled and technically proficient employee base. As of
April 1, 2011, we had approximately 2,700 employees
worldwide and approximately 2,300 of our employees were based
within the United States, of which approximately 87% were
hourly. Less than 10% of our employees in the United States are
unionized. We believe that we have good relations with our
employees.
Environmental
matters
We are subject to numerous environmental, legal and regulatory
requirements related to our operations worldwide. In the United
States, these laws and regulations include, among others: the
Comprehensive Environmental Response, Compensation, and
Liability Act, the Resources Conservation and Recovery Act, the
Clean Air Act, the Federal Water Pollution Control Act, the
Toxic Substances Control Act, the Atomic Energy Act, the Energy
Reorganization Act of 1974, as amended, and applicable state
regulations.
In addition to the federal laws and regulations, states and
other countries where we do business often have numerous
environmental, legal and regulatory requirements by which we
must abide. We evaluate and address the environmental impact of
our operations by assessing properties in order to avoid future
liabilities and comply with environmental, legal and regulatory
requirements. Thus far, we are not involved in specific
environmental litigation or claims, including the remediation of
properties we own or have operated, as well as efforts to meet
or correct compliance-related matters. We do not expect costs
related to environmental matters to have a material adverse
effect on our consolidated cash flows, financial position or
results of operations.
Properties
As of April 1, 2011, we operated 78 offices in 15
countries, with our corporate headquarters located in Princeton
Junction, New Jersey. Our headquarters in Princeton Junction is
our primary location, where our manufacturing and research and
development are conducted. While we lease most of our
facilities, as of April 1, 2011, we owned properties
located in Olds, Alberta; Monroe, North Carolina; Trainer,
Pennsylvania; Houston, Pasadena, and Deer Park, Texas;
Burlington, Washington; and Gillette, Wyoming. These properties,
as well as approximately 50 offices throughout North
America (including Canada), are utilized by our Services
segment. Our Products and Systems segments primary
location is in our Princeton Junction facility. Our
international segment has 19 offices located in Brazil, United
Kingdom, the Netherlands, France, Greece, Russia, Japan and
India.
23
Ratio of earnings
to fixed charges
The following table sets forth our ratio of earnings to fixed
charges for the periods indicated on a consolidated basis. You
should read these ratios of earnings to fixed charges in
connection with our consolidated financial statements, including
the notes to those statements, incorporated by reference into
this prospectus.
In calculating the ratio of earnings to fixed charges,
earnings means the sum of income before income taxes
and fixed charges exclusive of capitalized interest, and
fixed charges means interest expensed and
capitalized, amortized premiums, discounts and capitalized
expenses relating to indebtedness and an estimate of the portion
of annual rental expense on leases that represents the interest
factor.
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Nine-months
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ended
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February 28,
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Year-ended May 31,
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2011
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2010
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2009
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2008
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2007
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2006
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Ratio of Earnings to Fixed Charges(1)
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7.8
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5.3
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0.3
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0.3
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1.2
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0.5
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(1) |
In fiscal 2010, an adjustment of approximately $6.5 million
to reduce the value of the preferred stock (negative
accretion) has been omitted from this table.
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Prior to our IPO in October 2009, we completed several private
placements of our Class A and Class B preferred stock.
These preferred shares included various redemption and
conversion features and were reported outside the equity section
and adjusted to fair value, which represented their redemption
value at each reporting date. Effective upon the closing of the
IPO, all of the preferred shares outstanding as of the offering
were converted into common stock.
24
Risk
factors
Investing in our securities involves significant risks. You
should review carefully the risks and uncertainties described
under the heading Risk Factors contained in, or
incorporated into, the applicable prospectus supplement and any
related free writing prospectus, and under similar headings in
the other documents that are incorporated by reference herein or
therein. Each of the referenced risks and uncertainties could
adversely affect our business, operating results and financial
condition, as well as adversely affect the value of an
investment in our securities. Additional risks not known to us
or that we believe are immaterial may also adversely affect our
business, operating results and financial condition and the
value of an investment in our securities.
Use of
proceeds
Unless otherwise indicated in a prospectus supplement, we intend
to use the net proceeds that we receive from the sale of any
securities by us covered by this prospectus for general
corporate purposes including the reduction of outstanding
indebtedness, acquisitions, capital expenditures and working
capital and any other purposes that we specify in the applicable
prospectus supplement.
We will not receive any proceeds from the sale of the shares of
our common stock by the selling stockholder.
25
The securities we
may offer
We may offer, from time to time, shares of our common stock and
preferred stock, various series of debt securities or warrants
to purchase any of such securities, either individually or in
units, in amounts we will determine from time to time, with a
total value of up to $80,000,000 under this prospectus, at
prices and on terms to be determined by market conditions at the
time of offering. In addition, the selling stockholder may, from
time to time, sell our common stock in one or more offerings, up
to a total of 2,764,401 shares of our common stock. This
prospectus provides you with a general description of these
securities. See Description of Capital Stock,
Description of Warrants, Description of Debt
Securities and Description of Units. Each time
we offer a type or series of securities, we will provide a
prospectus supplement that will describe the specific amounts,
prices and other important terms of the securities, including,
to the extent applicable:
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designation or classification;
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aggregate principal amount or aggregate offering price;
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maturity, if applicable;
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rates and times of payment of interest or dividends, if any;
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redemption, conversion or sinking fund terms, if any;
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voting or other rights, if any;
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conversion prices, if any; and
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important federal income tax considerations.
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The prospectus supplement and any related free writing
prospectus we file with the SEC also may supplement, or, as
applicable, add, update or change information contained in this
prospectus or in documents we have incorporated by reference.
However, no prospectus supplement or free writing prospectus
will offer a security that is not registered and described in
this prospectus at the time of the effectiveness of the
registration statement of which this prospectus is a part.
The terms of any particular offering, the initial offering price
and the net proceeds to us will be contained in the prospectus
supplement, information incorporated by reference or in a free
writing prospectus we file with the SEC relating to such
offering.
26
Description of
capital stock
The following is a description of the material terms of our
second amended and restated certificate of incorporation and
bylaws. We refer to our certificate of incorporation as so
amended as our certificate of incorporation. The certificate of
incorporation, authorizes us to issue 200,000,000 shares of
common stock, par value $0.01 per share, and
10,000,000 shares of preferred stock, par value $0.01 per
share.
Common
stock
As of April 1, 2011, there were outstanding
26,780,181 shares of common stock held of record by 20
stockholders. In addition, there were approximately
2,874,000 shares of common stock reserved for issuance upon
exercise of outstanding stock options, of which approximately
876,000 were vested, and approximately 217,000 shares of
common stock reserved for issuance upon vesting of restricted
stock units.
Holders of common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of the
stockholders and do not have cumulative voting rights. Subject
to preferences that may be applicable to any outstanding shares
of preferred stock, holders of common stock are entitled to
receive ratably such dividends, if any, as may be declared from
time to time by our board of directors out of funds legally
available for dividend payments. Covenants in our outstanding
senior secured credit facility restrict our ability to pay
dividends on common stock. All outstanding shares of common
stock are fully paid and nonassessable. The holders of common
stock have no preferences or rights of conversion, exchange,
pre-emption or other subscription rights. There are no
redemption or sinking fund provisions applicable to the common
stock. In the event of any liquidation, dissolution or
winding-up
of our affairs, holders of common stock will be entitled to
share ratably in our assets that are remaining after payment or
provision for payment of all of our debts and obligations and
after liquidation payments to holders of outstanding shares of
preferred stock, if any.
Preferred
stock
As of April 1, 2011, there were no outstanding shares of
preferred stock and we have no present plans to issue any shares
of preferred stock. Under the terms of our certificate of
incorporation, our board of directors is authorized to issue
shares of preferred stock in one or more series without
stockholder approval. Our board of directors has the discretion
to determine the rights, preferences, privileges and
restrictions, including voting rights, dividend rights,
conversion rights, redemption privileges and liquidation
preferences, of each series of preferred stock. There are no
restrictions presently on the repurchase or redemption of any
shares of our preferred stock. Preferred stock will be fully
paid and nonassessable upon issuance.
The following description of preferred stock and the description
of the terms of any particular series of preferred stock that we
choose to issue hereunder and that will be set forth in the
related prospectus supplement are not complete. These
descriptions are qualified in their entirety by reference to our
certificate of incorporation and the certificate of designation
relating to any series of preferred stock. The rights,
preferences, privileges and restrictions of the preferred stock
of each series will be fixed by the certificate of designation
relating to that series. The prospectus supplement also will
contain a description of certain United States federal income
tax consequences relating to the purchase and ownership of the
series of preferred stock that is described in the prospectus
supplement.
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The prospectus supplement for a series of preferred stock will
specify:
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the maximum number of shares;
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the designation of the shares;
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the annual dividend rate, if any, whether the dividend rate is
fixed or variable, the date or dates on which dividends will
accrue, the dividend payment dates, and whether dividends will
be cumulative;
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the price and the terms and conditions for redemption, if any,
including redemption at our option or at the option of the
holders, including the time period for redemption, and any
accumulated dividends or premiums;
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the liquidation preference, if any, and any accumulated
dividends upon the liquidation, dissolution or winding up of our
affairs;
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any sinking fund or similar provision, and, if so, the terms and
provisions relating to the purpose and operation of the fund;
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the terms and conditions, if any, for conversion or exchange of
shares of any other class or classes of our capital stock or any
series of any other class or classes, or of any other series of
the same class, or any other securities or assets, including the
price or the rate of conversion or exchange and the method, if
any, of adjustment;
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the voting rights; and
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any or all other preferences and relative, participating,
optional or other special rights, privileges or qualifications,
limitations or restrictions.
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The issuance of preferred stock will affect, and may adversely
affect, the rights of holders of common stock. It is not
possible to state the actual effect of the issuance of any
shares of preferred stock on the rights of holders of common
stock until our board of directors determines the specific
rights attached to that preferred stock. The effects of issuing
preferred stock could include one or more of the following:
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acquisition of us by means of a tender offer;
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acquisition of us by means of a proxy contest or otherwise; or
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removal of our incumbent officers and directors.
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Anti-Takeover
effects of Delaware Law and our certificate of incorporation and
bylaws
Certain provisions of Delaware law, our certificate of
incorporation and our bylaws contain provisions that could have
the effect of delaying, deferring or discouraging another party
from acquiring control of our company. These provisions, which
are summarized below, may have the effect of discouraging
coercive takeover practices and inadequate takeover bids. These
provisions are also designed, in part, to encourage persons
seeking to acquire control of our company to first negotiate
with our board of directors. We believe that the benefits of
increased protection of our potential ability to negotiate with
an unfriendly or unsolicited acquiror outweigh the disadvantages
of discouraging a proposal to acquire our company because
negotiation of these proposals could result in an improvement of
their terms.
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Delaware
Law
We are subject to the provisions of Section 203 of the
Delaware General Corporation Law regulating corporate takeovers.
In general, Section 203 prohibits a publicly held Delaware
corporation from engaging, under certain circumstances, in a
business combination with an interested stockholder for a period
of three years following the date on which the person became an
interested stockholder unless:
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Prior to the date of the transaction, the board of directors of
the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an
interested stockholder;
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Upon completion of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the voting stock
outstanding, but not the outstanding voting stock owned by the
interested stockholder, (1) shares owned by persons who are
directors and also officers and (2) shares owned by
employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange
offer; or
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On or subsequent to the date of the transaction, the business
combination is approved by the board of directors and authorized
at an annual or special meeting of stockholders, and not by
written consent, by the affirmative vote of at least two-thirds
of the outstanding voting stock that is not owned by the
interested stockholder.
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Generally, a business combination includes a merger, asset or
stock sale or other transaction resulting in a financial benefit
to the interested stockholder. An interested stockholder is a
person who, together with affiliates and associates, owns or,
within three years prior to the determination of interested
stockholder status, did own 15% or more of a corporations
outstanding voting stock. We expect the existence of this
provision of the Delaware General Corporation Law to have an
anti-takeover effect with respect to transactions our board of
directors does not approve in advance. We also anticipate that
Section 203 may also discourage attempts that might result
in a premium over the market price for the shares of common
stock held by stockholders.
Certificate of
incorporation and bylaw provisions
Certain provisions of our certificate of incorporation and
bylaws may have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from
attempting to acquire, control of our company. Such provisions
could limit the price that certain investors might be willing to
pay in the future for shares of our common stock and may limit
the ability of stockholders to remove current management or
directors or approve transactions that stockholders may deem to
be in their best interest and, therefore, could adversely affect
the price of our common stock.
Undesignated Preferred Stock. As discussed above,
our board of directors has the ability to issue preferred stock
with voting or other rights or preferences that could impede the
success of any attempt to change control of our company. These
and other provisions may have the effect of deferring hostile
takeovers or delaying changes in control or management of our
company.
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Inability of Stockholders to Act by Written
Consent. We have provided in our certificate of
incorporation that our stockholders may not act by written
consent. This limit on the ability of our stockholders to act by
written consent may lengthen the amount of time required to take
stockholder actions. As a result, a holder controlling a
majority of our capital stock would not be able to amend our
bylaws or remove directors without holding a meeting of our
stockholders called in accordance with our bylaws.
Calling of Special Meetings of Stockholders. Our
bylaws provide that special meetings of the stockholders may be
called by the Chairman of the Board, the Chief Executive Officer
or by the board of directors acting pursuant to a resolution
adopted by a majority of the directors then in office.
Additionally, our bylaws provide that only stockholders entitled
to cast not less than 35% of all the votes entitled to be cast
at a special meeting of stockholders can require the Secretary
to call such a special meeting, subject to the satisfaction of
certain procedural and informational requirements. These
provisions may impair or prevent smaller stockholders from
forcing consideration of a proposal, including the removal of
directors.
Requirements for Advance Notification of Stockholder
Nominations and Proposals. Our bylaws establish advance
notice procedures with respect to stockholder proposals and the
nomination of candidates for election as directors, other than
nominations made by or at the direction of the board of
directors or a committee of the board of directors. However, our
bylaws may have the effect of precluding the conduct of certain
business at a meeting if the proper procedures are not followed.
Any proposed business other than the nomination of persons for
election to our board of directors must constitute a proper
matter for stockholder action pursuant to the notice of meeting
delivered to us. For notice to be timely, it must be received by
our secretary not later than 90 nor earlier than 120 calendar
days prior to the first anniversary of the previous years
annual meeting (or if the date of the annual meeting is advanced
more than 30 calendar days or delayed by more than 60 calendar
days from such anniversary date, not later than 90 nor earlier
than 120 calendar days prior to such meeting or the
10th calendar day after public disclosure of the date of
such meeting is first made). These provisions may also
discourage or deter a potential acquiror from conducting a
solicitation of proxies to elect the acquirors own slate
of directors or otherwise attempting to obtain control of our
company.
Board Vacancies Filled Only by Majority of Directors Then in
Office. Vacancies and newly created seats on our board
may be filled only by our board of directors. Only our board of
directors may determine the number of directors on our board.
The inability of stockholders to determine the number of
directors or to fill vacancies or newly created seats on the
board makes it more difficult to change the composition of our
board of directors.
No Cumulative Voting. The Delaware General
Corporation Law provides that stockholders are not entitled to
the right to cumulate votes in the election of directors unless
our certificate of incorporation provides otherwise. Our
certificate of incorporation expressly prohibits cumulative
voting.
Directors Removed Only for Cause. Our certificate of
incorporation provides that directors may be removed by
stockholders only for cause.
The provisions of Delaware law, our certificate of incorporation
and our amended and restated bylaws could have the effect of
discouraging others from attempting hostile takeovers and, as a
consequence, they may also inhibit temporary fluctuations in the
market price of our common stock that often result from actual
or rumored hostile takeover attempts. These provisions may also
have the effect of preventing changes in our management. It is
possible that these
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provisions could make it more difficult to accomplish
transactions that stockholders may otherwise deem to be in their
best interests.
Limitation of
liability and indemnification
Our certificate of incorporation contains provisions that limit
the personal liability of each of our directors for monetary
damages for breach of fiduciary duty as a director to the
fullest extent permitted by the DGCL. The inclusion of this
provision in our certificate of incorporation may have the
effect of reducing the likelihood of derivative litigation
against directors, and may discourage or deter stockholders or
management from bringing a lawsuit against directors for breach
of their duty of care, even though such an action, if
successful, might otherwise have benefited us and our
stockholders.
Our certificate of incorporation further provides that we may
indemnify and hold harmless each person who was or is made a
party or is threatened to be made a party to or is otherwise
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact
that he or she is or was a director or officer of our company to
the fullest extent permitted by the DGCL. Our bylaws provide
that we must indemnify any director or officer of the
corporation, and may indemnify any other person, who
(a) was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation) by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses
(including attorneys fees), judgments, fines, and amounts
paid in settlement actually and reasonably incurred by that
person in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her
conduct was unlawful, and (b) was or is a party or is
threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation
to procure a judgment in its favor by reason of the fact that he
or she is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys fees)
actually and reasonably incurred by that person in connection
with the defense or settlement of such action or suit if he or
she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless
and only to the extent that the Delaware Court of Chancery or
the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other
court shall deem proper.
Our bylaws provide a right of indemnification that includes the
right to have paid by us the expenses, including attorneys
fees, incurred by any of our officers or directors in defending
any such proceeding in advance of its final disposition. If
Delaware law so requires, however, the advancement of such
expenses incurred by a director or officer in such persons
capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such
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person) will only be made upon the delivery to us of an
undertaking by or on behalf of such person to repay all amounts
so advanced if it shall ultimately be determined by final
judicial decision that such person is not entitled to be
indemnified for such expenses by us.
We have entered into indemnity agreements with our directors and
certain of our executive officers for the indemnification and
advancement of expenses to these persons. We believe that these
provisions and agreements are necessary to attract and retain
qualified directors and executive officers. We also intend to
enter into these agreements with our future directors and
certain of our executive officers. Insofar as indemnification
for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling our
company pursuant to the foregoing provisions, we have been
informed that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
There is currently no pending material litigation or proceeding
involving any director, executive officer, employee or agent
where indemnification will be required or permitted. We are not
aware of any threatened litigation or proceeding that might
result in a claim for such indemnification.
Registration
rights
The holders of 3,186,836 shares of our common stock which
were issued upon conversion of the preferred stock outstanding
prior to our initial public offering, or their permitted
transferees, are entitled to rights with respect to the
registration of these shares under the Securities Act. These
rights are provided under the terms of an amended and restated
registration rights agreement between us and the holders of
these shares, and include demand registration rights, short form
registration rights and piggyback registration rights. We are
generally required to pay all expenses incurred in connection
with registrations effected in connection with the following
rights, including expenses of counsel to the registering
security holders up to $35,000 related to any demand or short
form registration and up to $45,000 related to any piggyback
registration. All underwriting discounts and selling commissions
will be borne by the holders of the shares being registered.
Demand registration rights. Subject to specified
limitations, the holders a majority of these registrable
securities may require that we register all or a portion of
these securities for sale under the Securities Act, if the
anticipated gross receipts from the sale of such securities are
at least $2.5 million. Stockholders with these registration
rights who are not part of an initial registration demand are
entitled to notice and are entitled to include their shares of
common stock in the registration. We are required to effect only
two registrations pursuant to this provision of the registration
agreement.
Short form registration rights. If we are eligible
to file registration statements on
Form S-3,
subject to specified limitations, the holders of not less than
25% of these registrable securities can require us to register
all or a portion of their registrable securities on
Form S-3,
if the anticipated aggregate offering price of such securities
is at least $500,000. We may not be required to effect more than
two such registrations in any
12-month
period. Stockholders with these registration rights who are not
part of an initial registration demand are entitled to notice
and are entitled to include their shares of common stock in the
registration.
Piggyback registration rights. If at any time we
propose to register any of our equity securities under the
Securities Act, other than in connection with (i) a demand
registration described
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above, (ii) a registration relating solely to our stock
option plans or other employee benefit plans or (iii) a
registration relating solely to a business combination or merger
involving our company, the holders of these registrable
securities are entitled to notice of such registration and are
entitled to include their shares of capital stock in the
registration. The underwriters, if any, may limit the number of
shares included in the underwritten offering if they believe
that including these shares would adversely affect the offering.
Transfer agent
and registrar
The transfer agent and registrar for the common stock is
American Stock Transfer and Trust Company. Its address is
6201 15th Avenue, Brooklyn, New York, New York 11219, and its
telephone number is
(800) 937-5449.
Listing
Our common stock is listed on the New York Stock Exchange under
the symbol MG.
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Description of
warrants
General
We may issue warrants to purchase debt securities, common stock,
preferred stock or any combination of these securities. We may
issue the warrants independently or together with any underlying
securities, and the warrants may be attached or separate from
the underlying securities. We may also issue a series of
warrants under a separate warrant agreement to be entered into
between us and a warrant agent. The warrant agent will act
solely as our agent in connection with the warrants of such
series and will not assume any obligation or relationship of
agency for or with holders or beneficial owners of warrants.
The following description is a summary of selected provisions
relating to the warrants that we may issue. The summary is not
complete. When warrants are offered in the future, a prospectus
supplement, information incorporated by reference or a free
writing prospectus we file with the SEC, as applicable, will
explain the particular terms of those securities and the extent
to which these general provisions may apply. The specific terms
of the warrants as described in a prospectus supplement,
information incorporated by reference, or other offering
material will supplement and, if applicable, may modify or
replace the general terms described in this section.
This summary and any description of warrants in the applicable
prospectus supplement, information incorporated by reference or
free writing prospectus we file with the SEC is subject to and
is qualified in its entirety by reference to all the provisions
of any specific warrant document or agreement. We will file each
of these documents, as applicable, with the SEC and incorporate
them by reference as an exhibit to the registration statement of
which this prospectus is a part on or before the time we issue a
series of warrants. See Where You Can Find More
Information and Incorporation of Certain Documents
by Reference for information on how to obtain a copy of a
document when it is filed.
When we refer to a series of warrants, we mean all warrants
issued as part of the same series under the applicable warrant
agreement.
Terms
The applicable prospectus supplement, information incorporated
by reference or free writing prospectus we file with the SEC,
may describe the terms of any warrants that we may offer,
including but not limited to the following:
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the title of the warrants;
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the total number of warrants;
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the exercise price or prices at which the warrants will be
issued;
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the currency or currencies that investors may use to pay for the
warrants;
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the date on which the right to exercise the warrants will
commence and the date on which the right will expire;
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whether the warrants will be issued in registered form or bearer
form;
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information with respect to book-entry procedures, if any;
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if applicable, the minimum or maximum amount of warrants that
may be exercised at any one time;
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if applicable, the designation and terms of the underlying
securities with which the warrants are issued and the number of
warrants issued with each underlying security;
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if applicable, the date on and after which the warrants and the
related underlying securities will be separately transferable;
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if applicable, a discussion of material United States federal
income tax considerations;
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if applicable, the terms of redemption of the warrants;
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the identity of the warrant agent, if any;
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the procedures and conditions relating to the exercise of the
warrants; and
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any other terms of the warrants, including terms, procedures,
and limitations relating to the exchange and exercise of the
warrants.
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Warrant
agreements
We may issue the warrants in one or more series under one or
more warrant agreements, each to be entered into between us and
a bank, trust company, or other financial institution as warrant
agent. We may add, replace, or terminate warrant agents from
time to time. We may also choose to act as our own warrant agent
or may choose one of our subsidiaries to do so.
The warrant agent under a warrant agreement will act solely as
our agent in connection with the warrants issued under that
agreement. The warrant agent will not assume any obligation or
relationship of agency or trust for or with any holders of those
warrants. Any holder of warrants may, without the consent of any
other person, enforce by appropriate legal action, on its own
behalf, its right to exercise those warrants in accordance with
their terms.
Form, exchange,
and transfer
We may issue the warrants in registered form or bearer form.
Warrants issued in registered form, i.e., book-entry form, will
be represented by a global security registered in the name of a
depository, which will be the holder of all the warrants
represented by the global security. Those investors who own
beneficial interests in a global warrant will do so through
participants in the depositorys system, and the rights of
these indirect owners will be governed solely by the applicable
procedures of the depository and its participants. In addition,
we may issue warrants in non-global form, i.e., bearer form. If
any warrants are issued in non-global form, warrant certificates
may be exchanged for new warrant certificates of different
denominations, and holders may exchange, transfer, or exercise
their warrants at the warrant agents office or any other
office indicated in the applicable prospectus supplement,
information incorporated by reference or other offering material.
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Exercise of
warrants
A warrant will entitle the holder to purchase for cash (or other
consideration, if so provided in the warrant) an amount of
securities at an exercise price that will be stated in, or that
will be determinable as described in, the applicable prospectus
supplement, information incorporated by reference or in a free
writing prospectus we file with the SEC. Warrants may be
exercised at any time up to the close of business on the
expiration date set forth in the applicable offering material.
After the close of business on the expiration date, unexercised
warrants will become void. Warrants may be redeemed as set forth
in the applicable offering material.
Warrants may be exercised as set forth in the applicable
offering material. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the
corporate trust office of the warrant agent or any other office
indicated in the applicable offering material, we will forward,
as soon as practicable, the securities purchased upon such
exercise. If less than all of the warrants represented by such
warrant certificate are exercised, a new warrant certificate
will be issued for the remaining warrants.
Prior to the exercise of their warrants, holders of warrants
exercisable for debt securities will not have any of the rights
of holders of the debt securities purchasable upon such exercise
and will not be entitled to payments of principal (or premium,
if any) or interest, if any, on the debt securities purchasable
upon such exercise. Prior to the exercise of their warrants,
holders of warrants exercisable for shares of preferred stock or
common stock will not have any rights of holders of the
preferred stock or common stock purchasable upon such exercise
and will not be entitled to dividend payments, if any, or voting
rights of the preferred stock or common stock purchasable upon
such exercise.
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Description of
debt securities
The debt securities may be either secured or unsecured and
either will be senior debt securities or subordinated debt
securities of the company. The debt securities will be issued
under one or more separate indentures between us and a trustee
to be specified in an accompanying prospectus supplement. Senior
debt securities will be issued under a senior indenture and
subordinated debt securities will be issued under a subordinated
indenture. Together, the senior indenture and the subordinated
indenture are called indentures in this description. This
prospectus, together with the applicable prospectus supplement,
will describe the terms of a particular series of debt
securities.
The following is a summary of selected provisions and
definitions of the indentures and debt securities to which any
prospectus supplement may relate. The summary of selected
provisions of the indentures and the debt securities appearing
below is not complete and is subject to, and qualified entirely
by reference to, all of the provisions of the applicable
indenture and certificates evidencing the applicable debt
securities. Other specific terms of the applicable indenture and
debt securities will be described in the applicable prospectus
supplement. For additional information, you should look at the
applicable indenture and the certificate evidencing the
applicable debt security that is filed as an exhibit to the
registration statement that includes the prospectus. If any
particular terms of the indenture or debt securities described
in a prospectus supplement differ from any of the terms
described below, then the terms described below will be deemed
to have been superseded by that prospectus supplement. In this
description of the debt securities, the words we,
us, our or the company refer
only to Mistras Group, Inc. and not to any of our subsidiaries,
unless we expressly state or the context otherwise requires.
General
Debt securities may be issued in separate series without
limitation as to aggregate principal amount. We may specify a
maximum aggregate principal amount for the debt securities of
any series.
We are not limited as to the amount of debt securities we may
issue under the indentures. Unless otherwise provided in a
prospectus supplement, a series of debt securities may be
reopened to issue additional debt securities of such series.
We expect that the prospectus supplement relating to a
particular series of debt securities will set forth:
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whether the debt securities are senior or subordinated;
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the offering price;
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the title;
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any limit on the aggregate principal amount;
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the person who shall be entitled to receive interest, if other
than the record holder on the record date;
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the date or dates the principal will be payable;
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the interest rate or rates, which may be fixed or variable, if
any, the date from which interest will accrue, the interest
payment dates and the regular record dates, or the method for
calculating the dates and rates;
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the place where payments may be made;
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any mandatory or optional redemption provisions or sinking fund
provisions and any applicable redemption or purchase prices
associated with these provisions;
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if issued other than in denominations of U.S. $1,000 or any
multiple of U.S. $1,000, the denominations in which the
debt securities shall be issuable;
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if applicable, the method for determining how the principal,
premium, if any, or interest will be calculated by reference to
an index or formula;
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if other than U.S. currency, the currency or currency units
in which principal, premium, if any, or interest will be payable
and whether we or a holder may elect payment to be made in a
different currency;
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if the principal, premium, if any, or interest will be payable
at the election of the company or holder in one or more
currencies or currency units other than that or those stated by
the debt securities, the currency or currency units in which
such payments shall be payable, the periods within which and the
terms and conditions upon which such election is to be made and
the amount so payable;
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the portion of the principal amount that will be payable upon
acceleration of maturity, if other than the entire principal
amount;
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if the principal amount payable at stated maturity will not be
determinable as of any date prior to stated maturity, the amount
or method for determining the amount which will be deemed to be
the principal amount;
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if applicable, that the debt securities shall be subject to the
defeasance provisions described below under Satisfaction
and discharge; defeasance or such other defeasance
provisions specified in the applicable prospectus supplement for
the debt securities;
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any conversion or exchange provisions;
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whether the debt securities will be issuable in the form of a
global security;
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any subordination provisions applicable to the subordinated debt
securities if different from those described below under
Subordinated debt securities;
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any paying agents, authenticating agents, security registrars or
other agents for the debt securities, if other than the trustee;
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any provisions relating to any security provided for the debt
securities, including any provisions regarding the circumstances
under which collateral may be released or substituted;
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any deletions of, or changes or additions to, the events of
default, acceleration provisions or covenants;
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any provisions relating to guaranties for the debt securities
and any circumstances under which there may be additional
obligors;
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any provisions granting special rights to holders when a
specified event occurs;
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any special interest premium or other premium; and
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any other specific terms of such debt securities.
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Unless otherwise specified in the prospectus supplement, the
debt securities will be registered debt securities. Debt
securities may be sold at a substantial discount below their
stated principal amount, bearing no interest or interest at a
rate which at the time of issuance is below market rates. The
U.S. federal income tax considerations applicable to debt
securities sold at a discount will be described in the
applicable prospectus supplement.
Exchange and
transfer
Debt securities may be transferred or exchanged at the office of
the security registrar or at the office of any transfer agent
designated by us.
We will not impose a service charge for any transfer or
exchange, but we may require holders to pay any tax or other
governmental charges associated with any transfer or exchange.
In the event of any partial redemption of debt securities of any
series, we will not be required to:
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issue, register the transfer of, or exchange, any debt security
of that series during a period beginning at the opening of
business 15 days before the day of mailing of a notice of
redemption and ending at the close of business on the day of the
mailing; or
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register the transfer of or exchange any debt security of that
series selected for redemption, in whole or in part, except the
unredeemed portion being redeemed in part.
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We will appoint the trustee as the initial security registrar.
Any transfer agent, in addition to the security registrar
initially designated by us, will be named in the prospectus
supplement. We may designate additional transfer agents or
change transfer agents or change the office of the transfer
agent. However, we will be required to maintain a transfer agent
in each place of payment for the debt securities of each series.
Global
securities
The debt securities of any series may be represented, in whole
or in part, by one or more global securities. Each global
security will:
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be registered in the name of a depositary, or its nominee, that
we will identify in a prospectus supplement;
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be delivered to the depositary or nominee or custodian; and
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bear any required legends.
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The prospectus supplement for any series of debt securities will
set forth the provisions applicable to one or more global
securities.
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Payment and
paying agents
Unless otherwise indicated in a prospectus supplement, the
provisions described in this paragraph will apply to the debt
securities. Payment of interest on a debt security on any
interest payment date will be made to the person in whose name
the debt security is registered at the close of business on the
regular record date. Payment on debt securities of a particular
series will be payable at the office of a paying agent or paying
agents designated by us. However, at our option, we may pay
interest by mailing a check to the record holder. The trustee
will be designated as our initial paying agent.
We may also name any other paying agents in a prospectus
supplement. We may designate additional paying agents, change
paying agents or change the office of any paying agent. However,
we will be required to maintain a paying agent in each place of
payment for the debt securities of a particular series.
All amounts paid by us to a paying agent for payment on any debt
security that remain unclaimed for a period ending the earlier
of:
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10 business days prior to the date the money would escheat to
the applicable state; or
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at the end of two years after such payment was due, will be
repaid to us thereafter. The holder may look only to us for such
payment.
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No protection in
the event of a change of control
Unless otherwise indicated in a prospectus supplement with
respect to a particular series of debt securities, the debt
securities will not contain any provisions that may afford
holders of the debt securities protection in the event we have a
change in control or in the event of a highly leveraged
transaction, whether or not such transaction results in a change
in control.
Covenants
Unless otherwise indicated in a prospectus supplement with
respect to a particular series of debt securities, the debt
securities will not contain any financial or restrictive
covenants.
Consolidation,
merger and sale of assets
Unless we indicate otherwise in a prospectus supplement with
respect to a particular series of debt securities, we may not
consolidate with or merge into any other person (other than a
subsidiary of the company), in a transaction in which we are not
the surviving entity, or convey, transfer or lease our
properties and assets substantially as an entirety to, any
person (other than a subsidiary of the company), unless:
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the successor entity, if any, is a U.S. corporation,
limited liability company, partnership, trust or other business
entity;
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the successor entity assumes our obligations on the debt
securities and under the indentures; and
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certain other conditions specified in the indenture are met.
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40
Events of
default
Unless we indicate otherwise in a prospectus supplement, the
following will be events of default for any series of debt
securities under the indentures:
(1) we fail to pay the principal or any redemption price of
or any premium on any debt security of that series when due;
(2) we fail to pay any interest on any debt security of
that series for 30 days after it becomes due;
(3) we fail to deposit any sinking fund payment when due;
(4) we fail to perform any other covenant in the indenture
and such failure continues for 90 days after we are given
the notice required in the indenture; and
(5) certain events involving bankruptcy, insolvency or
reorganization of the company.
Additional or different events of default applicable to a series
of debt securities may be described in a prospectus supplement.
An event of default of one series of debt securities is not
necessarily an event of default for any other series of debt
securities.
The trustee may withhold notice to the holders of any default,
except defaults in the payment of principal, premium, if any,
interest, any sinking fund installment on, or with respect to
any conversion right of, the debt securities of such series.
However, the trustee must consider it to be in the interest of
the holders of the debt securities of such series to withhold
this notice.
Unless we indicate otherwise in a prospectus supplement, if an
event of default, other than an event of default described in
clause (5) above, shall occur and be continuing with
respect to any series of debt securities, either the trustee or
the holders of at least 25 percent in aggregate principal
amount of the outstanding debt securities of that series may
declare the principal amount and premium, if any, of all the
debt securities of that series, or if any debt securities of
that series are original issue discount securities, such other
amount as may be specified in the applicable prospectus
supplement, in each case together with accrued and unpaid
interest, if any, thereon, to be due and payable immediately.
Unless we indicate otherwise in a prospectus supplement, if an
event of default described in clause (5) above shall occur,
the principal amount and premium, if any, of all the debt
securities of that series, or if any debt securities of that
series are original issue discount securities, such other amount
as may be specified in the applicable prospectus supplement, in
each case together with accrued and unpaid interest, if any,
thereon, will automatically become immediately due and payable.
Any payment by us on the subordinated debt securities following
any such acceleration will be subject to the subordination
provisions described below under Subordinated debt
securities.
Notwithstanding the above-described matters, each indenture will
provide that we may, at our option, elect that the sole remedy
for an event of default relating to our failure to comply with
our obligations described under the section entitled
Reports below or our failure to comply with the
requirements of Section 314(a)(1) of the
Trust Indenture Act will for the first 180 days after
the occurrence of such an event of default consist exclusively
of the right to receive additional interest on the relevant
series of debt securities at an annual rate equal to
(i) 0.25% of the principal amount of such series of debt
securities for the first 90 days after the occurrence of
such event of default and (ii) 0.50% of the principal
amount of such series of debt securities
41
from the 91st day to, and including, the 180th day
after the occurrence of such event of default, which we call
additional interest. If we so elect, the additional
interest will accrue on all outstanding debt securities from and
including the date on which such event of default first occurs
until such violation is cured or waived and shall be payable on
each relevant interest payment date to holders of record on the
regular record date immediately preceding the interest payment
date. On the 181st day after such event of default (if such
violation is not cured or waived prior to such 181st day),
the debt securities will be subject to acceleration as provided
above. In the event we do not elect to pay additional interest
upon any such event of default in accordance with this
paragraph, the debt securities will be subject to acceleration
as provided above.
In order to elect to pay the additional interest as the sole
remedy during the first 180 days after the occurrence of
any event of default relating to the failure to comply with the
reporting obligations in accordance with the preceding
paragraph, we must notify all holders of debt securities and the
trustee and paying agent of such election prior to the close of
business on the first business day following the date on which
such event of default occurs. Upon our failure to timely give
such notice or pay the additional interest, the debt securities
will be immediately subject to acceleration as provided above.
After acceleration, the holders of a majority in aggregate
principal amount of the outstanding debt securities of that
series may, under certain circumstances, rescind and annul such
acceleration if all events of default, other than the
non-payment of accelerated principal, or other specified amounts
or interest or a default relating to a covenant or other
provision of the indenture that cannot be waived without the
consent of each holder of outstanding debt securities of that
series, have been cured or waived.
Other than the duty to act with the required care during an
event of default, the trustee will not be obligated to exercise
any of its rights or powers at the request of the holders unless
the holders shall have offered to the trustee reasonable
indemnity. Generally, the holders of a majority in aggregate
principal amount of the outstanding debt securities of any
series will 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.
A holder of debt securities of any series will not have any
right to institute any proceeding under the indentures, or for
the appointment of a receiver or a trustee, or for any other
remedy under the indentures, unless:
(1) the holder has previously given to the trustee written
notice of a continuing event of default with respect to the debt
securities of that series;
(2) the holders of at least 25 percent in aggregate
principal amount of the outstanding debt securities of that
series have made a written request and have offered reasonable
indemnity to the trustee to institute the proceeding; and
(3) the trustee has failed to institute the proceeding and
has not received direction inconsistent with the original
request from the holders of a majority in aggregate principal
amount of the outstanding debt securities of that series within
60 days after the original request.
Holders may, however, sue to enforce the payment of principal,
premium or interest on any debt security on or after the due
date or to enforce the right, if any, to convert any debt
security (if the debt security is convertible) without following
the procedures listed in (1) through (3) above.
42
We will furnish the trustee an annual statement from our
officers as to whether or not we are in default in the
performance of the conditions and covenants under the indenture
and, if so, specifying all known defaults.
Modification and
waiver
Unless we indicate otherwise in a prospectus supplement, the
applicable trustee and we may make modifications and amendments
to an indenture with the consent of the holders of a majority in
aggregate principal amount of the outstanding debt securities of
each series affected by the modification or amendment.
We may also make modifications and amendments to the indentures
for the benefit of holders without their consent, for certain
purposes including, but not limited to:
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providing for our successor to become an obligor and assume the
covenants under the indenture;
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adding covenants or events of default, provided that such action
shall not adversely affect the holders in any material respect;
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making certain changes to facilitate the issuance of the debt
securities;
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securing the debt securities;
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providing for a successor trustee or additional trustees;
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conforming the indenture to the description of the debt
securities set forth in this prospectus or the accompanying
prospectus supplement;
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curing any ambiguities or inconsistencies, provided that such
action shall not adversely affect the holders in any material
respect;
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providing for guaranties of, or additional obligors on, the debt
securities;
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permitting or facilitating the defeasance and discharge of the
debt securities, provided that such action shall not adversely
affect the holders in any material respect; and
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other changes specified in the indenture.
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However, neither the trustee nor the company may make any
modification or amendment without the consent of the holder of
each outstanding security of that series affected by the
modification or amendment if such modification or amendment
would:
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change the stated maturity of any debt security;
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reduce the principal, premium, if any, or interest on any debt
security or any amount payable upon redemption or repurchase,
whether at our option or the option of any holder, or reduce the
amount of any sinking fund payments;
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reduce the principal of an original issue discount security or
any other debt security payable on acceleration of maturity;
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change the place of payment or the currency in which any debt
security is payable;
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impair the right to enforce any payment after the stated
maturity or redemption date;
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if subordinated debt securities, modify the subordination
provisions in a materially adverse manner to the holders;
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adversely affect the right to convert any debt security if the
debt security is a convertible debt security; or
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change the provisions in the indenture that relate to modifying
or amending the indenture or waiver of past defaults.
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Satisfaction and
discharge; defeasance
We may be discharged from our obligations on the debt
securities, subject to limited exceptions, of any series that
have matured or will mature or be redeemed within one year if we
deposit enough money with the trustee to pay all the principal,
interest and any premium due to the stated maturity date or
redemption date of the debt securities.
Each indenture contains a provision that permits us to elect
either or both of the following:
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we may elect to be discharged from all of our obligations,
subject to limited exceptions, with respect to any series of
debt securities then outstanding. If we make this election, the
holders of the debt securities of the series will not be
entitled to the benefits of the indenture, except for the rights
of holders to receive payments on debt securities or the
registration of transfer and exchange of debt securities and
replacement of lost, stolen or mutilated debt securities.
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we may elect to be released from our obligations under some or
all of any financial or restrictive covenants applicable to the
series of debt securities to which the election relates and from
the consequences of an event of default resulting from a breach
of those covenants.
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To make either of the above elections, we must irrevocably
deposit in trust with the trustee enough money to pay in full
the principal, interest and any premium on the debt securities.
This amount may be made in cash
and/or
U.S. government obligations or, in the case of debt
securities denominated in a currency other than
U.S. dollars, cash in the currency in which such series of
debt securities is denominated
and/or
foreign government obligations. As a condition to either of the
above elections, for debt securities denominated in
U.S. dollars we must deliver to the trustee an opinion of
counsel that the holders of the debt securities will not
recognize income, gain or loss for U.S. federal income tax
purposes as a result of the action.
With respect to debt securities of any series that are
denominated in a currency other than United States dollars,
foreign government obligations means:
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direct obligations of the government that issued or caused to be
issued the currency in which such debt securities are
denominated and for the payment of which obligations its full
faith and credit is pledged, or, with respect to debt securities
of any series which are denominated in Euros, direct obligations
of certain members of the European Union for the payment of
which obligations the full faith and credit of such members is
pledged, which in each case are not callable or redeemable at
the option of the issuer thereof; or
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obligations of a person controlled or supervised by or acting as
an agency or instrumentality of a government described in the
bullet above the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by such
government, which are not callable or redeemable at the option
of the issuer thereof.
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44
Reports
The indentures provide that any reports or documents that we
file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act will be filed with the trustee within 15 days
after the same is filed with the SEC. Documents filed by us with
the SEC via the EDGAR system will be deemed filed with the
trustee as of the time such documents are filed with the SEC.
Notices
Notices to holders will be given by mail to the addresses of the
holders in the security register.
Governing
law
The indentures and the debt securities will be governed by, and
construed under, the laws of the State of New York.
No personal
liability of directors, officers, employees and
stockholders
No incorporator, stockholder, employee, agent, officer, director
or subsidiary of ours will have any liability for any
obligations of ours, or because of the creation of any
indebtedness under the debt securities, the indentures or any
supplemental indentures. The indentures provide that all such
liability is expressly waived and released as a condition of,
and as a consideration for, the execution of such indentures and
the issuance of the debt securities.
Regarding the
trustee
The indentures limit the right of the trustee, should it become
our creditor, to obtain payment of claims or secure its claims.
The trustee will be permitted to engage in certain other
transactions with us. However, if the trustee acquires any
conflicting interest, and there is a default under the debt
securities of any series for which it is trustee, the trustee
must eliminate the conflict or resign.
Subordinated debt
securities
The following provisions will be applicable with respect to each
series of subordinated debt securities, unless otherwise stated
in the prospectus supplement relating to that series of
subordinated debt securities.
The indebtedness evidenced by the subordinated debt securities
of any series is subordinated, to the extent provided in the
subordinated indenture and the applicable prospectus supplement,
to the prior payment in full, in cash or other payment
satisfactory to the holders of senior debt, of all senior debt,
including any senior debt securities.
Upon any distribution of our assets upon any dissolution,
winding up, liquidation or reorganization, whether voluntary or
involuntary, marshalling of assets, assignment for the benefit
of creditors, or in bankruptcy, insolvency, receivership or
other similar proceedings, payments on the subordinated debt
securities will be subordinated in right of payment to the prior
payment in full in cash or other payment satisfactory to holders
of senior debt of all senior debt.
In the event of any acceleration of the subordinated debt
securities of any series because of an event of default with
respect to the subordinated debt securities of that series,
holders of any senior debt would be entitled to payment in full
in cash or other payment satisfactory to
45
holders of senior debt of all senior debt before the holders of
subordinated debt securities are entitled to receive any payment
or distribution.
In addition, the subordinated debt securities will be
structurally subordinated to all indebtedness and other
liabilities of our subsidiaries, including trade payables and
lease obligations. This occurs because our right to receive any
assets of our subsidiaries upon their liquidation or
reorganization, and your right to participate in those assets,
will be effectively subordinated to the claims of that
subsidiarys creditors, including trade creditors, except
to the extent that we are recognized as a creditor of such
subsidiary. If we are recognized as a creditor of that
subsidiary, our claims would still be subordinate to any
security interest in the assets of the subsidiary and any
indebtedness of the subsidiary senior to us.
We are required to promptly notify holders of senior debt or
their representatives under the subordinated indenture if
payment of the subordinated debt securities is accelerated
because of an event of default.
Under the subordinated indenture, we also may not make payment
on the subordinated debt securities if:
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a default in our obligations to pay principal, premium, if any,
interest or other amounts on our senior debt occurs and the
default continues beyond any applicable grace period, which we
refer to as a payment default; or
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any other default occurs and is continuing with respect to
designated senior debt that permits holders of designated senior
debt to accelerate its maturity, which we refer to as a
non-payment default, and the trustee receives a payment blockage
notice from us or some other person permitted to give the notice
under the subordinated indenture.
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We will resume payments on the subordinated debt securities:
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in case of a payment default, when the default is cured or
waived or ceases to exist, and
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in case of a nonpayment default, the earlier of when the default
is cured or waived or ceases to exist or 179 days after the
receipt of the payment blockage notice.
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No new payment blockage period may commence on the basis of a
nonpayment default unless 365 days have elapsed from 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 the basis for a subsequent payment blockage notice.
As a result of these subordination provisions, in the event of
our bankruptcy, dissolution or reorganization, holders of senior
debt may receive more, ratably, and holders of the subordinated
debt securities may receive less, ratably, than our other
creditors. The subordination provisions will not prevent the
occurrence of any event of default under the subordinated
indenture.
The subordination provisions will not apply to payments from
money or government obligations held in trust by the trustee for
the payment of principal, interest and premium, if any, on
subordinated debt securities pursuant to the provisions
described under the section entitled Satisfaction and
discharge; defeasance, if the subordination provisions
were not violated at the time the money or government
obligations were deposited into trust.
If the trustee or any holder receives any payment that should
not have been made to them in contravention of subordination
provisions before all senior debt is paid in full in cash or
other
46
payment satisfactory to holders of senior debt, then such
payment will be held in trust for the holders of senior debt.
Senior debt securities will constitute senior debt under the
subordinated indenture.
Additional or different subordination provisions may be
described in a prospectus supplement relating to a particular
series of debt securities.
Definitions
Designated senior debt means our obligations under
any particular senior debt in which the instrument creating or
evidencing the same or the assumption or guarantee thereof, or
related agreements or documents to which we are a party,
expressly provides that such indebtedness shall be designated
senior debt for purposes of the subordinated indenture. The
instrument, agreement or other document evidencing any
designated senior debt may place limitations and conditions on
the right of such senior debt to exercise the rights of
designated senior debt.
Indebtedness means the following, whether absolute
or contingent, secured or unsecured, due or to become due,
outstanding on the date of the indenture for such series of
securities or thereafter created, incurred or assumed:
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our indebtedness evidenced by a credit or loan agreement, note,
bond, debenture or other written obligation;
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all of our obligations for money borrowed;
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all of our obligations evidenced by a note or similar instrument
given in connection with the acquisition of any businesses,
properties or assets of any kind,
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our obligations:
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as lessee under leases required to be capitalized on the balance
sheet of the lessee under generally accepted accounting
principles, or
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as lessee under leases for facilities, capital equipment or
related assets, whether or not capitalized, entered into or
leased for financing purposes;
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all of our obligations under interest rate and currency swaps,
caps, floors, collars, hedge agreements, forward contracts or
similar agreements or arrangements;
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all of our obligations with respect to letters of credit,
bankers acceptances and similar facilities, including
reimbursement obligations with respect to the foregoing;
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all of our obligations issued or assumed as the deferred
purchase price of property or services, but excluding trade
accounts payable and accrued liabilities arising in the ordinary
course of business;
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all obligations of the type referred to in the above clauses of
another person, the payment of which, in either case, we have
assumed or guaranteed, for which we are responsible or liable,
directly or indirectly, jointly or severally, as obligor,
guarantor or otherwise, or which are secured by a lien on our
property; and
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renewals, extensions, modifications, replacements, restatements
and refundings of, or any indebtedness or obligation issued in
exchange for, any such indebtedness or obligation described in
the above clauses of this definition.
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Senior debt means the principal of, premium, if any,
and interest, including all interest accruing subsequent to the
commencement of any bankruptcy or similar proceeding, whether or
not a claim for post-petition interest is allowable as a claim
in any such proceeding, and rent payable on or in connection
with, and all fees and other amounts payable in connection with,
our indebtedness. However, senior debt shall not include:
any debt or obligation if its terms or the terms of
the instrument under which or pursuant to which it is issued
expressly provide that it shall not be senior in right of
payment to the subordinated debt securities or expressly provide
that such indebtedness is on the same basis or
junior to the subordinated debt securities; or
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debt to any of our subsidiaries, a majority of the voting stock
of which is owned, directly or indirectly, by us.
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Subsidiary means a corporation more than 50% of the
outstanding voting stock of which is owned, directly or
indirectly, by us or by one or more of our other subsidiaries or
by a combination of us and our other subsidiaries. For purposes
of this definition, voting stock means stock or
other similar interests which ordinarily has or have voting
power for the election of directors, or persons performing
similar functions, whether at all times or only so long as no
senior class of stock or other interests has or have such voting
power by reason of any contingency.
Description of
units
We may issue units comprised of one or more of the other classes
of securities described in this prospectus in any combination.
Each unit will be issued so that the holder of the unit is also
the holder of each security included in the unit. Thus, the
holder of a unit will have the rights and obligations of a
holder of each included security. The units may be issued under
unit agreements to be entered into between us and a unit agent,
as detailed in the prospectus supplement relating to the units
being offered. The prospectus supplement will describe:
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the designation and terms of the units and of the securities
comprising the units, including whether and under what
circumstances the securities comprising the units may be held or
transferred separately;
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a description of the terms of any unit agreement governing the
units;
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a description of the provisions for the payment, settlement,
transfer or exchange of the units;
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a discussion of material federal income tax considerations, if
applicable; and
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whether the units, if issued as a separate security, will be
issued in fully registered or global form.
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The descriptions of the units in this prospectus and in any
prospectus supplement are summaries of the material provisions
of the applicable agreements. These descriptions do not restate
those agreements in their entirety and may not contain all the
information that you may find useful. We urge you to read the
applicable agreements because they, and not the summaries,
define your rights as holders of the units. For more
information, please review the forms of the relevant agreements,
which will be filed with the SEC promptly after the offering of
units and will be available as described in the section entitled
Where You Can Find More Information on page 54
of this prospectus.
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Selling
stockholder
The selling stockholder may resell from time to time up to
2,764,401 shares of our common stock (plus an indeterminate
number of shares of our common stock that may be issued upon
stock splits, stock dividends or similar transactions in
accordance with Rule 416 of the Securities Act).
The following table, based upon information currently known by
us, sets forth as of April 1, 2011: (i) the number of
shares of common stock held of record or beneficially by the
selling stockholder as of such date (as determined below) and
(ii) the number of shares of common stock that may be
offered under this prospectus by the selling stockholder.
The selling stockholder, an entity affiliated with private
equity firm Thayer | Hidden Creek, originally acquired the
shares of our common stock included in this prospectus through a
series of private placements of our convertible preferred stock
prior to our initial public offering in October 2009. The
preferred shares were converted into shares of our common stock
in connection with our initial public offering. In connection
with a private placement we completed in October 2005, we
entered into an amended and restated registration rights
agreement with our preferred stockholders, including the selling
stockholder. This agreement granted these stockholders certain
registration rights with respect to shares of our common stock
issuable upon conversion of the shares of the preferred stock
held by them. For more information regarding this agreement,
please refer to the section titled Description of Capital
Stock Registration Rights beginning on
page 32 of this prospectus.
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Percentage of
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Common stock
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Common stock
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common stock
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beneficially owned
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offered pursuant
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Owned upon
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owned upon
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prior to the
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to this
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completion of
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completion of
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Name of Selling
Stockholder
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offering(1)
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prospectus(1)
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this offering(2)
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this offering(2)
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TC NDT Holdings, L.L.C.(1)
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2,764,401
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2,764,401
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%
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(1)
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The address of the selling
stockholder is 1455 Pennsylvania Avenue, N.W., Suite 350,
Washington, D.C. 20004. Daniel M. Dickinson and James J.
Forese, each a member of our board of directors, share voting
and dispositive power over the shares held by TC NDT Holdings,
L.L.C. with five other members of an investment committee.
Messrs. Dickinson and Forese disclaim beneficial ownership
of these shares except to the extent of their pecuniary interest
therein. The selling stockholder is neither a broker-dealer nor
an affiliate of a broker-dealer.
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(2)
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We do not know when or in what
amounts the selling stockholder may offer shares for sale. The
selling stockholder may not sell any or all of the shares
offered by this prospectus. Because the selling stockholder may
offer all or some of the shares pursuant to this offering, we
cannot estimate the number of the shares that will be held by
the selling stockholder after completion of the offering.
However, for purposes of this table, we have assumed that, after
completion of the offering, none of the shares of common stock
owned by the selling stockholder and covered by this prospectus
will be held by the selling stockholder.
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Plan of
distribution
Offering by
Registrant
We may sell the securities:
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through underwriters or dealers;
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through agents;
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directly to purchasers; or
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through a combination of any such methods of sale.
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Any underwriter, dealer or agent may be deemed to be an
underwriter within the meaning of the Securities Act. The
prospectus supplement relating to any offering of securities by
us will set forth its offering terms, including the name or
names of any underwriters, the purchase price of the securities
and the proceeds to us from such sale, any underwriting
discounts, commissions and other items constituting
underwriters compensation, any initial public offering
price, and any underwriting discounts, commissions and other
items allowed or reallowed or paid to dealers, and any
securities exchanges on which the securities may be listed. Only
underwriters so named in the prospectus supplement are deemed to
be underwriters in connection with the securities offered by us
within this prospectus.
If underwriters are used in the sale, they will acquire the
securities for their own account and may resell them from time
to time in one or more transactions, at a fixed price or prices,
which may be changed, or at market prices prevailing at the time
of sale, or at prices related to such prevailing market prices,
or at negotiated prices. The securities may be offered to the
public either through underwriting syndicates represented by one
or more managing underwriters or directly by one or more of such
firms. Unless otherwise set forth in the prospectus supplement,
the obligations of the underwriters to purchase the securities
will be subject to certain conditions precedent and the
underwriters will be obligated to purchase all the offered
securities if any are purchased. Any initial public offering
price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
Any agent involved in the offer or sale of the securities in
respect of which this prospectus is delivered will be named, and
any commissions payable by us to the agent will be set forth, in
the accompanying prospectus supplement. Unless otherwise
indicated in the prospectus supplement, any such agent will be
acting on a best efforts basis for the period of its appointment.
If so indicated in the prospectus supplement, we will authorize
underwriters, dealers or agents to solicit offers by certain
specified institutions to purchase securities from us at the
public offering price set forth in the accompanying prospectus
supplement pursuant to delayed delivery contracts providing for
payment and delivery on a specified date in the future. These
contracts will be subject to any conditions set forth in the
accompanying prospectus supplement and the prospectus supplement
will set forth the commission payable for solicitation of these
contracts. The underwriters and other persons soliciting these
contracts will have no responsibility for the validity or
performance of any such contracts.
Any underwriters to whom or agents through whom these securities
are sold by us for public offering and sale may make a market in
these securities, but such underwriters or agents will
50
not be obligated to do so and may discontinue any market making
at any time without notice. No assurance can be given as to the
liquidity of or the trading market for any such securities.
Underwriters, dealers and agents may be entitled, under
agreements entered into with us, to indemnification by us
against certain civil liabilities, including liabilities under
the Securities Act or to contribution by us to payments they may
be required to make in respect thereof.
In compliance with the guidelines of the Financial Industry
Regulatory, Inc., or FINRA, the maximum commission or discount
to be received by any FINRA member or independent broker dealer
may not exceed 8% of the aggregate principal amount of
securities offered pursuant to this prospectus.
Certain of the underwriters, agents or dealers and their
associates may engage in transactions with and perform services
for us in the ordinary course of business.
Our common stock is quoted on the New York Stock Exchange under
the symbol MG. The other securities are not listed
on any securities exchange or other stock market and, unless we
state otherwise in the applicable prospectus supplement, we do
not intend to apply for listing of the other securities on any
securities exchange or other stock market. Any underwriters to
whom we sell securities for public offering and sale may make a
market in the securities that they purchase, but the
underwriters will not be obligated to do so and may discontinue
any market making at any time without notice. Accordingly, we
give you no assurance as to the development or liquidity of any
trading market for the securities.
Offering by
selling stockholder
The selling stockholder may, from time to time, sell any or all
of its shares of common stock on any stock exchange, market or
trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices.
The selling stockholder may use any one or more of the following
methods when selling such shares:
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ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
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block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
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purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
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an exchange distribution in accordance with the rules of the
applicable exchange;
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privately negotiated transactions;
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short sales;
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through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
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broker-dealers may agree with the selling stockholder to sell a
specified number of such shares at a stipulated price per share;
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one or more underwritten offerings on a firm commitment or best
efforts basis;
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a combination of any such methods of sale; and
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any other method permitted pursuant to applicable law.
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51
The selling stockholder may also sell such shares under
Rule 144 under the Securities Act, if available, rather
than under this prospectus.
Broker-dealers engaged by the selling stockholder may arrange
for other broker-dealers to participate in sales. Broker-dealers
may receive commissions or discounts from the selling
stockholder (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be
negotiated, which commissions or discounts may be less than or
in excess of those customary in the types of transactions
involved. Any profits on the resale of shares of common stock by
a broker-dealer acting as principal might be deemed to be
underwriting discounts or commissions under the Securities Act.
Discounts, concessions, commissions and similar selling
expenses, if any, attributable to the sale of shares will be
borne by the selling stockholder.
The selling stockholder may from time to time pledge or grant a
security interest in some or all of the shares of common stock
owned by it and, if it defaults in the performance of its
secured obligations, the pledgees or secured parties may offer
and sell the shares of common stock from time to time under this
prospectus after we have filed a supplement to this prospectus
under Rule 424(b)(3) or another applicable provision of the
Securities Act supplementing or amending the list of selling
stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this
prospectus.
The selling stockholder also may transfer the shares of common
stock in other circumstances, in which case the transferees,
pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus and may sell
the shares of common stock from time to time under this
prospectus after we have filed a supplement to this prospectus
under Rule 424(b)(3) or other applicable provision of the
Securities Act supplementing or amending the list of selling
stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this
prospectus.
Any broker-dealers or agents that are involved in selling the
shares of common stock may be deemed to be
underwriters within the meaning of the Securities
Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any
profit on the resale of the shares of common stock purchased by
them may be deemed to be underwriting commissions or discounts
under the Securities Act. In no event shall any broker-dealer
receive fees, commissions or markups which, in the aggregate,
would exceed eight percent (8%) of the gross proceeds received
by the selling stockholder for the sale of securities hereunder.
Pursuant to the previously described amended and restated
registration rights agreement entered into with, among others,
the selling stockholder, we are required to pay all fees and
expenses incident to the registration of the shares of common
stock. We have agreed to indemnify the selling stockholder (as
well as persons, including broker-dealers or agents deemed to be
underwriters within the meaning of the Securities
Act) against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act, in accordance
with the amended and restated registration rights agreement, or
the selling stockholder will be entitled to contribution.
The selling stockholder has advised us that it has not entered
into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of its shares
of common stock, nor is there an underwriter or coordinating
broker acting in connection with a proposed sale of shares of
common stock by the selling stockholder. If we are notified by
the selling stockholder that any material arrangement has been
entered into with any underwriters or broker-dealers for the
sale of shares of common stock, if required, we will file a
supplement to this prospectus.
52
Where you can
find more information
We have filed with the SEC a registration statement on
Form S-3
under the Securities Act of 1933, as amended (Securities
Act), with respect to the securities covered by this
prospectus. This prospectus, which is a part of the registration
statement, does not contain all of the information set forth in
the registration statement or the exhibits and schedules filed
therewith. For further information with respect to us and the
securities covered by this prospectus, please see the
registration statement and the exhibits filed with the
registration statement. A copy of the registration statement and
the exhibits filed with the registration statement may be
inspected without charge at the Public Reference Room maintained
by the SEC, located at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for more information about the operation of the Public Reference
Room. The SEC also maintains an Internet website that contains
reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The
address of the website is
http://www.sec.gov.
We are subject to the information and periodic reporting
requirements of the Securities Exchange Act of 1934, as amended
(Exchange Act), and, in accordance therewith, we
file periodic reports, proxy statements and other information
with the SEC. Such periodic reports, proxy statements and other
information are available for inspection and copying at the
Public Reference Room and website of the SEC referred to above.
We maintain a website at
http://www.mistrasgroup.com.
You may access our Annual Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K
and amendments to those reports filed pursuant to
Sections 13(a) or 15(d) of the Exchange Act with the SEC
free of charge at our website as soon as reasonably practicable
after such material is electronically filed with, or furnished
to, the SEC. Our website and the information contained on that
site or connected to that site, are not incorporated into and
are not a part of this prospectus.
53
Incorporation of
certain documents by reference
The SEC and applicable law permits us to incorporate by
reference into this prospectus information that we have or
may in the future file with or furnish to the SEC. This means
that we can disclose important information by referring you to
those documents. You should read carefully the information
incorporated herein by reference because it is an important part
of this prospectus. We hereby incorporate by reference the
following documents into this prospectus:
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our Annual Report on
Form 10-K
for the fiscal year ended May 31, 2010, filed with the SEC
on August 17, 2010;
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our Quarterly Reports on
Form 10-Q
for the quarters ended August 31, 2010, November 30,
2010, and February 28, 2011 filed with the Commission on
October 14, 2010, January 13, 2011, and April 14,
2011, respectively;
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our Current Reports on
Form 8-K
filed on October 18, 2010, February 14, 2011 and
February 16, 2011; and
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the description of our capital stock contained in our
registration statement on
Form 8-A
(File No. 001-34481)
filed with the Commission on October 5, 2009, pursuant to
Section 12(b) of the Securities Exchange Act of 1934, as
amended, including any amendment or report filed for the purpose
of updating such description.
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Additionally, all documents filed by us with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act,
after the date of this prospectus and before the termination or
completion of this offering shall be deemed to be incorporated
by reference into this prospectus from the respective dates of
filing of such documents. Any information that we subsequently
file with the SEC that is incorporated by reference as described
above will automatically update and supersede any previous
information that is part of this prospectus.
We are not incorporating by reference any information furnished
under Items 2.02 or 7.01 (or corresponding information
furnished under Item 9.01 or included as an exhibit) in any
past or future current report on
Form 8-K
that we file with the SEC, unless otherwise specified in such
report.
Upon written or oral request, we will provide you without
charge, a copy of any or all of the documents incorporated by
reference, other than exhibits to those documents unless the
exhibits are specifically incorporated by reference in the
documents. Please send requests to Mistras Group, Inc.,
Attention: Investor Relations, 195 Clarksville Road, Princeton
Junction, New Jersey 08550, or call
(609) 716-4000.
Legal
matters
The validity of the securities offered in this prospectus will
be passed upon for us by Fulbright & Jaworski L.L.P.,
New York, New York.
Experts
The financial statements incorporated in this prospectus by
reference to our Annual Report on
Form 10-K
for the fiscal year ended May 31, 2010 have been so
incorporated in reliance on the report of PricewaterhouseCoopers
LLP, an independent registered public accounting firm, given on
the authority of said firm as experts in auditing and accounting.
54
$80,000,000
Common Stock
Preferred Stock
Debt Securities
Warrants
Units
2,764,401
Shares of Common
Stock
Offered by the Selling
Stockholder
PROSPECTUS
,
2011
Part II
Information not
required in prospectus
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Item 14.
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Other Expenses
of Issuance and Distribution.
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The following table itemizes the fees and expenses incurred or
expected to be incurred by the registrant in connection with the
issuance and distribution of the securities being registered,
other than underwriting discounts and commissions.
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Securities and Exchange Commission registration fee
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$
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14,703
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New York Stock Exchange listing fee
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*
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Accounting fees and expenses
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*
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Legal fees and expenses
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*
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Printing and engraving
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*
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Fees and expenses of the transfer agent or trustee
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*
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Miscellaneous
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*
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Total
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$
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*
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*
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Estimated expenses are not
presently known because they depend upon, among other things,
the number of offerings that will be made pursuant to this
registration statement, the amount and type of securities being
offered and the timing of such offerings. The foregoing sets
forth the general categories of expenses (other than
underwriting discounts and commissions) that we anticipate we
will incur in connection with the offering of securities under
this registration statement on
Form S-3.
An estimate of the aggregate expenses in connection with the
issuance and distribution of the securities being offered will
be included in the applicable prospectus supplement.
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Item 15.
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Indemnification
of Directors and Officers.
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Section 145 of the Delaware General Corporation Law
(DGCL) permits a corporation to indemnify its
directors, officers and other employees against expenses,
including attorneys fees, judgments, fines and amounts
paid in settlements actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by third
parties. The directors, officers or other employees must have
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
reason to believe their conduct was unlawful. In a derivative
action, an action only by or in the right of the corporation,
indemnification may be made only for expenses actually and
reasonably incurred by directors and officers in connection with
the defense or settlement of an action or suit, and only with
respect to a matter as to which they shall have acted in good
faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation. No
indemnification shall be made if such person shall have been
adjudged liable to the corporation, unless and only to the
extent that the court in which the action or suit was brought
shall determine upon application that the defendant officers or
directors are fairly and reasonably entitled to indemnity for
such expenses despite such adjudication of liability.
The registrant has adopted provisions in its bylaws which
provide that it will indemnify, to the full extent permitted by
the DGCL, any person who was or is a party or is threatened to
be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative, including any
action or suit by the registrant or in its right, by reason of
the fact
II-1
that such person is or was a director or officer of the
registrant, or while such person is or was a director or officer
of the registrant, is or was serving at the registrants
request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such
action, suit or proceeding, but in each case only if and to the
extent permitted under the DGCL or federal law. In addition, the
registrants board of directors may in its discretion
indemnify any person other than an officer or director made a
party to any action by virtue of his or her employment with the
registrant.
As permitted by Section 102(b)(7) of the DGCL, the
registrants second amended and restated certificate of
incorporation provides that a director shall not be personally
liable to the registrant or its shareholders for monetary
damages for a breach of fiduciary duty unless the breach:
(i) relates to the duty of loyalty; (ii) involves
intentional misconduct or knowing violation of law;
(iii) involves payment of unlawful dividends, stock
purchases or redemptions; or (iv) involves a transaction
from which the director derived an improper personal benefit.
In addition, the registrant has entered into indemnification
agreements with its directors and executive officers to
indemnify them against certain liabilities which may arise by
reason of their status. The registrant also maintains
directors and officers liability insurance for its
officers and directors.
The Exhibits listed on the Exhibit Index of this
registration statement are filed herewith or are incorporated
herein by reference to other filings.
(a) The undersigned 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 percent change in the
maximum aggregate offering price set forth in the
Calculation of Registration Fee table in the
effective registration statement; and
(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;
II-2
provided, however, that paragraphs (a)(1)(i), (a)(1)(ii)
and (a)(1)(iii) of this section do not apply if the information
required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to
the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement, or
is contained in a form of prospectus filed pursuant to
Rule 424(b) that is part of 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) That, for the purpose of determining liability under
the Securities Act of 1933 to any purchaser:
(i) If the registrant is relying on Rule 430B,
(A) Each prospectus filed by the registrant pursuant to
Rule 424(b)(3) shall be deemed to be part of the
registration statement as of the date the filed prospectus was
deemed part of and included in the registration
statement; and
(B) Each prospectus required to be filed pursuant to
Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration
statement in reliance on Rule 430B relating to an offering
made pursuant to Rule 415(a)(1)(i), (vii) or (x) for
the purpose of providing the information required by
Section 10(a) of the Securities Act of 1933 shall be deemed
to be part of and included in the registration statement as of
the earlier of the date such form of prospectus is first used
after effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer
and any person that is at that date an underwriter, such date
shall be deemed to be a new effective date of the registration
statement relating to the securities in the registration
statement to which that prospectus relates, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof. Provided, however,
that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such effective date, supersede or
modify any statement that was made in the registration statement
or prospectus that was part of the registration statement or
made in any such document immediately prior to such effective
date; or
(ii) If the registrant is subject to Rule 430C, each
prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be
deemed to be part of and included in the registration statement
as of the date it is first used after effectiveness.
Provided, however, that no statement made in a
registration statement or prospectus that is part of the
registration statement or made in a document incorporated or
deemed incorporated by reference into the
II-3
registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement or
prospectus that was part of the registration statement or made
in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability of the
registrant under the Securities Act of 1933 to any purchaser in
the initial distribution of the securities, the undersigned
registrant undertakes that in a primary offering of securities
of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered
or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to
the purchaser and will be considered to offer or sell such
securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the
undersigned registrant relating to the offering required to be
filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used
or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus
relating to the offering containing material information about
the undersigned registrant or its securities provided by or on
behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the
offering made by the undersigned registrant to the purchaser.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrants annual report
pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plans annual report pursuant
to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933
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 Securities Act of 1933 and will be governed by the final
adjudication of such issue.
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(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(e) The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of
the trustee to act under subsection (a) of Section 310
of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under
Section 305(b)(2) of the Trust Indenture Act.
II-5
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on
Form S-3
and has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the
City of Princeton Junction, State of New Jersey, on the
14th day
of April, 2011.
MISTRAS GROUP, INC.
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By:
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/s/ Sotirios
J. Vahaviolos
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Sotirios J. Vahaviolos
Chairman, President and Chief Executive Officer
II-6
Power of
attorney
We, the undersigned officers and directors of Mistras Group,
Inc., hereby severally constitute and appoint Sotirios J.
Vahaviolos, Francis T. Joyce and Michael C. Keefe, and each of
them singly (with full power to each of them to act alone), our
true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution in each of them for him and in
his name, place and stead, and in any and all capacities, to
sign any and all amendments (including post-effective
amendments) to this registration statement (or any other
registration statement for the same offering that is to be
effective upon filing pursuant to Rule 462(b) under 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, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as
full to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the
following persons in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ Sotirios
J. Vahaviolos
Sotirios
J. Vahaviolos
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Chairman, President, Chief Executive Officer (Principal
Executive Officer) and Director
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April 14, 2011
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/s/ Francis
T. Joyce
Francis
T. Joyce
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Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
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April 14, 2011
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/s/ Daniel
M. Dickinson
Daniel
M. Dickinson
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Director
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April 14, 2011
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/s/ James
J. Forese
James
J. Forese
|
|
Director
|
|
April 14, 2011
|
/s/ Richard
H. Glanton
Richard
H. Glanton
|
|
Director
|
|
April 14, 2011
|
/s/ Michael
J. Lange
Michael
J. Lange
|
|
Director
|
|
April 14, 2011
|
/s/ Ellen
T. Ruff
Ellen
T. Ruff
|
|
Director
|
|
April 14, 2011
|
/s/ Manuel
N. Stamatakis
Manuel
N. Stamatakis
|
|
Director
|
|
April 14, 2011
|
II-7
Exhibit index
The following documents are filed as exhibits to this
registration statement, including those exhibits incorporated
herein by reference to a prior filing under the Securities Act
or the Exchange Act:
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|
|
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Exhibit
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|
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number
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|
Exhibit title
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1
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.1*
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Form of Underwriting Agreement
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1
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.2*
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Form of Subscription Agreement
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3
|
.1(1)
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Second Amended and Restated Certificate of Incorporation of the
registrant, as currently in effect
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3
|
.2(1)
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Amended and Restated Bylaws of the registrant, as currently in
effect
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4
|
.1(1)
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Specimen Common Stock Certificate of the registrant
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4
|
.2*
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Specimen Preferred Stock Certificate of the registrant
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4
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.3
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Form of senior indenture, to be entered into between the
registrant and the trustee designated therein
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4
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.4*
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Form of senior note with respect to each particular series of
senior notes issued hereunder
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4
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.5
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|
Form of subordinated indenture to be entered into between the
registrant and the trustee designated therein
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4
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.6*
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|
Form of subordinated note with respect to each particular series
of subordinated notes issued hereunder
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|
4
|
.7*
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|
Form of Warrant with respect to each warrant issued hereunder
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4
|
.8*
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|
Certificate of designation, preferences and rights with respect
to any preferred stock issued hereunder
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|
4
|
.9*
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|
Form of Depositary Agreement with respect to the depositary
shares
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|
5
|
.1
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Opinion of Fulbright & Jaworski L.L.P.
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|
12
|
.1
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|
Statement of Computation of Ratio of Earnings to Fixed Charges
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23
|
.1
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Consent of PricewaterhouseCoopers LLP
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23
|
.2
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Consent of Fulbright & Jaworski L.L.P. (included in
Exhibit 5.1)
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|
24
|
.1
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|
Power of Attorney (see
page II-7)
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|
25
|
.1*
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|
Form T-1
Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of designated trustee under the senior
indenture
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25
|
.2*
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Form T-1
Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of designated trustee under the subordinated
indenture
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|
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*
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To be filed, if necessary,
subsequent to the effectiveness of this registration statement
by an amendment or as an exhibit to a report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, in connection with the offering of securities.
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(1)
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Incorporated by reference to the
same numbered exhibit of the registrants registration
statement on
Form S-1
(File No. 333-151559),
declared effective by the Securities and Exchange Commission on
October 7, 2009.
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II-8